I am preparing a more complete assessment of the entire transactions, but I'd 
like to articulate one potentially critical point (that Treasa and I were 
just discussing).

Problem:
If we are to confirm the price risk management component (leg) of the 
transaction (WTI swap) under the existing Morgan Stanley Capital Group Inc., 
please be aware that Morgan Stanley would have the contractual right to 
margin Enron for any positive incremental MTM value associated with this 
trade.  The contract contains a collateral threshold of $15MM; however, our 
current exposure is approximately $130MM out-of-the-money with Enron 
currently posting in excess of $110MM in cash and L/Cs.  Consequently, any 
incremental MTM in Morgan Stanley's favor would require the posting of margin 
in that amount.  For example, for the transaction contemplated, a $5 decline 
in the forward price curve would equate to incremental margin requirement of 
$80MM (assuming 16MM Bbl volume).

From a credit management standpoint, I have no objections.  However, the 
potentially significant margining requirements may undermine the funding 
objective of your structure.

Solution:
One solution would be to confirm this trade under the above-referenced master 
trading contract (not an ISDA), but exclude this transaction for margining 
purposes.  Both parties would retain setoff rights; and since our existing 
positions are grossly out-of-the-money, it is very unlikely that Enron would 
incur any incremental credit risk due to the transaction.

Rod