Jim,

I understand that unfortunately you are not able to meet with Keith next
week.  In view of this I attach a note which sets out our logical arguments
for not remaining part of a global programme.

To answer some of your questions more specifically:

We have got an indication of current market premiums from our broker, Steve
Wynne (he has not alerted the market).  Steve has been our broker since 1994
and until recently worked for JLT.  He now has his own company (Kingsbridge)
but retains a business arrangement with JLT.  Steve has extensive knowledge
of the UK water industry and has serviced Wessex to a very high standard
over the years.  Steve would use all the major UK carriers to establish a
programme but I would expect using Royal Sun Alliance and Winterthur at
least (as we have previously done) as they are very active in the UK water
sector.  We do not have any intentions to use a captive (our existing one is
currently being liquidated) as in essence there are very little advantages
of doing so.

Steve and Wessex have just begun the renewals process for the local
policies.  Also understand Steve contacted McGriff about global policy
renewals but got very little response.

All renewals are less than 3 months away and information gathering is
beginning.  Suggest we need to resolve this issue over the next few weeks.

Wessex recognises it is a subsidiary company and Enron has significant
buying power.  However for the reasons set out we still think it makes more
sense to have its own standalone programme topped up by Enron if needs be.

I am happy to discuss or meet on any of this.

Mark

 




-----Original Message-----
From: James.L.Bouillion@enron.com [mailto:James.L.Bouillion@enron.com]
Sent: 18, September ,2001 17:36
To: mark.watts@wessexwater.co.uk; mark.watts@wessexwater.co.uk
Cc: Rod.Hayslett@enron.com; Paul.Clayton@enron.com;
Earline.Kendall@enron.com
Subject: RE: Wessex Insurance's


           I will be happy to meet with Mr. Harris.  I do have travel plans
for the first week in October.  Hopefully, I will be here during his visit.
Please advise when you have definitive dates.

      -----Original Message-----
     From:   Mark Watts <mark.watts@wessexwater.co.uk>@ENRON
 
[mailto:IMCEANOTES-Mark+20Watts+20+3Cmark+2Ewatts+40wessexwater+2Eco+2Euk+3E
+40ENRON@ENRON.com]


     Sent:   Tuesday, September 18, 2001 7:06 AM
     To:     Bouillion, James L.; Mark Watts
     Cc:     Hayslett, Rod; Clayton, Paul; Kendall, Earline
     Subject:  RE: Wessex Insurance's

     I am more than happy to answer these questions. However my boss, Keith
     Harris Director of Finance and Regulation, is going to be in Houston
     in a
     couple of weeks and I believe he is going to try and meet with you as
     a face
     to face discussion will probably prove more beneficial.



     -----Original Message-----
     From: James.L.Bouillion@enron.com [mailto:James.L.Bouillion@enron.com]
     Sent: 12, September ,2001 20:54
     To: mark.watts@wessexwater.co.uk
     Cc: Rod.Hayslett@enron.com; Paul.Clayton@enron.com;
     Earline.Kendall@enron.com
     Subject: RE: Wessex Insurance's


     The "trade" with the parents and associated companies is really an
     allocation of premium as opposed to a purchase from the parent.  There
     was
     a separate insurance program purchased to cover all the Azurix assets
     and
     the premium was allocated to the participants.  Wessex received a
     portion
     of the premium through the allocation.  Due to our extensive regulated
     pipeline system, we are familiar with the issues related to the
     regulatory
     scrutiny of allocated premiums.  The pipelines include allocated
     premiums
     in their "rate case" and historically, we have been successful in
     supporting the amounts charged.

     On what are you basing your statement that the Azurix allocation to
     Wessex
     is not competitive?  Have you priced coverage in the market?  I would
     be
     very interested in the information that you have received as our only
     data
     points would be your premium levels when we acquired Wessex.  As you
     will
     recall,  Enron left your program in place initially.  Azurix placed
     their
     own program in December of 1999, and your program was terminated at
     that
     time. (This is only the second year of the Azurix program.)  The
     market has
     "hardened" considerably over the past two years.

     Once the North America assets are sold, the "Azurix" program will be
     remarketed (Dec., 2001) for the four (4) remaining water companies and
     a
     small U.S. exposure, if any remains.  This would be a portfolio of
     assets
     with similar operations and I would not anticipate  Wessex supporting
     the
     rest of the Azurix program.  We could also consider providing coverage
     under the Enron program, if it fits.

     If you have not gone to the market, how would you propose doing so in
     order
     to secure stand alone pricing?  What brokers and markets would you
     plan to
     use?  Do you plan to return to using a captive for certain coverages?

     Please advise.

           -----Original Message-----
          From:   Mark Watts <mark.watts@wessexwater.co.uk>@ENRON

 
[mailto:IMCEANOTES-Mark+20Watts+20+3Cmark+2Ewatts+40wessexwater+2Eco+2Euk+3E
     +40ENRON@ENRON.com]


          Sent:   Thursday, September 06, 2001 4:00 AM
          To:     Bouillion, James L.
          Subject:  Wessex Insurance's

          Jim,

          Thanks for your e-mail of 8 August informing us that a decision
     had
          been
          made to keep Wessex insurance's under the existing Azurix global
          programme,
          or to ultimately absorb the whole of Azurix into an Enron
     programme.
          Whilst
          we understand this, we are concerned that a continuation of the
     global
          policies, at the current cost to Wessex, will raise some
     regulatory
          problems
          for us in the UK.

          Our Licence requires us to report trades with parents and
     associated
          companies, and to demonstrate that any such trades are undertaken
     at
          arms
          length.  Moreover we are required to periodically test such
          arrangements.
          Clearly this has not been done in respect of Insurance.

          Even more worrying is the fact that the cost of the Global
     insurance
          programme to Wessex is simply not competitive.  The current level
     of
          premiums we pay, when added to the much higher excess levels we
     incur,
          are
          in excess of what we could arrange on a standalone basis.  Going
          forward, if
          Wessex is to support the rest of the Azurix programme, our costs
     can
          only
          but rise.

          In light of these problems we either have to reduce the cost of
     the
          Global
          policies to Wessex or allow Wessex to obtain standalone cover.

          Regards.

          Mark Watts

          Treasurer



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intended solely for the use of the individual or entity to whom they
are addressed. If you have received this email in error please notify
the Wessex Water IT Support Centre on:

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