Laine,

What would be the basis for their allegation that the TAA is not valid.  Is 
their a legal basis for their contention?




Laine A Powell@ENRON_DEVELOPMENT
12/10/2000 04:22 PM
To: Rob G Gay/NA/Enron@Enron, Richard A Lammers/SA/Enron@Enron
cc: Christiaan Huizer/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, 
Johannes.Walzebuck@shell.com.br, Peter E Weidler/NA/Enron@Enron 

Subject: Telecom with S&W

Rob and Rick -

 Spoke today with Sue Garven and Brad Barta.  Below find comments/notes -

Brad mentioned his concern about turnover of O&M staff with Duane's 
departure.   Responded that we had a capable plant manager with 10 years 
plant experience plus key people at the lower levels had remained.  Also told 
Brad that the two I&C consultants we have had since the outset of the project 
are still working at the facility and that we were taking on 6 technicans 
from Siemens during combined cycle start-up.  Brad seemed okay with the 
response.

Discussed two key contractual issues -
TAA - They expressed the importance of keeping the TAA in place with no 
dilution since it is so important to the lenders.  Furthermore they mentioned 
that SCC's position is Siemens will come after us to dilute the TAA and that 
in fact it is no longer valid.  (I agree Siemens will come after us for the 
risk profile modification) Responded that we felt that the TAA was still 
valid and mentioned that Siemens might want the TAA to commence at completion 
on oil.  Sue's commented that we need to calculate how much it would cost us 
to keep the start date at Substantial Completion on fuel.
Phase II - Explained that given the current commissioning program that we had 
no intention of lowering the dampners and testing for simple cycle Phase II 
on gas.  They are on board with this concept.  We just need to get a white 
paper to them to explain in detail.

Drilling -
The comment was the formations are tough but will get there slowly but surely.
Using 1 May as gas available at the plant date.

Change Orders -
Transmitted SCCs frustration on little movement on change orders related to 
the pipeline.  Told them that many of the change orders still without 
documents and in any case the strategy was to settle up at the end of the job.
Brad and Sue mentioned that they would feel more comfortable with the process 
and putting a number on the value of the change orders if we were closer to 
resolution.
worried about the size of the change orders - especially the outside case.
have not given this to the banks
there outside change order case is as follows -

    Power Plant  Pipeline  Total

Total EPC         US$ 419 mm
Approved Change Orders                    22 mm
Pending Change Orders  US$  10 mm  US$ 25 mm               35 mm
Cont Change Orders                8 mm            24 mm               32 mm

Hope this information is useful.

rgds

Laine