---------------------- Forwarded by Elizabeth Sager/HOU/ECT on 12/28/99 07:10 
AM ---------------------------


Stuart Zisman
12/27/99 10:55 PM
To: Elizabeth Sager/HOU/ECT@ECT, Rodney Malcolm/HOU/ECT@ECT, 
archie.malcolm@sympatico.ca
cc: David Portz/HOU/ECT@ECT 
Subject: Draft of Confirmation for Physical Transaction with Merrill 
(Moosehead)

As we discussed, attached is my draft of a confirmation under the Master 
Energy Purchase and Sale Agreement by and between EPMI and Merrill Lynch 
Capital Services, Inc.  In addition to the comments/questions noted within 
the Confirmation itself, I have the following thoughts/questions:

1) Note that the Enron Corp Guaranty is currently limited to an aggregate 
amount of $30,000,000 (this may become an issue late in the day when the 
folks over at Merrill figure out that this is one of the disadvantages to 
using a confirm as opposed to doing a sep. transaction with a separate and 
distinct Enron Corp. Guaranty);

2) Per Section 1.1 of the Master, in the event of any conflicts between the 
Master and a Confirm for a particular transaction, the Confirm governs;

3) Section 1.4 of the Master Agreement makes reference to a "Qualified 
Financial Contract" - is that applicable to this Transaction?  Might this 
somehow cause the accountants to treat the Transaction differently?;

4) Do we need to negate the reference to a "Forward Contract" in Section 4.6 
of the Master (Elizabeth we spoke about a concern that you had regarding this 
exact issue);

5) What changes should be made to the Confirm given the agreed to changes in 
the ISDA (Severability and Notice Update for example);

6) The last sentence of the Master appears to be missing some language.  It 
currently reads "Disallowance of cost pass-through or any unfavorable or any 
Affiliate of the Non-Defaulting Party shall not constitute a requirement for 
a change to the terms of this Agreement.";

7) Should we still eliminate the last portion of Section 8.1(ii) of the 
Master to permit free assignment to an Affiliate (this previously was a big 
issue given our concern that we might have to assign certain rights to an 
Affiliate in the event of a bankruptcy).  Section 8.1(ii) currently reads:

  Neither Party shall assign this Agreement or its rights hereunder without 
the prior written consent of the other Party, which consent may be withheld 
  in its sole discretion; provided, however, either Party may, without the 
consent of (but with notice to) the other Party (and without relieving itself 
from 
  liability hereunder), (i) transfer, sell, pledge, encumber or assign this 
Agreement and all Transactions hereunder as a whole or the accounts, 
  revenues or proceeds hereof as a whole in connection with any financing or 
other financial arrangements, (ii) transfer or assign this
  Agreement to an Affiliate of such Party; provided, that such Party's Credit 
Support Provider issues a Credit Support 
  Document substantially in the form provided in connection with the 
execution hereof,; 

8) The draft of the Confirmation does not make reference to any of the 3 
"Facilities".  Does it have to for acct purposes even though the only time 
that it was used was in the sections deal with gas supply (which did not make 
it into the Confirmation) and Section 6.2 of the prior physical agreement 
which used to make "Buyer responsible for charges imposed on the delivery of 
Energy from a given Facility but related to the operation of third party 
transmission" (this provision is not reflected in the Master and I suspect 
that Merrill would object strongly to its incorporation);

9) Did we ever determine whether the draft of the Confidentiality Agreement 
that I prepared was executed by Merrill?; and

10) The Master currently defines Stranded Costs but does not contain the 
standard provision regarding the same (should this be introduced???)