Message-ID: <8378811.1075842229092.JavaMail.evans@thyme>
Date: Thu, 21 Dec 2000 01:57:00 -0800 (PST)
From: mark.powell@enron.com
To: jonathan.mckay@enron.com, russell.diamond@enron.com
Subject: Engage Energy Canada, L.P.
Cc: william.bradford@enron.com, mark.haedicke@enron.com, peter.keohane@enron.com, 
	mary.cook@enron.com, dan.hyvl@enron.com
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X-From: Mark Powell
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Hey Russell and Jon,

As you are aware, we have been trying to get Engage Energy Canada, L.P. 
("Engage") to execute an updated master physical firm gas purchase and sale 
agreement (an "Amended Physical Master") over the last two and a half years 
with no success.  Until this week, we had received no comments from Engage 
with respect to our suggested amendments (despite sending four distinct forms 
of amendments starting in August, 1998).

The matter came to a head in June of this year when the Credit department 
wanted to call for collateral from Engage.  The existing (1994) agreement 
does not provide for this right.  As a result, we have been pressing this 
counterparty to execute the Amended Physical Master.  However, the 
counterparty has delayed providing comments repeatedly.  Through Russell's 
diligence, the general counsel of Engage gave me another call on Tuesday and 
(finally) provided some comments on the agreement.  In addition to a few 
minor nits, the general counsel has informed me that he will not provide 
comments on the "credit related" provisions of the Amended Physical Master.  

He has told me that Engage requires that we put in place 
credit/collateral/netting agreements which contemplate:
a.  physical transactions (gas and power);
b.  financial transactions (gas and power);
c. all Enron entities which transact with Engage and Engage Energy America 
Corp. (i.e. ECC, ENA, EPMI and any other entity) (as a result, the agreements 
would have to contemplate US/Canada distinctions as well).

Such counsel refuses to proceed in any other manner at this time.  Further, 
he has expressly told me that he will not go to Westcoast Energy Inc. to 
provide a  guarantee which is specific to the Amended Physical Master.

In order to comply with Engage's demands (i.e. preparing a master netting 
agreement, a master credit/collateral agreement and a mechanism by which we 
would be able to monitor exposure across all parties and products) I believe 
will be a fairly large undertaking (considering the emerging nature of the 
physical power market, the complexities involved and the general lack of 
response we have experienced with Engage over the last 2.5 years).  However, 
I understand that we have undertaken such a task on occasion in the past 
(albeit, without additional concept of power trading) with respect to 
particularly important trading partners.

Frankly, I am concerned that Engage's position (although, theoretically a 
good concept) is just another stalling technique.  Nevertheless, I will leave 
the decision as to the manner to proceed with Engage to you.   

Please give me a call to discuss this matter when you get the chance ((403) 
974-6708).

Thanks,

Mark Powell.
