WARRANTIES & INSURANCE

John:
I worked on someone else's project recently and have requested the cost to=
=20
include suppliers on the coverage so I will be interested to see if it is=
=20
available and, if it is, the cost.
Paul

John Schwartzenburg@ENRON_DEVELOPMENT
03/14/2001 07:03 AM
To: Keith Dodson/NA/Enron@ENRON, johng@nepco.com @ ENRON_DEVELOPMENT, Sheil=
a=20
Tweed@ECT, Brett R Wiggs/SA/Enron@Enron, Jake Thomas@ECT, Kay Mann@ENRON,=
=20
Nigel Carling/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Stephen P=20
Stein/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steve=20
Reistetter/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, John=20
Novak/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Sami Arap/SA/Enron@Enron, Mark=
=20
Evans@ECT, John G Rigby/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Scott=20
Dieball/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Paul E=20
Parrish/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, davidlu@nepco.com, Mark=20
Evans@ECT, Jon Chapman@ENRON_DEVELOPMENT
cc: Richard Leibert/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, James L=20
Bouillion@ECT, Rob Walls/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT=20

Subject: WARRANTIES & INSURANCE
LATEST MARKET DEVELOPMENT =20

JWVS

Paul, thanks for putting the word out on this, since excluding collateral=
=20
damage from warranty problems from BI will surely impact the risk profile o=
f=20
any project if the vendors will not step up to the collateral damage in the=
ir=20
vendor contracts.=20

Jim and Paul, do you know if the underwriters will offer coverage to the=20
vendors or turnkey contractors for this issue under their respective=20
contracts? GE (who are likely to want to continue to self-insure) can be=20
expected to put up a real struggle before choking liability for collateral=
=20
damage down, as they will likely see it as a material risk issue. I think =
it=20
ought to be added to the form contract discussions with GE as a test case.

I think this is an important enough change in the market that we need to=20
develop a common approach or at least a common understanding accross Enron=
=20
and NEPCO on the issues.=20

I will be back in the office next week and chase it up with you guys then.

=09Nigel Carling
=0903/13/2001 09:19 AM
=09=09=20
=09=09 To: Stephen P Stein/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Dan=20
Shultz/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, John=20
Schwartzenburg/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Joe=20
Reynolds/ENRON_DEVELOPMENT, Keith Dodson/NA/Enron@ENRON, John G=20
Rigby/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steve=20
Reistetter/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
=09=09 cc:=20
=09=09 Subject: WARRANTIES & INSURANCE
LATEST MARKET DEVELOPMENT

FYI
----- Forwarded by Nigel Carling/ENRON_DEVELOPMENT on 03/13/2001 09:16 AM=
=20
-----

=09Paul E Parrish@ENRON
=0903/13/2001 08:02 AM
=09=09=20
=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, David Lund, Dag Adolfsson/HOU/EES@EES, Curly=
=20
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/Corp/Enron, James =
A=20
Hughes/ENRON_DEVELOPMENT, Christopher B Hunt/ENRON_DEVELOPMENT, Michael=20
Oehrle/ENRON_DEVELOPMENT, Larry Reynolds/ENRON_DEVELOPMENT@ENRON_DEVELOPMEN=
T,=20
Rob Walls/NA/Enron, David K Bargainer/ENRON_DEVELOPMENT, 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, Brian Stanley/EU/Enron@ENRON, Roger=20
Tietz/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
=09=09 cc: Richard Vincent/ENRON_DEVELOPMENT, David Marshall/HOU/ECT@ECT, T=
erry=20
Yamada/Corp/Enron@ENRON, James L Bouillion/HOU/ECT@ECT, Paul=20
Clayton/HOU/ECT@ECT
=09=09 Subject: WARRANTIES & INSURANCE
LATEST MARKET DEVELOPMENT

To Distribution:

Recently, the insurance market has become much more restrictive with its=20
terms and conditions and is looking for substantial rate increases,=20
especially on property, machinery breakdown and business interruption=20
coverages. For example, because of market conditions and adverse loss=20
experience, Enron=01,s deductible for certain asset classes will be increas=
ed=20
from $500,000 to $5,000,000 combined per incident of property damage and=20
business interruption along with a (quantify percentage) premium increase.=
=20
In the context of construction risks and the associated operation of new=20
facilities, one of the major areas of underwriters=01, concerns are the nat=
ure=20
and scope warranties offered by the OEM.

Underwriters are requiring their insureds [Enron] to secure warranties from=
=20
major equipment suppliers, especially where technology risks are involved.=
=20
With the increase in insurance pricing and deductibles across the board, =
=20
underwriters are particularly sensitive to certain types of technology, an=
d=20
capacity will be severely limited or unavailable at any price if no=20
warranties are provided.

To ensure that superior, cost-effective insurance programs can be obtained=
=20
for our projects, it is imperative that Enron projects secure manufacturers=
=01,=20
warranties in the contracts negotiated with equipment suppliers and vendors=
..=20
Underwriters will require genuine guarantees, not just =01&token gestures=
=018. They=20
will require rights of subrogation against the OEM, which means that we=20
cannot agree to a waiver of subrogation for the benefit of the=20
manufacturers. It is the underwriter=01,s position that the manufacturer is=
to=20
take the risk for their design failure, faulty metallurgy, workmanship, and=
=20
unsuccessful =01&new=018 techniques and the underwriter will provide insura=
nce for=20
pure fortuitous loss or damage.

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