Message-ID: <26906732.1075844548208.JavaMail.evans@thyme>
Date: Wed, 19 Apr 2000 09:41:00 -0700 (PDT)
From: sara.shackleton@enron.com
To: mark.taylor@enron.com
Subject: physical option - proposals, term sheets, pricing
Cc: brent.hendry@enron.com
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Mark:  How should we handle this?  In the past, I have provided Andrea 
Bertone with Elizabeth Sager's latest (and evolving) physical trading forms 
which Tozzini has used as a starting point.  Sara
---------------------- Forwarded by Sara Shackleton/HOU/ECT on 04/19/2000 
05:12 PM ---------------------------


Sami Arap@ENRON_DEVELOPMENT
04/19/2000 02:43 PM
To: Rick Hopkinson/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Lynn 
Aven/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Sara Shackleton@ECT
cc:  
Subject: physical option - proposals, term sheets, pricing

FYI (just thoughts ...)
---------------------- Forwarded by Sami Arap/ENRON_DEVELOPMENT on 04/19/2000 
05:50 PM ---------------------------


D'Arcy Carroll
04/19/2000 01:51 PM
To: Don Black/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Remi Collonges/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Joao 
Guimaraes/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Luiz 
Baccaro/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Brett R 
Wiggs/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Joao Carlos 
Albuquerque/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Sami 
Arap/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, James M 
Bannantine/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT 

Subject: physical option - proposals, term sheets, pricing


Group - we need to address the due diligence for executing the " first " 
physical option transactions in Brasil and for Direct Sales ( and Wholesale 
).  The initial industrial candidates are: 

Owens Corning ( 1.6MWs firm ). 1 site,  peaking unit.  break-even R$182/MW - 
5 year term
Carbocloro ( 10 MWs firm ). 1 site 3rd part re-sale(Copel) , monthly call 
option. supplanting product sales, estimate minimum incentive strike R$ 
125/MW  - 3 or 4 year term,  
O Globo. (1-3MWs) 2 sites, peaking units.  awaiting summary terms and 
conditions. 
White Martins (10-15MWs ).   8 sites (MG), intersite flexibility to adjust 
product between sites and maximize energy re-sale.  3rd party re-sale 
(Cemig). short-term capacity basis indutrial demand for gases short-term 
variable price - 2 or 3 year

In all four cases, Enron is buying the right to buy power and all 3 are 
executable in Q2/Q3.  We are expecting (hoping) to transact paying no premium 
- with the focus on the strike price itself being the profitability incentive 
to the customer.  However, we'll need to guage our pricing ability ( and 
appetite from a book and risk control point of view ) for option length and 
the forward curve, not to mention getting the terms and conditions into 
reasonably standardized and legally binding contracts.  

Wholesale. Am including Wholesale on the wire given both the synergies on 
contracting and pricing and given the significant potential ( benefit and 
opportunity to Enron's regional trading effort ) to launch the physical and 
financial option product line into the commercial Wholesale effort.  

Note:  Particularly to put options - how many LDCs would we expect to charge 
us anything for our right to sell them power at R$30 or R$40/MWh ( or have 
charged us  3-5 months ago for the right to sell closer to R$50-60.  

We're having first sit down with Remi and Sami this afternoon, Wed Apr 19; 
please shoot any/all additional inputs, insights.