John:

Looks like we have exposure on the sale of CGAS despite the $30.2 MM being off balance sheet.  I feel strongly we will beat the $31.2 MM carry value.  60% of any excess will accrue to ENA .  See my note at the bottom on CGAS sale expectations.

 -----Original Message-----
From: 	Delacey, Charles  
Sent:	Wednesday, May 02, 2001 4:17 PM
To:	Pruett, Steve
Subject:	RE: Hawaii Sec 125 Trust

You are right.  Enron has a obligation to the banks under the total return swap confirm for the $30.2MM plus accrued interest (the only dif. is that it does not show up on the balance sheet).  CIBC is at risk for $946K plus yeild if the sale of the asset is less than $31.2 and the origional owner of the asset (ENA) could take a hit if the proceeds of the asset sale does not equal the amount monitized (ie the full $31.2) 

 
 -----Original Message-----
From: 	Delacey, Charles  
Sent:	Wednesday, May 02, 2001 3:29 PM
To:	Pruett, Steve
Subject:	RE: Hawaii Sec 125 Trust

Steve, Joe was down here when i got your message. He said he had spoken to John about this and would give you a call.  If you still need a memo let me know.  The answer is that there is a obligation of ENE on the swap for $30.2MM but it is not on the balance sheet.  The total return swaps are buried in the footnotes under price risk management activities (securitizations paragraph on page 38 of this years annual report).

 -----Original Message-----
From: 	Pruett, Steve  
Sent:	Wednesday, May 02, 2001 1:55 PM
To:	Delacey, Charles
Subject:	RE: Hawaii Sec 125 Trust

I understand the split.  Is there any balance sheet exposure & credit support for the $30.2 MM in the total return swap?

 -----Original Message-----
From: 	Delacey, Charles  
Sent:	Wednesday, May 02, 2001 1:43 PM
To:	Pruett, Steve
Subject:	RE: Hawaii Sec 125 Trust

steve, of the $31.2MM (CGAS)  that was monetized in Hawaii, $30.2 is covered by an ENE total return swap and the remaining $946,502 is equity risk held by CIBC (with no credit support from ENE)

 -----Original Message-----
From: 	Pruett, Steve  
Sent:	Wednesday, May 02, 2001 10:14 AM
To:	Deffner, Joseph; Proffitt, Tim; Delacey, Charles
Subject:	Hawaii Sec 125 Trust

Gentlemen:

John Lavorato has asked me (relative to CGAS which is in the Hawaii vehicle) whether Enron has any implicit guarantees behind Hawaii.  Could one of you confirm with John via email that there is no implicit (or explicit) guarantee to CIBC from Enron on the performance of the investments sold to CIBC.  Am I correct in thinking that CIBC invested +/- $17 MM (3%) of equity in the deal?

On a related matter, I informed the CGAS executive team that Enron will initiate a sales process within the next two weeks and will return to Columbus in mid-May with our divestment advisor.  Books would go out in late June, dataroom in July, offers in August and in Q4, possibly late Q3.  Drilling results are strong as is cash flow (2001E EBITDA of $10-11 MM vs. $4.8 MM in 1999, $9.2 MM in 2000), Appalachian gas reserves are of interest to a broader set of participants today than last year, we have a better track record, and E&P companies' access to capital is much better now than it was when we pulled the failed offering this time last year (indicated equity value of $15 MM).  

Therefore, I am confident Enron will net $2-5 MM more than the sale price to CIBC of $31.2 MM.

Steven H. Pruett
Vice President
Energy Capital Resources
Enron North America
Phone: 713-345-7109
Fax:  713-646-3640