RE: City of Palo Alto - credit reserve

As with muni bonds, it is nice to be able to just raise taxes to cover your costs. (Unless you are the taxpayer). Tx for update, Rick

-----Original Message-----
From: Ngo, Tracy
Sent: Tuesday, May 15, 2001 10:48 AM
To: Buy, Rick
Subject: RE: City of Palo Alto - credit reserve

Rick,

The muni's in CA have had the ability to purchase power out in the market since they never signed on to CA's deregulation plan in '98. Initially, the rating agencies were bullish on the IOU's and bearish on the munis assuming that the munis would not get the benefit of recovering stranded costs in a timely manner. However, as we've seen lately with all of the turmoil in CA, their perspectives have changed. Also, Palo Alto's affluent customer base is 1/3 local and 2/3 commuters and is mainly comprised of schools including Stanford University and the Palo Alto School District. Palo Alto in fact has one of the lowest unemployment rates in Santa Clara County.

We are basing our credit terms in all of the trading contracts to reflect the following:

-that we can only go to the proprietary 'enterprise' funds s.a. electric, gas and water funds for recourse and NOT the general fund
-the debt covenants tied to the utility revenue bonds reflect the net revenue pledge allocation of those enterprise funds to service the annual DS
-Palo Alto overall has minimal debt levels and the fact that the majority of the assets in the funds are comprised of rate stabilization fund reserves
-inclusion of Palo Alto's ability to raise rates sufficient to cover operating costs and annual DS as a MAC (I truly value this covenant)
-tiered margining lines based on S&P and Moody's ratings

Hope that helps.

Tracy

-----Original Message-----
From: Buy, Rick
Sent: Thursday, May 10, 2001 11:26 AM
To: Ngo, Tracy
Subject: RE: City of Palo Alto - credit reserve

The city buys power? Has PA been downgraded due to dot com flops? Rick

-----Original Message-----
From: Ngo, Tracy
Sent: Wednesday, May 09, 2001 12:02 PM
To: Hardy, Trey; Chang, Fang; Law, Samantha; Dunton, Heather
Cc: Rosman, Stewart; Badeer, Robert; Belden, Tim; Buy, Rick; Bradford, William S.; Rohauer, Tanya; Sacks, Edward; Conwell, Wendy; Radous, Paul
Subject: City of Palo Alto - credit reserve

Please note the following addition to the domestic credit reserve for May 2001:

CP: City of Palo Alto
Enron Entity: EPMI
Deal #: 605356.1
Deal Specifics: EPMI Sale
Term: 6/1/2001 thru 1/31/2005
Delivery Point: NP-15 (Firm CAISO Energy)
Volume: 25MW, 7X24; 804,600 nominal MWh)
Price: $95.00
Trader/Mid-Marketer: Bob Badeer/Stewart Rosman
Credit Reserve Amount: $185,000 (one hundred eighty-five thousand USD)

RAC: Deal confirmed under new EEI Master Power Purchase and Sale Agreement w/margin rights.

Please let me know if you have any questions to the above.

Regards,
Tracy Ngo
503-464-8755