Re: Next steps with Copel shares

Bruce,
At the end of the day, we need the name of the entity which will be the owner
of the shares to set up an account at Morgan Stanley, if it is different from
Enron Brazil Power Holdings. Legal will need corporate paperwork to open the
account.
Please let Theresa and I know when that determination is made. It sounds
like it is still under discussion.
Sheila
---------------------- Forwarded by Sheila Glover/HOU/ECT on 12/13/2000 09:16
AM ---------------------------

Lynn Aven@ENRON
12/12/2000 10:42 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, Sheila Glover/HOU/ECT@ECT, Edward E
Graham/SA/Enron@Enron, Rick Hopkinson/NA/Enron@Enron, Jeffrey E
Sommers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Bruce Harris/NA/Enron@Enron
Subject: Re: Next steps with Copel shares

Once ESA LLC (a Delaware company) gets the two certificates for 1.25M each,
Enron Brazil Power Holdings XII can be sold to Whitewing. If there is a
legal issue for having the ADR's held offshore we can certainly have EBPH XII
sale to a Cayco which will have net tax consequences similar to the
distribution to ESA LLC. . I am simply trying to simplify the
transaction. Please let me know if they need to be transferred to a Cayco
and I can work with legal and try to find an appropriate Cayco that may
already be established rather than setting up a new one.

Lynn

Bruce Harris
12/12/2000 10:25 AM
To: Lynn Aven/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, Sheila Glover/HOU/ECT@ECT, Edward E
Graham/SA/Enron@Enron, Rick Hopkinson/NA/Enron@Enron, Jeffrey E
Sommers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Bruce Harris/NA/Enron@Enron

Subject: Re: Next steps with Copel shares

What happens to ESA LLC with respect to Whitewing? If nothing, then
transferring to that company is ok as long as it is a CayCo. if it is nota
CayCo, we may have a legal issue to transfer it in.

Lynn Aven
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