Torrence Acquisition (South parcel)

Recommendations:

As the General Manager of the PERC/Enron Joint Power Development Program,
Enron hereby submits its recommendations to the Management Committee for
their consideration regarding the pending Torrence south parcel land
acquisition decision.

After reviewing the relevant commercial, legal and environmental issues with
the respective Project Managers and development personnel, Enron recommends
that the following courses of action be undertaken:

1. PERC should notify Peoples Gas, Light & Coke (PGL) on 6/16/00 that PERC
does not intend to assume the role of Buyer as provided for in the terms of
the land purchase Agreement executed between PGL and Air Liquide on
4/11/2000.

2. Assuming that PGL assumes the role of Buyer under the terms of the land
purchase Agreement executed between PGL and Air Liquide on 4/11/2000 and PGL
proceeds to the scheduled 6/26/00 closing, PERC and Enron should continue
their due diligence and development activities on the Torrence south parcel.
Upon establishment of a proposed budget and schedule, these activities should
be focused on achieving the goals of minimizing out-of-pocket development
expenses and implementing prudent risk mitigation strategies on behalf of
PERC and Enron.

3. Assuming that PGL assumes the role of Buyer under the terms of the land
purchase Agreement executed between PGL and Air Liquide on 4/11/2000 and PGL
plans to proceed to the scheduled 6/26/00 closing, PERC and PGL should
immediately begin preparation of the documents necessary to achieve the ICC
approval of any future transfer (sale,lease, or alternative structure) of the
Torrence south parcel from PGL to Torrence Power LLC.

Other Issues/Risks:

1. This recommendation is based upon the belief that although the Torrence
south parcel does hold potential value to PERC and Enron as a project
development site, the overall viability and risk/reward profile of the
commercial opportunity has not yet been sufficiently finalized.

The potential sources of value associated with this site are listed below:

a. The site/project currently hold a priority position in the ComEd
interconnection queue.
b. The site (in combination with the Calumet project) captures the majority
of available interconnection capability (500-600 MW) in the Calumet region of
the ComEd system. This would force competing IPP projects (i.e. Wizvest) to
bear the financial burden of ComEd system upgrade costs.
c. The site (in combination with the Calumet project) represents an integral
component of developing a commercial solution to the Mission Energy/ComEd 500
MW "in-city" regulatory obligation to the city of the Chicago.
d. The site represents one of the unique in-city sites capable of supporting
a power project from a zoning, fuel supply, and transmission perspective.

The factors contributing to the recommendation for PERC and Enron not to
proceed to closing on 6/26/00 are listed below:

a. The existence of known environmental contamination and the liabilities
associated with entering the chain of title on the Torrence south parcel.
b. The indemnification language contained within the land purchase Agreement
executed between PGL and Air Liquide on 4/11/2000.
c. The incomplete status of the overall commercial development opportunity
associated with the Torrence south parcel.
d. PERC and Enron's desire to maintain the flexibility to minimize
development costs while further developing the commercial development
opportunity and associated value proposition prior to executing an
ICC-approved land transfer from PGL to Torrence Power LLC.

2. It is PERC and Enron's understanding that PGL plans to proceed to the
closing on 6/26/00 and assume the role of Buyer under the terms of the land
purchase Agreement executed between PGL and Air Liquide on 4/11/2000.

3. The south parcel represents a potential power plant development project
site upon which PERC and Enron will continue to conduct due diligence and
development activities. The site is currently being evaluated as a candidate
for a 6 x LM 6000 facility with either an '01 or '02 in-service date.

4. PERC and Enron have decided that it would not be prudent for either of
their respective organizations to assume any form of environmental liability
associated with the Torrence south parcel. PERC and Enron shall work to
develop risk mitigation strategies including land options, environmental
indemnifications, and other structures which protect their respective assets
and the overall economic viability of a development project on the Torrence
south parcel.

5. A potential risk associated with the above recommendations is that the
time required to complete the ICC approval process necessary to transfer the
Torrence south parcel from PGL to Torrence Power LLC. PERC development
personnel have estimated that the ICC approval process could require up to 6
months (The transfer of the Calumet parcel was "fast-tracked" and took 3
months to achieve ICC approval). This risk could impact the viability of an
'01 in-service date for a Torrence Power LLC development project. PERC and
Enron will work to minimize the impact of this risk.

6. PERC and Enron shall work to develop a binding agreement which specifies
an approval and cost-sharing mechanism for future development decisions on
the Torrence south parcel. Such an agreement shall also specify a formula
for the sharing of proceeds associated with the marketing/selldown strategy
currently under development by PERC and Enron for all of the Chicago
development projects.

Feel free to contact me if you have any questions or wish to discuss the
above recommendations and information.

Fred Mitro
General Manager