---------------------- Forwarded by Jeffrey C Gossett/HOU/ECT on 04/23/2001 
10:44 AM ---------------------------
   Enron Americas - Office of the Chairman
From: Enron Americas - Office of the Chairman@ENRON on 04/17/2001 01:05 AM
Sent by: Enron Announcements@ENRON
To: ENA Employees
cc:  
Subject: Capital Book

To further the process of reaching the stated objectives of increasing Enron 
America,s Velocity of Capital and associated Return on Invested Capital, we 
have decided to create a Capital Book. The Capital Book will have no profit 
target associated with it and will be managed by Joe Deffner. The purpose of 
creating this book is to ensure that all transactions within Enron Americas, 
with any form of capital requirement, are structured correctly and are 
allocated the appropriate cost of capital charge. 

The previous numbers used in the Business Plans at the beginning of this year 
will remain for all transactions in place and where we hold assets. 
Therefore, on any assets currently held within each business area, the 
capital charge will remain at 15%. Internal ownership of these assets will be 
maintained by the originating Business Unit subject to the Internal Ownership 
Policy outlined below.

The cost of capital associated with all transactions in Enron Americas will 
be set by Joe. This process is separate and apart from the current RAC 
process for transactions which will continue unchanged.

Capital investments on balance sheet will continue to accrue a capital charge 
at the previously established rate of 15%. Transactions which are structured 
off credit will receive a pure market pass through of the actually incurred 
cost of capital as opposed to the previous 15% across the board charge. 
Transactions which are structured off balance sheet, but on credit will be 
priced based upon the financial impact on Enron America,s overall credit 
capacity.

On transactions that deploy capital through the trading books, the Capital 
Book will take a finance reserve on each transaction, similar to the way the 
Credit Group takes a credit reserve. This finance reserve will be used 
specifically to fund the capital required for the transaction. As noted 
above, the Capital Book will have no budget and will essentially charge out 
to the origination and trading groups at actual cost.

By sending market-based capital pricing signals internally, Enron America,s 
sources of capital and liquidity should be better optimized across the 
organization. 

Questions regarding the Capital Book can be addressed to:
Joe Deffner  853-7117
Alan Quaintance 345-7731