Collateral Requirements in Power Contracts

Elizabeth:
I had a question about a recurring provision that I have seen in your Power
Contracts. Looks like our credit group accepts a Guaranty from a
Counterparty's Credit Support Provider as a form of Performance Assurance to
satisfy any collateral posting requirements. On the financial side,
Guarantys always supplement the colateral requirements such that we require
them to post cash or LC's to us even if we are holding a parent Guaranty.
Why is there a different approach on the power side? Alos, how does credit
value a parent guaranty? For example, if the parent's financial condition
worsens, does the value of the Guaranty drop? Let me know what you think.

Carol St. Clair
EB 3889
713-853-3989 (Phone)
713-646-3393 (Fax)
carol.st.clair@enron.com