Sorry, I neglected to forward this to you earlier.   You've gotta give these 
guys credit for being tenacious!  I'll keep you posted on any meaningful 
developments after their meeting with DOE on the 25th.  Thanks for your 
patience.  DF 
---------------------- Forwarded by Drew Fossum/ET&S/Enron on 07/13/2000 
12:15 PM ---------------------------
   
	
	
	From:  Drew Fossum                           07/10/2000 02:39 PM
	

To: Steven Harris/ET&S/Enron@Enron, Kevin Hyatt/ET&S/Enron@Enron, Lorraine 
Lindberg/ET&S/Enron@ENRON
cc:  

Subject: Pueblo

 Just got an update on the project that won't go away.  Dennis has a meeting 
lined up with DOE decisionmakers on the 25th.  He is going to pitch the 
project as an approximately 100 mw power plant, to be owned by (read 
"financed by") DOE, with the gas pipeline owned by Dennis and\or third 
parties (read "Enron"?).  Dennis has run economics that show the DOE will get 
a more than 10% cost savings on the project compared to current PNM rates, 
even assuming a fairly high gas transport cost because of the smaller gas 
load.  How did he do it?  Very easy:  they ran the power plant economics 
using about a $2.00 gas cost instead of current, real world prices.   Dennis' 
argument is going to be:  "I'll take the risk on building the pipeline and 
the power plant at a capped cost, and then sell the power plant to you."  
"You take the risk on gas cost:  if gas cost tracks the 18-24 month average, 
you will realize your 10% cost savings, but if current fuel costs continue or 
escalate, you lose."    Either way, your reliability improves and you kick 
PNM in the shins."  Dennis and Tino apparently think they can sell DOE on 
this.  By the way, their current story on Richardson is that he won't resign, 
and won't be forced out by the administration because that would create even 
more publicity.  You'll love this:  they think Richardson is even more likely 
to sign off on the deal now because his chances of being nominated for VP or 
cabinet are dead and he now has nothing to lose in DC.  They think his real 
angle is now to bring home the bacon to New Mexico and then run for governor 
out there!!  Apparently the rank and file out in the home state think he got 
hosed and made a scapegoat unfairly.  
 I've asked  Lorna Brennan to pull some historical San Juan prices together 
to give to Tino to confirm whether his $2 price is wacky.  Other than that, I 
just told Tino that we are potentially interested in the pipeline part of the 
project if the risks and rewards make sense, and that EE&CC might be 
interested in the design/build on all of it.  He said he'd get back to me 
after the 25th meeting and tell me whether the project is undead.  DF