Re: Next steps with Copel shares

Sorry, I should have included you on copy list.

Regards, Bruce
---------------------- Forwarded by Bruce Harris/NA/Enron on 12/13/2000 09:23
AM ---------------------------

Bruce Harris
12/13/2000 09:29 AM
To: Sheila Glover/HOU/ECT@ECT, Theresa T Brogan/HOU/ECT@ECT, Robert H
George/NA/Enron@Enron, Donna Lowry/HOU/ECT@ECT
cc: Bruce Harris/NA/Enron@Enron

Subject: Re: Next steps with Copel shares

Ok.

FYI--we are still having discussions as to what exactly we are going to do
with the shares now that they are directly held in the Corp. vault by Enron
Brazil Power Holding XII. I suspect that what we will do will be to just
keep all the shares in XII and put them into the brokerage account, with some
sales occurring over time going forward. If this plan is agreed to, then
early next week we can call BONY together with Morgan Stanley (our prime
broker?) and work out a streamlined settlement procedure so that MS is
assured that shares will be delivered.

Regards, Bruce

To: Bruce Harris/NA/Enron@Enron
cc:

Subject: Re: Next steps with Copel shares

Bruce,
Please add theresa brogan to the distribution list. Theresa manages the
Equity Trading Group.
Thanks, Sheila
---------------------- Forwarded by Sheila Glover/HOU/ECT on 12/13/2000 09:13
AM ---------------------------

Lynn Aven@ENRON
12/12/2000 10:04 AM
To: Bruce Harris/NA/Enron@Enron
cc: Robert H George/NA/Enron@Enron, Kay Young/HOU/ECT@ECT, Dan
Boyle/Corp/Enron@Enron, Joe Kishkill/SA/Enron@Enron, Kent
Castleman/NA/Enron@Enron, Bruce Harris/NA/Enron@Enron, Sheila
Glover/HOU/ECT@ECT, Edward E Graham/SA/Enron@Enron, Rick
Hopkinson/NA/Enron@Enron, Jeffrey E
Sommers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
Subject: Re: Next steps with Copel shares

Bruce Harris:

We do not need to set up a new Cayman entity to transfer the two certificates
for 1.25M to. We achieve no US tax benefit for transferring or holding the
shares in a Cayman entity.

I propose that EBPH XII obtain the two certificates and then distribute those
certificates to Enron South America LLC, the sole shareholder of EBPH XII.
The value of the certificates at the date of transfer will determine the US
tax treatment. Given the liquidity discount surrounding the stock, using
the screen price on the date of the transaction is probably not a good
indicator of the fair market value. For tax purposes, we will assume the
value to be the historical cost basis since recent trades have been in a
narrow band on either side of that value. If the first 1.25M certificate
is sold shortly after the transfer to Enron South America LLC, we will need
to adjust the transfer price since the sales price to a third party will be a
valid indicator of what the fair market value was on the date of the
distribution..

If the ultimate transfer price is higher than the tax basis, EBPHXII will
recognize taxable income and pay US tax on the gain in the year the
distribution was made to Enron South America LLC. This would result in
reporting a tax expense in 2000 and perhaps book income in 2001 if that sale
takes place after the end of the year.

If the value on the date of the transfer is ultimately determined to be less
than the historical tax basis, the distribution to Enron South America LLC
will result in there being unrecovered basis in EBPH XII.

If the shares are sold by EBPH XII to affiliated Cayman companies, the same
valuation issues exist with the same potential for recognition of US gain on
the sale from EBPH XII to an affiliated. Distributing the shares to Enron
South America LLC will be much easier.

Lynn

Bruce Harris
12/08/2000 11:31 AM
To: Robert H George/NA/Enron@Enron, Kay Young/HOU/ECT@ECT
cc: Dan Boyle/Corp/Enron@Enron, Lynn Aven/NA/Enron@Enron, Joe
Kishkill/SA/Enron@Enron, Kent Castleman/NA/Enron@Enron, Bruce
Harris/NA/Enron@Enron, Sheila Glover/HOU/ECT@ECT, Edward E
Graham/SA/Enron@Enron, Rick Hopkinson/NA/Enron@Enron, Jeffrey E
Sommers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT

Subject: Next steps with Copel shares

Robert and Kay, thanks for all your work on getting the shares moved out of
Brazil and into the parent CayCos. I understand that by sometime early next
week the physical ADR certificates will be returned by BONY to the Enron
vault.

Here is what we now need to do:

1. We are going to need to send one certificate back to BONY and split it
into three new certificates. Two certificates will be for approximately
1.25M shares each, the balance for about 5M shares.

2. We need to form a new CayCo and sell or otherwise transfer (capital
split?) the two 1.25M tranches to this NewCo. This needs to happen next week.

3. Pending Dan Boyle's structuring efforts and an affirmative Corp. decision
(supervised by Joe Kishkill), the two existing CayCos which now own the Copel
shares will be sold into Whitewing Fund. That means about 12.5M shares will
go to Whitewing and the certificates will remain in the vault. This would
happen last week of the year--if it happens (there are actually about
15,443,000 total ADRs--I am approximating in this email).

4. The NewCo shares will remain outside this structure entirely. We will need
to put one tranche of 1.25M into a brokerage account--Sheila at this point we
will bring you in for assistance (again, hopefully next week).

5. Robert--we need to work out soon with Sheila, Skadden,and BONY to
establish an efficient mechanism to convert the full 1.25M share certificate
to unrestricted ADRs absent and prior an immediate buyer(s)--or we need to
figure out foolproof mechanics for constantly reissuing new certificates for
every small sale. We will then be looking for effective points to sell these
1.25M shares--and again, Joe Kishkill will provide price/volume targets
(execution via Gary Hickerson's group who has not yet been informed). In 3
months time, we will repeat the process for the other 1.25M tranche.

Robert--please call me so we can determine: (a) how to set up NewCo/transfer
shares, and (b) how to work the 1.25M "unrestriction" with BONY and Skadden.

Regards, Bruce
713-853-0950