FYI
---------------------- Forwarded by Andrea Calo/ENRON_DEVELOPMENT on 
01/05/2000 07:48 PM ---------------------------


Lynn Aven
01/05/2000 07:57 PM
To: Andrea Calo/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Andrea Bertone/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Brent 
Hendry/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Dan 
Feather/Enron_Development@ENRON_DEVELOPMENT, Sami 
Arap/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Michael 
Guerriero/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT 
Subject: Re: Enron-Azurix Energy Management Services Agreement  

Thanks for the list of activities that will be performed for Azurix.  There 
are both US and Argentine tax issues that need to be addressed related to 
these services.

US Tax Issues
Where will the services listed be performed?
Will the services be provided by an Enron affiliate or will they be 
subcontracted to third parties?

To the extent that the services are performed by Enron affiliates in 
Argentina, there should be no issue with the income being subject to US tax.  
However, it should be noted that if an Enron Argentine entity provides the 
services but requires assistance from a US affiliate, the income may be 
subject to US tax as well as Argentine taxes.  To avoid the US tax at the 
Argentine entity, the Enron US entity could bill the Enron Argentine entity 
for services but the high Argentine withholding tax on services rendered in 
Argentina by offshore companies probably gives you a worse result.  
Therefore, we need to analyze the sourcing of the services to make sure that 
we have taken into account all possible US income tax exposure.

Argentine Tax Issues
EAS ( I assume this is the new name for Enron International Argentina S.A.) 
is a possible candidate for the entity to transact this business.   It has 
current losses and net operating loss carryforwards that would be utilized by 
any income generated by the EES activity.   Now is probably a good time to 
discuss with Argentine management the direction of the business to determine 
if EAS is an appropriate entity or whether we want to set up a special 
purpose entity.

 I think that EAS is owned directly out of the US.  The only issue with using 
EAS is that it will be difficult to get any earnings generated by the EES 
project back to Corp (or even out of Argentina for that matter) difficult.  
First, it would be best to convert EAS from an S.A. to a limited company.  
Secondly, Enron Corp and Enron PIpeline Company which currently own 100% of 
EAS would have to contribute their interests to a special purpose Cayman 
Island company.  This may or may not be able to be done without paying US 
tax.  If EAS has any appreciated assets, such appreciation would be subject 
to US tax when contributed to the Cayman Island company.  

Please arrange a time and we can discuss these issues in more detail.

Regards

Lynn





Andrea Calo
04/25/2000 04:05 PM
To: Lynn Aven/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:  

Subject: Re: Enron-Azurix Energy Management Services Agreement

Lynn, 

I know you have been expecting this information.  Please find attached the 
services EES wants to provide to Azurix, and the mails regarding this issue 
below.  Please give me a call if you need further information. Thanks.

Regards,

Andrea



From: Dan Feather on 04/25/2000 11:16 AM
To: Andrea Calo/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Michael 
Guerriero/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Pablo 
Acevedo/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Andrea Bertone/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Sami 
Arap/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Brent 
Hendry/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT 
Subject: AZX List of Services

Andrea, 

Attached is the list of services as we discussed this morning.  

Please give me a call if you have any further questions.  

Thanks. 

Dan
4891-3604
(15) 4188-6243



---------------------- Forwarded by Andrea Calo/ENRON_DEVELOPMENT on 
04/25/2000 05:47 PM ---------------------------


Andrea Calo
04/25/2000 04:11 PM
To: Sami Arap/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Randy Young/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Michael 
Guerriero/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Brent 
Hendry/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT 
Subject: Re: Enron-Azurix Energy Management Services Agreement  

Sami,

In response to your query, Enron Tax has not been involved yet.  Brent, 
Andrea and I tried to talk with Lynn Aven last week but unfortunately he was 
not available.  Also, since the deal was only clearly outlined yesterday we 
didn't think it was necessary to pressure Lynn yet. 

Initially, we are thinking of using EAS, however we will have to run it 
through tax first to see whether there are any tax implications.  If there 
are, we will look into either creating an SPC or using an existing company if 
the corporate purpose allows.

Andrea B. and I tried to contact you earlier today on the outside counsel 
issue, but you were unreachable.  We spoke with Alberto Navarro Castex, 
senior partner of Alfaro-Navarro, in Argentina which mainly works with the 
Exxel Group.  Andrea B. met him some time ago at an event organized at 
Tozzini Freire in San Pablo (since he is associated with this firm) and 
thought his firm was of interest.  I have also met Alberto in the past, and 
think his credentials are worth taking into account. 

In addition to this, the matter was discussed with Mike Guerriero and he 
believes that given the nature of the business being carried out by the Exxel 
Group in Argentina, Alfaro-Navarro would probably have the expertise to 
assist us in these transactions.  I just received their brochure which was 
faxed to the San Pablo office for your review.  Andrea and I would like to 
discuss this issue with Randy and you as soon as you get the chance to read 
the material.  Please give me a call if you have any further questions or 
comments.

Regards,

Andrea C.





Sami Arap
04/25/2000 01:29 PM
To: Andrea Bertone/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Andrea 
Calo/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Michael Guerriero/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Brent 
Hendry/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT 
Subject: Enron-Azurix Energy Management Services Agreement

To better understand this deal, I've got a few questions:

- Has anyone from Enron's Tax Group been involved in these internal 
discussions ?

- Which Enron entity will render such Energy Management Services to Azurix ?  
Will Enron Argentina form a special purpose company to pursue EES type of 
deals in Argentina (or have we already formed a SPC) ?

If Andrea Calo will be in Houston for the next two weeks and Andrea Bertone 
will be coordinating the pre-feasibility legal studies of EnronOnLine in 
Brazil, we need to approach Argentine counsel asap.  Please send me your 
thoughts with respect to local counsel as we need to discuss this issue 
shortly.

Rgds,

Sami