Rick:

Attached is follow-up analysis that Kenny Bickett, John Garrison and I have completed on the Azurix potential asset sales and impairments.  The analysis reflects a $305 million charge, or $294 million after tax.

We have assumed asset values that we would place at the 90% confidence level.  These numbers are slightly higher than you saw before as a result of (1)  our taking a 90% confidence level approach and (2) further analysis on Lurgi which reflects an impairment based upon a controlled shut-down alternative rather than a sale.  The numbers also include our recent litigation settlement, Azurix Corp severances, and Azurix Corp PP&E impairments.

We would be available at any time to discuss this analysis with you.  Since AA has not reviewed any of this information, the next step is to get AA to confirm the analysis and numbers.  We will wait on your approval to take this step.  Please let me know when to proceed.


Thanks,
Michael Anderson