Rod,

We looking for your help on some ideas on how to implement a good long term project that has negative short term cash flow.

We have been working with Halliburton to identify deliverability improvements at Redfield through the use of  improved technology related to identifying poor performing wells and implementing down hole remediation.  This project has costs and revenues as shown below that are great from a long term standpoint.  Steve Thomas and Maurice Gilbert have done an excellent job of identifying the benefits to NNG and the upsides in revenue that are expected.  Dave Waymire has also been very helpful in analyzing alternative and economics and have shown that the project has a great return (in excess of 30%).  Our problem is that the cost for the workovers at Redfield are all O&M expenses and not capital and we have a negative IBIT for the first 2 - 3 years of the project.  We have proposed that Halliburton structure the expenses such that they come in over a 5 - 10 year period so we don't have this negative IBIT flow in the first years, however, Halliburton has not been interested and has proposed a 30% finance charge for this structure.

What would be the appetite for possibly pre-paying a majority of these costs in '01 to avoid the negative '02 and '03 earnings impact or is there an Enron company that would finance/extend the expense payments.  This is a great project that we should do, however, it is difficult given the negative earnings impacts in the first couple of years.  Got any ideas to handle this financial hurdle??????

Year		Expense		Revenue		Net 
'01		   ($173,000)		     -0-			  ($173,000)
'02		($2,420,000)		   $300,000		($2,120,000)
'03		($2,250,000)		$1,290,000		   ($960,000)
'04 and		       -0-			$2,055,000/yr		 $2,055,000/yr
forward

Thanks,

Kent