LDP President election and Basic Energy Law Bill

John, as requested, I attach a note on the impact of the upcoming election
for LDP party president.

LDP President Election. The bottom line is that the outcome of the election
is unlikely to adversely impact the pace of energy sector deregulation in
Japan. There are a couple of reasons:
(a) the LDP is a status quo party - no single leader is powerful enough to
radically change the policy direction of the party; and
(b) the LDP represents only one pillar of the policy making triangle, which
includes the bureaucracy and large industry.

However, the choice of leader will impact market sentiment and the Japanese
economy as a whole, which in turn will have an indirect impact on the pace of
reform.

Basic Energy Law Bill. John, you are probably starting to see press on the
progression of the Basic Energy Law Bill. The Bill recently moved up for
consideration by the LDP Energy sub- committee, the committee headed by Mr Y
Kamei. We are still confident that the Bill will not pass beyond Mr Kamei's
committee. Mr Y Kamei and METI are opposed to the Bill. In addition, there
is growing opposition from politicians representing environmental and
anti-nuclear interests.

In the unlikely event that the Bill does receive the approval of Mr Kamei's
committee, its passage is likely to be delayed until after the election for
party president and the upper house elections in July. Further, the Bill is
currently in summary form and will need to be drafted in full, with due
consideration given to the impact on existing laws, a process that takes some
time.

In the meantime, our lobbying efforts continue:
The US Government is fully briefed and stands ready to intervene if the Bill
progresses further. In addition, the USG voiced their opposition to the Bill
last week during a visit to Washington by the promoter of the Bill, Mr Kanno
a member of the LDP and an ex TEPCO VP.
The Nikkei newspaper is likely to run an editorial on the Bill in the next
week or so, aided by information from Enron.
We are using our position in the "new entrants" group to lobby the Japanese
Government.
We continue to keep Y Kamei informed on an informal basis.

Transmission Access.
Following on from our discussion last Thursday, Enron Japan will be making an
application almost immediately with Kyushu Electric for transmission access
in connection with a transaction Morton Eric is running. The transaction will
raise several regulatory issues and, if successful, will give us an SSEUB
"licence" and access to the economic power exchange (Keizai Yuzu).

kind regards