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August 4, 2000.

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MEMORANDUM

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VIA E-MAIL

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To:????? Steven Van Hooser, Esq.???????????????? ??????????? Enron Capital & 
Trade Resources

Shari Stack, Esq.????? ??????????? 

??????????? Sara Shackleton, Esq.

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From:? Rogelio L?pez-Velarde

??????????? Sean McCoy 

??????????? 

Re:????? CRE Resolution Encouraging the Use of Financially Settled Commodity 
Derivatives Transactions For Natural Gas Prices? ??????????? ??????????? 
??????????? ??????????? ??????????? ??????????? ? .

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The Energy Regulatory Commission (Comisi?n Reguladora de Energ?a) (&CRE8), 
published last Wednesday in the Federal Register a resolution by means of 
which the CRE encourages the use of financially settled commodity derivatives 
transactions (&Financial Instruments8) to hedge the risk of the natural gas 
price variations in Mexico (the &CRE Resolution8). Over-the-counter Financial 
Instruments transactions are being enticed by the CRE in light of the surge 
of natural gas prices[1]. It is expected that such derivatives market will be 
expanded to other type of energy commodities, such as electric power.

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Essentially, the CRE is encouraging the use of Financial Instruments by 
giving a discount of the price index applicable for the month of August, 2000.

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The CRE Resolution provides in general terms that:

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1. The Mexican Users[2] that are able to sign a Financial Instrument with 
Pemex-Gas y Petroqu?mica B?sica (&PGPB8), or with any third party, before 
September 1, 2000, covering commodity prices fluctuations for the period of 
September 2000 thru February 2001, will benefit from a factor of at least 
0.75, which will be applied to the price of reference (i.e. $3.705 U.S. 
Dollars per MMBtu), which results in a price of $2.7788 U.S. Dollars per 
MMBtu, only during the month of August, 2000 (the &Discount Factor8).

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??????????? 2.Mexico,s Local Distribution Companies (&LDCs8), that have 
contracted Financial Instruments for their clients, shall passthrough to the 
Users the benefits resulting from the Discount Factor, only if such end users 
have previously agreed upon the rendering of such services.

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??????????? 3. Needless to say, the price determination for the period of 
September 2000, thru February 2001, will be freely agreed upon between seller 
of the Financial Instruments, and the User or the LDC, as the case may be.

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??????????? 

??????????????????????? ??????????????????????? ??????????????????????? 
??????????? Very truly yours,

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RLV/JCC/SMC

H:\jcc10\VARIOS\Futuros Gas\MM Futuros Gas.doc

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[1]Domestic natural gas prices in Mexico are indexed to a liquid market in 
South Texas. Such index prices have increased in 43% during the period of 
May-June 2000, and in 89% from January-June 2000.

[2]As defined in the Natural Gas Regulations, &User8 shall mean either a 
marketer or an end user.
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