FYI.
----- Forwarded by Alan Aronowitz/HOU/ECT on 07/13/2000 08:56 AM -----

	John Viverito@ENRON
	07/13/2000 05:59 AM
		 
		 To: Alan Aronowitz/HOU/ECT@ECT
		 cc: 
		 Subject: FW: Weather and Oil Derivatives

Alan-

Jeremy has requested that I forward this on to you, as he had experienced a 
"bounce back" problem with your address.
----- Forwarded by John Viverito/Corp/Enron on 07/13/2000 05:58 AM -----

	Jeremy.Pitts@BAKERNET.com
	07/13/2000 05:52 AM
		 
		 To: John.Viverito@enron.com, john_viverito@enron.com, 
johnviverito@enron.com, 'alan.aronowitz@enron.com'
		 cc: 
		 Subject: FW: Weather and Oil Derivatives


Resending....

-----Original Message-----
From: Pitts, Jeremy
Sent: Thursday, July 13, 2000 7:16 PM
To: 'John.Viverito@enron.com'
Cc: Davis, Paul; Eguchi, Naoaki; Toyohara, Shinji;
'alan.aronowitz@enron.com'; 'nicholas.o'day@enron.com';
'michael.grimes@enron.com'; 'jonathan.whitehead@enron.com'
Subject: FW: Weather and Oil Derivatives

John,

I refer to our telephone conversation this afternoon regarding our advice 
(copy
below) and confirm the matters discussed as follows:

1. We note your conversation with Terry Tanaka of IBJ in which he commented
that it was his understanding that the FSA had given informal approval for 
banks
to conduct weather derivative transactions.  This gives banks who engage in
weather derivative transactions (and their counterparties) a possible 
additional
argument that the transaction are "being conducted in accordance with law" for
the purposes of the defense in Article 35 of the Criminal Code.

 This does not change our advice with respect to transactions between
Enron Japan and non-bank counterparties.

 However, if Enron Japan were to enter into a weather derivative with a
bank, Enron Japan would be able to rely on the tacit approval given by the FSA
to the bank - but only to the extent to which the bank would be willing to
represent and warrant to Enron Japan that the bank was authorised to enter 
into
the transaction under Japanese laws and regulations.

2. We note your comment regarding the possibility that Enron Japan would
enter into back-to-back transaction with an offshore Enron affiliate and thus
transfer all risk in relation to the weather derivative transactions outside
Japan.  As mentioned in our advice, one of the factors that will suggest that
Enron Japan is engaged in a "legitimate business activity" will be the fact 
that
Enron Japan manages the risk under the transactions that it enters into and 
does
not take purely speculative positions.  Entering into back-to-back 
transactions
is one way in which Enron Japan may manage risk.  However, there are also 
other
risk management techniques (such as hedging in local markets - to the extent
possible - or hedging in offshore markets).  Insofar as these different risk
management techniques are all effective methods of risk management, we do not
believe that any one method of risk management is necessarily preferable to
another.

3. We have checked the home page for the Japanese Financial Law Board and
confirm that it does not contain any information directly relevant to weather
derivatives.  The home page does contain discussion of the application of the
Criminal Law to financial derivatives generally, but simply notes that the
parties to a financial derivative that is not specifically authorised by law
cannot rely on the "act in accordance with law" defense under Article 35 of 
the
Criminal Law.

4. You have asked us whether we would be able to change our risk assessment
from "relatively low" to "extremely low".  We are most reluctant to change our
view.  Our difficulty is that the risk of possible action by the regulators or
by the police is extremely difficult to predict and it is therefore necessary
for us to take a slightly cautious approach.

 We do note that similar concerns about gambling were raised when swaps
were first introduced in Japan in the 1980s and again when new derivatives
products such as oil derivatives and equity derivatives were introduced in the
1990s.  However, as far as we are aware, no prosecutions have ever been
commenced in Japan alleging that swap or derivative transaction constitute
gambling.

5. In our advice we identified a number of factors that tend to raise or
lower the risk of possible action.  We would like to emphasise that, if Enron
Japan does commence weather derivative trading in Japan, Enron Japan should:

* clearly add specific representations regarding the "legitimate business"
issue in its contract documentation;

* establish clear internal policies regarding counterparty selection and
risk management (possibly in the form of a board resolution);

* only transact business with (a) authorised financial institutions (see
above) or (b) large sophisticated counterparties with a legitimate business
purpose; and

* transact business in an "appropriate" manner.

  These points are explained in further detail in the attached
advice.

We hope this helps to clarify the risks.  Please let us know if you need
additional information.

Best regards

Jeremy Pitts

Registered Foreign Lawyer - Jurisdiction of Primary Qualification - New South
Wales
Designated Jurisdictions - England and Wales and the State of Victoria
Direct Tel:  (81-3) 3479 3839
Direct Fax:  (81-3) 3479 0225
Voice/Fax Messaging: (81-3) 4464 6094

This is an e-mail from Baker & McKenzie - Tokyo Aoyama Law Office (Qualified
Joint Enterprise Offices).

The contents of this e-mail may be privileged and confidential and are 
intended
only for the use of the addressee. No one else may copy, forward, disclose or
use all or any of it in any form. If you are not an intended recipient, please
notify us immediately (by reply e-mail) and delete this e-mail from your 
system.
Thank you.

-----Original Message-----
From: Pitts, Jeremy
Sent: Friday, July 07, 2000 7:49 PM
To: 'John.Viverito@enron.com'
Cc: 'scott.gilchrist@enron.com'; Davis, Paul; Eguchi, Naoaki; Toyohara,
Shinji; 'alan.aronowitz@enron.com'; 'nicholas.o'day@enron.com';
'michael.grimes@enron.com'; 'jonathan.whitehead@enron.com'
Subject: Weather and Oil Derivatives

John  - the memo is attached.  I am copying this to Scott in the event that we
have transmission problems getting to you.

Scott - could you make sure that John receives this message.

Thanks and best regards

Jeremy Pitts

 <<Gamble 06.07.00.doc>>

 - Gamble 06.07.00.doc