FW: Canadian Retail

Perhaps we could discuss this following the GC meeting tomorrow. Jim

-----Original Message-----
From: =09Crawford, Sharon On Behalf Of Keohane, Peter
Sent:=09Tuesday, April 03, 2001 6:15 PM
To:=09Derrick Jr., James; Haedicke, Mark
Subject:=09Canadian Retail

Jim and Mark, as you know, we have established a retail affiliate within En=
ron Canada known as Enron Direct. In addition, EES has a Canadian entity, =
EES Canada, which was established for the purposes of entering into some cr=
oss-border transactions in Canada. For various reasons, it has been decide=
d to roll Enron Direct into EES Canada reporting, commercially, to Rob Miln=
thorp, who will in turn report to Dave Delainey. There are two legal/gover=
nance-related issues that I wanted to raise with you:

1.=09Governance: As a result, it will be necessary to make various corpora=
te re-organizations to EES Canada. This will include having EES Canada est=
ablished as an Alberta corporation, where Enron Canada has, and Enron Direc=
t will have, its principal Canadian office. In relation to this, I was con=
sidering that EES Canada should be organized consistent with Enron Canada, =
with two Canadian resident nominee directors and Canadian-resident officers=
. A few years back, it was decided, for corporate law and, more importantl=
y, tax-related "permanent establishment" issues, that all directors and off=
icers of Enron Canada would be Canadian-resident employees of Enron Canada.=
Accordingly, Enron Canada was re-organized with a nominee board of direct=
ors consisting of Rob Milnthorp (as the senior commercial employee) and me =
(as the senior legal employee) with a Canadian slate of officers being the =
Vice-Presidents or Managing Directors in Canada responsible for the various=
commercial or commercial-support groups. I was thinking of doing likewise=
with EES Canada. Although I have not yet obtained a copy of the corporate=
records for EES Canada, I believe the current directors of EES Canada are =
Jim and an outside lawyer at Blake, Cassels & Graydon in Toronto, Ernest Mc=
Nee. I am not sure, but it is also likely that various US-based employees =
of EES are designated as the officers of EES Canada. Would it be appropria=
te to re-organize EES Canada along the same lines that Enron Canada has bee=
n organized, or do you have concerns?

2.=09Law Firm: Following-up on our conversation last week, I want to confi=
rm that our continued use of Donahue Ernst & Young for this retail project =
was "grandfathered" on the basis that they were "up the learning curve" on =
a number of the contracting, regulatory, licensing and market participation=
issues. There is one twist, however, with respect to EES Canada. Althoug=
h I was not involved, I believe that EES Canada was established to execute =
on some gas transactions in Ontario with the use of a Blakes partner in Tor=
onto, Ernest McNee. However, as the focus of the business initiative in Ca=
nada will, at least in the near future, be more involved and predominantly,=
if not entirely, in Alberta; and as Donahue Ernst & Young is involved in r=
egulatory proceedings on our behalf with respect to market design issues af=
fecting the Alberta gas and power markets, as well as being familiar with t=
he licensing and contracting requirements for Enron Direct in Alberta; and =
given my understanding that Blakes' involvement with EES Canada has been re=
latively limited, I think it would make sense to have Donahue Ernst & Young=
continue on with this matter. I am, however, sensitive to Jim's concerns,=
and therefore wanted your thoughts on the matter.

I look forward to hearing from you.

Regards,
Peter