Mark-to-Market

Bob,

I wanted to continue the analysis on mark-to-market that I had spoken to you
about on the phone.

I thought that it was getting very difficult explaining the whole transaction
by phone, so I am having Krishnarao who is in Vince's group explain the
transaction to you.

Krishna has been helping us structure the deal here in India, and he has just
returned to Houston from India after working with the team here.

He will seek an appointment with you to explain the transaction. I would
like you to please spend some time with him, and then based on the discussion
please send us a note detailing how sucha a transaction would be marked to
market.

Please cosider the fact that currently there are no such transactions from
the Indian side. This is a very important transaction for us, and we may
need to repeat this in coming months, hence setting up the system to account
for these maybe well worth it. Also, what I am concerned about is that there
will be an Enron India (EIPL) account in India based on Indian GAAP, and upon
consolidation there will be a US GAAP accounting in the US. It is here that
we would like to have mark-to-market accounting. EIPL is structured through
Mauritius, and then Caymen Islands.

Another key question to consider is that when we m-t-m the transaction in the
US there will be a tax accruing in the year of m-t-m (say 2000). However, in
India, as a result of the accrual accounting, there will not be any income
showing till the year 2002 or 2003. We will need to know how that would get
treated, and whether there is a way to get credit for the tax payable in the
US. I am also confused about whether US tax would be levied, since none of
the income is being brought back into the US (remains overseas - subpart-F
and other concerns).

Finally, we have been working hard in structuring a fixed price contract and
getting a fixed for floating swap in the US (this is still not allowed to
Indian Corporates). I need you to think about this too, and see if some type
of accounting will solve this issue. Krishna knows what I am talking about,
and will brief you on the same.

Krishna - Please walk Bob through the three structures we had worked here.

Look forward to your help and comments. This is going to be an exciting
project for us all.

Regards,
Sandeep.