Perhaps we could discuss this following the GC meeting tomorrow.  Jim

 -----Original Message-----
From: 	Crawford, Sharon   On Behalf Of Keohane, Peter
Sent:	Tuesday, April 03, 2001 6:15 PM
To:	Derrick Jr., James; Haedicke, Mark
Subject:	Canadian Retail

Jim and Mark, as you know, we have established a retail affiliate within Enron Canada known as Enron Direct.  In addition, EES has a Canadian entity, EES Canada, which was established for the purposes of entering into some cross-border transactions in Canada.  For various reasons, it has been decided to roll Enron Direct into EES Canada reporting, commercially, to Rob Milnthorp, who will in turn report to Dave Delainey.  There are two legal/governance-related issues that I wanted to raise with you:

1.	Governance:  As a result, it will be necessary to make various corporate re-organizations to EES Canada.  This will include having EES Canada established as an Alberta corporation, where Enron Canada has, and Enron Direct will have, its principal Canadian office.  In relation to this, I was considering that EES Canada should be organized consistent with Enron Canada, with two Canadian resident nominee directors and Canadian-resident officers.  A few years back, it was decided, for corporate law and, more importantly, tax-related "permanent establishment" issues, that all directors and officers of Enron Canada would be Canadian-resident employees of Enron Canada.  Accordingly, Enron Canada was re-organized with a nominee board of directors consisting of Rob Milnthorp (as the senior commercial employee) and me (as the senior legal employee) with a Canadian slate of officers being the Vice-Presidents or Managing Directors in Canada responsible for the various commercial or commercial-support groups.  I was thinking of doing likewise with EES Canada.  Although I have not yet obtained a copy of the corporate records for EES Canada, I believe the current directors of EES Canada are Jim and an outside lawyer at Blake, Cassels & Graydon in Toronto, Ernest McNee.  I am not sure, but it is also likely that various US-based employees of EES are designated as the officers of EES Canada.  Would it be appropriate to re-organize EES Canada along the same lines that Enron Canada has been organized, or do you have concerns?

2.	Law Firm:  Following-up on our conversation last week, I want to confirm that our continued use of Donahue Ernst & Young for this retail project was "grandfathered" on the basis that they were "up the learning curve" on a number of the contracting, regulatory, licensing and market participation issues.  There is one twist, however, with respect to EES Canada.  Although I was not involved, I believe that EES Canada was established to execute on some gas transactions in Ontario with the use of a Blakes partner in Toronto, Ernest McNee.  However, as the focus of the business initiative in Canada will, at least in the near future, be more involved and predominantly, if not entirely, in Alberta; and as Donahue Ernst & Young is involved in regulatory proceedings on our behalf with respect to market design issues affecting the Alberta gas and power markets, as well as being familiar with the licensing and contracting requirements for Enron Direct in Alberta; and given my understanding that Blakes' involvement with EES Canada has been relatively limited, I think it would make sense to have Donahue Ernst & Young continue on with this matter.  I am, however, sensitive to Jim's concerns, and therefore wanted your thoughts on the matter.

I look forward to hearing from you.

Regards,
Peter