Subject: RE: Pro Formas
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Mon, 5 Nov 2001 05:36:13 -0800 (PST)

That works for me.   I will attempt to answer some of Heather's questions as well.

-----Original Message-----
From: Saunders, James
Sent: Monday, November 05, 2001 7:14 AM
To: Chandler, Bob
Cc: Hayslett, Rod; [email-masked]'
Subject: FW: Pro Formas
Importance: High

Bob - I believe we need to classify the notes w ENE on TW and NNG as long term (Other).

-----Original Message-----
From: [email-masked]
[ <mailto:[email-masked]>]
Sent: Sunday, November 04, 2001 4:52 PM
To: Saunders, James
Subject: Pro Formas
Importance: High

Jim -

I'm afraid I have another "to do" for you.  Given the potential for all of
the overhang issues and given the significance of the receivables from the
parent, we developed some pro-forma balance sheets for NNG and TW, which
are attached.  These assume:

   The note receivable from parent company continues to be classified as
   current (represents net of all prior cash flows between NNG/TW and
   parent)
   The only borrowings under the revolvers relate to draw downs to repay
   the Citibank bank debt assumed by NNG and TW

We have highlighted in red the critical numbers. Given the overhang issues
at Enron Corp. I have the following questions:
   Should the note receivable from parent be classified as current? (i.e.
   would Enron truly be able to pay this amount to NNG/TW if needed)
   How will the debt be repaid in one year if Enron Corp.'s note receivable
   is not available to the pipelines?  Would you be able to draw down
   additional debt?
   Basically, what is the plan?
   Is the only debt expected to be drawn on these revolvers the assumed
   debt?  How much more in addition, if any?

Here is the basic plan, if something were to happen so that Enron was unable to pay NNG /TW back in time, then the notes with the bank would be transformed into term deals (length to be determined later).     The banks are comfortable that the ability to repay the notes exists in the pipes from the existing and projected cash flows of the entities.     There is no question that we should be able to borrow more against the pipes, with market multiples at 9X EBITDA and lenders willing to lend against it, there never has been a problem in that regard.   The securitizations of course will prevent the same kind of deals being done, but they are really to protect the banks from an Enron credit event (preference issues).

(See attached file: NNG FS pro forma.xls)(See attached file: TW FS pro
forma.xls)

I have to believe that the banks did this before agreeing to extend so much
credit - you might want to check around and see who provided this to the
banks rather than re-creating the wheel (Kevin Howard maybe).

Heather
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