Since you aren't going to the meeting, you might enjoy this.  
-----Original Message-----
From: Markel, Gregory A. [mailto:GMarkel@brobeck.com]
Sent: Monday, July 16, 2001 6:06 PM
To: Brownfeld, Gail
Subject: FW: E-mail re damages expert


	t

> Gail,
> 
> As you requested, here is a summary of what we discussed  last week  with
> our damages experts, Seth Schwartz and Emily Medine of Energy Ventures
> Analysis, Inc.
> 
> They have received everything they requested from Enron in terms of
> documentation.  They have also gotten hold of the RDI and Hill &
> Associates reports which discuss the coal / synfuel market outlook.  They
> have also reviewed the comments to Rev Proc 200-47, which was the one that
> requested input regarding the IRS's decision at that time to suspend
> issuing PLRs until it rethought the standards that should apply.
> 
> Generally speaking, they are finding support for the idea that the
> synfuel/coal spread should diminish and approach zero over a relatively
> short period of time.  Essentially, they are finding that the two are
> commercial substitutes for one another, and that the    primary  reason
> for a discount in synfuel early on is to achieve market acceptance.  In
> fact, there is even some support for the idea that synfuel would trade at
> a premium to coal, because at least some power plants found that burning
> synfuel rather than coal reduces their emissions of nitrous oxide.  The
> spread is the key number both for our damage case and for mitigation.  We
> have discussed previously  how the spread works into the swap agreement
> analysis..  However it is also the key number in mitigation because if the
> spread is less than $5.25 (fully expensed) then the damages should be zero
> if coal is available to run the machines so that Sempra can get the tax
> credit.  Obviously in the short run they may have a claim for down time
> but in the longer run the facilities should be operating and producing
> credits. 
> 
> They also are looking at how the European market was heading towards
> accepting synfuel.  This is particularly significant since Europe would be
> a large market for Pier IX product.  In this regard, they've been looking
> at records from the CoalTrans conference held in Madrid 10/25-27/00.  Did
> anyone from Enron attend this conference?
> 
> They cannot yet put numbers to their analysis, but it generally appears
> that their work is heading in the right direction for us.
> 
> On mitigation, as you know, we've been stonewalled by Sempra on our first
> attempt to get information about what they are doing currently in
> Kentucky.  I expect this will be a battle.  The court rules require us to
> attempt to "meet and confer" to resolve the issue without court
> intervention first, then write a letter to the court, and only if that
> results in an impasse can we resort to motion practice.  We  had an
> unproductive meet and confers today on these issues. We will try to bring
> this to ahead as quickly as possible  We are also preparing deposition
> notices for the person most knowledgeable about the mitigation issues.  We
> have also asked Emily and Seth to work on a model for what Sempra could do
> in mitigation efforts based on general market information.  If and when we
> get the specific information about what is happening in Kentucky
> currently, that information will be incorporated into their mitigation
> model.
> 
> 

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