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                                                                     EXHIBIT 4.9





                    AFFILIATE DEBENTURE GUARANTEE AGREEMENT
                            (ENRON PIPELINE COMPANY)


                                  ENRON CORP.



                         DATED AS OF NOVEMBER 21, 1996
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                    AFFILIATE DEBENTURE GUARANTEE AGREEMENT


         AFFILIATE DEBENTURE GUARANTEE AGREEMENT (this "Investment Guarantee"),
dated as of November 21, 1996, is executed and delivered by Enron Corp., a
Delaware corporation (the "Guarantor"), and The Chase Manhattan Bank, a New
York banking corporation, as trustee (the "Investment Guarantee Trustee"), for
the benefit of the Holder (as defined herein) of the Affiliate Debenture (as
defined herein) of Enron Pipeline Company, a Delaware corporation (the
"Issuer").

         WHEREAS, pursuant to an Indenture (the "Affiliate Indenture"), dated
as of November 21, 1996, between the Issuer and The Chase Manhattan Bank, as
indenture trustee (in such capacity, the "Indenture Trustee"), the Issuer is
issuing to the Holder on the date hereof its 7.75% Debenture Due 2016 (the
"Affiliate Debenture");

         WHEREAS, as incentive for the Holder to purchase the Affiliate
Debenture, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Investment Guarantee, to make Guarantee Payments
(as defined herein) to the Holder of the Affiliate Debenture on the terms and
conditions set forth herein and;

         NOW, THEREFORE, in consideration of the purchase by the Holder of the
Affiliate Debenture, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Investment Guarantee
for the benefit of the Holder.

                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

         SECTION 1.1      Definitions and Interpretation

         In this Investment Guarantee, unless the context otherwise requires:

         (a)     capitalized terms used in this Investment Guarantee but not
defined in the Preamble above have the respective meanings assigned to them in
this Section 1.1;

         (b)     capitalized terms used in this Investment Guarantee but not
otherwise defined herein shall have the meanings assigned to them in the
Affiliate Indenture;

         (c)     a term defined anywhere in this Investment Guarantee has the
same meaning throughout;

         (d)     all references to "the Investment Guarantee" or "this
Investment Guarantee" are to this Investment Guarantee as modified,
supplemented or amended from time to time;

         (e)     all references in this Investment Guarantee to Articles and
Sections are to Articles and Sections of this Investment Guarantee, unless
otherwise specified;

         (f)     a term defined in the Trust Indenture Act has the same meaning
when used in this Investment Guarantee, unless otherwise defined in this
Investment Guarantee or unless the context otherwise requires; and

         (g)     a reference to the singular includes the plural and vice
versa.

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person.  For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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         "Business Day" means a day other than a day on which banking
institutions in the City of New York are authorized or required by law to
close.

         "Corporate Trust Office" means the office of the Investment Guarantee
Trustee at which the corporate trust business of the Investment Guarantee
Trustee shall, at any particular time, be principally administered, which
office at the date of execution of this Agreement is located at 450 West 33rd
Street, 15th Floor, New York, New York 10001.

         "Covered Person" means the Holder or any beneficial owner of the
Affiliate Debenture.

         "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Investment Guarantee.

         "Guarantee Payments" means, with respect to the Affiliate Debenture,
to the extent not paid or made by the Issuer, the due and punctual payment of
the principal of, premium, if any, and interest on the Affiliate Debenture,
when and as the same shall become due and payable, whether at maturity or upon
declaration of acceleration or otherwise, according to the terms of the
Affiliate Debenture and of the Affiliate Indenture.

         "Holder" shall mean any holder, as registered on the books and records
of the Issuer of the Affiliate Debenture.  The initial Holder of the Affiliate
Debenture is the Partnership.

         "Indemnified Person" means the Investment Guarantee Trustee, any
Affiliate of the Investment Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Investment Guarantee Trustee.

         "Majority in liquidation amount of the Affiliate Debenture" means,
except as provided by the Trust Indenture Act, a vote by Holder(s) of the
Affiliate Debenture, voting separately as a class, of more than 50% of the
outstanding principal amount of the Affiliate Debenture plus accrued and unpaid
interest to the date upon which the voting percentages are determined.

         "Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person.  Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Investment Guarantee shall include:

         (a)     a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition relating
thereto;

         (b)     a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;

         (c)     a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

         (d)     a statement as to whether, in the opinion of each such
officer, such condition of covenant has been complied with.

         "Partnership" means Enron Preferred Funding, L.P.

         "Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of November 21, 1996, among
Enron Corp., a Delaware corporation, as general partner, Organizational
Partner, Inc., a Delaware corporation, as initial limited partner and such
other persons who become limited partners as provided therein.





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         "Partnership Preferred Securities" means those securities representing
limited partnership interests in the Partnership.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.

         "Responsible Officer" means, with respect to the Investment Guarantee
Trustee, any officer within the Corporate Trust Office of the Investment
Guarantee Trustee, including any vice president, any assistant vice president,
any secretary, any assistant secretary, the treasurer, any assistant treasurer
or other officer of the Corporate Trust Office of the Investment Guarantee
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.

         "Successor Investment Guarantee Trustee" means a successor Investment
Guarantee Trustee possessing the qualifications to act as Investment Guarantee
Trustee under Section 4.1.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.

         "Investment Guarantee Trustee" means The Chase Manhattan Bank, a New
York banking corporation, until a Successor Investment Guarantee Trustee has
been appointed and has accepted such appointment pursuant to the terms of this
Investment Guarantee and thereafter means each such Successor Investment
Guarantee Trustee.

                                   ARTICLE II
                              TRUST INDENTURE ACT

         SECTION 2.1      Trust Indenture Act; Application

         (a)     This Investment Guarantee is subject to the provisions of the
Trust Indenture Act that are required to be part of this Investment Guarantee
and shall, to the extent applicable, be governed by such provisions; and

         (b)     if and to the extent that any provision of this Investment
Guarantee limits, qualifies or conflicts with the duties imposed by Section 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.

         SECTION 2.2      Lists of Holders of Securities

         (a)     The Guarantor shall provide the Investment Guarantee Trustee
with a list, in such form as the Investment Guarantee Trustee may reasonably
require, of the names and addresses of the Holder(s) of the Affiliate Debenture
("List of Holders") as of such date, (i) within one (1) Business Day after
January 1 and June 30 of each year, and (ii) at any other time within 30 days
of receipt by the Guarantor of a written request for a List of Holders as of a
date no more than 14 days before such List of Holders is given to the
Investment Guarantee Trustee provided, that the Guarantor shall not be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Investment
Guarantee Trustee by the Guarantor. The Investment Guarantee Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.

         (b)     The Investment Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.





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         SECTION 2.3      Reports by the Trust Preferred Guarantee Trustee

         Within 60 days after May 15 of each year, the Investment Guarantee
Trustee shall provide to the Holders of the Affiliate Debenture such reports as
are required by Section 313 of the Trust Indenture Act, if any, in the form and
in the manner provided by Section 313 of the Trust Indenture Act.  The
Investment Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.

         SECTION 2.4      Periodic Reports to Trust Preferred Guarantee Trustee

         The Guarantor shall provide to the Investment Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.

         SECTION 2.5      Evidence of Compliance with Conditions Precedent

         The Guarantor shall provide to the Investment Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Investment Guarantee that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act.  Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)(1) may be given in the
form of an Officers' Certificate.

         SECTION 2.6      Events of Default; Waiver

         The Holders of a Majority in liquidation amount of the Affiliate
Debenture may, by vote, on behalf of the Holders of the Affiliate Debenture,
waive any past Event of Default and its consequences.  Upon such waiver, any
such Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Investment Guarantee, but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.

         SECTION 2.7      Event of Default; Notice 

         (a)     The Investment Guarantee Trustee shall, within 90 days after
the occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Affiliate Debenture, notices of all Events of
Default actually known to a Responsible Officer of the Investment Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, the Investment Guarantee Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the
Investment Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Affiliate Debenture.

         (b)     The Investment Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Investment Guarantee Trustee shall
have received written notice, or of which a Responsible Officer of the
Investment Guarantee Trustee charged with the administration of the Affiliate
Debenture shall have obtained actual knowledge.

         SECTION 2.8      Conflicting Interests 

         The Affiliate Debenture shall be deemed to be specifically described
in this Investment Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.





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                                  ARTICLE III
                    POWERS, DUTIES AND RIGHTS OF INVESTMENT
                               GUARANTEE TRUSTEE

         SECTION 3.1      Powers and Duties of the Investment Guarantee Trustee

         (a)     This Investment Guarantee shall be held by the Investment
Guarantee Trustee for the benefit of the Holders of the Affiliate Debenture,
and the Investment Guarantee Trustee shall not transfer this Investment
Guarantee to any Person except a Holder of the Affiliate Debenture exercising
his or her rights pursuant to Section 5.4(b) or to a Successor Investment
Guarantee Trustee on acceptance by such Successor Investment Guarantee Trustee
of its appointment to act as Successor Investment Guarantee Trustee.  The
right, title and interest of the Investment Guarantee Trustee shall
automatically vest in any Successor Investment Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Investment Guarantee Trustee.

         (b)     If an Event of Default actually known to a Responsible officer
of the Investment Guarantee Trustee has occurred and is continuing, the
Investment Guarantee Trustee shall enforce this Investment Guarantee for the
benefit of the Holders of the Affiliate Debenture.

         (c)     The Investment Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Investment Guarantee, and no implied covenants shall be read into
this Investment Guarantee against the Investment Guarantee Trustee.  In case an
Event of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) and is actually known to a Responsible Officer of the Investment
Guarantee Trustee, the Investment Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Investment Guarantee, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.

         (d)     No provision of this Investment Guarantee shall be construed
to relieve the Investment Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

                 (i)      prior to the occurrence of any Event of Default and
         after the curing or waiving of all such Events of Default that may
         have occurred:

                          (A)     the duties and obligations of the Investment
                 Guarantee Trustee shall be determined solely by the express
                 provisions of this Investment Guarantee, and the Investment
                 Guarantee Trustee shall not be liable except for the
                 performance of such duties and obligations as are specifically
                 set forth in this Investment Guarantee, and no implied
                 covenants or obligations shall be read into this Investment
                 Guarantee against the Investment Guarantee Trustee; and

                          (B)     in the absence of bad faith on the part of
                 the Investment Guarantee Trustee, the Investment Guarantee
                 Trustee may conclusively rely, as to the truth of the
                 statements and the correctness of the opinions expressed
                 therein, upon any certificates or opinions furnished to the
                 Investment Guarantee Trustee and conforming to the
                 requirements of this Investment Guarantee; but in the case of
                 any such certificates or opinions that by any provision hereof
                 are specifically required to be furnished to the Investment
                 Guarantee Trustee, the Investment Guarantee Trustee shall be
                 under a duty to examine the same to determine whether or not
                 they conform to the requirements of this Investment Guarantee;

                 (ii)     the Investment Guarantee Trustee shall not be liable
         for any error of judgment made in good faith by a Responsible officer
         of the Investment Guarantee Trustee, unless it shall be proved that
         the





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         Investment Guarantee Trustee was negligent in ascertaining the
         pertinent facts upon which such judgment was made;

                 (iii)    the Investment Guarantee Trustee shall not be liable
         with respect to any action taken or omitted to be taken by it in good
         faith in accordance with the direction of the Holders of the Affiliate
         Debenture relating to the time, method and place of conducting any
         proceeding for any remedy available to the Investment Guarantee
         Trustee, or exercising any trust or power conferred upon the
         Investment Guarantee Trustee under this Investment Guarantee; and

                 (iv)     no provision of this Investment Guarantee shall
         require the Investment Guarantee Trustee to expend or risk its own
         funds or otherwise incur personal financial liability in the
         performance of any of its duties or in the exercise of any of its
         rights or powers, if the Investment Guarantee Trustee shall have
         reasonable grounds for believing that the repayment of such funds or
         liability is not reasonably assured to it under the terms of this
         Investment Guarantee or indemnity, reasonably satisfactory to the
         Investment Guarantee Trustee, against such risk or liability is not
         reasonably assured to it.

         SECTION 3.2      Certain Rights of Investment Guarantee Trustee

         (a)     Subject to the provisions of Section 3.1:

                 (i)      The Investment Guarantee Trustee may conclusively
         rely, and shall be fully protected in acting or refraining from acting
         upon, any resolution, certificate, statement, instrument, opinion,
         report, notice, request, direction, consent, order, bond, debenture,
         note, other evidence of indebtedness or other paper or document
         believed by it to be genuine and to have been signed, sent or
         presented by the proper party or parties.

                 (ii)     Any direction or act of the Guarantor contemplated by
         this Investment Guarantee shall be sufficiently evidenced by an
         Officers' Certificate.

                 (iii)    Whenever, in the administration of this Investment
         Guarantee, the Investment Guarantee Trustee shall deem it desirable
         that a matter be proved or established before taking, suffering or
         omitting any action hereunder, the Investment Guarantee Trustee
         (unless other evidence is herein specifically prescribed) may, in the
         absence of bad faith on its part, request and conclusively rely upon
         an Officers' Certificate which, upon receipt of such request, shall be
         promptly delivered by the Guarantor.

                 (iv)     The Investment Guarantee Trustee shall have no duty
         to see to any recording, filing or registration of any instrument (or
         any rerecording, refiling or reregistration thereof).

                 (v)      The Investment Guarantee Trustee may, at the expense
         of the Guarantor, consult with counsel of its selection, and the
         advice or opinion of such counsel with respect to legal matters shall
         be full and complete authorization and protection in respect of any
         action taken, suffered or omitted by it hereunder in good faith and in
         accordance with such advice or opinion.  Such counsel may be counsel
         to the Guarantor or any of its Affiliates and may include any of its
         employees.  The Investment Guarantee Trustee shall have the right at
         any time to seek instructions concerning the administration of this
         Investment Guarantee from any court of competent jurisdiction.

                 (vi)     The Investment Guarantee Trustee shall be under no
         obligation to exercise any of the rights or powers vested in it by
         this Investment Guarantee at the request or direction of any Holder,
         unless such Holder shall have provided to the Investment Guarantee
         Trustee such security and indemnity, reasonably satisfactory to the
         Investment Guarantee Trustee, against the costs, expenses (including
         attorneys' fees and expenses and the expenses of the Investment
         Guarantee Trustee's agents, nominees or custodians) and liabilities
         that might be incurred by it in complying with such request or
         direction, including such reasonable advances as may be requested by
         the Investment Guarantee Trustee; provided





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         that, nothing contained in this Section 3.2(a)(vi) shall be taken to
         relieve the Investment Guarantee Trustee, upon the occurrence of an
         Event of Default, of its obligation to exercise the rights and powers
         vested in it by this Investment Guarantee.

                 (vii)    The Investment Guarantee Trustee shall not be bound
         to make any investigation into the facts or matters stated in any
         resolution, certificate, statement, instrument, opinion, report,
         notice, request, direction, consent, order, bond, debenture, note,
         other evidence of indebtedness or other paper or document, but the
         Investment Guarantee Trustee, in its discretion, may make such further
         inquiry or investigation into such facts or matters as it may see fit.

                 (viii)   The Investment Guarantee Trustee may execute any of
         the trusts or powers hereunder or perform any duties hereunder either
         directly or by or through agents, nominees, custodians or attorneys,
         and the Investment Guarantee Trustee shall not be responsible for any
         misconduct or negligence on the part of any agent or attorney
         appointed with due care by it hereunder.

                 (ix)     Any action taken by the Investment Guarantee Trustee
         or its agents hereunder shall bind the Holders of the Affiliate
         Debenture, and the signature of the Investment Guarantee Trustee or
         its agents alone shall be sufficient and effective to perform any such
         action.  No third party shall be required to inquire as to the
         authority of the Investment Guarantee Trustee to so act or as to its
         compliance with any of the terms and provisions of this Investment
         Guarantee, both of which shall be conclusively evidenced by the
         Investment Guarantee Trustee or its agent taking such action.

                 (x)      Whenever in the administration of this Investment
         Guarantee the Investment Guarantee Trustee shall deem it desirable to
         receive instructions with respect to enforcing any remedy or right or
         taking any other action hereunder, the Investment Guarantee Trustee
         (i) may request instructions from the Holders of a Majority in
         liquidation amount of the Affiliate Debenture, (ii) may refrain from
         enforcing such remedy or right or taking such other action until such
         instructions are received, and (iii) shall be protected in
         conclusively relying on or acting in accordance with such
         instructions.

                 (xi)     The Investment Guarantee Trustee shall not be liable
         for any action taken, suffered, or omitted to be taken by it in good
         faith and reasonably believed by it to be authorized or within the
         discretion or rights or powers conferred upon it by this Investment
         Guarantee.

         (b)     No provision of this Investment Guarantee shall be deemed to
impose any duty or obligation on the Investment Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Investment Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation.  No permissive power or authority available
to the Investment Guarantee Trustee shall be construed to be a duty.

         SECTION 3.3      Not Responsible for Recitals or Issuance of
Investment Guarantee

         The recitals contained in this Investment Guarantee shall be taken as
the statements of the Guarantor, and the Investment Guarantee Trustee does not
assume any responsibility for their correctness.  The Investment Guarantee
Trustee makes no representation as to the validity or sufficiency of this
Investment Guarantee.

                                   ARTICLE IV
                          INVESTMENT GUARANTEE TRUSTEE

         SECTION 4.1      Investment Guarantee Trustee; Eligibility

         (a)     There shall at all times be a Investment Guarantee Trustee
which shall:





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                 (i)      not be an Affiliate of the Guarantor; and

                 (ii)     be a corporation organized and doing business under
         the laws of the United States of America or any State or Territory
         thereof or of the District of Columbia, or a corporation or Person
         permitted by the Securities and Exchange Commission to act as an
         institutional trustee under the Trust Indenture Act, authorized under
         such laws to exercise corporate trust powers, having a combined
         capital and surplus of at least 50 million U.S. dollars ($50,000,000),
         and subject to supervision or examination by Federal, State,
         Territorial or District of Columbia authority.  If such corporation
         publishes reports of condition at least annually, pursuant to law or
         to the requirements of the supervising or examining authority referred
         to above, then, for the purposes of this Section 4.1(a)(ii), the
         combined capital and surplus of such corporation shall be deemed to be
         its combined capital and surplus as set forth in its most recent
         report of condition so published.

         (b)     If at any time the Investment Guarantee Trustee shall cease to
be eligible to so act under Section 4.1(a), the Investment Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).

         (c)     If the Investment Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Investment Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.

         SECTION 4.2      Appointment, Removal and Resignation of Investment
Guarantee Trustee

         (a)     Subject to Section 4.2(b), the Investment Guarantee Trustee
may be appointed or removed without cause at any time by the Guarantor except
during an Event of Default.

         (b)     The Investment Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Investment Guarantee Trustee
has been appointed and has accepted such appointment by written instrument
executed by such Successor Investment Guarantee Trustee and delivered to the
Guarantor.

         (c)     The Investment Guarantee Trustee appointed to office shall
hold office until a Successor Investment Guarantee Trustee shall have been
appointed or until its removal or resignation.  The Investment Guarantee
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Investment Guarantee
Trustee and delivered to the Guarantor, which resignation shall not take effect
until a Successor Investment Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Investment Guarantee Trustee and delivered to the Guarantor and the resigning
Investment Guarantee Trustee.

         (d)     If no Successor Investment Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery of an instrument of removal or resignation, the Investment
Guarantee Trustee resigning or being removed may petition any court of
competent jurisdiction for appointment of a Successor Investment Guarantee
Trustee.  Such court may thereupon, after prescribing such notice, if any, as
it may deem proper, appoint a Successor Investment Guarantee Trustee.

         (e)     No Investment Guarantee Trustee shall be liable for the acts
or omissions to act of any Successor Investment Guarantee Trustee.

         (f)     Upon termination of this Investment Guarantee or removal or
resignation of the Investment Guarantee Trustee pursuant to this Section 4.2
and before the appointment of any Successor Investment Guarantee Trustee, the
Guarantor shall pay to the Investment Guarantee Trustee all amounts to which it
is entitled to the date of such termination, removal or resignation.





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<PAGE>   10
                                   ARTICLE V
                                   GUARANTEE

         SECTION 5.1      Guarantee

         The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), if, as and when due, regardless of any defense, right of
setoff or counterclaim that the Issuer may have or assert.  The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Guarantor to the Holders or by causing the Issuer
to pay such amounts to the Holders.

         SECTION 5.2      Waiver of Notice and Demand

         The Guarantor hereby waives notice of acceptance of this Investment
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.

         SECTION 5.3      Obligations Not Affected

         The obligations, covenants, agreements and duties of the Guarantor
under this Investment Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:

         (a)     the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Affiliate Debenture to
be performed or observed by the Issuer;

         (b)     the extension of time for the payment by the Issuer of all or
any portion of the interest, principal or premiums, if any, or any other sums
payable under the terms of the Affiliate Debenture or the extension of time for
the performance of any other obligation under, arising out of, or in connection
with, the Affiliate Debenture (other than an extension of time for payment of
interest during an Extension Period (as defined in the Affiliate Indenture));

         (c)     any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Affiliate
Debenture, or any action on the part of the Issuer granting indulgence or
extension of any kind;

         (d)     the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;

         (e)     any invalidity of, or defect or deficiency in, the Affiliate
Debenture;

         (f)     the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or

         (g)     any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.

         There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.





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<PAGE>   11
         SECTION 5.4      Rights of Holders

         (a)     The Holders of a Majority in liquidation amount of the
Affiliate Debenture have the right to direct the time, method and place of
conducting of any proceeding for any remedy available to the Investment
Guarantee Trustee in respect of this Investment Guarantee or exercising any
trust or power conferred upon the Investment Guarantee Trustee under this
Investment Guarantee.

         (b)     If the Investment Guarantee Trustee fails to enforce its
rights under the Investment Guarantee after a Holder of the Affiliate Debenture
has made a written request, such Holder of the Affiliate Debenture may
institute a legal proceeding directly against the Guarantor to enforce the
Investment Guarantee Trustee's rights under this Investment Guarantee, without
first instituting a legal proceeding against the Issuer, the Investment
Guarantee Trustee or any other Person.  Notwithstanding the foregoing, if the
Guarantor has failed to make a Guarantee Payment, a Holder of the Affiliate
Debenture may directly institute a proceeding in such Holder's own name against
the Guarantor for enforcement of the Investment Guarantee for such payment.
The Guarantor waives any right or remedy to require that any action be brought
first against the Issuer or any other person or entity before proceeding
directly against the Guarantor.

         SECTION 5.5      Guarantee of Payment

         This Investment Guarantee creates a guarantee of payment and not of
collection.

         SECTION 5.6      Subrogation

         The Guarantor shall be subrogated to all (if any) rights of the
Holders of Affiliate Debenture against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Investment Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Investment
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Investment Guarantee.  If any amount shall be paid to the Guarantor
in violation of the preceding sentence, the Guarantor agrees to hold such
amount in trust for the Holders and to pay over such amount to the Holders.

         SECTION 5.7      Independent Obligations

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Affiliate
Debenture, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Investment
Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.

                                   ARTICLE VI
                                 SUBORDINATION

         SECTION 6.1      Ranking

         This Investment Guarantee will constitute an unsecured obligation of
the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor, including, without limitation, the
fees, charges, expenses and indemnities due to the Property Trustee or the
Delaware Trustee in respect of the Declaration of Trust, the Trust Preferred
Securities Guarantee and the Affiliate Debenture Guarantee Agreement, (ii) pari
passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred security of any Affiliate of the
Guarantor, and (iii) senior to the Guarantor's common stock.





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<PAGE>   12
                                  ARTICLE VII
                                  TERMINATION

         SECTION 7.1      Termination

         This Investment Guarantee shall terminate upon the repayment in full
(whether at maturity, upon redemption or otherwise) of all of the principal of,
interest on (including all accrued and unpaid interest thereon) and any other
amounts payable in respect of the Affiliate Debenture.  Notwithstanding the
foregoing, this Investment Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of the Affiliate
Debenture must restore payment of any sums paid under the Affiliate Debenture
or under this Investment Guarantee.

                                  ARTICLE VIII
                                INDEMNIFICATION

         SECTION 8.1      Exculpation

         (a)     No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Investment Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Investment Guarantee or by law, except that an Indemnified
Person shall be liable for any such loss, damage or claim incurred by reason of
such Indemnified Person's gross negligence or willful misconduct with respect
to such acts or omissions.

         (b)     An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which principal, interest or other payments to Holders of
the Affiliate Debenture might properly be paid.

         SECTION 8.2      Indemnification

         The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.  The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of
this Investment Guarantee or the resignation or removal of the Investment
Guarantee Trustee.

                                   ARTICLE IX
                                 MISCELLANEOUS

         SECTION 9.1      Successors and Assigns

         All guarantees and agreements contained in this Investment Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Affiliate
Debenture then outstanding.





                                       11
<PAGE>   13
         SECTION 9.2      Amendments

         Except with respect to any changes that do not adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Investment Guarantee may only be amended with the prior approval of the Holders
of at least a Majority in liquidation amount of the Affiliate Debenture.

         SECTION 9.3      Merger of the Guarantor

         The Guarantor covenants that it will not merge or consolidate with any
other corporation or other entity or sell or convey all or substantially all of
its assets to any person (other than such a sale or conveyance to a Subsidiary
or any successor thereto (such a sale or conveyance being called an "Asset
Drop-Down")), unless (i) either the Guarantor shall be the continuing
corporation or the successor corporation or other entity or the person which
acquires by sale or conveyance substantially all the assets of the Guarantor
shall expressly assume the obligations of the Guarantor hereunder, according to
their tenor, and the due and punctual performance and observance of all of the
covenants hereof to be performed or observed by the Guarantor, by instrument in
form satisfactory to the Investment Guarantee Trustee, executed and delivered
to the Investment Guarantee Trustee by such corporation or other entity, and
(ii) the Guarantor or such successor corporation or other entity, as the case
may be, shall not, immediately after such merger or consolidation, or such sale
or conveyance, be in default in the performance of any such covenant or
condition.  In the event of any Asset Drop-Down after the date hereof, any
subsequent sale or conveyance of assets by a Subsidiary to which assets were
transferred in such Asset Drop-Down will be deemed to be a sale or conveyance
of assets by the Company for purposes of this provision.

         SECTION 9.4      Notices

         All notices provided for in this Investment Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:

         (a)     If given to the Investment Guarantee Trustee, at the
Investment Guarantee Trustee's mailing address set forth below (or such other
address as the Investment Guarantee Trustee may give notice of to the Holders
of the Affiliate Debenture):

                          The Chase Manhattan Bank
                          450 West 33rd Street, 15th Floor
                          New York, New York 10001
                          Attention:  Global Trust Services
                          Telecopy:  (212) 946-8158, 8159 or 8160

         (b)     If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Affiliate Debenture):

                          Enron Corp.
                          1400 Smith Street
                          Houston, Texas  77002
                          Attention:  Treasury Department
                          Telecopy:  (713) 646-3422

         (c)     If given to any Holder of Affiliate Debenture, at the address
set forth on the books and records of the Issuer.

         All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.





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<PAGE>   14
         SECTION 9.5      Benefit

         This Investment Guarantee is solely for the benefit of the Holders of
the Affiliate Debenture and, subject to Section 3.1(a), is not separately
transferable from the Affiliate Debenture.

         SECTION 9.6      Governing Law

         THIS INVESTMENT GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.





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<PAGE>   15
         This Investment Guarantee is executed as of the day and year first
above written.

                                        ENRON CORP., as Guarantor
                                        
                                        
                                        
                                        By:  /s/ William D. Gathmann
                                           -------------------------
                                             William D. Gathmann
                                             Vice President and Treasurer
                                        
                                        THE CHASE MANHATTAN BANK,
                                        as Investment Guarantee Trustee
                                        
                                        
                                        
                                        By:  /s/ Ronald Halleran
                                           ---------------------
                                             Ronald Halleran
                                             Second Vice President
                                        




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