See below - I believe the amount that falls out of the books will be my 
entire discounted proceeds.  I am awaiting a call back on this but it looks 
like schedule E will be the best way to go.
---------------------- Forwarded by Georgeanne Hodges/HOU/ECT on 12/08/2000 
04:20 PM ---------------------------
   
	Enron North America Corp.
	
	From:  David Leboe                           12/05/2000 10:35 AM
	

To: Michael S Galvan/HOU/ECT@ECT
cc: Hope Vargas/HOU/ECT@ECT, Roger Ondreko/HOU/ECT@ECT, Georgeanne 
Hodges/HOU/ECT@ECT 
Subject: Re: ECP Sub Notes  

Current plan is to sell the proceeds (in the money Swap received from El 
Paso) to Condor.  Primary issue relates to gain recognition.

The concern is that we are receiving and "in the money" NYMEX swap in return 
for the Notes.  The transaction would be considered a nonmonetary exchange 
pursuant to APB 29 (since we are not receiving cash).  Any gain under APB 29 
is deferred until cash is received (in excess of basis).  If the Notes were 
accounted for under FV, we could "fair value" the Notes immediately preceding 
the transaction and mitigate gain deferral under APB 29.  

To the contrary, if the Notes are Accrual, any gain on the disposition ($5 
million) would be deferred as of 12/31/00 (since we cannot take a gain on an 
accrual asset prior to the transfer/sale to Condor).

So the $5 million dollar question at hand is whether we can build an argument 
that the Notes should have been FV'd to begin with.

I believe our arguements in the past (for Accrual treatment) were weak and AA 
did not challenge at the time we adopted FV acctg for Structured Credit 
investments.  I think we should push the issue with AA and argue that the 
Note should have been marked to begin with.

If we cannot successfully argue for FV treatment of the Note currently, 
Condor would be entitled to a gain on the NYMEX swap once Global Finance 
monetizes the swap in 1Q 01 via a seperate QSPE transaction.

Basic issue is 4Q Gain vs. 1Q 01 gain for ENA.

Let me know what you think.

Thanks.





Michael S Galvan
12/05/2000 10:17 AM
To: David Leboe/HOU/ECT@ECT
cc: Hope Vargas/HOU/ECT@ECT 
Subject: Re: ECP Sub Notes  

If you're referring to the debt originally with ECM (approx $158MM), then 
you're correct, it's in the Accrual book.  Regarding AA's question, how would 
the sale be impacted if fair value vs accrual ?  


   
	Enron North America Corp.
	
	From:  David Leboe                           12/05/2000 08:36 AM
	

To: Hope Vargas/HOU/ECT@ECT, Michael S Galvan/HOU/ECT@ECT
cc: Roger Ondreko/HOU/ECT@ECT 
Subject: ECP Sub Notes

Are these notes in the Fair Value book or the Accrual book?

If I recall correctly, they are in the Accrual book.

If so, can we build an arguement that they should have been in the Fair Value 
book, but for some unforseen reason, they were included in the Accrual Book?

As you may or may not be aware, we are trying to sell ECP to El Paso by the 
end of the year.  One of the issues AA has brought up is whether our current 
treatment of the sub notes is Accrual or Fair Value.

Please advise.

Thanks.