NEPCO's position sounds more typical for a cost plus contract.  Is this a 
lump sum deal? If so, then I think NEPCO is taking an aggressive approach to 
both LOL and retention.  A 10% limit of liability during the warranty period 
is particularly aggressive, unless there are a lot of carve outs to the limit 
of liability, and other give-and-takes which make it make sense. Another 
factor which might make a difference is the treatment given to the GE 
contract.  Is NEPCO taking risk on GE performance, and is the dollar value of 
the GE equipment included in the price used to figure the % of liability?

I'm glad to discuss this if I can be of help.

Kay







   
	
	
	From:  Dean Russell @ ECT                           08/17/2000 10:17 AM
	

To: Kay Mann/Corp/Enron@Enron
cc: Karen E Jones/HOU/ECT@ECT, Sheila Tweed/HOU/ECT@ECT 

Subject: EPC Limits of Liability

Kay - Ron Coker in the CTG group suggested you might be able to help with 
this.

ENA/SF is in the middle of negotiating the EPC contract for Pastoria (750 MW) 
with NEPCO.  We have hit a couple of snags in the contract and would very 
much appreciate your input as to what is "market." 

1. Limit of Liability -  NEPCO would like 80% up to Substantial Completion, 
40% up to Final Acceptance, and 10% for the Warranty Period.  GE's LOL is 
100% of their contract value though the warranty period. (which Kiewit also 
agreed to on Pittsburg.)
2. Retention - NEPCO would like to have 10% retention on payments only for 
the first 5% on the contract value and then 5% retention thereafter.  We 
would prefer 10% throughout the payment schedule.

What do you think?  We want the Owner's position to be as strong as possible 
to enhance the sale of the project, but NEPCO is under a great amount of 
pressure to reduce their contingent liability, and we really don't want to 
leave them holding the bag once we are gone if it is not necessary.  

Regards, Dean