Re: Tembec and US Originators

Rob, we may be saying the same thing here - for the EES outsourcing
proposition (which is more than just asset management) as being defined by
Rodney et al should be managed together by Industrial Origination and ECC.
Although, I would agree that ECC should lead the sale process. My view is
that we should not and will not recreate the structuring, customer facing and
execution requirements in Canada and Mexico required to do these deals. It is
an important strategic iniative for ENA to complete a number of these deals.
The problem is that a clear target list, joint accountabilities and schedule
between the groups has not been rolled out which was discussed at Columbia
Lakes. All other industrial business other than P&P commodity/asset business
is the perview of ECC.

Ultimately, I have not seen any outsourcing transactions from Canada in the
deal structuring/due diligence queue. The US group can help get these done
and can help in the pitch.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 08/04/2000
04:40 PM ---------------------------

Rob Milnthorp
08/03/2000 04:17 PM
To: David W Delainey/HOU/ECT@ECT
cc: Bryan Burnett/HOU/ECT@ECT, Rodney Malcolm/HOU/ECT@ECT
Subject: Re: Tembec and US Originators

Dave, my thoughts regarding your note:

This is not what we agreed to in Columbia Lakes. You were very clear on the
point that ENA Industrial Marketing had enough to do South of the border. We
have staffed up our Industrial Marketing Team in Toronto and are covering all
industrials (on a full-time basis) which meet our load threshold in Ontario.
Unlike the U.S., Ontario is a relatively small market where we can and have
complete coverage. Paul and his group have done a tremendous job at
positioning Enron in this marketplace, demonstrating our core competencies,
and developing credibility. The last thing I want is some marketer up here
from the U.S. selling the box without knowing how to fill that box (ie does
not know the market fundamentals, rules or regulatory regime). This does
nothing for Enron as it confuses the customer on who they should be talking
to and destroys whatever credibility we had created to date. I have attached
for your reference, a status report on industrial coverage.

Perhaps the problem lies in how we are defining outsourcing. As you know,
there exists a continuum from portfolio management through to the energy
island concept. Enron Canada has been pitching the entire outsourcing
continuum recognizing that for many of these industrials, they will want to
walk before they run. The majority that we have talked to are interested in
portfolio management, our market expertise & information, wholesale
settlement services, and assistance with market opening readiness. I cant
imagine how a U.S. originator could talk to or offer these services to
Canadian Industrials. This is clearly in Enron Canada's wheelhouse.

With respect to the opposite side of the outsourcing continuum, it makes
total sense to have ENA utilize its resources in pursuing energy island,
asset outsourcing type structures. With these opportunities, I see ENA taking
the lead with ECC second chair. Where these opportunities are identified by
ECC, we will forward these to the appropriate ENA originator. To date, ENA
and ECC have worked well on Blue Circle, Terra, Co-Steel and Nexfor.

As for Tembec, I am confused with what you mean by not changing the deal
team. Kelli Metcalf has been up here twice talking to Tembec about a cogen in
an area that does not make any economic sense. Jan and Paul have met with
Tembec a number of times and we have had extensive discussions with Tembec
specific to Ontario, Portfolio Management, Wholesale Settlement Services,
Supply Procurement, and Asset Optimization. I realize that Bryan Burnett has
an excellent relationship with Tembec and we should leverage off of this, but
to simply "keep ECC in the loop" is fundamentally absurd and is not in
Enron's best interests.

Regards
Milnthorp

David W Delainey
08/03/2000 12:09 PM
To: Rob Milnthorp/CAL/ECT@ECT, Max Yzaguirre/NA/Enron@ENRON, Rodney
Malcolm/HOU/ECT@ECT, Bryan Burnett/HOU/ECT@ECT, Raymond Bowen/HOU/ECT@ECT,
Paul Devries/TOR/ECT@ECT
cc:
Subject: Tembec and US Originators

Guys, to end all arguments, I would suggest the following protocol which is
similar to what was discussed at Columbia Lakes:

a) P&P swaps and anything to do with the network strategy/assets in the
paper sector in Canada and Mexico - Industrial Origination;
b) Pure energy commodity positions and stand-alone energy assets (no
outsourcing) for all industrial segments in Canada and Mexico - ECC or Enron
Mexico;
c) Energy outsourcing for all industrial segments in Canada and Mexico - I
would like Enron Canada and Enron Mexico to develop a written target list in
which ECC, Enron Mexico and the Industrial Origination groups would work
together to develop, sell and execute on the most profitable and value adding
outsourcing product for the industrial customer in Canada and Mexico - ECC
and Enron Mexico's understanding of the energy markets in Canada and Mexico
coupled with the customer facing, product development and execution skills in
Houston should provide a winning team. I am asking for the three teams to
clearly identify the outsourcing targets, lead sales and structuring people
and the timing as far as starting discussion with each target customer
(ASAP). I would hope that the Mexican and Canadian teams would lead the
sales process and the Houston team lead the structuring, customer facing and
execution but I will let you decide the optimum mix. Either way, I am
expecting this target list completed and agreed to in the next two weeks for
Canada and Mexico;
and d) for Tembec I don't think it makes sense to change the deal team at
this point; however, the US team will keep the Canadian team in the loop and
if the products become non-outsourcing related the deal should be passed to
ECC.

Regards
Delainey

---------------------- Forwarded by David W Delainey/HOU/ECT on 08/03/2000
12:31 PM ---------------------------

Rob Milnthorp
08/03/2000 09:46 AM
To: David W Delainey/HOU/ECT@ECT
cc:
Subject: Tembec and US Originators

Dave, attached is some of the background correspondence in anticipation of
our meeting with Brian Burnett.

Regards
Milnthorp
---------------------- Forwarded by Rob Milnthorp/CAL/ECT on 08/03/2000 09:29
AM ---------------------------

Angela McCulloch
07/27/2000 11:07 AM
To: Rodney Malcolm/HOU/ECT@ECT, Edward Ondarza/HOU/ECT@ECT, James A
Ajello/HOU/ECT@ECT
cc: Rob Milnthorp/CAL/ECT@ECT
Subject: Tembec and US Originators

Rodney, Edward, Jim - We've been over this issue a number of times and I
thought we had reached resolution when we last met with Delainey. My
understanding with respect to coverage of Canadian Industrials is as follows:

1.) ENA to take lead on industrials that have facilities in both US and
Canada and will co-ordinate coverage with ECC with respect to Canadian
Facilities.

2.) ECC to take lead on industrials that have Canadian Facilities only.

3.) With respect to Canadian Pulp & Paper Industrials, ENA will cover Pulp &
Paper Swaps and SPV structuring. ECC will cover these industrials for all
other Enron products (i.e. power, gas, services, etc.) Again, coverage needs
to be co-ordinated.

Specific to Tembec, I share Paul's concerns on why ENA would send 2 people to
talk to Tembec re: outsourcing when Tembec is across the hall from ECC, ECC
has an established relationship, and Tembec is a Canadian Company with no US
facilities.

It is my hope that we can resolve this amongst ourselves without having to
get Dalainey involved. I would suggest a conference call next week. In the
interim, Paul will forward a CA to Tembec in contemplation of an outsourcing
arrangement.

Regards,

Angela McCulloch for Rob Milnthorp
Assistant to Rob Milnthorp
(403) 974-6738
---------------------- Forwarded by Angela McCulloch/CAL/ECT on 07/27/2000
11:04 AM ---------------------------

Paul Devries
07/25/2000 01:30 PM
To: Rob Milnthorp/CAL/ECT@ECT
cc:
Subject: Tembec and US Originators

Rob, We just had a very good meeting with Tembec about Energy procurement and
energy outsourcing. While the meeting went well, I am very confused about
the Enron team making the pitch to them. My understanding is that the
Canadian originators - particularly the Toronto team for Eastern Canadian
companies will be responsible for everything except for pulp and paper swaps
and to some extent, new SPV's.

In this instance,

1. Tembec is a Canadian Company
2. All their assets are in Canada
3. Jan has been working with Tembec people in their largest facility
4. We know the executive team at Tembec
5. We clearly are very knowleadgable in all aspects of the Ontario energy
market which is their focus right now
6. We understand and are pitching the overall energy outsourcing arrangement
similar to the US pitches

With this in mind, I am not sure why Kellie Metcalf and Bob Anderson flew up
here (6 hours flight time there and back, $4,000 to $5,000 in flights and
hotels) for a 4 hour meeting with Tembec. Kelly was quite vocal in saying
that this is a client they want to serve out of Houston. I have stated to
her that that does not make any sense in terms of efficiency and costs and
knowledge of the market where Tembec's assets are. Obviously, much of the
technical engineering work would and should be done by the engineering team
put together in the Industrial Services Group should a deal be struck.
However, the commercial negotiations and marketing should be led by this
office!!!

I thought this had been agreed to already. We managed to piece up the
meeting and deliver the "Enron" message, but going forward we need to have
this resolved.

Cheers, Paul D