---------------------- Forwarded by Darron C Giron/HOU/ECT on 04/11/2001 
04:09 PM ---------------------------


Jeffrey C Gossett
04/11/2001 02:37 PM
To: Darron C Giron/HOU/ECT@ECT
cc:  
Subject: TW transportation index hedges entered into 1/2001

More Deals.
---------------------- Forwarded by Jeffrey C Gossett/HOU/ECT on 04/11/2001 
02:36 PM ---------------------------
   
	Enron North America Corp.
	
	From:  Dan Fancler @ ENRON                           04/11/2001 02:33 PM
	

To: Georgeanne Hodges/HOU/ECT, Jeffrey C Gossett/HOU/ECT@ECT
cc: Vincent Strohmeyer/ET&S/Enron@Enron, James Saunders/FGT/Enron, Bob 
Chandler/ET&S/Enron@Enron, Roger G 
Leworthy/ENRON_DEVELOPMENT@ENRON_DEVELOPMENt, Ron Baker/Corp/Enron 
Subject: TW transportation index hedges entered into 1/2001

Thanks for your assistance and that of Jeff.   In addition to the 8 trades 
sent yesterday (see below), which Jeff is assisting on the offsetting 
positions, we have another done on March 7, 2001  ticket # QV8401.1, please 
add it to the list.

At year end Ron Baker worked with your group to document the offsetting third 
party positions on the following trades.

NI8156.1
NK4742.1
NT6154.1
NV5358.1


I understand that as a result of that work about 97 third party trades were 
identified to offset these 4 Transwestern trades.  Somehow an effectiveness 
test was done.  We were not involved in any of that work and I hope all 97 
trades (If that is the correct number) are still on ENA's books and are still 
effective.  At this time I don't see how I can measure effectiveness without 
the third party positions in our books.  Can ENA met the effectiveness 
standard and measurement requirements of SFAS 133 or is it the responsibility 
of the business unit that originated the hedge.  At this time we are only 
measuring our own positions.   Roger, indicated in the below memo that Ernie 
was going to do the effectiveness testing.   

We need your advice on if we should continue hedging positions with ENA.  I 
am concerned that ETS does not have the ability to monitor and maintain 
effectiveness when ENA facilitates the transaction because ETS loses control 
of the offseting 3rd party position.   I was under the impression that 
intercompany trades were kept in an affiliate book.  Perhaps we can get 
together next week and work out documentation procedures and the use of the 
affiliate book.  Anyday except Monday. 

Thanks,  Dan



 
---------------------- Forwarded by Dan Fancler/ET&S/Enron on 04/11/2001 
01:21 PM ---------------------------


Vincent Strohmeyer
04/10/2001 01:52 PM
To: Jeffrey C Gossett/HOU/ECT@ECT
cc: Dan Fancler/ET&S/Enron@ENRON 

Subject: TW transportation index hedges entered into 1/2001

Jeff,

I hope you can help me with this.  I need to find a way to identify 
offsetting 3rd party derivative transactions relating to the internal trades 
done with TW for the following deals:

TW RMTC QL2915.1
TW RMTC QL2918.1
  
  
TW RMTC QL5424.1
TW RMTC QL5444.1
  
  
TW RMTC QL5357.1
TW RMTC QL5358.1
  
  
TW RMTC QL9270.1
TW RMTC QL9273.1

Tiffany Miller identified you as the person that did this for our deals with 
ENA earlier.  Please let me know as soon as possible, if you can help.  If 
not, do you have any suggestions?

Vince
713.853.6701


Roger G Leworthy@ENRON_DEVELOPMENT
04/10/2001 11:36 AM
To: Dan Fancler@Enron, Bob Chandler@ENRON
cc: Ron Baker/Enron@EnronXGate, Ernie de Lachica@Enron 

Subject: TW transportation index hedges entered into 1/2001


	

Dan/Bob,
Following my voice mail message (to Dan), I want to circle back on the 
accounting impact of the recent internal transportation derivatives between 
TW and RMTC.

The concern that has arisen is that TW has taken the "out-of-the-money" 
impact of these trades (approx. $27MM) to OCI while RMTC has marked the 
"in-the-money" impact through income.

TW has taken its impact to OCI because it is, on a standalone accounts basis, 
designating these internal trades in cash flow hedge relationships.

However, from an Enron consolidated financial position viewpoint, the 
internal trades cannot be designated as hedges (and, thus, would need to be 
reversed which would have a negative impact on earnings of $27MM).

So, in order not to have this negative impact, 3rd party "offset" 
transactions in ENA must be identified and documented as cash flow hedge 
transactions.

It may be that RMTC has already identified offsetting 3rd party derivative 
transactions relating to the internal trades done with TW. 

However, if not, we think that the best place for responsibility for getting 
these 3rd party trades IDENTIFIED AND PROPERLY DOCUMENTED IN CASH FLOW HEDGE 
RELATIONSHIPS is with the business unit that wanted the internal trade in the 
first place - i.e. TW in this case.

If this has not already been done, can you have someone in your shop work 
with ENA to identify and obtain copies of sufficient 3rd party trades that 
hedge the risk hedged by TW. Once this is accomplished, Enron Corp. 
consolidated hedge documentation needs to be established as a matter of 
urgency; again, we consider this responsibility is best placed in the BU 
using the internal trade as a hedge. In this regard, Ernie (effectiveness 
testing) and I will be available to assist with this documentation.

Please do not hesitate to advise comments or questions on this matter. I am 
preparing the FAS 133 impact 3/31 Pro-Formas based on the identification and 
development of the consolidated hedge documentation.

Roger