IN: Mark, re. the above, we are working on a significant number of divestments (very important transactions for cashflow reasons totalling potentially over 500MM US) in Europe that are likely triggers; I urgently need to address this with you guys - Michael Brown wants me to sort out a waiver letter / procedure before the weekend. Can't get a hold of Lance. Could you or Lance give me a shout this morning. Thanks, Marcus

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OUT: negative covenants in merger agreement

IN: I am changing the way the curve is generated starting in Jan 2004 to better replicate seasonal fundamentals. There are convincing arguments as to why the summer/winter spreads should tighten over time. However, in the previous methodology they blew out. For instance summer/winter in Cal 3 was .232 while Cal 10 was .256. I have added a seasonality dampening function that both contracts the summer/winter spread and applies a premium to the electric load demand months of July and August over time. The formula for the curve remains the same except for a premium lookup for the month as well as for the year. These premiums are as follows: Jan -.008 Feb -.004 Mar -.001 Apr .002 May .003 Jun .004 Jul .004 Aug .004 Sep .003 Oct .002 Nov -.003 Dec -.006 These premiums start in Jan 2004 On Wednesday Jan 2003 settled 2.959, the 3/4 spread was marked at .0375, the 4/5 spread was marked at .0475. In the old methodology Jan 2003 = 2.959 Jan 2004 = 2.959 + .0375 = 2.9965 Jan 2005 = 2.9965 + .0475 = 3.044 In the new methodology Jan 2003 = 2.959 Jan 2004 = 2.959 + .0375 - .008 =2.9885 Jan 2005 = 2.9885 + .0475 -.008 = 3.028 The only change in the formula is from: Month x = Month (x- 1 year) + lookup on year on year table to Month x = Month (x- 1 year) + lookup on year on year table + lookup on month premium table The seasonality premiums will change over time and I will let you know when I change them

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OUT: New curve generation methodology

IN: The consensus of the group is to hold our meeting in Washington on November 12. We'll meet from 10-4. John Crespo has graciously offered to host the meeting at Hess' offices in Alexandria, Va. located at: Amerada Hess Corporation 2800 Eisenhower Avenue -- Third Floor

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OUT: Drafting Committee Meeting - November 12

IN: All, The unofficial word on the street is that deal closing is slated for Feb 7 and UBSWenergy launch is Feb 11. Our intention is to launch financial products only for our regions beginning with Summer '02 through Cal '03. As we are successful in signing up counterparties to reach a critical mass, we'll be adding products that are closer to the front of the curve (less correlated to NG.) We need to do this to protect ourselves from "ambushes" by single parties when we don't have a critical mass of players that we can lay risk off with. Please note that, as a result, we may "only" have a couple of more weeks to play with in terms of studying up and refreshing ourselves on the fundamentals in our respective regions. Therefore, I'd like each of you to fill-in the information listed on the attached document for the region listed by your name. Feel free to use any resources you need (fundies, etc.) and have them finished by next Thurs. (2/7). Someone please nominate yourself to format each paper in the same manner and have them all put together in one binder nice and pretty. Have a goodie. Flet ECAR (Cinergy) - Krugh MAIN (ComEd) - Ave' SERC (TVA) - Jackie SERC (SOCO) - Twisty SPP (ENT) - New Boy

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OUT:
Regional Research Projects