Message-ID: <28720963.1075844451028.JavaMail.evans@thyme>
Date: Tue, 24 Aug 1999 12:14:00 -0700 (PDT)
From: no.address@enron.com
Subject: Re: Champion - legal
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X-From: Brent Hendry AT ENRON_DEVELOPMENT@CCMAIL
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I am still somewhat unclear on the indexing structure but I will specify what 
I see the deal as and you can correct me if I get it wrong.
When the deal was described to me it sounded like we were buying a floor and 
that we would imbed the floor into the physical power deal.  After looking at 
the structure you sent it looks like they are the ones buying the floor. They 
are getting paid (by virtue of the reduced cost of energy) if the spot goes 
below the strike.

Based on your email this is how I think the deal would be structured.

We supply on a firm basis 3MW of energy for three months.

They pay a floating price for the energy based on the following formula: 
R$42.75 minus an amount, if positive, equal to [factor] multiplied by the 
difference between [a strike price in R$] and the Spot Price.  The Spot Price 
will be in R$ per pound of a paper product quoted in R$ [which is to be 
defined]. (I did not understand your third bullet point very well.  The 
relationship between the two indexes was unclear and contrary to your formula 
it did not appear that these indexes were quoted in R$.  Please clarify these 
issues for me.)   We will need to know where and when to pick up the spot 
price so that everyone understands what published price will be used each 
month when the price is determined.  The [factor] will be something you will 
need to come up with to correlate the volumes you are hedging with the amount 
of electricity actually sold.  We will also need to make clear if there will 
be a floor on how low the price can go.  Do you intend for the price to be 
able to go below zero?  If so, what do you intend to happen?  Based on your 
answers we will need to go to outside counsel to make sure we do not violate 
the Brazilian anti-gaming laws or any regulations.

I may have missed the point of how the trade is supposed to work so any 
additional information would be helpful before we go to outside counsel. 
Thanks.




D'Arcy Carroll
24/08/99 05:44 PM

To:   Andrea Bertone, Brent Hendry/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:   Claudia Brun, Don Black
Subject:  Champion - legal

Pls find overview listed re ECE-Champion-Elektro transaction:

ECE selling equivalent of 3MW (Peak- and Off-peak) energy eg consumption
take-or-pay for period Sep - Oct - Nov
Price will be R$42.75 which represents 5% discount to present average
Elektro rate of R$45
ECE wants to adjust on a monthly basis the R$42.75 sales price downward 
should the price of PPI UK A$ cut size 80g index or the PPI UK A4  Reels 60g 
index average below Strike Price x (Pounds per Metric Ton).  The adjustment 
will be based on formula: Avg. Monthly hedged volume * (Index avg-Strike 
Price) * R$/Pound spot price

We are trying to finalize negotiations this afternoon re both the energy sale 
and the incorporated index and strike etc.,... and should feel like we have 
substantial flexibility to articulate how best to structure the transaction. 
Pls shoot any/all inputs including needs for additional information.