RE:

As I said yesterday it is my understanding that we need Dynegy's permission in order to engage in such discussions. I however have not seen the final merger documents so I may be mistaken. Given Dynegy's presentation to the analysts on Monday it doesn't look like the want to divest of the pipes. This is Greg's call.

-----Original Message-----
From: Donahue, Jeff
Sent: Tuesday, November 13, 2001 1:55 PM
To: Whalley, Greg; McMahon, Jeffrey; Horton, Stanley
Cc: Muller, Mark S.
Subject:

Greg, Jeff and Stan:

I just received a call from David Dehaemers at Kinder, Morgan. They are interested in buying Transwestern and offered to have Rich call Ken - but I waived that off in order to get a read from you all.

With respect to the merits, if a preferred at the pipe level is being treated as effectively debt by the rating agencies, a sale is roughly equivalent to a preferred with respect to both ratings and liquidity. In addition, the sale should provide greater proceeds due to lower cost of funds and may have a higher probability of success. One key issue will be funding the sale at signing or HSR rather than regulatory approval.

I first wanted to test you three, and if supportive, determine the best path upon which to proceed including gaining Dynegy's consent.

Jeff