Subject: Re: OneOK storage deal
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Wed, 21 Feb 2001 04:34:00 -0800 (PST)

If you have any questions about this let me know.  It will be a pain in the 
ass if the deal is between Enovate and Oneok but is then flipped to EMW to 
manage.  There will be twice as many legs and the volumes will need to be 
adusted at minimum on a monthly basis, and likely a weekly basis.  Again, let 
me know if you need anything.

DG

From: Richard Tomaski@ENRON on 02/21/2001 11:42 AM
To: James Simpson/HOU/ECT@ECT, Kevin Radous
cc: Gregg Penman, Darron C Giron/HOU/ECT@ECT, Mark Mixon, Kay 
Classen/NA/Enron@Enron, Lee Fascetti, Paul Burgener, [email-masked] 
Subject: OneOK storage deal

Enovate sold a virtual storage service to OneOk marketing.  

Transaction parameters:
MSV = 500,000 mmbtu
Daily injection \ withdraw rights = 0-25,000
enovate's demand charge = $1.75 per MSV mmbtu
Commodity charges = none
Term: Apr01 - Mar02
Location: People's Citygate

As we all know, our risk managment systems will not handle this kind of a 
transaction without al ot of manual manipulation. Below are my 
recommendations for booking this transaction.

1.  enovate should book the expected usage pattern based on the current 
market curve with a zero price (and hedge, if the trader wants) in enovate's 
MTM risk books.  The trader should periodically adjust this usage pattern as 
market conditions change.  The negative fallout from this expected usage 
should be applied against the demand charge.
 
2. As Oneok actually withdraws or injects gas into the virtual storage, we 
should record the transaction in Sitara and adjust our expected usage deal.  
The trader can hedge this position financially, physically or may be able to 
use the PGL Hub.

3. The demand charge should be booked in Tagg & Sitara and offset with 
financial annuity so we will not realize any MTM gain on the demand charge.  
We will adjust this financial annuity as losses are incurred.  Once the 
annuity is all used up, we will take all losses as incurred.  Any annuity 
amount left over at completion of the program will be taken as a gain at that 
time.

4.  This deal will be managed in the EMW book eventhough the actual 
injections\withdraws will be recorded in the enovate book.  The enovate 
physcial book will be flat - in and out at a zero price.

Cost of Carry should work in our favor unless they elect to go negative 
early.  All cash requirement should fall out in our EMW books.

Jim will build a model to determine the expected usage and track his related 
hedges (This will be similar to what Lee has, but not as complicated)

This is not intended to be a comprehensive description of how to book this 
transaction, only an outline what I believe should be reflected in our 
books.  Please forward any questions or comments to me.  Thanks.

Richard