Subject: Alberta PPA Financing
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked]
Date: Wed, 20 Sep 2000 03:42:00 -0700 (PDT)

I want to get a handle on how termination payments are handled vis a vis the 
collateral obligations, particularly where the Index moves down relative to 
the forward price and its effect on Swap 1.

@ $5.00 (assuming $5.00 example forward price) there is no issue.  There is 
no collateral obligation and Swap #1 settles at $300MM and Swap #3 settles at 
$0.

@ $6.00 (assuming $5.00 example forward price) there is $15MM collateral 
obligation of ECC to Swapco on Swap #1 and $15MM collateral obligation of RBC 
to ECC on Swap #3 each with $45MM collateral threshold, as Swap #1 settles at 
$360MM due from ECC to Swapco and Swap #3 settles at $60MM due from RBC to 
ECC.  This seems to make sense.  Swapco has a claim against ECC for $360MM 
with Enron Corp. Guarantee and $15MM of collateral.  ECC has a claim against 
RBC for $60MM with $15MM of collateral.

@ $4.00 (assuming $5.00 example forward price) there is $15MM collateral 
obligation of Swapco to ECC on Swap #1 and $15MM collateral obligation of ECC 
to RBC on Swap #3 each with $45MM collateral threshold, as Swap #1 settles at 
$240MM due from ECC to Swapco and Swap #3 settles at $60MM due from ECC to 
RBC.  This is where I get lost.  Swapco has a claim against ECC for $240MM 
with Enron Corp. Guarantee but has given $15MM of collateral when it owes 
nothing.  How is the collateral applied when it owes nothing.  RBC has a 
claim against ECC for $60MM with Enron Corp. Guarantee and $15MM of 
collateral.  This part seems to make sense.

Somebody smarter than me needs to explain.