Leslie:
Just 2 comments to this:

1. Should we mention their ability to exercise subrogation rights and the 
effect it may have on our counterparties?  This is really not a risk as much 
as it is a relationship issue.

2. With respect to Section 6.1(a), based on last night's conversation, I 
doubt very much that they will remove the reference to counterparties.  They 
really feel that this is a risk taht we should bear given our relationship to 
the counterparties.  Bill is speaking with them about this issue this morning.


Carol St. Clair
EB 3892
713-853-3989 (Phone)
713-646-3393 (Fax)
carol.st.clair@enron.com



	Leslie Hansen
	06/28/2000 02:53 PM
		 
		 To: Carol St Clair/HOU/ECT@ECT
		 cc: 
		 Subject: Legal risk factors for Dash

Carol:

Gaurav asked me to summarize all relevant risks associated with the Reliable 
Power Product for the Dash.  Please let me know if you think I should add or 
revise anything:

1.  Section 8.3 indemnity obligation -- We are required to indemnify the 
insurer from any third party claims arising out of the insurer's performance 
under the policy except for a claim by a swap counterparty based upon our 
refusal to pay out on the swap because the insurer denied coverage.  We hope 
to have a one-year limitation on this obligation; however, this limitation 
would be subject to tolling in an insolvency situation.

2.  The insurer is permitted to revoke coverage for up to one year if there 
is a fraud or material misrepresentation or omission by ENA in obtaining 
coverage.  (The current version of the policy also provides for revocation if 
the insurer subsequently discovers fraud on the part of the swap 
counterparty.  However, we intend to eliminate this from the insurance policy 
if possible.)  ENA is not limited to the group of employees administering the 
auction but rather includes the entire organization.  Therefore, we could pay 
out on a swap to a counterparty after the insurer had approved coverage and 
face a situation where the insurer changed its mind and decided to deny 
coverage based on, e.g., a material omission by ENA in failing to provide 
relevant information relating to coverage at the time the claim was 
presented.  Absent counterparty fraud, we would not be able to go back to our 
counterparty and demand reimbursement on the swap.

3.  Credit risk -- The insurer fails to pay out upon the occurrence of an 
Insured Event while we are required to pay out to our swap counterparty in 
the underlying swap.

4.  Loss adjustment credit risk -- If the price we use to pay a counterparty 
under the swap is subsequently corrected by the floating price source, we may 
be require to make a payment to our counterparty under the swap before the 
insurer makes a payment to us for the loss adjustment.  However, if the price 
adjustment results in a refund being owed to us by our counterparty, we may 
have to pay the insurer the amount of the refund before we actually get a 
refund from our counterparty.

5.  Under Section 6.1(b), the insurer can deny coverage based upon any breach 
of our duties under the policy.  For instance, if we fail to comply with the 
notice requirements for presenting a claim, we forego our right to coverage.  
However, we will still be required to pay out on the underlying swap.  

Leslie