Tracy,

Did you have a chance to read my email response earlier this week?  I believe 
that it is highly unlikely that we will be able to net exposures across 
non-defaulting (Enron) entities.  Paul Simons can (and maybe has by now) 
given opinion to this idea.  Historically, I believe the opinion has long 
been that such netting (set-off against affiliates of non-defaulting party) 
in the US should work within the case of contractual default, but outside of 
bankruptcy.  However, in the special case of legal bankruptcy, such netting 
(though contractually agreed by the parties) may be challenged.  Introducing 
the fact that one of Enron's entities is a UK entity may further cloud the 
likelihood.  Clearly, if the relationship involves more than on Kaiser 
entity, netting almost certainly will not work.

Has Diana not responded to your credit exposure questions regarding the form 
of governing confirmation and legal entity?  I believe that she is in the US, 
but should be checking in.  Perhaps you should try calling her?  I think we 
will find that the transacting entity is a subsidiary of Kaiser Aluminum.

Risk management systems for metals are still not ideal.  Volumetric/CVAR type 
analysis may not yield such reliable results.   

Rod

 -----Original Message-----
From:  Ngo, Tracy  
Sent: 24 May 2001 22:15
To: Nelson, Roderick
Cc: St Clair, Carol; Shackleton, Sara; Pitt, Michael; Boyd, Justin; Evans, 
Mark; Wolfe, Greg
Subject: Kaiser Aluminum & Chemical Corporation - UK and US swaps
Importance: High

Rod,

Enron North America is looking to enter into power swaps with Kaiser Aluminum 
& Chemical Corporation starting June 2001.  I'm seeing in the credit system 
that MG plc has forward financial metals positions with Kaiser, however I 
need clarification on whether the swaps are done with Kaiser Aluminum & 
Chemical Corporation or Kaiser Aluminum International Inc.  Secondly, is 
there a Master ISDA Agreement governing those swaps?  In pulling the mtm 
monthly breakout, it appears that MG plc is OTM north of $10MM US and the 
liquidation of that portfolio occurs mostly in cal '02.

Given Kaiser's limited credit line, I'd like to look into the potential of 
setting off financial exposures in the UK and US in cases of default.  Kaiser 
is looking at other businesses with Enron and this could be quite fruitful to 
tap into in order to increase trading liquidity going forward.

In summary, we need to answer at minimum the following:
? confirmation of which Kaiser entity is financial transacting with MG plc
? volatility of the metal positions that go out to Jan '04 to ensure how 
quickly this out-of-the-money position can move
? what type of paper is confirming the swaps (whether long-form confirms or 
Master ISDA)
? what credit/legal terms and laws may affect our efforts to establish a 
Netting Agreement for UK and US financial

Can you help me in coordinating a meeting with London legal/credit and 
Portland credit/Houston legal to discuss pertinent issues associated with a 
Netting Agreement between Kaiser (single entity or multiple entities) and 
Enron entities (MG plc and ENA) as soon as possible.  Please let me know your 
thoughts to the above and who we need to contact to get the above points 
addressed.  In Houston legal, Carol St. Clair is available to work on the 
drafting of such a Netting Agreement and is speaking with Sara Shackleton 
about the concept as well.

Please let me know as soon as possible your comments to the above and in 
setting up a conference call to push this forward.

Thanks,
Tracy