Recap:
The California project's ("ACE") fundamental position, coal generation in gas-on-margin market, is attractive on the fundamentals.  ACE's economics through a range of scenarios (forward SRAC rates) also appears attractive.  However, due to the uncertainty in the California market, the deal team needs to resolve issues 1. and 2. (at minimum) before returning for final approval:

Timing Risk:  Price and execute a 30-40 day call on "deal purchase" to keep competition at bay and buy time to work through market and partner risks.
Market Risk:  Approach So Cal Edison and CDWR to structure and close a deal that enables ACE to sell directly to CDWR (or other credit worthy counter party for term, or at least until So Cal Edison starts honouring its QF contract with ACE on a current pay basis.
Partner Risk:  Approach Constellation, co-managing partner in ACE, to price/structure buyout of their interest in ACE or a swap of Pennsylvania for California project positions.

Follow Up:
The following actions have been taken:

Timing Risk:  Greg Blair initiated discussions last night with the seller's advisor, Chase, to purchase an option to close in late April.  We expect to hear back from Ahlstrom (seller) today or Friday.  Deal team will notify Office of Chairman when we discover Ahlstrom's bottom line on option premium, expiration date and strike price.
Market Risk & Partner Risk:  Greg Blair and Terry Donovan put messages into Millenium (ACE manager) and Constellation to get things moving on CDWR/Edison deal and to see if we can structure a deal to get control of ACE. Substantive progress on either front will be reported.

Regards,

Mike J Miller