Oboe'..

			ow

    Os'


	   Finance Committee Meeting

October 8, 2001


I Committee Members
   Mr. Herbert S. Winokur, Jr., Chairman
   Mr. Robert A. BeIftr
   Mr. Norman P. Blake, Jr.
   Mr. Ronnie C. Chan
   Mr. Paulo V. Penax Pereira
   Mr. Frank Savage


			    EC4U4Mom71

   I CONFIDENTIAL I


:xH064-00002

EndIin pmsibIIWe.'~

EXHIBIT
 4614
CmnNo If 04.0025





															 I:
															 6
															 C
															 4


										 EC4049A0638186
EXHOG4-00003





Herbert S. Winokur, Jr., Chairman
Robert A. Belfer
Norman P. Blake, Jr.
Ronnie C. Chan
Paulo V. Ferraz Pereira
Frank Savage

AGENDA

  Meeting of the Finance Committee
of the Board of Directors of Enron Corp.

 4:00 p.m. (CDT), October 8, 2001
50k" Floor Boardroom, Enron Building
	Houston, Texas

I Approval of August 13, 2001 Finance Committee Minutes

  Chief Financial Officer Report

/ rreasurer Report

4. Chief Risk Officer Report
     Quarterly Risk Update
	  - Audit & Compliance and Finance Committee Roles
	  - Trade Credit Update
	  - Market Risk Update
	  - Post Transaction Reviews

5. Projects and Amendments
     A) Revision to the Risk Management Policy
	  - Approve for Recommendation to the Board

     B) Pi~oject Southwood
	  - Approve for Recommendation to the Board

Mr. Winokur

Mr. Fastow

Mr. Glisan

Mr. Buy


Mr. Buy

6. Other Business

7. Adjourn

 9,.
 0#b
See Addendum for Deal Approval Sheets approved between Board meetings

ECASGM0lU

FYHfl~A-flflflOA

Page
 1-1

2-1

3-1

4-1

4-2
4-4
4-15
4-26

 5-1
5A-1

Mr McMahon

58-1

6-1

7-1





														 E
														 4-

														 U
														 1'
														 a
														 a
														 4


										 EC46ug~~
EXHOS4-00005





			     1 1   -. 1


	    Enron Corp.
	Finance Committee Minutes
       from August 13, 2001 meeting


			       EC4g4g~~~

EXHOO4-OOOOG





DRAFT

EXHOS4-00007

			   MINUTES
	       MEETING OF THE FINANCE COMMITTEE
		  OF THE BOARD OF DIRECTORS
			 ENRON CORP.
			AUGUST 13, 2001

    Minutes of a meeting of the Finance Committee ("Committee") of the
Board of Directors of Enron Corp. ("Company"), noticed to begin at 5:00
p.m. C.D.T., but actually begun at 5:50 p.m., C.D.T., at the Enron Building
in Houston, Texas.
    All of the Committee members were present as follows:

	     Mr. Herbert S. Winokur, Jr., Chairman
	     Mr. Robert A. Belfer
	     Mr. Norman P. Blake, Jr.
	     Mr. Ronnie C. Chan
	     Mr. Paulo V. Ferraz Pereira
	     Mr. Frank Savage

    Directors John H. Duncan and Kenneth L. Lay, Messrs. William S.
Bradford, Richard B. Buy, Richard A. Causey, Timothy A. DeSpain,
Andrew S. Fastow, Ben F. Glisan, Jr., David G. Gorte, Mark E. Koenig,
and Theodore R. Murphy, and Ms. Rebecca C. Carter, all of the Company
or affiliates thereof, also attended the meeting. Director Jeffrey K. Skilling
and Mr. Richard N. Foster, of McKinsey & Company, mc, joined the
meeting in progress as noted below.
    The Chairman, Mr. Winokur, presided at the meeting, and the
Secretary, Ms. Ceder, recorded the proceedings.
    Mr. Winokur called the meeting to order, noted that a draft of the
minutes of the meeting of the Committee held on April 30, 2001 had been
distributed to the Committee members, and called for any corrections or
additions.   There being none, upon motion duly made by Mr. Savage,
seconded by Mr. Chan, and carried, the minutes of the meeting of the
Committee held on April 30, 2001 were approved as distributed.

    Mr. Winokur called upon Mr. Fastow to present the Chief Financial
Officer's report, a copy of which is filed with the records of the meeting.


						  EC4894W0W1'





	   Mr. Fastow discussed total return swaps that had been completed in June
	   and July and noted that the ending balance shown in the presentation
	   materials did not reflect recent activity, which had led to an ending balance
	   of zero. He also reviewed recent treasury stock purchase activity. He then
	   presented a chart depicting the Company's interest rate exposure in
	   different areas and noted the dollar amounts at fixed and at floating
	   interest rates. He stated that the chart now reflected all elements of the
	   balance sheet, and while the overall amount had increased, the fixed-
	   floating ratio remained fairly constant. He then discussed other asset
	   monetizations.
		Mr. Fastow then noted that the Company was diversifying its funding
	   sources and compared the percentage of funding the Company had
	   received from banks, U.S. capital markets, and non-U.S. capital markets
	   over the last three and one-half years.    He then commented on the
	   Company's liquidity and net margin activity.

		Messrs. Foster and Skilling joined the meeting.

		Mr. Fastow then presented a summary of the status of asset
	   dispositions. He stated that the new accounting rules relating to goodwill
	   could impact the Company's debt to total capital ratio and commented that
	   the Company would be closely monitoring the sale of assets and the
	   impact on the ratio.

		Mr. Winokur called upon Mr. Glisan to present the Treasurer Report,
	   a copy of which is filed with the records of the meeting.  Mr. Glisan
	   reviewed the Company's active letters of credit and discussed the changes
	   since year end.   He presented the Company's guarantee portfolio as of
	   June 30, 2001 ahd noted that guarantees continued to increase due to the
	   significant increase in activity by the Wholesale group. He then presented
	   the liquidity forecast and commented on the sources and uses of funds.
	   He reviewed the Company's key financial ratios and noted that the
	   Company was on target to meet the year end goals.   He then discussed
	   the Company's ratings by the rating agencies and provided comments on
	   the views of each of the agencies.

		Mr. Winokur called upon Mr. Buy to present the Chief Risk Officer's
	   report, a copy of which is filed with the records of the meeting.  Mr. Buy
	   stated that he would only be reviewing the overall portfolio summary and
	   that he would be avaijable to answer any questions on the other material
	   provided in the report. He stated that the Risk Assessment and Control
	   group had     expanded   the portfolio  summary  to include      additional
									      EC45949M930791


EXHO64-OOOO8





	  international assets.  He then reviewed the assets in each of the four
	  performance categories, comprised of exceeding expectations, meeting
	  expectations, below expectations, and troubled. Mr. Skilling joined him in
	  answering questions from the Board regarding the assets in the troubled
	  category.
	       Mr. Winokur called upon Mr. Glisan to discuss a proposed resolution
	  relating to brokerage account authorizations.  Mr. Glisan discussed the
	  proposed resolution and following a discussion, upon motion duly made by
	  Mr. Savage, seconded by Mr. Ferraz Pereira, and carried, the proposed
	  resolution relating to brokerage account authorizations, as presented at the
	  meeting, was approved for recommendation to the Board.

	       There being no further business to come before the Committee, the
	  meeting was adjourned at 6:20 p.m. C.D.T.


		    Secretary
	  APPROVED:


	  Chairman

	  K:',s Minutes',2001 Minutes\OBI$O1F.doc


								      EC46949A9030192

EXHOG4-OOOO9





											N
											I
											'1
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											4
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								    EC4694uJ7u

EXH0S4-0001 0





		   Enron Corp.
	       Chief Financial Officer Report
		    October 8, 2001


					     EC4680M038794

EXHOO4-COO1 1

2-1





		       Finance Issues


		  * Enron Stock Activity
		  * Interest Rate Exposure
		  * Liquidity - Margin Activity
		  * Finance Related Asset Sales
		  * Outstanding Financings and Debt
		  * Summary Asset Dispositions
		  * Restructurings


				2-2                   EC4a49MLW?n
EXHO64-00012





	    Enron Stock Activity
      Stock Trading Activity - MTM
      Description

Opening Balance
Total Return Swaps
Ending Balance


Stock Purchase Activity (Treasury)
Description

Opening Balance
Repurchases
Other Activity
Ending Balance

400

$37.95   ($5,154)

400

Shares
 (000)

 577
7,079
(3,646)

Avg Price

Amount
 (000)

$78.21   $553,662

4010

								       Autt,orizatn, Sttject to ~n DerrOs ap~rovaI
								       Activiy                                  7078,501

		       includes Stock Option Exercises Stock Option Swaps (Non-Oualified}, and oIhe~ miscellaneous


																EC4U49A803O796

Shares
 (000)

Avg Price

Qtr P&L
  (000)

   ~uky Fbstion Lit               VOR       ttbnal open

Livii ($Ws~                     $1000

Orent posion (SIvM               ~.38

.%shtc ~1Is exehide mA poadion which S 'sitbeted .i ~A
      okpot~ontepo4
-t,aides 60% of JO) K an open posilon

$30000
$11.32

EXHOO4-00013

2-3





	     Interest Rate Exposure

		45, 000 , 000


		40.000000


		35,000,000


		30.000,000


		25.000.000


		20,000,000


		15.000,000


		10.000,000


		 5,000,000


		       0

		      Notes:
		      1. Current OP Balance of $1987 MM represents 23% of floating rote debt.
		      2. FO$Z goal of 80/20 IWfit composition.

								   2-4

2,443.605 601,202 9.563,546   $39,827,S89


				   8,01,54

DFIoaUng-22%
L EFo~ed - 78%

Projects- P~epays   140's   LTD-Off   OP   Projects- LTD-B/S Leases   ENE    Hedges  Total
Oft B/S                       B/S           On B/S                   Liabilities

EXH0O4-00014

EC46S4wg~g7





	  Liquidity - Margin Activity
	       as of September 26, 2001

			       Current Liquidity ($MM~
								   Normal        Disaster
								   Market        Market
								     (P50)         (P99)
										   1,524

				  Cash & ST Lines
				  Inventory
				  PRM Asset
				  Net ARIAP
				  Debt Shelf

				  Equity Shelf
				  Operational OF
				  Whitewing Vehicle Capacity

									  7,665          1,634

									    260
									   29.6

									    3.0

				  Board ADDroved LiquidIty Factor
				  Margin 10 day MeUc
				  Actual Coverage Factor

				  Required Coverage Factor

				  LiquidIty Factor wI largest Historical Monthly Maroin Out
				  Max Monthly Margin Out
				  Actual Coverage Facto!

									    996
									    7.7

											  636
											  2.0

											  1.5


											  996
											  1.6

							      2-5

								       EC4U4gA.g93708

1,524
1,134
 300
3,242
1,000
 375
 (50)
 160

(50)
160

Total

EXHO64-OOO1 5





     Finance Related Asset Sales
	  Prepays and 140 Sales
		($MM)

		   12/31/98

			     &'3W99

				      12/31/99

						 &'30/00

							  12/31/00

	       $    1,258 $    2,239 $    2,489 $     2,962 $   4,016 $

								    6/30/01

									     9/30/OlE

								     5,031 $    5,665

	       $     573 $       683 $     1,316 $     772  $    1,521 $   1,533 S    1,687
	       $    1,831  $    2,922 $    3,805 $    3,734 $    5,537 $   6564 5     7,252

		$8,000

		$7,000

		$6,000

		$5,000

		$4,000

		$3,000

		$2,000

		$1,000

		       12/31/98 6/30/99 12/31/99 6130100 12/31/00 6/30/01 9130/OlE


						     z~t
									/
								   y~o= ~'f2~~Y~9fr1


						   -b FA=   /4'9% (~=s)  3tC55/A!

												   2'~

								   k7ChPV aowt

							 yk~Jt(t -
										    EC4IY48MOM1e9

Prepays
Pasb 140

E
E
0
'S
a
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.5

2-6





     Outstanding Financings and Debt
		($MM)

		       o Capital Nkts - Non-Usi
		       * Capital lvkts - US
					  I. -


						-r

						      m


						       2000

Bank
Cap Mkt-US
Cap Mkt - Non US
	     Total

	1998
 Year End     % of
Outstanding   Total
    11,330     61%
     7,229     39%
	-       0%
$   18,559    100%

      1999                  2000              3Q '01 E
 Year End     % of     Year End    % of   Quarter End   % of
Outstanding   Total   Outstanding  Total  Outstanding   Total
    14,453     56%        17,933    52%       19,961     50%
    10,224     40%        12,897    38%       16,390     41%
     1 037      4%         3,550    10%        3,477      9%
$   25,714    100%    $   34,380   100%   $   39,828    100%

						  2-7
												E046949A00wrn

I, Bank

45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
 5,000

C-

K.
t~t

1998          1999

r

3QOIE





($ in millions)

Summary Asset Disposition Status

Disposition Status

     Said

     Sale Pending

     2001 Active Negotiation

     2001 High Priority

     2002 Active Negotiation - PGE
			  - Carnhusker

     2002 High Priority

Number of

  Assets

      30

	7

	9

      19

	I
	1

      21

Book Value
   On BIS

   $1,878

      626

    1,132

      158

    1,589
	0

    1,176

Book Value

   Off 815

    $124

      585

      99

      306

	0
      2~ 0.0
      252

	     Total                                                               88          $6,669       $1,666

						    -8

																	    c-s.

									      4
									      4

								    .12

								    .1

					1<

EC46949M030601





		  Restructurings
				 ,~ tlod&o'=u
       a. Oabhou&cky1~, tM ~ ~&Ld                       I
					    tnoP
       * Raptoy car- r~                       .~
					 cda~t

		   A,

	  Whitewi,,g .7 ~ (/fl ~9%( 4

a
							      .7,
   a
				    witA

		       oAr            <.~

						     +


			       2-0
								 EC4eg4 PAoo3o~g2





Summary of Major Non-Plan Divestitures

	    ($ millions)

		  Timing Assetjsusiness

					       Probability

							    Book
							    Value

EGEP India
Ecoelectrica
CEG/CEG-Rio
Azurix North America
Enron Wind (preferred)

Medium
 High
Medium
 High
 Low

$

378
146
247
197
200

$      390 $
       266
       247
       150
       200

2002  PGE
      Europe (Turkey/Poland)
      SK Enron
      GAS PART
      Trans redes
      EOTT Units
      COPEL
      GAIL
      Other Azurtx**

High
Low
Low
Low
Low
Low
Low
Low
Low

$     1,368
       266
       294
       213
       138
       127
       108
	70
       295

$     1,878 $
       240
       220
       205
       146
       127
	90
	51
       136

$     4.047

$     4.346

$     3.599

		  * Includes Canoun and IASA Mexico, Madera Ranch, Geoplan and Mendoza.


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EC4 09 49 AG 0 30 003

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6

  Price
tEst. VaIue~

Net Cash
Proceeds

307
254
247

200

Total

1,517
 240
 220
 205
 141
 127
  90
  51

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						    Aaenda Item 3

EXHO64-00022





		      Enron Corp.
		      Treasurer Report
		       October 8, 2001


						 8C4949AU38U8

EXHOG4-00023

3-1





			 Enron Corp.
		 Active Letters of Credit by Category
			      ($000)

				   09/21101

					       12131100

							 I 2131/99

Bids
Debt
EOTT
Lea sos
Other
Other Third-Party
Performance1
Trade'

$    7,766
    65,932
   139,055
    12,871
    18,833
       25
   980,403
   863,585

$    6,321
    24,241
   102,089
    12,750
   280,179
     6,605
   425,210
   634,300

$    5,968
    52,946
   150,310
    15,604
    80,071
    24,078
   522,006
    76,269

Grand Total

$ 2,088,470   $ 1,491,695

$  927,252

	    'irs or 58 15,622 posted as Margin are included in the Trade and Performance ealegonies


					  3-2
								      EC4694u.go7

EXHO6A.00024





			 Enron Corp.
			Guarantee Portfolio
			      (000's)

				08131101

Trade (Payment & Performance)
EOTT Trade
Swap Agreements
(Master & Individual)1
Projects (Non-Debt)2
Debt

$23,009,811
   544,7"

 13,222,421
  6,627,145
  3,338,969

$21,197,904
   544,744

 10,878,431
  4,632,739
  3,422,444

$17,316,817
   440,375

  7,148,443
  4,756,470
  2,493,049

		  Grand Total   $46,743,090
1 Increased counterparty activity.
2 Increase primarily due to6 NEPCO projects $1.B18MM

$40,676,262

$32,155,154

											     EC4694eA~~ggjg

12131100

12/31199

EXHO64-00025

3-3





							       Enron Corp
					    Liquidity Forecast & Sensitivities
							  As of September 26, 2001
									 ($000)
		   Sources Available:                                              Overnight    2-IC Days     lI-SO days        Total
		     Commercial Paper (Backed by committed Bank Revolver)          1233,000                                     1233000
		     Uncommitted Bank Lines & Loan Sales Lines        2              255,000                                      255000
		     teller of Credit Facilities                                      36,530                                       36530
		     Inventory                                                                  1,134,000                       1,134,000
		     Net Accounts Receivable/Accounts Payable                                   3,242,000                       3,242,000
		     Net PRMA                                                                     300,000                         300,000
		     Operational Cashflows                                                        (50,000)                        (50,000)
		     Shell Registration for Public Debt Issuance                                1,000,000                       1,000,000
		     Shelf Registration for Public Equity Issuance                                375000                          375,000
		     Whitewing Vehicle Capacity                                                   160,000                         160,000
		     Merchant Portfolio Available for Monetization                                                490,883         490,883
		     Scheduled Asset Monetizations                                                                120,000         120,000

		 Total Sources Available                                       $1,524,530   $6,161,000         $610,883      $8,296,413

			   CP Program Capacty is $3,350 maior
			  2 Lear, Sales capacity is $550 million
			   [IC Lines Capacty total$2,125 miller
			   A/R Sale Proceeds comprise less than 10% of Trade Receivables Available ($tI.IB)
			   IS mikion shares at 125 per share


									       3-4


EXHOG4-00026





			    Enron Corp
		     Liquidity Forecast & Sensitivities
			  As of September 26, 2001
				 ($000)

	       Forecasted Outflows:                                                  0/WiG Days    11-90 days       Total
		  General & Administraliw Expenses                                       50000         405,000       455,000
		  Debt Maturities                                                      1312,000      1,400.000      2,712,000
	       Total Forecasted Outflows                                               $1,362,000    $1,805,000    $3,167,000

	       Contingencies:                                                        O/N-10 Days   11-90 days       Total
		  Margin Acti~4ty (Postings & Deposits Returned) 1                      836,000                      836 000
	       Total Contingencies                                                      $836,000                    $836,000

	       Forecasted Inflows;                                                   0/N-jO Days   11-90 days       Total
		  10 Year Benchmark                                                                  1,000,000      1,000,000
		  Recei'able Monetization                                               250,000        500,000       150.000
		  Contract Monetization                                                              1,400,000      1,400,000
		  Prepaid Contracts                                                     350,000        400,000       750,000
		  Eon Monetization                                                      185,000                      185,000
	       Total Forecasted Inflows                                                 $785,000     $3,300,000    $4,085,000

			  Represenls 99% confidence interval on 10 day V@R based on h~toricaI trsrgin.


															       ECAIO4eAJPJB1O

									 3-5


EXHOG4-00027





	  Crisis Funding Breakdown
		   ($MM)

			 Normal Process

		    CP Dealer CP Direct
	      Date  Placement Placement

	   Week I
	    11-Sep


	    12-Sep

	   13-Sep

	   14-Sep

	  Week 2
	   17-Sep

	   18-Sep
	   19-Sep
	   20-Sep
	   21-Sep

			 305

			 865


			 435

			 507
			 403
			 220
			 216

				       Rank
				      Loans

					   74

				   125    103


				   190     70

				    67     85

				     2     80
				    28     91

					     Crisis
					       Bank
					       Lines

						      Total
						    Funding  Comments

					50     671      721   NoOP Market
							      bnplemented Bilateral Loans with Cifi, Chase,
							      and BofA
					       512      512   Marketopenbutverylight
							      Covered $354MM of crisis borrowings from 9/11
							379   Treasuries resume trading
							      Covered additional $266 of crisis borrowings
						       1,093  Begantooverfund
							      Repaid $15OMM of WestLE BL

							695   Stock reopen, Fed cuts 50 bps
							      Repaid final $1 00MM on WestLB BL
							659
							403
							302
							335

		 Slow paid large receivables.
		 Stepped up Direct CP placement efforts.
		 Over funded when possible.
		 Sept 11-14: Longest term available 6 weeks at 100 bp wider than before.
		 Sept 17-21: Longest term available 6 weeks at 50 bp narrower than prior week.

					      3-6


EXHO64-00020





  B


 Financings Completed Since September 11

		 Amount

Transaction

($MM)

Market

  Prepay

Receivables

Mon etization

250

Conduit

  EOTT 140

Master Lease

Program

Prepay Extension

Inventory

Sale

ServiceCo.

140 Sale

			      $1,375

											   EC46949A0030612

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0

IE&V
  ~0W   &e.A

2' ~

2


	   ~
~

   ~h  ~ ~

	    O~    *(f*tt~
_

Sale

350

Bank

185

Bank

150
150
150

Bank
Bank
Bank

140

Bank

t

A

N





Enron Financings in 2001
 Completed to Date:
			  Amount

Type

# Deals

($ billion)

Bank                       24        6.29
Capital Markets             5        4.75
Total                      29     $11.04

6 Syndications (Closed in 2000)

2.1

To be Completed

	 - AFt
t)  AKL' At -/P'3*)

S   C'
      I
       i~~1,

t


  Cl

			    Amo~ud't~~
		  # Deals  f$-biilion)
   Type

Bank
Capital Markets

	   1.80>
(2>    - -1.50-

Relinancings

Total               10    <(5.05

 Projected Total 2001:          $15.09

				    %,<' DC-i  v


				     K-It .oY~;

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								 0.2
								  9


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a

'C>t  co-ic

NJ
ci.

4- r&~

t=QD ii,-'   A  s-  u-'~ '-~





Key Financial Ratios
     Focus

		-  K!  ~             ct1wLj

     - or-
u~-.       ~4-7            V          $


			   4.07         4.16        4.02

 3.52          3.69



7

K>

&t

	  -4


	(flmr

	 IC!

	    -c>.w
		    F'' -
		- ;~  F>   9
	   -   (01w;     ,J
		    9~ ~nc
Remaining 2001 Transactions to
  AIR Sale
  Contract Monetization
  Prepaid Contracts

C
2 /


      O~ P~rC

    Si-i'>

Meet Plan
    $500
  $1,400
    $400

						-~       3.36
					     3.08
		   2.62         2.54

														  EC46949A0030814
									 Other 2001 Finance Activity

								  Ten Year Benchmark

											       $1,000

-4-- Funds flow Interest Coverage             ---- Into rest Coverage

Kit'
   C

A     4~*   ~/b~IJ. L~    /61/2 ,fx


Dt-~    $&j-*

       o     ~Q4~
		   -1


       &   ~(4/<

3-9

			   I

    /    /        ~4J? ~

>         <-/

      -/                   I.-
		   .11 ~,7


			     46/> J(\7r'.  'Vt)
		      y

5


4

2.18

I

1998

1999

2000

2Q '01

2001 P

 '4-
2' 1v~

C AAJ-'r ~





	     Rating Summary

Rating Agency

Long Term

Commercial Paper

     Standard & Poors

     Mood

     Fitch IBCA

     R and I (Japan)

			  BBB+

			  Baa 1

			  BBB+

			   A-.

					   A2

					   P2

					   P.2

					   n/a

							  Stable

							  Stable

							  Stable

							  Stable

				   3-10                        EC45949M030615

EXHO64-00032

Outlook





     Net Investment Activity
	    ($MM)

Pro form a
    2001
Operating
  Results

   Q3&Q4
  Iden tilled
Transactions

Funds Flow from Operations               1804                   374              2526         2,900

Change in Working Capital                (3,142)              (3,797) (1)        1,426  (2)   (2,371)

Proceeds from Asset Sales                1,423                1535                 738        2,273   (3)

Investing Activities                     (2,583) (4)          (3,379)             (350)       (3,729)

(I)  Includes $426 MM in margin deposit refunds.
(2)  Includes $1 B in Accounts Receivable Sales, $500 MM
     posted and $2SOMM ofinventorymonetizations.
(3)  Primarilyproceeds from sale of Peaking Power Plants.
(4)  June YTD includes $347 MM related to Sithe intangibles, $487
     restructuring, $326 MM for Azurix privatization.

						    {~    (~(

of LICs replacing cash margin


       MM forsithe


	>,c     $0~~A~2 v/c 5tOu~
	\J r>v~

		 )

									       EC46y4gMoao8i6
				      3-11

Actual
 June
  VTD

Pro form a
   2001





	    Cost of Capital

5 year annualized return

Equity Analyst Forecasted Stock Prices

		      ENE WACC

35.0%
30.0% -
25.0%
20.0%
15.0% -
10.0% -
 5fl% -
 0.0%

Itr-98  Sep-98  IMr-99 Sep-99 I~r-00 Sep-00 Iv~r-01

After Tax Debt
Equity

     % of Capital
Cost   Structure

WACC

3.8%
10.2%

C' C' C~
    V

45%
55%

Sep-01


1.7%
5.6%
7,3%

ry  .~cr

Finn

Recommendation

 12 Month
Target Price

AG. Fdwards            Accumulate                            55
CIBO Oppenheimer       Buy                                   80
CSFB                   Strong Buy                            84
Goldman Sachs          Buy                                   68
Howard Well            Accumulate                            76
Menill Lynch           Buy                                   75
Morgan Stanley         Outperform                            85
Pwdential              Buy                                   55
Simmons                Buy                                   55
					    Average        70.3

					     Closing    Implied
Current Stock Price                 Date       Price Equity Return
				9/26/2001     25.150     179.7%

					 V. of Capital
Cost of Capital                     Cost   Structure
After Tax Debt                      3.8%       45%         1.7%
Equity                            179.7%       55%        98.8%
					WACC             100.5%


					     Closing    Implied
$35 Target Price                    Date       Price Equity Return
				9/26/2001     25.150      39.2%

					 4 of Capital
Cost of Capital                     Cost   Structure
After Tax Debt                      3.8%       45%         1.7%
Equity                             39.2%       55%        21.5%
					WACC              23.3%

iv'    rr Ri      OK
		     ocu-t> p

-~
						  EC46g494o9~081y

3-12

Cost of Capital

  Pr


U





-WI           '.ffi v-J  L~j  L.J  uU   U-i  L4   12-2  ~-~-j ~-~-J k____ II] w


		       Estimated New Issue Cost
				    As of September 26, 2001


		   Enron Estimated New Issue Cost

		   USD                          lv       3y      5y       jOy
			 Capital Markets     3.88%    5.93%   6.35%     7.33%
			 BankMarket         L+125    L+150

		   USD Equivalent libor Funding Spreads

			 USD

			 Sterling
			 Euro

					 1.76%
					 1.12%
					 1.08%

						  1.76%
						  1.12%
						  1.08%

							  1.55%
							  1.31%
							  1.24%

								    1.80%
								    1.50%
								    1.47%

 Qo~.04 pt;

S I e

V           24

						      3-13
												  EC45949M089318





k-~  Lit LA   Lw  Lw  &S   Ut  4W   LJ.~J L-2 L~~9 ~ t-J c-~----i LW W

Comparison of Funding Spreads
	       Marketers and Producers

 375


 325


 275


 225


 175


 126
  01/02101

ytjw

	  ~M
o   &YLor 5~4A

o  ~oYZ eA5i4 S
	     3)")
      - cc~t~+ fUfc'O~-1

 o&fEtI   &
    pssdt rh~
       Uj tAt

-NIR8.300% due 05/01/11
-Calpine 8.500% due 02/15111
-FSR3 R~wer 7.750% due 04/01/11
- Enron 6.75% due 08/0 1/09

    NRG 8.250% due 09/15/10
    Allegheny Energy 7.600% due 03/15/11
-6 Paso 7.000% due 05/15/11
-'~%iB 7.125% due 09/01/11

						     3-14                                        EC46o4guoaooi9

0.
.0
V
a
I
a.
&0

02/11/01     03/23/01   05/02/01     06/11/01    07/21/01   08/30/01





L~.   '---- C> ~ &---i L-L cJ4 Q2 W LI) L~


		     Market Structure
			 Sector Spreads
		       As of September 21, 2001

	    9

	    8

	    7


	    5

	    4

	    S

											       HISTORICAL 5-YEAR YIELD
			    HISTORICAL 3-YEAR YIELD
										9
															     -Treasury
										8                                            - Enron

										7                                                Duke
															     -Dy negy
									     S                                                   El Paso

										5                                            -Mirant
																 Reliant
										4
															     -Williams
										3
	      g~~g~gSgggggg goOO
						 000

	      ='o~n~nfeo~.o-.nenr-o~

       Historical 3-Year Treasury Spread (bps)

       ENE (BBB+/BaaI)

       OUK (A/fl)

       DYN (S88+IBaa2)

       EPO (BBS/Baa2)

       PAIR (BBB-/Baa2)

       REt (B88~/Baa2)

       WMB (RBS-/Raa2)

       Treasury Rate

			      912112001
				   190

				   135

				   185

				   210

				   275

				   215

				   205

				 3.37%

					  9/1/2001

					      156

					      106

					      191

					      163

					      251

					      241

					      174

					    3.89%

						    612912001

							 148

							 143

							 198

							 168

							 248

							 263

							 180

						       4,60%

							      3/30/2001
								   139

								   143

								   205

								   180

								   290

								   240


								 4,39%

						  ~ikt&r6)r  c~

							  -Treasury
							  -Enron
							       Duke
							  -Dynegy
							       El Paso
							  --Mirant
							       Reliant
							  -Williams

	      K) LjiiCcc~

~  Lov~i  \;ru 4}' -
	   I   U

 t&J    dr.Am-~ S Wv 64

     3-15
N   -k4,rt

		   EC4949~0306~
dear  aYt&A w~Qt

q,\fl ~ -  flfA -. r~-~-,A ~4~L

I-----

		       ---I


%r)

V      it
     A-          N
       44~>     ~

	    HISTORICAL 10-YEAR YIELD
9

					   - Treasury
					   -Echos
					       Duke
			   -  .            -Dynegy
				      -        ElPaso
					   -Mired
					   -Retant
					   ---Williams
3                                          _____


    ogg2gsgQgog

				     Sn

0000000000 0000000000

Historical 5-Year Treasury Spread (bps)                                   Historical 10-Year Treasury Spread (bps)
			 9/21/2001        9/7/2001  6/29/2001 313012001                        9/21/2001  9/7/2001  6/29/2001  3/30/2001
ENE (2884-/Ba    ) ~ ~       225              168       159       161     ENE (BOB+/Oaal)           220      183        15$        173

DUK (A/AS)              -    122              109       114       104     DUI< (A/A31               146      135        133        188

DYN (BDB+/Baa2)    ,'        195              155       163       186     0Th (BBB+/Baa2)           210      IRS        183        208

EPS (B6B/Eaa2) /             226              195       183       172     EPO IABR/8aa21            238      232        218        188

PAIR (BBB./Ba    )           270              218       238       N/A     PAIR (RBB4Baa2)           290      265        276        N/A

REI (8   */Baa2)             225              205       219       221     REI (BBB+/Baa2)           235      230        263        268

WMB (BEB-/Baa2)              220              178       184       176     WMB (BBE-/Baa2)           228      207        198        198

Treasury Rate              3.83%            430%      4.95%     456%      treasury Rate           4.70%     4,79%     5.41%       4.92%





	   __ &w WA ~t tic w kit wi


		      Market Indicators
			 As of September 26, 2001

			  YTD Max
Interest Rates

YTD Mm    YTD Change

1213112000

30 Day A21P2 CP
 3 Yr Treasury
 5 Yr Treasury
10 Yr Treasury
Libor (3M)
Equities
Dow Industrials
S&P Index
NASDAQ
Commodities
Natural Gas (Henry Hub)
Crude (NYMEX)

3 Year Sovereign Spreads

YTD Max

'flD Mm    YTD Change

1213112000

Argentina (B-ICaal /B-)
Brazil (BB-IB1/BB-)


			      o   LQ\erky a>>

										EC4eg49Mo~B21

912612001

6.45%
5.14%
5.05%
5.52%
6.40%

11,338
1,374
2,859

10.50
32.19

2.83%
3.29%
3.77%
4.55%
2.59%

8,236
 966
1,423

 1.89
21.81

-3.37%
-1.84%
-1.2 1%
-0.48%
-3.81%

(2,247)
 (317)
(1,005)

(8.61)
(4.75)

6.40%
5.13%
4.98%
5.11%
6.40%

10,787
1,320
2,471

10.50
26.80

3.03%
3.29%
3.77%
4.63%
2.59%

8,540
1,003
1,466

1.89
22.05

26.10%
9.40%

4.96%
4.4 1%

15.68%
4.3 1%

9126)2001

7.00%
5.02%

22.68%
9.33%

I(ot~2.

3-16





					I


					  S


					  S
					  3
					  b





  Enron Corp.
Chief Risk Officer Report
   October 8,2001


	4-I

EC4694eAoo3gn'jj

EXI1064-OOQ4O





      Audit & Compliance
	and Finance
       Committee Roles


		      EC449M030824

																				      A

EXHOGA-00041

4-2





   Roles For Monitoring The Risk Management Policy

     Audit and Complianc9 Committee

~   Review internal controls as it relates to the
    operation of the Risk Management Policy

>   Review limit violations and determine that
    actions taken by management are consistent
    with the Policy

	Finance Committee

r Approve risk management framework and
  review policy issues

r Determine appropriateness of limits,
  correlations, profitability and liquidity based
  on the Company's risk appetite as ratified
  by the Board

~- Review corporate liquidity and funding
  plans

     r Review investment returns achieved
       relative to expectations


4-3

2

EXHOB4-00042

EC4uqjs,no~





     Trade Credit Update


	    4-4


EXHOB4-00043





		       Trade Credit Update
			Table of Contents
	    *  Trade Credit Portfolio
	    *  Net Credit Exposure by E-Rating
	    *  Major Trading Relationships
	    *  Top 25 Net Credit Exposures for August 31, 2001
	    *  Collateral
	    *  Change in Cash Collateral
	    *  Top 5 Country Net Credit Exposures
	    *  California Update
	    *  Bankruptcy Update


				    4-5                          EC4UWN2?

EXHO64-00044





Trade Credit Portfolio

66%


34%

     $1092
      311.47


      $5.67
      54 84

m
   Gross Exposure

       $16.69
	$1621

75%
25%

as of August 31, 2001
    In $Bns

    ($1.16)
    ($1.15)

($0.50)
($0.59)

68%
32%

($0.38)
($0. 25)

* Investment Grade
* Non-Investment Grade

($0.23)
($0.18)

65%


35%

Cash Collateral

   ($1.54)
   ($1.40)

Other Collateral
(including monetizations)

    ($0.73)
    ($0.75)

    $9.26
    $9.73


    $5.06
    $4.43

Net Exposure

  $14.32
   $14.18

Numbers in italics represent comparable amounts at June 30, 2001.

4-c                              EC4U4IANNSZI

EXHOS4-00045





		      Net Credit Exposure by E-Rating


							Investment
							  Grade


							  Non-
							Investment
							  Grade

		 70% -

		 60%

		 50% -

		 40% -

		 30% -

		 20% -

		 10% -

		  0% -

			 1
			 2

			 3


			 4


			 5

			 7
			 8
			 9

			 10
			 11

										       0813112001
										       $14.32 Bn

									4-7                                              EC46s4eAa0

EXHOO4-00046

100%

90%

00%

0


0
a-
0

1

2

3


4


5
S
7
8

9
10

0613012001
$14.16 Rn





	  Major Trading Relationships
		 as of August31. 2001
	      Total Net Exposure $14.32 Bn

Parent
E*Rating

  Major
Relationship~
   40%   /
	 /
	/

RelationshIp

     4    tXJtorp.
     5    Sierra Pacific Resources
rnPG&E Corporation
     4    Dynegy Inc.
     4    El Paso Corporation
     2    Bonneville Power Administration
     3    Coral Energy Holding, L.P.
     I    Government Of The United States
     1    Koch Industries, Inc.
     1    BP p.l.c~
     11   Edison International
     4    TransAlta Corporation
[F] calpine Corporation
[flEOTT Energy Partners LP
     2    FPL Group Inc.
     3    Westcoast Energy Inc.
     4    Petro-Canada
     3    T~af15Ca~da Pipelines Limited
     5    Canadian Natural Resources Ltd.
     I    American International Group. Inc.
     S    Avists Corporation
     3    Sempra Energy
     2    Duke Energy Corporation
~CMS Energy Corporation
     4    Dominion Resources Inc.
     5    Williams Companies, Inc., The
     4    Reliant Energy Inc.
		 Major Relationships Total

 Gross
Exposure
In SUM'.

1,615
 542
 505
 268
 340
 229
 222
 216
 197
 274
 196
 162
 258
 133
 131
 118
  90
  84
  81
  75
  70
 154
 175
  90
  82
  33
 161

	      Net
Collateral Exposure
In 5MM.     In SUM's

(101)     1,514
  -         542
  -         505
  -         288
(100)       240
  -         229
  -         222
  -         216
  -         197
  (88)      186
  (34)      162
  -         162
(100)       158
  -         133
  -         131
  -         116
  -          90
  -          84
  -          81
  -          75
  -          70
  (86)       66
(118)        57
  (34)       56
  (29)       53
  -          33
(141)        20

6,521      (833)   5,688

	    Count.rp.flJ.s now to 'Major R.Iatlonships list

Non-Investment Gmd. Credit Exposures

4-S
					    EC4349A330m

EXHOO4-00047





    Top 25 Net Credit Exposures for August 31, 2001
							      In $MM's

		E-Rating         Counterparty Name (Legal ~ntlty)                  June 30, 2001 August 31, 2001
		     4    TXU Europe Energy Trading Ltd.                                   1554          1,476
		     12   Pacific Gas & Electric Company                                    474           505
		     5    Nevada Power Company                                              422           373
		     2    Bonneville Power Administration                                   105           229
		     1    United States Department of Energy                                188           205
		     3    Coral Energy Holding, L.P.                                        193           191
		     2    Koch Petroleum Group, [P.                                         393           180
		     4    Dynegy Power Marketing, Inc.                                      196           177
		rSouthern California Edison Company                                         145           156
		~~~jCalpine Energy Services, L.P.                                           160           154
		     5    Sierra Pacific Power Company                                      149           145
		rEOTT Energy Liquids, LP.                                                                 132
		     4    TransAlta Utilities Corporation                                   172           131
		     3    El Paso Merchant Energy, LP.                                      214           131
		     3    IBM Corporation                                                   102           120
		     2    Florida Power & Light Company                                     134           120
		     3    Public Utility District No. 1 of Snohomish County                  98           116
		     4    Engage Energy Canada LP.                                           71            98
		     1    BP Energy Company                                                 163            93
		     4    Coastal States Trading Inc                                        154            93
		     3    SBC Services Inc.                                                                89
		     3    City of Santa Clara California, Silicon Valley Power               45            88
		     4    Petro-Canada Oil and Gas                                           79            83
		     4    Canadian Natural Resources                                         82            72

		rOwest Communications Corp.                                                  70            70
										     Top 28 Total        5,227
								    Other Net CredIt Exposures           9,092
								     Total Net CredIt Exposure          14,319
	   Coant.qmflMs flew to Top 28' list
   j22J Non-investment Grade Cr.dlt Exposures


EXHO64-00048





				    Collateral
					 In $MM's

813112001    913012001

Counterparty

0&3112001   09/3012001

			CASH POSITIONS
The Chase Manhattan Bank (1)
Duke Energy Trading and Marketing, L LC
Sempra Energy Trading Corp.
Reliant Energy Services, Inc
BP Corporation North America Inc.
The New Power Company
El Paso Merchant Energy, IP.
Morgan Stanley Capital Group Inc.
PSEG Energy Resource. & Trade LLC
Goldman Sacha Capital Markets, L.P.
Calpine Energy Services, UP.
UtiliCOtp United Inc.

Other Cash - Incoming
Other Cash - Outgoing

Aquta RiSk Management Corporation
Mirant Americas Ene*gy Marketing. L.P.
Bank of America, National Association
Enlergy-Koth Trading, LP
Credit Suisse First Boston International
Merrill Lynch Capilal Services, Inc.
I-less Energy Trading Company LLC
Pllibro Inc
Reliant Energy Services. Inc.
El Peso Merchant Energy, IP.
Matron,. Ltd
Morgan Stanley Capital Group Inc.
Williams Energy Marketing & Trading Company
J. Aron & Company
Duke Energy Trading and Marketing, L.L C.
Net Outgoing Cash

Tot.I Incoming Cash
Total OutgoIng C~.h


Bank oI&tontra.l

OUTGOING SECURITIES

				       INCOMING LETTERS OF CREDIT
377         255   Abegheny Energy Supply Company. LLC
118         190   C$,ine Energy Services, L.P.
67          168   TXU Energy Trading Company
169         160   Constelation Power Source, Inc.
88          130   EPCOR Energy Services (Albetta) Inc.
109         tog   The Prerneor Refining Group. Inc.
100         100   Select Energy, Inc.
100          96   SempraEnergyTradingCorp.
49           53   Southern California Edison Company
33           52   Entergy-Koct Trading, LP
50           50   Other
48           48   Total Incoming Letters of Credit

 233         267
 156)        (122)

 64)            0
(200)           0
 (26)         (48)
 120)         (50)
 1t7)         (59)
 145)         (60)
 (43)         (681
 (72)         (781
1135)         (921
(100)        (100)
(145)        11231
1119)        11361
(296)        (186)
 t61)        (210)
(521)        (330)

(579)          16

1,541         1,678
(2,120)      (1.5621

		  Counterpertv

		     OUTGOING LETTERS OF CREDIT
Duke Energy Trading and Marketing, LL.C.
California Power Exchange Corporation
Pack Gas & Electric Company
Wilierns Energy Marketing & Trading Company
Mirant flnericas Energy Marketing, L.P.
Aquila Risk Management Corporation
The Caitfomia Independent System Operslor Conporabon
Arjufa Enes~y Marketing Corporation
Oman Liquefied Natural Gas. LLC.
Sate R  Finanoal Products Corporation
Powerex Cow.
Duke Energy Marketing LiMed Partnership
Other
Total Outgoing Letters of Credit

Mahonia Ltd
ISO Now England Inc.
Total Outgoing Surety Bonds

(93)       (125)

OUTGOING SURETY BONDS

127         122
 50         III
101         110
 76          76
 40          40
 11          35
 50          32
 21          31
 23          23
 44           0
328         364

671        944

08/3112001


     (200)         (200)
     1107)         1107)
     1100)         (tOO)
	0          (tOO)
	o           (55)
	o           ISO)
      (36)          (36)
	0           (30)
      (231          (19)
      (181          (18)
      (27)            0
      (181            0
	IA)          (5)

(533)        1720)

(981)        (9811
(40)          (45)

(1,021)      11,028)

(1) Includes amount related to prepay structure with Mahonia Ltd.

4-10                                EC45049AN30832

EXHO64-00049

Cournti.rparty





	  Change in Cash Collateral
		  In $MM's


		    Major Cash Positions - Incoming

Cou,flarp.rty

IncomIng Cat,     Outgoing C.t -4-- Mat CaSt

The Chase Manhattan Bask
Duke Energy Trating and Marketu,g. LI. C
Senpra Energy TradIng Cap
Reliant Energy Senices, Itt
OP Cowaba NOV91 M,e~ce itt
The Nee Power Can pany
El Paso M.rchan( Energy. L.R I)
Morgan Stanley Capita) Group Inc
P560 Energy Resowces & Trade ITO
Goldman SC,. Capita Maskats. LP.
Capine Energy SONICOS, IP.
Utilcap Uneled Inc

1,544


El

06/30/2001 08/31/2001 09/30/2001  03 Change
     566      3??      255             (331)
      66      118      190              124
      42       67      188              126
     135      189      160              25
      92       88      130              36
      70      109      109              39
	0     100      100              100
     120      IOU      96               24)
      32       49      53               21
      10       33      52               42
	o      50      50               50
	0      48      48               48
     246      233      257              22

Tobsi incoirikig  ~         1 541

lATh       260

Major Cash Position. - Outgoing

	    Coijntagma,ty
Diii. Energy Traifrg and Merketing. L L C.
I ken & Coin peny
WIlsa Erergi Marketing & ?TS6IIQ Cci  eny
Moegan Statey Capital Group no
Mahonw LW
S Paso Merchant Energy. L P. (3)
Reliant Energy Serhicos, Itt
Phbo Inc
Hess Energy Trading Ccinpany LIC
Fkrri) Lynch Capital Senices no
CvOI Sue.. First Boston Irterriabo-isl
Fntingy-tcoch Trackg, IP
Bank of Ainedca, Nebasi Assodabon
M'rantAsnesicas Energy Mai*etng. L P
A~.als Risk Maragasnert Carpasboc

06/30/2001 08/31/2001 09/30/2001

			   03 Change
(35))     (521)      330)        21
(63)      (161)      (210)       (1471
(10)      (296)      (186)       1170)
442)      11191      (1361        6
14421     11451      (1231       319
  0       (lCD)      11001       (lOU)
124)      (135)      (92)        32
(54)        721       78)        24)
  (I)       43)       68)        67)
  491       45)      (601        Ill)
  (SI       (171     (591        (50)
  o         (201     (501        50)
  o         126)     (48)        (48)
(101)     12001        0         lOt
(112)       (64)       0         112
(184)     1156)      (122)       82
				 (lii

Total Outgoing     1.548)   (2,120)   ff~i~f

													     Nat Cab     1250)      579)

																	    II        258

									   (1) I'I008* and outgoing coQateml posted in the same rount for a - cesh
									     POSlIOO equal to zero


															    EC45949A9fl0533

		  4,760

			     3,~?


~~lt
       2 633

4,000

3.-

taco
I,-

   0

1.000)

(2,000)

(3.-)

(4.000)

1)10/2000    1213112003   343111001     UlXl2901    8/31)2001

EXHO64-00050

4-11





		 Top 5 Country Net Credit Exposures
						      In $MM's

										    Other Net Credit Exposures

										   Czech Republic

	   E-Rating     Country

				  June 30, 2001

	       1    USA
	       1    United Kingdom
	       1    Canada
	       1    Germany
	  flMexico

					    Top S Total
			       Other Not Credit Exposures
				Total Net Credit Exposure


	Calculated based on country of incorporation.

						       August 31, 2001
							       10,399
								1,874
								1,270
								  98

								      % of
								      Total
								       73%
								       13%
									9%
									1%

								  54
							       13,895
								 824
							       14,319

										   Sweden
										   Switzerland
										   France
										   Netherlands
										   Australia
										   Slovakia
										   Norway
										   Spain
										   China
										   Trinidad & Tobago
										   Italy
										   Bermuda
										   Croatia
										   Belgium
										   South Korea
										   Panama
										   Cayman Islands
										   Brazil
										   Japan
										   Slovenia
										   Hong Kong
										   Liberia
										   Colombia
										   Finland
										   Austria
										   Ireland
										   Philippines
										   Argentina
										   Other
										   Total

													48
													43
													40
													39
													36
													36
													29
													27
													26
													23
													23
													21
													19
													19
													18
													17
													16
													12
													10
													10
													 9
													 9
													 a
													 8
													 7
													 6
													 6
													 5
													 5
													49
												       624

									    EC4SB4IAMW
EXHO64-00051

% of
Total

10,246
 1.833
 1,356
  127

72%
13%
10%
1%

N/A

	 Counterpadles new to Top rust

m Non-Investment Grade Credit Exposures

4-12





				 California Update
					as of August 31, 2001
					    In $MM's


		 Utility Exposure                               Enron  PGE Net Exposure
		 Pacific Gas & Electric Company ("PG&E")          505    72      577
		 Southern California Edison Company ("Edison")    156    40      196

							  Total Utility Exposure 773


       * The Edison "bailout" bill stalled in the California Senate and support is weak.


       * PG&E filed its Plan of Reorganization ("POW') on September 2gth, which would pay
	  accepted claims in full, plus interest.

       * PG&E's unsecured creditors would be paid 60% cash and given 40% in restructured
	  debt.

       *  PG&E's POR faces numerous legal challenges from the State of California and if
	  successful, will take from 1.5 years to 3 years to achieve consummation.

       * Of $577MM in Enron exposure to PG&E (includes $7'2MM at PGE), $403MM is related to
	  negative CTC claims that PG&E is disputing.


					     4-13                                       ECAUGMOSOW

EXHOO4-00052





	     Total Exposure
		   $71 7(1)
	      107 counterpartles


(I) Amount represents exposure before any recovery.

Bankruptcy Update
       as of August 31, 2001
	   In $MM's


	  * As a result of Enrons migration into the retail
	     sector and declining credit markets, current
	     bankruptcy rates represent a significant
	     increase from historical Enron experience.
	  * Total bankruptcies from 1994 to 1999 were
	     fewer than twenty counterparties and $3OMM.


	  Bankrupt Counterparty Exposures over $IOMM

Counterparty Name

Business Unit    Exposure

Pacific Gas & Electric Company    EES, ENA, PGE

36onetworks, inc

Sub-Totat Exposures over $IOMM

EAS

% of Total
Exposure

577

81%

87

664

Other Exposure

12%


7%

53

717

Total Exposure

414

ECS4IAN

EXHO64-00053





     Market Risk Update


		      EC4U4Mc37

EXHOO4-OOO54

4-IS





		      Market Risk Update
			   Table of Contents

	    *  Risk Profile
	    *  Risk Profile by Market Concentration
	    *  Risk Profile by Business Unit
	    *  Backtesting of Enron Corp. Aggregate VaR
	    *  Utilization of VaR Limits
	    *  Market Risk Limit Violations
	    *  Scenario Analysis
	    *  Liquidity Risk Ratio Analysis
	    *  Brazilian Foreign Exchange Exposure Update


				   4-16
							      EC4U4SMOUUO
EXHOO4-00055





		       Risk Profile
	      Eight Months Ended August 31, 2001 and 2000

Trading PM.
($MA4)
it,

     fl807
	      677


   ~flj          826
   LULL r
   Antedc.. America.
     Ga.      Pow.

  L         YTD 8131101 P&L = $2.2 B

	    YTD 8131100 PAIL = $1.8 B


	  28 ~     58 ~g     ____
		   rn
European  Products Financial. Emerging
 Ga. &                       Business..
 Power

Business Unit Comparison
	   YTD Trading P&L = $2.2 B

Trading P&L
($MM)  1,658


"4

NI


2~
     Americas

107

I 13

42

Euro~    Global     Industrial
	Markets     Markets

	    Average VaR              fl YTD 8131/01 Avg VaR = 879 MM               Average VaR            {TO Average VaR = 879MM
	    ($A4M)                           YTD 6131200 Avg VaR = $38 MM          ($MM)

						  II     -~                           A
															  (2)
						  (6)    (3) (3)   (4) (7)
													       (II)
	    20)                                fIG)                                                  (18)

	    141)                                                                    (4I(

	    ISA)                                                                    (Sal
		   (60)
	    ia~    Arn.vica. Avn.rlcas European Products Financial. Emerging            Americas    Europe    Globl      Industrial
			    Power      Get &                      Susinem.
				       Power                                                                  Markets    Markets

Return on VaR - Eight Month. Endad August 31
 2001    128%    140%     141%     21%

 2000    210%    189%     092%     72%

	      Enron
168%     210%  ~4%

157%     49%   352% J

Return on VaR - Eight Month. Endd August 31
  2001      191%       188%       78%

  2000      281%       116%       139%

	    (1) Comn,odltles aggre2St.d par ConcentratIon Limit Categories

Market Concentrationci

EXHO64-00056

4-17

	Enron
201%      214%

114%      352%

EC4SSUADOSD83I





	    Risk Profile by Market Concentration
	    Eight Months Ended August 31, 2001 and 2000

Americas   Americas
 Gas        Power

European Gas
  & Power

Products   Financials

Emerging
Businesses

Trading P&L     S      YTD 8/31/01 PAL=$2.2B
		       Y1D 8131100 PAL = $1.8 B

			     48
(9)        (22) 4   ___ ~

NA Gas  Am$css  NA Power Am.flcas UK Power Emso~nn Co,tlrwq,tsI Noidic
	  GM              Pow.,             GM     Power        Power
	  Odier           Ott.,

	SI'
24 2

Co.'    GIobM    Credit  Flnmnlars  Sti
	Products Tr.dIn~   0th"

Selsis    W.a.'  Em.JWng
		 .4-"
		  at-

	  Rsurn on VaR - Eight Month. End.d AogusI 31

	  2001   121%    65%     141%    32%     115%    99%    107%   (7s%~   175%   (14%)    98%    127%   244%    82%     135%   85%

	  2000   207%    295%    110%    iUA~    167%   (22%)   111%    30%    53%     63%     11%    185%    NA     43%     53%    105%


																 EC4349A130840
EXHOO4-00057

(5MM)


975

725

415

225

(25)
(5MM)
 a


(18)


(32)


(48)


(64)

Average VaR       YTO 8/31/01 Avg VaR = $79 MM~
		  YTD 8131/00 Avg VaR = $38 MMJ





	       Risk Profile by Business Unit
	    Eight Months Ended August 31, 2001 and 2000

								 Global
								 Markets

										Industrial
										 Markets

							       Average VaR          YTD 8131101 Avg VaR = $79 MM
										    YTD 8/31/00 Avg V.A = 538MM

	  fttum on VaR - Eight Mont. En~d August31
	  2001   104%     157%    12%    115%     99%    82%    107%    05%

	  2000   207%     400%   227%    487%    (22%~   43%    161%    11%


			  Total Enron RoVaR YTD 8131101 = 214%
		  t

						  135%  (75%)   188%  122%  135%  3%   244%

						  59%   30%     63%   164%  63%   23%   WA


						  Total Enron RoVaR YTD 8/31/00 = 352%
					      4-ID

							      EC4U4flpI
EXH004-OOO58

Americas

Europe

269

(SMM)

875


660


425


200


(16)

(32)

(4B)

(64)

  [Trading P&L          YTD 8/31/01 P&L = $2.2
  I.  ________          YWSflhIOOP&L$1.8B

(251    NA Ga  ISA Power Am.&a. A~ power Ewopeen Metal.  OcetnantS   Creelt  A,wfraNa~  Nordit   Coal     Global  water   Global   ~

(SUM)                                                                         Power                       Ott",                           barber
  0

34%

114%





 Backtesting of Enron Corp. Aggregate VaR
		   12 Months Ended August 31, 2001
- Curve Shift PIL - VaR - VaR Limit - Expected Tail Lou (ETL ETL Advisory Limit

12 Month Corn. UmitEvolutiogi:   06/01/00 10/07/00   12/07/00  12/28100 02/13/01  08/14/01
		(MM)              $75      $100       5140      $100      $125      5150


					   4-20

       (1150 MM)


 ......(5820MM)


EC4U49A30342

(SAW)
600

200


100


  0


(100)


(200)


(300)


(400)

12/4/00 - 1485MM


		       2/00. (1551 MM)

 Kupieclest sets out sccwtable TSflQS 01 instances


( where cuiveahifi profit a rid loss exceeds VaR. Al 95%


					I
 confidence and for the 251 trading days shown, the
 acceptable rang. is between 6 and 2ltirnes. Adual
 occurrences are 17, indicating that the VaR model is
 acceable.

EXHO64-00059





				  Utilization of VaR Limits
				   Quarterly Comparison
					       ~v;age VaR


	       21 2L2L21      24 QLQLUI    24 2L9L22     24 QL2LSI    21 2L2L21    21 2L2L21     21 SISLSA
	       2000  2001     2000 2001    2000  2001    2000  2001   2000  2001   2000  2001    2000  2001

		Americas       Americas     European      Products    Financials   Emerging    TOTAL ENRON
		    Gas          Power     Gas & Power                            Businesses     TRADING

Not. I: QJ 2001 r.p,.s.nMd by July 1-August31.
Not. 2: Utltlzstton calculatIons we,. band on Commodity Group Limits, not Concentration Limits.

ConcentratIon Limits we,. not established until 8114101.

								       4-21

															    EC441Mfl
EXI406A-00060

Percentage
of VaR Limit

100%


 78% -


 60%


 26% -


  0% -





				 Market Risk Limit Violations
				      July Ito September 26, 2001
	   o     No Violations of Board Approved Portfolio Limits

	   o     No Violations of Board Approved Concentration Limits

	   o     No Violations of Business Unit Limits

	   La    Commodity Group Limits are established conservatively to act not as traditional "limits", but as triggers for
		 management decision making, thereby ensuring compliance with Concentration Limits. Commodity Group Limits
		 may be adjusted frequently in response to business needs and maricet dynamics.

				  Commodity Group Limit Violations
					INVSR U Maturity/Gap uNet Open Position

	 50-


	 40 -


	 30-
Number of
Violations
	 20 -


	 10-


	  0-

Globat    R.gulat.d UK Powar
Product.   Portfolio
	    (PGEI

I
M*talsttt  European
	      Gas

Sr ax
      (1)
Steal     tAiniber

		 I) Violations were the resub of booking errors.

EOL. Crud.    North
	    Arn.rlcan
	      Gas

EXHOO4-OOOG I

4-22

EC4UBANIOW





		   Scenario Analysis
		    as of September 2001

What if...
    War in the Middle East Breaks Out
    * Most militant Middle Eastern countries declare an oil
      embargo; crude prices rise to $42 for the next four months
    * A majority of the Middle Eastern countries declare an oil
      embargo; price of crude spikes to $75 for the next four
      months
    * Terrorists destroy a gas pIpeline in the Gulf; gas prices
      Increase an average of $1 per month for the next 12
      months
    Recession
    * Recession and war foam cause a credit crunch, reduction
      In volumes and foregone profits
    * In addition to above, Enron realizes losses from an
      Increase In bankruptcies
    Prolonged and Unexpected Winter Freeze in the U.S.
    * Gas and power prices rise due to an increased demand as
      a result of colder weather

($MM)

	     Potential Lasses
    (100)     (200)    (300)


- ($82)*


			 ($274)


		  ($200)

       ($250p*

($1BO)k

($160)

($70)

($230)

* Worst Case, assumes Instantaneous impact on current positions.

 Losses incurred or income foregone over a 3 month period.


					      4-23        K

Crude
Natural Gas
Loss In Potential Profits
Credit Losses
Power

  1
EC4U4IAOOIO4I

(400)

EXHO64-00052





Liquidity Ratio =

Liquidity Risk Ratio Analysis
   Ten Day Forward Time Horizon
	Future Available Cash + Borrowing Capacity
    Trading Portfolio's Potential Future Cash Requirements

.1

05/20/01    05/27/01    00/03/01    00/1 0/01    00/1 7/01     0S/24/O1~2

      Liquidity Ratio - P50(1) Potential Margin Exposure
45.0
45.0                 - - - - - - - -
42.0
35.0
fl.o
33 .0
30.0
27.0
24.0
2 1 .0
15.0
15.0
12.0
 * .0
 * .0
 3.0
 0.0
  05/13/01     05/20/01   08/27/01    05/03/01


  'I inciuen f4.t Account. R.c.lveb/. and Debt and Equity Sh.ifR.glstratlon.

      -        P50 Advisory Limit = 3.0
      -  -  -  Lk~uidity Ratio

			...........


05/1 0/01     05/17/01     05/24/01


				     .2

								 4-24                                           EC4s4g~a~6

EXHO64-OOO63

Liquidity Ratio - P99 Potential Margin Exposure
								 P99 Advisory Limit = 1.5

						       -  -  -   Liquidity Ratio

I 5.0

1 3.5

1 2.0

1 0 .5

 * .0

 7.5

 5.0

 4.5

 * .0

 1 .5

 0.0
  00/Is/ol





		   Brazilian Foreign Exchange Exposure Update
		Brazilian Reals ("BRL") Cumulative Translation Adjustment (CTA)
				  Current and Forecasted Balances
			   *  Historical OTA Balance
			   *  Forecasted CTA Balance
			   - BRL Historical Rate

		1,600 *~    - BRL Forward Rate                       1,488   1,547  A.60
							     1,420
		1,400 -L
						     1,224                          - 4.00
		1,200--

				1,004                                                350
											    '4'
	  t2                                                                                C
							    a                               ci,

		 800 -
										     3.00

		 600 - -
										     2.50
		 400 -


		 2004       -+-     -+--          -p---     -     -i---   -+---   -


			Mar-01  Jun-01 Sep-Cl        Dec41   Dec-02  Dec-03 Dec44

						      4-25

											 EC44018647

								   - tOO

1,164

EXHO64-00064





   Post Transaction Reviews


	    4-25        ECUI4SMCSOI4S
EXHO64-DOOG5





	    Procedure: Post Transaction Reviews

	*  Post transaction reviews for transactions over $200 Million will be performed at a
	   minimum of 18- and 36-month intervals after closing. Additional transaction
	   reviews will occur as directed by the Chief Risk Officer or in response to Board
	   questions.


	*  "Merchant" investments will continue to be monitored by RAC and quarterly
	   portfolio performance reported to the Finance Committee at regularly scheduled
	   meetings.


	*  Compliance related issues resulting from transaction reviews will be evaluated and
	   discussed with the Audit and Compliance Committee. All other issues resulting
	   from transaction reviews will be discussed with the Finance Committee.


	*  Major strategic implications resulting from transaction reviews will be presented to
	   the full Board.

							    4-27

									       2
									    EC4U4egjnJp~

EXHOO4-OOO66





	An~.n.. lion, ~


EXHO64-00087





I       {~sr  '.1


8W5/EEIAA&ALS


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EWS'EOM&MO


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		     A'


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She Pm             0(45.


snIp.'             SS,,401S..d C'..'

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	II 200.C~Sfl pas 8585 IhH58'Hs*5 AISsaBIP 81 .6 ISIS


60.01 weII -040 'army LO. (loOn ge40I 1W. amA I40py
'Pt s~ -- -

   Onroal A~,. Oeal.
~ofrgfljjI Capital EarfndIIw..
     October S, 2005

5       SIlOS

200       00      0< M.4E.I~ aIM.,   an       Males         54      5       10%

15.0

MJ~SQ   04%pa

US

-        I

10    1

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FAS 40 FVsas..sg                                          ladwdogV            (2001    1040]    (21 4014a51.0   00510     LI       Pm              5        10      00%


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E~H084.OC60





											     En.,,. Achy, beebe
											 potmotbol 0mph.1 EopmndIOur.s
											       October!. asot

	0vv&trn,           Foods. Pry,., log,         P 0o* nn.oa 4*4.0 89800 o.o.n ~~0.0940o5 AwO             00.003.           3.q     30      0.0 M.4o    9a40r0  ho       .00,00.       44               050%
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												       403.0
												       oh ,.&o,0y0975              -

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EXH04.X0070

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167.01,            [  I





	      Enron Corp.
	   Projects and Amendments
	       October 8, 2001


				     ECW4SMB3SI4

EXI-lO64-00071

5-I





I
S
o                            mocoavsvuvoi
C
C


	D

	C


	3,





       Revision to the


    Risk Management Policy


		      EC4949A863on5
	    SA*1

EXHO64-00073





			    Summary of Policy Changes
	 We recommend Board approval of the following amendments to the Risk Management Policy:

	 MARKET RISK
	 *  Instead of requiring the Chief Executive Officer to approve daily changes to Business Unit Limits,
	    Commodity Group Limits and allocations of Discretionary VaR, the Chief Risk Officer or his
	    designee is authorized to approve in consultation with the Risk Management Committee

	     -  Portfolio and Concentration Limits still to be approved by the Board (no change)

	 *  Business Unit and Commodity Group loss notifications and limit violations to also be sent to the
	    President, instead of only to the Risk Management Committee

	 *  Recommended changes to Policy Limits:
	    Note: Enron Carp. Aggregate VaR Limit - - - NO CHANGE REQUESTED ---$150 MM

						       Recommended                Existing
						       Concentration Limit        Concentration Limit
	    EuroDean Natural Gas & Electricity
	    VaR Limit                                  $45 MM                     $35 MM
	 TRANSACTION APPROVAL PROCESS
	 *  Rather than signing all deals, Enron Global Finance is only required to sign deals with funded
	    capital greater than or equal to $2.5 MM
	 *  Deputy Treasurers are authorized to sign deals that do not require approval of ENE-OOC or ENE-
	    Board of Directors on behalf of Enron Global Finance
	 *  Minor change in approval authority to reflect consolidation of Enron Transportation Services and
	    Enran Global Assets & Services into Enron Global Services
												    4

	 *  Revised approval amounts and maturities used in E-DASH process                         ft

					       SA-2                                        E046949A003J1J7

EXHOO4-00074





					   C.,

					   to


		  Enron Corp.
	     Risk Management Policy
		 Proprietary and Confidential

		   August 14, 2001

		  Amended October 9. 2001


EXHOS4-00075





	  Enron Corp.
	  Risk Management Policy
	  Proprietary and Confidential


						 Executive Summary
							     of the
				     Enron Corp. Risk Management Policy

	  This summary highlights selected information described mare fully else where in this Enron Carp. Risk
	  Management Policy (the "PollcyJ1   This summary does not contain all the information necessary to fully
	  understand and comply with the risk management framework described herein. Employees should read the
	  entire Policy, including the Appendices2, to ensure they are in compliance.


	  Enron Corp. and its subsidiaries (the "Company") are exposed to market, credit, operational and liquidity/funding
	  risks in the normal course of its business activities.  This Policy establishes a framework under which the
	  Company's exposure to risks shall be evaluated, managed and controlled, and pursuant to which capital will be
	  allocated and preserved.  The Policy focuses on four major types of risk: (a) market risk; (b) credit risk; (c)
	  operational risk and (d) liquiditylfunding risk.
	  As described in Section 5 of this Policy, these risks shall be managed on a portfolio basis for standard
	  transactions via various market risk limit structures and credit approval processes, and for non-standard
	  transactions via the Transaction Approval Process described in Appendix V and the Guarantee Approval
	  Process described in Appendix E.    This Policy provides an overview of various risk measurement tools and
	  limits to be applied to these risks, and the roles and responsibilities for the key participants of the risk
	  management framework.

	  Market Risk                                                                                                     to

	  No single risk statistic reflects all aspects of the risk that value will be lost due to a change in some market
	  variable. Therefore,  different risk metrics shall be   used  individually or in combination   to provide a
	  comprehensive view of market risk exposure.    The Company manages its trading activities by segregating
	  different types of risks in each position, and aggregating risks along Commodity Group lines across each
	  Portfolio. The methodology and parameters employed in the application of specific risk metrics are described in
	  this Policy, and may be updated by Risk Assessment & Control ("RAG') periodically to ensure best practices are
	  employed in the Company's risk management processes.        The Company's market risks are reported to the
	  Board of Directors of Enron Corp. (the "Board") at all regularly scheduled meetings.  Specific Loss Notification
	  and Limit Violation reporting requirements are described in Section 4,1.2.3 of this Policy and summarized in the
	  table below.

	  Credit Risk

	  Credit risk is a function of: (a) the value of the position exposed to default; (b) the proportion of this value that
	  could be recovered in the event of a default and (c) the probability of default or shift in credit quality of a
	  counterparty.  RAG manages the limit structure for credit risk and reviews all credit exposures throughout the
	  Company. The Company's credit risks are reported to the Board at all regularly scheduled meetings.


	   Defined terms appear in this Policy with the initial letter of the term capitalized. Each defined term is listed alphabetically
	  and defined in the Glossary of this Policy (see Section 8).
	  2 Excluding actual market risk limit amounts due to confidentiality.

							     -  I.
												      E C46949AOoaa~g
EXHOS4-00076





	  Enron Corp.
	  Risk Management Policy
	  Proprietary and Confidential


	  Operational Risk

	  Operational risk is defined as the risk of direct or indirect loss from inadequate or failed internal processes,
	  people and systems, or from external events. An operational risk event may increase the Company's exposure
	  to market, credit, liquidity, reputation, regulatory and legal risk. The Company's primary objective for monitoring
	  its exposure to operational risk is to (a) identify the derivation of operational risk exposures and (b) to improve
	  the Company's systems and processes to mitigate such risk.  The Company shall develop systems and
	  processes that enable it to better evaluate its operational risk.


	  Liquidity I Funding Risk

	  Liquidity/funding risk focuses on whether the Company is able to raise enough capital to meet its cash and
	  collateral requirements. Margin activity under the Company's Trading Portfolio has a significant impact on the
	  Company's funding requirements, and is often determined by changes in commodity prices. Consequently, the
	  Trading Portfolios Potential Future Cash Requirements based on a Monte Carlo Simulation of margin exposure
	  is compared to the Future Available Cash and Borrowing Capacity across the Company to calculate the Liquidity
	  Ratio.  The Liquidity Ratio is the primary metric of the Company's liquidity/funding risk.  A Liquidity Ratio
	  Advisory Limit shall be implemented to act as a trigger for senior management's review and action.


	  Portfolios and Limit Structure

	  Risks shall be managed across the Company in the following Portfolios, with market risk limits established by
	  either: (a) the Board of Directors of Enron Corp. (the "Board") or (b) the Chief Exzzutivo Offitorchief Risk Officer
	  of Enron Corp. (the "G&QChief Risk Officer") in consultation with the Risk Management Committee (the "RMC"),
	  as noted below:

	     Portfolio     Portfolio Limit     Concentration Limit       Enron Business unit Limits      Commodity
													 Group Limit
						    Board                  GEQChief Risk Officer
					    * Americas Natural Gas       *   Enron Americas
					    * Americas Electricity       *   Enmn Europe
					    * European Natural Gas and   *   Enmn Global Markets       GEOchief Risk
	     Trading          Board           Electricity                *   Enron Industrial Markets      Officer
					    * Products                   *   Enron Broadband
					    * Financials                 *   Portland General Electric
					    * Emerging Businesses        *   Enron Transportation
									     Services
	    Merchant           N/A                    N/A                          N/A                      N/A
	     Capital           N/A                  Board
					    * Enron Stock transactions             N/A                      N/A
									   GEOChief Risk Officer
	    Regulated         Board                   N/A                *   Portland General Electric GEOChief Risk
									     Enrort Transportation         Officer
									     Services
	  Other Assets         N/A                    N/A                          N/A                      N/A
	   & Contracts

	   Enron Business Units jnd correeponding limits can be changed at any time by the CEO.

						    - II -


									       EC46949A0030860
EXI-1064-00077





	  Enron Corp.
	  Risk Management Policy
	  Propnetaty and Confidential


	  Market Risk and Liquidity Risk Limit Violations and Loss Notifications

	  Limit Violations and Loss Notifications are reported within one day after the occurrence of any of the following:

	       *  VaR Limit Violations - if the actual VaR is in excess of the respective VaR Limit
	       *  Expected Tail Loss Notification - if the actual Trading Portfolio Expected Tail Loss is greater than that
		  implied by the Trading Portfolio VaR Limit
	       *  Liquidity Ratio Advisory - if the Liquidity Ratio is ess than 3.0 at 50% confidence level, or less than 1.5
		  at S0/a confidence level
	       *  Daily Loss Notifications - if the Daily Loss is in excess of the respective VaR limit
	       *  Cumulative 5-Day Loss Notifications - if the net sum total of five-days of profit or losses is in excess of
		  225% of the respective VaR Limit
	       *  Position Limit Violations - if the actual position is in excess of the respective position limit


	  The following table summarizes the authority to be notified upon the occurrence of each type of Limit Violation.
	  Loss Notification or Liquidity Ratio Advisory as either: (a) the Board, (b) the CEO, or (c) the Risk ki3nn~zmont
	  Gemm4ttee~(I!RMCZ. All Portfolio and Concentration Limit Violations and all Portfolio Daily Loss Notifications are
	  also reported to the Board at regularly scheduled meetings.

													     Net Open qr
						Expected        Liquidity     Daily Loss      Cumulative     Maturity/Gip
	       Limit Type          VaR          Tail Loss         Ratio                       5-day Loss      Position

	   PortfolIo               Board          CEO             CEO           Board            Board          N/A
	   Concentration           CEO            NM              N/A           CEO              CEO            N/A
	   Business Unit       R4AC.President     N/A             N/A        R4A&President   ~MCPresident       N/A
						calculated,
	   Commodity Group     RMGPresident     but no limit      N/A        RMQPresident    RA4CPresident   ~A4GPresiddnt

	  Roles and Responsibilities

	  Individuals or groups that play a key role in the Company's enterprise-wide risk management framework, as
	  described in this Policy, are listed below. Their primary responsibilities are described in Section 6 of this Policy.
	       *  Board of Directors of Enron Corp.
	       *  Audit & Compliance Committee of the Board of Directors
	       *  Finance Committee of the Board of Directors
	       *  Chief Executive Officer of Enron Corp.
	       *  Chief Risk Officer of Enron Corp.
	       *  Risk Management Committee
	       *  Enron Business Units
	       *  Global Risk Management Operations (or other middle-office function)
	       *  Accounting
	       *  Legal
	       *  Risk Assessment & Control
	       *  Treasury/Global Finance
	       *  Internal Audit


						     - III -                               EC46949A0030861
EXHOS4-OOO78

C
C
to





       Enron Corp.
       Risk Management Policy
       Proprietary and Confidential


	  I INTRODUCTION...................................................................................I
	  1.1  Objective.................................................................................1
	  1.2  Risk-Based Capital Allocation.............................................................1
	  1.3  Preservation of Capital...................................................................1
	  2 PORTFOLIOS.....................................................................................2
	  2.1  Trading Portfolio.........................................................................2
	  2.2  Merchant Portfolio........................................................................2
	  2.3  Capital Portfolio.........................................................................2
	  2.4  Transportation and Distribution Regulated Portfolio ("Regulated Portfolio")...............2
	  2.5  Other Assets and Contracts Portfolio......................................................2
	  3 RiSK-BASED CAPITAL ALLOCATION..................................................................3
	  3.1  Risk Measurement for Market Risks.........................................................3
	   3,1.1  Value-at-Risk............................................................................3
	   3.1.2  ExtremeValuemeory........................................................................4
	   3.1.3  Stress Testing and Scenario Analysis.....................................................4
	   3.1.4  Net Open Position and Maturity/Gap Position..............................................4
	   3.1.5  Earnings-at-Risk.........................................................................4
	   3.1.6  Hedging or Transfer of Market Risks......................................................5
	   3.1.7  Foreign Currency and Interest Rate Exposure..............................................5
	   3.1.5  Market Parameters........................................................................6
	   3.1.9  Model Maintenance and Review.............................................................6
	  3.2  Risk Measurement for Credit Risk..........................................................6      4
	   3.2.1  Mark-to-Market Credit Exposure...........................................................6
	   3,2.2  Counterparty VaR Exposure................................................................6
	   3.2.3  Physical Delivery Credit Exposure........................................................6
	   3.2.4  Settlement Credit Exposure...............................................................7
	  3.3  Risk Measurement for Operational Risks....................................................7
	  3.4  Risk Measurement for Liquidity/Funding Risk...............................................7
	  3.5  Returns on Risk Capital...................................................................8
	   3.5.1  Return on Value-at-Risk ("RoVaR")........................................................8
	   3.5.2  Credit Pricing and Return on Credit Risk.................................................8
	   3.5.3  Return on Capital-at-Risk ("RoCaR")......................................................8

	  4 PRESERVATIONOFCAPITAL..........................................................................9
	  4.1  Capital Associated with Market Risk.......................................................9
	   4.1.1  Limit Structure for Market Risks.........................................................9
	    4.1.1.1 Portfolio Market Risk Limits ("Portfolio Limits")......................................9
	    4.1.1.2 Market Risk Concentration Limits (Concentration Limits")...............................10
	    4.1.1.3 Enron Business Unit Market Risk Limits ("Enron Business Unit Limits')..................10
	    4.1.1.4 Commodity Group Market Risk Limits ("Commodity Group Limits)...........................10
	    4.1.1.5 DiscretionaryVaR.......................................................................11
	    4.1.1.6 Trader/Desk Level Sub-Limits (Trader/Desk Sub-Limits") ................................Ii
	    4.1.1.7 Market Risk Limit Structure brOther Portfolios.........................................11
	    4.1.1.8 Exchange Limits........................................................................11
	   4.1.2  Administration and Reporting of Market Risks.............................................12
	    4.1.2.1 Limit Changes and Policy Modifications.................................................12
	    4.1.2.2 Position Reporting.....................................................................12
	    4 1 2 3 Limit Violation and Loss Notification Requirements.....................................13
	  4.2  Capital Associated with Credit Risk.....................................................15
	   4.2.1  Limit Structure/Guidelines for Credit Risk Assessment ...................................15
											      EC46849M030962

EXHO64-00079





       Enron Corp.
       Risk Management Policy
       Prnprietary and Confidential

	    4.2.1.1 Internal Ratings...................................................................15
	    4.2.1.2 Credit Limits......................................................................16
	    4.2.1.3 Tenor Limits.......................................................................16
	   4.2.2  Administration and Reporting for Credit Risks........................................16
	    4.2.2.1 Documentation Approval.............................................................17
	    4.2.2.2 Credit Aggregation System ('CAS")..................................................17
	    4.2.2.3 Gounterparty Credit Files..........................................................17
	    4,2.2.4 Credit Reserve Monitoring..........................................................17
	 4.3   Capital Associated with Operational Risk.............................................18
	   4.3.1  Guidelines for Operational Risk
	    4.3.1.1 Segregation of Duties..............................................................18
	    4.3.1.2 Fundamental Operating Standards....................................................18
	    4.3.1.3 Code of Ethics.....................................................................18
	    4.3.1.4 Information Systems Support and Business Continuity Planning.......................19
	   4.3.2  Administration and Reporting for Operational Risks...................................19
	 4.4   Capital Associated with Liquidity/Funding Risk.......................................20
	   4.4.1  Limit Structure for Liquidity/Funding Risk...........................................20
	   4.4.2  Administration/Reporting for Liquidity/Funding Risk..................................20

	 5  REQUESTS FOR ALLOCATION OF RISK CAPITAL....................................................21
	 5.1   Portfolio Risk Capital...............................................................21
	 5.2   Transaction Specific Risk Capital....................................................21
	   5.2.1  Approval Process for Standard Transactions...........................................21
	   5.2.2  Approval Process for Non-Standard Transactions.......................................22

	 6  ROLES AND RESPONSIBILITIES.................................................................23
	 6.1   Board of Directors of Enron Corp. (the "Board")......................................23
	   6.1.1  Finance Committee of the Board of Directors ("Finance Committee")....................23
	   6.1.2  Audit and Compliance Committee of the Board of Directors ("Audit Committee").........24
	 6.2   Chief Executive Officer of Enron Corp. (the "CEO")...................................24
	 6.3   Chief Risk Officer of Enron Corp. (the "Chief Risk Officer").........................24
	 6.4   Risk Management Committee............................................................24
	 6.5   Enron Business Units.................................................................25
	   6.5.1  Office of the Chairman of an Enron Business Unit.....................................25
	   6.5.2  Authorized Traders and Commercial Personnel..........................................25
	 6.6   Global Risk Management Operations ("GRMO")...........................................26
	 6.7   Accounting...........................................................................27
	 6.8   Legal................................................................................27
	 6.9   Risk Assessment and Control ("RAC")..................................................27
	 6.10 Treasury/Global Finance...............................................................29
	 6.11  InternalAudit........................................................................29
	   6.11.1 Enron Assurance Services.............................................................29
	   6.11.2 Information Technology Compliance....................................................29

	 7  MISCELLANEOUS..............................................................................30
	 7.1   Brokerage Accounts Administration....................................................30
	 7.2   Employee Trading.....................................................................30
	 7.3   Employee Review and Compliance with Policy...........................................30
	 7.4   Transition Plan for Policy Compliance................................................31
	 7.5   Supersedes Prior Policies............................................................31
	 8  GLOSSARY...................................................................................32
											       EC4o49Mo~,U~

EXFHO64-00080





	 Enron Corp.
	 Risk Management Policy
	 Proprietary and Con fidentia~

	   9   APPENDICES........................................................................38

	  Appendix
	  Appendix
	  Appendix
	  Appendix
	  Appendix
	  Appendix
	  Appendix
	  Appendix

		  A-
		  B-
		  C-

		  F-

		  H-

		    Market Risk Limits
		    Description of Enron Credit Risk Ratings (E-Ratings)
		    Credit Risk Procedures
		    Transaction Approval Process
		    Guarantee Approval Process
		    Fundamental Operating Standards *
		    Operational Risk Considerations *
		    Sample Documentation of Employee Acknowledgement of Policy

													 a
													 q
													 to


	  These are guidelines and may be updated periodically.

										       E046949A0030864

EXHO64-00081





	  Enron Corp.                                                                                  Page 1
	  Risk Management Policy
	  Pro pnma,y and Confidential

	  1   Introduction
	  Eriron Corp. and its subsidiaries (the "Company")1  are exposed to market, credit, operational and
	  liquidity/funding risks in the normal course of its business activities.  These business activities include, but
	  are not limited to, wholesale services, retail energy services, and transportation and distribution services. It
	  is the Company's philosophy to actively manage its business activities and the resulting risk exposures in a
	  manner that is consistent with the Company's risk appetite.      This comprehensive, enterprise-wide risk
	  management policy (the "Policy") establishes a framework under which the Company's exposure to risks
	  shall be evaluated, managed and controlled, and pursuant to which capital will be allocated and preserved.
	  Employees are expected to act in a manner consistent with the Company's risk philosophy and to uphold this
	  Policy in its entirety.


	  1.1  Objective
	  The objective of this Policy is to ensure that the Company's capital is allocated efficiently and that
	  appropriate action is taken to preserve the Company's capital in accordance with its appetite for risk.
	  Effective risk management enables the Company to maximize shareholder value by reducing volatility in the
	  Company's earnings and minimizing the likelihood that the Company's net income and cash flows could
	  decline to the point of financial distress.


	  1.2  Risk-Based Capital Allocation
	  The Company's capital shall be allocated with a comprehensive view toward risk and the positions taken by
	  management across the Company. The Company's Risk Capital represents the capital required to cushion
	  against potential losses arising from adverse changes in the value of assets or earnings capacity due to
	  market factors, credit events and operational risks. The amount required to provide for unexpected losses
	  under worst-case or extreme market conditions considering quantitative and qualitative factors described in        an
	  this Policy must be considered in the allocation of the Company's Risk Capital.
	  Each transaction shall be evaluated according to this Policy, both on a stand-alone basis and on the basis of
	  its incremental impact on the various Portfolios of the Company (see Section 2). This process ensures that
	  the Company's allocation of Risk Capital is consistent with the Company's approved risk appetite.


	  1.3  Preservation of Capital
	  The Company shall preserve its capital by defining, measuring and controlling risk according to the
	  provisions of this Policy. Specifically, the Company shall:  (a) allocate capital according to market, credit,
	  operational and liquidity/funding risks; and (b) limit the concentration of risks in any given commodity,
	  counterparty, time period and geographic region.


	   Defined terms appear in this Policy with the initial letter of the term capitalized. Each defined term is listed

	  alphabetically and defined in the Glossary of this Policy (see Section 8).

													 EC46949A0030865
EXHOS4-00082





	  Enron Corp.                                                                                Page 2
	  Risk Management Policy
	  Proprietary and Confidential


	  2     Portfolios
	  During the normal course of business, the various Eriron Business Units may enter into transactions, which
	  create positions for the Company ranging from asset purchases to derivative transactions.  The Company
	  will manage the risk inherent in these positions on a portfolio basis across the Company.    The various
	  Portfolios are described below.  The Risk Management Committee must approve any changes to the
	  composition of these Portfolios.


	  2.1   Trading Portfolio
	  The Company's Trading Portfolio is designed to manage the Company's exposures related to commodity
	  transactions, including: (a) the purchase, sale, storage and physical delivery of natural gas, electricity and
	  other commodities included in Appendix A; (b) the provision of risk management services; and (c) the
	  optimization of market arbitrage opportunities.  These exposures shall be managed within approved limits.
	  The Trading Portfolio's exposures are accounted for using the mark-to-market accounting method.


	  2.2   Merchant Portfolio
	  The Company's Merchant Portfolio is designed to manage exposures related to merchant investments in
	  public and private companies. This portfolio includes equity, "equity-like," debt and "debt-like" instruments in
	  the public and private sectors.


	  2.3   Capital Portfolio
															4
	  The Company's Capital Portfolio is designed to manage exposures inherent in positions and transactions
	  involving the Company's own stock, its issued debt, and its other funding transactions or derivatives thereof.


	  2.4   Transportation and Distribution Regulated Portfolio ("Regulated Portfolio")
	  The Company's Transportation and Distribution Regulated Portfolio ("Regulated Portfolio") is designed to
	  manage exposures related to the business activities of the Company's subsidiaries and affiliates involved in
	  transportation and distribution activities (e.g., natural gas pipelines and utilities).
	  Activities in the Regulated Portfolio may have specific accounting, legal and regulatory requirements that
	  suggest separate application of risk management practices. Although separate application may be required,
	  this Policy shall apply equally to these regulated activities, unless the Chief Risk Officer of Enron Corp.
	  ("Chief Risk Officer) approves an alternate application. For example, functions that are generally performed
	  by Global Risk Management Operations ("GRMO") as described in Section 6.6 may be performed by
	  separate middle-office functions. For purposes of this Policy, any reference to GRMO shall incorporate and
	  apply to any equivalent middle-office functions.


	  2.5   Other Assets and Contracts Portfolio
	  The Company's Other Assets and Contracts Portfolio is designed to manage exposures embedded in the
	  Company's assets (investments, contractual arrangements, etc.) that are either accounted for on an accrual
	  basis or are not otherwise captured in the other Portfolios described above.
	  This portfolio includes: (a) selected operating assets throughout the Company's network of domestic and
	  international assets; (b) contracts that provide access to third-party assets and market-making activities; (c)
	  off-balance sheet and contingent positions; and (d) transactions that are entered into for hedging purposes
	  under SEAS 133.


												       EC4es4sAos3oeee
EXHO64-00083





EXHO64-00084

Enrnri Corp.                                                                              Page 3
Risk Management Policy
Fropnetary and Confidential

3    Risk-Based Capital Allocation
All decisions regarding the allocation of capital shall be based on a thorough analysis of market, credit,
operational and liquidity/funding risks.  These risks will be monitored and actively managed on a continuing
basis under the guidelines established in this Policy. The Company may be exposed to other risks that are
not specifically covered by this Policy. However, the Company manages those risks accordingly.
The Company's market risk limit structure is designed to align the Company's risk appetite with its business
objectives. Approved market risk limits take into account potential or expected returns and the amount of
capital required to provide for potential losses.
Specific processes to be utilized in the allocation of capital include: (a) the credit risk approval process
described in Section 4.2 and Appendix B and Appendix C, (b) the Transaction Approval Process described in
Section 5 and Appendix 0, and (c) the Guarantee Approval Process described in Section 5 and Appendix E.
These processes include the consideration of operational risk and liquidity/funding risk.


3.1   Risk Measurement for Market Risks
Market risk arises from the possibility that value will be lost due to a change in some market variable. Each
Enron Business Unit and its middle office function, Global Risk Management Operations ("GRMO'3, shall
process and provide information to calculate the required risk metrics used to measure market risk.  The
results of these calculations shall be made available at the appropriate level, and provided to the head of the
appropriate Enron Business Unit, Risk Assessment and Control ('RAC") and others as required by the Risk
Management Committee.       Aithough limits may not be specified for each metric, the results of these risk
metrics shall be considered in the Company's overall assessment of risk and in the capital allocation
process.
														CM
No single risk statistic reflects all aspects of market risk.  Therefore, different risk metrics shall be used
individually or in combination to provide a comprehensive view of market risk exposure. The methodology         to
and parameters employed in the application of the risk metrics described below shall be established by RAC
to ensure that best practices are employed in the Company's risk management processes. Any change in
the application of these risk metrics must be approved by RAC.     From time to time, RAC may also require
other risk metrics not specifically addressed in this Policy to be used by Enron Business Units and GRMO to
ensure that the Company's market risk is properly measured.
Market Risk Limits shall be established in accordance with Section 4.1.1 of this Policy, while monitoring and
reporting requirements are described in Section 4.1.2 of this Policy.

3.1.1  Value-at-Risk
Value-at-Risk ("VaR") is a key indicator of potential exposure from adverse market moves in a normal market
environment. The Company's approved standard VaR methodology uses a 95% confidence interval and
assumes a one-day close-out horizon. Positions are characterized as Delta and Gamma, and outcomes are
simulated one thousand times using Monte Carlo Simulation, with returns assumed to conform to a normal
distribution.
Each Enron Business Unit is required to use the approved standard method described above, together with
the Company's established calculation engine, to calculate VaR for each Commodity Group.    Commodity
Groups are a collection of individual commodities and positions having sufficient relationship and correlation
to allow for their aggregation into a meaningful Benchmark Position. Statistical diagnostic review techniques,
such as Back Testing, shall be performed as deemed necessary by RAC for any or all Commodity Groups to
test VaR model efficacy.  Developing markets or specific businesses may exhibit attributes that require an
alternative method to calculate VaR.        The Chief Risk Officer must approve the use of an alternate
methodology.
VaR shall be applied as appropriate and calculated daily for positions within the Trading, Merchant,
Regulated, and Capital Portfolios. VaR may also be determined to be an appropriate measurement tool for
selected contractual positions included in the Other Assets and Contracts Portfolio, and shall be calculated
as required by RAC.


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Enron Corp.                                                                              Page 4
Risk Management Policy
Proprietary and Confidential


3.1.2  Extreme Value Theory
Extreme Value Theory ('EVT") examines the characteristics of extreme events, whose impact on a portfolio
cannot be determined using the standard VaR metric. Extreme event risk is present in all areas of risk
management, and its quantification is an important complement to standard statistical measures of risk such
as VaR, which assume normal market conditions.    Extreme value measurements shall be used to assist in
sizing and calibrating limits such as those expressed as VaR, and to serve as a reference for management
decision-making.
The Company's approved E\IT methodology uses historical profits and losses and current positions to
construct a probability distribution that represents both the level of risk at which the new distribution applies
based upon current positions (referred to as Extreme Value at Risk or SEVSRn)     and the expected loss
beyond EVaR given extreme conditions (referred to as the Expected Tail Loss or "ETL").  EVaR and ETL
shall be applied to the Trading Portfolio and to certain Commodity Groups as appropriate and monitored
daily.


3.1.3  Stress Testing and Scenario Analysis
Stress testing provides an indication of potential exposure from sudden and extraordinary changes in market
conditions, including those that would not necessarily be reflected in VaR measurements. Scenario analysis
is based on historical and hypothetical economic events and systemic crises.
Stress testing and scenario analysis shall be used to capture price, basis, liquidity, volumetric and other risks
associated with current or potential Portfolio positions.     Portfolios containing options require specific
attention, particularly due to their non-linear behavior.   Traditional risk metrics such as VaR do not fully
capture option risk or market risk resulting from extreme market movements. Stress testing and scenario         ~0
analysis should include sensitivity analysis of option position attributes (Delta, Gamma, Vega, Theta, Rho
and Eta) versus price, volatility and time changes, and resulting theoretical profit/loss.
Stress testing and scenario analysis shall be performed as required by the Chief Risk Officer. Where
appropriate. RAG shall provide guidance on specific stress tests to be performed.   The results may be
determined by historic simulation, shifts of price or basis curves, shifts in VaR calculation parameters, or
shifts based on specified economic scenarios.  Each Enron Business Unit and GRMO shall perform stress
testing at the level necessary to provide meaningful risk identification, drawing upon the insights of traders
and risk managers.  Scenario analysis shall be performed by RAC with information provided by the Enron
Business Units and GRMO.


3.1.4  Net Open Position and Maturity/Gap Position
As indicators of volumetric exposure, non-statistical risk metrics such as position measurements provide
additional information on an exposure's size and direction.   Accordingly, these metrics facilitate the control
and management of exposures that other risk metrics may not adequately represent.
Net Open Position and Maturity/Gap Position measurements shall be applied as appropriate and monitored
daily for certain Commodity Groups. Metrics such as gross long position and gross short position shall also
be calculated periodically to facilitate the evaluation of market segment liquidity risk. These risk metrics shall
be calculated using a Benchmark Position calculation methodology approved by RAG.


3.1.5  Earnings-at-Risk
The Company's VaR methodology may be difficult to apply to positions not accounted for on a mark-to-
market basis (i.a. positions that are accounted for on an accrual or other basis) or to positions that are
illiquid. Earnings-at-Risk is a primary risk measurement tool for such positions, as it represents the extent to
which earnings may vary over a specified time period. The applicable time period is customarily defined as


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	   Enron Corp.                                                                              Page 5
	   Risk Management Policy
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	   the life of the asset or contract. The net economic Earnings-at-Risk shall be calculated for such positions as
	   required by the Risk Management Committee. The underlying calculation will adopt the same method as the
	   standard VaR metric, with the exception that an appropriate liquidation horizon, usually significantly greater
	   than one day, shall be chosen as appropriate for the specific position.
	   Earnings-at-Risk measures do not form part of the established limit structure, although they shall be
	   considered in an overall assessment of the Company's risk profile, risk appetite and required returns on risk.


	   3.1.6    Hedging or Transfer of Market Risks
	   For purposes of this Policy, hedging shall mean activities that reduce, transfer or convert one type of risk or
	   position to another deemed more tolerable. This definition differs from an accounting definition and does not
	   suggest that the hedge position would necessarily qualify for hedge accounting under Statement of Financial
	   Accounting Standards No. 133.
	   If an Enron Business Unit incurs an exposure within a Portfolio other than the Trading Portfolio and wishes to
	   hedge such exposure, it must do so by executing a transaction with the appropriate Authorized Trader in the
	   Trading Portfolio. RAG shall be notified of any significant transactions for which the hedging transaction and
	   the underlying position are reported in different Portfolios. All hedge positions should have an observable
	   correlation with the underlying exposure, and should be rebalanced regularly to substantially neutralize the
	   underlying exposure.
	   The Company manages its trading activities by segregating different types of risks in each position, and
	   aggregating risks along Commodity Group lines across each Portfolio.      If in the ordinary course of its
	   business, an Enron Business Unit or trading desk incurs an exposure in the Trading Portfolio to an
	   underlying commodity or financial instrument for which it does not have explicit trading authority, it must
	   either: (a) hedge that exposure with the Authorized Trader who does have that specific authority, or (b)
	   request approval from the Risk Management Committee to carry the position and manage the exposure.
	   The Risk Management Committee together with the CEO may authorize this activity by approving a
														       ~0
	   Commodity Group to be traded in that Enron Business Unit under a corresponding Commodity Group Limit.
	   Such authorization may be restricted in some manner, with any such restrictions documented in a memo for
	   the files that describes the nature of the position, the authorized size of the position (i.e., Net Open Position
	   and/or Maturity/Gap Position limit) and the VaR limit for the position.


	   3.1.7    Foreign Currency and Interest Rate Exposure
	   The Company is exposed to foreign currency exposure and interest rate exposure in each of its Portfolios.
	   The foreign currency desk shall manage the currency exposure of the Trading Portfolio, and the interest rate
	   desk shall manage the interest rate exposure of the Trading Portfolio, with the exception of such positions in
	   the Company's pipeline and domestic utility business units.   Significant unhedged interest rate and foreign
	   currency exposure elsewhere in the Company, whether mark-to-market exposure or overall economic
	   exposure, shall be reviewed by the Risk Management Committee individually, and in the aggregate with the
	   Trading Portfolio, to determine the appropriate risk management strategy for the Company's interest rate and
	   foreign currency exposures.
	   The following provisions of this Policy refer to currency and interest rate risks embedded in the Portfolios or
	   in the individual or consolidated financial statements of the Company. The sources of these risks with regard
	   to foreign currency can be characterized broadly as including:
		    i. Currency risk remaining in the positions and sub-portfolios that comprise the Trading Portfolio and
		      that are denominated in currencies other than US dollars;
		 ii.  Currency risk in investments in overseas assets or projects, where the carrying value of the
		      investment is denominated in currencies other than US dollars;
		 iii. Currency risk in respect of earnings, after local expenses, in currencies other than US dollars,
		      where no amount has been remitted, in US dollars, to the Company; and
		 iv.  Currency risk in cash balances held in currencies other than US dollars.


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	   Enron Corp.                                                                             Page 6
	   Risk Management Policy
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	   The sources of these risks with regard to interest rate iftsk can be broadly characterized as including:
		 i.   Interest rate risk remaining in the net assets and liabilities, including settled cash, of the positions
		      and sub-portfolios comprising the Trading Portfolios
		 ii,  Interest rate  risk arising from cash-flow mismatches in the re-pricing profiles of funding
		      transactions
		 iii. Interest rate risk arising from funding requirements of contracts or obligations not accounted for on
		      a mark-to-market basis


	   3.1.8    Market Parameters
	   All risk metrics and processes outlined in this Policy are derived from a combination of market parameters,
	   such as prices, volatilities and correlations. If such parameters are outdated, or do not in some other way
	   accurately reflect market conditions, risk and performance data derived from such market parameters will be
	   distorted and the Company's ability to manage risk will be impeded. Consequently, upon request, each
	   Enron Business Unit and GRMO shall provide RAG with evidence of all market parameters (e.g., curve
	   validation) used by them in the calculation of Risk Metrics and in the measurement of profits and losses,
	   including, but not limited to the following: (a) price and volatility curves, (b) correlation and risk factors, and
	   (c) benchmark conversion factors. This evidence shall be verified by RAG at its discretion.


	   3.1.9    Model Maintenance and Review
	   Each Enron Business Unit shall follow the Company's modeling guidelines in the preparation and
	   maintenance of any valuation models. Evidence of verification of all significant model assumptions and
	   inputs used for pricing and measuring risk in structured transactions shall be provided to RAG upon request.
	   RAG shall also oversee the Company's model review process, ensuring the appropriateness of the derivative
	   pricing models and their underlying assumptions, and any other non-standard risk measurement models or
	   calculations. This formalized model review process shall be developed during a transition period and
	   implemented as directed by the Risk Management Committee.


	   3.2   Risk Measurement for Credit Risk
	   Credit risk is a function of: (a) the value of the position exposed to default, (b) the proportion of this value that
	   could be recovered in the event of a default, and (c) the probability of default or shifts in credit quality. Limits
	   and reporting procedures for credit risk are described in Section 4.2 of this Policy.


	   3.2.1    Mark-to-Market Credit Exposure
	   Mark-to-market exposure is the current replacement value of a contract that could be lost if a counterparty
	   defaults today. The potential for a credit loss arises when a counterparty defaults on a contract that is in the
	   money to the Company or is an asset of the Company at the time of default.


	   3.2.2    Counterparty VaR Exposure
	   Counterparty VaR exposure is the potential difference in the value of a current counterparty contract if
	   fluctuations occur in such parameters as market prices, interest rates or exchange rates.


	   3.2.3    Physical Delivery Credit Exposure
	   Physical delivery exposure is the value of the physical product delivered to a counterparty prior to receiving
	   payment for such product, whether or not the counterparty has been invoiced.


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	   Enron Corp.
	   Risk Management Policy
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	   3.2.4   Settlement Credit Exposure
	   Settlement exposure is the risk that payment will not be made by a counterparty as of the contractual due
	   date.


	   3.3    Risk Measurement for Operationai Risks
	   Operational risk is defined as the risk of direct or indirect loss from inadequate or failed internal processes,
	   people and systems, or from external events. Operational risk overlaps with many other risk classes. An
	   operational risk event might also increase the Company's exposure to market, credit, liquidity, reputation,
	   regulatory and legal risk.
	   For purposes of this Policy, the definition of operational risk does not include strategic risk, asset operations
	   risk or environmental risk.  Strategic risk, asset operations risk and environmental risk shall be: (a) assessed
	   for new positions as required under the Transaction Approval Process in Appendix D and (b) monitored and
	   managed for existing positions by the Enron Business Unit responsible for the position.
	   The Risk Management Committee shall designate individuals in GRMO and each Enron Business Unit to
	   work with RAG to develop systems and processes that enable the Company to better evaluate its operational
	   risk. Operational risk will be evaluated based on various qualitative assessments and limited quantitative
	   analysis until  parameters and metrics necessary for quantitative measurement can be defined and
	   implemented. The Company's primary objective for monitoring its exposure to operational risk is to (a)
	   identify the derivation of operational risk exposures and (b) improve the Company's systems and processes
	   to mitigate such risk. Guidelines and reporting procedures for operational risk are described in Section 4.3 of
	   this Policy.

															       (0

	   3.4    Risk Measurement for LiquiditylFunding Risk
															       I',
	   Liquidity/funding risk focuses on whether the Company is able to raise enough capital (whether through debt,
	   equity, or counterparty collateral) to meet its cash requirements, and is a function of funding liquidity and
	   position liquidity.  Margin deposits received and margin deposits required under the Company's Trading
	   Portfolio have a significant impact on the Company's funding requirements, and are often determined by
	   changes in commodity prices.     Position liquidity refers to the extent to which a position can be liquidated
	   quickly, and in large volume, without substantially affecting the position's price.     Key determinants of the
	   liquidity of a position and the cost of liquidation include: (a) the level of third-party interest and market activity
	   in the asset, (b) the time period available to convert the asset to cash, (c) the size (value or volumes) of the
	   asset, and (d) perception of the Company in the marketplace. Active management of funding requirements
	   and capital availability should minimize funding shortfall&    See Section 4.4 for the limit structure and
	   reporting guidelines.
	   The Liquidity Exposure Ratio ("Liquidity Ratio") is the primary metric of the Company's liquidity/funding risk to
	   be implemented under a transition period determined by the Risk Management Committee.             The Liquidity
	   Ratio shall be calculated daily over a specified time period by dividing (a) the sum of the Company's Future
	   Available Cash and Borrowing Capacity, by (b) the Company's Potential Future Cash Requirements. Future
	   Available Cash      shall  represent the Company's current     cash-flow forecast       as  determined by the
	   Treasury/Global Finance department, considering operating and investing activities.         Borrowing Capacity
	   shall also be determined by the Treasury/Global Finance department, calculated as the sum of: (a)
	   commercial paper: (b) uncommitted bank lines and loan sales lines; (c) letter of credit facilities; (d) net
	   accounts receivable and accounts qavable; ~ net price risk management assets: (fl inventory: (eg) shelf
	   registrations for public debt issues; and (fh) shelf registrations for public equity issues. Potential Future Cash
	   Requirements shall be calculated by the Trading Portfolio's risk systems and shall represent a simulation of
	   margin exposure and collateral requirements for the Trading Portfolio.
	   Liquidity stress testing shall be performed periodically, as required by the Chief Risk Officer, to quantify the
	   liquidity/funding risks associated with specific positions.   Such stress testing may include specific asset
	   liquidity stress tests to quantify the risks associated with illiquid positions.  Results of liquidity stress testing
	   will be made available to the CEO and to other parties at the discretion of the Chief Risk Officer.
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	  Enron Corp.                                                                         PageS
	  Risk Management Policy
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	  3.5   Returns on Risk Capital
	  A fundamental premise of this Policy is that no major risk shall be assumed without due consideration for the
	  expected return on that risk, both on an individual transaction basis and in terms of that transaction's impact
	  on the aggregate risk profile of the Company. Risk and associated returns shall be assessed consistently in
	  order to facilitate meaningful comparisons between businesses, asset classes and risk types.
	  Each Enron Business Unit, as a user of Risk Capital, must periodically report to the Chief Risk Officer how its
	  capital has been used and what returns were realized on such capital. These results may be included in the
	  reports made by the Chief Risk Officer to the Finance Committee at their regularly scheduled meetings. The
	  following measurement methodologies and metrics are approved for use in determining returns on Risk
	  Capital.


	  3.5.1   Return on Value-at-Risk ("RoVaR")
	  Return on Value-at-Risk ("RoVaR") is defined as aggregate profit and loss, divided by the average daily VaR
	  for the same period.  GRMO shall calculate RoVaR at least quarterly for each Commodity Group that the
	  Enron Business Unit is authorized to trade and for all the Commodity Groups traded by the Enron Business
	  Units in aggregate. These calculations shall be made in accordance with RAC guidelines, and the results of
	  these calculations shall be provided to the Chief Risk Officer or his designee.


	  3.5.2   Credit Pricing and Return on Credit Risk
	  To enable the Company to accurately charge for and allocate a portion of the Risk Capital associated with
	  credit risk, credit reserves shall be established to reflect potential credit losses in the event of counterparty
														  Is
	  default. These credit reserves shall be funded on a deal-specific basis at the discretion of the vice-president
	  in charge of the credit risk management function in RAC by applying a probabilistic model that simulates
	  defaults based on counterparty ratings and calculating expected losses over the term to maturity for
	  transactions. Credit reserves will be assessed across the Portfolios and tested for adequacy on a monthly
	  basis.
	  Return on credit risk represents the extent to which returns from a given class of credit risk exceed the
	  market price for that credit risk.  Commodity transactions should be priced to account for the customers'
	  credit rating, thereby adequately compensating the Company for assuming this credit risk.


	  3.5.3   Return on Capital-at-Risk (~LRoCaR~~)
	  Return on Capital-at-Risk ("RoCaR') represents the aggregate of expected returns against aggregate Risk
	  Capital.  This metric shall be applied as appropriate to facilitate the comparison of different types of
	  transactions across the company using a common framework.        RoCaR shall be considered in the
	  Transaction Approval Process for non-standard transactions that is discussed in Section 5 of this Policy.


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	  Enron Corp.                                                                                     Page 9
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	  4    Preservation of Capital
	  The Company shall preserve and safeguard capital from the impacts of market, credit, operational and
	  liquidity/funding risks in accordance with its risk appetite. To preserve capital, measurement techniques and
	  associated reporting standards shall be applied for each primary risk factor. A limit structure shall be applied
	  for market, credit and liquidity/funding risks.


	  4.1    Capital Associated with Market Risk
	  The Company's capital is constantly exposed to the risk of loss that arises from movements in market prices,
	  commodity volumes and other factors.  Market risk shall be managed on a daily basis for transactions and
	  positions within the Trading Portfolio, the Merchant Portfolio, the Capital Portfolio and the Regulated
	  Portfolio, and on a periodic basis for the Other Assets and Contracts Portfolio as required by the Chief Risk
	  Officer.


	  4.1.1     Limit Structure for Market Risks
	  Primary control of market risk is established through limits approved by the Board, the CEO, the Chief Risk
	  Officer in consultation with the Risk Management Committee, and the Office of the Chairman of the
	  appropriate Enron Business Unit.  The risk appetite of the Company is established by senior management
	  and ratified by the Board. It is the responsibility of senior management to engage in risk-taking activities in
	  accordance with the Company's risk appetite within approved risk/return boundaries required by the Board,
	  investors, lenders and credit rating agencies.   These limits are used to promote the appropriate level of
	  awareness by both the Company's senior management and Enron Business Unit personnel to ensure that
	  risks are known, communicated and appropriately evaluated in light of the Company's business and risk
	  management objectives and strategies.
	  Criteria considered in establishing risk limits shall include, among other factors, relevant market analysis,
	  market liquidity, prior track record, business strategy, trader experience, appropriate implementation of a
	  trader level limit structure, risk management infrastructure, and qualitative operational risk assessment.
	  The Company's market risk limits and sub-limits shall be applied on a daily basis as described in the
	  following sections, based on the close-of-business positions at the following levels for each Portfolio, with
	  each level being subordinate to the one(s) above it:
		 i.   Portfolio level
		 ii.  Market concentration level
		 iii. Business unit level
		 iv.  Commodity Group level
		 v.   Trader/desk level

	  4.1.1.1     Portfolio Market Risk Limits ("Portfolio Limits")
	  The Board shall approve an aggregate VaR Limit for the Trading Portfolio and for the Regulated Portfolio
	  ('Portfolio limits).  The Board shall also approve an ETL Advisory Limit ("ETL Limit") for the Trading
	  Portfolio.   The Trading Portfolio limits as specified in Appendix A apply to the Company's entire Trading
	  Portfolio, including certain activities in the pipeline and domestic utility business units.   The Regulated
	  Portfolio limits covering different positions within the pipeline and domestic utility business units are also
	  specified in Appendix A. The other Portfolios described in Section 2 of this Policy do not have limits at the
	  Portfolio level, although they may provide a VaR measurement at this level. They may. however, have limits
	  applied to positions within their Portfolio, as noted in the following sections.


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	 Enron Corp.                                                                         Page 10
	 Risk Management Policy
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	 4.11.2    Market Risk Concentration Limits ('Concentration Limits")
	 For certain Portfolios, the Board shall approve individual VaR limits subordinate to Portfolio VaR Limits
	 representing the maximum risk appetite for specific markets or activities (Concentration Limits').  These
	 Concentration Limits aggregate risk into categories of positions under a methodology approved by the Risk
	 Management Committee. Concentration Limits enable the Board to limit the Company's exposure to certain
	 markets and activities, while providing management with the flexibility to establish and modify Enron
	 Business Unit Limits and Commodity Group Limits as business strategies and markets change.
	 The Risk Management Committee shall ensure the Enron Business Unit Limits described in Section 4.1.1.3
	 of this Policy and Commodity Group Limits described in Section 4.1.1.4 of this Policy are allocated in a
	 manner that provides for compliance with these Concentration Limits.   Specific monitoring and reporting
	 requirements in accordance with Section 4.1.2.2.2 of this Policy shall ensure these Commodity Groups are
	 aggregated across the Company to facilitate the monitoring of compliance with Concentration Limits.
	 The Board shall approve Concentration Limits within the Trading Portfolio as specified in Appendix A, for the
	 following categories: (a) Americas Natural Gas, (b) Americas Electricity, (c) European Natural Gas and
	 Electricity, (d) Products, (e) Financials and (f) Emerging Businesses.
	 The Board shall approve a Concentration Limit on transactions captured within the Capital Portfolio related to
	 Enron stock (see Appendix A). Other positions within the Capital Portfolio are subject to risk measurement,
	 but are not subject to this limit.

	 4.1.1.3   Enron Business Unit Market Risk Limits ('Enron Business Unit Limits")
	 The Chief Risk Officer or his designee, in consultation with the Risk Management Committees an4-tI~e-Chief
	 Exacutivz Cificar shall determine an overall VaR limit for each Enron Business Unit ("Enron Business Unit
	 Limits") holding a position in the Trading Portfolio or the Regulated Portfolio. These limits shall be expressed
	 as amounts of aggregate VaR for the Commodity Groups approved for trading within that Enron Business
	 Unit. The Enron Business Unit Limits are subordinate to Concentration Limits and Portfolio Limits.  As a
	 result, the risk taken within aD of the Enron Business Units cannot in aggregate conflict with the appetite for
	 risk in any individual Concentration Limit or Portfolio Limit approved by the Board. These limits shall be
	 reviewed periodically by the Risk Management Committee and can be modified at any time by the Risk
	 Llanngzmznt Ccrnmittco and tha CEOChief Risk Officer or his designee, in consultation with the Risk
	 Management Committee, at any timo at thoir diccrction.

	 4.1.1.4   Commodity Group Market Risk Limits ("Commodity Group Limits")
	 The Risk Management Committee together with the President must approve the individual Commodity
	 Groups that wilt be traded within each Enron Business Unit, and the Chief Risk Officer or his designee shell
	 agDroves-we44-as the products that are authorized for trading within a specific Commodity Group (such
	 products are hereinafter referred to as "Authorized Products").   See Appendix A for a listing of existing,
	 approved Commodity Groups as of the date of the most recent amendment to this Policy.
	 The Chief Risk Officer or his designee shall determine whether a new product that an Enron Business Unit is
	 proposing to trade is a standard product, easily combined with the other products in the same Commodity
	 Group, or a unique product to the Company that needs to be placed in a new Commodity Group. The Risk
	 Management Committee together with the G&QPresident may establish a new Commodity Group for a new
	 product.
	 The Chief Risk Officer or his designee, in consultation with the Risk Management Committee, tegethe*-with
	 the-CEO-shall grant limits for individual Commodity Groups ("Commodity Group Limits") applicable for each
	 Enron Business Unit with positions in the Trading Portfolio or in the Regulated Portfolio. Commodity Group
	 Limits represent the limits for a Commodity Group within a specific Enron Business Unit, and shall be
	 expressed as some combination of: (a) a maximum Net Open Position, (b) a maximum Maturity/Gap
	 Position, (c) a maximum VaR, (d) a maximum EVaR and/or ETL, or (e) other metric recommended by the
	 Risk Management Committee.  RAC shall notify the appropriate individuals within the Enron Business Units
	 and GRMO of any change in limits at least one day prior to the opening of trading for which the new limits
	 are effective.


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	  Enron Corp.                                                                         Page 11
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	  Commodity Group Limits may be granted for the same Commodity Group to more than one Enron Business
	  Unit, and accordingly, such limits shall be set at a level that ensures compliance with the Board approved
	  Concentration Limits. Although more than one Enron Business Unit may be authorized to trade a single
	  Commodity Group, only one Head Trader shall be designated for each Commodity Group across the
	  Company, except for the pipeline and domestic utility business units who shall designate their own Head
	  Traders.  Such Head Trader and his staff are the only individuals authorized to trade with third parties on
	  behalf of the Company. AJI other transactions in this Commodity Group across the Trading Portfolio, with the
	  exception of the pipeline and domestic utility business units, must be executed with such Head Trader's
	  desks.

	  4.1.1.5   Discretionary VaR

	  A maximum amount of VaR (Discretionary VaR") specified in Appendix A may be allocated by the GiOChief
	  Risk Officer or his designee snd Rick tAnnagomant Cammittac to the Enron Business Units, subject to the
	  constraints imposed by the Concentration Limits approved by the Board as specified in AppendIx A.
	  Allocation of Discretionary VaR to increase Enron Business Unit Limits and Commodity Group Limits in
	  excess of the Board approved Concentration Limits specified in Appendix A, must be approved by the Board
	  as a reallocation of Concentration Limits.

	  4.1.1.6   Trader/Desk Level Sub-Limits ("Trader/Desk Sub-Limits")
	  The Enron Business Units with Commodity Group Limits may utilize a limit structure established by the Office
	  of the Chairman of the Enron Business Unit at the trader and/or desk level ("Trader/desk Sub-Limits").
	  These sub-limits shall be subordinate to the Commodity Group Limits assigned to that Enron Business Unit,
	  Trader/desk Sub-Limits facilitate monitoring and control of exposure to specific geographical regions and
	  other components of market exposure as deemed necessary by the Office of the Chairman of the Enron
														   C~4
	  Business Unit.  The effective utilization of these limits as risk management tools by Head Traders shall be
	  considered in determining operational risk and in allocating Risk Capital through the establishment of Enron
	  Business Unit Limits and Commodity Group Limits.
	  These    Trader/Desk Sub-Limits are not subject to the formal Limit Violation and Loss Notification
	  requirements described in Section 4.1.2.3 of this Policy, nor are they required to be specifically reported in
	  the reports described in Sections 4.1.2.2.1 or 4,1.2.2.2 of this Policy.

	  4.1.1.7   Market Risk Limit Structure for Other Portfolios
	  The Merchant Portfolio and the Other Assets and Contracts Portfolio are not subject to market risk limits, as
	  those positions have been subject to individual review via the Transaction Approval Process or other ongoing
	  management procedures.    However, each Enron Business Unit shall provide RAC with all necessary
	  information to quantify and monitor the market risk inherent in those transactions that are part of the
	  Merchant Portfolio and the Other Assets and Contracts Portfolio, as directed by the Risk Management
	  Committee.    RAC shall perform certain analyses and reports on these Portfolios as further described in
	  Section 6.8 of this Policy.

	  4.1.1.8   Exchange Limits
	  Each Enron Business Unit may be subject to limits and other requirements imposed by exchanges, including
	  the New York Mercantile Exchange, the Chicago Board of Trade, the International Petroleum Exchange and
	  the London Metals Exchange.    All Enron Business Units shall comply with any such limits, as may be
	  modified from time to time, and shall provide a periodic summary of compliance with such limits to the
	  Company's legal department and to the Chief Risk Officer or his designee.


												E045949A0030575

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													 Page 12
	  Enron Corp.
	  Risk Management Policy
	  Pro pr/eta,'~ ant Con fidential


	  4.1.2    Administration and Reporting of Market Risks

	  4.1.2.1    Limit Changes and Policy Modifications
	  The Board must approve any modifications of Portfolio Limits or Concentration Limits, as well as any
	  changes, amendments, supplements or updates to this Policy.   The Risk Management Committee is
	  authorized to interpret and clarify this Policy in compliance with the Policy's stated objectives between
	  meetings of the Board of Directors.
	  The Office of the Chairman of an Enron Business Unit may request an allocation of additional Risk Capital by
	  submitting a memo to the Risk Management Committee justifying the allocation. All grants of additional Risk
	  Capital must be made within the Portfolio Limits and Concentration Limits established by the Board.     The
	  Chief Risk Officer or his designee, in consultation with the Risk Management Committee aM-t~e-GSQ-rnay,
	  it th~r iiczrzitizn, reallocate Enron Business Unit Limits and Commodity Group Limits in order to increase
	  the limit of the requesting Enron Business Unit and, concurrently, remain in compliance with the Portfolio
	  Limits and Concentration Limits. The new limits shall be effective no earlier than the trading day following
	  the date of the request and muct be rat ifiod by tho CEO.

	  4.1.2.2    Position Reporting
	  Another key objective of the Company's enterprise-wide risk management framework is to provide
	  employees and managers with a comprehensive understanding of how the Company is positioned compared
	  to various markets and exposures.  This objective can only be achieved if the risks inherent in all of the
	  Company's Portfolios are measured and reported in a meaningful fashion that facilitates the implementation
	  of corporate risk mitigation strategies and supports informed decision making.  The following reporting
	  requirements (which may be modified by RAC on an ongoing basis to ensure best practices are applied
	  throughout the Company) must be followed by all employees of the Company involved in risk management
	  activities.
	  Reporting is the responsibility of GRMO or another middle office function for each Enron Business Unit.
	  Moreover, each Authorized Trader who is responsible for complying with a specific limit must review the
	  position reports for which they are responsible, prior to commencement of the next day's trading to ensure
	  that their trading strategy for the upcoming day's activity is in compliance with their limits.  Reporting of
	  market risks shall generally be reported on a mark-to-market basis, regardless of the type of accounting
	  actually applied to the transactions.
	  Certain federal and state regulatory requirements prohibit the Company's pipeline and domestic utility
	  businesses from sharing certain information with affiliated non-regulated businesses.           Consequently,
	  reporting of such information for these specific Enron Business Units shall not be provided to other Enron
	  Business Units. Any employee who has questions about marketing affiliate issues should immediately
	  contact the vice-president for regulatory and legislative affairs or an equivalent officer at the appropriate
	  Enron Business Unit.

	  4.1.2.2.1   Enron Business Units Daily Position Report
	  GRMO shall prepare, distribute and make available data from the Trading Portfolio and the Merchant
	  Portfolio creating a daily report (the "Enron Business Units Daily Position Report").  The Enron Business
	  Units Daily Position Report shall compare Portfolio Limits, Enron Business Unit Limits, and Commodity
	  Group Limits for that Enron Business Unit to corresponding actual results, as well any other risk parameters
	  required by RAC.
	  The amounts by which the mark-to-market value of a Commodity Group can change for unit changes in all
	  market parameters over the term structure and on a net aggregate basis shall be disclosed either in the
	  Enron Business Units Daily Position Report or its supporting schedules. For positions with option or non-
	  linear risks, the concentration of sensitivities (Delta, Gamma, Vega, Theta, Rho and Eta) shall also be
	  disclosed. The supporting schedules shall also detail any change in the valuation adjustments.

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	  4.1.2,2.2   Enron Concentration Limit Dai!y Positon Report
	  In order to monitor each Concentration Limit, and to aggregate the Company's consolidated results of the
	  Trading Portfolio on a Commodity Group basis, GRMO shall issue a daily report (the "Enron Concentration
	  Limit Daily Position Report') that includes all positions within the Trading Portfolio consolidated across the
	  Company by Commodity Group.    The Capital Portfolio's Concentration Limit shall also be included in this
	  report.

	  4.1.2.2.3   Regulated Portfoiio Reporting
	  Each Enron Business Unit that manages positions included in the Regulated Portfolio must prepare,
	  distribute and make available to RAG, under a transition plan governed by the Risk Management Committee,
	  a daily report that compares limits to actual results, as well as any other risk parameters required by RAG.
	  This Portfolio shall be reported on a mark-to-market basis, regardless of the type of accounting actually
	  applied to the transactions.

	  4.1.2.2.4   Other Assets and Contracts Portfolio Reporting
	  Each Enrori Business Unit that manages positions included in the Other Assets and Contracts Portfolio must
	  prepare, distribute and make available to RAG, a monthly report that discloses Earnings-at-Risk and any
	  other risk parameters as required by the Risk Management Committee. The preparation of this information
	  for positions included in the Other Assets and Contracts Portfolio is new for most Enron Business Units and
	  accordingly, the Risk Management Committee shall approve an extended transition plan addressing when
	  each Enron Business Unit must begin providing this information.
	  The Risk Management Committee shall consider the impact of the separate Portfolio reporting when
	  considering the risk of individual Portfolios.  An underlying position in the Other Assets and Contracts        el
															  ed
	  Portfolio may be hedged with a transaction in the Trading Portfolio, or vice versa, as further described in
	  Section 3.1.6.   Consequently, a risk aggregation methodology shall be considered by RAC as the
	  development of risk measurement and reporting for the Other Assets and Contracts Portfolio advances.


	  4.1.2.3   Limit Violation and Loss Notification Requirements
	  Any instances when (a) actual results are in excess of corresponding limits (hereinafter referred to as "Limit
	  Violations"), (b) losses are in excess of corresponding stop-loss advisory limits (hereinafter referred to as
	  'Loss Notifications"), or (c) when the ETL exceeds the ETL Limit (hereinafter referred to as "ETL
	  Notifications") must be reported to the designated parties as described in the following sections.
	  The Head Trader responsible for compliance with the limits is responsible for providing a thorough written
	  explanation of any Limit Violations, Loss Notifications, and ETL Notifications, as well as a plan for complying
	  with the limit structure. Unless specifically authorized by the Risk Management Committee, the Head Trader
	  must modify his risk-taking activities as quickly as possible to comply with the limits specified.
	  Based upon stress test results or other indicators of exposure, the Chief Risk Officer may require a full
	  review by RAG of any position or group of positions.   RAG also may determine that certain management
	  notifications regarding trading results are required, in addition to those described herein. A summary of any
	  review, along with corresponding recommendations from RAC, may be presented to the Risk Management
	  Committee to facilitate their Risk Capital allocation to Error Business Units, and other evaluation of
	  individual Enron Business Units' risk-taking activities.
	  All Portfolio Daily Loss Notifications and a summary of Portfolio Limit Violations and Concentration Limit
	  Violations, along with an analysis of Enrons market risks, shall be reported by the Chief Risk Officer to the
	  Audit and Compliance Committee of the Board of Directors (Audit Committee") and/or the Finance
	  Committee of the Board of Directors (Finance Committee") at regularly scheduled Audit Committee and
	  Finance Committee meetings.


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	  4.1.2.3.1   Portfolio Limit Monitoring and Reporting

	  If any of the following situations occurs in regards to any Portfolio, such situation shall be reported
	  immediately to the Risk Management Committee.       Chiof Rick Officor, the President of Enron Corp. (the
	  "President"), the CEO and others at their discretion: (a) the aggregate VaR exceeds the corresponding
	  Portfolio VaR Limit causing a Limit Violation, (b) the net sum total of Daily Profit or Loss for each of the
	  Commodity Groups assigned to that ?ortfoVo exceeds the corresponding Portfolio VaR Limit triggering a
	  Loss Notification, (c) the net sum total of Cumulative 5-Day Profit or Loss for each of the Commodity Groups
	  assigned to that Portfolio exceeds 225% of the corresponding Portfolio VaR Limit triggering a Loss
	  Notification, or (d) the ETL exceeds the ETL Limit for that Portfolio causing an ETL Notification,  The
	  occurrence of a situation under either (a) or (b) or (c) above shall also be reported immediately to the
	  Chairman of the Board of Enron Corp. and the Chairman of the Finance Committee.

	  4.1.2.3.2   Concentration Limit Monitoring and Reporting
	  If any of the following situations occurs in regard to any Concentration Limit, such situation shall be reported
	  immediately to the Risk Management Committee CNcf Rick Officer, the President, the CEO and others at
	  their discretion: (a) the aggregate VaR for the Commodity Groups assigned to that Concentration Limit
	  exceeds the corresponding Concentration Limit causing a Limit Violation; (b) the net sum total of Daily Profit
	  or Loss for each of the Commodity Groups assigned to a specific Concentration Limit exceeds the
	  corresponding Concentration Limit; or (c) net sum total of Cumulative 5-Day Profit or Loss for each of the
	  Commodity Groups assigned to a specific Concentration Limit exceeds 225% of the corresponding
	  Concentration Limit.
															  C,
															  (N

	  4.1.2.3.3   Enron Business Unit Limit Monitoring and Reporting
	  If any of the following situations occurs in regard to any Enron Business Unit, such situation shall be reported
	  immediately to the Risk Management Committee. the President and others at their discretion:       (a) the
	  aggregate VaR for Trading Portfolio positions within that Enron Business Unit exceeds the corresponding
	  Enron Business Unit VaR Limit causing a Limit Violation, (b) the net sum total of Daily Profit or Loss for each
	  transaction that is subject to the Enron Business Unit Limits exceeds the corresponding Enron Business Unit
	  VaR Limit, or (c) the net sum total of Cumulative 5-Day Profit or Loss for each transaction that is subject to
	  the Enron Business Unit Limit exceeds 225% of the corresponding Enron Business Unit VaR Limit.

	  4.1.2.3.4   Commodity Group Limit Monitoring and Reporting
	  If one of the following occurs in regard to any Commodity Group authorized to be traded within an Enron
	  Business Unit, such situation shall be reported immediately to the Risk Management Committee         the
	  President and others at their discretion:  (a) any Net Open Position, Maturity/Gap Position or VaR for the
	  positions within the Enron Business Unit exceeds the corresponding limit for that Commodity Group within
	  that Enron Business Unit causing a Limit Violation, (b) the Daily Profit or Loss for that Commodity Group in
	  that Enron Business Unit is a loss that exceeds the corresponding VaR limit, or (c) the Cumulative 5-Day
	  Profit or Loss is a loss for that Commodity Group within that Enron Business Unit that exceeds 225% of the
	  corresponding VaR limit.

	  4.1.2.3.5   Trader/Desk Sub-limit Monttoring and Reporting
	  GRMO shall provide limit monitoring and reporting to the Head Traders as appropriate for any Trader/desk
	  level limits established by the Office of the Chairman of the Enron Business Unit. The formal documentation
	  of loss notifications and limit violations for Trader/desk level limits is not required under this Policy.


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	  Enron Corp.                                                                              Page 15
	  Risk Management Policy
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	  4.2    Capital Associated with Credit Risk
	  The capital required to support credit risk shall be quantified, administered and reported as noted in the
	  following sections of this Policy.  RAG develops and administers credit policies, assesses credit quality,
	  approves counterpart' credit risk, establishes appropriate limits and monitors counterparty credit exposures
	  for each Portfolio.   The Merchant Portfolio is subject to the Transaction Approval Process and ongoing
	  portfolio analysis performed by RAG. My Merchant Portfolio credit exposures are identified through these
	  processes.     The Regulated Portfolio has its own unique credit procedures to comply with regulatory
	  requirements. Credit exposures across all Portfolios shall be aggregated and reviewed by RAG on a regular
	  basis, under a transition period to be governed by the Risk Management Committee.
	  RAG may utilize credit mitigation techniques to effectively manage credit risk and to protect the Company in
	  the event of counterparty defaults.   Accordingly, RAG may transfer credit risk by executing credit linked
	  structured deals or credit derivative trades as well as by securing insurance or monetizing transactions.
	  Alternatively, RAG may attempt to reduce or mitigate counterparty exposure by: (a) collecting collateral in the
	  form of cash, letters of credit or cash equivalents, (b) mitigating credit risk through bank guarantees, and (c)
	  accepting other security as negotiated and agreed with a counterparty.


	  4.2.1     Limit Structure/Guidelines for Credit Risk Assessment
	  Assessing counterparty creditworthiness is an integral part of determining the Company's credit risk.  RAG
	  has developed various guidelines and standards described in the following sections for internal ratings, credit
	  limits, tenor limits and counterparty reassessments to assist in limiting and monitoring credit exposure. RAG
	  personnel conduct all assessments of counterparty creditworthiness.
	  Following an initial assessment of a counterpart/s creditworthiness, RAG personnel monitor changes in the
	  counterpart/s financial condition, including qualitative factors that would affect the initial assessment. The
															     to
	  timing of the review cycle is a function of the risk level of the products involved, the credit quality and activity
	  of the counterparty and the counterparty's credit history with the Company. As a result, the reassessment of
	  an active counterparty is a matter of analyst discretion, but, at a minimum, counterparties with an exposure
	  over $50      million shall be reassessed  at least semi-annually.    In  addition, non-investment grade
	  counterparties shall be reassessed at least annually, while investment grade counterparties should be
	  reassessed at least bi-annually. The same review process and approval levels indicated below shall apply to
	  a counterpart/s reassessment.

	  4.2.1.1     Internal Ratings
	  As part of the counterparty approval and assessment process, RAG shall assign each counterparty a credit
	  risk rating (an 'E-Rating") on a scale of 1 to 12 (see Appendix 8).  The primary objective of establishing
	  counterparty E-Ratings is to provide a framework for approving credit risk and for monitoring the quality of
	  the Company's portfolio of credit risk.  Consistent application of the E-Rating framework shall ensure the
	  consistency of credit risk assessments across counterparties.  In determining E-Ratings, RAG shall review
	  quantitative and qualitative counterparty information. Such information includes, but is not limited to:
		 i.   Published credit rating (e.g., Standard & Poors, Moody's and other rating agencies)
		 ii.  Financial statements
		 iii. Financial ratio analysis
	       iv.    Management expertise
		 v.   Rank within industry
	       vi.    Reputation
	       vii.   Strategic direction
	       viii.  Trading activities and controls
												       EC46g4g~Q~879

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Enron Corp.
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Proprietary and Contkiential

     ix.  Sovereign risk
If public credit ratings are available, RAG shall utilize the public ratings as a benchmark when establishing an
E-Rating. Additional quantitative data may be analyzed with a financial scoring model that calculates a risk
grade for a counterparty against a representative peer group based on profitability, liquidity, debt service and
leverage.  RAG shall utilize a financial analysis management system as approved by the vice-president in
charge of the credit risk management function in RAG, in conjunction with other tools that combine
judgmental and factual data about a borrower to analyze creditworthiness.  These key quantitative results
impact the final E-Rating assigned to a counterpart>'.   However, the quality of the creditworthiness
assessment is often contingent upon the availability of financial or public information.
Qualitative data shall be obtained from external sources such as reference materials, interviews with
counterparty management, analyst commentary and other sources providing tangible insight.    The strength
and vision of the counterpart/s management are critical subjective factors in assessing the viability of the
counterparty's business. This information compliments RAG's knowledge of the counterparty gained through
quantitative analysis.

4.2.1.2   Credit Limits
In assessing counterparty creditworthiness, RAG shall establish one global Credit Limit for each active
counterparty.   These limits provide a framework for monitoring exposure against limits and managing the
Company's concentration of exposure to a particular counterparty or group of counterparties.  Credit limits
are approved and governed by the Credit Risk Procedures reflected in Appendix C and are subject to review
and adjustment at the discretion of the vice-president in charge of the credit risk management function in
RAG.
Both quantitative and qualitative information can provide input to RAG's decision on limits. The Company's
risk appetite for a particular counterpart>' is impacted by counterparty's credit profile, the volume of business         0
															  CN
the Company expects to transact with the counterparty and the counterparty's relative size in relationship to
other participants in the applicable industry.  Various other Credit Limits may be established for a                      '0
counterparty based on the level and type of trading activities conducted by the Company and that
counterparty.   These limits may be reflected as contractual thresholds or established for internal guidance
purposes.    Guidance Credit Limits are used so that RAG can accurately monitor and manage the overall
credit risk for a counterpart>', while contractual limits are used to manage risk within specific contract or
transactions.   Counterparty Credit Limits shall be captured and maintained by RAG to facilitate effective
monitoring and reporting and shall be filed in a counterparty's credit file.

4.2.1.3   Tenor Limits
In addition to establishing a global Credit Limit for each counterpart>', RAG shall set one global Tenor Limit
(i.e., maximum term to maturity) for active counterparties. Tenor limits provide acceptable risk for long-term
transactions in which credit risk increases with maturity due to: (a) greater probability of a counterparty
default, (b) higher volatility or change in market prices that leads to increased credit exposure, and (c) larger
volumes on average for longer-term deals. RAG also retains the flexibility to restrict the tenor of specific
products as appropriate.
RAG approval authority is outlined in the table set forth in Appendix C, and is subject to review and
adjustment at the discretion of the vice-president in charge of the credit risk management function in RAG.


4.2.2   Administration and Reporting for Credit Risks
A number of resources and monitoring tools are utilized to assist RAC in the credit management process,
including the Credit Aggregation System ("CAS") and counterpart>' credit files.  Other internal or external
analytical tools are also available to assist with counterparty credit assessment.      To the extent a
counterparty's exposure exceeds its pre-assigned limit, the excess should be reported to the Chief Risk
Officer or his designee.
RAC shall prepare various reports to quantify and report significant credit risks created by the Company's
trading activities and to summarize critical credit risk indicators. These reports shall be provided to the Chief


											  EC46949A0030880





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	   Enron Corp.                                                                               Page 17
	   Risk Management Policy
	   Proprietary and Confidential

	   Risk Officer upon request so that he can determine the form and manner in which such reports will be made
	   available to senior management and the Board.      These reports may include, but are not limited to, credit
	   reserves, top twenty-five counterparty exposures, E-Rating exposures, industry exposures, counterparty
	   concentrations and non-per-forming or distressed assets.    In addition to counterparty credit exposures, RAG
	   is responsible for periodically reporting exceptions to contractual requirements to the Chief Risk Officer.  The
	   Chief Risk Officer shall review and approve the level of the Company's credit reserves monthly.

	   4.2.2.1  Documentation Approval
	   Various forms of agreements such as master contracts or confirmations support counterparty relationships
	   and specific transactions. In order to limit the Company's credit risk exposure, RAG shall approve the credit
	   provisions included in such documents and actively participate in the negotiation of the documents.
	   Agreements such as master firm purchase/sale agreements, International Swap Dealers Association (ISDA)
	   master agreements and other master contracts shall contain credit provisions authorized by RAG.  Some of
	   the major provisions impacting credit risk include: (a) netting provisions, (b) provisions relating to the
	   perfection of collateral and security interests, (c) Material Adverse Change (UMAC) clauses, (d) cross default
	   provisions, (e) set-off clauses, (f) provisions relating to the right to access and receive data, (g) provisions
	   relating to the right to audit, and (h) provisions relating to exposure threshold(s).

	   4.2.2.2  Credit Aggregation System ('GAS")
	   GAS enables RAG to record Credit Limits and monitor end-of-day credit exposure.       GAS aggregates
	   counterparty exposure globally and displays active transactions from business unit source and back office
	   accounting systems.  GAS also allows RAG to maintain information on credit enhancements, contractual
	   agreements, netting rights and any other relevant counterparty information, as well as enabling RAG to
	   prepare reports on exposures by size, exposures by Enron entity, exposures by product, collateral
	   requirements and credit watch list participants.  Exception reports can also be generated.  Approved E-
	   Ratings, Credit Limits and Tenor Limits are captured and maintained in GAS.   Gounterparty collateral and
	   guarantees are also captured and maintained in GAS to ensure monitoring and compliance.

	   4.2.2.3  Counterparty Credit Files
	   Credit files shall be created and maintained, as necessary, for each counter-party with a trading relationship
	   governed by this Policy. Credit files provide the primary support for credit approval and credit risk decisions.
	   To this end, files shall support the assessment of counterparties' creditworthiness, including assessed 2-
	   Ratings, Credit Limits, and Tenor Limits, and shall contain sufficient information to explain the current status
	   of a counterpar-ties' credit relationship with the Company.  Credit files also may include applicable financial
	   statements, correspondence,  rating agency reports, research, executed agreements and guarantees,
	   corporate resolutions and any other information as deemed appropriate.     These files are confidential in
	   nature and are controlled by RAG.

	   4.2.2.4  Credit Reserve Monitoring
	   As described in Section 3.5.2 of this Policy, the credit risk management function in RAG shall apply a
	   probabilistic model that simulates defaults based on counterparty ratings and calculating expected losses
	   over the term to maturity for transactions. Credit reserves will be assessed across the Portfolios and tested
	   for adequacy on a quarterly basis.  If the credit reserve that the Accounting department records for the
	   quarter is over 10% more or less than the credit reserve per the model simulated by RAG, the CEO shall be
	   notified by the Chief Risk Officer to ensure he is aware of any subjective issues considered in the Company's
	   credit reserve analysis.


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	  4.3     Capital Associated with Operational Risk
	  Operational risk losses may include the costs to fix an operational problem, payments to third parties, write
	  downs, latent losses and contingent losses. The Company shall maintain a rigorous control environment to
	  manage and limit exposure to operational risk. This protects the Company from additional market, credit and
	  liquidity exposures arising from operational failures.


	  4.3.1    Guidelines far Operational Risk
	  Operational risk is not subject to limits under this Policy. RAC, Enron Assurance Services, and Information
	  Technology   Compliance departments     shall provide       an independent focus on  the operational risk
	  management and shall work closely with each Enron Business Unit and GRMO to identify, assess,
	  categorize, quantify and mitigate exposure to operational risk. The collection of internal loss data will allow a
	  transition, over time, to more sophisticated measurement methodologies.    Until internal loss information is
	  available, the assessment of operating risk will be based on a qualitative judgment of the adequacy of the
	  control environment and limited quantitative analysis. This assessment of operational risk shall     be
	  considered in the Risk Capital allocation process when the Risk Management Committee establishes Enron
	  Business Unit Limits and when RAG establishes Credit Reserves.         A list of the primary operational risk
	  considerations is included in Appendix G of this Policy.

	  4.3.1.1   Segregation of Duties.
	  Enron Business Units shall keep segregated from the business groups or individuals entering into
	  transactions each of the following activities: recording and aggregation of transactions; preparation, issuance
	  and verification of the Company or third-party documentation; reporting of positions and Commodity Group
	  information; review of the reasonableness of prices and models,         periodic validation of prices from
															 to
	  independent market sources; monitoring of limits; physical and/or financial settlement of transactions;
	  reconciliation of accounts; and preparation of financial statements.

	  4.3.1.2   Fundamental Operating Standards
	  The organizational structure for the origination, administration, review and approval of risk exposures is
	  designed to provide a clear segregation of responsibility and accountability among risk-taking and middle-
	  office risk management personnel. Enron Business Units shall comply with the Company's Fundamental
	  Operating Standards contained in Appendix F, as such standards may be updated from time to time. GRMO
	  is responsible for effective implementation of the risk management framework and adherence to this Policy.
	  The independent risk management function, RAG, is responsible for oversight of the risk management
	  activities throughout the Company to ensure compliance with the Policy.

	  4.3.1.3   Code of Ethics
	  All employees of the Company shall transact business with the highest integrity and in accordance with the
	  ethical values set forth by the Company.  In particular, each employee shall comply with the Company's
	  Code of Ethics that includes the Company's policies on the following matters:
		  i. Principles of Human Rights
		  ii. Securities Trades by Company Personnel
		 iii. Business Ethics
		 iv. Confidential Information and Trade Secrets
		 v. Safety
		 vi. Use of Communication Services and Equipment
		 vii. Internet Security
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	 Risk Management Policy
	 Proprietary and Confidential

									    Page 19

	      viii. Governmental Affairs and Political Contributions
	      ix.   Consulting Fees, Commissions, and Other Payments
		x.  Compliance with the Foreign Corrupt Practices Act
	      xi.   Compliance with Antitrust Laws
	      xii.  Compliance with Environmental Laws
	      xiii. Conflicts of Interests, Investments, and Outside Business Interests of Officers and Employees
	      xiv.  Responsibility for Reporting
	      xv.   Compliance; Administration

	 These policies may be amended, altered or terminated by the Company at any time.

	 4.3.1.4    Information Systems Support and Business Continuity Planning
	 The Company shall have adequate information systems in place to support risk management activities. The
	 Company shall review thoroughly all material risks associated with business disruption in each Enron
	 Business Unit's field of endeavor arid establish prudent guidelines to ensure business continuity in ease of
	 operational failure of critical systems.


	 4.3.2    Administration and Reporting far Operational Risks
	 As discussed in Section 3.3, a framework to better evaluate the Company's exposure to operational risk will
	 be developed.  This framework will include reporting requirements that address exposures to and actual
	 losses from operational risk.
	 All Enron Business Units are required to perform serf-assessments of operational risk quarteriy or as
	 otherwise required by RAC. Enron Assurance Services, Information Technology Compliance and RAG shall
	 review the scope of each self-assessment.  The Risk Management Committee shall consider this self-
	 assessment and other indicators of operational risk when allocating capital to the Enron Business Unit Limits.


										    EC46949A0030883
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												  Page 20
	  Enron Corp
	  Risk Management Policy
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	  4.4   Capital Associated with Liquidity/Funding Risk
	  Liquidity/funding risk arises from the potential that funding requirements will exceed funding availability for a
	  given time period.   Funding requirements may vary over time as a result of: (a) exchange margin
	  requirements, collateral obligations and coJlateral receivables primarily related to Trading Portfolio activities,
	  (b) new investments, (c) the payment of interest and dividends, and (d) the maturing of debt and other
	  obligations.  Funding availability may vary over time as a result of: (a) available cash, (b) access to capital
	  markets, (c) available collateral and (d) the time required to convert positions to cash or liquid assets.
	  The Company shall use the Liquidity Ratio, liquidity stress testing and other methods as specified by the
	  Chief Risk Officer to measure liquidity/funding risk.


	  4.4.1   Limit Structure for Liquidity/Funding Risk
	  The CEO shall approve an advisory limit for liquidity/funding risk ('Liquidity Ratio Advisory Limit') to be
	  implemented under a transition period approved by the Risk Management Committee. This shall be based
	  on the Liquidity Ratio discussed in Section 3.4 of this Policy. The Liquidity Ratio shall be calculated using
	  two different assumptions to derive the Trading Portfolio's Potential Future Cash Requirements, the
	  denominator of the calculation: (a) a 50% confidence level, and (b) a 99% confidence level.


	  4.4.2   Administration/Reporting for Liquidity/Funding Risk
	  The Liquidity Ratio shall be calculated on a daily basis and reported by RAC to the CEO, the Chief Risk
	  Officer, and the Treasury department designee.  If the Liquidity Ratio is (a) less than 3.0 using a 50%
	  confidence level to calculate Potential Future Cash Requirements or (b) less than 1.5 using a 99%
	  confidence level to calculate Potential Future Cash Requirements, the Chief Risk Officer shall provide a
	  Liquidity Ratio Advisory to the CEO and others at his discretion. The CEO shall direct senior management to
	  take certain actions to mitigate the Company's liquidity/funding risk.


												   E045949A0030884
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C'4

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	  Enron Corp.                                                                                 Page 21
	  Risk Management Policy
	  Proprietary and Con fidentiad


	  5    Requests for Allocation of Risk Capital
	  All Company transactions shall be characterized as either standard or non-standard transactions. Standard
	  transactions are: (a) routine transactions executed in the ordinary course of business that can be easily
	  valued on a daily basis, (b) authorized under the market risk Portfolio Limits, and (c) executed in accordance
	  with the credit risk procedures contained in this Policy.  Non-standard transactions include those that are
	  unusual or require a capital investment at the outset of the transaction or during its term.  Non-standard
	  transactions may be complex and require ad hoc consideration and specific approval as specified by the
	  Transaction Approval Process attached hereto in Appendix 0.
	  RAG employs different procedures and guidelines for the analysis of deals classified as standard
	  transactions than are applied for deals classified as non-standard transactions.   Any issues regarding the
	  characterization of a transaction as standard or non-standard should be directed to RAC and addressed prior
	  to or upon commencement of negotiations.        RAG determines whether a transaction is standard or non-
	  standard, and this assessment is qualitative.     Prior to execution, each transaction shall be analyzed
	  sufficiently to enable the different types of risk to be identified and measured.


	  5.1   Portfolio Risk Capital
	  Market risk limits assigned to each level of the Company's limit structure represent allocations of Risk
	  Capital. As such, the Enron Business Unit that proposes the addition of a new Commodity Group or new
	  product shall perform a cost/benefit analysis.  This analysis shall be reviewed by RAG and by each of the
	  relevant risk management functions. This analysis shall include not only the business strategy and summary
	  of specific risks inherent in this business activity, but also an assessment of the incremental costs and
	  stresses upon the risk management infrastructure necessary to adequately control risk in compliance with
															  C
	  this Policy, with recognition given to additional strain placed on the existing risk management environment by
	  the new activity and the impact of a new activity on operational risk. RAG shall present its recommendations
	  to the Risk Management Committee for final approval. A similar analysis of the returns on Risk Capital for
	  individual Commodity Groups and Portfolios shall be prepared on an ongoing basis to support the continued
	  evaluation of the Risk Capital allocation process, as described in Section 3.5 of this Policy.
	  Approval of credit risk exposure and operational risk exposure also represents allocation of Risk Capital.
	  However, credit risk limits are not assigned on a portfolio basis; instead individual transactions are subject to
	  credit review as specified in Sections 4.2 and 5.2 of this Policy.


	  5.2   Transaction Specific Risk Capital

	  5.2.1  Approval Process for Standard Transactions
	  Standard transactions generally include those documented on approved confirmations, valued in core
	  systems and established in business units within the Company.         RAG approves the execution of standard
	  transactions either directly with commercial personnel or through the Company's global Internet-based
	  transaction systems.  All counterparties must be pre-approved by RAC for online trading.     Online trading
	  shall incorporate controls within the system to review Credit Limits and Tenor Limits as well as product
	  approvals prior to allowing counterparties to execute transactions.      For deals executed other than online,
	  commercial personnel are responsible for (a) obtaining approval from RAG prior to executing transactions
	  that expose the Company to credit risk and (b) understanding the current credit terms for executing
	  transactions with a counterparty. RAG shall provide verification of credit trading terms or specific transaction
	  approval upon request.
	  The transaction  approval  process may vary by Enron          Business    Unit depending on the quality of
	  counterparties as well as the liquidity and volatility of products. In some circumstances, RAG may maintain
	  watch lists to highlight counterparties that require approval prior to trade execution as well as to specify
	  counterparties with which deals may not be executed. RAG will make these reports available on a company-
	  wide basis on RAGs intranet web site and in hardcopy format. If a counterparty is referenced on a watch list
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	  or has not transacted with the Company for six months, then commercial personnel must contact RAG for
	  specific transaction approval prior to trade execution. Generally, counterparties are listed on these reports
	  for one or more of the following reasons: (a) the counterparty's credit is near or in excess of its global Credit
	  Limits; (b) the counterparty is subject to credit enhancement requirements; and/or (c) the counterparty is not
	  creditworthy to transact without RAC's direct involvement and evaluation.
	  Upon receiving a request to approve a standard transaction, RAG should evaluate the incremental credit
	  exposure of the proposed deal with the counterparties' credit exposure to determine if the risk will be within
	  the established global Credit Limits.  If the aggregated exposure is within Credit Limits, the transaction may
	  be approved. RAG will also consider offsetting positions when determining the credit risk involved with the
	  proposed transaction.  When a transaction requires credit enhancement, commercial personnel or RAG
	  should disclose the requirements to the counterparty prior to executing the transaction.


	  5.2.2    Approval Process for Non-Standard Transactions
	  in certain circumstances, the Company enters into non-standard transactions. Criteria for identifying these
	  types of deals include:
		   i. Capital expenditures required at the inception or during the term of the proposed transactions
	       ii.   Embedded funding in the deal structure using current price curves
	       iii.  Drafted or non-standard documentation
	       iv.   Customized valuation (i.e., not valued by core systems)
	       v.    Outside credit and market risk limits
	       vi.   Expenditures in a business that is not pre-approved
	       vii.  Expenditures that are outside a pm-approved capital budget
														      U,
	  Non-standard transactions have an approval process similar to non-budgeted capital expenditures. In order
	  to determine the proper approval level of senior management, non-standard structured transactions must
	  comply with the Transaction Approval Process attached hereto as Appendix 0. RAG will determine the risk-
	  adjusted capital amount for the transaction by evaluating the credit and market risks as well as the upfront
	  and implied capital requirements for the transaction.
	  Enron Corp. is requested from time to time to issue credit support instruments on behalf of its subsidiaries,
	  affiliates and unaffiliated third parties in the furtherance of the foregoing parties conducting business in the
	  marketplace. These credit support instruments include, but are not limited to, guarantees, letters of credit,
	  letters of indemnity and comfort letters. The Guarantee Approval Process described in Appendix E sets forth
	  the approval requirements for the issuance of Enron Corp. credit support.
	  Procedures for compliance with, and daily administration of, the Guarantee Approval Process periodically
	  shall be reviewed and revised, as appropriate, by the Global Finance department and RAG, and approved by
	  the Office of the Chairman of Enrort Corp., the Chief Financial Officer or the Treasurer, For the purposes of
	  this policy, a certification by the Office of the Chairman, the Chief Financial Officer, the Treasurer or any
	  Deputy Treasurer, to the effect that this policy has been complied with in connection with the issuance of any
	  Financial Guarantee or Performance Guarantee shad be conclusive evidence of such compliance and may
	  be relied upon by all persons interested in such Financial Guarantee or Performance Guarantee.


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	  6    Roles and Responsibilities
	  Corporate governance is a primary consideration of this Policy, as without established reporting relationships
	  and defined responsibilities, established systems, methods and rules are of little value.   The primary
	  governing bodies that participate in the Company's risk management process are described in this Section.


	  6.1   Board of Directors of Enron Corp. (the "Board")
	  The Board is accountable to the shareholders of the Company and assumes overall responsibility for the
	  management of the Company.    By establishing the risk management guidelines used by the Company,
	  including the Transaction Approval Process and this Policy, the Board ensures the Company's risk-taking
	  activities are consistent with its strategies and that Risk Capital is properly allocated and preserved. The
	  Board delegates the day-to-day execution of its risk management responsibilities to the Company's senior
	  management.
	  The Board's risk management responsibilities include, among others things:
		i.   The establishment of an overall framework for the evaluation, management and control of risk in
		     capital allocation and capital preservation decisions through the approval of risk management
		     policies and processes, including this Policy and the Transaction Approval Process
		ii.  The establishment of specific Portfolio Limits and Concentration Limits, as deemed necessary, to
		     ensure that the Company's risk-taking activities are consistent with the risk appetite of the Board
		iii. The evaluation and approval of specific transactions in accordance with the Transaction Approval
		     Process
		iv.  The review and approval of recommendations of its working committees
															       C,,
	  The Board holds regularly scheduled meetings throughout the calendar year.  The Board may also hold                  Ic
	  special meetings to address and resolve issues requiring consideration and/or approval that cannot be
	  deferred until the next scheduled meeting.  The Board has delegated much of its responsibility for risk
	  management, including the implementation of this Policy, to the CEO.


	  6.1.1    Finance Committee of the Board of Directors ("Finance Cammittee")
	  The Finance Committee is responsible for monitoring the Company's finance activities.       The Finance
	  Committee's risk management responsibilities include, among other things:
		   i. The review, monitoring and development of recommendations to the Board concerning the
		     Company's risk management policies and processes, including this Policy and the Transaction
		     Approval Process
		ii.  The evaluation of risks incurred by the Company to ensure these risks are appropriate and
		     consistent with the Company's overall business strategies and the risk appetite of the Board
	  The Finance Committee may, at its discretion, make recommendations relating to risk management activities
	  to the Board. The Chief Risk Officer is responsible for presenting a summary of the Company's market and
	  credit risks to the Finance Committee at each of its regularly scheduled meetings.  This ensures that the
	  Finance Committee and the Board understand the risks inherent in the Company's activities. The summary
	  presented by the Chief Risk Officer shall include a review of any significant changes to this Policy, as well as
	  a summary of senior management's recommendations regarding specific Risk Capital allocation issues. The
	  Chief Risk Officer also reports periodically to the Finance Committee on the returns achieved by the
	  Company relative to expectations. Certain reports on Loss Notifications and Limit Violations will be sent to
	  the Chairman of the Finance Committee between regularly scheduled meetings as required by Section
	  4.1,2.3 of this Policy.


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6.1.2    Audit and Compliance Committee of the Board of Directors ("Audit Committee")
The Audit   Committee operates under a written charter adopted by the Board and is responsible for
overseeing the Company's financial reporting,  internal controls and compliance processes.  Risk
management responsibilities of the Audit Committee include reviewing the Company's administration of and
compliance with the parameters established by this Policy.
The Chief Risk Officer shall present summaries of market risk limit notification and limit violation activities of
the Company and any significant changes to this Policy at each regularly scheduled meeting of the Audit
Committee.


6.2    Chief Executive Officer of Enron Corp. (the "CEO")
The CEO is responsible for the overall management of the Company, including the execution and
implementation of and compliance with the Board's policies and directives. The CEO's risk management
responsibilities include, among other things:
       i.  The establishment of an overall framework for the Company's implementation of the risk
	   management policies and processes established by the Board, including compliance with the
	   Board approved Portfolio Limits and Concentration Limits
	 ii.Tho cctablichmznt. togzthor with tho Risk Manogomont Committco, of spocific Enron Bucinocc Unit
	   Limitc and Commodity Group Limits to oncurs that tho Cornr"t rick takh potivitioc a--
	   concictznt with ~k ..:,I, ~ ..~f *k,. O.~A


       I.  The review and approval of transactions as prescribed by the Transaction Approval Process
The CEO has delegated much of his risk management responsibilities to a variety of corporate and Enron
Business Unit functions, as described in this Policy.

6.3    Chief Risk Officer of Enron Corp. (the "Chief Risk Officer")
The Chief Risk Officer reports to the CEO, has dotted line reporting responsibility to the Board and is a
member of the Risk Management Committee. The Chief Risk Officer's management responsibilities include,
among other things:

       i.  The implementation and oversight of the Company's risk management policies and processes
       ii. The establishment, in consultation with the Risk Management Committee, of specific Bran
	   Business Unit Limits and Commodity Group Limits to ensure that the Company's risk-taking
	   activities are consistent with the risk appetite of the Board
       iii. The determination of whether a new product is a standard product that can be combined with an
	   existing Commodity Group or whether a new Commodity Group must be established
       iv. Approval of products that are authorized for trading within a specific Commodity Group
       wThe reporting to the Board and its working committees on the Company's compliance with this
	   Policy and other relevant information related to the company's risk management function

Some of the Chief Risk Officer's responsibilities are prudently delegated to RAC as described in Section 6.8
of this Policy.


6.4    Risk Management Committee
The Risk Management Committee reports to the CEO, and its membership includes the Chief Risk Officer
and such other individuals as determined by the CEO.    The Risk Management Committee's risk
management responsibilities include, among other things:


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	       i.    The otdnblishmont and review of systems and controls to measure risk and monitor compliance as
		     required by this Policy
	       ii.   Tha cztsblichmcnt, togothor Consultation with the CEOChief Risk Officer reaardinp-e* specific
		     Enron Business Unit Limits and Commodity Group Limitc, '.vhizh in oggrzgatz do not cenflict with
		     the 603rd approvod Portfolio Lir''- '"' '""'' I
	       iii.  The approval of individual Commodity Groups that may be traded within each Enron Business-as
		     xcll oc tha prcductr that arc authorized for tradir" within a spocific Cornr~.~M~~ r.~,
	       iv.   The designation and management of Head Traders (see Section 6.5.2 below) for each Commodity
		     Group in the Trading Portfolio
	       v.    The approval, together with the CEO, of new Commodity Groups
	       vi.   The periodic review of Company positions that need management attention to ensure that
		     reorganizations, transfers, and employee turnover do not interfere with the active management of
		     all of the Company's positions, contracts, investments, assets and liabilities.
	  The Risk Management Committee meets on an ad-hoc basis, as appropriate, to ensure its involvement in the
	  Company's dynamic business activities. Representatives from RAG, GRMO and the various Enron Business
	  Units may be periodically called upon to make reports to the Risk Management Committee regarding specific
	  risk management issues.
	  The Risk Management Committee fulfills its risk management responsibilities through direct oversight and
	  prudent delegation of its responsibilities to both corporate and business unit personnel.  Authority for the
	  approval of Credit Limits is delegated to RAC,


	  6.5  Enron Business Units
	  Each Enron Business Unit is responsible for compliance with the Policy as described herein.
															    IC


	  6.5.1    Office of the Chairman clan Enran Business Unit
	  Either the Chief Executive Officer or the Chief Operating Officer of each Enron Business Unit is responsible
	  for the implementation of and compliance with this Policy within their respective business unit. Each Enron
	  Business Unit's Office of the Chairman's risk management responsibilities include, among others things:
	       i.    The establishment of a framework within the business unit for the implementation of the risk
		     management policies and procedures established by the Board and any additional requirements
		     established by the CEO, Risk Management Committee, the Chief Risk Officer or RAC
	       ii.   The management of business unit positions to ensure that all required Limits are observed and
		     any required Limit Violation and Loss Notifications, together with any required documentation, are
		     provided to the appropriate parties as required under this Policy
	       iii.  The designation of key commercial managers for each asset, liability, and active contract to ensure
		     the Company's Risk Capital is optimized in compliance with this Policy
	       iv,   The management and review of the activities and responsibilities of traders and commercial
		     personnel, including verification that this Policy is reviewed and implemented by their business unit
	       v.    The provision of guidance to traders regarding position management upon notification of a Limit
		     Violation or a Loss Notification
	       vi.   The review of their respective Enron Business Unit to ensure compliance with this Policy


	  6.5.2    Authorized Traders and Commercial Personnel
	  Only those employees specifically approved by the Office of the Chairman of an Enron Business Unit or its
	  designee, as reported to RAC, will be authorized to enter into Transactions on behalf of the Company. RAG


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	  shall maintain a record of these Authorized Traders. The Office of the Chairman of each Enron Business
	  Unit or its designee is responsible for immediately reporting any change in its Authorized Traders to RAC,
	  even if such changes are due to the termination or reassignment of an existing trader or the hiring of a new
	  trader.     Head Traders are those traders who are responsible for a specific Commodity Group e
	  Conzzntrztion Limit under this Policy.
	  Traders and commercial personnel who have direct contact with potential counterparties represent the
	  Company's first    line of defense against transactions  with unauthorized    market risk exposure and
	  unacceptable credit exposure.   Commercial  personnel     include originators, marketers and business
	  development personnel.
	  Authorized Traders' and/or commercial personnels' risk management responsibilities include, among other
	  things:
		 i.   The review and compliance with this Policy, including the management of their activities in a
		      manner that is consistent with the Company's overall business strategies and the risk appetite
		      applicable to positions they manage
		 ii.  The identification of material risks inherent in their activities and the timely communication of
		      information regarding market developments, trends and counterparty credit events to RAC
		 iii. The submission of required counterparty information to RAC for credit analysis and review
		      purposes
		 iv.  The verification that all required approvals are obtained from RAG and Legal, as well as any
		      approvals required under the Transaction Approval Process, if applicable, prior to entering into a
		      transaction
		 v.   The proactive reduction of risk exposures as limits are being approached or in anticipation of
		      planned transactions that would increase risk exposures beyond established risk tolerances
														       C,,
		 vi.  The determination, together with the Company's Accounting Department, of the appropriate         q
		      accounting impact of trading, risk management and hedging strategies involving the use of        ~C
		      instruments as defined in SFAS 133
		 vii. The development of procedures, together with the Company's Accounting Department, for testing
		      the ongoing effectiveness of derivative hedges to ensure compliance with SFAS 133 requirements
		 viii. The accurate recording and valuation of positions in the Company's risk books and financial and
		      accounting systems
		 ix.  The reporting, as required under this Policy, of any Limit Violation or Loss Notification or other
		      exceptions to the limit structure


	  6.6    Global Risk Management Operations ("GRMO")
	  Global Risk Management Operations ('GRMO) plays a key role in the implementation of each Enron
	  Business Unit's risk management processes. Accordingly, GRMO has a dual reporting role at the executive
	  level to both the Chief Accounting Officer of Enron Corp. and to commercial management.    For certain
	  businesses or activities, a middle office function other than GRMO may perform a similar role and have
	  equivalent responsibilities to those described for GRMO in this Section.  For purposes of this Policy, any
	  discussion of GRMO's roles and responsibilities is intended to apply to the middle office functions of those
	  businesses or activities that do not employ GRMO,
	  GRMO's risk management responsibilities include, among others things:
		 i.   The coordination of logistics and settlements
		 ii.  The execution and confirmation of contracts with counter-parties
		 ii.  The capture and reporting of the Company's risk positions as required by RAC with sufficient detail
		      to allow accurate analysis and reporting of market and credit risks
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	       iv.    The preparation of various valuation and risk analyses, with the distribution of results arid
		      conclusions to the appropriate personnel in RAC
		v.    The participation in new product development and approval to ensure that operational risks are
		      addressed and infrastructure needs are met prior to the commencement of any new business
		      activity
	       vi.    The preparation and distribution of market risk limit exception reports on a timely basis, including
		      explanations for exceptions provided by the appropriate traders
	       vii.   The support of investigations into any trading anomalies
	       viii.  The support of operational risk assessments of trading offices


	  6.7   Accounting
	  The Company's Accounting department performs a back office function responsible for the management of
	  certain financial and accounting functions and for certain statutory and compliance reporting.  The Back
	  Office's risk management responsibilities include, among others things:
		i.    The reconciliation of the monthly general ledger to the risk reports such as the Enron Business
		      Units Daily Position Report
		ii.   The analysis of budget to actual
	       iii.   The preparation of weekly and monthly management reports
	       iv.    The preparation of cash flow and income forecasts
		v.    The evaluation of the adequacy of credit reserves based on simulations by RAC and other
		      considerations

	  6.8   Legal
	  The Companys Legal function is responsible for ensuring that the documentation supporting the transactions
	  executed by Authorized Traders and other employees considers and protects the Company from risk
	  exposure. All documents that contain a commitment binding the Company must be reviewed and initialed by
	  a member of the Company's Legal department prior to execution.  The Legal function's risk management
	  responsibilities include, among others things:
		i.    The management and resolution of all legal issues related to the business of the Company
		ii.   The drafting, review and approval of all master agreements, confirmations, guarantees and other
		      documents that Enron Business Units must sign to execute transactions
	       iii.   The monitoring of the Company and each Enron Business Unit to ensure each conforms to all
		      laws, regulations and Company policy
	       iv.    The administration of the Company's Code of Ethics that is incorporated by reference into this
		      Policy


	  6.9   Risk Assessment and Control ("RAC")
	  RAC reports directly to the Chief Risk Officer, and includes the market risk management function, the credit
	  Risk management function, the operational risk assessment function, and the various strategic risk
	  management initiatives of the Company's enterprise-wide risk management policy.  RAC also includes
	  management of the Transaction Approval Process designed to provide special review of market and credit
	  risks as well as operational exposures for specified transactions in accordance with this Policy, and
	  management of the Guarantee Approval     Proces&  The credit risk   management function         has dual
	  responsibilities to (a) support the commercial personnel on daily basis in relation to credit risk issues, and (b)


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to act independently in identifying, reporting and monitoring credit risk exposures and ensuring that senior
management is kept informed of these exposures

References to RAC shall be interpreted as the appropriate individual and/or group within RAG depending on
the issue being addressed.  The Chief Risk Officer's risk management responsibilities delegated to RAG
include, among others things:
     i.    The oversight of the overall risks and risk management practices to ensure that they are consistent
	   with Company policy and strategy; engaging management in discussions regarding events or
	   developments in macroeconomic, legal, regulatory and technological structural shifts that could
	   expose the Company to potential losses
     ii.   The oversight of the development, approval and administration of policies, methodologies, and
	   practices for measuring, monitoring and managing the risk exposures of the Company; the review
	   of proposed modifications to existing risk measurement methodologies, and the development of
	   new risk measurement tools for market risk, credit risk, liquidity risk and operational risk, in
	   coordination with the Company's research function
    iii.   The central management of the Company's market and credit exposure governed by this Policy,
	   the aggregation of risks across the Company and the review of the risk profile of the overall
	   portfolio
    iv.    The establishment of credit reserves against potential credit losses, as appropriate
     v.    The review and recommendation for approval of market risk limits to the Chief Risk Officer,
	   following analysis of market risks
    vi.    The establishment and approval of counterparty credit limits
    vii.   The recommendation, implementation and approval of credit risk mitigation and hedging strategies
	   for positions that fall outside the direct responsibility of an Enron Business Unit
    viii.  The review and approval of Benchmark Position methodology, the review of curve validation
	   results, stress test results, and any other significant analyses prepared by GRMO; the evaluation
	   of the effectiveness of the VaR process via Back Testing, and the refinement of VaR model
	   requirements
    ix.    The oversight of a model veiling process to ensure market and credit risks are accurately
	   quantified
     x.    The provision of operational risk assessment guidelines, addressing whether Enron Business Unit
	   employees are appropriately trained to understand and comply with the Company's established
	   risk management processes
    xi.    The assessment of whether the Company's infrastructure supports the credit, market, operational
	   and liquidity risk management needs of the Company to support, measure, monitor and manage
	   exposures
    xii.   The assessment of returns achieved by Enron Business Units in the various Portfolios relative to
	   expectations and to the level of risk incurred
    xiii.  The reporting to the Finance Committee and Audit Committee at regularly scheduled Board
	   meetings, as well as providing special analyses and reports to the CEO and to the Chairman of the
	   Finance Committee
    xiv.   The performance of due diligence for the Merchant Portfolio to determine it a potential investment
	   counterparty has appropriate accounting systems, controls and infrastructure for appropriated
	   stewardship of Enron's capital
    xv.    The monitoring of deal milestones, compliance requirements and performance for Merchant
	   Portfolio investments to determine if the investment is performing according to the approved Deal
	   Approval Sheet ("DASH") and appropriate legal documentation


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	      xvi.    The assessment of special valuation issues or specifying limitations on the use of certain
		      derivatives; the performance or review of special analyses on the Company's overall risks, using
		      specialized stress tests and scenario tests
	      xvii.   The review and approval of counterparties and trading positions transactions prior to execution in
		      order to identify, measure and price the associated credit risk, and for significant changes in credit
		      quality and risk issues, such as exceptional gains and losses
	      xviii.  The review of requests for new Commodity Groups and new products within existing Commodity
		      Groups, the identification of issues and the recommendation of limit structures
	      xix.    The performance of due diligence on issuers of counterparties' letters of credit and guarantees to
		      ensure they meet minimum credit standards
	      xx.     The coordination of review and execution of all counterparty documents with the Company's Legal
		      function, including negotiating directly with counterparties to ensure credit risk is mitigated through
		      contractual arrangements
	      xxi.    The maintenance of current and complete credit files, and actively monitoring counterparty credit
		      events and industry/market trends for potentially adverse effects on the counterpar~s credit
		      profile, using internal and external information sources


	  6.10 Treasury/Global Finance
	  Treasury/Global Finance supports this Policy by managing funding/liquidity risk as addressed in Sections 3.4
	  and 4.4 of this Policy, these responsibilities include obtaining or coordinating the preparation of cash flow
	  projections, considering both business-as-usual scenarios and planning for liquidity constraints.
	  The Treasurer shall report at each meeting of the Finance Committee the aggregate amount of the
	  Company's (a) payment obligations and (b) estimated contingent liability of performance obligations not
	  involving the payment of money under all the Company's guarantees, letters of credit, letters of indemnity,
	  and other support arrangements effective at the time of the meeting.

	  6.11 Internal Audit


	  6.11.1 Enron Assurance Services
	  Enron Assurance Services operates under a written charter adopted by the Audit Committee and maintains
	  its independent and objective stature by its functional reporting responsibilities to the Audit Committee, The
	  objective of Enron Assurance Services is to improve the Company's operations by bringing an independent,
	  systematic and disciplined approach to evaluate and enhance the effectiveness of risk management, control
	  and governance processes.
	  Working in concert with the Company's independent auditors and other various control and monitoring
	  functions across the Company, (i.e., RAC, information technology compliance, security, legal, ethics,
	  environmental, and quality management), Enron Assurance Services directs a broad, comprehensive
	  program of assurance and consulting activities within the Company.  This includes establishing scopes,
	  selecting subjects, selling frequencies, allocating resources and utilizing a variety of techniques required to
	  accomplish internal control/risk management objectives.


	  6.11.2 Information Technology Compliance
	  The objective of Information Technology Compliance is to monitor and improve information technology risks
	  and controls across the Company.  Information Technology compliance serves as the primary auditor of the
	  Company's information technology systems and works in concert with the Company's independent auditors,
	  Information Technology Compliance serves as a complimentary organization to Enron Assurance Services
	  with a specific focus on information technology.


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	   7    Miscellaneous

	   7.1    Brokerage Accounts Administration

	   Certain Enron Business Units shall be authorized periodically to open trading accounts with clearing brokers
	   to facilitate the conduct of their business. All requests to open or renew a trading account with a broker shall
	   be reviewed and approved by the Chief Risk Officer or his designee(s).  The Company shall also notify
	   brokers of the names of Company personnel authorized to irade futures, options or other contracts. The
	   Company shall update these authorizations periodically.
	   Brokerage account agreements must be reviewed by the Legal department of the Company prior to
	   execution, and at least one officer of an Enron Business Unit and one officer of RAC are required to open an
	   account as required by corporate resolution. Brokers must be in compliance with all rules and regulations of
	   the Securities and Exchange Commission requirements. The Company shall maintain a comprehensive file
	   of all open brokerage accounts that lists the purpose for which each account was opened and the names of
	   Authorized Traders. Changes in Authorized Trader lists shall be communicated to the appropriate brokers
	   as necessary.  All brokerage accounts shall be reviewed periodically to determine whether they are still
	   active, and shall be closed if no longer needed.


	   7.2    Employee Trading
	   No employee of the Company may engage in the trading of any position for the benefit of any party other
	   than the Company, whether for their own account or for the account of any third party, where such position
	   relates to any security, commodity, contract or derivative thereof within any Commodity Group listed in
	   Appendix A.   The only exception to this restriction is that employees who are not involved with the
	   Commodity Groups listed under the heading 'Financials" in Appendix A, may trade for their own account
	   those items with which they are not involved.
	   Periodically, certain employees, their family members and anybody that is financially dependent on those
	   employees, may also be restricted from trading specific securities and derivatives thereof.  In addition to
	   these trading restrictions, if any employee should at any time possess non-public information about any
	   public company, that employee, the employee's family members and anybody that is financially dependent
	   on that employee, shall be restricted from trading in that issue, and that employee may not disclose the non-
	   public material information to anyone that does not have a business need to know.
	   Employees must seek dispensation from the Risk Management Committee for any exception to these
	   requirements. In no case should employees' personal trading conflict with the Company's trading initiatives.
	   Employee with  questions regarding  employee trading and investing should contact the          Company's
	   Compliance department.


	   7.3    Employee Review and Compliance with Policy
	   As determined by the Chief Risk Officer or his designee(s), Company employees participating in any activity
	   or transaction within the coverage of this Policy shall sign a statement approved by the Chief Risk Officer
	   (see Appendix hi for sample employee compliance statement) that such employee (a) has read this Policy,
	   (b)  understands this Policy, and (c) has complied and will comply with     this Policy, with specific
	   acknowledgement of employee trading restrictions.
	   The Company's employees should comply with this Policy.  Willful or deliberate non-compliance or
	   falsification of risk metrics or profits and losses referred to by this Policy will be regarded as gross
	   misconduct.


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										    Page 31
Enron Corp.
Risk Management Policy
Proprietary and Confidential

7.4   Transition Plan for Policy Compliance
The Board delegates to the Risk Management Committee the authority to approve exceptions to Policy
requirements during a transition period.  RAC shall work with the Enron Business Units to develop a
transition plan to implement the Policy guidance and requirements described herein.


7.5   Supersedes Prior Policies
This Policy supersedes and replaces all previous policies of Enron Corp. approved by the Board concerning
risk management or trading or transaction approval.  This Risk Management Policy was approved by the
Board on August 14, 2001, and shall be amended by the Board as necessary, the dates of such
amendments to be reflected on the first page hereof.
Enron Business Units may execute their own risk management policies and procedures that are subordinate
or in addition to the requirements in this Policy.


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	  Enron Corp.                                                                        Page 32
	  Risk Management Policy
	  Proprietary and Confidential


	  8   Glossary
	  Affiliate shall mean any entity in which the Enron Corp. has an ownership interest less than 80%.
	  Audit Committee shall mean the Audit and Compliance Committee of the Board of Directors of Enron Corp.
	  Authorized Traders shall mean those traders approved by the Office of the Chairman of an Enron Business
	  Unit or its designee to enter into Transactions on behalf of the Company.
	  Back Testing refers to the process of systematically comparing outputs from a model to actual observed
	  outcomes the model is designed to forecast.  In the context of VaR, this means that actual daily trading
	  profits and losses should  be compared to the calculated VaR.  Since the standard approved VaR
	  methodology assumes a 95% confidence interval, it follows that, on average, a loss would occur that
	  exceeds VaR, once in every twenty trading days. The occurrence of such observations at a greater or lower
	  frequency than that implied by the 95% confidence interval may indicate that the results of the model
	  understate or overstate risk.
	  Benchmark Position shall mean the position within a Commodity Group into which all other positions within
	  the same Commodity Group can be converted using price volatility and correlation-based conversion factors.
	  Such conversion factors shall be established and authorized by RAC, and any significant changes in the
	  factors or methodology shall be reviewed and approved by RAG.
	  Board shall mean the Board of Directors of Enron Corp.
	  Borrowing Capacity shall mean, as used in calculating the Liquidity Ratio, the sum of the Company's: (a)
	  commercial paper, (b) uncommitted bank lines and loan sales lines, (c) letter of credit facilities, (d) net
	  accounts receivable and accounts payable, fe) net Drice risk management assets. (fl inventory. (eg) shelf
	  registrations for public debt issues, and (fit) shelf registrations for public equity issues, as determined by the
	  Company's Treasury/Global Finance department.
	  Capital Portfolio is designed to manage exposures in the Company's capital structure as described in
	  Section 2.
	  CEO shall mean the Chief Executive Officer of Enron Corp.
	  Chief Risk Officer shall mean the Chief Risk Officer of Enron Corp.
	  Commodity Group shall mean a collection of positions having sufficient relationship and correlation as
	  approved by Risk Management Committee that allow for aggregation into a Benchmark Position.
	  Commodity Grouc Limits shall mean those market risk limits assigned as described in Section 4.1.1.4 of this
	  Policy.
	  Company shall mean Enron Corp. and its subsidiaries.
	  Concentration Limits shall mean the maximum risk appetite for specific markets or activities approved by the
	  Board and aggregated into specified Commodity Groups of categories of positions, as described in Section
	  4.1.1.2 of this Policy. These Concentration Limits are listed in Appendix A.
	  Conforming shall mean a transaction that is routine, non-budgeted and within the general business lines of
	  the Company: in an industry where the Company has established expertise; and in a country where the
	  Company has established a local presence and is currently conducting business.   To be designated
	  Conforming, the RAC recommendation must be "Proceed with Transaction".
	  Credit Aggregation System ("CAS"j provides Credit Risk Management with the capability to record limits and
	  monitor end of day credit exposures. The credit risk aggregation system aggregates counterparty exposure
	  globally and displays active transactions from business unit source and back office accounting systems.
	  Credit Limits shall mean limits governed by the credit risk management function of RAC as described in
	  Section 4.2.1.2 and Appendix C.
	  Credit Risk Procedures shall mean the credit risk management function personnels' authority as described in
	  Appendix C.
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	   Risk Management Policy
	   Proprietary and Confidential

	   Cumulative 5-day Loss shall mean when the Cumulative 5-day Profit and Loss results in a loss in excess of
	   225% of the corresponding VaR limit.  Upon a Cumulative 5-day Loss, Loss Notifications are triggered in
	   accordance with Section 4.1.2.3. ~olIowing the occurrence of a Daily Loss or a Cumulative 5-Day Loss, the
	   Cumulative 5-day Loss calculation is reset.
	   Cumulative 5-Day Profit and Loss shall mean the net sum total of Daily Profit and Loss for each Commodity
	   Group for five consecutive business days, without giving effect to the impact of change in valuation
	   adjustments. Upon a specified Cumulative 5-Day Loss, Loss Notifications are triggered in accordance with
	   Section 4.1.2.3 of this Policy,
	   Daily Profit and Loss shall mean a single day of the profit or loss without giving effect to the impact of change
	   in valuation adjustments.  Upon a specified Daily Loss, Loss Notifications are triggered in accordance with
	   Section 4.1.2.3 of this Policy. The Daily Profit and Loss will be calculated using the mark-to-market method
	   on a net present value basis, exclusive of valuation adjustments. This measurement shall be calculated from
	   (a) the profit or loss reported on the Company's daily position reports, and (b) the valuation adjustment
	   activity reported in a separate schedule.  No other adjustments to the calculation shall be considered in
	   determining the Daily Profit or Loss, regardless of whether or not the profit and loss results include catch-up
	   or other type of unusual entries,
	   Deal Approval Sheet (DASI-B is the document used in the official approval of the deal. It encompasses a
	   summary of RAC's final analysis of the risks and mitigants in the deal as well as the expected value and
	   range of values  Other documents employed in this process include Guarantee Approval Sheet (GASH),
	   Modeling Assumption Sheet (MASH) and Revaluation Approval Sheet (RASH).
	   Delta shall mean the change in value due to a unit change in the price of the underlying.
	   Discretionary VaR as referred to in Appendix A shall mean an amount of VaR included in the Trading
	   Portfolio Limit and reflected in the Trading Portfolio's Concentration Limits that the CEO and Risk
	   Management Committee can allocate to Enron Business Units and Commodity Groups at their discretion.
	   Divestiture shall mean the disposal of an asset (including securities).
	   Earnings-at-Risk is a risk metric to be applied as described in Section 3.1.5 of this Policy.
	   Enron Business Unit(s) shall mean Enron Corp. and any entity controlled, directly or indirectly, by Enron
	   Corp., (including internal groups created for the purposes of trading, or aligned according to the commodities
	   set out in the Appendices), or any entity directly or indirectly under common control of Enron Corn. For this
	   purpose, the criteria for establishing "control" of any entity include but are not limited to, ownership of more
	   than fifty percent (50%) of the voting power of such entity.
	   Enron Business Unit Limit shall mean the overall VaR limit for each Enron Business Unit as determined by
	   the Risk Management Committee and the CEO.
	   Enron Business Units Daily Position Report shall mean the report comparing Portfolio Limits, Enron Business
	   Unit Limits, and Commodity Group Limits for each respective Enron Business Unit to corresponding actual
	   results, as described in Section 4.1.2.2.1.
	   Enron Concentration Limit Daily Position Report shall mean the report that monitors each Concentration
	   Limit and aggregates the Company's consolidated results of the Trading Portfolio on a Commodity Group
	   basis. The Capital Portfolios Concentration Limit shall also be included in this report as described in Section
	   4.1.2.2.2.
	   Enron Rating (E-Rating) shall mean the Enron Credit Rating as referenced in Appendix B of this Policy.
	   E-Ratino shall mean a RAC assigned counterparty credit risk rating on a scale of 1 to 12 as described in
	   Appendix B.
	   Eta shall mean the change in the price of an option as correlations change.
	   Exoected Tail Loss (~ETL") shall represent the expected daily loss beyond Extreme VaR.
	   Expected Tail Loss Advisory Limit (FTL Limit") shall mean the Board approved advisory limit that applies to
	   the Company's Trading Portfolio used to trigger certain notifications.


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	  Proprietary and Con fidential

	  ETL Notification shall mean the occurrence of an ETL measurement in excess of the ETL limit requiring
	  notifications as described in Section 4.1.2.3.1.
	  Extreme Value-at-Risk ("EVaR") shall mean the potential exposure measurement based on historical profits
	  and losses and current positions given a specified confidence level and a tat-tailed distribution (as opposed
	  to a normal distribution used for the Company's VaR calculations).
	  Extreme Value Theory ("EVT") examines the characteristics of extreme events, whose impact on the portfolio
	  cannot be determined using the standard VaR metric, and is described in Section 3.1.2 of this Policy.
	  Finance Committee shall mean the Finance Committee of the Board of Directors of Enron Corn.
	  Financial Guarantee shall mean a guarantee issued by the Company that (a) guarantees obligations (i) for
	  the repayment of money borrowed which are or should be shown on a balance sheet as debt in accordance
	  with Generally Accepted Accounting Principles ("GAAP"), or (ii) as lessee under leases which, in accordance
	  with GAAP, are capital leases, and (b) constitutes "Debt" under the definition of "Debt" in the principal credit
	  agreement of the Company; provided, that a Financial Guarantee shall not include any letter of indemnity or
	  other support arrangement (including, without limitation, a sponsor or parent support or performance
	  agreement).  For purposes of this policy, any letter of credit issued for the account of the Company and
	  obligations related thereto, including, but not limited to, obligations arising under any master letter of credit
	  agreement for any such letter of credit, shall be treated as debt.
	  Fundamental Operating Standards shall mean the standards as referenced in Appendix F of this policy.
	  Future Available Cash shall mean, as used in calculating the Liquidity Ratio, the Company's current cash-
	  flow forecast as determined by the Treasury/Global Finance department, considering operating and investing
	  activities,
	  Gamma shall mean the change in Delta of an option given a change in the price of the underlying.
	  Global Risk Management Operations shall mean the middle office function of the Enron 8usiness Units,
	  whose responsibilities are described in Section 6.6.
	  GRMO shall mean the Global Risk Management Operations of Enron Corn.                                    U,
	  Guarantee Anproval Process provides for a process of review and approval of guarantees (see Appendix E).
	  Guidance Credit Limits shall mean the credit limits used by RAC to accurately monitor and manage the
	  overall credit risk for a counterparty.
	  Head Trader is the person on the trading desk designated to allocate capital to traders, approve trading
	  strategies and monitor trading activity, positions and profit and loss.
	  Letter of Credit shall mean any letter of credit issued for the account of the Company and obligations related
	  thereto, including but not limited to obligations arising under any master letter of credit agreement for any
	  such letter of credit.
	  Limit Violation shall mean an occurrence where a Net Open Position, Maturity/Gap Position, or VaR
	  measurement exceeds the corresponding limit, consequently triggering certain reporting as described in
	  Section 4.1.2,3 of this Policy.
	  Liquidity Exoosure Ratio (tiauiditv Ratio") shall be calculated as the sum of the Company's Future Available
	  Cash and Borrowing Capacity divided by the Company's Potential Future Cash Requirements where:
	  Liquidity Ratio Advisory Limit shall mean the specified level of the Liquidity Ratio that will require the Chief
	  Risk Officer to notify the CEO in accordance with Section 4.4.2.
	  Liquidity Ratio shall be calculated daily over a specified time period by dividing (a) the sum of the Company's
	  (i) Future Available Cash and (ii) Borrowing Capacity, by (b) the Company's Potential Future Cash
	  Requirements.
	  Loss Notification shall mean an occurrence where a Daily Loss or Cumulative 5-Day Loss measurement
	  exceeds a specified percentage of the corresponding VaR limit, consequently triggering certain reporting as
	  described in Section 4.12.3 of this Policy.


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	  Enron Corp.                                                                              Page 35
	  Risk Management Policy
	  Pro pr,etary and Confident dad

	  Material Adverse Chance ("MAC") shall mean a change in the business conditions, financial conditions, or
	  operations of a party that prohibits the party from performing its obligations under a contract.
	  Maturity/Gap Position shall mean the largest rolling net open position within a specified reference period.  It
	  is a measure designed to capture time spreads in the portfolio.
	  Merchant Portfolio is designed to manage exposure related to merchant investments as described in Section
	  2.
	  Monte Carlo Simulation is an analytical technique that uses a computer to generate random outcomes
	  assuming a distribution.
	  Net Ocen Position shall mean the discounted aggregate of the open positions in a Commodity Group on a
	  Benchmark Position equivalent basis.
		 Net Open Position for interest rate exposure is measured and limited by sensitivity analysis
		 measured through a partial duration hedge metric. Selected points are identified on the yield curve,
		 and position exposures are allocated to time buckets for each of these points along the yield curve.
		 Sensitivity is calculated by increasing the yield associated with one time bucket by one basis point
		 while holding all other points along the curve constant. This process is applied to each time bucket
		 separately across the entire term structure.
		 Net Open Position for foreign currency positions in the Trading Portfolio is translated into an
		 equivalent U.S. Dollar position using the closing spot rate.    The equivalent U.S. Dollar position is
		 summed to provide the net foreign currency open position.
	  Non-Conforming shall mean a transaction that is outside the general business lines of the Company or in an
	  industry where the Company has little or no expertise; made in a country where the Company has no local
	  expertise or where the overall exposure to the country is excessive; or made to an entity or within an industry
	  that would result in excessive exposure to that entity or industry.  Non-conforming transactions include all
	  with RAC recommendation of "Returns Below Capital Price" or "Do Not Proceed".
	  Other Assets and Contracts Portfolio is designed to manage exposures embedded in the Compan/s assets
	  (investments, contractual arrangements, etc.) that are either accounted for on an accrual basis or are not
	  otherwise captured in the Trading Portfolio, the Merchant Portfolio, the Capital Portfolio, or the Regulated
	  Portfolio.
	  Performance Guarantee shall mean any guarantee not constituting a Financial Guarantee, any letter of
	  indemnity or any other support arrangement (including, without limitation, any sponsor or parent support or
	  performance agreement). For example, a guarantee of a swap agreement, swap confirmation, or master
	  swap agreement is a Performance Guarantee.
	  Policy shall mean the Enron Corp. Risk Management Policy.
	  Portfolio shall mean the specific aggregation of positions as defined in Section 2 of this Policy.
	  Portfolio Limits shall mean the limits assigned to aggregate positions for the Portfolios identified in Section 2,
	  as described in Section 4.1.1.1 of this Policy.
	  Position Limit Violation shall mean the occurrence of a Net Open Position or Maturity/Gap Position
	  measurement that exceeds the corresponding limit.
	  Potential Future Cash Requirements shall mean the denominator of the Liquidity Ratio, representing the
	  simulation of margin exposure and collateral requirements for the Trading Portfolio
	  Preoaid or Embedded Debt Financing shall mean the maximum exposure to the Company as a result of a
	  prepaid physical or derivative trading/risk management transaction, a tilted swap or other transaction where
	  debt financing of a counterparty is embedded in a trading/risk management transaction.
	  President shall mean the President of Enron Corp.
	  Principal Credit Agreement of Enron Corp. shall be the U.S. $1,750,000,000 364-Day Revolving Credit
	  Agreement dated as of May 14, 2001, as such Revolving Credit Agreement now exists or may be amended
	  from time to time, among Enron Corp.. as Borrower, the Banks named therein, and The Chase Manhattan
	  Bank, NA. and Citibank NA., as Co-Administrative Agents.

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	  Risk Management Policy
	  Prophetary and Confidential

	  RAG shall mean the Risk Assessment & Control department of the Company.
	  RAG Recommendation shall mean RAG's recommendation on a Transaction, which will be one of the
	  following: (a) proceed, (b) returns below capital price, or (c) do not proceed, or any other categories
	  determined by RAG.
	  Regulated Portfolio shall mean the Transportation and Distribution Regulated Portfolio.
	  Return on Capital-at-Risk (RoCAR") shall mean the aggregate of expected returns against aggregate Risk
	  Capital.
	  Return on Value-at-Risk ("RoVAR"~ shall mean the aggregate profit or loss, divided by the average daily VaR
	  for the same period.
	  Rho shall mean the change in the price of an option due to changes in interest rates,
	  Risk-Adiusted Capital shall mean the aggregation of exposure in a transaction that results from: (a) capital
	  expenditure; (b) commodity position; (c) credit; or (d) guarantees, with such exposures translated into an
	  equivalent amount of capital as determined by RAG.
	  Risk Assessment and Control ("RAG") shall mean the Company's Risk Assessment and Control department.
	  Risk Capital represents the amount of capital at risk due to market factors, credit quality and operational
	  events as more clearly described in Section 1.2 of this Policy.
	  Risk Manacement Committee ("RMC") shall mean the Risk Management Committee of Enron Corp.  Its
	  membership includes the Chief Risk Officer and such other individuals as determined by the CEO.
	  Subsidiary shall mean: (a) any subsidiary directly or indirectly 80%-owned to 100%-owned by Enron Corp.,
	  (b) any direct or indirect subsidiary of Enron Corp. if the other owners of such subsidiary hold stock in such
	  subsidiary for the purpose of meeting legal requirements of the jurisdiction in which such subsidiary is
	  incorporated, and (c) Enron Equity Corp., Enron Capital & Trade Resources International Corp. or any of its
														       '1
	  direct or indirect subsidiaries or any other direct or indirect subsidiary of Enron Equity Corp. or Enron Capital
	  & Trade Resources International Corp. not 1 00%-owned by Enron Equity Corp. or Enron Capital & Trade         '0
	  Resources International Corp. if the other owners of such subsidiary collectively hold a minority ownership
	  interest in such subsidiary that entitles them primarily only to a return of capital contributions or to share in
	  the profits, losses, distributions, or dividends of such subsidiary and does not entitle them to participate in the
	  operation, management or control of its business. For purposes of this Policy, the right to vote by itself shall
	  not be deemed to entitle an owner to such participation.
	  Tenor Limits shall mean limits governed by the credit risk management function of RAG as described in
	  Section 4.2.1.3 and Appendix C.
	  Theta shall mean the change in the value of an option for a one-day decay holding all other parameters
	  constant.
	  Trade Guarantee shall mean guarantees issued in the normal course of business by Enron Corp. to support
	  the obligations of Enron Corp. Subsidiaries or Affiliates with respect the purchase and/or sale of physical
	  commodities or financial transactions related to trade activities.
	  Trading Portfolio is designed to manage exposures to commodity transactions as described in Section 2.
	  Transaction shall mean shall mean risk-adjusted capital, divestiture or embedded debt financing with the
	  exposure reflected net to Enron, including funding vehicle exposure.
	  Transaction AoDroval Process provides for (a) a process of review and approval of Capital Expenditures, and
	  (b) a process for prior transactions involving Capital Expenditures to be reviewed for performance and results
	  (see Appendix 0).
	  Transportation and Distribution Regulated Portfolio ("Regulated" Portfolio) shall mean the Portfolio described
	  in Section 2 that manages the regulated activities in the Company's natural gas pipelines and domestic utility
	  subsidiaries.
	  Unaffiliated Third Party shall mean any entity in which Enron Corp. has no ownership interest.


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										       Page 37
	  Enron Corp.
	  Risk Management Policy
	  Proprietary and Confidential

	  Value-at-Risk (WaR) shall mean the potential exposure related to a Commodity Group or Position
	  representing the potential change in value resulting from changes including: market prices, interest rates,
	  currency rates, counterparty credit condition, liquidity, funding and settlement risk, among others. VaR shall
	  be calculated using the RAG approved VaR methodology at the 95% confidence interval using a 1-day time
	  horizon.  Any recalibration or modification of the VaR methodology or parameters that take into account
	  observed or anticipated changes in market factors or developments in VaR technologies must be approved
	  by RAG.
	  VaR Limit Violation shall mean the occurrence of a VaR measurement that exceeds the corresponding limit.
	  yeas shall mean the change in the price of an option due to a change in volatility.
	  Volumetric Risk shall mean the risk of loss due to a change in expected volumes.


													    40

													    q
													    IC


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	  Enron Corp.
	  Risk Management Policy
	  Proprietary and Confidential


	  9    Appendices

	      A - Market Risk Limits
	      B - Description of Enron Credit Risk Ratings (2-Ratings)
	      C - Credit Risk Procedures
	      D - Transaction Approval Process
	      E - Guarantee Approval Process
	      F - Fundamental Operating Standards *
	      G - Operational Risk Considerations *
	      H - Sample Documentation of Employee Acknowledgement of Policy

									       'I,
									       IC
									       to


								 EC45949A00369O2

EXHO64-OO1 19

Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix
Appendix





												    Page A-i
	   Enron Corp.
	   Risk Management Policy
	   Proprietary and Confidential

	   Changes are denoted in red

					Appendix A - Market Risk Limits
	   Tradino Portfolio                                           VaR           Expected Tail
								      Limits         Loss Advisory
								      ($000)            1$QQQI

	   Aggregate Portfolio Limit (1)

	    AMERICAS NATURAL GAS
	      'North American Natural Gas
	      * Southern Cone Natural Gas
	      * LNG

	    AMERICAS ELECTRICITY
	      * North American Electricity
	      'Southern Cone Electricity
	      * Global Risk Markets

								    150,000

										    520,000

								    100,000


								    100,000

EUROPEAN NATURAL GAS &
 * European Natural Gas
 * UK Electricity
 * Continental Electricity
 * Nordic Electricity

ELECTRICITY

PRODUCTS
 * Global Products
 'Coal

FINANCIALS
 * Credit Trading
 'Financial instruments (Interest Rates, Foreign Currency)
 * Equity Trading
 'Convertible Arbitrage

EMERGING BUSINESSES
 'Metals & Minerals
 'Australian Electricity
 'Japanese Electricity
 'Weather Derivatives
 'Freight Markets
 'Emissions
 'Pulp & Paper
 'Lumber
 * Steel
 * Meats Trading
 * Grain Trading
 'Soft Commodities
 * Bandwidth
 * Data Storage
 * Advertising
 'DRAM
 * Voice Minutes
 * Financial Real Estate

45,000


20,000


15,000


20,000

CAPITAL PORTFOLIO                                           N IA

Enron Stock                                               10,000

REGULATED PORTFOLIO                                       10,000

.LEGENO:
Portfolio Limit (Approved by Beard)
Concentration Limits (Approved by Board)
Commodity Groups'

(1)  $50 MM of Discretionary Var is included in the $150 MM Trading Portfolio Limit and
     Trading Portfolio Concentration Limits above: Discretionary VaR to be allocated to
     Enron Business Units and Commodity Groups by the CEOChief Risk Offic
     Commodity Groups listed for informational purposesi-CEQ-an4 may cliang at any
     time.

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	   Enron Corp.
	   Risk Management Policy
	   Proprietary and Con fidentia/


	       Appendix B - Description of Enron Credit Risk Ratings (E-Ratings)

    ENRON                       MOODy'S
    RATING      S & P RATING     RATING                         INVESTMENT GRADE DESCRIPTION

		  AAA/AAt-       Aaa/Aa           Exceptional degree of stability and substance
						* Significant balance  sheet and cash  flow demonstrated throughout
						  business or industry cycle with positive trends and long-term outlook
						* Significant size and strength in industry
						* Very high quality assets
						* Capacity to pay interest and principal very strong
						* Low financial leverage with substantial debt capacity
						* Un uestioned access to  lobal markets
	 2        AA/AA-/A+     Aa2/Aa3/A1      * High degree of stability and diversity
						* Balance sheet and operations slightly more susceptible to adversity with
						  the business or industry cycle
						* High quality assets
						* History of strong earnings and cash flow with excess interest coverage
						  levels
						* Modest financial leverage with ample debt capacity
						* Ready access to capital markets under normal market conditions
	 S          NA-           A2IA3         * Strong market and    financial position with a history of successful
						  performance, but more susceptible to economic changes
						* Assets are good quality with little reliance on intangibles. CAPEX is
						  reasonable
						* Strong cash flow and interest coverage levels with trends generally
						  consistent
						* Financial leverage is satisfactory with sufficient debt capacity
						* Access to capital markets under normal market conditions
	 4        BEB+/BBB      Baal/Baa2       * Satisfactory earnings, cash flow and interest coverage, although trends
						  are occasionally inconsistent
						* More concentration of business risk, by product or market, may be
						  present. Susceptible to cyclical changes
						* Assets are of average quality, which may require significant CAPEX;
						  intangibles may be material in nature
						* Highly experienced/qualified management
						* Access to capital markets will generally be available under normal
						  market conditions
	 5          B8B-           Baa3         * Higher degrees of susceptibility to  cyclical trends due to industry
						  position, less diversification, etc.
						* Assets and cash flows are reasonably sound with adequate coverage
						  levels
						* Financial leverage is slightly above average and assets may require
						  significant CAPEX
						* Access to capital markets may be available under normal conditions
	 6          BB~            Bal          * Higher degree of volatility of earnings, cash flow, interest and overall
						  performance
						* More long-temi uncertainty, but with less near-tern, vulnerability than
						  other speculative grades
						* Financial leverage is high with some debt capacity remaining
						* Adequate coverage
						* May have above average' risk elements relative to industry
						* Less access to public markets, reliant on bank financing

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	   Enron Corp.
	   Risk Management Policy
	   Propnetary and Confidential

	       Appendix B - Description of Enron Credit Risk Ratings (E-Ratings)

     ENRON                       MOODY'S
     RATING    S & P RATING       RATING                       INVESTMENT GRADE DESCRIPTION

       7            88              Ba2           Earnings, cash flow and interest coverage may be volatile with trends
						  subject to erratic swings
						* Outlook contains factors which may lead to unstable conditions
						* Assets are below average quality but are expected to maintain value
						* CAPEX requirements could be significant due to asset quality/possible
						  material reliance on intangibles
						* Financial leverage is high with some debt capacity remaining
						* Adequate financial controls
						* Experienced management, but depth of management is less certain
						* Access to financing primarily available from banks or other private
						  sources; less access to public markets
       8            88-             Ba3         * Pronounced risk elements with uncertainty of future performance
						* Earnings and cash flows are volatile
						* Assets are below average quality; CAPEX spending requirements could
						  be significant
						* Marginal interest coverage levels
						* Less access to public markets
       9            6+/B           81/82        * Earnings and cash flow will generally be strained
						* Trends are unfavorable and the outlook is difficult
						* Adverse economic market or other event may affect the company's
						  financial performance in the future
						* Assets are significant value to provide a "second way our; significant
						  intangibles exist
						* Financially over-leveraged, with minimal sources of financing available
						* Management turnover or lack of experience or stability may result in
						  deterioration of financial performance
       10           B-              83          * Adverse business, financial or economic conditions will likely impair
						  capacity to repay interest and principal
						* Assets are insufficient value to provide a "second way our; warrants
						  additional levels of supervision
						* Financially over leveraged
						* Weak  interest coverage   levels; management turnover or lack of
						  experience or  stability may  result in deterioration of financial
						  performance
       11           CCC           Caaa/Ca       * Poor quality in most respects
						* Interest likely to be in arrears with principal payments in danger
						* This rating may be used to cover a situation where a bankruptcy petition
						  has been filed, but debt service payments continue
       12           0                           * Payment default, interest and/or principal payments have not been made
						  on due date, even if applicable grace period has not expired
						* This category is also used when the Company has filed a bankruptcy
						  petition and debt service payments are jeopardized
						* Repayment in full is highly questionable

												EC46949A0O30805
EXHO64-OO1 22





										Page C-i

	 Enron Corp.
	 Risk Management Policy
	 Proprietary and Confidential

			    Appendix C - Credit Risk Procedures

	 If the assigned E-Rating is consistent with the public credit rating, any level of credit risk management
	 personnel has the authority to approve the internal E-Rating. A manager or above in credit risk management
	 in RAC must approve E-Ratings for counterparties whose public ratings are not consistent with the assigned
	 E-Rating and for non-publicly rated counterparties.  Credit risk management RAG personnel approval
	 authority is described in tables below.

	Credit Limit Authority
	($MillionsJ

	     Credit Risk Management               E 1-2          E 3-5            E 6-8           E 9-12
	      Personnel Authority
	 Analyst Level I                           $10            $5               $2             $0.25
	 Analyst Level II                          $20           $15              $10              $2
	 Manager                                   $50           $35              $20              $5
	 Director                                 $100           $100             $50              $25
	 V.P.                                     $200           $200             $100             $50
	 Chief Risk Officer or Office of the    Over $200      Over $200        Over $100        Over $50
	 Chairman of Enron Corp.


	 Tenor Limits
	     Credit Risk Management               E 1-2          E 3-5            E 6-8           E 9-12
	      Personnel Authority
	 Analyst Level I                         2 years        1 year            1 year         3 months
	 Analyst Level II                        5 years        5 years           3 years        6 months
	 Manager                                 7 years        7 years           5 years         1 year
	 Director                                10 years       10 years          7 years         3 years
	 V.p.                                    15 years       15 years          10 years        5 years
	 Chief Risk Officer or Office of the   Over 15 years  Over 15 years    Over 10 years    Over 5 years
	 Chairman of Enron Corn.

												      EC4694WO~9O6
EXHO64-OO 123

It,

I'
It,





	 Enron Corp.
	 Risk Management Policy
	 Propnelary and Conlidontial


				 Appendix D - Transaction Approval Process

Changes are denoled in red

TRANSACTION
   size (4i

 JrIIOJPJA(]PIU
   Ei4rrr(
Request For:
 RISK
 ADJUSTED
 CAPITAL
   or
 PREPAIDOR
 EMBEDDED
 DEBT
 FINANCING ~)
   or
 DIVESTITURE

 (>$2,500,OOO) (I)


 transaction
 a~pgg~t
	I,

      RISK
  ASSESSMENT
& CONTROL (RAC)

 * Transaction
  Review and
  Valuation
 * Credit and
  Market Risk
  Assessment
 * Pricing
 * RAG
  RECOMMEN-
  DATION

[

 BUSINESS GROUP
 HEAD
~ RETAIL        ____
 CHAIRMAN & CEO    7

h WHOLESALE OOC.

		-fr
		-4

ongoing portfolio review and revaluation

	  (Ii Except NON-CONFORMING transacheos and venture capital transactions not auThorized by the Conipanys charter, for both of which The lin'~t is $5OO~O.
	  (21 OeM A~provaI Sheets approved by the RETAIL CHAIRMAN & CEO. WHOLESALE GOC and ENE-OOCwlI be disbibuted to the ENE-BOD (Finance Conv-rittee) alter
	    approval.
	  (3tTmn~tj~s deemed NON-CONFORMING only due to RAC RECOMMENDATION being "Returns Below Capital Price" will NOT require Ft/F-ROD approval ii' 575MM.
	  41 Merchant asset DIVES TI TURFS exceeding 5500MM and strategic asset DIVESTIWRFS excooding 5200MM require ENE-BOD approval.
	  '~i Transactions meeting certain criteria ney be approved under the F-DASH process of The Transaction Approvd Process. See page 0-3.
	    DEFINED TERMS IN ITALICS at pages D-T & 0-8

								       64-52

												  EC4694BAfh3bsr

Page D-1

 Approving Unit
FUNCTIONAL
GROUP HEAD

CONFORMING

I

-4

$MM

a 2

05

<= 10 (21

c 20 (2)

<=75(21


 75+

I" ENE-QOC

I" ENE-ROD

  NON
CONFORMING

	    ENE-GOC


Lni.fr

-fr

EXHO64-00I 24





	   Enrori Corp.
	   Risk Management Policy
	   Propriela,y and Confidential


					Appendix 0 - Transaction Approval Process
				    Approval Process for Originated Contractual Transactions

*~rriJCrJFtltlcJ tRrJUP~I


     ORIGINATED
    TRANSACTION
    Non-standard
    documentation

    OR

    Deal results in
    violation of
    existing limits

   RISK ASSESSMENT
   & CONTROL (BAC)

r
C
(
I

Commodity    ]
Position Risk

VaR

 Capital           $
Expenditure
 (if any)

		Reserve
Credit Risk

PVB Savings
 Guarantee
(or equivalent)

     ADJUSTED

I       RISK)
      CAPITAL

RAC

 APPROVAL
TRANSACTION   3
  PROCESS

I

													EC4684sAflg08
							    LA-Si
EXI-1064-OO 125

Page D-2





	   Enron Corp.
	   Risk Management Policy
	   Prnpnetary and Confidential

				       Appendix 0 - Transaction Approval Process
						       E-DASH Process (II

				 Approval Amount and Maturity
	     Rating
	    Minimum 21

				   510MM  <= 520MM  <a 535MM  <a 550MM  a 575MM
				   $SMM   a $1OMM   a $1 5MM  a 520MM   c= $2SMM

  AAA-fAaa3         a 10 years a 10 years a tO years  a 5 years  <= 5 years   DASH
		    a 7 ycais     7 years  a 5 years

   AA-/Aa3          a 10 years  a 7 years  a 5 years  a 3 years    DASH       DASH
		    a- Ii years a 5 years  a 4 years

    A-/AS           a 7 years   a 5 years I < 3 years  DASH        QA~H     . DASH
		    a 5 years   <-3vearsl a2 yeaw
							       r ~~~-~--- -


  BBB./Baal         <  5 years  a 3 years  a I year    I DASH  I   DASH -     DASH
		    a 4 years   a 2 years   DASH

  BBBIBaa2          <=3 years   a 2 years   p~ASIi                 PASII      DASH
				 DASI-l                -~

  BuG-/BasS         <  2 years  <  I year   DASH      -J?ASH       DASH       DASH
		       l'eai     DASH

						       .pA~H                  DASH
   GB-/HaS           < I year    DASfl      DASH                   ~MQfl         -
		     13 iicjiillTh                 *

B~IBl, but not                                                    -
lower than B-/RS    < 6 months   DASH       DASH       PASH        DASH       DASH
		     3 iroolls

(

TRANSACTION   ]
 APPROVAL
 PROCESS

Example Transactions Include:

* Prepay.

* Tilted swaps or other
transactions where debt
financing eta counterparty is
embedded in a trading frisk
management transaction

	     "Approval to be documented in an Expedited DASH (E-DASH") and approved by ENRON GLOBAL FINANCE, RAC, and BUSINESS GROUP
	       HEADS only.
	     ~" In the case ot entities split-rated by Moody's and Standard & Poor's, the lower applicable rating level shall apply (e.g.. an A*-/A2 counterparty is
	     classified as A-/A3 or higher and a B8B-/8a2 counterparty is classified as 88-/BaS or higher). In the case of unraled enlilies, the Moody's/Standard
	     & Poor's rating equivalent to the E-rating as determined by RAG shall apply.
	     Items in gray represent previous Approval Amounts and Maturities.


								  SA-54

PREPAID OR EMBEDDED DEBT FINANCING

Page D-3

>575MM
> $25 MM

EXHO64-0O 126

EC4584gMoavgog





	   Enron Corp.
	   Risk Management Policy
	   P'opriatary and Confidential

				       Appendix 0 - Transaction Approval Process
						       Approval Authority

		     CONFORMING    NON-CONFORMING

		      LIMIT (1MM)    LIMIT (5MM)

rIdE-BOO----------775.                  25+

EN F. 00 C

<= 75

VI/HOLESALEOOC      <20

RETAIL CHAIRMAN &
CEO

BUSINESS GROUP
HEADS
(WHOLESALE)


BUSINESS GROUP
flEA OS
(OTHER)


FUNCTIONAL GROUP
flEA OS

<s 10


<S 5


05

t 25
N/A

N/A

N/A


N/A

<-2         N/A

Enron Corp. Board of Directors (Execuirve Committee between
Board Meetings)
Enron Corp. Office of the Chairman
Chairman & CEO
President & COO
Chairman & CEO

Enron Americas

President & CEO

				  COO
Enron Broadband Services          Chairman & CEO
				  President & COO
Enron Europe                      President & CEO
				  COO
Enron Global Markets              President & CEO
				  COO
Enron Industrial Markets          President & CEO
				  COO

Enron Global Services              Chairman & CEO
				   President & COO
Enron Energy Services              President
Enron India                        CEO
Enron Global Finance               CEO

Enron Xeeleralor                   Chairman & CEO

Enron Net Works                    President & CEO

Enron Principal Investments        Managing Director

														    EC46949Aoe308lo

EXHO64-00127

Page D-4

The ENE-OOC has authority to suspend or revoke approval privileges.





															    Page D-5
	   Enron Corp.
	   Risk Management Policy
	   Pmoprialary and Conhdenhai


					  Appendix 0 - Transaction Approval Process
							     Incumbency Certificate

				     CONFORMING     NON-CONFORMING
				      LIMIT 5MM)      LIMIT 15MM)

ENE.BOD


ENE.OOC

WHOLESALE OOC

RETAIL CHAIRMAN &
CEO

BUSINESS GROUP
USA OS
(WHOLESALE)


BUSINESS GROUP
flEA DS
OTHER)

75+


C- 75

C- 20

'.10

'a 5


'a 5

25+


C- 25

N/A

N/A

N/A


N/A

FUNCTIONAL GROUP     '2          N/A
HLA OS

Enrori Corp. Board of Directors (Executive Committee between Board
Meetings)

Ken Lay, Mark Frevert, Greg Whalley - Enron Corp. Office of the Chairman
Vacant

Dave Dalainey, Chairman & CEO

Enron Americas                    John Lavorato. President 8 CEO
				  Louis. Kitchen, COO
Enron Broadband Services          Vacant, Chairman & CEO
				  Jim Fallon, President & COO
Enron Europe                      John Sherrift, President & CEO
				  Michael Brown, COO

Enron Global Markets              Mike Mcconnell, President & CEO
				  Jell Shankman, COO
Enron Industrial Markets          Jell McMahon, President & CEO
				  Ray Bonn, COO
Enron Global Services             Stan Norton, Chairman & CEO

				  JIm Hughes, Pres,Oent & COO

Enron Energy Services             Janet Oletrlch, Presidenl

Enron India                       Vacant

Enron Global Finance              Andy Fastow, CFO

Enron Xcelerator                  Vacant

Enron Net Works                   Greg Piper, President & CEO

Enron Principal Investments       Kevin Garland, Managing Director

		   The Chief Risk Officer maintains incumbency certificate with approval authority.

												EC4H4IAOOSOO11
						       5A-56
EXHDG4-OO 125





       Enron Corp
       Risk Management Policy
       Propdetary and Con fidsn*iai


					   Appendix 0 - Transaction Approval Process
						       Other Authorized Signatures


				     SIGNATURE REQuIREMENr

	     RAC MANAGEMENT                All Deals            Rick Buy, Chiet Risk Officer
								Dave God,, Vice President. Underwriting & Chiof Underwriter

 All Deals with Funded Capital
	 > 12.5MM
       with Funded Capital
I >s 12.5MM and do not require
IENE.OOC or ENS-BOO approval

Andy Fastow, CFO
Ben Glisan, Managing Director & Treasurer
Tim Despain, Vice President, Finance & Deputy Treasurer
Barry Schnapper, Vice President, Finance & Deputy Treacurer

											  EC46849A0030912

Page 0-6

ENRON GLOBAL
FINANCE

EXHO64-00129

5.4-57





      Enron Corp
      Risk Management Policy
      P'npherary and Confidential


				    Appendix D - Transaction Approval Process
						       Definitions

CONFORMING


DIVES TITURES

NO fl-CONFORMING


PREPAID OR
EMS EnDED
DEBT FINANCING
RA C


RA C
RECOMMEN-
DATION

* Routine, nontudgeted and within the general business lines of Enron
* Made in an industry where Enron has established expertise
* Made in a country where Enron has established a local presence and is currently conducting business
* RAG RECOMMENDATION must be ?roceed with Transaction"
* RAG will determine if CONFORMING
* Disposal of assets (including securities)

* Outside the general business lines of Enron or in an industry where Enron has little or no expertise
* Made in a country where Enron has no local expertise or where the overall exposure to the country is
 excessive
- Made to an entity or within an industry that would result in excessive exposure to that entity or industry
* Includes all transactions with RAG RECOMMENDA TIONs of ~Retums Below Capital Pric&' or "Do Not
 Proceecf'
- RAG will determine if NON-CONFORMING
* Maximum exposure to Enron or any affiliate as a result of a prepaid physical or derivative trading / risk
 management transaction, a tilted swap or other transaction where debt financing of a counterparty
 is embedded in a trading / risk management transaction
* Risk Assessment and Control group at Enron
* Chief Risk Officer, responsible for RAG activities

- RAG's overall recommendation on a TRANSACTION, summarized in one of the following:
    - Proceed with Transaction
    - Returns Below Capital Price
    - Do Not Proceed

												 EC46949A0030913

Page D-7

EXHOO4-O0l 30

LA-SB





      Enroii Corp.
      Risk Management Policy
      Proprietary and Confidenhial


				       Appendix D - Transaction Approval Process
							   Definitions

RISK
ADJUSTED
CAPITAL


TRANSACTION

* The aggregation of exposure in a transaction that results from:
     - Capital Expenditure
	    cash outflow or commitment to make a cash outflow (examples include any form of
	    debt or equity financing and prepaid physical or derivative trading / risk management
	    transactions)
	   * providing, directly or indirectly, a guarantee of obligations of unalliliated third parties
	    or of NON-CONFORMING obtigations
	   * the maximum exposure to Enron or any affiliates as a result of a tilted swap or other
	    transaction where debt financing of a counterparty is embedded in a trading / risk
	    management transaction
	   * a commodity or financial position that results in an exposure outside of Board
	   approved limits
     - Commodity positions
      Credit
     - Guaranties
 Such exposure translated to an equivalent amount of capital
* RAt wiN determine the components and total amount of RISK ADJUSTED CAPITAL
RISK ADJUSTED CAPITAL IDIVESTITURE I PREPAID OR EMBEDDED DEBT FINANCING
* Exposure reflected net to Enron, including funding vehicle exposure
* RAC will dete,mine exposure

								 5A .~                                            EC46949A0030914
EXHOO4-0D131

Page D-8





														    ~~1
	   Enron Corp.                                                                    Page E-1
	   Risk Management Policy
	   Pro prietary and Confidential


			       Appendix E - Guarantee Approval Process
	      Procedures for Approval of Financial Guarantees and Performance Guarantees

	   FINANCIAL GUARANTEE

	   A.     A Financial Guarantee shall be approved as follows:

	   Any Subsidia,y:

		  By the Office of the Chairman, Chief Financial Officer, the Treasurer or any Deputy Treasurer,
		  regardless of principal amount, if the Financial Guarantee would guarantee unconditional, non-
		  contingent payment obligations, provided that any Financial Guarantee that is a trade Letter of Credit
		  shall be approved by any one of the foregoing officers or any Assistant Treasurer.

	   Any Affiliate, where Support is Equal to, or Less than, the percentage of Enron Corp. 's direct or indirect
	   ownership:

	   1.       By the Office of the Chairman, Chief Financial Officer, Treasurer or any Deputy Treasurer
		  regardless of principal amount, if the Financial Guarantee would guarantee unconditional, non-
		  contingent payment obligations, provided that any Financial Guarantee that is a trade Letter of Credit
		  shall be approved by any one of the foregoing officers or any Assistant Treasurer.

	   Any Affiliate, where the amount of Support by Enron Corp. is Greater than, the percentage of Swan Corp.'s
	   direct or indirect ownership whether expressly or ibmugh joint and several liability:

	   1.     By the Office of the Chairman, Chief Financial Officer, Treasurer or any Deputy Treasurer and the
		  Business Group Head (as defined in the Transaction Approval Process), if the Financial Guarantee
		  would guarantee unconditional, non-contingent payment obligations (greater than Enron Corp.'s
		  ownership interest) that are less than or equal to $2,500,000 in principal amount;

	   2.     Upon evaluation and approval of the Financial Guarantee and the related transaction pursuant to the
		  Transaction Approval Process, a Financial Guarantee that would guarantee unconditional, non-
		  contingent payment obligations (greater than Enron Corp.'s ownership interest) exceeding
		  $2,500,000 in principal amount. may be executed by the Office of the Chairman, the Chief Financial
		  Officer, the Treasurer or any Deputy Treasurer.

	   Any Unafflulated Third Party:

	   1.     By the Office of the Chairman, Chief Financial Officer, Treasurer or Deputy Treasurer and the
		  Business Group Head (as defined in the Transaction Approval Process), if the Financial Guarantee
		  would guarantee unconditional, non-contingent payment obligations less than or equal to $2,500,000
		  in principal amount;

	   2.     Upon the evaluation and approval of the Financial Guarantee and the related transaction pursuant to
		  the Transaction Approval Process, a Financial Guarantee that would guarantee unconditional, non-
		  contingent payment obligations exceeding $2,500,000 in principal amount, may be executed by the
		  Office of the Chairman, the Chief Financial Officer, the Treasurer or any Deputy Treasurer.


											  EC46949Afo30915

EXH064-OO 132





	   Enron Corp.                                                                Page E-2
	   Risk Management Policy
	   Proor:etay and Confidential

	   Appendix E - Guarantee Approval Process
	   B.     Amendment

	   1.     An amendment to a Financial Guarantee that would (a) increase the obligations of Enron Corp.
		  under the Financial Guarantee or (b) extend the duration of the Financial Guarantee shall be
		  approved in accordance with the rules that would apply if the Financial Guarantee and its
		  amendment together were an original F(nancial Guarantee.

	   2.     Any other amendment to a Financial Guarantee which supports the obligations of a Subsidiary or an
		  Affiliate shall be approved by the Office of the Chairman, the Chief Financial Officer, the Treasurer or
		  any Deputy Treasurer,


	   PERFORMANCE GUARANTEE

	   A.     A Performance Guarantee shall be approved as folLows:

	   Any Subsidia,y

		  By the Office of the Chairman, Chief Financial Officer, the Treasurer or any Deputy Treasurer,
		  regardless of amount, provided, that any Performance Guarantee that is a Trade Guarantee may be
		  approved by any one of the foregoing officers or any Assistant Treasurer.

	   Any Affiliate, where Support is Equal to, or Less than, the percentage of Enron Corp.'s direct or indirect
	   ownership:

		  By the Office of the Chairman, Chief Financial Officer the Treasurer or any Deputy Treasurer,
		  regardless of amount, provided, that any Performance Guarantee that is a Trade Guarantee may be
		  approved by any one of the foregoing officers or any Assistant Treasurer.

	   Any Affiliate, where the amount of Support by Enran Cop. is Greater than, the percentage of Enron Corn. 's
	   direct or indirect ownership whether expressly or through joint and several liability:

	   1.     By the Office of the Chairman, Chief Financial Officer, Treasurer or any Deputy Treasurer and the
		  Business Group Head (as defined in the Transaction Approval Process), if the Performance
		  Guarantee would support payment obligations (greater than Enron Corp.'s ownership interest) that
		  are less than or equal to $2,500,000 in principal amount or performance obligations that would
		  create an estimated contingent liability less than or equal to $2,500,000 in principal amount;

	   2.     Upon evaluation and approval of the Performance Guarantee and the related transaction pursuant to
		  the Transaction Approval Process, Performance Guarantees that support payment obligations
		  (greater than Enron Corp.'s ownership interest) exceeding $2,500,000 in principal amount, or
		  performance obligations that create an estimated contingent liability (greater than Enron Corp.'s
		  ownership interest) exceeding $2,500,000 in principal amount, may be executed by the Office of the
		  Chairman, the Chief Financial Officer, the Treasurer or any Deputy Treasurer,


										       EC46949A0030916
EXHO64-OO 133





	   Enron Corp.                                                                   Page E-3
	   Risk Management Policy
	   Pro pri era ny and Con fidential

	   Appendix E - Guarantee Approval Process
	   Any Unaffihiated Third Pa fly:

	   1.     By the Office of the Chairman, Chief Financial Officer, Treasurer or Deputy Treasurer and the
		  Business Group Head (as defined in the Transaction Approval Process), where the Performance
		  Guarantee would support payment obligations less than or equal to $2500000 in principal amount
		  or performance obligations that would create an estimated contingent liability not exceeding
		  $2,500,000 in principal amount;

	   2.     Upon the evaluation and approval of the Financial Guarantee and the related transaction pursuant to
		  the Transaction Approval Process, a Financial Guarantee to an Unaffiliated Third Party that would
		  support payment obligations exceeding $2,500,000 in principal amount or performance obligations
		  that would create an estimated contingent liability exceeding $2,600,000 in principal amount, may be
		  executed by the Office of the Chairman, the Chief Financial Officer, the Treasurer or any Deputy
		  Treasurer,

		  For the purposes of this Section, in calculating the percentage of Enron Corp.'s ownership of an
		  Affiliate, any shares of such Affiliate owned by employees, officers, directors or agents of Enron
		  Corp. or any Subsidiary shall be deemed owned by Enron Corp.


	   B.     Amendment

	   1.     An amendment to a Performance Guarantee to any Affiliate where support is greater than the
		  percentage of Enron Corps ownership interest that (a) increases payment or performance              (N
														      (0
		  obligations under the Performance Guarantee or (b) extends the duration of the Performance
		  Guarantee, shall be approved in accordance with the rules that would apply if the Performance       IC
		  Guarantee and its amendment together were an original Performance Guarantee.

	   2.     Any other amendment to a Performance Guarantee which supports the obligations of a Subsidiary or
		  an Affiliate shall be approved by the Office of the Chairman, the Chief Financial Officer, the
		  Treasurer, any Deputy Treasurer; provided that any such amendment to a Trade Guarantee shari
		  require the approval of any Assistant Treasurer, any Deputy Treasurer, the Treasurer, the Chief
		  Financial Officer or the Office of the Chairman.

	   PRICING

	   A.     Financial Guarantees and Performance Guarantees will be priced in accordance with established
		  Risk Assessment and Control Group ('RAV) practices.
	   B.     Letters of Credit will be assigned a price in addition to any charges that may accrue from issuing
		  institutions.
	   MISCELLANEOUS

	       A. All monetary threshold approval limits referred to herein, where applicable, shall incorporate by
		  reference any changes to the Transaction Approval Process deal approval limits as it relates to
		  Conforming Investments.

	       8. Performance Guarantees that are guarantees shall contain express monetary limits on guaranteed
		  obligations unless otherwise approved by the Board of Directors of Enron Corp. or waived by the
		  Chief Financial Officer or the Treasurer.


												   EC46949ADO3O911
EXHOS4-OO1 34





	   Enron Corp.                                                                 Page BA
	   Risk Management Policy
	   Propn~ta'y and Confidential

			      Appendix 2 - Guarantee Approval Process
	   DEFINF~IONS

	   Affiliate shall mean any entity in which Enron Corp. has an ownership interest less than 80%.

	   Financial Guarantee shall mean a guarantee issued by Enron Corp. that (a) guarantees obligations (i) for the
	   repayment of money borrowed which are or should be shown on a balance sheet as debt in accordance with
	   Generally Accepted Accounting Principles (MGPAP"), or (ii) as lessee under leases which, in accordance with
	   GAAP, are capital leases, and (b) constitutes 'Debt" under the definition of "Debt" in the principal credit
	   agreement of Enron Corp.; provided, that a Financial Guarantee shall not include any letter of indemnity or
	   other support arrangement (including, without limitation, a sponsor or parent support or performance
	   agreement). For purposes of this policy, any letter of credit issued for the account of Enron Corp. and
	   obligations related thereto, including, but not limited to, obligations arising under any master letter of credit
	   agreement for any such letter of credit, shall be treated as debt.

	   Letter of Credit shall mean any letter of credit issued for the account of Enron Corp. and obligations related
	   thereto, including but not limited to obligations arising under any master letter of credit agreement for any
	   such letter of credit.

	   Performance Guarantee shall mean any guarantee not constituting a Financial Guarantee, any letter of
	   indemnity or any other support arrangement (including, without limitation, any sponsor or parent support or
	   performance agreement). For example, a guarantee of a swap agreement, swap confirmation, or master
	   swap agreement is a Performance Guarantee.

	   Principal Credit Agreement of Enron Corp. shall be the U.S. 31 750,000,000 364-Day Revolving Credit
	   Agreement dated as of May 14, 2001, as such Revolving Credit Agreement now exists or may be amended
	   from time to time, among Enron Corp., as Borrower, the Banks named therein, and The Chase Manhattan
	   Bank, NA. and Citibank NA., as Co-Administrative Agents.

	   Subsidiary shall mean: (a) any subsidiary directly or indirectly 80%-owned to 100%-owned by Enron Corp.,
	   (b) any direct or indirect subsidiary of Enron Corp. if the other owners of such subsidiary hold stock in such
	   subsidiary for the purpose of meeting legal requirements of the jurisdiction in which such subsidiary is
	   incorporated, and (c) Enron Equity Corp., Enron Capital & Trade Resources International Corp. or any of its
	   direct or indirect subsidiaries or any other direct or indirect subsidiary of Enron Equity Corp. or Enron Capital
	   & Trade Resources International Corp. not 100%-owned by Enron Equity Corp. or Enron Capital & Trade
	   Resources International Corp. if the other owners of such subsidiary collectively hold a minority ownership
	   interest in such subsidiary that entitles them primarily only to a return of capital contributions or to share in
	   the profits, losses, distributions, or dividends of such subsidiary and does not entitle them to participate in the
	   operation, management or control of its business. For purposes of this policy, the right to vote by itself shall
	   not be deemed to entitle an owner to such participation,

	   Trade Guarantee shall mean guarantees issued in the normal course of business by Enron Corp. to support
	   the obligations of Enron Corp. Subsidiaries or Affiliates with respect the purchase andlor sale of physical
	   commodities or financial transactions related to trade activities.

	   Transaction A~proval Process provides for (a) a process of review and approval of Capital Expenditures, and
	   (b) a process for prior transactions involving Capital Expenditures to be reviewed for performance and results
	   (see Appendix D).

	   Unaffiliated Third Party shall mean any entity in which Enron Corp. has no ownership interest

	   References herein to Chief Financial Officer, Treasurer, Deputy Treasurer or Assistant Treasurer shall mean
	   the Chief Financial Officer of Enron Corp., the Treasurer of Enron Corp., the Deputy Treasure(s) of Enron
	   Corp. or the Assistant Treasurer of Enron Corp.


											EC4G949MOaOg1O

EXHOS4-OO1 35





												     Page E-5

      Enron Corp.
      Risk Management Policy
      Pvop~iera~y and Confkienlial

					Appendix E - Guarantee Approval Process
						 Guarantee Approval Flowchart


														origlnai to Count.rparty
														Copy to Legal
														*Input to D.tabn.

	    Ye.

  erformance
  Guarantee

	No


  Financial
  Guarantee


Fl?

					Guarantee
 Credit Risk          Corp. Legal       Approval
Management                               Process
 SM Limits <=1500MM                   9.. Exhibit IV
* >5590MM approved by
Treasurer

 DASH
  or
GASH 4')

	      (7~nte?'1
ii            ii
Corp Legal          p oval

		ScE  b  V

		 ('I Guarantees may be inciuded in the DASH for a transaction, However, It there is no DASH, or if the guarantee is not
		       incorporated in the DASH, a GASH is used.  GASH" is defined as Guarantee Approval Sheet.

												  En ran
												  Global
												  Finance

												       EC48949A0930919

								 5A-64

Business
  Unit

 Final
Approved
Document

No

Letter of


Credit


    Yes

EXHOO4-OO1 36





     Enron Corp.
     Risk Management Policy
     Propbeta'y and Con4dentia!


				       Appendix E - Guarantee Approval Process

	   BUSINESS
	     UNIT


			    2
Guarantee % a Ownership

LIMIT $MM (1)

r

  Other     ]
All Amounts

      r~ntee(1T~')
      I      Approval
	     Process

					    Affiliate
				   Guarantee % > Ownership %
				       4Tran.acIlon size based on
					 Incremental Amountt21)
					       0,
					   Unaffiliated
					   3rd Parties

									 > 2.5

														      Business Group Head
															     And
														       ENE - OCCI CFO I
															   Treasurer
														       / Deputy Tr..surer


															  TransactIon
														       Approval Process

														See Exhibit IIn~


	       Limit Is lessor of notional amount or P99; notional amount will always be noted on DASH or GASH.

	     ~I Incremental Amount equals amount that Support> Ownerehlp.

	     (2l Authorized signatories alter review end approval through the Transaction Approval Process.


								5A45
EXH064-OO 137

Page E-6

APPROVING
   UNIT

L~~J

EC46049uoM020





	Enron Corp.                                                       Page F-i
	Risk Management Policy
	Pro prietary and Confidential


		       Appendix F - Fundamental Operating Standards *


	Quantitative
	Transactions are recorded accurately and timely (completeness, accuracy)

	       *   Transactions are recorded with 100% accuracy and valued appropriately in an
		   approved risk system for the applicable product
	       *   Transactions are input into appropriate risk system on date of trade
	       *   All trades executed on the telephone must be executed on t&ephones that are recorded
		   electronically, and all trades executed over the Internet must be executed with
		   appropriate recording back up

	Daily Profit and Loss position reporting is accurate and timely (completeness, accuracy)

	       *   Reports are 100% accurate at time of issuance (no revisions)
	       *   Daily positions and profit and loss have been approved and signed off by trading
	       *   Reports issued on next day of trading at a commercially pre-determined time
	       *   Trading limit violations noted and communicated to management on next day of trading


	Timely confirmation and execution of transactions (completeness, accuracy, existence)

	       *   Confirmation of all brokered trades with brokers by close of business trade date
	       *   Confirms sent to counterparties (non-exchange) within 24 hours of trade execution and
		   agreed to risk system data
	       *   Confirms received from counterparties (non-exchange) within 48 hours of trade
		   execution and agreed to risk system data
	       *   Confirms executed with counterparty within 7 days of trade date with exceptions noted
		   and communicated to management with the associated level of risk for non-execution
		   (i.e. master agreement in place, number of trades unexecuted)

	Settlements with counterparties occurs accurately and timely (non CACS, non Dash deals)

	       *   Invoices/payments agree with contractual terms
	       *   All invoices/payments sent to counterparties are resolved within 30 days of dispute date
		   with material exceptions noted and communicated to management
	       *   Overdue cash collections followed up with counterparties within 48 hours of due date


	 These are guidelines and may be updated periodically.


									  EC46949MO~921
ExHOe4-oo1 38





	Enron Corp.                                                       Page F-2
	Risk Management Policy
	PropTietary and Confidential


		       Appendix F - Fundamental Operating Standards *
	Operating system data matches risk systems and general ledger data

	       *   Flash to actual variances and prior month adjustments cleared within 30 days of
		   identification
	       *   AU trading general ledger accounts are reconciled and outstanding items cleared within
		   7 workdays subsequent to month-end

	Qualitative
	Establish and implement business and controls infrastructure

	       *   Business unit head has ultimate responsibility to ensure operating standards are met
		   (working in conjunction with GRMP and RAG)-
	       *   Full functionality and interfaces for market risk, credit risk and corporate reporting,
		   and/or a systems roadmap for that development
	       *   Appropriate involvement in business for specialist services (Legal, Tax and HR)
	       *   Sufficient resourcing both in quality and quantity for all processes
	       *   Global databases are in place and updated to accommodate business counterparties
	       *   Trading/origination activities and trading limits have been approved and authorized by
		   Enron management
	       *   Credit limits have been defined and approved and capabilities exist to monitor credit
											   q
		   exposure by counterparty
	       *   Transaction approval process has been defined and communicated

	Define functional responsibilities across business/offices and ensure segregation for the
	following duties

	       *   Execution (Commercial)
	       *   Controls (Commercial Support)
	       *   Review (RAG)


	 These are guidelines and may be updated periodically.


									    EC46849AtJO3og22
EXHO64-OO1 39





	 Enron Corp.                                                     Page 0-1
	 Risk Management Pobicy
	 Proprietary end Confidential


		       Appendix G - Operational Risk Considerations *

	 PeoDle

	       *   Incompetence
	       *   Fraud
	       *   Excessive dependence on a few top level employees
	       *   Lack of institutional knowledge

	 Organizational

	       *   Improper segregation of duties
	       *   Lack of governance
	       *   Operational constraints
		   -  Efficiency risk
		   -  Scalability or transaction volume risk

	 Process Risk

	       *   Model risk
		   -  Wrong algorithm
		   -  Misuse of a correct model
		   -  Wrong inputs to a cored model
											  'a
		   -  Control over changes to model
		   -  Combination of above

	       *   Position and P&L Reporting
		   -  MTM error
		   -  Risk Books, Infinity, RisktRAC, CAS and DPR do not reflect correct positions
		   -  Limit Violations

	 Transaction Specific Risk

	       *   Pricing error
	       *   Execution error
	       *   Product complexity/transaction complexity misperception
	       *   Booking error
	       *   Settlement error
	       *   Documentation/contract risk
	       *   Unexpected cost - legal or other transaction fees
	       *   Unidentified risks


	  These are guiderines and may be updated periodically.

									  EC46O4SAg~3Qg~3

EXHO64-0O 140





Enron Corp.
Risk Management Policy
Proprietary anti Confidential

Technology

External

Appendix G -Operational Risk Considerations *

*  Computer system failure
*  Programming error
*  Communication infrastructure breakdown
*  Blind acceptance of system-generated valuations

*  Regulatory
*  Legal

* These are guidelines and may be updated periodically.

Page G-2


 EC46948Aoe3eg24

   EXHO64-00141

IC

IC





												   Page f-I-i
	  Enron Corp.
	  Risk Management Policy
	  Pro pnetary and Confidential


			       Appendix H - Sample Documentation of

				Employee Acknowledgement of Policy

						      Enron Corp.
				      Risk Management Policy
		       Acknowledgement of Review and Compliance


	   _______________________________ do hereby acknowledge that I have read and understand the Enron
	  Corp. Risk Management Policy (the "Policy"). I hereby certify compliance with such policy statement since my
	  employment, or since I last so certified. I will continue to comply with such policy statement.


	  I understand that I may not engage in the trading of any position for the benefit of any party other than Enron
	  Corp. and its subsidiaries (the "Company"), whether for my own account or for the account of any third party
	  where such position relates to any security, commodity, contract or derivative thereof within any Commodity
	  Group listed in Appendix A of the Policy, except that I may trade for my own account those items included under
	  the heading "Financials" in Appendix A with which I am not involved as part of my employment for the Company.


							       Date:

	  Employee Signature

									       C
									       N
									       Mg
									       Ac

	  Employee Name Printed


	  Enron Business Unit


	  Any exceptions noted below:


										      EC4694oMoa4Jg~
EXH064-OO 142





				AGENDA ITEM 5(a)
		       ENRON CORP. RISK MANAGEMENT POLICY
			(SUGGESTED FORM OF RESOLUTIONS)

	      WHEREAS, the Board of Directors of the Company approved resolutions
	 on August 13 - 14, 2001, adopting the Enron Corp. Risk Management Policy (the
	 "Risk Management Policy") which established a comprehensive means of
	 evaluating, managing and controlling the Company's exposure to risk and under
	 which capital will be allocated and preserved;

	      WHEREAS, the objective of the Risk Management Policy is to ensure that
	 the Company's capital is allocated efficiently and that appropriate action is taken
	 to preserve the Company's capital in accordance with the Company's disposition
	 for risk;

	      WHEREAS, it would be in the best interest of the Company to revise the
	 Risk Management Policy to that which is attached to these minutes and as is
	 described therein;

	      NOW THEREFORE BE IT RESOLVED, that the revisions to the Risk
	 Management Policy be, and the same hereby is, approved and adopted, in the
	 form presented to and discussed at this meeting, a copy of which is attached to
	 the minutes of the meeting, and that the persons, officers and approving units
	 identified therein shail perform the responsibilities as specified therein;

	      RESOLVED FURTHER, that all actions heretofore taken by the Chairman
	 of the Board and Chief Executive Officer, the President and Chief Operating
	 Officer, the Vice Chairman, the Chief Financial Officer, the Chief Risk Officer (or
	 his or her designee), the Treasurer or any Vice President, in the name and on
	 behalf of the Company, related to or in connection with transactions of the type
	 contemplated by the revised Risk Management Policy attached to these minutes
	 but which originated prior to these resolutions, including, without limitation, the
	 execution and delivery of any instruments or other documents as any such officer
	 shall have deemed necessary, proper, or advisable, are hereby adopted, ratified,
	 confirmed, and approved in all respects; and

	      RESOLVED FURTHER, that the Chairman of the Board and Chief
	 Executive Officer, the President and Chief Operating Officer, the Vice Chairman,
	 the Chief Financial Officer, the Chief Risk Officer (or his or her designee), the
	 Treasurer, any Vice President of the Company, or any other person designated
	 or authorized by the Board to act on behalf of the Company be, and each of them
	 hereby is, authorized, directed (any one or them acting alone) to take any and all
	 such further action, to amend, execute, and deliver all such further instruments

							      EC46949AO03o926

EXHOS4-00143





	  and documents, for and in the name and on hehaif of the Company, under its
	  corporate seal or otherwise, and to pay all such expenses as in their discretion
	  appear to be necessary, proper, or advisable to carry into effect the purposes
	  and intentions of this and each of the foregoing resolutions.


								EC4ug49Mo~g27
EXHO64-OO 144





												       an
												       S
												       0
												       I5
												       U
												       C
												       C
												       4


									   ECA69A9P&9~'28
EXHO64-OO1 45





    Project Southwood
  Georgia Pacific - Leaf River

     Enron Industrial Markets

	   Presentation to
     Enron Corp Finance Committee
    For Recommendation to the Board
	    of Directors

									    IC

	   October 8, 2001


			    EC46949Ao~g~g
EXHO64-OO 146





      Project Southwood
      Why ElM Needs a Pulp MW?

*  Market Pulp is a $20B Global Market ($90B
   integrated pulp) with significant volatility

including

      *  Asset ownership increases credibility with industry players

*  Physical supply enhances marketability of
   products

financial

      *  ElM's ability to contract for tons has been limited to date
	 due to lack of physical presence
      *  ElM's purchase of newsprint assets (Garden State Paper -
	 3rd Quarter 2000, Stadacona - 1st Quarter 2001) have had a
	 positive effect on ElM's ability to transact business:

Trading Hubs

Total Notional Value of Trades

Jan 01

    2

$2MM

Counterparties

11

June 01

     6

$70 MM

   150

						 EC4694gMoafg~
						   Inc C~n!rdema~


EXHO64-OO 147

N

'a





	     Project Southwood
	     Georgia Pacific's Leaf River Pulp Mill
       High Quality Asset
       * State of the art facility; one of the largest single-line pulp mills in the
	 world.
       * Ranks 5th out of 50 North American softwood mills for lowest cash
	 costs.
       * Extremely well maintained with a history of proactive maintenance.
       * Greenfield construction in 1984 - clean environmental record.
       * 99% of energy produced on site with 87% of steam requirements
	 generated from mill byproducts.
									  C.,


       * High quality, properly incented, non-union workforce.
       Structure Mitigates Risk
       * Fixed price, full requirements fiber supply contract for 7 years with
	 Georgia-Pacific. (Fiber represents 70% of variable costs and 40% of
	 total costs.)
       * Mutually agreed upon capex budget with a 3-year risk sharing
	 provision with Georgia-Pacific.
       * ElM pulp desk pays the mill a fixed price for 50% of the physical
	 output; floating price (based on RISI index) for the other 50%.


       Separate Financial Pulp Swap Transaction
       * ElM pulp desk enters into a financial pulp swap with Georgia-Pacific
	 far 277,250 MT/yr (roughly equivalent to 50% of the mill's annual
	 production). GP pays fixed; ElM pays floating.

						     <tr ri?t2 VI       (221

				     EC4694gA0030931
EXHOS4-OO1 48





       Project Southwood
       Mill Purchase

 50% Floating $Itori
   50% Fixed Slton


Asset & WC

   Debt
 Proceeds
 $265 MM

  7 yr.
Fiber Supply

 Fixed Slton

   A


r

k

 7 yr. Physical
  Pulp 100%
   Offtake


	   P&l
	Payments

	5274.5 MM
	7 yr. Balloon
	   Loan

Credit Support for
repayment of bullet
     loan

					     $ Millions

			Cash Distribution to GP
			     Transaction Costs
			  Initial Capital Injection

					      ($265.0)
					      ILA1
					      ($274.5)

NPV @ 12.5% of Project Cashfiows
NPV @ 12.5% of Net Terminal Value

$ 145.5(2)
$ 113.2(2)

			 NPV of Mill Purchase      ($15.8)

	(1~ A $30 MM liquidity line will be used to offset any periodic operational cash shortfalls.
	(2) 12.5% = the RAC Pre-tax Hurdle Rate


EXH064-OO 149

Enron

Georgia
Pacific

4;- ,~   fl


	   4
	  r


	  'A

Bank

'7

(1)

EC46949A9030932





Project Southwood
Financial Pulp Swap

* Term: 7

  Fixed
 $5641 MT


 Floating $
at RISI Index

years

	       * Notional Volume: 277,250 MT/Yr.

		 NPV ~ 8.38% of Financial Swap   $75.8 MM (1)

(1) 8.38% = LIBOR + GP Credit Risk of 3.6%

ECA5S4gAfo3oga3

OZt''IY .;Th

EXHO64-OO1 50

Enrort

Georgia
Pacific





      Project Southwood
      Summary Financial Results

	    EBIT

	       Mill

	       Swap

	       Total        $77,731   $23,707  $23918   $23,231 $22,403  $21,101  $20,307  $20,841

			       2001     2002      2003     2004    2005     2006     2007      2008


			    $1,976   $23,707   $23918   $23,231 $22,403  $21,101  $20,307   $20,841

			   $75755        12        12       12       12       12      12        12


	     Not income

			       $57    $3,142    $3,276   $2,841   $2,317  $1,494     $991    $1,329

			   $49,241


	     Free Cpphflow

			    $1,376    $2,995    $4,397   $3,333   $4,450  $3,955   $3,039    $3,496

				12   $14,252    $8,877   $8,631   $8383   $8,135   $7,887    $7,638

	       Total         $1,376  $17,247  $13,274   $11,964  $12,833 $12,090  $10,926   $11,134

	       Mill

	       Swap

	       Total        $49,298   $3,142    $3278    $2,841  $2,317   $1,494     $991   $1,329

	       Mill

	       Swap

										       EC46g4gAooaagu
										 ~Yor;je~~rv tiC :2~~,tJrfrpr~cfl


EXHO64-001 51

(C

'a





      Project Southwood
      Effect on Enron Corp. Ratios

2001 Enron Corp Ratios

Earnings Per Share
Funds Flow Interest Coverage
Pre-tax Interest Coverage
B/S Debt to B/S Capital

Enron Corp
  2001
Base Case

  $1.80
  4.02
  3.31
  43.4%

Enron Ratios Including Leaf River Transaction

 Oft B/S     Enron B/S
100% Debt    100% Debt

$1.86
4.02
3.39
43.3%

$1.86
4.02
3.39
43.9%

    Enron S/S
60% Debt /40% Eauitv

     $1.85
     4.02
     3.39
     43.5%

2002 Enron Corp Ratios

Earnings Per Share
Funds Flow Interest Coverage
Pre-tax Interest Coverage
B/S Debt to B/S Capital

Enron Carp
  2002
Ease Case

  $2.15
  4.02
  3.66
  43.4%

Enron Ratios Including Leaf River Transaction

 Off B/S     Enron B/S
100% Debt    100% Debt

$2.15
4.04
3.68
43.4%

$2.15
3.99
3.52
44.0%

    Enron 5/5
60% Debt 1 40% Eauitv

     $2.15
     4.02
     3.65
     43.5%

									       EC46949A8030935

								   'ro9r;~T2r. :n~is'fenr;.v


EXHOG4-DO1 52

N

'0





	     Project Southwood
      -- Valuation Context

	Pulp Prices
	   * RISI 10-year Historical Average is $546/MT
	   * RISI 7-year Average Forecast is $5561MT
	   * ElM Valuation uses $SIBIMT over the 7-year term


       Acquisition Price
	   * Mill was built in 1984 for $560 MM
	   * Mill replacement cost today is approximately $1.0 Billion
	   * GPaskingpricewas$350MM
							       to


	   * ElM is paying $274 MM


	Terminal Value
	    * Current Transaction Multiples are 3.3X Peak EBITDA
	    * Enron Purchases Leaf River Mill at 2.13X Peak EBITDA
	    * Terminal Value assumes 2.OOX Peak EBITDA


						     EC4G94gAJOyjg36


EXHOS4-OO1 53





		ENRON RISK ASSESSMENT AND CONTROL
		       DEAL APPROVAL SHEET

						    NEW DEAL

       DEAL NAME:      SOUWWOOD                                Date DASH Completed: September 21,2001
       Counterparly:   Georgia-Pacific                         RAC Underwriter: Chip Schneider
       Business Unit:  Enron Industrial Markets                RAC Analyst:     Adam Pollock.lAndre Carigucu
       Business Unit Originator George McCormick               Transaction Type: Equity - Privale
       Industry: industrial-Paper & Allied Products            Capital Funding Source:Off Balance Sheet-On Credit.
							       Country:         United States
       This Transaction: Private                               Expected Closing Date: September 28. 2001
			Strategic
			Ncr-Conforming                         Expected Funding Date:November 30, 2001
       RAG Recommendation: ~ Proceed with Transaction         ~ Returns below Capital Price
				Q Do not Proceed
       Board Approval:          Pending

       APPROVAL AMOUNT REQUESTED ($OOOs)
	  Capital Commitment
	  Liquidity Line between Enron-SundanceltRPM
	  TOTAL

	* The Liquidity Line is provided to lund additional cash required to offset periodic operational cash shortfalls. The expected total
	nominal payment over? years is $11.1 million (PV $6.2 million). The nominal P95 calculated amount is $29.8 million (PV $13
	million).
	EXPOSURE SUMMARY ($OOOs)
	   This Transaction                                   274.5M
	   Existing Exposure                                    0.OM
	   TOTAL                                             $ 274.5M

	- ElM will be equired to buy-out GPs equity interest in the mill (see description and formula below),  fluctuations in the
	calculated value of GP's equity are driven largely by commodity prices. The expected nominal payment in 2008 is $2.2 million
	CPV $1 million). The nominal P95 amount calculated for 2008 is $19.8 million (1W $9 million).
	DEAL DESCRIPTION

												       a
												       In

	Enron Industrial Markets ('ElM") is seeking approval for the acquisition of a supermajority (96%) interest in the Leaf
	River Pulp Mill rLRPM") in New Augusta, Mississippi, for $274.5 million (asset cost of $265.0 million +
	financing/closing costs/contingency of $9.5 million).  Additionally, an agreement is sought to structure the
	acquisition to defer the recognition of a taxable gain (the "Deferral Agreement" is valued at approximately $45
	million) to Georgia-Pacific for a seven-year term.  Georgia-Pacific CGP") is divesting itself of its market pulp
	operations as part of a strategic shift away from commodity-like products and toward consumer products with
	"brand" value. The alignment of Enron's goal to develop a more liquid commodity market and GP's slrategic goal of
	moving further down the value chain presents Enron with an opportunity to obtain a world-class asset with a
	reasonable return risl&return profile.

	The Leaf River pulp mill has an annual production of 554,500 MT of market pulp. The asset is capable of producing
	both Southern Bleached Softwood Kraft (SBSK) and Southern Bleached Hardwood Kraft (SBHK) pulp.       The mill
	was built in 1984 for a cost of $560 MM by Great Northern Nekoosa Corporation. In 1990, GP acquired the mill and
	has owned and operated the mill since that time. The asset is one of the largest single-line production pulp mills in
	the world. Jacobs-Sirrine's 01 2001 database lists Leaf River as the 6"' lowest among 50 North American pulp
	producers and as having the 2~ lowest cost basis among 13 producers of Southern Bleached Softwood Kraft
	(SBSK) pulp in North America. The mill employs 341 non-union, salaried employees. The estimated replacement
	cost of Ihe mill is $1 billion.

	The transaction will enable ElM, via a JV structure, to indirectly control LRPM. To facilitate the structure, an LIC
	(Newco") owned 96% and 4%, respectively, by ElM (through Sundance) and GP will be formed. GP will contribute
	the Leaf River mill valu&d at $265 million including working capital valued at $52MM.   ElM will contribute credit
	support for debt financing of the asset, as well as capital, operations, personnel and marketing services. GP and
	ElM will share the net cash flow from Newcos operations pro-rata to their respective percentage interests. GP will
	receive a $265 million cash distribution at closing and a 4% share of membership interest in the LLC. ElM will have
	operational control of the facility and 96% of the economics during a 7-year term. At the end of 7 years, Enron will
	buy-out GP's 4% interest at 5.0 x EBITDA less Net DeLl (EBITDA calculated using a 5-yr historical average). ElM
	will have the ability to terrrinate the joint venture before the end of seven years by paying GP a stipulated 'make-
	whole" premium to compensate GP for its loss in tax deferral benefits.  The calculation of this payment will be
	agreed upon In the documents.
													E C46949M030037
EXHO64-O01 54

 274. SM
  30.OM
$ 304.5M





	 RAC Deal Approval Sheet                                                             Deal Name: 1RPM DASH 0921 01


	 The acquisition will be financed primarily with debt having recourse to Enron. Any principal repayment will trigger a
	 tax liability for GP (which tax reduces the value of the Deferral Agreement proportionally by the amount of such
	 principal payment in relation to the total initial principal amount).  Thus, Newco will seek a seven-year non-
	 amortizing loan from a 3rd party lender.  Newco's debt will be backed by Enron credit support.       In order to
	 preserve the value of the Deferral Agreement to GP, GP will wrap the loan and Enron credit support with a guaranty
	 of its own. From an economic perspective, Enron has not structUred the transaction on the assumption that such
	 GP credit support will be called upon. GP will, however, be granted a springing lien on the assets of the LIC it their
	 credit support/guaranty is called upon to the extent that GP performs on such obligation.  In accordance with the
	 springing lien concept, ElM will agree to maintain the asset in good condition consistent with industry standards In
	 order to preserve the collateral value of the asset for GP in the event they are called upon to perform under the
	 guaranty.

	 Industry

	 Pulp represents 30% of the $300 billion/year global market for forest products (larger than any other pulp/paper
	 product).  Market Pulp represents 6% ($20 billion/year) of this global market.  End uses for softwood kraft pulp
	 incrude everything from printing and wr~ing paper to tissue products and boxboard. Softwood kraft pulp Is also an
	 input for other major paper products such as newsprint, The rationale for the proposed acquisition is to accelerate
	 ElM's strategy to develop its physical and financial trading and market-making activities in the pulp market. Enron
	 currently owns no pulp assets and seeks to "touch at least 500,000 MT of pulp capacity this year.     With the
	 acquisition of LRPM, ENE will control 1.3% ci global market pulp capacity.

	 The Leaf River mill produces a 525K pulp that is known for its high brightness, low dirt content and consistent
	 quality. By owning the Leaf River asset, the ELM pulp book will own 100% of the mill's SBSK physical output -
	 estimated to be 554,500 MT/year. ElM will also assume GP's existing off-take sales contracts.

	 The Leaf River mill uses three types of pinewood furnish as inputs to the pulp making process - tree length      ~
	 roundwood, Short roundwood and chips. These fiber costs represent 70% of Leaf River's variable costs and 40% of  '7
	 the milrs total operating costs. GP will provide all the necessary fiber inputs to Newco at a fixed price for seven
	 years. Under the agreement, GP will provide up to 2.5 million rough green short Ions of roundwood per year at a
	 price of $24.68 per rough green ton and up to 1 million green short tons of chips per year at a price of $27.13 per
	 green short ton. Newco will not be permitted to purchase fiber from any other party unless requirements exceed
	 these limits.

	 GP and Enron will agree on a 3.year capital expenditure budget that supports the forecasted level of production
	 (554.500 MT/year). Excess expenditures will be split 50/50 between GP and Enron, up to an agreed-upon annual
	 cap. Enron will pay any capital expenditures exceeding the cap. Similarly, if the CAPEX budget for each year is not
	 spent in its %ntirety. the remainder will be split 50/50 between GP and Enron.

	 Currently, the Leaf River mill's output production capacity is limited by the mill's chemical (liquor) recovery and
	 refining capacity. Historically, GP has exchanged liquor with other area GP mills in order to "de-bottleneck" the Leaf
	 River mill. As part of the proposed transaction, GP will enter into a liquor swapping agreement with NewCo. Under
	 this arrangement, GP will provide white liquor (unused refined chemicals) to the Leaf River mill. In exchange, the
	 Leaf River mill will provide equivalently valued black liquor (used unrefined chemicals) to GP, which has other mills
	 in the vicinity with excess chemical recovery capacity.

	TRANSACTION SOURCES AND USES OF FUNDS (soQos)
					       Sources                                      Uses
	   Sundance                            274.5M       Plant Acquisition              265.OM
	   Enron Balance Sheet Sources           O.OM       Contingency                     5.OM
							    CBS Financing Fees              2.7M
							    Transaction Costs               O.BM
							    Cash Balance                    1 .OM
	   Total                               $274.5M                                   $ 2745M

												EC46949A0830938
										       Page 2


EXHO64-001 55





	PAC Deal Approval Sheet                                                        Deal Name: 1RPM DASH 092101

       RETURN SUMMARY ($OOOs)

										    Unlevered

Return Components:

Purchase Cost
Operating Cash Flows
Shorif ails
8uyout Fee
Terminal Value

pv 0
Capital
Price
-274,458
151,569
  -6,116
   -971
114,183

Cumulative
  IRA


 .4.99%
 -100.0%
 -100.0%
 11.20%

Capital Price Comoonents

Risk free rate (%):
Equity Premium (%):
Credit Premium (%):
Country Premium (%):
Transaction-Specific (%):

       6.83
       5.02
       0.00
-      0.00
       0.65

	   Total NPV

			   -$15,793   11.20%      I RAC CAPITAL PRICE:

									 12.5OJ

	CASH FLOW SUMMARY


	TRANSACTION UPSIDES/OPTIONALITY

	The strategic benefits of owning a supermajority interest in this asset (access to physical pulp, increased liquidity,
	incremental market-making opportunities, incremental origination opportunities) cannot be easily quantified and
	have not been included in the purch~se price analysis.

	The asset valuation model assumes that the mill will produce 554,500 MT of SBSI< per year. ElM's technical due
	diligence team estimales that Ihe mill Is capable of producing 573,250 MT of SBSK per year. Additional production
	capacity cbuld have a positive impact on the mill's profitability.

	ElM may sell the mill, pay the Mrnake whol& premium to GP (which amount will be determined in a manner tat
	preserves the present value of GP's initial approximate $45 million tax deferral value stemming from the Deferral
	Agreement), and negotiate an off take agreement with the new owner. Thus, ElM would retain a long 585K positioh
	while eflminating operational risk and freeing up capital.

										 Page 3

EXF-1064-001 56

	       IRR DistrifrjIion
2 0.0%

15.0%

10.0%

5.0%

0.0%

	  *  ht   *                ~  *
Cfl  fl   00 -    *   '0  0%  00   c
     00   (4 N    -   V*% 0'  ~    -
'0   eO   0% VI   (N  00           (N VI
00   N    u~ *~   (~  -   't  00   rI ,~

~0


In

EC46g4gAJ~gag





	FtAC OeM Approval Sheet                                                            Deal Name: LRPMDASItOS21OI


	The plant is located in the SEAC service territory and has rand available for additional power generation facilities.

	EXiT STRATEGY

	This is a strategic investment with a contemplated seven-year holding period.  Earlier sale will be allowed with a
	"make-whole" provision (the consequences of which are described above) and a buy-out of GP's equity interest   -

	RISK MATRIX

		  RISK DESCRIPTION
	  Operating Risk
	  Ne wOo maybe exposed to hidden
	  integration and/cr transition costs


	  Enron lacks pulp mill operating
	  expe rise


	  Credit I Market Risk


	  By entering into a seven-year fiber
	  supply agreement. En ron is taking on
	  GPpen'ormance risk.


	  NBSK is the industry standard pulp
	  grade.  ElM may be exposed to
	  market risk by raking a position in a
	  commodity that is NOT the industry
	  benchmark.

								MITIGATION/COMMENTS

					     Corporate overhead expenses have been accounted for in the asset
					     valuation model. ENE due diligence teams are comfortable that
					     Accounting, IT and Human Resources integration issues have been
					     addressed. Additionally, the due diligence and transition teams
					     include ElM personnel that managed the transition and integration of
					     Garden State and Stadacona.

					     ElM intends to keep the existing mill management team and
					     employees.    The mill workforce is a highly skilled, non-union,
					     properly compensated team that has a proven track record of
					     performance improvement.   ElM is rapidly expanding its asset
					     management expertise given experience with existing newsprint
					     assets.
					     The ElM pulp book will own 100% of the mill's 585K production
					     (554,500MT).

					     The mill is trading fiber price volatility for GP credit risk and fiber
					     procurement risk. GP perceives economic value for the fiber supply
					     agreement and therefore has incentive to perform according to the
					     terms of the agreement. GP has a BBB-/ BaaS credit rating. The
					     contract will not have liquidated damages.

					     SBSK is a lower value alternative to NBSK for many end-uses and
					     thus, is sold at discount to NBSK (historically @$4DIMT. or 7%
					     discount).  In addition to this market discount, we have included an
					     additional $23/MT (11% total) discount to our forward curve in the
					     valuation of this asset. 585K pricing is highly correlated with NBSK.
					     588K represents 43% of annual US psdprroduction.

	   Environmental I Permitting Risk
	   As is the case with 'host industrial          Environmental due diligence is being performed by ENE, EHS.
	   plants, potential exists for litigation or    external legal counsel (Vinson & Elkins) and third party technical
	   environmental compliance issues               consultants (Pilko & Associates, Inc.). These efforts have uncovered
	   assacia ted wit), the asset,                  no material issues. ElM continues to negotiate with GP to obtain
							 coverage for post-closing discoveries as well as appropriate credit
							 support of the seller's ability to meet such liabilities.

	   Legal RIsk

					    legal    Risk Rating has    not been finalized. The  diligence
					     investigation, including labor, environmental, tax and liabilities to be
					     assumed is still underway.   No udeai.breaker~ Issues have been
					     uncovered.  Documentation relating to the creation of Newco, its
					     capitalization and operations is in early stages. In addition, there are
					     multiple ancillary agreements regarding power, transportation, fiber
					     supply  and by-product off-take, among  others, that must be
					     addressed. A legal risk memo will be prepared after resolution of all
					     of these outstanding issues.

													       N

													       ho

												      Page 4


									EC46949A0030940

EXHOG4-00157





	RA/C Deal Approval Sheet                                                        Deal Name: LRPM.DASH.SS21O1

	   Tax Risk                          ElM  will  acquire   effective ownership  of  LRPM   through  a
					     partnership/joint venture arrangement that enables GP to avoid
					     current payment of lax on approximately $245 million in taxable gain
					     that would otherwise result from an outright purchase by ElM of
					     LRPM.    GP avoids payment of such tax only so long as the debt
					     arrangement contemplated (i.e., GP remains a JV member and
					     provides the above-described credit support) remains in place, the
					     JV does not dispose of LRPM, and the principal on the loan is not
					     paid before maturity.  The present value of GPs tax deferral is
					     approximately $45 million, assuming a seven-year deferral period.
					     Consequently, GP has required (and ElM h'~ agreed) that ElM pay
					     GP the present value of the lost tax deferral benefit in the event that
					     ElM causes a tax liability for GP.

	   Other
	   The mill has a CF rating on its          ENE Regulatory is currently investigating whether
	   cogenerallon                             1) Enron/Sundance can own a OF and 2) whether Enron/Sundance
						    could sell power to an adjacent 3rd party that is a non-ulility.

	KEY SUCCESS FACTORS (relative sliding scale)

						    NA    Poor                                 Excellent
	   Core Business                                                             x
	   Strategic Pit                                                               x
	   Upside Potential                                                    X
	   Management                                                                   x
	   Risk Mitigation                                                           x.

	OTHER RAC COMMEWTS

	The Leaf River Pulp Mill is a relatively new plant, built on a green-field site, employing modern technotogy and
	methods.

	RAG is applying to the terminal value a 3001* liquidity discount (350A Base case less 5% control adjustment) to
	adjust to uncertainties arising from the marketability and liquidity of this type of asset seven years from now.

	Preliminary findings from SAC due diligence reveal no major issues  related to finance and operations
	(management/staff, planninghudgeting, financial reporting, inlernal controls/systems, etc.)

	CONDITIONS PRECEDENT

	Final execution of the PSA is subject to ElM and RAC satisfaction with the following:

	1.  ElM has se~ured off-balance sheet debt financing for substantially all of the purchase price
	2.  ElM has entered into employee agreements with key mill personnel
	3.  ENE counsel has confirmed that no pending legal actions or proceedings have been instituted or threatened by
	    the closing date
	4.  All transaction documentation will be formalized between ElM and GP
	5.  ElM will have completed its due:ditigence efforts related, but not strictly limited to the following hems:
	    * Perry County Municipal Bonds
	    - Capital Budgeting Plan
	    - Insurance Policy


										      PageS


											      EC45949A0030941
EXI-1064-OO1 58





	 RAG Deal Approval Sheet                                                       Deal Name: LRPM DASH_092101


	 MILESTONES

1.  Execution ala PSA
2.  Receipt of regulatory approvals, as appropriate
3.  Report of mill operations to RAG
4.  Buyout of GP's 4% interest

09/28/01
11/30/01
Quarterly beginning 04/3 0/02
12/31/08

Page 8

EXHO64-OO1 59

.4

*0

EC46949A0030942





	 RAC Deal Approval Sheet                                                        Deal Name: LPPM_DASItOQ21O1

APPROVALS


ElM Corp Development
ElM Technical Services
EWE Environmental.
Heath and Safety
ElM Accounting
EWS Legal
EWS Tax
ElM 000
RAt Management
ENE Global Finance
ENE 000

	   Name


Andy Kelemen/George Mccormick
Eric Connor
Michael Terraso

Kent Castleman
Mark Haedicke/Julia Murray
Stephen Douglas
Jeff McMahon/Ray Bowen
Rick Buy/Dave Gorte
Andy Fasmw/Ben Glisan
Ken Lay/Mark Frevert/Greg Whalley

								   EC46949uo3og~

N

In

EXHOS4-00 160

Page?





					       FAS H

				 DEAL NAME: Project Southwood

     Global Finance Summary (Addendum to DASH)

     1.    Transaction Summary for iNVESTMENT:                   Amount

	   Total Deal/Project Capital Commitment                 $274.5m
	   Less: Financings (including Syndications)             $274 Sm
	   Net Enron Investment                                  $0
									-n
	   (a) Capital commitment information is based on:

	     Acquisition price of $265m plus a $lm initial cash balance and plus $8.5m in Financing
	     Costs and Legal Fees.

	   (b) Any intent to Syndicate? How much? Intent to take investment off-balance sheet?

	     We need to syndicate $274.5m in debt. We believe we can syndicate this with
	     approximately 10 different banks ($27m each) via a club bank approach.

	     The investment will be acquired via Sundance Industrial Partners, LP ("Sundance"), a
	     deconsolidation vehicle for Enron Industrial Markets, and accounted for under
	     "Investments in and advances to unconsolidated equity affiliates". Enron owns 50% of
	     the voting rights of Sundance and 80% of the economics (net economics of
	     approximately 95% via contractual arrangements).
											  'a
	   Cc) Likely Syndication market:
		    O Industry/Strategic Partner      0 Private Equity
		    O Capital Markets                 0 Off-balance sheet vehicle
		    * Bank Markets                    C Other

	   (d) Additional information:

	     The asset acquisition has to be financed with 100% non-amortizing debt since this
	     enables Georgia Pacific to defer their capital gains tax on the asset sale for the term of
	     the debt (agreed to seven years).

     2.    lnvestnient (j~ equity) terms and pricing:

	   For Enron:         0 Market     C Above Market        U Below Market
	   For Third Parties: I Market     C Above Market        0 Below Market
	   Additional Information:

	   Safomon Smith Barney (558) is ElM's partner in Sundance and will have to contribute
	   $68.75m of capital to the structure. Of this $68.75m, $10.5m will be funded and $58.25m
	   will be an unfunded cbmmitment. Salomon Smith Barney's preferred return for both
	   funded and unfunded commitment over the funded capital equates to Libor + 6.7%.

	   558's investment recapitalizes Sundance but is not intended to reduce the $274.5m in
	   support from Eraron via the Total Return Swap/Put option.
								    EC46949A0030944

EXHOS4-0016i





     3.    Flnancing~ i.e. debt) terms and pricing:

		   *Market                DAboveMarket         DBelowMarket

	   Describe Risk Transfer, if any:

	   No risk transfer, 100% recourse to Enron.

	   The investment will be financed 100% with debt supported through a combination oVa
	   TRS/Put option from Enron. The debt will be deconsolidated as a result of the ownership
	   by Sundance. Further, the TRS/Put option support by Enron will be accounted for as a
	   pnce risk management liability and is expected to be marRed at appraimately $0.

	   We are assuming the debt would be priced around 137.5bps over Ubor (based on the
	   pricing of the EOTT financing). The financing term will be either a three-year loan with an
	   option to refinance for four more years, or a straight seven-year bullet depending on cost
	   and on how interested banks are on the term.

     4.    Describe liquidity restrictions, if any, for equity andlor debt:

	   There would be no liquidity restrictions for either equity or debt since Sundance will control
	   the asset and the debtholders will have recourse to Enron, not to the asset.

     5.    What type of continuing involvement will Enron have relating to the debt?

	   Since the asset will be fevered to 100% of the acquisition cost, Enron will have to support
	   the debt. Most likely a Put/Total Return Swap will be used for this purpose
											 U,

     6.    Intent to Hedge Investment? NO Explain:
     7.    How long does Enron expect to own this investment?

	   The rationale for the proposed acquisition is to accelerate ElM's strategy to develop its
	   physical and financial trading and market-making activities in the pulp market. Therefore
	   the purpose is to acquire pulp volumes for trading purposes, thus whenever ElM has an
	   oppd'rtunity to sell the asset at an attractive value (while keeping the physical off-take) the
	   asset will be sold.


     Enron Global Finance Representative: A=~& t'V~~-         Wifliarn Brown 09/24/01
					 Signature


     Enron Global Finance Legal:                              Jordan H. Mintz  09/24/01


								  E046948A0e30945
										       O..n.,. C


EXHQ64-OO 162





			ENRON RISK ASSESSMENT AND CONTROL
				  DEAL APPROVAL SHEET

					  APPENDIX

      BACKGROUND

      GP is a manufacturer and distributor of build[ng products and a producer of a variety of pulp and paper products
      Including pulp. containerboard, packaging and tissue products. The company's FY2000 revenues were $22 billion.
      As of September 10, 2001, GE' had a market capitalization of $7.4 billion. The company is~eadquartered in Atlanta.
      GP is rated BBB./Baa3 by S&PlMoody's with a stable outlook.

      In Autumn 2000, GP attempted to package three assets together (Leaf River; Woodland, Maine; and Brunswick,
      Georgia) in an effort to sell their pulp business to a single buyer. At that time, GP received no binding bids for the
      assets. In March 2001, GE' and ElM resumed discussions for purchase/sale of just the Leaf River mill. GP's original
      asking price for the mill was $350 million. While the purchase price of $265 million represents a significant decrease
      in value from their initial expectations, the proposed deal structure stemming from the Deferral Agreement (the value
      of which equals approximately $45 million). The proposed purchase price compares favorably to recent transactions
      in the forest products industry, as shown below.
      GP COMPARABLETRANSACTIONANALYSIS
      (UsSmiihons to, E~

				  Data     EV     EVI    EVI    EVI
						  Ton  EB~TDA  Sat..

												  Othir

	  Stadacona                Jan.00  S  370   S  718    3,56   1,35 Ero.~ac~iirsdDaishowaForestProdurcsCanadannev~spdn arid g'o~n&voodrniUs
	  Nc,sk* 5ko~.Tasn,mn      Mar.01  S  128   S  456    3.24   0.49 CarwHoaHarvwcF)ac~Ar.oTasm.optep rnIinNowZ.aiand
	  AIianceFo,eszPro~ccs     Apr-01  S  766   S  640    7.62   109 Saleo1ne.'nprint,SBHKflrAp~ sndIA1coawdgroundwoodrniUsro8o~varei'
	  Haind                    May-01  S 2.632  S 385    9.66   2.96 uPM-k)~n~~.no pwchese.jA newsprirtrmflsinoormeny.ndAusuia
	  Norak. Sko9.Mack.nzt.    Jun.01  5  104   5  452    3,32   0.90 Pope&Tatdec@redaCaMdan~SKprApniI
	  GP Pep.t                 Jun01   5 1.650  $ 1.031   6.00   1.32 Oon,tar acquired 4 tincoaled paper end trinket pu~ wiNs
	  Celgar                   AuQOl   S  25.4  S  599    501    123 ErronproposedacqulsiflonoiaCsnadienNsHknulprnil
				  Avausge $   843   S  766    5.48   1.34

	  Leaf RN.,                Nov.01  S  265   S  478    2.16   0.91 cu~rtrit to osedtsansacUon

	   EBIWA and Sales defe are b.sad on FV2.YX,eswls
	    Cornpanbt.s in bold rep,oseM Wrrpu* I,. nseclions

	VALUATION SENSITIVITY ANALYSIS

					      change In NPV From Base C... (-$15.8 MM)

					    (110.0)   (96.0) (70.0)   (50.0)  (30.0)  (10.0)  10.0   30.0     50.0    70.0

			Aoduvllon Vob.z,ws (MT/fly)

		     585K Aloes (50% of Production)

				     Fbed Costs

				   V.nuble Costs

				 A'odtxtlort Days


			    Dicount to 585k hider


			      Capt.I ExpendIluree

				   Dscovnt F~te

		    L~uidRy Os 'otfl cr.rnlnui Viii.)


														       EC45949A0039946

EXH 064-00 163

con, p eny

'a        I

   * .   .b t,'C.r .q,negt-At


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			   NPV
$BSI< Pno.. (50% at Productloo)
			   NPV
rix.d Cost.
			   NPV
VarlaN. Cost.
			   NPV
Producllon Days
			   NPV
~BITDA MuItipt. (Terminal Value)
			   NPV
Viscount to 665K Ina.x
			   NPV
Irlhlatlon
			   NPIA
Capital xpendilu;s.
			   NPV
cllscosjrll Rsl~
			   Nfl I

Lquidlly Discotmni (Terminal Vatus)
			   NPI4

 (15.6)
 5,9.5
 ('5.8)
100.0%

100.0~~

 356.0

  5.5
 (15.8)
 10.0%
 (15.6)
 2.6%
 (75.8)
100.0%
 (15.8)
 12.5%

30.0%
 (75.6)

$        (109) *           77'
	432.8           606.3
$        (105)5            73
       117.0%           84.0%
$         (95)5            55
       126.0%           77.0%
$         (89)5            29
	34A.6           358.9
$         (50)5            (4)
	  4.6             6.4
$         (34)5            2
	13.0%            7.01'
$         (33)5            0
	 5.5%            0.0%
$         (33)$
       136.0%           71.0%
S         (25) $           (9)
	13.5%           11.5%
$         (27)5            (4)
	35.0%           25.0%
$         (24)5            (9)

														m
														'0


											   EC46849M839'4'
EXHO64-OD 164

1&-
PrOatictioc Volumes (MI~O~)

1.,iwu        I ~            1 ,S57.1





EXHOB4-OO1 65

			AGENDA ITEM 5(b)
	       (SUGGESTED FORM OF RESOLUTIONS)

   WHEREAS, the Executive Committee of the Board deems it
advisable and in the best interests of the Company for Enron North
America Corp. ("ENA") or an affiliate or designee thereof, to form a
limited liability company (the "LLC") with Georgia Pacific Corporation
or affiliates or designees thereof and contribute assets thereto in an
amount not to exceed $275,000,000 for the purpose of acquiring,
owning, and operating the Leaf River Paper Mill in New Augusta,
Mississippi, as well as providing a  $30,000,000  liquidity line
mentioned in the deal approval sheet for the transaction, on the
terms and conditions presented to the Executive Committee (the
'Leaf River Transaction");

    WHEREAS, the Executive Committee of the Board deems it
advisable and in the best interests of the Company that approvals be
granted, as set forth below, in connection with the Leaf River
Transaction;

    NOW, THEREFORE, IT IS RESOLVED, that Kenneth Lay,                      N
Chairman and Chief Executive Officer of the Company, and L. Greg           ~0
Whalley, President and Chief Operating Officer of the Company, be,
and hereby are, authorized on behalf of the Board, jointly and
severally, to:

    (a)      settle and approve the terms and  authorize
	     execution on behalf of the Company or its
	     affiliates of all agreements to be executed in
	     connection with the Leaf River Transaction,
	     including an LLC Operating   Agreement,  a
	     Contribution Agreement, and such  additional
	     documents, agreements, guaranties, and other
	     instruments relating to the Leaf River Transaction
	     undertaken or proposed to be undertaken by the
	     foregoing resolutions, and  obligating the
	     Company and its affiliates in an amount not to
	     exceed $275,000,000, as well as providing a
	     $30,000,000 liquidity line mentioned in the deal
	     approval sheet for the transaction, as may be
	     required or necessary in order to enable the
	     Company and its affiliates to fulfill their respective


						       EC46949A0030948





			 obligations   in connection    with the foregoing
			 resolutions;

		    (b)  pay or     authorize  the payment    of all fees,
			 expenses, or charges incurred by or on behalf of
			 the Company or its affiliates in connection with
			 the transactions contemplated by the foregoing
			 resolutions, including (but without limitation) the
			 fees and expenses of the Company's and its
			 affiliates'  financial, legal,  and   professional
			 advisers; and

		    (c) take any and all such further action as they shall
			deem necessary or desirable in connection with
			the transactions contemplated by the foregoing
			resolutions;

		    RESOLVED FURTHER, that Mr. Lay, any Vice Chairman of
	      the  Board, Mr. Whalley, any Managing        Director, or any Vice
	      President (including any Executive Vice President, Senior Vice
	      President, or Vice President), the Treasurer or any Deputy Treasurer
											 N
	      of the Company and its counsel, acting on the approval of Mr. Lay
	      and Mr. Whalley, jointly and severally, be, and each hereby is,
	      authorized, empowered, and directed (and any one of them acting
	      alone) to take any and all such further action, to amend, execute,
	      and deliver all such further instruments and documents, for and in
	      the name and on behalf of the Company or its affiliates, under their
	      respective corporate seals or otherwise, and to pay all such
	      expenses as in their discretion appear to be necessary or desirable
	      to carry into effect the purposes and intentions of this and each of
	      the foregoing resolutions; and

		    RESOLVED FURTHER, that all actions heretofore taken by
	      the officers and representatives of the Company and ENA or its
	      affiliates with respect to the transactions contemplated above be, in
	      all respects, approved, confirmed, and ratified.


	      KAa Minutes\2001 Minutes\092501 \LEAP RIVER RESdoc


									     EC4894rnjagg4g

EXHO64-GO 166





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Other Business


     6-1

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				       U

				 Adjourn

EXHO64-O0 170

7-1

EC45949A0030953





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		   1 Approval of August 13, 2001 Finance Committee Minutes

		   2. Chief Financial Officer Report

		   3. Treasurer Report

		   4. Chief Risk Officer Report
			 Quarterly Risk Update
			       - Audit & Compliance and Finance Committee Roles
			       - Trade Credit Update
			       - Market Risk Update
			       - Post Transaction Reviews

		   5, Projects and Amendments
			 A) Revision to the Risk Management Policy
			       - Approve for Recommendation to the Board

			 B) Project Southwood
			       - Approve for Recommendation to the Board

		   6. Other Business

		   7. Adjourn


				     See Addendum for Deal Approval Sheets approved between Board meetings E~6948AJOJIJ9~

Mr. Winokur

Mr. Fastow

Mr. Otisan

Mr. Buy


Mr. Buy

Page
 1-1

 2-1

 3-1

 4-1

 4-2
 4-4
4-15
4-26

 5-1
5A-1

Mr. McMahon

EXI-4064-O0 172

58-1


 6-1

7-1


     P~cs