Message-ID: <27526617.1075857041167.JavaMail.evans@thyme> Date: Tue, 7 Mar 2000 10:40:00 -0800 (PST) From: john.sherriff@enron.com To: soma.ghosh@enron.com Subject: Re: Eastern Cc: william.bradford@enron.com, tanya.rohauer@enron.com, vasant.shanbhogue@enron.com, bryan.seyfried@enron.com, vince.kaminski@enron.com, david.weekes@enron.com, steve.young@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: william.bradford@enron.com, tanya.rohauer@enron.com, vasant.shanbhogue@enron.com, bryan.seyfried@enron.com, vince.kaminski@enron.com, david.weekes@enron.com, steve.young@enron.com X-From: John Sherriff X-To: Soma Ghosh X-cc: William S Bradford, Tanya Rohauer, Vasant Shanbhogue, Bryan Seyfried, Vince J Kaminski, David Weekes, Steve W Young X-bcc: X-Folder: \Vincent_Kaminski_Jun2001_9\Notes Folders\Credit X-Origin: Kaminski-V X-FileName: vkamins.nsf Unless we can model the protection in some form we will not know what our true exposure is. So I need our team reassessing how we can model the benefit of the credit proctection. Please keep working on this. John Soma Ghosh 07/03/2000 17:57 To: John Sherriff/LON/ECT@ECT cc: William S Bradford/HOU/ECT@ECT, Tanya Rohauer/HOU/ECT@ECT, Vasant Shanbhogue/HOU/ECT@ECT, Bryan Seyfried/LON/ECT@ECT Subject: Re: Eastern John, We are currently not modelling the effect of insurance on Eastern on an individual risk basis. I have spoken at length with Houston Research & Credit Risk Management on this & whilst we can look at the effect of protection on the portfolio, there appears to be no viable way of modelling protection on a name by name basis; Given that the portfolio of risk is dynamic, specific allocation of protection is not appropriate. As I mentioned in my earlier message there is $135mm cap on any one loss, assuming no losses have occured prior to that. I am happy to discuss this further with you if required. Bill, I'd appreciate any comments you may have re. the above. Regards, Soma John Sherriff 06/03/2000 15:06 To: Soma Ghosh/LON/ECT@ECT, Bryan Seyfried/LON/ECT@ECT, Mariano Gentilini/LON/ECT@ECT cc: Subject: Re: Eastern Soma How are we modeling the affect of the insurance packages on the Eastern deal? John Soma Ghosh 06/03/2000 11:53 To: John Sherriff/LON/ECT@ECT cc: Subject: Re: Eastern The protection is not a fixed allocation of protection to individual counterparties but covers the global portfolio of risk. Enron has in place 3 tranches of credit insurance covering up to $135mm per event. Whilst the insurance is not counterparty specific, it would be available for credit loss on Eastern provided that losses had not been incurred prior to an Eastern loss. I have already discussed with Houston Credit Risk Management & Research the possibility of allocation of risk protection on a name basis; at this point in time there has been no resolution in finding an appropriate way to allocate protection by name. Summary of insurance: Enron absorbs the first $10mm of losses in any one year capped at the aggregate of $30mm over a ten year period. AEGIS absorbs the next $35mm of losses for the same ten year period. Chubb will pick up the next $50mm losses for any single event and $100mm in losses in the aggregate for 5 years RSA takes the next $50mm for losses in excess of $95mm over a five year period & covers the top 9 counterparties by exposure Regards, Soma John Sherriff 03/03/2000 18:16 To: Soma Ghosh/LON/ECT@ECT cc: Subject: Re: Eastern Soma How does the company's credit insurance (done by Houston last year) affect this exposure? John Soma Ghosh 03/03/2000 16:24 To: John Sherriff/LON/ECT@ECT cc: David Weekes/LON/ECT@ECT, Steve W Young/LON/ECT@ECT, Barry Pearce/LON/ECT@ECT, Fernley Dyson/LON/ECT@ECT, William S Bradford/HOU/ECT@ECT, Rick Buy/HOU/ECT@ECT, Oliver Gaylard/LON/ECT@ECT Subject: Re: Eastern Please note that Total Exposure $ number is $979.8mm NOT $783.2mm. Apologies, Soma ---------------------- Forwarded by Soma Ghosh/LON/ECT on 03/03/2000 16:22 --------------------------- Soma Ghosh 03/03/2000 16:17 To: John Sherriff/LON/ECT@ECT cc: David Weekes/LON/ECT@ECT, Steve W Young/LON/ECT@ECT, Barry Pearce/LON/ECT@ECT, Fernley Dyson/LON/ECT@ECT, William S Bradford/HOU/ECT@ECT, Rick Buy/HOU/ECT@ECT, Oliver Gaylard/LON/ECT@ECT Subject: Re: Eastern John, as requested: Total exposure as at 29 Feb 2000: o620.9mm ($783.2mm) Eurocash I monetezation: -o124.7mm (-$196.1mm) Less credit derivatives: o40.0mm ($63.1mm) Total Net Exposure as at 29 Feb 2000: o456.2mm ($713.9mm) Net month on month increase: o125.4mm ($197.9mm) Total Value of Eastern Group Guarantee: o520mm ($820.6mm) Amount backed by TXU: Zero As well as the increase in overall exposure, please note the change in shape of the exposure month on month most notably credit exposure now peaking at the front end of the transaction (ex credit derivs. the max exposure is at day 1), compare to max. exp. at Feb 2005 for month end Jan.. Shape of profile & increase in MtM primarily due to: - Power curve downward shift at front end yrs 0-11 - Power curve upward shift at back end yrs 12-18 - Gas curve upward shift yrs 1-5.