Let's get together on this and have a conference call.  Thanks.  


   
	
	
	From:  William S Bradford                           12/27/2000 05:12 PM
	

To: Jeffrey A Shankman/HOU/ECT@ECT
cc: Don Black/HOU/EES@EES, Tracy Ngo/PDX/ECT@ECT, Elizabeth Sager/HOU/ECT@ECT 
Subject: Morgan Stanley Power Desk

Jeff,

It is my understanding that you will be speaking with Simon Greenshields at 
Morgan Stanley ("MS") tomorrow.  I have outlined the facts as I know them in 
regards to our position with PG&E.

Enron Energy Marketing Corporation ("EEMC") has four outstanding purchases 
from PG&E Energy Trading - Power LP ("PG&E").  One of these transactions PG&E 
has backed with a purchase from MS.  We have not been disclosed exact terms 
of the transaction PG&E has with MS.  The terms of our transaction with PG&E 
are as follows:

EEMC purchases 100MW around the clock 1/1/2001 to 12/31/2002 from PG&E with 
delivery point of SP15 at price of $29/Mwh

This transaction is currently in-the-money $130mm.

We are proposing to assign EEMC's position to EPMI and then EPMI would agree 
to take assignment from PG&E its position with MS in return for unwinding 
EPMI's transaction with PG&E.  Our net book value would remain unchanged but 
we would transfer credit exposure to MS rather than PG&E.

It is my understanding that MS is currently posting margin to PG&E above some 
threshold within the Master contract between PG&E and MS.  With the 
assignment EPMI would assume the contract under its Master agreement.  The 
current agreement has no executed margining agreements but we have been 
exchanging margin above a $15mm bilateral threshold.  Enron would be willing 
to either not require collateral on the deal or take the collateral under the 
current terms negotiated but not yet documented.

If we choose to take collateral, MS can post either cash or letters of 
credit.  If they post cash, EPMI contractually can invest those funds as we 
see fit but will be required to pay interest at the Fed Funds interest rate.

Give me a call if you have any questions.

Bill