More PX Exposure: EEI Event of Default

---------------------- Forwarded by Mary Hain/HOU/ECT on 01/22/2001 10:19 AM
---------------------------

Steve C Hall
01/22/2001 09:50 AM
To: Elizabeth Sager/HOU/ECT@ECT, Richard B Sanders/HOU/ECT@ECT, Tracy
Ngo/PDX/ECT@ECT, Tim Belden/HOU/ECT@ECT, Christian Yoder/HOU/ECT@ECT, Mary
Hain/HOU/ECT@ECT
cc:
Subject: More PX Exposure: EEI Event of Default

As if we needed another reason to avoid at all costs a default at the PX:

I notice that one "Event of Default" under Enron's EEI master agreement is an
Enron Corp default on indebtedness to third parties, which results in the
acceleration of obligations in excess of $100 million. This sounds like our
doomsday scenario at the PX, under which we default on a payment or
chargeback, and the PX liquidates our block forward/CTS positions, which the
PX values in excess of negative $100 million, and then exercises our LCs.

This makes it even more imperative that we (1) avoid a default at the PX and
(2) reduce our CTS collateral with the PX.