Subject: TGS Update/strictly privileged and confidential
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked]
Date: Mon, 12 Mar 2001 08:58:00 -0800 (PST)

The Province of Rio Negro in Argentina claims TGS owes approximately $352 
million in stamp taxes, interest & penalties.; TGS recently filed its final 
administrative appeal in Rio Negro against that province's stamp tax 
assessment.;;The administrative process normally could take a couple of more 
months, but because the Province of Rio Negro could reject;the appeal any day 
and seek to collect the taxes, TGS has no choice but to immediately seek an 
injunction in the Argentine Supreme Court.; Once Rio Negro rejects the appeal 
(which it will), TGS waives its right to go to the Supreme Court for an 
injunction, a risk it cannot afford to take.; 
;
This suit could potentially have a negative impact on Enron's bilateral 
investment treaty (BIT) claim in the International Center for the Settlement 
of Investment Disputes (ICSID), because the parties are required to make an 
election under the BIT.; In other words, a party cannot have previously filed 
suit for relief in the local court if it seeks redress in ICSID arbitration.; 
Technically, Enron hasn't filed in the local court, and;we will argue that 
Enron's claim under the BIT is independent of; the TGS claim in local court.; 
This;argument is novel, however, and it is not clear how it will play 
out.;;Recall that on February 22, 2001, Enron filed its ICSID claim for a 
declaratory judgment against the Republic of Argentina for the actions of 
both Neuquen ($224 million assessment);& Rio Negro provinces.; Therefore, 
even if ICSID rejects Enron's;claim;regarding Rio Negro, the Neuquen claim 
should remain valid giving Enron leverage for negotiation with the federal 
government.;;
;
;In late 1999, TGS filed an action in the Argentine Supreme Court for a 
declaratory judgment and;injunction against the Province of Santa Cruz 
($17million assessment).; Our local contacts inform us that despite precedent 
to the contrary, the Supreme Court appears to be leaning toward granting at 
least a partial injunction in that case.
;
About a; month ago, the federal government and the provinces tentatively 
agreed to do away with the stamp tax prospectively and the federal government 
would provide another income stream for the provinces.; As you are aware, 
President de la Rua recently asked his entire cabinet to step down following 
the resignation of Economy Minister, Machinea, citing the troubled economy, 
now in its 32nd month of recession.;;Machinea's office;has been fairly 
ineffective as the arm of the federal government addressing the existing 
stamp tax issues among the provinces, producers and transporters.; Therefore, 
de la Rua's appointment of an orthodox, hard line economy minister, Ricardo 
Lopez Murphy, is seen by investors as positive.; It is unclear how this 
governmental change will impact the tentative agreement on the future of 
stamp taxes, but I am investigating.; We will make arrangements to meet with 
Mr. Lopez Murphy, as we have with the past government officials concerning 
the stamp tax, its impact on Enron, and on the foreign investment climate in 
Argentina.
Please call me if you have any questions.; x56159.
Regards,
Michelle