enovate, LLC

---------------------- Forwarded by Kay Mann/Corp/Enron on 04/03/2001 12:58
PM ---------------------------
From: Travis McCullough@ECT on 04/03/2001 12:52 PM
To: Gregg Penman/Corp/Enron@Enron
cc: Kay Mann/Corp/Enron@Enron

Subject: enovate, LLC

Gregg:

Here is a very brief summary of my review of the LLC Agreement. It appears
that the only thing we really need in order for Enron to more actively manage
enovate's funds is a resolution by enovate's Board of Managers approving
Enron Corp.'s investment of enovate's funds according to a policy that
mirror's Enron's investment policy. This would enable our treasury group to
invest enovate's funds in the same manner that they invest Enron's. I
believe the following provisions of the LLC Agreement already contemplate
such an arrangement:

enovate is managed by the Board of Managers, which delegates its management
rights to the Managing Member (which is an Enron entity) (Section 6.1).
The Board adopts various policies and guidelines for certain activities of
enovate, and enovate has apparently already adopted Enron Corp.'s risk
procedures and control guidelines (see def'n of Risk Procedures and Control
Guidelines). The mechanism is already in place for enovate to adopt Enron's
investment policies.
The Managing Member has the express authority under Section 6.1.2, subject to
the risk guidelines, to (among other things) open and maintain bank and
investment accounts (Section 6.1.2© and invest Company funds in the name
and on behalf of the Company (Section 6.1.2(j)). The Managing Member is also
required to establish and maintain certain accounts for the Company (Section
10.4).
The Managing Member has the obligation to provide reports to the Board of
Managers, which will enable the Board of Managers to ensure that Enron is
complying with the investment policy.
The LLC agreement does prohibit the Managing Member from commingling
enovate's funds with those of any other member. Our treasury group has
confirmed that any investment of enovate's funds by Enron will be as agent
for enovate and investments will be held in enovate's name.
Enron's treasury group already provides a similar function to several other
entities with third party investors in which we are the managing member. I
am certain that they would be happy to answer any questions that Peoples may
have about how the investment program would be implemented and conducted.

Therefore, I think that the LLC agreement already provides the basic
authorization for Enron to invest enovate's funds; in fact, Enron could
really just go ahead and start an investment program without any action by
the members whatsoever -- adopting an investment policy and investing funds
is clearly within the authority already granted to the Managing Member.
Obviously, though, it is in our best interests to make sure that Peoples is
comfortable with what we are doing, We could probably also "customize" the
resolutions authorizing Enron to provide this service to address any concerns
that Peoples may have; however, I think it would be best if we did not
substantially depart from the existing Enron guidelines, as it may make it
more difficult for the treasury group to manage the funds if they are
required to operate by different rules.

Feel free to pass this message on to Peoples, and feel free to call if you
have any questions before our Thursday call.

Travis McCullough
Enron North America Corp.
1400 Smith Street EB 3893
Houston Texas 77002
Phone: (713) 853-1575
Fax: (713) 646-3490