Mariella,

Attached is a spreadsheet that calculates the Energy Payment received from PREPA and the cost of LNG from Cabot for the year 2001. It can also be used  for future years. A not-so-obvious revelation from the attached calculations is that for the year 2000, the Energy payment and the cost of LNG per kwh are equal if the heat rate for Eco @ 100% dispatch is 7473 BTU/kwh (i.e., before application of the Fuel Cost Correction Curve). Since Eco's heat rate at 100% of 507MW is lower than 7473 BTU/kwh, the PPA pays a little above the actual fuel cost. 

I will be happy to review this with you or with Remi. Also, I will FAX to you the handwritten pages mentioned. 

Regards,

Paul

 

 -----Original Message-----
From: 	Sierra, Rick  
Sent:	Monday, August 20, 2001 6:48 PM
To:	Mahan, Mariella
Cc:	Y'Barbo, Paul
Subject:	RE: LNG cost and energy revenue matching

M,

One of the papers you reference was prepared by Paul Y'Barbo, the other by me.  In essence, as long as the PR-CPI is higher than the basis, we maintain a positive energy margin.  I am not sure I can find the documents - they may be in my new office or in the files I have asked Cynthia to keep in a file cabinet on your floor - last time I was on your floor they were still in boxes.

Paul - please see if you have the documents Mariella is asking for.  If you are not sure what she is talking about, please contact her and provide what she needs (you may have to reproduce the mathematical equations).

Rick

 -----Original Message-----
From: 	Mahan, Mariella  
Sent:	Monday, August 20, 2001 5:48 PM
To:	Sierra, Rick
Cc:	Collonges, Remi
Subject:	LNG cost and energy revenue matching

Hi Rick,
Believe it or not it was only two days ago that I threw away the analysis you performed for me when I asked the question of: is Eco exposed to fuel risk because it's PPA energy pricing formula (including indexing) appears different than its LNG cost formula (including indexing)?  I know the conclusion reached by you, Doug R. and the folks from ECT who helped put the transaction together at the time was: No.  In fact, we have a small positive energy margin.  Conditions would almost have to be unimaginable for the margin to become negative, etc.  

In today's staff meeting I was asked to involve Remi Collongues (he heads our trading efforts in Brazil) in taking a look at the revenue-cost aspects of our LNG project in Puerto Rico to confirm or correct the conclusions reached earlier.  Do you still have a copy of the analysis you prepared for me?  It was a hand-written analysis together with copies of the pertinent PPA and FSA provisions. 

Thanks in advance. Mariella