National Bank of Canada (NBC)

Louise and Bill,

As you are aware, NBC has sent us notification of an event of default under=
the ISDA due to our failure to post collateral (in the form of an LC). To=
date, NBC has resisted all of our commercial solutions to this issue. At =
the close of business today, our cure period for the event of default will =
expire, and NBC will be able to draw on the $1.4MM LC posted and terminate =
the contract. Today we have seen a bit of movement in their position. They=
are now willing to accept cash as collateral if Enron will agree to reduce=
its collateral threshold to some agreed upon amount. Bill Bonnell, their =
credit manager, has suggested $4MM as the appropriate level. This would ent=
ail Enron posting $3MM in addition to the $500K collateral call for a total=
of $3.5MM. I believe we could more than likely negotiate the threshold to=
$5MM if we are willing to post the cash. A $5MM level would require an ad=
ditional posting of $2MM which is what we originally forecasted to try to b=
uy down the position exposure. As we must have a resolution today to fores=
tall further action on the part of NBC, please advise as to management's wi=
llingness to use cash for the purpose of preventing termination of this con=
tract.

Thanks,
Tanya