Lucy: Tana tells me you are looking for some guidance as to which Enron entity should be used for booking trading transactions with various counterparties. There are a couple of general rules that apply to "normal" trading circumstances and I'll spell them out below, but remember that these are not hard and fast rules and may go straight out the window when circumstances vary (even just a little bit) from "normal." For example, abnormal situations exist where the trading transaction is in connection with another transaction with an Enron company (e.g. a financing or equity investment), the counterparty has a legally justifiable desire to trade with a certain Enron company, the product being traded is only traded by a particular Enron company or the counterparty is in a jurisdiction outside the country where we are trading (except as spelled out below). Having said all that, the following rules (generally tax driven) can be used as general guidelines: 1. If there is no master agreement in place between the counterparty and an Enron company, the trade should be entered into on behalf of the Enron company based in the country where the Enron trader is when the trade is concluded and, if there is any hope of further trading with the counterparty, Credit and Legal should be notified to negotiate a master agreement. Of course, if the counterparty is outside the country where we are trading, Legal should be consulted ahead of time (there are some countries where derivatives are actually illegal, special procedures must be followed or can't be done by us from the U.S.). 2. If there is a master agreement between the counterparty and either ENA or Enron Canada, and the Enron trader is in the U.S. or Canada, the trade should be entered into by the trader on behalf of the Enron company that is party to the master agreement. If the trader is outside of the U.S. or Canada, other rules may apply. 3. If there is a master agreement between the counterparty and ECT International (usually only European counterparties), and the Enron trader is in the U.S. or the U.K., the trade should be entered into by the trader on behalf of ECT International. Note that there are special considerations if the trader is in the U.K. based on U.K. regulatory issues (the trade is actually "arranged" by Enron Europe Finance and Trading Ltd. on behalf of ECT International). If such a master exists but the trader is not in the U.S. or U.K., the trade should be handed off to a trader located in one of those two countries for final negotiation and execution. It would be a good idea to consult with Legal or Tax if this comes up for more specific advice. These general rules relate to which Enron entity should be the legal counterparty to the transactions. This doesn't determine where within the Enron family the actual risk should ultimately reside. If we want the risk to be in an Enron company other than the Enron counterparty for contractual purposes, an intercompany transaction should be booked (probably through RMT) to get the risk in the right place.
Answer: Enron Entity for Financial Trading
Kim, Kelli and Jeff - I have taken a look at the Northern California Power Agency deal, and it looks pretty good from a credit standpoint. We currently have some exposure to NCPA on the power side, but it rolls off by the end of the year, so I think that we can still get this deal done. Some outstanding issues: 1. We MUST have a Master Firm in place with NCPA to transact on this deal. I can begin working on this, but I need to get NCPA's latest financial results to determine an appropriate collateral threshold for NCPA. This shouldn't be a huge hurdle. 2. We need to ask Jeff Hodge for his opinion with respect to NCPA transacting a deal of this tenor. There are sometimes tenor limits placed on municipal entities to limit the term under which they are authorized to transact. Jeff: How do we research this issue? NCPA has provided us a brief statement that indicates that "NCPA will work expeditiously to execute a definitive contract and has all the necessary approval authorities", but my feeling is that we need something a little more substantial than that. 3. Kelli: Have you spoken with Global Finance to price the embedded loan in this deal? 4. Kim: I don't think a credit reserve will be needed on this deal. 5. Kim: From the document that NCPA sent out, it appears that your Monday bid is preliminary and conditional. We need to make sure that NCPA understands our requirements with respect to executing a Master. Can your contact at NCPA help me get a copy of their latest financials so we can expedite that process? 6. Kim: ONE VERY IMPORTANT NOTE: NCPA's credit ratings have remained solid throughout the California power crisis, for a number of reasons. As such, I am pretty comfortable moving forward with this deal, given the above requirements. However, if their financial results indicate some problems, we may need to include some stringent credit requirements in the Master. I'm pretty sure that their results will look good, but this is a contingency to bear in mind as your prepare your bid. Please give me a call with any questions. Thanks, JRW
Answer: NCPA
Earlier this year, the Joint Legislative Audit Committee instructed the Legislative Analyst to prepare a fiscal and policy analysis of the California Power Authority. That report was released today during an informational hearing. I have forwarded a copy of the report to Jeff. I will forward a brief overview by facsimile to San Francisco, Houston and Portland. The highlights of the report are as follows: The focus of the CPA has shifted dramatically since its inception. The CPA originally focused on purchasing peakers whereas it is now focused on DSM. There are several areas that may warrant additional legislative activity: Provide legislative oversight Establish a mechanism for using revenue bonds Clarify the CPA's eminent domain authority Clarify the power of the CPA to invest in transmission Clarify the relationships between all California power agencies In addition, I spoke to Energy Committee staff today about next year's possible activities. In their estimation, the Legislature may be forced to address some of the items in the LAO report regarding the CPA. In addition, they have to do something regarding the bonds because SBX2 18 was never sent to the Governor because of his threatened veto. They expect no bills authorizing grants or incentives due to the state's budget crunch. Senator Bowen is still interested in DA and green DA, but they see this as a second tier item. The future of DA will be dictated in part by how the CPUC addresses the undercollection.
Answer: Legislative Update
market_relations@nyiso.com writes to the NYISO_TECH_EXCHANGE Discussion List: Dear Market Participants 1st Rochdale Cooperative. Ltd. is being removed from the NYISO-administered electric energy markets. The changeover of 1st Rochdale's customers to the provider of last resort, Consolidated Edison Company of New York, will take place on Friday, October 12 for the Saturday, October 13th market. 1st Rochdale had previously posted a sufficient amount of collateral to cover its obligations to the energy market and the NYISO anticipates, therefore, that no losses associated with this transition will be borne by the market. Regards,
Answer:
NYISO Market Participant change - 1st Rochdale Cooperative, LTD