Re: WARRANTIES & INSURANCE

Thanks, Nigel.

Gang, we really should get a group together to discuss this issue and how i=
t=20
impacts the project development, EPC, and insurance approaches. A common=20
response to the change in the insurance coverages would seem appropriate.=
=20
Owners will want EPC contractors to take this risk if they cannot get it=20
covered by operational insurance, EPC contractors will be very loath to tak=
e=20
such a risk as this if not completely and securely back-to-back with the=20
turbine boys or compensated significantly for taking the risk without the=
=20
back-to-back. GE et al can be expected to resist taking the risk.=20

Sheila, would you and Kay check and see who might like to sit in on a=20
dicussion on this matter, I will check with Keith Dodson, and Mr. Lund coul=
d=20
you check with Mr. Gillis? Maybe meet or have a call next week?

JWVS

=09Nigel Carling
=0904/02/2001 12:59 PM
=09=09=20
=09=09 To: John Schwartzenburg/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
=09=09 cc:=20
=09=09 Subject: WARRANTIES & INSURANCE
LATEST MARKET DEVELOPMENT #2

FYI
----- Forwarded by Nigel Carling/ENRON_DEVELOPMENT on 04/02/2001 12:59 PM=
=20
-----

=09Paul E Parrish@ENRON
=0904/02/2001 10:29 AM
=09=09
=09=09 To: Nigel Carling/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Spencer=20
Burton/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, John=20
Cullen/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Michael=20
McGarry/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Bob=20
Meckna/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, James=20
Naeger/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Donald=20
Reid/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Michael Guerriero/SA/Enron@Enron,=
=20
Kevin Ruffcorn/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rafi=20
Khan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Richard Quek/SIN/ECT@ECT, Manuel=
=20
Gallego/ENRON_DEVELOPMENT@ENRON_DEVELOPMENt, John R Ayres/NA/Enron@Enron,=
=20
Brett R Wiggs/SA/Enron@Enron, davidlu@nepco.com, Dag Adolfsson/HOU/EES@EES,=
=20
Curly Baca/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Brian D=20
Barto/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Kenneth Bean/HOU/EES@EES, Karl=
=20
Breckon/NA/Enron@Enron, John Cates/HOU/EES@EES, Ed Cattigan/EU/Enron@ENRON,=
=20
Ned E Crady/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Greg Curran/CA/Enron@Enron=
,=20
Scott Dieball/ENRON_DEVELOPMENT@ENRON_DEVELOPMENt, Roberto=20
Figueroa/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, David=20
Glessner/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, David Howe/Enron@EnronXGate,=
=20
James A Hughes/Enron@EnronXGate, Christopher b Hunt/Enron@EnronXGate, Micha=
el=20
Oehrle/ENRON_DEVELOPMENT, Larry Reynolds/ENRON_DEVELOPMENT@ENRON_DEVELOPMEN=
T,=20
Rob Walls/ENRON@enronXgate, David K Bargainer/Enron@EnronXGate, Cheryl=20
Costa/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Ed=20
Dannhaus/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Phillip=20
Foster/ENRON_DEVELOPMENT@ENRON_DEVELOPMENt, Gavin=20
Gaul/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Bruce=20
Golden/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steve=20
Heck/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Edward J Hlopak=20
Sr/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Edward Hlopak Jr/Enron=20
Communications@Enron Communications, Ed=20
Husami/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, John G=20
Rigby/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Robert Lundin/NPNG/Enron@ENRON,=
=20
Michael Ranz/ENRON@enronXgate, Scott=20
Laidlaw/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Joe=20
Lakes/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Martin Penkwitz/HOU/EES@EES, Jim=
=20
Sutherland/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Brian Stanley/EU/Enron@ENRO=
N,=20
Roger Tietz/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Richard=20
Vincent/ENRON_DEVELOPMENT, David Marshall/HOU/ECT@ECT, Terry=20
Yamada/Corp/Enron@ENRON, James L Bouillion/HOU/ECT@ECT, Paul=20
Clayton/HOU/ECT@ECT
=09=09 cc:=20
=09=09 Subject: WARRANTIES & INSURANCE
LATEST MARKET DEVELOPMENT #2

To Distribution:

Recently we sent out a notice that the insurance market is requiring that=
=20
warranties from major equipment manufacturers [mainly prototype turbines]=
=20
were to come first before insurance. Following is a summary of recent marke=
t=20
changes that underwriters are requiring related to the vendor=01,s warranty=
=20
issues on prototype machines. Please note that the market could become more=
=20
restrictive and require the following on proven technology as well. This=20
market change should be incorporated into the contracts between Enron and i=
ts=20
vendors for the purchase of major equipment for power plants.

Underwriter requirements during:

Construction Period:

1. Vendor=01,s Warranty for the part that failed - required as builder's ri=
sks=20
policy does not cover it.
2. Vendor=01,s Warranty for resultant damage within the casing - now being=
=20
required by underwriters.
3. Vendor=01,s Warranty for resultant damage within vender=01,s scope of su=
pply -=20
now being required by Underwriters.
4. Vendor=01,s LD's following all of the above - underwriters now requiring=
=20
before DSU [delay in start up] insurance responds on at least prototype=20
machines.=20
5. Vendor=01,s responsibility for collateral damage to items not within the=
ir=20
scope of supply and resultant LD's =01) underwriters are not asking for thi=
s.

Operating Period [Permanent Insurance]:

1. Vendor=01,s Warranty for part that failed - required even though machine=
ry=20
breakdown [boiler & machinery] coverage will respond.
2. Vendor=01,s Warranty for resultant damage within the casing - now being=
=20
required by underwriters.
3. Vendor=01,s Warranty for resultant damage within their scope of supply -=
now=20
being required by underwriters.
4. Vendor=01,s LD's following all of the above - underwriters not asking fo=
r=20
this.
5. Vendor=01,s responsibility for collateral damage to items not within the=
ir=20
scope of supply and resultant LD's - underwriters not asking for this.

We have been told that two-year warranties after Taking-Over are generally=
=20
all that underwriters expect. We also have been told that if there were=20
problems such as we have experienced at Dabhol, longer warranties would be=
=20
extremely useful in arranging favorable terms and conditions on the permane=
nt=20
insurance. If there were no problems after two years it would not make much=
=20
difference.=20

If you find that someone is not listed in the distribution list, please pas=
s=20
this email to them. If you have any questions please call or email one of u=
s=20
listed below:

Richard Vincent
David Marshall
Terry Yamada
Paul Parrish
Jim Bouillion
Paul Clayton