Northwestern Deal ,
 Dave / Chris:

I wanted to give you both a heads up that the Northwestern (NW) GE 7EA deal 
should close today or tomorrow, and advise you of a related earnings 
recognition issue. 

The deal that we are on the path of closing is consistent with the executed 
DASH and works as follows: at the signing of the letter agreement, NW pays 
ENA $3 million, with another $5 million paid on July 15 (the Turbine 
Deposits). The balance of $40 million is paid by NW at such time as the 
assignment of the turbine contract is made to the LLC, and ENA sells the LLC 
member interests to NW. The outside date for this to occur, via a notice 
provided by NW, is Sept. 1. The $8 million paid by NW, and the obligation to 
purchase the member interests is a firm commitment guaranteed by Northwestern 
Corp. The only condition to NW's obligation to purchase the member interests 
is that ENA effect the assignment of the turbine contract into the LLC. If 
ENA does not effect the assignment, then NW would also be entitled to a 
return of the $8 million in Turbine Deposits. 

This structure is the same we followed for the Intergen deal which closed in 
January, except the Intergen deal did not have an extended period between the 
date of execution of the letter agreement, and the turbine contract 
assignment. In the Intergen deal, ENA did not receive any payments prior to 
the assignment and sale of the member interests.

The earnings issue raised by accounting (Herman Manis) is that, 
notwithstanding NW's firm commitment to purchase, ENA has two (albeit very 
minor) performance obligations. First, ENA has to obtain an Acknowledgement 
and Consent from GE prior to or concurrent with exercising its purchase 
option with E Next and assigning the turbine contract to the LLC  (we have 
had to do this for every turbine transaction). Second, ENA has to perform 
under its agreement with E Next in that if there is an event of default prior 
to the time we effect the assignment, we theoretically could loose our 
purchase option right with E Next and be unable to perform under our 
agreement with NW. We have suggested to Herman that both of these items are 
perfunctory in nature, and that all income from this transaction should be 
recognized upon execution of the letter agreement, We have further stated 
that we could obtain a letter from GE solving the first issue, but there is 
no solution to the second issue. Herman advised us that to the extent we 
receive a letter from GE on the first issue, and can convince Arthur Anderson 
that the second item is perfunctory in nature, we could recognize all income 
upon execution of the letter agreement (prior to the actual assignment of the 
turbine contract to the LLC). He did not think we had a good case relative to 
the second issue, and is reluctant to approach Arthur Anderson.

Thus, based on the above, in a worst case we may not be able to recognize any 
income form this transaction until Q3. While we think we have a shot at 
getting accounting to change their position, we do not think that this 
outcome should change our position on the deal as the underlying 
profitability is significant. The deal is also consistent with the approved 
DASH. We therefore recommend that we proceed with the execution of the letter 
agreement, and then decide as to how we should proceed on the income 
recognition issue depending on your views regarding income being recognized 
in Q2 vs. Q3.

Please advise me if you are OK with us closing on the deal as scheduled, or 
if you have any other questions.

Regards,

Ben
w.duran@enron.com, christopher.calger@enron.com