Re: Tax Planning - Privileged Solicitor/Client Communication

You've summarized things nicely and I think the ultimate P/L assessment will
reside with Wes with he, in turn, needing guidance on the tax consequences.
Wally, as discussed during the call yesterday, I would like for you to assess
the likelihood of the tax result (both as to the options idea and the Papier
Masson settlement) obtaining given the change in law risk mentioned. After I
have your assessment of such risk, I will then speak with Wes to discuss the
book consequences. Finally, Morris and I will be in Calgary on Wednesday
Nov. 29th thru Friday Dec. 1st and thus able to personnally address these
matters (as well as others). Best regards. Steve.

Enron Capital & Trade Resources
Canada Corp.

From: Peter Keohane 11/16/2000 11:06 AM

To: Morris Richard Clark/HOU/ECT@ECT, Stephen H Douglas/HOU/ECT@ECT,
wys@blakes.com
cc: Rob Milnthorp/CAL/ECT@ECT, Paul Devries/TOR/ECT@ECT, Wes
Colwell/HOU/ECT@ECT, Sharon Crawford/CAL/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT
Subject: Tax Planning - Privileged Solicitor/Client Communication

Thanks for the call yesterday. Milly would like to have a decision on how we
will proceed for execution by the end of November. At the tail end of the
call, alternatives were discussed, but I just wanted to confirm the action
plan.

Morris/Stephen/Wally will consider and then review with Wes two alternatives:

1. option purchases (or other deferral strategies), and whether, if those
can be rolled year-on-year for a considerable period of time (ex. 10 years)
without reasonable anticipation of legislative amendments restricting such
deferrals, such that most of the present value of the deferral can be booked
as earnings currently;

2. Papier Masson newsprint swap termination structure, in particular,
whether the transaction is worth pursuing considering three issues: (i)
present value of the tax deferral; (ii) option value to the deferral
becoming permanent if the swap is re-transacted in the future if the market
moves down from where the termination value was obtained; and/or (iii)
although from a corporate perspective Enron would remain in the same hedge
position, accounting for future P&L swings at the ECC level and at the ENA
level if Leg 1 (PML/ECC) is unhedged from Leg 2 (ECC/ENA).

If I have it wrong, please let me know. Otherwise, we look forward to
hearing from you.

Again, many thanks, Peter.

Mark, FYI.