Mike,
Below is the latest summary drafted by Michel. We our currently waiting 
receipt of $9.5million contractually due today. We will keep you updated as 
soon as there is news of the payment or otherwise. (There is a Bank Holiday 
in Spain Nov 1st).

Regards
David 
---------------------- Forwarded by David Hardy/LON/ECT on 31/10/2000 17:23 
---------------------------


Michel Decnop
26/10/2000 10:45
To: John L Nowlan/HOU/ECT@ECT, John Sherriff/LON/ECT@ECT, Michael R 
Brown/LON/ECT@ECT
cc: David Hardy/LON/ECT@ECT, Robert Quick/LON/ECT@ECT, Chris 
Mahoney/LON/ECT@ECT, Anastasia Karabatsos/LON/ECT@ECT, Steve W 
Young/LON/ECT@ECT, Ross Koller/LON/ECT@ECT, Graham Cane/LON/ECT@ECT, Adam 
Nye/LON/ECT@ECT, Tani Nath/LON/ECT@ECT 

Subject: Garcia Munte / Update and exit strategy

As we are entering a new phase - hopefully the last one - in our business 
relationship with GM, it seems usefull to make an analysis of the situation 
today and the next steps; some changes in the teams, both sides, make this 
excercise even more necessary.

The goal since March 2000 has been to reduce our credit exposure to GM, 
taking into account that a too forceful action would have killed the company 
and transform our exposure into a straight loss.
We decided a specific course of action, splitting the unsecured exposure 
(product already delivered), from the financing of strategic inventories, 
without which GM cannot operate. 

For the first part(unsecured exposure), it couldnot be a straight downhill 
run, because the company needed regular supply to keep its customers, so we 
worked a -stair- plan bringing this exposure today to USD 14.5 million, with 
a 9.9 million payment October 31st and a last instalment of  4.6 million by 
end november.
We are not delivering any more product directly to GM but use ECTRIC Spain 
(ESSL), or pre-payment. The use of ESSL being not practical for the rack 
customer(bottom barrel retail customers), we insist on prepayment for those, 
and use ESSL for Kuwait Petroleum Corp and Continental, practically no credit 
risk customers. It must be kept in mind that this pre-payment policy ,may at 
one stage or another, dry up GM treasury to a point where they will not be 
able to repay fully the agreed instalments, especially the end october one.So 
it is a choice between getting the -old- debt repaid first, but give shorter 
terms of credit for new deliveries, say usd 3 million per 10 days period or 
so.  

For the second (strategic inventories), we estimated that the best strategy 
would be to have these inventories (93.000 mt : book value usd  20.6 million)
in a vehicle we have some control on. We decided on the already existing 
ESSL, however ESSL could not handle commercial operations without an 
operating licence in Spain, and we  got it in June, thanks to GM strong 
efforts. ESSL is 50/50 Joint Venture company in which each paid their share 
of Equity, however the 42.500 metric tons GM share inventories have been 
financed 100 pct by Enron,and Enron is "lending" its 42.500 MT to GM, on an 
industry accepted practice of buy/sale monthly contracts. In consequence, we 
asked GM to sign a Deed of Transfer of the whole to ESSL, which was done, but 
a discrepancy between seller legal entity (Garcia Munte Trading versus Garcia 
Munte Petroleos) and the advice from our Spanish lawyers to have this deed 
notarized, as well as having direct storage agreements with the terminal, has 
delayed sofar the completion of the legal paperwork.
We are now putting as a pre requisite before any new agreement to have this 
paper work signed.  The main reason to get this additional protection is to 
protect Enron interests in case of GM bankrupcy, as there is no clear legal 
opinion on the attitude a Spanish judge may have on such a complex case. 
It is necessary also to put into the equation that in case of GM bankrupcy, 
and in case a judge doesn't consider ESSL title solid enough, meaning we 
loose the control of the 93.000 metric tons  (or 42.500),  we have in the 
books a total hedge value of usd 6.6 million (difference between today's 
market value of usd  295 per metric ton versus original value of usd 225 per 
metric ton).

Position today : We had a meeting with GM in London october 23rd, our minutes 
of which is enclosed. We received from GM a long proposal for a new 
cooperation in Spanish that is being presently translated, at first sight it 
seems that this proposal doesn t match our own vision of the meeting. 
However, it seems the best strategy is still to avoid to despair GM to the 
point they will stop to repay,  and continue to battle for getting documents 
in good legal order. This is a narrow path, and all parties need to have a 
clear understanding of the parameters involved (hopefully explained above) 
before we go to the next meeting.
Thank you
Michel