New Cash Conrol Process - 2:00 pm Meeting, December 5, 2001 in the 50th floor Board Room Overview

Our bankruptcy filing requires a cultural change in the cash management procedures of Enron.  Because of our fiduciary obligation to our creditors, we now must move to centralized cash management.  These new procedures will amend our prior policy.  As management of the "Debtor", we should approach each decision about our business, including cash receipts and disbursements, from the perspective of, "Does this enhance the value of the Debtor's estate?"  This memo addresses the new policies that are to be immediately implemented both for entities in the Chapter 11 reorganization and entities that have not filed.  There will be a meeting Wednesday, December 5, 2001 at 2:00 PM in the Board Room on the 50th floor to discuss the new policies.  

As a debtor-in-possession ("DIP"), we have new cash flow reporting obligations and we must develop and adhere to a cash flow budget.  Failure to adhere could have serious consequences to our DIP financing availability as well as diminish our credibility with the creditors with whom we must negotiate our ultimate exit from Chapter 11 as a reorganized entity.

All Enron business units (not just the ones in bankruptcy) will need to conform to these new requirements because additional entities are likely to be included in the bankruptcy filing, and because it is extremely important for Enron management to be able to see the totality of cash flow requirements for the Company.  

There are special procedures outlined at the end of the memo specifically relating to the business units in bankruptcy (the Debtor business units).

New Processes and Procedures

Until further notice, a newly formed committee, the Cash Flow Management Committee (the "Committee"), will meet daily to review and approve daily payments and 5-day projections for each business unit.  The Committee will be headed by George Wasaff and will also consist of Ray Bowen, Dave Gorte, Tim DeSpain, Bob Butts, Julia Murray and Lisa Mellencamp.  The Committee will be assisted by our financial advisor, Batchelder & Partners and our outside counsel, Weil, Gotshal & Manges.  The Committee will review payments only after approval by the business units.  Business units remain responsible for their own internal approval processes.

George Wasaff will be the Company's "Cash Czar".  His responsibilities will include (i) a review of weekly cash budgets from all business units, (ii) presentation of weekly budgets to the Committee for approval, (iii) a review of daily disbursements for the current and immediately succeeding days and (iv) comparison of actual to budget variances for cash receipts and disbursements.  

As outlined in Rick Causey's memo of December 4, 2001, all business units must provide weekly cash flow projections.  Each week's submission should be accompanied by a sufficiently detailed explanation of any variances between budget and actual cash receipts and disbursements for the preceding week. Further details of the exact requirements and format of these projections will be provided at the meeting.

All divisions must also provide rolling 5-day cash flow projections through the intranet system by 9:00 am each day.  These 5-day projections must include a projection of all cash receipts and disbursements for the subsequent 5 business days.  Copies of all supporting documentation should be sent to George Wasaff, Mary Perkins, and Tim DeSpain.  Each business unit will be responsible for pre-screening weekly budgets and eliminating any non-essential payments.  This projection should agree to weekly cash flow projections provided on each Friday for the ensuing calendar week with variances clearly identified.  By working with 5-day rolling projections, we can eliminate the last minute scramble to assure that  the payment is consistent with our situation.

In order to be eligible for payment, items must appear on the weekly and daily cash flow projections.  Failure to include on both will result in non-payment.  Since our payments are subject to heightened scrutiny, our general rule is that the practice of same day and manual wires will be discontinued.  In addition, please flag any payments made to related parties as these may require separate reporting to the Court.  Any questions on this process should be routed to George Wasaff.

Special Procedures for Debtors (Companies in bankruptcy)

See the attached Exhibit A for a list of the current Debtor Companies.  Additional companies may be added with each having its own petition date.  As a general rule, we are legally prohibited from paying any pre-petition liabilities.

The standard for what constitutes pre-petition is:
ï¿½	Were goods delivered to Enron prior to December 2, 2001 (or specific petition date for entities filing after Dec. 2)?
ï¿½	Were services provided prior to the petition date?
ï¿½	If requests for payment are not clear, the business unit must contact vendors and request them to provide an invoice, signed by an officer, stating what portion of the goods or services were delivered pre-petition.
ï¿½	If you are unsure or have any questions, please contact George Wasaff.

You must segregate any pre-petition claims for payment.  In virtually all cases these claims will not appear on the cash disbursement list because we are generally prohibited from making payment.  However, the Company does have very limited authority to make payment to pre-petition vendors deemed to be "critical".  In order for a pre-petition disbursement to be approved, such disbursement must:  (1) make sound business and operational sense; (2) be mission critical; and (3) there must not be a substitute vendor.  The business unit heads will be responsible for ensuring that recommendations to the Committee for any disbursements to critical pre-petition vendors meet this test.  The Committee's presumption will be that a vendor is not critical.  If you believe that a pre-petition claim clearly meets the "critical" test, you may submit it as a clearly flagged item, stating your reasons for requested payment.  The Committee and corporate management will consider these recommendations by the business unit.

Internal Controls

We need to reassess internal controls and determine if changes are required, especially in light of recent personnel changes.  All internal controls, new and existing, will be subject to review by Andrew Parsons.  He will be communicating with you regarding his assessment and requirements for any changes to be made.

I look forward to seeing you this afternoon at the meeting. 


Exhibit A - Enron Entities that Have Filed

Filed December 2, 2001

1.	Enron Metals and Commodity

2.	Enron Corp. (Main Case)

3.	Enron North America Corp. 

4.	Enron Power Marketing, Inc.

5.	PBOG Corp.

6.	Smith Street Land Company

7.	Enron Broadband Services, Inc.

8.	Enron Energy Services Operations, Inc.

9.	Enron Energy Marketing Corp.

10.	Enron Energy Services, Inc.

11.	Enron Energy Services, L.L.C.

12.	Enron Transportation Services Company

13.	BAM Leasing Company

14.	ENA Asset Holdings, L.P.

Filed December 3, 2001

15.	Enron Gas Liquids, Inc.

Filed December 4, 2001

16.	Enron Global Markets, L.L.C.

17.	Enron Industrial Markets, L.L.C.

18.	Enron NetWorks, L.L.C.


