Rodney, please give Cliff a call.  I spoke with him today.  He will handle.  
Please fill him in on your discussions to date.

Thanks
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 06/01/2000 
02:55 PM ---------------------------
   
	Enron North America Corp.
	
	From:  Rodney Malcolm                           05/31/2000 10:56 AM
	

To: David W Delainey/HOU/ECT@ECT
cc:  
Subject: Merrill Lynch Offer - Termination of Midwest Peaking Trade

Dave,

The Bid Offer is now officially at $0 - $17MM - See below offer from Merrill.

Below is the response from Dan Gordon who was my counterpart at Merrill after 
my discussion with him where I told him I wanted to just terminate the trade 
without paying any fees.  I had asked Dan to come up with a number they would 
think appropriate for terminating the trade.  I also discussed the deal with 
their relationship officer Robert Furst so they are all engaged.  I think Dan 
is simply trying to elicit a higher first bid from us without him doing any 
work or potentially leaving any money on the table since it is us that wants 
to unwind the trade.

I have Rogers Herndon pulling some information on how much the position has 
moved since we did the deal.  I also have him working through what we would 
have done if we owned the deal i.e. how much gas basis risk we would have 
mitigated and what the value would be now as well and any other hedges we 
would have put on and the value of them now.  This will give us information 
to either negotiate or at least get a better picture of what a better offer 
should be.  I have also notified Elizabeth Sager, our lawyer, to dig back in 
and get back up to speed on the deal to prepare to discuss it.  

As I see it our options are: 

Option 1:  Negotiate
Rogers/Kevin/Myself go to NY and negotiate/highlight the risks in the deal 
with ML

Option 2: Relationship Play
Either myself or Cliff start leaning on the relationship people at ML to 
force ML into a more realistic first offer.  

Let me know your thoughts on how you want to proceed.
Rodney


---------------------- Forwarded by Rodney Malcolm/HOU/ECT on 05/31/2000 
10:40 AM ---------------------------


"Gordon, Dan (CICG NY - SWAPS)" <DGordon@exchange.ml.com> on 05/31/2000 
07:15:54 AM
To: Rodney Malcolm/HOU/ECT@ECT
cc: "Furst, Robert (IBK-DAL)" <rfurst@exchange.ml.com>, "Tilney, Schuyler 
(IBK-HOU)" <stilney@exchange.ml.com>, "Kostiner, Barry (CICG - NY SWAPS)" 
<bkostiner@exchange.ml.com>, "Gontkovic, Craig (CICG - NY SWAPS)" 
<CGontkovic@exchange.ml.com> 
Subject: Merrill Lynch Offer - Termination of Midwest Peaking Trade



Rodney-

Merrill Lynch has reviewed the transaction that was executed with Enron in
December, 1999 involving physically and financially settled call options on
certain mid-continent peakers owned by Enron.  At that time, a fee of
approximately $17 million was charged to execute the transaction.

Since the execution of the trade, Merrill Lynch has had to manage the risk
associated with the sizeable position as well as hedge certain gas basis
risks that Merrill Lynch was obligated to assume in order to accommodate the
accounting treatment desired by Enron as part of the transaction.
Additionally, as I am sure that you and your traders are aware, the position
has considerably appreciated in value since trade execution.

Even with these factors, Merrill Lynch is prepared to accommodate Enron's
request to terminate the transaction in exchange for a fee of $17 million.
This fee encompasses the original fee that Enron had agreed to pay to
Merrill Lynch and does not take into consideration any of Merrill Lynch's
hedge breakage costs or our foregone upside in the trade.

Should you wish to discuss the matter further, please do not hesitate to
contact me.

Regards, as always.

Dan Gordon