Message-ID: <29473214.1075859996092.JavaMail.evans@thyme> Date: Mon, 8 May 2000 09:38:00 -0700 (PDT) From: paul.simons@enron.com To: mark.haedicke@enron.com, jeffrey.hodge@enron.com, alan.aronowitz@enron.com, elizabeth.sager@enron.com, mark.taylor@enron.com, justin.boyd@enron.com, mark.elliott@enron.com, robert.quick@enron.com, edmund.cooper@enron.com, lorna.jones@enron.com Subject: New UK Power Trading Agreement - the "Grid Trade Master Agreement" Cc: michael.brown@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: michael.brown@enron.com X-From: Paul Simons X-To: Mark E Haedicke, Jeffrey T Hodge, Alan Aronowitz, Elizabeth Sager, Mark Taylor, Justin Boyd, Mark Elliott, Robert Quick, Edmund Cooper, Lorna Jones X-cc: Michael R Brown X-bcc: X-Folder: \Mark_Taylor _Dec_2000\Notes Folders\Notes inbox X-Origin: Taylor-M X-FileName: mtaylor.nsf As you will see this has now been finalised and is attached below. ---------------------- Forwarded by Paul Simons/LON/ECT on 08/05/2000 16:35 --------------------------- Ali Lloyd 08/05/2000 09:44 To: Paul Simons/LON/ECT@ECT, David Hardy/LON/ECT@ECT, Diana Higgins/LON/ECT@ECT, Janine Juggins/LON/ECT@ECT, Richard Lewis/LON/ECT@ECT, Eric Gadd/LON/ECT@ECT, Rob Bayley/LON/ECT@ECT, Simon Hastings/LON/ECT@ECT, ECT London UK Power Trading, Peter Morris/LON/ECT@ECT, Gail Hill/LON/ECT@ECT, Jonathan Bond/LON/ECT@ECT, James New/LON/ECT@ECT, David Hutchinson/LON/ECT@ECT, Paul Dawson/Govt. Affairs/LON/ECT@ECT, Lee Munden/LON/ECT@ECT cc: Subject: Grid Trade Master Agreement Attached is a copy of the final version of the new Grid Trade Master Agreement developed by Allen & Overy on behalf of the UK Electricity Industry (specifically the EFA Association). The agreement is designed to replace the EFA Standard Terms and Condition as the standard contract for OTC electricity trading post-NETA. The agreement is for physical delivery 'on the system' achieved by notification of Energy Contract Volumes to BSC Co. (Hence it is similar to the NBP Contract in gas). The agreement is heavily influenced by ISDA language. Enron (through Paul Simons and others) has contributed significantly to the development of this contract. Hence I would hope we are happy to trade on it unamended. However if anyone has any significant concerns about the contract or would like us to agree any extra clauses bilaterally with counterparties then please speak now (by the end of this week) or forever hold your peace. Later this month we will begin the process of signing up with counterparties. With each party we need to agree a number of items as follows (see Schedule 2): Who acts as no the ECV Notification Agent (can be one of the parties or a third party). My view is we would do it at a price (to compensate us for the assymetrical risk we would be taking on) - we are currently thinking about what this price should be. The contract default is that the Buyer acts as the ECV Notification Agent. Method of transmission of confirms (default fax) - Gail please comment. Compensation Threshold. If a party fails to perform its obligations relating to contract notification or nomination then it pays damages to the other party to keep it whole (ie it pays the cash out charges incurred by the other party). The Compensation Threshold allows termination if these damages reach a certain level in any month. The default is 'not specified' - ie no termination. Legal please comment. Cross Default Threshold - this defines a minimum payment default level above which cross-default applies. Credit Department please advise. Termination Payment Method. The contract has two approaches to calcualting termination payment - the "Loss" method and the "Market" method. Leagl/Credit - please advise on preference. Change in Taxes - this clause can be switched on or off - Tax Dept please advise. Credit Support - to be discussed with Credit Dept on a case by case basis. Rollover Clause - the Agreement has a clause in it which automatically converts existing EFA deals to Grid Trade Master deals when NETA starts. This clause can be switched off, but presumably we would wish to keep it switched on. In agreeing GTMs withg counterparties, we should start with our biggest counterparties first. I would suggest: Entergy Dynegy Accord National Power/npower TXU AEP Aquila British Energy Yorkshire Scottish & Southern I understand Richard has nominated Derek to start this process. Any comments? Ali