Please keep marianne castano in the loop on this--she is the EES lawyer handling.  MDS


From:	Molly Harris/ENRON@enronXgate on 11/21/2001 11:10 AM
To:	Carol St Clair/ENRON@enronXgate
cc:	James E Keller/HOU/EES@EES, Mike D Smith/HOU/EES@EES, William S Bradford/ENRON@enronXgate, Elizabeth Sager/ENRON@enronXgate, Don Black/ENRON@enronXgate 
Subject:	RE: NIMO/Notice RE: Posting of Additional Security



I received the margin letter this morning via Fax.  However, it is backdated to Nov 19th for my phone call with Richard Ott at NIMO.  We have 5 days to deliver (some flexibility to view it as 5 business days).  The margin call is for $4,283,512.  It is to cover NIMO for settlement and imbalance risk for EES participation in their "Supplier Select" program. 

Molly

 -----Original Message-----
From: 	St. Clair, Carol  
Sent:	Wednesday, November 21, 2001 10:33 AM
To:	Harris, Molly
Cc:	Keller, James; Smith, Mike; Bradford, William S.; Sager, Elizabeth
Subject:	RE: NIMO/Notice RE: Posting of Additional Security

What is the next step on this?

Carol St. Clair
EB 4539
713-853-3989 (phone)
713-646-8537 (fax)
281-382-1943 (cell phone)
8774545506 (pager)
281-890-8862 (home fax)
carol.st.clair@enron.com

 -----Original Message-----
From: 	Harris, Molly  
Sent:	Tuesday, November  20, 2001 3:41 PM
To:	St. Clair, Carol
Subject:	FW: NIMO/Notice RE: Posting of Additional Security


FYI - Let's discuss. Thanks Molly
 -----Original Message-----
From: 	Castano, Marianne  
Sent:	Tuesday, November 20, 2001 11:16 AM
To:	Harris, Molly
Cc:	Keller, James; Smith, Mike
Subject:	NIMO/Notice RE: Posting of Additional Security

	Molly:

	Per your request, we did a bit of research regarding whether NIMO, pursuant to its gas tariff, can request additional security from us in light of the recent credit downgrades experienced by Enron Corp.

Under NIMO's "Supplier Select" program, credit appraisals and security requirements are reviewed by NIMO annually and adjusted "as financial evaluations dictate". See PSC No. 218 - Gas, Leaf No. 186, Revision 3, effective August 1, 2000.  NIMO may require a supplier to post security for the full amount of the supplier's credit exposure if (i) the supplier or its guarantor is at the minimum rating (listed as "BBB" from S&P or Fitch or "Baa2" from Moody's) and is placed on credit watch with negative implications by S&P, Fitch or Moody's or NIMO receives information that the supplier or its guarantor's credit rating could be downgraded below such minimum rating; or (ii) the supplier's status as a billing agent is terminated by another New York utility for failing to render timely bills to customers or to make timely payments to the utility.  If in (i) the supplier's or guarantor's credit rating is not downgraded during the next 60 days, the security requirement will be lifted.  See PSC No. 218 - Gas, Leaf No. 186.2.  

	In the event of (i) or (ii) above, the supplier may satisfy its security requirement by providing one of the following forms of security, as mutually agreed by NIMO and the supplier: (i) prepayment or an advance cash deposit which will accumulate interest at the applicable rate per annum approved by the NYPSC; (ii) a stand-by irrevocable letter of credit or surety bond issued by a financial institution with at least an "A" bond rating; (iii) a security interest in collateral found to be satisfactory to NIMO; (iv) a guarantee, acceptable to NIMO, by another party with a satisfactory credit rating of at least "BBB" by S&P or Fitch or "Baa2" by Moody's; (v) payments made by the supplier into a lockbox administered by a third party (which will reduce any security requirements to 50% of what would otherwise be required); or (vi) other mutually agreed means of providing or establishing adequate security.  See PSC No. 218 - Gas, Leaf No. 186.4.  For your information, NIMO may only call on the posted security in the following events: (i) after providing 5 day's notice to the supplier whenever the supplier fails to pay NIMO charges when due, unless the supplier makes full payment within the 5-day notice period; or (ii) if supplier files a petition in bankruptcy (or the equivalent, including an involuntary petition against the supplier) or if for any reason the supplier ceases to provide service to its customers under NIMO's Supplier Select program.  See PSC No. 218 - Gas, Leaf No. 186.7.  No prior notice is required under (ii).

	Please call me re:  the above if you have questions/need additional information.

	MLC