Before I draft a response, I wanted to clarify that Section 3.0 of Schedule "C" to the Contracting Party Agreement governing NGX provides for the determination of unsecured credit availability, which is essentially a collateral threshold, for investment grade counterparties or counterparties that have provided an investment grade guarantee, which can be determined in the sole discretion of NGX, but with a maximum for BBB credits of Cdn. $30 million (the previous maximum for BBB+ credits was Cdn. $35 million).  

Accordingly, it is arguable that NGX can apply whatever unsecured credit threshold it chooses, however, arguably, it must do so acting in a commercially reasonable manner and having regard to its equitable treatment of similar graded credits.  Accordingly, I will draft a response on this basis, imposing an obligation on NGX to treat us reasonably and equitably, but in the meantime, I believe that we should be taking steps to satisfy NGX's credit requirements both by providing the margin they require and by having the traders minimize their position to the extent possible.

I will forward a draft response shortly.

Regards,
Peter

 -----Original Message-----
From: 	Keohane, Peter  
Sent:	Friday, November 02, 2001 9:30 AM
To:	Kitchen, Louise; Bradford, William S.
Cc:	Otto, Randy
Subject:	RE: Removal of Unsecured Limits and Requesting Security

I will prepare a response and provide a draft for review.  Bill, I will talk to Randy about posting and he can co-ordinate with you or Tanya or Jay. 

 -----Original Message-----
From: 	Kitchen, Louise  
Sent:	Thursday, November 01, 2001 8:38 PM
To:	Bradford, William S.; Keohane, Peter
Subject:	RE: Removal of Unsecured Limits and Requesting Security

I think so - respond rejecting his statements on ENE and state we expect fair treatment with other BBB credits.  Meanwhile we'll send the margin - our guys should be able to minimize the position.

Louise

 -----Original Message-----
From: 	Bradford, William S.  
Sent:	Thursday, November 01, 2001 6:37 PM
To:	Keohane, Peter
Cc:	Kitchen, Louise
Subject:	FW: Removal of Unsecured Limits and Requesting Security

Do we need to respond?

 -----Original Message-----
From: 	"Kenny Foo" <Kenny.Foo@ngx.com>@ENRON  
Sent:	Thursday, November 01, 2001 5:36 PM
To:	Otto, Randy; wbradfo@ect.enron.com
Cc:	Ron Manitowich; Gary Gault
Subject:	Removal of Unsecured Limits and Requesting Security

Hi Randy, Bill.

As per our discussion this afternoon Randy,

Enron Corp. (Enron) has deteriorated further in the market place and the
recent downgrade of Enron by S&P to BBB, although not completely a surprise,
is still disconcerting.  I applaud Enron's effort in obtaining additional
Bank lines to shore up liquidity but am disappointed that your Pipeline
assets had to be pledge in support of same.  Additionally, Moody's and S&P
have stated publicly that further downgrade is possible.

I would like to remind you that NGX does not provide any unsecured lines to
entities who are rated below BBB.

As you well know, given NGX's size and the fact that NGX needs to keep the
integrity of the exchange intact, we have no option but to inform you of the
following.

Accordingly, please be advised that EFFECTIVE IMMEDIATELY Enron Canada Corp
(ECC) will no longer have any unsecured lines here at NGX (reference
attached Contracting Party's Agreement, Schedule C, para 3.0.a).

We respectfully request that ECC provide Collateral (preferably Irrevocable
Letter of Credit, else Registered Interest in Cash) by the close of business
day Monday, November 5, 2001 (reference Contracting Party's Agreement,
Schedule C, para 8.1).

As I said, if some other counterparty was in the position you are in right
now, you would expect us to do what it takes to keep the exchange
safe/intact/whole at all times.

Please call if you have any questions.

Kenny Foo
Credit and Risk Manager
NGX Financial Inc
140 - 4 Avenue SW, Suite 2330
Calgary,  Alberta, T2P 3N3
Ph: (403)974-1737
Fx: (403)974-1719

Attachment:

 - CPA_SCHEDULE C.pdf << File: CPA_SCHEDULE C.pdf >>