On Tuesday of this week I visited our Helsinki oil trading office. Set out 
below are some general observations.

There are about 8 people in the office: 3 traders; 2 logistics people; 1 
accounting/risk management person; and a couple secretaries. The office is 
headed by Ilkka Kokko, a fairly young Finn. We bought the business in 
September of last year.

The basic activity is the purchase of various oil products from Russian 
refineries; the transportation of the products by RTC (railroad tank car) 
from the refinery to various Baltic ports; the storage of the products at the 
ports; and the loading of the products onto vessels for sale in other 
markets. Many of the vessels are ocean-going because the products are sold in 
non-European markets.

The products are normally purchased on a DAF (delivered at frontier) basis, 
which means that title passes to Enron when the RTC crosses the Russian 
border. As a result, Enron must arrange for the transport of the products 
from the border to the port. This is arranged for us by the company that will 
store the products at the port. In other words, the contract we have with the 
terminal operator provides for transportation of the products from the 
Russian border to the port, the unloading from the RTCs into storage, 
storage, the unloading from storage into our vessels and all related customs, 
measurement and testing services. We have these deals with about 5 different 
Baltic companies.

About 20-30 vessels a month are chartered. About 25-40 product purchases a 
month are done, some of which are term deals up to one year. About 300,000 
tonnes a month is purchased.

Payments and settlements are done from London. We pay in dollars. The money 
is almost always paid into accounts outside of Russia.

Because the business  results in a long position, the Helsinki office hedges 
its position by doing deals with Enron's book in London -- no hedging is done 
with anyone else. The business experienced some earnings volatility late last 
year (had a negative gross margin of $200,000 in November and a positive 
gross margin of $350,000 in December). This was largely because the position 
wasn't effectively hedged. Hedging is difficult because the hedges are dirty 
(due to basis and to product differences) and because it is difficult to 
predict the amount of product that will be delivered in any given time period 
(due to transportation bottlenecks and to flexibility in the Russians' 
delivery obligations to us).

The business historically prepaid for part of the products it purchased. The 
financing was historically arranged through a bank that would require a 10% 
margin on funds it advanced -- $10 million deposited with the bank would mean 
up to $100 million advanced to the Russians. The bank also insisted on having 
recourse against Greenergy (the company we acquired) for all amounts 
outstanding. 

Enron has given Ilkka a $20 million limit on our exposure on these prepaid 
deals. Because the bank wants to have recourse against Enron for all amounts 
outstanding, the old method of financing these prepaid deals no longer works 
given the amount of prepaid financing Ilkka would like to do. Ilkka is trying 
to come up with another financing structure where the banks look solely to 
the Russians for payment for at least part of the outstanding amount.

Ilkka is also thinking about buying products from the Russians at the 
refinery gate. This would require Enron to arrange transportation from the 
refinery, not just from the Russian border under the current DAF deals. Ilkka 
thinks this will help him control the deliveries more and, as a result, 
facilitate his hedging program.

Ilkka is also looking at buying some terminal assets in Estonia. The London 
corporate development team is looking at this.

Ilkka confirmed to me that he has never paid any bribes in connection with 
the business (even before the acquisition by Enron) and that he understands 
the FCPA restrictions.

Robert Quick has made about three visits to the office and is working on a 
variety of issues related to this business. Robert, please correct me if I've 
made any errors or add something if I've left it out. Thanks!