Interesting idea!  Hopefully we can find a simpler approach, but I don't see 
any inherent problem with something like that if it seems to make the most 
financial sense.  Thanks. df


   
	
	
	From:  Mary Kay Miller                           02/18/2000 07:18 AM
	

To: Drew Fossum/ET&S/Enron@ENRON
cc:  

Subject: Re: Pueblo  

How about doing something along the lines of what we did with UCU on NBPL in 
phanthom equity stock?  or something like that-- Mike worked on that deal and 
I'm not sure who else-  MK


   
	
	
	From:  Drew Fossum                           02/17/2000 05:50 PM
	

To: Steven Harris/ET&S/Enron@Enron, Kevin Hyatt/ET&S/Enron@Enron, Lorraine 
Lindberg/ET&S/Enron@ENRON
cc: Mary Kay Miller/ET&S/Enron@ENRON, Susan Scott/ET&S/Enron@ENRON, Maria 
Pavlou/ET&S/Enron@ENRON 

Subject: Pueblo

I heard from Tino this afternoon and here's what's going on:
1.  Tino has been focused exclusively on right of way issues.  He's been 
flying around in helicopters, etc. and not worrying about much else. They've 
got environmental people already doing non-field work on possible routes, 
like checking for available turtle studies and cultural resource stuff.  
Dennis has been focused on the political angles (apparently) and has 
purportedly gained some additional intelligence about PNM's effort to get DOE 
to re-up their contract for a new two year term.  Tino says DOE told PNM to 
pound sand and will continue to take service under month-to-month rollover of 
the existing PNM-DOE contract until some alternative (i.e., Dennis) comes 
along.  
2.  Tino wants to get deeper into talking to us about possible deal 
structures very soon.  This topic includes at least three things:  (1) how to 
structure the ownership of the pipeline to maximize Enron and Dennis 
finincial upside; (2) how to structure ownership of the power plant and 
related facilities to maximize Enron and Dennis financial upside, while 
satisfying DOE on Indian ownership, and (3) how to streamline the regulatory 
approval process.  An example of the concerns Tino and Dennis are focused on 
is "if the pipeline has a regulated rate of return, but the power plant has 
to share profit with the Tribe ownership entity, where do we put the bulk of 
the return???"  Also of concern is how we cut Dennis in on a slice of 
upside--stock in Enron?  Profit sharing on the power plant or pipeline 
ownership entity?  Something else? 
3.  What do the economics look like?  This is obviously a threshold question 
that we ought to be moving toward an answer on for ourselves, even if we 
aren't in a position yet to share the information.  Specifically, given what 
we know about the likely cost of the pipeline, and the likely capital cost 
and heat rates of the turbines ENA has available, and what we know about 
forward gas curves, and what we know about how much power PNM supplies to DOE 
and at what rate (from the document Tino gave us in KC and PNM's tariff), do 
we think we can build this thing and beat PNM's current price to DOE?  Can we 
beat it by 10%?  Can we beat it by 10% and have enough $$$ to sweeten the 
deal for the Tribe (partly because that would make it more attractive to 
DOE)?    

I suggested to Tino that he ought to put together a list of the issues that 
they are working on and that they think we should be working on and what the 
critical path issues and decisions are.  If we do the same, then we'd be in a 
position to get another meeting together and have a productive agenda and 
find out if this project has real potential or not. 

Bottom line, I think if our analysis of question 3 is that we can hit decent 
RAROC numbers and still undercut PNM's existing DOE contract and cut the 
Tribe in on a decent share of the power plant upside, we ought to move 
forward aggressively.    DF