Edits are included in the body of the attached.







Barton Clark@ECT
10/17/2000 01:00 PM
To: Herman Manis/Corp/Enron@ENRON
cc: Sheila Tweed/HOU/ECT@ECT 
Subject: Re: Ft. Pierce -- HRSG Option Agreement  

I agree we need more discussion. However, re the " need to skate around lease 
issues in whatever docs are created now", remember the only document we 
propose to sign in the near future is the HRSG option and the only payment we 
propose to make is the option premium to secure the delivery date. I don't 
see the need to worry about the lease issues in the other draft documents we 
create now to try to gain agreement in principle to the basic commercial 
terms of the deal. The other documents will never be signed without necessary 
97-10 compliant provisions unless we opt to flip the project to a third party 
concurrently with their execution. If we don't opt to flip to a third party, 
we will revise the documents before their execution to address the lease 
issues. By your response, are you implying that the simple creation of these 
other draft documents and our discussion of the commercial terms therein with 
our counterparty gives rise to on-balance sheet concerns irrespective of what 
we actually sign?



	Herman Manis@ENRON
	10/17/2000 12:08 PM
		
		 To: Barton Clark/HOU/ECT@ECT
		 cc: Sheila Tweed/HOU/ECT@ECT
		 Subject: Re: Ft. Pierce -- HRSG Option Agreement

We need to discuss these issues in more detail tomorrow during the 10 am 
presentation.  We need to be careful to skate around lease issues involving 
97-10 in whatever docs are created now because we could end up in a lease 
model in the future.  Anything we create now and should have to live with may 
hurt us in the future if in a lease.




Barton Clark@ECT
10/17/2000 11:26 AM
To: Darrell Stovall/NA/Enron@ENRON
cc: David Fairley/HOU/ECT@ECT, Rusty Stevens/Corp/Enron@ENRON, Mathew 
Gimble/HOU/ECT@ECT, Sheila Tweed/HOU/ECT@ECT, Herman Manis/Corp/Enron@ENRON 
Subject: Re: Ft. Pierce -- HRSG Option Agreement  

The option of equipment  is the same method used to secure firm delivery 
dates in the ABB transformer financing, which was ultimately rolled into a 
West LB structure. As I understand it, in a 97-10 context, option premium is 
not a hard cost and hence does not give rise to on-balance sheet concerns so 
long as total project soft costs of which the premium is a part do not exceed 
10% of aggregate project cost. Here, to keep the deal off-balance sheet we 
are looking to either (i) a TECO or other third party investor take out ( by 
purchase of the project entity membership interests concurrently with the 
project entity's execution of definitive project agreements ) or (ii) a West 
LB lease structure. Even though we are not drafting the project documents to 
incorporate a West LB structure at this time, we need to maintain flexibility 
to revise the documents to reflect a West LB structure if a third party deal 
does not materialize or if we determine a West LB structure would be more 
beneficial and West LB would agree to the takeout.The principal constraint 
imposed by maintaining this flexibility is that all of our expenditures under 
the HRSG contract until the take out is firmed up must be able to be 
characterized as option premium/soft cost and must not - when aggregated with 
other project soft costs - exceed 10% of total project costs. 

We have opted not to draft all of the project documents on a West LB model 
now because it has been determined ( subsequent to the draft of the HRSG 
contract on a West LB model) that as a practical matter incorporation of this 
approach into all the project agreements  will impede our ability to reach 
commercial agreement with FPUA. If we fail to reach commercial agreement, the 
off-balance sheet concerns are all academic. Put another way, we think that 
if we can reach commercial agreement first, it will be easier to revise the 
documents later to incorporate a West LB structure ( if we decide to go that 
route ) because it will be easier for FPUA to conceptualize the changes 
imposed by our financing requirements after the principal commercial issues 
are solved. The same rationale applies to the HRSG vendor. I know this 
requires a change to the HRSG draft to eliminate the West LB structure 
currently reflected therein, but if we opt for the third party takeout, the 
West LB approach currently reflected in the HRSG contract would have to be 
deleted anyway.
I
As soon as it is drafted, we need to run the HRSG option by Herman Manis to 
ensure that our approach does not jeopardize our ability to use the West LB 
alternative later or otherwise have adverse accounting treatment. I 
understand the off-balance sheet treatment is in part a function of our 
intent at the time we enter into project agreements, and to my knowledge the 
option has never been used where a third party takeout or lease takeout are 
being considered as alternative off-balance sheet approaches at the time a 
project document is signed. It seems to me, however, that the bare execution 
of the HRSG option where the ultimate takeout mechanic is uncertain and no 
definitive project agreements have been signed does not foreclose our ability 
to later opt for a West LB takeout or otherwise result in the project having 
to be taken on balance sheet if a third party takeout does not materialize.

By copy hereof, I'm requesting Herman share with us his thoughts on our 
proposed approach to the Ft. Pierce project.





	Darrell Stovall@ENRON
	10/17/2000 07:57 AM
		 
		 To: Cheryl Costa/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, John G 
Rigby/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
		 cc: Barton Clark@ECT
		 Subject: Ft. Pierce -- HRSG Option Agreement

FYI, as indicated previously, Bart Clark/ENA recommends an option approach 
for purchase of HRSG and has lead in developing agreement. Previous ABB 
option agreement (attached/below) may be used as starting point.

Bart, there is a question as to whether the option approach will satisfy off 
balance sheet requirements. Please advise.



---------------------- Forwarded by Darrell Stovall/NA/Enron on 10/17/2000 
07:39 AM ---------------------------


Barton Clark@ECT
10/16/2000 05:05 PM
To: Darrell Stovall/NA/Enron@ENRON
cc:  

Subject: Re: equipment option  

Thanks. I will get to the option as soon as I finish a couple of other 
agreements scheduled to be completed before the Thursday meeting on 
definitive agreements. I'll add a revised option to the list and try to have 
it done by Thursday to discuss and send to the accountants.




	Darrell Stovall@ENRON
	10/16/2000 04:57 PM
		
		 To: Barton Clark/HOU/ECT@ECT
		 cc: Bruce Golden/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
		 Subject: Re: equipment option

Bart,

Initial heat balance part of HRSG RFP went out today -- balance hopefully 
will go out later this week. 

Reason for 10/18 target date on draft HRSG option? ... I suggest that we need 
to provide this to bidders as early as possible in the process to avoid "late 
in the game" surprises and potential delays in getting HRSG commitment. 

Let's discuss as appropriate -- Darrell
 
 



Barton Clark@ECT
10/16/2000 11:04 AM
To: Darrell Stovall/NA/Enron@Enron
cc:  

Subject: equipment option

FYI, I will see about revising the ABB option for the Fort Pierce deal as 
soon as I finish some other matters ( including the Interface EPC for Ft. 
Pierce ) that are also in line. Once revised, the option will need to go to 
accounting for review and approval. I understood the draft HRSG contract went 
out last week. What is the driver on the requested 10/18 date for completion 
of the HRSG option?
----- Forwarded by Barton Clark/HOU/ECT on 10/16/2000 10:59 AM -----

	Kay Mann@ENRON
	10/16/2000 10:44 AM
		 
		 To: Barton Clark/HOU/ECT@ECT
		 cc: 
		 Subject: equipment option

Hi Bart,

I think this is at least close to the final draft. It ain't pretty but it 
seemed to work.  You won't hurt my feelings if you make massive revisions, so 
long as I get a copy of the new-and-improved version.


Kay