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                                                                    EXHIBIT 10.7




                       FIRST AMENDMENT TO CREDIT AGREEMENT


     THIS FIRST AMENDMENT TO THE CREDIT AGREEMENT (this "Amendment") dated as of
January 4, 2000, between Enron Corp., an Oregon corporation (the "Lender"), and
Azurix Corp., a Delaware corporation (the "Borrower").

     The Lender and the Borrower are parties to a Credit Agreement dated as of
May 1, 1999 (the "Agreement"). Capitalized terms used in this Amendment and not
otherwise defined have the meanings given to them in the Agreement. The Lender
and the Borrower now desire to amend the Agreement in certain respects.
Accordingly, the Lender and the Borrower hereby agree as follows:

     1.   Amendment to Section 1. Section 1 of the Agreement is hereby amended
by replacing the last sentence thereof with the following:

     "The Borrower shall request that the Lender make an Advance hereunder by
     delivering a notice to such effect on or before 9:00 a.m. Houston time at
     least one Business Day prior to the date requested for the funding of such
     Advance. Such notice shall further state the specific purposes for which
     such Advances will be used and (a) whether and to what extent such Advance
     will be used to pay general, administrative and operating expenses,
     including interest (a "GAO Advance"), and (b) whether and to what extent
     such Advance will be used to pay expenses other than general,
     administrative and operating expenses (a "Non-GAO Advance"). Subject to the
     maximum aggregate principal amount of GAO Advances permitted to be
     outstanding pursuant to Section 2 hereof and compliance with the other
     terms and conditions of the Agreement, the Lender shall make any GAO
     Advance properly requested by the Borrower pursuant to this Section 1. The
     Lender shall not be obligated to make any Non-GAO Advance requested by the
     Borrower pursuant to this Section 1. Any determination to make a Non-GAO
     Advance shall be in the sole discretion of the Lender."

     2.   Amendment to Section 2. Section 2 of the Agreement is amended by
deleting the period after clause c) thereof and adding the following proviso
after such clause c):

     "; provided, however, that, until the earlier of (i) the date on which the
     Borrower issues and sells debt securities or enters into credit facilities
     usable for general corporate purposes, and (ii) March 31, 2000 (the date
     which is the earlier of the dates referred to in (i) and (ii) shall
     hereinafter be referred to as the "Non-GAO Advance Availability Termination
     Date"), the Lender may in its sole discretion make and permit the aggregate
     outstanding principal amount of Advances to be equal to an amount of up to
     One Hundred Eighty Million Dollars (U.S. $180,000,000); provided, further,
     however, that in no event shall the aggregate outstanding principal amount
     of either the GAO Advances or the Non-GAO Advances exceed One Hundred
     Twenty Million Dollars (U.S. $120,000,000), respectively."

     3.   Amendment to Section 3. The first sentence of Section 3 of the
Agreement is amended and restated in its entirety to read as follows:






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     "Interest shall accrue on the outstanding and unpaid principal amount of
     the Advances on a daily basis at a rate per annum equal to the Fed Funds
     Rate (as defined below) plus (a) in respect of GAO Advances, 1.5%, and (b)
     in respect of Non-GAO Advances, 3.75%; provided, however, that upon the
     occurrence and during the continuation of any Event of Default (as
     hereinafter defined), interest on the unpaid principal amount of any
     Advance shall accrue at the rate set forth above plus an additional 2% per
     annum."

     4.   Amendment to Section 5. Section 5 of the Agreement is amended by
adding the following sentence at the end of that Section:

     "The Borrower shall repay all Non-GAO Advances (a) upon and to the extent
     that the Borrower receives proceeds (i) from the issuance and sale of any
     debt securities, or (ii) under any credit facilities usable for general
     corporate purposes, and (b) to the extent not repaid pursuant to clause (a)
     hereof, on or before March 31, 2000."

     5.   Amendment to Section 6. Section 6 of the Agreement is amended by
adding the following proviso to the end thereof:

     ", including interest; provided, however that the Borrower may use the
     proceeds of any Non-GAO Advance made hereunder before the Non-GAO Advance
     Termination Date to pay the expenses specified in the applicable notice
     pursuant to which such Advance was requested."

     6.   Amendment to Section 7. Section 7 of the Agreement is hereby amended
by replacing the period at the end of clause c) thereof with "; or" and adding
the following clause (d) thereto:

     "(d)(i) Any principal, interest, fees or other amounts due in respect of
     any indebtedness of the Borrower is not paid when due, whether by scheduled
     maturity, required prepayment, acceleration, demand or otherwise, and such
     failure is not cured within the applicable grace period, if any, and the
     aggregate amount of all such indebtedness of the Borrower so in default
     exceeds Ten Million Dollars (US$10,000,000); (ii) any other event shall
     occur or condition shall exist under any agreement or instrument relating
     to any Indebtedness of the Borrower the effect of which is to accelerate or
     to permit the acceleration of the maturity of any such indebtedness,
     whether or not any such indebtedness is actually accelerated and the
     aggregate amount of all indebtedness of the Borrower so in default exceeds
     Ten Million Dollars (US$10,000,000); or (iii) any indebtedness of the
     Borrower shall be declared to be due and payable, or required to be prepaid
     (other than by a regularly scheduled prepayment) prior to the stated
     maturity thereof, and the aggregate amount of all indebtedness of the
     Borrower so accelerated exceeds Ten Million Dollars (US$10,000,000)."

     7.   Amendment to Section 8. Section 8 of the Agreement is amended and
restated in its entirety to read as follows:






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          "8. Notices, Etc. All notices and other communications provided for
     under this Agreement shall be in writing (including facsimile transmission)
     and telecopied or delivered, if to the Lender, at its address at 1400 Smith
     Street, Houston, Texas 77002, Attention: Jeffrey McMahon telecopy number
     (713) 646-5930 and if to the Borrower, at its address at 333 Clay Street,
     Houston, Texas 77002, Attention: General Counsel, telecopy number (713)
     345-5330; or, as to each party, at such other address as shall be
     designated by such party in a written notice to the other party complying
     as to delivery with the terms of this Section 8."

8.   Continuation. The Agreement, as modified by this Amendment, is continued in
full force and effect.

     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

ENRON CORP.                                AZURIX CORP.


By: /s/ JEFFREY MCMAHON                    By: /s/ ANDREA L. MAINELLI
   --------------------------------           ------------------------------
   Name: Jeffrey McMahon                      Name: Andrea L. Mainelli
   Title: Executive Vice President,           Title: Managing Director, Finance
          Finance and Treasurer








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