So...

MGU, complete utility outsourcing to ENA.  Requires all gas supply and assets are bequeathed to ENA with a gas sale to MGU.  Risks to MGU include performance risk, commission scrutiny, and assets remaining with ENA for 60-90 days in the case of ENA insolvency.  They are betting the entire reliability of their utility performance to one counterparty.  That is a big bet for any company and was managed completely through TRUST...

Peoples is different.  Keyspan is different.  Their worse case is ENA goes away and they a) have more money in the bank, b) grew their diversified earnings at a pace unachievable on their own, c) will get addicted to this new business and d) have very little to loose with their alternative being partnering with our closest competitor.  The choice for these guys is to grow or not.  They will not loose what they had before ENA.

I know our role for the unforeseeable future will be that of a broker.  Even on MGU, I am attempting to find a way to mitigate their concerns with providing a third party back stop.  On Keyspan, the play is to bring them into the PEC deal linking the Midwest and the NE.  

Originators must be optimist's and I don't like letting a deal I believe in die.  MGU will be a challenge due to the commission scrutiny I may not be able to now...  overcome.  I believe more than ever we can link counterparties together and provide the backbone of some new vehicle.  Peoples has been painful and there are still challenges ahead, but they are willing to provide financial backing for money.  They have a taste ($10 MM, 2000 and $18 MM, 2001) of this new business and do not want it to cease.

So, first, I do want to move ahead with my new role and second, really want to have Keyspan and PEC together in NY.  The NY event is 2 weeks away and Chuck, Ed and Mike have committed.  For the group, I want Russell and Deirdre McCaffrey, 1 analyst and 1 associate to see if we can get anything going.  It is an investment of around $2MM to determine if we can get an asset play working.

Please reconsider the NY trip to include Keyspan and provide me the go ahead to form this group.  The below attachment is to show, with time, focus and persistence there is always a way around (or over) all problems.

Thanx,
Laura



 -----Original Message-----
From: 	Penman, Gregg  
Sent:	Thursday, November 15, 2001 11:10 AM
To:	Luce, Laura; Tomaski, Richard; Dickson, Stacy E.; Johnson, Rudwell
Subject:	FW: Enovate/WPS winter deal

It looks like we may have worked out an arrangement for the WPSC deal.  Essentially, PEC will provide the full guarantee, ENA will give PEC a reimbursement agreement for 50%, and ENA will receive 50% (25% under bankruptcy) of the deal proceeds.  In exchange, we may need to cover a small (few hundred thousand dollars) shortfall on the 25th of November.  This would most likely be accomplished by not cash settling a portion of the transactions and instead delaying payment until enovate has the cash.  I am working out the details of whether or not this is feasible.  Any questions, please let me know.  I will let you know if we hit any road bumps, but we are going to try to close this by tomorrow.

Stacy - Thank you for your excellent suggestion on documentation. Hopefully, it will pass through the rest of the PEC organization.

Gregg

 -----Original Message-----
From: 	t.hermann@pecorp.com@ENRON  
Sent:	Thursday, November 15, 2001 10:28 AM
To:	a.huprikar@pecorp.com
Cc:	j.pokorny@pecorp.com; d.zagorski@pecorp.com; m.klyasheff@pecorp.com; j.nassos@pecorp.com; p.kauffman@pecorp.com; j.gabel@pecorp.com; r.rodriguez@pecorp.com
Subject:	Enovate/WPS winter deal

As most of you are aware, enovate has been finalizing negotiations w/
Wisconsin Public Service for a winter peaking exchange (ie the non-regulated
version of storage).  This is a 16/d, 5 day peaking deal effective only this
winter.  It generates fixed revenues of appx. $250,000, plus additional
commodity charges that are minor.  WPS will not accept a PG from Enron, and
Enron can not issue an LC for their half.  WPS will accept a PG from Peoples
for the entire amount (the entire amount is $5 MM).

Enron will provide the reimbursement agreement back to PEC.  Enron has
agreed to a 75/25 sharing on this deal, which will go to 50/50 if they are
NOT under bankruptcy.  In addition, Enron is - subject to final management
approval - going to cover a small cash shortfall that enovate anticipates
having during November due to a) a net operating loss during October, and b)
completion of the $18 million cash distribution last week (Gregg and I
inadvertently sent back too much).

While this is not an ideal arrangement we feel this is appropriate given the
nature of this deal and current credit circumstances.  At this point we are
not viewing this as a template for future deals of this nature.

Please let Gregg Penman, Roy Rodriguez or myself know if this does not work.


Thanks,

--Tim

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