Subject: Alberta PPA Financing
From: [email-masked]
To: [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Mon, 18 Sep 2000 08:28:00 -0700 (PDT)

The Bank's counsel has raised the following issues:

1.  X-default of a generic nature referencing any Enron swap transaction over 
a certain threshold amount.  As it is essentiaIly an Enron Corp. credit, I 
would fiercely oppose this, but it is a commercial issue.  If it is to be 
included, the issue is not the occurrence of the event of default, but 
exercise of termination as a result of an event of default, and then only if 
the exercise of the right of termination is finally determined to have been 
validly exercised.  But as I say, I would tell the Bank to get stuffed.

2.  X-default to Enron Corp. Credit Agreement.  Again this is a commercial 
issue, but if the Bank is getting the longer form Guarantee this is not 
necessary.  This could however fix to the requirement for the longer form 
Guarantee, if the Bank will take a plain vanilla short form Enron Corp. 
Guarantee with the x-default.  In any event, if this concept is to be 
included, it similarly would need to be qualified to acceleration as a result 
of an event of default under the Enron Corp. Credit Facilities.  Frankly, if 
Clement is prepared on the longer form Enron Corp. Guarantee, I would tell 
the Bank to get stuffed.

3.  X-Default if the Enron Corp. Credit Agreement is determined to be 
unenforceable.  Unless I am missing something, this is ridiculous.

4.  The Bank wants to "syndicate" the exposure which might include Schedule 
II Canadian Chartered Banks, and which might increase the Bank's cost of 
funding.  Therefore they want to build a price escalator into the swaps.  
Again, this is a business issue, but if it is to be included it will be a 
difficult concept in the context of the swaps, as opposed to a syndicated 
loan.  The price escalator will be complicated enough, as well as 
incorporating syndication rights and obligations on terms satisfactory to 
Enron, such as to which financial institutions, % of permitted syndication, 
least cost alternatives, exercise of agent and majority rights, and recourse 
for defaults by the Bank (i.e. unlike a loan we are taking credit risk of the 
Bank as counterparty on the swaps).

The Bank's counsel did not seem to want to give a legal opinion on the Bank 
but was willing on Swapco.  I would insist on getting it from the Bank, as 
again this is not a loan but a swap on which we are taking the Bank's credit 
exposure.  I am not sure of the status of the requirement for a Bank 
guarantee if RBC DS is the counterparty rather then Bank.

Please let me know.