FYI,

Someone requested I resend this language.


---------------------- Forwarded by Brant Reves/HOU/ECT on 01/22/2001 08:47 
AM ---------------------------


Brant Reves
01/19/2001 02:17 PM
To: Kim Ward/HOU/ECT@ECT, Barry Tycholiz/NA/Enron@ENRON
cc: Edward Sacks/Corp/Enron@Enron, Tracy Ngo/PDX/ECT@ECT, Wendy 
Conwell/NA/Enron@ENRON 
Subject: El Paso credit terms

Kim/Barry,

Situation 1:
The following credit matrix could be included within Section 12 of the 
Jan'02-Dec'03 transaction between ENA and El Paso Electric Company.

STANDARD & POOR'S RATING EVENT	CREDIT LINE
BBB- or Above	Open
BB+	$10,000,000
BB	$5,000,000
BB- or Below	$0

Situation 2:
Without credit lines, the credit reserve for this deal would be $450,000.

In addition, the most recent S&P write-up is attached below.

brant


Research:
                                                                  Return to 
Regular Format
  Summary: El Paso Electric Co. 
  Publication Date:
              01-Aug-2000
  Analyst:
              Judith Waite, New York (1) 212-438-7677 

 Credit Rating:
                                       BBB-/Stable/--

  Rationale


    Debt reduction, cost cutting, and increased sales have brought El Paso 
Electric Co. back toward
    investment-grade benchmarks. The company has exceeded debt-reduction 
targets and expects debt to be
    about 50% of total capital by 2002. If sales continue to grow at even 
one-half the historical 3% to 4% per year,
    cash flow interest coverage should improve to 3.5 times by then. Still, 
the ratings on El Paso Electric continue to
    reflect the company,s high leverage, dependence on nuclear power, high 
fixed costs, and high rates. 

    The company borrowed heavily to fund its 15.8% interest in the Palo Verde 
nuclear plant, which supplies 50% of
    the utility,s power. The plant,s past operating problems and continued 
structural problems add some risk to the
    company,s already weak financial profile. Most importantly, customers in 
the generally low-income service
    territory fought against rate increases needed to recover the nuclear 
investment, helping to put El Paso Electric
    in bankruptcy. A settlement signed with Texas customers in 1995 allowed 
the company to keep a $25 million
    rate increase implemented in 1994, permitted accelerated depreciation of 
generation and transmission assets,
    and froze rates until 2005 in exchange for extending the El Paso Electric 
franchise. 

    In 1998, the company agreed to reduce rates--mainly residential--in New 
Mexico and Texas, bringing them
    more in line with Southwestern averages. By the time retail competition 
comes to either state (2002), El Paso
    Electric will have a fairly competitive cost structure which should allow 
them to retain retail customers. By that
    time, El Paso Electric will have separated its assets into a regulated 
transmission and distribution business
    and an unregulated electricity generation business, as required by New 
Mexico and Texas law. Costs incurred
    to effect this change will be recovered in a competitive transition 
charge. Stranded costs (accrued charges
    related to generating plant costs which would have been recovered in a 
regulated market) will be recovered over
    a five-year transition period in New Mexico. In Texas, the rate 
settlement allowed El Paso to recover those costs
    through accelerated depreciation over the 10-year period of the 
settlement agreement. 

    In the wholesale market, El Paso successfully renegotiated contracts with 
the Comision Federal de
    Electricidad, the national utility of Mexico, to supply peaking capacity 
in the summer months of 2000 and 2001,
    and with the Rio Grande Electric Cooperative Inc. to supply power to two 
Texas cities over a four-year period.
    Importantly, El Paso Electric also reached a settlement with the city of 
Las Cruces, N.M., ending a long dispute
    over that city,s threat to municipalize the electric distribution system. 
Las Cruces sales account for about 8% of
    total revenue.