Great Plains Gasification Associates, A Partnership, Transco Coal Gas Company, A Partner Other Than The Tax Matters Partner - Page 3

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          corporation of one of the partnership’s general partners pledged            
          certain stock as security for DOE’s loan guarantee.                         
               The partnership built the coal gasification plant in Mercer            
          County, North Dakota, near available coal reserves.  Upon its               
          completion in 1984, the project was the only commercial-scale               
          operation of its type in the United States.                                 
               From an engineering perspective, the project was successful,           
          employing innovative catalytic processes to convert low-grade,              
          low-value lignite coal into high-Btu (British thermal units)                
          pipeline-quality synthetic natural gas.  The plant achieved                 
          average daily production of 125,000 mcf (thousand cubic feet).              
          It remains in production today.                                             
               Economically, however, the project was less successful.  As            
          construction neared completion, energy prices dropped.                      
          Anticipated initial losses from the project rose.  Anticipated              
          cashflows fell.  In 1985, the partnership defaulted on the DOE-             
          guaranteed loan.  Pursuant to the guarantee agreement, DOE paid             
          off the loan; by subrogation, the partnership’s debt shifted from           
          FFB to DOE.  In a June 30, 1986, foreclosure sale, DOE bid $1               
          billion for the partnership’s mortgaged assets, effectively                 
          reducing the partnership’s outstanding $1.57 billion liability by           
          $1 billion in exchange for the mortgaged project assets.3                   

               3 In October 1988, the U.S. Department of Energy (DOE)                 
          released the partnership’s remaining debt when it took possession           

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