RE: Torrence Cost Sharing Agreement

Fred,

My understanding (which I will verify) is that Enron would still be at risk
from an environmental standpoint with a lease. We could try to lessen our
exposure as much as possible with the lease, and get indemnity from PGL.

Kay

Fred Mitro@ECT
06/13/2000 01:37 PM
To: Kay Mann/Corp/Enron@Enron
cc: Ben Jacoby/HOU/ECT@ECT, Laura Luce/HOU/ECT@ECT, Rusty
Stevens/Corp/Enron@ENRON

Subject: RE: Torrence Cost Sharing Agreement

Attached is the cost sharing agreement proposed by PERC on the Torrence
site. It proposes that ENA agree to share all future development costs and
environmental liabilities on the Torrence parcel on a 50/50 basis. I believe
that there are some inconsistencies between the language in this Agreement
and the PDA signed in April of 2000 (i.e. dates, terms, and the members of
the management committee).

I have informed PERC that it is ENA's policy not to step in the chain of
title on properties with known environmental liabilities. I have recommended
to PERC that PGL (Peoples regulated utility) buy the Torrence property (they
want if for remediation purposes anyway) from Air Liquide on June 26th and
hold it while PERC and ENA complete the due diligence required to develop a
commercially viable power plant development project. It will be my
recommendation that ENA does not execute this cost sharing agreement as
written. If the environmental liability risk was removed and stronger
language inserted on the control of going-forward development expenditures
then it would represent a commercially reasonable agreement. Ideally we
would like this agreement to provide for ENA to market the Torrence and other
development sites (ENA's sell-down strategy) under a known value sharing
formula and transaction financial "triggers". I will discuss this approach
with Laura Luce and Curtis Cole this week.

From a legal perspective, could we structure a long-term lease between PGL
and Torrence Power LLC (PERC & ENA as owners) that could provide commercial
site control to PERC/ENA while leaving the environmental liabilities on the
Torrence property with PGL? (this would be fitting, because PGL has owned
the property in the past and have likely been the major contributor to the
site's environmental contamination).

Call me to discuss these issues.

Fred

---------------------- Forwarded by Fred Mitro/HOU/ECT on 06/13/2000 01:58 PM
---------------------------

s.stawasz@pecorp.com on 06/12/2000 12:59:56 PM
To: Fred.Mitro@enron.com, lluce@enron.com
cc: j.nassos@pecorp.com, j.badeusz@pecorp.com, c.cole@pecorp.com,
de.anderson@pecorp.com, w.morrow@pecorp.com
Subject: RE: Torrence Cost Sharing Agreement

Sorry. Attachment was missing

<<Enron cost sharing ltr Ag v2<<

< ----------
< From: Stawasz, Stanley M.
< Sent: Monday, June 12, 2000 11:39 AM
< To: 'Fred Mitro-Enron'; 'Laura Luce - Enron'
< Cc: Nassos, John G.; Badeusz, John; Cole, Curtis; Anderson, Dean;
< Morrow, William
< Subject: Torrence Cost Sharing Agreement
<
< Attached for your review is the Letter Agreement to share expenses for the
< development of the Torrence project.
<

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- Enron cost sharing ltr Ag v2.doc