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Enron Mail |
I agree with Milly's comments and concerns in his attached e-mail.
A few points: 1. I would send a clarifying memo, and would speak specifically to Diane Seib and Peggy Hedstom to ensure for the time being that all physical and financial power transactions receive legal review. This does not mean that Linda/Sharon have to document all of them, rather we can still leave it up to documentation where appropriate. But a lawyer needs to review all power confirms for the time being (physical and financial) to make sure that the product is being properly defined. 2. In terms of power product definition, Milly has raised valid concerns which warrant legal review, which are market opening risk, change in market rules between now and market opening, and the size of the transactions being entered into. There is also the inherent risks of the PPA, in essence interrutible risk. All these risks need to managed at the front end. i.e. Once a deal is executed by the trader, the lawyer cannot fix it after the fact. Although the power traders or originators should already understand these risks for the product when they are transacting, please meet with Davies and Zufferli ASAP to ensure that they are cognizant of these risks when they are transacting. 3. Please check our corporate resolutions to make sure that they cover off execution of confirms for power transactions in a similar fashion to gas transactions (i.e. anything over a year must be signed by Milly, if it is less than a year it can be signed by Zufferli as the responsible trader or Davies as the responsible originator). I note, however, for the time being, at least until the market opens, Milly wants to see all power trades regardless of tenor. Peter. ---------------------- Forwarded by Peter Keohane/CAL/ECT on 11/10/2000 02:31 PM --------------------------- Rob Milnthorp 11/10/2000 08:40 AM To: Greg Johnston/CAL/ECT@ECT cc: Peter Keohane/CAL/ECT@ECT Subject: Re: Canadian Financial Trading Confirmation Process Greg, ok with your process for the most part. Would like to see all power swaps route through legal until the market is open, operating, and we have a complete understanding/comfort with the Alberta Market. Frankly, the size and magnitude of these swaps (ie 25MW - 100MW) warrant legal looking at (and me for that matter). I think we dropped the ball when we sent out power swap confirms with little thought given to market opening risk, change in rules, rate caps, etc. These issues should have been thought through between commercial and legal before any swaps were executed. In some respects, we have now doubled down on our PPA exposure by entering into "unconditional" swaps. Regards Milnthorp Greg Johnston 11/10/2000 08:23 AM To: Mary Cook/HOU/ECT@ECT, Sharon Crawford/CAL/ECT@ECT, Chris Gaffney/TOR/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Peggy Hedstrom/CAL/ECT@ECT, Tana Jones/HOU/ECT@ECT, Peter Keohane/CAL/ECT@ECT, Jonathan McKay/CAL/ECT@ECT, Rob Milnthorp/CAL/ECT@ECT, Mark Powell/CAL/ECT@ECT, Dianne Seib/CAL/ECT@ECT, Linda Sietzema/CAL/ECT@ECT, Mark Taylor/HOU/ECT@ECT, John Zufferli/CAL/ECT@ECT cc: Subject: Canadian Financial Trading Confirmation Process Further to a discussion with Mark Taylor, I wanted to confirm our collective understanding/proposal regarding the legal procedures associated with the financial trading process in Canada. As you are all aware, all financial confirms for Enron Canada are now generated and distributed by the confirm desk in Calgary. However, it seems that there has been some confusion relating to the legal procedures associated with this process. In short, I believe that everyone is in agreement that the legal process regarding Canadian financial confirms will be basically the same as for Canadian physical confirms. That is, as is currently the process for physical deals, the commercial people will generate all deal tickets and, to the extent that the financial transactions are straight forward, the Calgary confirm desk will generate, have executed and distribute to counterparties the confirmation letters based upon those deal tickets, with no involvement of the legal department. However, for any financial transactions that are out of the ordinary or contain special terms (as well as amendments), just as with physical transactions, the confirm desk will provide the deal ticket to Linda or Sharon in Calgary. Linda and Sharon will then prepare the draft financial confirm based upon the deal tickets, which will be reviewed and approved by either myself or Mark Powell. Once approved, the confirm will be initialed by the reviewing lawyer, checked for credit and sent to the commercial person to review, approve and have executed by McKay, Milnthorp or Zufferli as appropriate. The executed confirm will then be returned to either Linda or Sharon, who will attend to distributing it to the counterparty. Again, this will only be required for transactions which are out of the ordinary. With respect to negotiating and implementing, and addressing ongoing legal concerns with respect to, ISDAs on behalf of Enron Canada, Mark Taylor's group, and I understand specifically Mary Cook, will continue to have responsibility for such matters. Therefore, to the extent that we need to put an ISDA in place with a counterparty or if a counterparty has legal concerns about the implementation of the ISDA, the process will be the same as it has been in the past, meaning that those matters will be dealt with in Houston. Given that Linda and Sharon will now have responsibility for preparing initial drafts of atypical financial confirmations, I think it is essential that Tana spend a few days in Calgary as soon as her schedule permits to run each of Sharon and Linda (as well as perhaps some of the people in Peggy's group who will be dealing with financial confirmation matters) through her ISDA training course and to help Linda and Sharon set up the process in our legal group to deal with these matters. As well, we will need to ensure that Linda and Sharon receive (either from Houston or Dianne) electronic versions of all confirmation precedents (ie. confirm forms, amendment forms, etc.) necessary for them to properly undertake these activities. If anyone has any questions or concerns regarding the above, please do not hesitate to contact me. Otherwise, I think we should implement these procedures as soon as possible, including having Tana join us for a few crisp winter days in Calgary. Thanks Greg
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