Joe, where is the arb? Ultimately, this cannot be a cost of capital play 
given the owners.  Is this primarily an off-balance sheet issue for the 
customer?  Are we taking disposal or terminal value risk on the facility?  
Operational risk? Did we come up with this structure or was this the mandated 
structure in the RFP?

Is this a play that you would support? 

On a previous issue, do you feel confident that we can monetize the El Paso 
note on the ECP sale at the 8.25%?  It is important for us to be able to 
quickly monetize this note for obvious reasons.

How is it going otherwise?

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 10/03/2000 
01:19 PM ---------------------------
   
	
	
	From:  Jean Mrha @ ENRON                           09/27/2000 04:21 PM
	

To: David W Delainey/HOU/ECT@ECT
cc: Brian Redmond/HOU/ECT@ECT, W Tom Byargeon/HOU/ECT@ECT, Julie Gomez, Chris 
Hilgert/HOU/ECT@ect 
Subject: Re: Devil's Tower  

David,

Devils Tower is a deepwater project on Mississippi Canyon block 773.  
Dominion is the operator and has a 60% working interest in the project.  
Mariner Energy (20%) and Pioneer Resources (20%) are the remaining working 
interest owners.

During the first week of September, Production Offshore, managed by Tom 
Byargeon, received an RFP and an information packet to submit a proposal for 
the development of a floating production system and export pipelines.

Since the Devils Towers project exists in a prolific active deepwater reserve 
area and this area has little developed infrastructure, this project is 
strategic and creates a very relevant and marketable infrastructure 
position.  For example, Exxon has indicated their interest in tying back 
their production from Crazy Horse (south of Devils Tower) to this platform.  
In addition, the production from this platform could be funneled into Exxon's 
export pipelines on the shelf.

This project will financed by a structure where Enron forms a joint venture 
(JV) with an independent third party.   The joint venture partners capitalize 
the JV with a nominal amount of funds.  The JV leases capacity on the 
platform and export pipelines from a special purpose vehicle (SPV).  The SPV 
uses the lease agreement to obtain a loan from financial institutions.  In 
turn, the SPV uses equity capital (from a tax based investor) and the loan 
proceeds to purchase or develop the deepwater assets.

The JV receives cash flows from leasing the production capacity from the 
Devils Tower deepwater assets.  This capacity on the deepwater assets will be 
sold for five to seven years under a production handling agreement (PHA).  
Final point, the JV receives a financial instrument (most likely a note 
receivable)  equal to their portion of the net proceeds from the PHA.

Enron books income on the monetization of this financial instrument via a 
FASB sell down (most likely, selling a note receivable to a bank for cash).  
In addition, because the lease capacity for the deepwater assets will be sold 
for only five-seven years and these assets will have a minimum working life 
for twenty, there exists potential upside for Enron.  For example, cash flows 
from incremental PHAs (ie., through tiebacks to Devils Tower deepwater 
assets) can be monetized via the FASB 125 sell down.

The financial structure was designed to minimize capital outlays and 
financial risk.  Also, Joe Deffner and Roger Ondreko are very familar with 
the structure and assisted in its design.

The RFP is due October 2nd.   There will a meeting tommorrow from 1-3 pm to 
discuss the status of the proposal in EB 3583. Please feel free to attend.

Regards, 

Jean



David W Delainey@ECT
09/27/2000 01:26 PM
To: Brian Redmond/HOU/ECT@ECT, Jean Mrha/NA/Enron@Enron
cc:  

Subject: Devil's Tower

Guys, can you give me an update on what this deal is about - e-mail would be 
fine?

Regards
Delainey