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                                                                   EXHIBIT 10.16

                            [ENRON CORP. LETTERHEAD]



                                October 20, 1997



Northern Border Pipeline Company
1111 South 103rd Street
P.O. Box 3330 (Zip: 68103-0330)
Omaha, Nebraska 68124-1000


Dear Ladies and Gentlemen:

                                GUARANTY (T1103F)

         As an inducement to Northern Border Pipeline Company (hereinafter
"Northern Border") to grant credit, or assume a credit risk, from time to time,
in respect to transportation of gas by Northern Border pursuant to a U.S.
Shippers Service Agreement T1103F (the "Agreement"), which Agreement is
identical to or substantially the same as the copy attached hereto, for the
benefit of Enron Capital & Trade Resources Corp. (hereinafter the "Shipper"),
Enron Corp. (hereinafter the "Guarantor"), shall pay to Northern Border promptly
when due, or upon demand thereafter the full amount of all indebtedness due to
Northern Border from Shipper, pursuant to Article 4 of the agreement (including
interest and expenses of all collection and reasonable counsel's fees incurred
by Northern Border by reason of the default of Shipper), up to an annual
aggregate amount of U.S. $3,000,000.00 during each year that the Agreement
remains in effect.

         This Guaranty by Guarantor shall remain in full force and effect during
the term of the Agreement, and any extension or renewal thereof and thereafter
until Shipper has fully performed all of its obligations under the Agreement.
This Guaranty applies to all successors and/or assigns of Shipper; provided,
however, that in the event Shipper is released pursuant to the Agreement and
Northern Border's FERC Gas Tariff by Northern Border from its obligations under
the Agreement, the Guarantor shall have the right to cancel this Guaranty by
written notice to Northern Border on or after the effective date of such
release.

         Guarantor waives notice of acceptance hereof and notice of the volumes
of gas transported by Northern Border for the benefit of Shipper, and of the
amounts and terms thereof, and of all defaults or disputes with Shipper, and of
the settlement or adjustment of such defaults or disputes. The Guarantor,
without affecting its liability hereunder in any respect, consents to and waives
notice of all changes of terms, the withdrawal of extension of credit or time to
pay, the release of the whole or any part of the indebtedness, the settlement or
compromise of differences, the acceptance or release of security, the acceptance
of notes, or any other form of obligation for Shipper's indebtedness, and the
demand, protest and notice of protest of such instruments or their endorsements.

         The obligation of the Guarantor is a primary obligation and covers the
payment of all existing and future indebtedness obligations of Shipper to
Northern Border under the Agreement. This obligation shall be enforceable before
or after proceeding against Shipper or against any security held by Northern
Border




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and shall be effective regardless of the solvency or insolvency of Shipper at
any time, the extension or modification of the indebtedness of Shipper by
operation of law or the subsequent incorporation, reorganization, merger or
consolidation of Shipper or any other change in the composition, nature,
personnel or location of Shipper.

         THIS GUARANTY SHALL FOR ALL PURPOSES BE DEEMED TO BE MADE IN, AND SHALL
BE GOVERNED BY, THE LAWS OF THE STATE OF TEXAS. This Guaranty shall be binding
upon Guarantor, its successors and assigns and shall inure to the benefit of
Northern Border, its successors and assigns.

         Guarantor reserves to itself all rights, setoffs, counterclaims and
other defenses, if any, which Shipper is or may be entitled to arising from or
out of the Agreement and/or Northern Border's FERC Gas Tariff.

         Guarantor's liability under this Guaranty shall be limited to direct,
actual, monetary damages under the Agreement; provided that, in no event will
Guarantor be subject to consequential, exemplary, equitable, loss of profits,
tort or any other damages.

         The Guarantor in executing this Guaranty, represents and warrants to
Northern Border that:


                  (i) The Guarantor is a corporation duly organized and existing
         in good standing and has full power and authority to make and deliver
         this Guaranty;


                  (ii) The execution and delivery and performance of this
         Guaranty by the Guarantor has been duly authorized by all necessary
         action of its directors and shareholders and does not violate the
         provisions of any presently applicable law or its articles of
         incorporation or by-laws or constitute a default under any material
         ("material" for purposes of this representation meaning creating a
         liability of U.S. $50,000,000 or more) agreement presently binding on
         it; and


                  (iii) This Guaranty has been duly executed and delivered by
         the authorized officers of the Guarantor and constitutes its lawful,
         binding and legally enforceable obligation, except as such
         enforceability may be limited by the effect of any applicable
         bankruptcy, insolvency, reorganization, moratorium or similar laws
         affecting creditors rights generally and by general principles of
         equity.


         IN WITNESS WHEREOF, this Guaranty has been duly executed William D.
Gathmann, Vice President, Finance and Treasurer of the Guarantor this 21 day of
October, 1997.


"GUARANTOR"

ENRON CORP.                                     Attest:



BY:      /s/ William D. Gathmann                        /s/ Kate B. Cole
     ---------------------------------         ---------------------------------
         William D. Gathmann                            Kate B. Cole
         Vice President, Finance                        Assistant Secretary
         and Treasurer