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Enron Mail |
Dear Dan,
As discussed in our recent conversation, we (Enron North America "ENA") need to understand the issues related to the distinction between "investor owned utilities" (or "IOUs") and municipal utilities (or "municipals") in connection with derivatives activity. In the U.S., this distinction enables us to treat IOUs as general corporates. Thus, we negotiate our standard ISDA Master with an IOU, except that we add an Additional Termination Event to prevent the IOU from taking an adverse stance in its state public utility commission proceedings. A copy of our standard ISDA Schedule which includes the Additional Termination Event in Part 1 (j) is attached for your review. Our approach with respect to U.S. municipals is dramatically different. When negotiating an ISDA Master with municipals, we use a Schedule modeled after the 1992 U.S. Municipal Counterparty Schedule, having additional reps, the added concept of "Incipient Illegality" and an enforceability opinion. A copy of that Schedule and our general template form of legal opinion is also attached for your reference. We would like to understand whether this distinction in the utility world also exists in Canada, and if so, in all Canadian provinces, and whether there is a distinction when a municipal is an investor in an IOU (as we understand that the government may assist a utility to emerge from bankruptcy). In that regard, would you recommend that ENA use distinct ISDA Schedules for these types of entities and/or would you recommend specific changes to our format? Should we add any additional representations to our form of Legal Opinion? Also, we would like to point out that we use the ISDA agreements to govern a wide variety of financial derivative transactions including derivatives based on interest rates, equities, bonds, energy commodities (such as oil, natural gas, electricity, etc...), paper and pulp products, currencies and weather. Please take this into account when giving your advice. As I mentioned on the telephone the most pressing ISDA at hand is the one we have been asked to do with Ontario Power Generation. They are contemplating entering into weather derivatives with us. I understand from speaking with them that they are an "Ontario Business Corp. Act" corporation and that the Ontario Government has at least a partial shareholder stake in their company. I would propose for Sara and I to speak with you and Steve Ashborn on Monday to at least discuss what we need to do with regard to OPG. Please advise when would be convenient for you. (For us, any time from 3 pm Houston time onwards should be fine). Many thanks, Shari Stack
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