Wes, please have the detailed HPL numbers available to discuss on Monday.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 07/19/2000 
09:34 PM ---------------------------


Brian Redmond
07/19/2000 03:02 PM
To: David W Delainey/HOU/ECT@ECT
cc: Jean Mrha/NA/Enron@Enron, Julie A Gomez/HOU/ECT@ECT, Wes 
Colwell/HOU/ECT@ECT, Patrick Wade/HOU/ECT@ECT, Timothy J 
Detmering/HOU/ECT@ECT, Jeff Donahue/HOU/ECT@ECT, John J 
Lavorato/Corp/Enron@Enron, Michael C Bilberry/HOU/ECT@ECT, Jim 
Coffey/HOU/ECT@ECT, Mark Frevert/NA/Enron@Enron, Todd Busby/NA/Enron@Enron 
Subject: Re: Project Triple Lutz/Tarantula  

Team:

I have scheduled a meeting for 2 August to review our Triple Lutz and 
Tarantula deliverables.  A preliminary summary of our current status is as 
follows:

1.  Entex Contract - (John L.)
 -  T. Martin cost to unwind Texas desk P/L (incl. Entex) = $134.881MM
 - J. Schwieger cost to unwind storage book = $28MM 

2.  Storage Value Algorithm - (Jean M., John L., Jim S.)
 - J. Mrha discussions with J. Schwieger and J. Lavo continuing
 - Working on reconciling EOY balancing and modeling physical storage 
constraints

3.  Storage Acquisition Targets - (Jean M., Julie G.)
 - Target list prepared, preparing facility costs analysis.

4.  Bammel Header - (Jean M.)
 - Analyzing Northern Texas and Beaumont Markets

5.  Project Torque: (Wes C., J. Coffey)
 -  P/L established based on physical gas flow from POPS system and $ flows
  from general ledger.  No direct tie to UNIFY settlements information 
  but now numbers are reconcilable
 -  1999 Margin Summary
  Gross Margin = $111MM (not including financial trading), 
  Net Margin = $101MM
  EBITDA (HPL standalone before G&A) = $48MM
  EBITDA (HPL standalone) = $35MM 
 -  Book Value Summary
  Non-Houston BV of  $398MM (incl. $129MM monetizations)
  Houston BV (incl. FV) = $2.3 bn  + Texas & Storage P/L unwind of $163MM
   requires a lease payment for Houston assets 
   of $19MM over 30 yrs
  Pad gas BV = $153MM  (on basis of $2.34/mmBtu) not included in above
  Working gas BV = $116MM (on basis of $2.34/mmBtu) not included in above

6.  HPL Acquisition (T. Detmerming):
 -  Base Case Structure:  sale of non-Fair Value assets, 30 yr. lease of FV 
assets
  Both bidders want ENA to provide/contribute trading and business operations
  services.
 -  Duke Field Services:  interested in base case structure, wants ENA to 
provide 
  trading services on a contract basis under a JV arrangement (Bridgeline)
 -  AEP:  interested in base case structure, wants ENA to sell trading desk 
(and 
  potentially provide business operation services under a service 
arrangement) 
 -  Info memo being prepared to be delivered in August, data room being 
formed.




David W Delainey
07/05/2000 12:33 PM
To: Jean Mrha/NA/Enron@Enron, Julie A Gomez/HOU/ECT@ECT, Brian 
Redmond/HOU/ECT@ECT, Wes Colwell/HOU/ECT@ECT, Wes Colwell/HOU/ECT@ECT, 
Patrick Wade/HOU/ECT@ECT, Timothy J Detmering/HOU/ECT@ECT, Jeff 
Donahue/HOU/ECT@ECT, John J Lavorato/Corp/Enron@Enron
cc: Mark Frevert/NA/Enron@Enron 
Subject: Project Triple Lutz/Tarantula

Guys, as a follow up to our meeting today, I thought I would put together a 
list of deliverables agreed to in the meeting.  The goal would be to have a 
definitive strategy for HPL and storage assets by the end of July that could 
be acted upon.

 a) Elimination of the Entex contract - current value - John L.;
 b) Storage value algorithm incorporating spread values, increasing intra-day 
and monthly volatility and blowdown values - Jean M, John L, Jim S.;
 c) Storage acquisition targets and issues surrounding value/execution - top 
5 to 10 for blowdown and tarantula strategy - Jean M, Julie G.;
 d) Structure, value, cost and issues surrounding Bammel "header" - Jean M.;
 e) Project Torque - definitive balance sheet, income statement and 
contribution margin statement for HPL - Wes C.;
 f) Establish viability of selling HPL assets - small private placement - 
working with Lehman to finalize value, exection risk, timing, structure et al 
- Patrick   W.
 
 I would like this group to get back together in the fourth week of July to 
determine a final action plan.

Regards
Delainey