Craig and Kim,

 As you know,  I have obtained a 60 day trial subscription to Moody's 
RiskCalc.

 You wanted to know if it makes sense for Enron to purchase RiskCalc.

 Well, after plowing through their 100 page manual and sitting through 
today's 2-hour Moody's presentation, it is necessary for us to have 
information about Enron's counterparties to move to the next step with 
RiskCalc.

 We have obtained some information on Enron's European counterparties from 
our colleagues in the London office.

 We need for you and/or your colleagues in the Houston office to supply us 
with a list of Enron's North American counterparties.  

 More specifically, to evaluate Moody's RiskCalc we will need the following 
financial inputs for Enron's North American (private firm) counterparties:

  
  
Fiscal Year
The prior twelve months of financial data are represented. Annual statements 
are usable as well as quarterly statements after summing the flow variables, 
such as cost of goods sold, net income, sales, and EBIT. The value should be 
a four-digit integer year without mention of the day or month such as 1999 or 
2000. Forecasts until the year 2009 can be made. A constant rate of inflation 
is applied to future years using last year's (1999) inflation level. In 
general this 'estimation error' will not cause any great problems, as size 
affects default rates at very large scales (e.g., $10,000,000 vs. $1,000,000 
makes a significant difference, $1,000,000 vs. $1,050,00 does not). 

Cash & Equivalents
This measure of liquid assets includes cash and marketable securities. 

Inventory
Inventories are taken directly from the balance sheet, in thousands dollars, 
without any alterations for accounting method (e.g., LIFO, FIFO, Average 
Cost). This item represents merchandise bought for resale and materials and 
supplies purchased for use in production of revenue. Specifically this would 
include purchase cost, sales cost, sales taxes, transportation costs, 
insurance costs, and storage costs.

Current Assets
This item primarily represents cash, inventories, accounts receivables, 
marketable securities, and other current assets. 

Total Assets
Total Assets and every other variable are entered in thousands of dollars. 
For example, $15,500,000 should be entered as 15500. Specifically, total 
assets are the sum of current assets plus net property, plant, and equipment 
plus other noncurrent assets (including intangible assets, deferred items, 
and investments and advances). Leave previous year's total assets blank for 
Australian companies. 

Current Liabilities
Liabilities are positive values. Included in current liabilities are 
short-term debt, accounts payable, and other current liabilities. 


Total Liabilities
This balance sheet account, total liabilities, is a positive number 
representing the sum of current liabilities plus long-term debt plus other 
noncurrent liabilities (including deferred taxes, investment tax credit, and 
minority interest). 


Retained Earnings
Retained Earnings, a historical measure of performance, is the cumulative 
earnings of the company less total dividend distributions to shareholders. 
Typically, it is the prior year's retained earnings plus net income less 
distributions. Retained earnings are generally positive. Some firms with low 
credit quality will have negative retained earnings. Leave this field blank 
for Australian companies. 

Sales
This item consists of the industry segment's gross sales (the amount of 
actual billings to customers for regular sales completed during the period) 
reduced by cash discounts, trade discounts, and returned sales and allowances 
for which credit is given to customers. 

Cost of Goods Sold
Entered in thousands of dollars, this value is generally a positive number 
less than sales. It represents all costs directly allocated by the company to 
production, such as material, labor, and overhead. Not fixed overhead or 
items that would be included in Selling, General, and Administrative 
Expenses. Leave this field blank for Australian companies. 

EBIT
Earning before interest expense is operating income after depreciation. It 
can be positive or negative but is usually greater then net income. 

Interest Expense
This item represents the periodic expense to the company of securing short- 
and long-term debt. Typically, we expect this charge to be approximately the 
prevailing interest rate times the total liabilities. One measure of 
computing this is: Interest Expense = 0.07 * total liabilities. 


Net Income
This item represents the income (or loss) reported by a company after 
expenses and losses have been subtracted from all revenues and gains for the 
fiscal period including extraordinary items and discontinued operations. A 
loss is represented by a negative sign. For example, a $5,000,000 loss would 
be entered as -5000. Leave previous year's net income blank for Australian 
companies. 



Extraordinary Items
Positive or negative, this item represents unusual items that sometimes 
appear on the income statement. The items are designated by the company as 
extraordinary and presented after net income from continuing operations and 
discontinued operations. These items include extraordinary gains/losses, 
income (loss) from discontinued operations, and cumulative affect of 
accounting changes. Expenses are entered as negative values, gains as 
positive values. Leave previous year's extraordinary items blank for 
Australian companies. 


Country
This model is calibrated for the United States, Canada, and Australia. 


 We look forward to receiving this information for Enron's private firm North 
American counterparties so that we can move on to the next step with the 
evaluation of RiskCalc.


Thanks,
Iris