Subject: Fidelity update
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked]
Date: Fri, 5 Jan 2001 02:29:00 -0800 (PST)

Randy, give them what they want and lets move on - don't give another 
guarantee provide the indemnity for the IRS and environmental claims.  Mark 
if there is a flaw in my thinking let me know.

Joe, these guys have been exceedingly difficult to deal with - I would think 
twice before we bring these guys into any Enron deal in the future.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 01/05/2001 
10:18 AM ---------------------------

Randal Maffett
01/04/2001 01:13 PM
To: David W Delainey/HOU/ECT@ECT
cc: Mark E Haedicke/HOU/ECT@ECT 
Subject: Fidelity update

Last week during the holidays, we made a lot of progress w/ Fidelity 
regarding their "take-out" from the Partnership at Dallas.  We exchanged 2 
drafts of a Letter Agreement which says ENA (or an affiliate) will buy their 
99% LP interest in Landfill Gas Investments, LP (LGI) on or before Jan 31, 
2001.  Included in our draft was a provision whereby the ENE Guaranty would 
be extinguished.  However, late yesterday Fidelity came back and said they're 
not willing to extinguish the Guaranty completely.  The way the deal w/ 
Fidelity will be structured, ENA will pay them the delta between the $5.2MM 
initial payment they made less the accrued tax credits on the date we close 
(est to be $300K+/-).  Fidelity wants 2 things:

protection in the event the IRS disallows/disqualifies the tax credits 
accrued (i.e., the $300K), and
protection against any environmental claims that may have occurred while they 
were a partner in LGI (June, 200 thru Jan, 2001).

There are 2 basic alternatives to consider:

replace the existing guaranty to LGI with a new guaranty to Fidelity with a 
specific cap on the tax credit amount ($300K+/-) and with the same 
environmental coverage (up to $5MM) as currently exists but restricting it to 
issues which occurred while they were a partner.  The probability of either 
ever being triggered is extremely remote.  Replacing the benefactor from LGI 
to Fidelity is significant for us because it eliminates future environmental 
exposure related to LGI as well as prevents potential future buyers of our LP 
interest from seeing that ENE once was willing to issue such a guaranty.
replace the existing guaranty with an indemnity from ENA which provides 
Fidelity with the same protection as alternative #1.  Per ENA accounting 
since the amount of exposure is limited to $5.3MM in aggregate, this would 
not be significant/material enough to be separately identified as a balance 
sheet item.

The problem we have is Fidelity has a Guaranty "in hand" and unless you give 
me approval to go back and structure our deal around them, we don't have any 
leverage to get them to release it.  They are willing to work with us on 
either of the 2 alternatives listed above.  This is the only remaining 
commercial issue left w/ Fidelity.

Please advise or call to discuss further.  Ext. 33212.  Thanks!

RANDY