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Jeff,
I got 20 cents for the swith option per Dth. My assumptions are as follows: price curve assumption: Waha --- IF-WAHA La Plata Pool and TW(Ignacio) -- IF-EPSO/SJ California Border -- NGI-SOCAL Correlation assumption: Waha- SJ 95% Socal- SJ 90% See the attached spreadsheet for more info. Call me for questions. Zimin Jeffery Fawcett@ENRON 10/11/2000 02:56 PM To: Zimin Lu/HOU/ECT@ECT cc: Subject: Options model Zimin, We're trying to price out a "live" options deal. Here are the parameters: Volume: 32,000 Dth/d Term: Jan. 1, 2002 through Oct. 31, 2006 (58 mos.) Price: One part rate, $0.2175/Dth, plus applicable fuel Primary Receipt/Delivery Points: (East - to -East Transport) Receipt: La Plata Pool (use San Juan, Blanco price equivalent) Delivery: Waha area Option: Alternate Delivery Pnt.: California Border (East - to- West Transport) Price: Floor- $0.2175/Dth, plus 4.75% pipeline fuel, plus 50% of the difference between the California Border index price and the San Juan Basin index price. Specifically, we'll use: (SoCalGas large pkgs. minus TW (Ignacio, pts. south)) An important things to consider: This option is only for Alternate Firm deliveries. Alternate firm is really just a glorified version of interruptible. Can you run the option model and tell me what is the dollar value of this rather "unpure" option? I appreciate it. Give me a call at 3-1521 if you have any questions. Also, can you get us an answer by Friday, 10/13/00? We're looking to get the proposal out to the customer by the end of the week if possible. Thanks.
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