Initial Comments Met with Mike Smith and Arnold Eisenstein this AM.  One problem I see is that the mileages and the capital in the presentation don't match.  The $822 mm seems to match a case with 175 miles of mainline rather than 239.

Arnold and Ron Matthews had already tentatively scheduled a get-together tomorrow to work on optimization and to get the facilities and the estimates on the same page.

Mike Smith mentioned that looks like the Indian ROW renewal will cost about $80mm in todays dollars, $40mm in ten years, remainder in 20.  Not sure what a reasonable escalator is to use for reservations.

Regarding Bush' tarriff.  I would not assume that there is enuf contingency and escalation to cover the increase.  The escalation is there to cover normal inflation of material and construction costs and the contingency is there to cover the incompleteness in scoping at the time of the estimate preparation.  (Rand Corp some years back did an extensive study of estimates ex contingency versus final costs and confirmed that primarily due to insufficient scoping details, a seemingly large level of contingency was required to cover the actual costs.   When a project is a gleam in someone's eye, probably need 25%, by the time you are starting construction - maybe 5%.)

Also James C. sent me a copy of his baseline model.  I have a relatively quick and dirty model I use for preliminary analyses and for roughly the same assumptions we ended up in about the same place - about 5.5% IRR on equity. Bear in mind that this included no increases in volumes over time, no incremental Row payments and no payoff at the end of 20 years.  

Another point.  Will you really be able to sell the 540 at 45 cents (plus a bush tarriff kicker) 100% 365 days a year?

That's all for now.  Have a surprise 1 o'clock with Horton.

