Subject: Capital Charge and Calculating Return on Invested Capital
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Date: Wed, 22 Nov 2000 02:31:00 -0800 (PST)

Over the last few months, we have been working on a new methodology to 
measure and report business unit's retrurns on invested capital.   Several 
different variations were considered, and I am glad to report that Skilling, 
Causey and Fastow have approved the process outlined here.

Simply stated (with an example shown below):  Return on equity will be 
calculated based on a pre-determined debt/equity structure.  Business unit 
capital will include both on-balance sheet and off-balance sheet uses of 
capital and business unit's will be charged for the cost of their debt at 
Enron's cost of funds.  Business unit's should focus on improving their 
return on equity over time.

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This metric will not replace other targets (i.e., IBIT and Funds Flow).  

We are currently working to overlay this approach to the submitted 2001 
Plans.  If you have questions, please contact myself or Mike Deville.