Message-ID: <15137972.1075857184318.JavaMail.evans@thyme>
Date: Thu, 17 Feb 2000 09:30:00 -0800 (PST)
From: donald.black@enron.com
To: carl.livermore@enron.com, berney.aucoin@enron.com, grant.masson@enron.com
Subject: TECO model
Cc: scott.healy@enron.com, mike.miller@enron.com, benjamin.rogers@enron.com, 
	lou.stoler@enron.com
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X-From: Donald M- ECT Origination Black
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Team,

We've done a lot of good work lately on the evaluation models and I think we 
are converging on a platform that accurately models the product, the project 
and my structure's risk.  The only remaining issues when we're done will 
relate to the curves.

Just so we're all on the same page, I thought I would lay out the base 
scenario:

Hourly vols
Mid power and oil curves
Beginning debt of $375/kw amortising mortgage style over 20-years
Debt interest rates of T+225
Plant residual value of $100/kw
Enron will own a 50 MW call from 5/2001 to 12/31/2020.  Strike prices will be 
$50/mwh for years 1-5, $75/mwh for years 6-10, and $100/mwh for the balance 
of the term.
The basic put or no put trigger algorithm is (plant value + put option value 
>= par amount of bonds outstanding).  As the model calculates equity's 
decision whether or not to put the plant to Enron, we should reduce each 
years par amount of bonds outstanding by the debt service reserve fund.  This 
proxy's the fact that equity will consider when making their put decision 
each year that there are moneys in the DSRF, working capital reserves and 
equity sweep accounts.
Whatever power/oil correlation's structuring thinks are appropriate.

I hope to see results Monday.  If there are any questions, please call me at 
3-4750.

regards,

Don Black