Mark, other than the "political risk", I would give a low risk rating (1-2), 
but would give it a "3" as result of the politaical risk associated with the 
government changing the market rules or legislation.  As time has passed 
since the first auction the Government has showm a much greater inclination 
to do some not well thought out initiatives geared toward keeping prices down.

  


From: Mark E Haedicke on 11/22/2000 11:56 AM CST
To: Peter Keohane/CAL/ECT@ECT
cc:  
Subject: Re: Plan B Auction - Need for Approvals ?  

Peter:

I think your collective e-mails constitute the legal risk memo.  What do you 
think the legal risk rating ought to be?

Regards,

Mark



	Peter Keohane
	11/22/2000 10:28 AM
		 
		 To: Mark E Haedicke/HOU/ECT@ECT
		 cc: John J Lavorato/Corp/Enron@Enron, Greg Johnston/CAL/ECT@ECT, Derek 
Davies/CAL/ECT@ECT, Rob Milnthorp/CAL/ECT@ECT
		 Subject: Plan B Auction - Need for Approvals ?

Mark, thanks for the voice mail.  In terms of a risk memo, I agree that one 
should not be necessary as in many respects this can be characterized as 
normal course trading within position limits under a standardized Master 
Agreement and without an outlay of capital, but hopefully the following 
(together with my memo from last night - copy attached) suffices to the 
extent a risk memo is required.

In terms of unusual risks:

1.  We do not have any rights to collateral under the proposed Master.  
However, the counterparty is the Balancing Pool which is essentially 
Government of Alberta credit risk.  Derek Davies is I believe dealing with 
Credit to resolve credit issues.  In fact, I believe the Balancing Pool is 
taking significant risk as it is selling the power firm under a Master which 
does not match up to the interruptible nature of the PPAs it holds.

2.  The Balancing Pool will be secured under the Master by a parental 
guarantee of Enron Corp. and has a somewhat discretionary right to call for 
collateral from us under the Master if there is a material change in Enron 
Corp.'s creditworthiness.

3.  It is a requirement of the auction that we will have entered into 
back-to-back physical hedges for 70% of the volume we acquire, and we are 
currently working at putting those deals in place conditional on us bidding 
and being successful in the auction.  Penalties can be imposed if 70% of the 
volume purchased is not properly hedged.

4.  As we are dealing with the Government of Alberta, we always run the risk 
(as we are somewhat seeing now with respect to the Sundance PPA we acquired 
in the first auction) that they can change the auction rules, the market 
rules or the legislation in ways that are adverse to us.  In terms of the 
auction rules, as with the first auction, they could be better drafted, but 
our fundamental concern will be to make sure that it is clear that if we post 
a bid deposit and do not bid that we get the deposit back, and to ensure that 
the rules are clear enough that we are comfortable that we are in complete 
control of whether or not we can comply with the rules.

Peter.

(Milly, sorry for not copying you on my first memo - see below.)
---------------------- Forwarded by Peter Keohane/CAL/ECT on 11/22/2000 08:52 
AM ---------------------------
   
	Enron Capital & Trade Resources 
	Canada Corp. 
	
	From:  Peter Keohane                           11/21/2000 06:38 PM
	

To: Mark E Haedicke/HOU/ECT@ECT
cc: John J Lavorato/Corp/Enron@Enron, Derek Davies/CAL/ECT@ECT, Greg 
Johnston/CAL/ECT@ECT 
Subject: Plan B Auction - Need for Approvals ?

Mark, as I have mentioned to you the Plan B Alberta Power Auction is 
scheduled for Nov 29/00, under which Enron Canada can purchase for one-year 
terms, in each of three successive years, up to approximately 300MW/year #1;  
130MW/year #2; and 65MW/year #3, of the unsold PPA capacity that reverted 
back to the Balancing Pool of Alberta following the first auction last 
August.  The bid qualification documentation needs to be in Friday and US 
Thanksgiving is Thursday/Friday.  I wanted you to be aware of this, and 
determine from you if any corporate approvals need to be obtained.

Firstly, Derek Davies/John Zufferli will only be bidding to the extent 
authorized by Lavo.

Secondly, bid qualification commits us to the rules of the auction, the forms 
of documentation to govern both the auction and the purchase if we are 
successful, and requires a bid deposit (approximately C$6.5MM), but does not 
obligate us to bid and, provided we comply with the auction rules, the Bid 
Deposit will be returned after the auction.

Thirdly, unlike the PPA auction the risks are much less significant in terms 
of volume and term.  In terms of documentation, if we are the successful 
bidder, we will be buying power from the Balancing Pool under a physical 
Master, which seems to be a Canadianized version of the EEI Master and which, 
although not entirely to our liking, is generally satisfactory.

Fourthly, the position will, I understand, be managed in the power trading 
book within approved position limits.  Note:  The nominal amounts owing (i.e. 
no up front payment is required) on an unhedged basis for the entire 300MWs 
in year #1 would be something like C$260MM, assuming a C$100/MW purchase 
price.  Year #2 would be C$114MM and year #3 would be C$57MM.

Given the nature of the transaction, the short time that we have with US 
Thanksgiving intervening, and numerous other demands, I do not believe that a 
DASH, Risk Memo and/or Board Approval is necessary, but please let me know.

I will leave you a brief voice mail to follow-up.

Peter.