Kyle,

We are presenting the Northern Border Stipulation at the Bankruptcy Transaction Review Committee, BTRC, this afternoon at 1 pm our time.  The Stipulation that has been negotiated contains the features and time flexibility that ECC will need to complete the settlements with Birchill and/or Tenaska, that capacity has been carved out for special handling.  It also means that the other remaining ENA capacity on NBPL will be rejected in two weeks.  That also means that ENA will give up any other rights to the remaining capacity and that about 5 days later NBPL will be posting the space to find new creditworthy shippers.

The approach that I want to use today is that the Northern Border Stipulation is what we are discussing today.  The Stipulation has the processes/flexibility incorporated the ECC needs to finis up your settlements.  Your settlements should be presented separately and discussed in more detail.  Could you guys be in position to talk to the BTRC on Tuesday?  

Call me and we can discuss in more detail,
Ruth Concannon
ruth.concannon@enron.com
713-853-1667

 -----Original Message-----
From: 	Concannon, Ruth  
Sent:	Thursday, May 16, 2002 10:34 AM
To:	'michael.koss@us.pwcglobal.com'
Cc:	McMichael Jr., Ed; Garza, Maria; Germany, Chris; Barbe, Robin
Subject:	Northern Border Stipulation Cliff Notes

Michael  --  I recommend that you use the following as your Cliff Notes for the NBPL Stipulation:

Most of ENA's seven firm maximum rate transportation agreements with Northern Border Pipeline, NBPL, were used to ship gas purchased from Enron Canada, ECC, at the US/Canadian border to markets in the upper Midwest and Chicago.  The gas supply for these ECC and ENA agreements was created by upstream "producer netback" transactions that ECC arranged with various Canadian producers.  Producer netback transactions imbed the cost of transportation from the supply basin to the market area into the final price that the producer receives for its gas.  Before bankruptcy, ECC's firm transportation on NOVA and Foothills and ENA's firm transportation costs on NBPL were ultimately paid by the netback producers.

The remaining ENA firm maximum rate transportation contract with Northern Border was entered into when the spread between the NNG-Ventura and an adjusted NGPL-Midcontinent indices allowed ENA to financially hedge the cost of the transport between the receipt and delivery points. These hedges are no longer in place and the spot market prices do not support keeping the contract for the Estate.

ECC is not in Chapter 11, however, most if not all of the producers involved with these producer netback transactions have the right to terminate under their agreements with ECC under certain defaulting events that ECC has indicated have occurred in the current operating scenario.  Since there has been no gas sales to ECC, and no sales from ECC to ENA at the border, ENA's transportation on NBPL has not been used since the petition date.  ENA's current reservation charges on NBPL are over $605,000 per month.

During ECC's settlement process with the NOVA/Foothills/NBPL netback producers, only one producer, Birchill, has indicated a willingness to acquire the NOVA/Foothills/NBPL transportation capacity related to its original deal.  ENA's Northern Border Stipulation has incorporated the flexibility and features needed to have this capacity permanently released back to Birchill when the settlement is executed by the parties.  

The Stipulation also contains ENA's recommendation that the remaining ENA contracts and capacity be rejected since the producer netback deals are dead and the financial hedges that ENA used to justify holding the transportation capacity are no longer in place.

Producer Netback Deal Structure

Netback Producers sell gas to ECC in the Alberta Province
ECC has firm transportation on Canadian pipelines  --  NOVA and Foothills  (Note:  US and Canadian Transportation Costs are deducted from Producer's Price)
ECC ships gas to the US Border and sells gas to ENA at a pass through price
ENA has firm transportation on US pipeline  --  NBPL  (Note:  US Transportation Costs are deducted from ECC's Price)
ENA ships gas on NBPL from the Canadian border to US markets and sells at US market area index prices

Call me and we can discuss,

Ruth
713-853-1667