Mark - for your info.




   Mark



---------------------- Forwarded by Mark Evans/Legal/LON/ECT on 06/03/2001 
18:20 ---------------------------


Mark Evans
06/03/2001 18:15
To: Ann Ballard/enron@enronxgate, Lance Schuler-Legal/HOU/ECT@ECT, Donna 
Lowry/Enron@EnronXGate
cc: Jonathan Marsh/EU/Enron@Enron, Mahesh Lakhani/LON/ECT@ECT 

Subject: Re: Equity Stake in British Energy (STRICTLY PRIVATE AND 
CONFIDENTIAL)


Ann, Lance,

the possibility of Enron Europe shorting the stock of British Energy (BE), a 
UK listed company has raised its head again and I would be grateful for your 
assistance (or for the assistance of someone in your teams) in analysing the 
US consequences.

I attach for your information an exchange of emails which took place in 
October last year when we last discussed this.

The largest trade we would execute would be to short up to 5% of the capital 
of BE, which is currently worth approx UKo50m. I believe that Enron 
Investment Services Limited (as agent for ECT Investments Inc. - the 
principal in the transaction) would execute the trade through third party 
brokers in the UK. 

A number of issues cropped up last time and I presume the position is not 
changed as a result of our transaction being being a short sale rather than a 
purchase. The issues were:

1. Hart Scott Rodino:  could you please let us know how HSR impacts the sale, 
whether filings are required which mean the transaction has to be delayed, 
and what further information you need to be able firm up on your analysis. 

2. PUHCA: same as for HSR.

3. Restricted List: hopefully Donna will be able to confirm that BE is not on 
the restricted list, but I have not seen the list for some time. 

4. Enron Corp Personal Trading Rules: Richard Lewis is the originator of the 
idea for the trade in the UK and he expects to have a say in when it is 
liquidated, so it might be said that he has a degree of "responsibility" for 
the trade although it would be executed through John Greene's team. Richard 
and his team are responsible for UK Power and Gas and Continental Gas at 
Enron Europe. They do not on a day to day basis have responsibility for 
equity trading within Enron Europe. My reading of the latest version of the 
Personal Trading Rules which I received: 

"Employee Trading.  No employee of any Enron Business Unit may engage in the 
trading of any Position for the benefit of any party other than an Enron 
Business Unit (whether for their own account or for the account of any third 
party) where such Position relates to  (i) any financial instrument, 
security, financial asset or liability which falls within such employee,s 
responsibility at an Enron Business Unit, or (ii) any other commodity not 
covered by (i) included in any Commodity Group".  

...is that this trade should not result in Richard or any of his team losing 
the ability as a result of the above rule to trade generally in equities for 
their own account. Do you agree? Is there any mechanic for getting a 
clearance on that front? 

5. Insider Trading: two UK issues here which we are getting to the bottom of. 
Firstly, Richard and/or members of his team with knowledge of this potential 
trade may have already shorted BE in their own names. If done in anticipation 
of a future large short trade by Enron Europe, Enron Europe's trade could 
make them insiders and their trades criminal offences. Secondly we need to be 
clear that the information which is driving Enron Europe (through ECT 
Investments Inc) to execute the trade is public information and not insider 
information: eg information obtained through a one on one trading 
relationship with BE. Breach of these rules, or even the appearance of breach 
of these rules, could breach the rules of the SFA, our UK regulator.

I presume there are similar issues in the US. 

I will call you both this evening to discuss this if I may. It would be very 
useful if a Houston lawyer could be nominated to assist us on this and to 
coordinate input from the (inevitable) various sources . 


Many thanks in advance.




        Mark













---------------------- Forwarded by Mark Evans/Legal/LON/ECT on 06/03/2001 
17:40 ---------------------------


Paul Simons
06/10/2000 16:01
To: Ann Ballard/Corp/Enron@ENRON
cc: Michael Mills/LON/ECT@ECT (bcc: Mark Evans/Legal/LON/ECT)

Subject: Re: Equity Stake in British Energy (Confidential)  

Ann

We would like to kick off the filing under the HRS Act - if only to be able 
to move forward quickly if we decide to do so. Seeking guidance from outside 
counsel may be a waste of time in light of the clear advice you received 
recently from V&E.  But we'll be guided by you if you think otherwise.

Michael Mills - who is the commercial person leading this in London -  would 
first like to understand at what point the filing fee becomes irrecoverable 
(this may be day 1!).

Please provide any info on this and Michael will then decide whether to kick 
off the filing (which, if I've understood correctly, will not take more thanm 
20 days - please confirm).

Please liaise with Michael directly since I'm out Monday and we may well want 
to begin this process then.  Many thanks for your help

Paul


From: Lance Schuler-Legal on 06/10/2000 08:17 CDT
To: Paul Simons/LON/ECT@ECT
cc: Ann Ballard/Corp/Enron@ENRON 

Subject: Re: Equity Stake in British Energy (Confidential)  

I assume that we still do not have material, inside information for US 
securities laws purposes.  I think the Chinese Walls issue we have resolved.  
As for HSR, it is applicable to foreign investments if the target meets 
certain revenue requirements from the US.  You may want to followup on this 
point from Ann.  Good luck.  Lance.

W. Lance Schuler
Enron North America Corp.
1400 Smith Street, EB 3826
Houston, Texas  77002
Phone:  713/853-5419
Fax:  713/646-3393
Email:  lance.schuler-legal@enron.com



	Paul Simons
	10/06/2000 05:40 AM
		
		 To: Mahesh Lakhani/LON/ECT@ECT
		 cc: Donna Lowry/HOU/ECT@ECT, Ann Ballard/Corp/Enron@ENRON, Lance 
Schuler-Legal/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Mark 
Evans/Legal/LON/ECT@ECT, Richard Lewis/LON/ECT@ECT, Sheila Tweed/HOU/ECT@ECT, 
Erica Gut/LON/ECT@ECT, Stephen Dwyer/LON/ECT@ECT, Janine Juggins/LON/ECT@ECT
		 Subject: Re: Equity Stake in British Energy (Confidential)

Ann/Donna/Lance

If BE or other equity trades are executed by a UK trader are the US issues we 
have been discussing still relevant if the trades are booked in our US 
entity? 

Do you need to see the agency agreement Mahesh refers to below?

Thanks

Paul



Mahesh Lakhani
06/10/2000 09:51
To: Paul Simons/LON/ECT@ECT
cc: Donna Lowry/HOU/ECT@ECT, Ann Ballard/Corp/Enron@ENRON, Lance 
Schuler-Legal/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Mark 
Evans/Legal/LON/ECT@ECT, Richard Lewis/LON/ECT@ECT, Sheila Tweed/HOU/ECT@ECT, 
Erica Gut/LON/ECT@ECT, Stephen Dwyer/LON/ECT@ECT, Janine Juggins/LON/ECT 

Subject: Re: Equity Stake in British Energy (Confidential)  

As I mentioned at the meeting on Wednesday, we should use the structure that 
we are setting up for John Greene's European equity trading activities.  
Enron Investment Services Ltd (the UK agent) is now set up and the agency 
agreement with ECT Investment Inc has been drafted and is being circulated 
for comments.  The securities would be held in ECT Investment Inc as agent 
with Enron Investment Services Ltd acting as its agnet..

Mahesh



Paul Simons
05/10/2000 19:19
To: Donna Lowry/HOU/ECT@ECT
cc: Ann Ballard/Corp/Enron@ENRON, Lance Schuler-Legal/HOU/ECT@ECT, Mark E 
Haedicke/HOU/ECT@ECT, Mark Evans/Legal/LON/ECT@ECT, Richard 
Lewis/LON/ECT@ECT, Sheila Tweed/HOU/ECT@ECT, Erica Gut/LON/ECT@ECT, Mahesh 
Lakhani/LON/ECT@ECT 

Subject: Re: Equity Stake in British Energy (Confidential)  

Thanks, Donna - This is very helpful.  My guess is that the securities will 
be held by the normal US entity - ECT Investments Inc - while we continue to 
"set up shop" in London.  UK Tax may wish to consider this. Thanks

Paul


To: Paul Simons/LON/ECT@ECT
cc: Ann Ballard/Corp/Enron@ENRON, Lance Schuler-Legal/HOU/ECT@ECT, Mark E 
Haedicke/HOU/ECT@ECT, Mark Evans/Legal/LON/ECT@ECT, Richard 
Lewis/LON/ECT@ECT, Sheila Tweed/HOU/ECT@ECT 

Subject: Re: Equity Stake in British Energy (Confidential)  


	

Paul, As a follow up to the Chinese Wall issues, I have verified that Gary 
Hickerson does not currently have a position in British Energy (as of 
10/3/00).  After discussion with Lance, we have determined that it will be 
acceptable for the commercial team to have direct contact with Gary providing 
direction for Gary's group to purchase shares for the London group, assuming 
London is not in possession of material non-public information.  We will NOT 
be putting British Energy on the Private Restricted List for Gary, thus 
allowing him to freely trade if he so chooses.  Please let me know if this 
will be problematic.

From an operational standpoint, EEL does not have an existing account with 
Morgan Stanley, the broker dealer that Gary's group executes trades through, 
so it appears that one will have to be established if the securities are 
going to be purchased in EEL's name.  Is there currently any thought on which 
entity will actually own the shares?  Donna



Ann Ballard@ENRON
10/05/2000 11:26 AM
To: 
cc: Donna Lowry/HOU/ECT@ECT, 
Subject: Re: Equity Stake in British Energy (Confidential)  

I am not at all sure that Enron could rely on the "Solely for Investment 
Purposes" exemption of Section 802.9 of the Rules promulgated under the 
Hart-Scott-Rodino Anti-trust Improvements Act.  On its face the rule seems to 
be applicable if the voting securities are acquired for investment purposes 
only and the post-acquisition holdings will be 10% or less, regardless of 
dollar value.  Section 801.1(i) defines "solely for  purpose of investment" 
as having no intention of participating in the formulation, determination or 
direction of the basic business decisions of the issuer.  Background 
Information published by the FTC relating to Rule 801.1(i) in the Statement 
of Basis and Purpose lists conduct which may be viewed as inconsistent with 
an investment purpose.  Those include (i) nominating a candidate for the 
Board of Directors, (ii) proposing corporate action requiring shareholder 
approval, (iii) soliciting proxies, (iv) having a controlling shareholder, 
director, officer or employee simultaneously serving as an officer or 
director of the issuer, (v) being a competitor of the issuer, or (vi) doing 
any of the foregoing with respect to any entity directly or indirectly 
controlling the issuer.  Although the Statement of Basis and Purpose says 
that the presence of any of these factors will be taken into account in 
determining whether or not an investment purposes exists, I have been advised 
recently by Neil Imus, a partner in the Anti-trust Section of Vinson & 
Elkins' Washington Office, that the FTC Staff does not like the Section 802.9 
exemption, and will not allow a competitor to rely on the exemption.  If an 
investment of more than $15 million of voting securities will be made, then 
we should consider whether to make further inquiry with the FTC staff or make 
a filing under the HSR Act.  The filing fee is US$45,000, and the waiting 
period would begin upon filing by Enron and expire 20 days later.  It is 
likely that early termination of the waiting period would be granted as I 
assume that there would be no substantive anti-trust issues. The penalty for 
violating the HSR Act is up to $10,000 per day.  I would be very interested 
if anyone has gotten different advice on this exemption from other counsel.  



	Paul Simons@ECT
	10/05/2000 10:38 AM
		 
		 To: Sheila Tweed/HOU/ECT@ECT, Donna Lowry/HOU/ECT@ECT, Lance 
Schuler-Legal/HOU/ECT@ECT, Ann Ballard/Corp/Enron@ENRON
		 cc: Richard Lewis/LON/ECT@ECT, Mark Evans/Legal/LON/ECT@ECT, Mark E 
Haedicke/HOU/ECT@ECT
		 Subject: Equity Stake in British Energy (Confidential)

We are currently analysing British Energy to ascertain whether or not we want 
to take an equity stake in them.  Our equity trading capability in London is 
not quite up and running, which means that if a decision is taken to move 
forward with this investment, the equity trades would need to be executed by 
traders based in Houston.  

Lance has kindly provided some useful initial information on this and has 
indicated that you may be able to assist further.  The issues would seem to 
be as follows:

1. Chinese Walls Procedures

I understand that your Chinese Walls procedures require all proposed 
investments of this kind to be routed through Donna Lowry.  Donna, on the 
assumption that our decision to invest is not based on price-sensitive, 
non-public information, please let us know what other procedures we need to 
follow to satisfy your requirements. 

2. Hart Scott Redino

I gather that these issues will not arise if the stake we are looking to take 
is less than $15 million, or less than 15%.  We will certainly be taking less 
than 15% of  BE, but it is not clear to me what the size of our investment is 
likely to be.   (Richard?).

Lance, you mentioned that if the shares are being acquired for "investment 
purposes only" then we would be exempt from these requirements.  Presumably 
this is in addition to the size requirements mentioned above.  My 
understanding is that our stake would be purely for investment purposes - 
essentially to hedge our trading position should the price of power go up, 
and that we are not looking to acquire BE (or a substantial stake in BE) 
which is in the same sector as Enron.  Assuming this is the case (and 
Richard, please correct me if I'm mistaken), please let me know whether we 
need to take this issue further.

3. PUHCA Issues

I am not sure what these are (!), but perhaps Sheila could comment on whether 
any arise on the facts given above.  

It may also be helpful to note that British Energy is a UK company quoted on 
the London Stock Exchange, but not on any North American Exchange.  It does, 
however, have substantial assets in Canada and a 50/50 joint venture with a 
US partner which owns Three Mile Island and another generating asset.  Please 
let me know if you require further information.

Many thanks.

Paul