Capital Book ,
 To further the process of reaching the stated objectives of increasing Enro=
n=20
America=01,s Velocity of Capital and associated Return on Invested Capital,=
 we=20
have decided to create a Capital Book. The Capital Book will have no profit=
=20
target associated with it and will be managed by Joe Deffner. The purpose o=
f=20
creating this book is to ensure that all transactions within Enron Americas=
,=20
with any form of capital requirement, are structured correctly and are=20
allocated the appropriate cost of capital charge.=20

The previous numbers used in the Business Plans at the beginning of this ye=
ar=20
will remain for all transactions in place and where we hold assets.=20
Therefore, on any assets currently held within each business area, the=20
capital charge will remain at 15%. Internal ownership of these assets will =
be=20
maintained by the originating Business Unit subject to the Internal Ownersh=
ip=20
Policy outlined below.

The cost of capital associated with all transactions in Enron Americas will=
=20
be set by Joe. This process is separate and apart from the current RAC=20
process for transactions which will continue unchanged.

Capital investments on balance sheet will continue to accrue a capital char=
ge=20
at the previously established rate of 15%. Transactions which are structure=
d=20
off credit will receive a pure market pass through of the actually incurred=
=20
cost of capital as opposed to the previous 15% across the board charge.=20
Transactions which are structured off balance sheet, but on credit will be=
=20
priced based upon the financial impact on Enron America=01,s overall credit=
=20
capacity.

On transactions that deploy capital through the trading books, the Capital=
=20
Book will take a finance reserve on each transaction, similar to the way th=
e=20
Credit Group takes a credit reserve. This finance reserve will be used=20
specifically to fund the capital required for the transaction. As noted=20
above, the Capital Book will have no budget and will essentially charge out=
=20
to the origination and trading groups at actual cost.

By sending market-based capital pricing signals internally, Enron America=
=01,s=20
sources of capital and liquidity should be better optimized across the=20
organization.=20

Questions regarding the Capital Book can be addressed to:
Joe Deffner  853-7117
Alan Quaintance 345-7731
ena.employees@enron.com