This Risk Memo relates to our first import of physical power into Italy. 
Under the deal, we supply the municipality, IMOLA, with 66GWh of power at the 
Swiss/Italian border for 1 year (rolling for further yearly periods if the 
contract is not terminated by either party). The contract value is in the 
region of o1 million. The power is for onward supply to IMOLA's own customers.

The contract is on a standard form I produced recently in conjunction with 
Italian counsel, but warrants this risk memo as it is the first deal of its 
kind.  It is conditional on IMOLA securing from the Italian network operator 
(ENEL) transmission from the border to the ultimate customer within 90 days. 
We have agreed we will extend this period by a further 90 days in appropriate 
circumstances. We prepared the customer's request for transmission to give it 
the best possible chance of success.

As required by Italian law, IMOLA have the right to terminate the contract at 
any time (including during the first year) upon 6 months' notice. We are 
raising with the Italian Energy Authority whether such a right of termination 
(which was recently introduced under the new energy law) is appropriate for 
one year deals such as this. In the case of IMOLA, we are seeking to restrict 
their right of termination to cases where their own customers have exercised 
the same right (this will stop IMOLA shopping around for a better price). It 
is not clear whether this restriction is effective under the new law, but we 
have principle on our side (the law is intended to protect the ultimate 
customer) and there is no legal (or other) down-side in including it.

Each party has a right of termination if interconnector charges above a 
certain proportion of the contract price are introduced. However, it is worth 
noting that there are no such charges levied at the moment and (so far as we 
are aware) none are proposed.

The contract includes a right on the part of Enron to match third party 
offers IMOLA may receive when the contract expires, and Italian counsel have 
confirmed that this right should be legally enforceable by us. 

The deal (and indeed the standard form) is subject to Italian law and to ICC 
arbitration in Geneva.

There are no particular legal risks under this transaction, but please call 
me if you would like to discuss it in greater detail.

Best regards

Paul