mark, an issues update:

1. timing issues--sithe has extended the time for potential tollers to give 
comments back on the tolling and related agreements until next friday, may 
12. final bids are not yet in and will probably be coming in as late as a 
week after that (may 19). we anticipate some real negotiation on the 
documentation and some issues that may be hard to resolve. our restructure 
document negotiations will be running a parallel path. this is a lot to 
accomplish, particularly with marty's torturous page-turning, wear you down 
negotiating style and the fact that he will be involved in all. marty has 
said he sees his june 1 date slipping.

2.bondholder issues--we have issues in addition to our consent issue that we 
have discussed. with respect to one of the transport pieces with transcanada, 
it signed a consent directly running to the bondholders that arguably it 
could be breaching if it consented to the assignment of the transport to us. 
marty's lawyer is clearly worried about this and transcanada is likely to at 
least ask for an indemnity from sithe and/or us. business guys are discussing 
splitting that risk 55 sithe/45 us, the partnership split under the proposed 
restructured deal. additionally, we have been asked to agree that the 
transport assigned to us is pledged to the bondholders and in essence agree 
that we will indemnify the bondholders directly if we do not make the 
transport contract payments. that number has potentially moved from $190 
million to a significantly larger number ($350 million???). seems like the 
toller may have some concern with bondholder  issues potentially in trying to 
protect itself during this long tolling period. this obviously could affect 
timing. bondholders are likely to have QF concerns as well (both on our side 
and with PECO). hard to tell what the business strategy is right now with 
respect to informing the bondholders about the transactions.

3.limitation on sithe liability--sithe served us very skinny documents, 
including no reps and warrranties except basically as to title, and those 
came from a shell subsidiary where it is dropping its interest (supposedly 
for tax purposes) and disappeared at closing. there will need to be 
significant push back on a number of fronts to get some fairer documents.

4.tax issues--leboeuf and steve douglas are working on, but there is a 
potential for disconnect between the two sides as to tax treatment that we 
are trying to run to ground. the deal is so tight and so structured that we 
worry that a disconnect could make a deal hard to do.

5.due diligence--the business guys have not really done. le boeuf has been 
geared up to help starting monday (financial, plant, material contracts). 

Lisa J. Mellencamp
Enron North America Corp. - Legal
1400 Smith St.
Houston, TX  77002
Tel:  (713) 853-7986
Fax: (713) 646-3393
E-mail:  Lisa.Mellencamp@enron.com