Subject: Canadian function currency
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Thu, 24 Jan 2002 14:00:42 -0800 (PST)

We have traditionally have had currency issues in Canada regarding P&L preservation versus cashflow preservation.

We have been valued in P&L under the US$ but due to Revenue Canada reasons our functional currency has been C$ (i.e.  the preponderence of cashflows were in C$ from the legacy gas deals, PetroCanada, Suncour, etc, and the PPA position).  Since trader evaluation at year end has been in US$, traders would hedge C$ positions immediately as the trade occured.  The hedge would extend until the position rolled of his book.  From a P&L systems point of view, this would preserve the trader's P&L in US$.  However, from a treasury point of view currency risk would still exist until cash exchange hands; these cash exchange dates were different for financial trades, physical trades and inter-company trades.  There was also some currency risk (albeit small) between billing dates from SAP and settlement dates of the respective trade type.

It is my opinion that the functional currency should match the evaluation currency in order to mitigate many of the above problems.  To a certain extent, I am indifferent if it is US$ or C$.

The timeline of the decision is being driven by our accounting group who need to set up the SAP system.  They are trying to work within a deadline to have the company capable of performing transactions by Jan 29.  This is the date that they have been told to meet by Houston.  As a result, we would need a determinination of the functional currency by Mon Jan 28.