I have attached a memo from Don Black regarding his meeting with Duke 
yesterday. As you will note,this memo outlines the factual differences 
between the parties. The legal issue is one straight out of first year 
Contracts class: Was there a meeting of the minds so as to create a binding 
contract? When I first looked at this I was somewhat concerned. In response 
to an email from Duke describing a particular index pricing, Julian responded 
simply "I agree." But after talking to Don, Greg Whalley ,reviewing all the 
email correspondence, and, most importantly, listening to the trader tapes, I 
am convinced that Julian never agreed to the index that Duke is alleging. In 
other words I think we can make a good argument to get around  the damaging " 
I agree" email. It is clear that Duke's trader didn't, and probably still 
doesn't understand what index she was usingin her email. The Master Agreement 
provides for arbitration in Houston with three arbitrators, one of whom must 
have 8 years of experience in derivatives. I'll take my chances with that 
kind of panel. I estimate our liklihood of prevailing is in the 70-80% range. 
Let me know if you need anything further.
 ---------------------- Forwarded by Richard B Sanders/HOU/ECT on 10/06/99 
08:14 AM ---------------------------


Don Black@ENRON_DEVELOPMENT
10/05/99 05:46 PM
To: Richard B Sanders@ECT, Greg Whalley@ECT
cc:  
Subject: Duke meeting

Julian Poole and I attended at meeting at our office with Erik Ludtke and Amy 
Statler of Duke Intl. today.  We reviewed the tapes and the emails, and they 
are hanging their hat on the fact that the only monomic price published by 
Cammesa is the index to which they are referring.   Our answer to that claim 
is that they defined the trade as a 7 by 24 flat load, when the index they 
are trying to use is a demand weighted index.  Also, in the tape, immediately 
following the word "monomic" by Amy, is a definitional description; "capacity 
plus energy".   Cammesa states that there is no where that you can find the 
definition of the word monomic in their library.  We believe that monomic 
means the hourly price plus the capacity payment for peak hours.

Lastly, the index she wants to use is a monthly number, published only once a 
month, but she states in her  "let's add" email that she would like it to "be 
the monthly average of the monomic spot price published by Cammesa"  I asked 
her how do you calculate the monthly average of a number that is published 
once a month.  I related to her that the logic did not follow.  She responded 
with a forgettable comment.

We had a long discussion about whether or not a trade had occurred.  I 
explained to them that legally, the transaction is not closed until the deal 
is closed by an authorized ECT trader in Houston. Also, we explained the 
closure process to them multiple times.   We never admitted to a trade.

They think that they caught Julian.  I told them that if they had been 
clearer in their definition of their desired index, I would feel a "trader's 
obligation" to follow-thru with the process, but if they wanted to use the 
"Precio Medio Monomico as Published by the Cammesa in the section of The 
Boletin entitled Los Resultados Economicos for the applicable months"   or  
the "Precio Medio En El Mes, Monomico, published in the Informe Mensual under 
the heading Precio de la Energia and Monomico", they should have just said it.

They want $500,000 in LD's, or they will let us honor the trade and flip it 
out to them at $22.50 for a MTM loss of $308,000.  Our estimate is that the 
alleged trade is about $220,000 out of the money at present.

Our decision is to allow this matter to take its course.  Erik is going to 
decide what he wants to do, and will inform me.  If he wants to pursue the 
matter, he will refer the matter to Bruce of Duke Intl.

If anyone has any instructions as to how we should proceed, please let us 
know.

For future reference, the traders here have been informed to not agree to 
things in an email, even if they are agreeing to the clarification of an 
outline of a deal clearly marked "INDICATION".  Lesson learned.