Subject: New Westpark Collateral rules
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Wed, 3 Jan 2001 07:22:00 -0800 (PST)

Hey Jim,

While I was out on vacation last week, Patrick unwound some positions that 
brought Westpark onto the radar screen.  Not having my understanding or 
knowledge of this relationship, the credit analyst looking at the trades 
asked the market risk to run a 5-day VAR.  Excluding December, the open 
position (which later was completely unwound) had positive 5-day VAR that 
exceeded the collateral being held, i.e. $1.5MM.  Because Patrick did 
eventually close out his position while deep in the money, their is no credit 
risk on any of his business.  However, combing the volatile nature of this 
price environment (prompt, gas daily being so dramatic), large volumes, and 
one sided nature of trading, we are now uncomfortable with the $300M/Bcf rule.

Until the market calms a bit, what was once quoted as $300M for each Bcf 
open, is now $1MM for each Bcf open.  This collateral to be posted upfront.  
By increasing this multiple, we should easily be able to stay within the 99th 
percentile of probable VAR.

Please communicate this strategy to Patrick and let me know if you would like 
to schedule a meeting to further discuss.

thanks
brant