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Enron Mail |
Team,
We've done a lot of good work lately on the evaluation models and I think we are converging on a platform that accurately models the product, the project and my structure's risk. The only remaining issues when we're done will relate to the curves. Just so we're all on the same page, I thought I would lay out the base scenario: Hourly vols Mid power and oil curves Beginning debt of $375/kw amortising mortgage style over 20-years Debt interest rates of T+225 Plant residual value of $100/kw Enron will own a 50 MW call from 5/2001 to 12/31/2020. Strike prices will be $50/mwh for years 1-5, $75/mwh for years 6-10, and $100/mwh for the balance of the term. The basic put or no put trigger algorithm is (plant value + put option value <= par amount of bonds outstanding). As the model calculates equity's decision whether or not to put the plant to Enron, we should reduce each years par amount of bonds outstanding by the debt service reserve fund. This proxy's the fact that equity will consider when making their put decision each year that there are moneys in the DSRF, working capital reserves and equity sweep accounts. Whatever power/oil correlation's structuring thinks are appropriate. I hope to see results Monday. If there are any questions, please call me at 3-4750. regards, Don Black
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