re : qf projects summary no these are on credit total return swaps . as an ex - finance guy , i characterise as off - balance sheet , on credit , off footnote disclosure . chuck
louise kitchen @ ect
03 / 27 / 2001 12 : 06 pm
to : charles ward / corp / enron @ enron
cc :
subject : re : qf projects summary
when you say off the balance sheet - is it non recourse ?
charles ward @ enron
03 / 27 / 2001 08 : 19 am
to : louise kitchen / hou / ect @ ect
cc : w david duran / hou / ect @ ect , garrick hill / hou / ect @ ect , mike mazowita / corp / enron @ enron , chip schneider / na / enron
subject : qf projects summary
all projects are owned in a trs / foe structure ( total return swap / friend of enron ) as a result of our continued ownership in portland general .
the two current east project companies are motown and cornhusker .
motown consists of two 50 % interests and has trs of about $ 56 million and is on the balance sheet for about $ 2 million :
michigan power - 129 mw power plant fully contracted for power 20 + years and 14 remaining years of fixed cost gas . the ppa is deep in the money versus cost to generate ( even after the swapped gas in 2015 ) . dynegy operates and is managing general partner ( " mgp " ) and operator . fair performance record on both at best . michigan is currently entering into qf stranded cost filings and the time is near to propose a restructuring . we have waited for about 9 months as doug clifford ( the origination on the purchase ) had been attempting to purchase dynegy ' s interest ( they have too high a book value and are accrual based ) .
the proposed restructuring will take the form of an upfront payment in return for an option to provide power from the market . this approach gives consumer ' s ( a bbb credit ) much needed cash at a time when they are significantly underrecovering due to increased fuel costs and set fuel recovery rates . consumer ' s ( like many other utilities ) has a hard time seeing their exposure ( purchased power cost certainty for the volume and term ) and doesn ' t see any regulatory filing complications with their current stranded cost filings .
the amended ppa is a non - unit contingent power short which we fill long - term with a contract from the power desk . the desk takes the obligation because generation investments provides a full backstop pricing through their ownership of the plant and the swapped gas ( we either float past the swapped gas or contract for differences those years with the gas desk ) . the ppa and desk contract are securitized in the capital markets for the term of the ppa at 1 . 05 dscr and about 75 bps over consumer ' s current corporate bonds . the plant essentially becomes a $ 0 npv machine and the power desk has significant optionality to call from the market rather than the plant for 20 + years . during the term of the swapped gas , when the plant isn ' t called by the desk we can sell the gas into the market for a profit .
it is fairly easy to see the increased value . the project is currently project financed at about 1 . 5 dscr for about 14 years ( lots of cash ) . the desk has significant optionality and always a matched cost supply with the plant . the plant gains efficiency due to revised o & m , insurance , reserves , etc . which are no longer required due to the removal of project financing .
difficulties - dynegy and consumers . consumers can be rational . dynegy either must sell or play along . current operational / project management issues which dynegy caused may make their interest available .
ada - 29 mw plant fully contracted for power 20 + years . enron is the mgp . ge operates for us . 50 % owned by coned . fixed gas through 2008 . we would propose a restructuring at the same time as michigan power ( this would leave consumers with only one unrestructured ppa ) . currently revisiting buying comed ' s interest .
cornhusker - trs of about $ 206 and about $ 24 on balance sheet . a 100 % interest in a single 250 mw plant in texas . small coop which is very litigious . plant has had some rather spectacular failures ( i have pictures which make the engineers on our floor shudder which i would be glad to pass along ) but the ppa only requires 60 % availability before significantly in the money capacity payments are reduced ( essentially an impossible to reach loss ) . the failures have been related ( westinghouse 501 f ) . carl tricoli spent the first 7 months ( upto february ) trying to sell the project to the coop . we spent last month determining that the coop will never buy the project ( they just don ' t have the $ and we are a very expensive lender . we ' re taking a last stab at a restructuring proposal in the coming month and upon appraisal of the coop ' s intentions , we ' ll potentially enter the sell mode . el paso has indicated an interest in the project already as the ex - citizen ' s employee ' s over there attempted to restructure some time ago . if we sell the closing should be by 9 / 30 / 01 .
again , i apologize for the delay in getting you this info . call with questions .
chuck
re : qf projects summary
no these are on credit total return swaps . as an ex - finance guy , i characterise as off - balance sheet , on credit , off footnote disclosure . chuck
louise kitchen @ ect
03 / 27 / 2001 12 : 06 pm
to : charles ward / corp / enron @ enron
cc :
subject : re : qf projects summary
when you say off the balance sheet - is it non recourse ?
charles ward @ enron
03 / 27 / 2001 08 : 19 am
to : louise kitchen / hou / ect @ ect
cc : w david duran / hou / ect @ ect , garrick hill / hou / ect @ ect , mike mazowita / corp / enron @ enron , chip schneider / na / enron
subject : qf projects summary
all projects are owned in a trs / foe structure ( total return swap / friend of enron ) as a result of our continued ownership in portland general .
the two current east project companies are motown and cornhusker .
motown consists of two 50 % interests and has trs of about $ 56 million and is on the balance sheet for about $ 2 million :
michigan power - 129 mw power plant fully contracted for power 20 + years and 14 remaining years of fixed cost gas . the ppa is deep in the money versus cost to generate ( even after the swapped gas in 2015 ) . dynegy operates and is managing general partner ( " mgp " ) and operator . fair performance record on both at best . michigan is currently entering into qf stranded cost filings and the time is near to propose a restructuring . we have waited for about 9 months as doug clifford ( the origination on the purchase ) had been attempting to purchase dynegy ' s interest ( they have too high a book value and are accrual based ) .
the proposed restructuring will take the form of an upfront payment in return for an option to provide power from the market . this approach gives consumer ' s ( a bbb credit ) much needed cash at a time when they are significantly underrecovering due to increased fuel costs and set fuel recovery rates . consumer ' s ( like many other utilities ) has a hard time seeing their exposure ( purchased power cost certainty for the volume and term ) and doesn ' t see any regulatory filing complications with their current stranded cost filings .
the amended ppa is a non - unit contingent power short which we fill long - term with a contract from the power desk . the desk takes the obligation because generation investments provides a full backstop pricing through their ownership of the plant and the swapped gas ( we either float past the swapped gas or contract for differences those years with the gas desk ) . the ppa and desk contract are securitized in the capital markets for the term of the ppa at 1 . 05 dscr and about 75 bps over consumer ' s current corporate bonds . the plant essentially becomes a $ 0 npv machine and the power desk has significant optionality to call from the market rather than the plant for 20 + years . during the term of the swapped gas , when the plant isn ' t called by the desk we can sell the gas into the market for a profit .
it is fairly easy to see the increased value . the project is currently project financed at about 1 . 5 dscr for about 14 years ( lots of cash ) . the desk has significant optionality and always a matched cost supply with the plant . the plant gains efficiency due to revised o & m , insurance , reserves , etc . which are no longer required due to the removal of project financing .
difficulties - dynegy and consumers . consumers can be rational . dynegy either must sell or play along . current operational / project management issues which dynegy caused may make their interest available .
ada - 29 mw plant fully contracted for power 20 + years . enron is the mgp . ge operates for us . 50 % owned by coned . fixed gas through 2008 . we would propose a restructuring at the same time as michigan power ( this would leave consumers with only one unrestructured ppa ) . currently revisiting buying comed ' s interest .
cornhusker - trs of about $ 206 and about $ 24 on balance sheet . a 100 % interest in a single 250 mw plant in texas . small coop which is very litigious . plant has had some rather spectacular failures ( i have pictures which make the engineers on our floor shudder which i would be glad to pass along ) but the ppa only requires 60 % availability before significantly in the money capacity payments are reduced ( essentially an impossible to reach loss ) . the failures have been related ( westinghouse 501 f ) . carl tricoli spent the first 7 months ( upto february ) trying to sell the project to the coop . we spent last month determining that the coop will never buy the project ( they just don ' t have the $ and we are a very expensive lender . we ' re taking a last stab at a restructuring proposal in the coming month and upon appraisal of the coop ' s intentions , we ' ll potentially enter the sell mode . el paso has indicated an interest in the project already as the ex - citizen ' s employee ' s over there attempted to restructure some time ago . if we sell the closing should be by 9 / 30 / 01 .
again , i apologize for the delay in getting you this info . call with questions .
chuck
