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Enron Mail |
At Brent's request, I am sending you the memo below.
----- Forwarded by Tana Jones/HOU/ECT on 10/31/2000 09:41 AM ----- Molly Harris 10/18/2000 06:37 PM To: Meredith M Eggleston/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Paul Smith/HOU/EES@EES, Karen A Cordova/HOU/EES@EES, James E Keller/HOU/EES@EES, Timothy J Hamilton/HOU/EES@EES, Eric Melvin/HOU/EES@EES, Evan Hughes/HOU/EES@EES cc: Tana Jones/HOU/ECT@ECT, Allison McHenry/HOU/EES@EES, Larry Joe Hunter/HOU/ECT@ECT, William S Bradford/HOU/ECT@ECT, Ted Murphy/HOU/ECT@ECT, Vicki Sharp/HOU/EES@EES, Wanda Curry/HOU/ECT@ECT, Michael Tribolet/Corp/Enron@Enron, David Gorte/HOU/ECT@ECT, Vladimir Gorny/HOU/ECT@ECT Subject: Springs SWAP Confirmations From a Credit perspective, I informed Allison that credit provisions are not required for these particular deals since I learned of the trades 2 days ago (after the deals had been executed without our approval upfront). Credit believes it does not make sense to execute stand alone financial deals. These deals should be executed as amendments to the pricing component of the physical contracts (i.e., a restructuring). This process would mitigate the operational, credit and legal risks of this proposed business. My understanding of the business strategy of EES is to enter into financial transactions to hedge the portfolio, not to execute financial trades with end users. Please advise if the legal position is changing. Assuming we are unable to achieve the aforementioned solution, these deals raise more significant issues regarding support and control of new business endeavors for EES which already has significant infrastructure and control issues. It raises issues to be resolved on: Credit approval and monitoring Credit provisions Legal support in EES with financial and ISDA experience Netting issues and additional credit risk from having multiple masters with our clients (physical and financial) Execution of masters post trade execution Capturing and monitoring these OTC financial trades separate from financial settlements of physical trades Managing portfolio position risk Operational issues capturing and properly valuing the trades Operational support for confirmations and ensuring timely execution In short, we need to establish processes to support this business. I will set up a meeting with relevant parties to discuss further. In respect to the attached confirmations for Springs, additional questions should be raised with regard to operational/billing and legal implications for consolidated billing of financial and physical invoices. This has been specified in the payment date. Is EES capable of accomplishing this operationally today? Doesn't this raise legal issues of consolidated billing and settlements under two different contracts which do not stipulate netting (physical with financial)? Regards Molly From: Tana Jones on 10/18/2000 12:37 PM To: Allison McHenry/HOU/EES@EES cc: Karen A Cordova/HOU/EES@EES, Larry Joe Hunter/HOU/ECT@ECT, Marianne Castano/HOU/EES@EES, Molly Harris/HOU/ECT@ECT, Paul Smith/HOU/EES@EES Subject: Re: Springs SWAP Confirmations I'm sure you all know this by now, by Molly Harris had told me this deal does not need any additonal credit terms added. Allison McHenry@EES 10/17/2000 05:35 PM To: Marianne Castano/HOU/EES@EES, Karen A Cordova/HOU/EES@EES, Paul Smith/HOU/EES@EES, Tana Jones/HOU/ECT@ECT cc: molly.harris@enron.com, Larry Joe Hunter/HOU/ECT@ECT Subject: Springs SWAP Confirmations Attached are the most current versions of the Springs SWAP Confirmations, with changes suggested by Joe Hunter, and Annex A. Molly advised us not to send the confirmations noting Credit Provisions would follow. Tana has offered to help us draft the Credit attachment if we give her the details. Again, I am turning my file over to Karen Cordova while I am on vacation, and the confirmations are located under J:\Legal\SWAPs\Sales. Thanks and see you on the 25th.
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