Pete,

The F/M relief sited may not apply in all instances because technically we 
may have failed to preserve our rights by not notifying Furnas for 6 months.  
They have responded as such although they have not assessed any penalties to 
date.  The real test is may 4 when we are supposed to be in Phase 3 on Gas.
---------------------- Forwarded by Rob G Gay/NA/Enron on 01/17/2001 04:27 PM 
---------------------------


Christiaan Huizer@ENRON_DEVELOPMENT
01/17/2001 02:04 PM
To: Peter E Weidler/NA/Enron@ENRON
cc: Laine A Powell/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Richard A 
Lammers/SA/Enron@Enron, Mariella Mahan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, 
Celso Bernardi/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rob G Gay/NA/Enron@Enron, 
Jose Bestard/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rafael 
Rangel/NA/Enron@Enron, Felipe Ospina/NA/Enron@ENRON, Joao Carlos 
Albuquerque/SA/Enron@Enron, Jose Lucio Reis/SA/Enron@Enron, John 
Novak/SA/Enron@Enron, Johannes.Walzebuck@shell.com.br 

Subject: Re: Period after commissioning on oil - PPA availability penalties 
vs. diesel cost exposure  

Pete,

 There are two types of penalties under the PPA for the account of EPE (the 
latter can be used as a hedge to diesel cost exposure and we don't have any 
penalties right now)

(1) Delay penalties in being unable to provide the guaranteed capacity of 480 
MW on gas starting May 4, 2001 (this is where the Force Majeure extension is 
able to provide relief). The penalties here are calculated as R$ 400 per 
delayed MW per day. 

(2) Penalties due to capacity shortfall (basically - are we able to meet 
dispatch requests). If the moving average of the monthly average of the 
projects equivalent availability, calculated in accordance with provisions of 
annex-7 of the PPA, is less than 92%, a penalty shall be assessed in the 
amount of monthly capacity portion of the tariff for each phase times the 
guaranteed capacity for the phase multiplied by (92% - moving average of the 
monthly availability).

Penalties type (1) does not apply in the concept analyzed as it relates to 
delay in gas (Force Majeure Claim issue). 

Refusing a dispatch request above 220 MW has an impact on penalties type (2) 
(guaranteed capacity is 300 MW). Given that the plant currently has a moving 
average of the monthly availability of about 99.7%, there is a margin built 
up that can be used to accept an availability hit by refusing a dispatch 
request above 220 MW. Therefore, to avoid the huge fuel costs associated with 
being dispatched above 220 MW, the PPA availability penalty concept can be 
utilized as an alternative. If we continue to decline to be dispatched above 
220 MW for a long period however, the built up margin will be reduced and 
eventually we'll have to pay penalties because the 12-month moving average 
moves below 92%.

Please let me know if additional questions

Christiaan 







Peter E Weidler@ENRON
01/17/2001 09:41 AM
To: Christiaan Huizer/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Laine A Powell/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Richard A 
Lammers/SA/Enron@Enron@ENRON_DEVELOPMENT, Mariella 
Mahan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Celso 
Bernardi/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rob G 
Gay/NA/Enron@Enron@ENRON_DEVELOPMENT, Jose 
Bestard/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rafael 
Rangel/NA/Enron@Enron@ENRON_DEVELOPMENT, Felipe 
Ospina/NA/Enron@ENRON@ENRON_DEVELOPMENT, Joao Carlos 
Albuquerque/SA/Enron@Enron@ENRON_DEVELOPMENT, Jose Lucio 
Reis/SA/Enron@Enron@ENRON_DEVELOPMENT, John 
Novak/SA/Enron@Enron@ENRON_DEVELOPMENT, 
Johannes.Walzebuck@shell.com.br@ENRON_DEVELOPMENT 
Subject: Re: Period after commissioning on oil - PPA availability penalties 
vs. diesel cost exposure  

Why do we have penalties - I thought we had force majuere extension until 
september or so.

Christiaan - please clarify thanks

Pete