February 16, 2000

1. February 16, 2000 CONFIDENTIAL ENA, Commercial Transactions Group LM6000 Valuation Process

2. CTG, LM6000 Valuation Table of Contents 1. Introduction 2. Transaction Process 3. Modeling inputs 4. Conclusion 5. Key Contacts Attachments: a. Simple Cycle Questionnaire b. O&M Questionnaire c. Cashflow Model Template d. O&M Output e. Engineer Output f. Combined Cycle Questionnaire

3. CTG, LM6000 Valuation 1.Introduction

4. CTG, LM6000 Valuation - Introduction Summary • ENA had acquired the rights to 24 LM6000 turbines at the end of 1999 • The turbine rights were purchased through a WestLB structure which allows the turbines to be placed off Enron’s balance sheet • The cost basis per turbine is $13,950,000, and based on the current WesLB structure (which would expire 3/15/00), the carrying cost per turbine is estimated to be $310,000 • The turbines are coming on-line based on the following schedule:

5. CTG, LM6000 Valuation - Introduction Summary (Cont’d) • In anticipation of the numerous LM6000 projects in the pipeline, a task force (consisting personnel from CTG, Origination, Engineers and Asset Management) was set up at the beginning of 2000 to spearhead a modeling process • To provide a consistent modeling approach to all LM6000 projects • To facilitate smooth transaction executions • To share knowledge among the projects • The following outline a brief summary of the effort of the task force

6. CTG, LM6000 Valuation 2.Transaction Process

7. CTG, LM6000 Valuation - Transaction Process Transaction Lifecycle Origination Transaction Development Deal Diligence Internal Approval Closing Funding/ Syndication Portfolio Management RAC • Underwriting • Risk Analytics • Global Finance • Transaction • Capital Development Structuring • Commodity Structuring • Tax Dept • Property Tax Dept • Global Finance • Accounting • Engineering • Asset Management • Legal • Insurance • Midstream • Development • Pulp & Paper/Industrial

8. CTG, LM6000 Valuation - Transaction Process Commercial Transactions Group Origination NepCo/EPC Contractor Engineers Finance CTG Commodity Structuring Asset Mgt. Property Tax Accounting RAROC Tax

9. CTG, LM6000 Valuation - Transaction Process Transaction Analysis Procedures Initial Analysis (for LOI, internal analysis, etc.) Set up a deal introduction meeting with Origination Fill out project cost and O&M summary sheets (see appendix A and B) with Originators Submit the summary sheets to Engineers and Asset Management, and follow up with a meeting Input project cost and operating cost information into the standardized financial model (see appendix C) The estimated turnaround time for the project cost estimates is 2 days for non-unionized region, and 4 days for unionized region Modify the model and input all other required information (see Section 4 for the Contact List) Update the Dispatch Model if applicable

10. CTG, LM6000 Valuation - Transaction Process Transaction Analysis Procedures (Cont’d) Full-Blown Due Diligence Draft proposal Get capacity payment from desk (when applicable) Generate formal tasking letter to get project cost estimates from NepCo/Engineer NepCo site visits Finalize Project Cost and O&M estimates The project cost estimates need to be formally “dashed” by engineers before making any commercial commitment Finalize inputs with all parties involved Send the model to RAC RAC generates DASH for approval

11. CTG, LM6000 Valuation 3.Modeling Inputs

12. CTG, LM6000 Valuation - Modeling Inputs Turbine Cost (including Carrying Cost)

13. CTG, LM6000 Valuation - Modeling Inputs Other Project Cost Get the estimates for the inputs from the following sources: InputsSources • Fin Fan Cooler - $186,000/turbine as per Engineer • Other EPC Cost - Engineer/NepCo • Financing Assumption - Global Finance • Mobilization Expenses - Asset Management (See appendix d) • Owner’s Engineer - Asset Management (See appendix d) • Other Soft Cost - Engineer

14. CTG, LM6000 Valuation - Modeling Inputs Technical Assumption InputsSources • Capacity • Heat Rate (New & Clean and Maximum Degraded) • Start Charge • No need to model Capacity Degradation as per Bruce Golden • Yearly Degradation • These are based on 1500 hrs of operation. Average heat rate in any given year would be new & clean heat rate expected HHV X (1 + the above %). Note these are not cumulative, each starts from new & clean. Get the following from Engineers (See Appendix e) • 1st year average +0.325% • 2nd year average +0.725% • 3rd year average +0.925% • 4th year average +1.025% • 5th year average +1.125%

15. CTG, LM6000 Valuation - Modeling Inputs Technical Assumption (Cont’d) • Estimated Construction Drawdown Schedule (as per Bruce Golden):

16. CTG, LM6000 Valuation - Modeling Inputs Operating Expenses Assumption InputsSources • Variable Operating Cost • Major Maintenance • Fixed Operating Expenses • Start Charge - Engineers • Fuel - Commodity Structuring • Debt Reserve Fee - Global Finance (if applicable) Get the following from Asset Management (See Appendix d)

17. CTG, LM6000 Valuation - Modeling Inputs Financing Assumption (Preliminary)

18. CTG, LM6000 Valuation - Modeling Inputs Tax Assumptions Federal Tax • Assume 35% Income Tax Rate • Model Federal Net Operating Loss Deduction • Federal NOL can be carried forward for 15 years State Tax • Income Tax Rate varies by States (7% is a rough average figure) • Model Federal Net Operating Loss Deduction • Federal NOL can be carried forward for 8 years Franchise Tax • Franchise Tax Rate varies by greatly by States (some states are exempt, and others are taxed as low as 1.5% to as high as 7%) • Check with the Franchise Tax Dept (Warren Schick, Jim Curry) for deal specific Franchise Tax Rate

19. CTG, LM6000 Valuation - Modeling Inputs Tax Assumptions (Cont’d) Miscellaneous Tax The following taxes vary by projects and location: • Gross Receipts Tax • Sales & Used Tax on Fuel Cost • Sales & Used Tax on Hard Cost

20. CTG, LM6000 Valuation - Modeling Inputs Depreciation Assumptions (Cont’d) Years Method Residual (%) Tax Depreciation EPC Cost 15 MACRS 0% Start-Up Cost 5 SL 0% Financing Cost 20 SL 0% Book Depreciation All Depreciable Cost 30 SL 10% Mobilization Expenses are expensed rather than capitalized

21. CTG, LM6000 Valuation - Modeling Inputs Combined-Cycle LM6000 • Most of the process and assumptions used for LM6000 peakers apply to combined cycle LM6000 • However, due to the specific nature of combined cycle LM6000 turbines, a separate team of engineers was set up to focus on project cost estimates for combined cycle LM6000 turbines • The key engineer is Bruce Golden • Please see appendix for the questionnaire specific to combined cycle LM6000 (See appendix f)

22. CTG, LM6000 Valuation 4.Conclusion

23. CTG, LM6000 Valuation - Conclusion Conclusion • Although the presentation is geared toward LM6000 turbines, the key contacts are applicable to other types of turbine valuation • The standardized financial model can also be used as a template for other types of turbine valuation, bearing in mind that the inputs and assumptions used for LM6000 turbines may not be applicable to other types of turbines • This presentation, as well as the Financial Model Template, IDC Calculation, and questionnaires are located in: O:\naes\from_ko\LM6000\Control

24. CTG, LM6000 Valuation 5.Key Contacts

25. CTG, LM6000 Valuation - Key Contacts Key Contacts