David W Delainey
11/13/2000 10:55 AM
To: dlhart1@aep.com
cc: Brian Redmond/HOU/ECT@ECT, Timothy J Detmering/HOU/ECT@ECT 
Subject: Confidential

Dwayne, in response to your request, I am providing a quick summary of our 
discussion on Friday.  As I had mentioned, this is a competitive process and 
time is of the essence.  If we get resolution to these points, I would be 
prepared to sit down over a finite period of time (three or four days) to try 
and hammer out the transaction.

Specifically:

AEP Point #2: ENA would accept a triggering event and MAC clause for the 
lease.  This would under certain conditions allow AEP to purchase the leased 
assets at the present value of the future lease payments plus the fair value 
in year thirty of the underlying assets at an agreed upon discount rate.  The 
triggering events would include bankruptcy, insolvency or Enron Corp falling 
below investment grade.  An Enron Corp guarantee would be offered to secure 
that covenant.  We would similarly ask for similar credit language in the 
lease agreement, with an AEP parental guarantee, securing the lease 
obligation from AEP.  These paragraphs would be constructed in a similar 
manner to triggering events and MAC clauses in master commodity documents.

ENA would also acknowledge that it would not sell the lease or physical 
assets underlying the lease to any other party but AEP.  I would anticipate 
that this would be managed through a ROFR structure.  This would ensure that 
AEP would have access to the assets if sold and that AEP can feel confortable 
that they will be dealing with Enron for the period of the lease.

Notwithstanding above, Enron needs the flexibility to pledge or sell the AEP 
lease stream in order to monetize your obligation to cash if desired.  This 
makes the set-off language difficult.  With the triggering event and MAC 
clause, the need for set-off to protect AEP in the event of Enron default 
should not be required.

AEP Point #5:  ENA would agree to a three month non-compete which prohibits 
ENA from soliciting business with the suppliers or producers connected to the 
Pipeline.  This non-compete would apply to transactions over one month in 
duration. This would apply to ENA only and no other Enron Corp affiliates.

AEP Point #6:  I believe that ENA has already agreed in principal to your 
request under this point.

AEP Point #1:  ENA would require indemnity limitation, including 
representation and warranties and basic construction, similar to our last 
draft language previously provided to you.  Would also request a two year 
window rather than three on environmental claims.

AEP Point #3:  ENA would counter with a $40 million break up fee if AEP does 
not get requisite SEC approval by April 1, 2001.

AEP Point #4:  On HSR and FERC approvals, AEP's position as layed out in the 
letter is not practical since it would be very difficult to pull out certain 
pieces of the pipe from the deal and ensure that both parties get the benefit 
of the bargain.  If AEP is unwilling to give an asset divestment covenant and 
given AEP's limited gas infrastructure position,  ENA's position is that AEP 
should take the risk that they will be able to get the approvals.  

Other:  ENA will not agree as a condition to this transaction a settlement of 
any FERC issues between AEP and EPMI; however, ENA would always be willing to 
discuss such items in a different forum.

If you have any questions or comments do not hesitate to contact myself or 
Tim Detmering.  

Regards
Dave Delainey