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Enron Mail |
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The Enron BOD approved the some limit changes today, effective for trading=
=20 day Tuesday, February 13, 2001, consistent with the risk management policy'= s=20 intent to provide a trading limit framework whereby management can review= =20 Enron's consolidated exposure to commodities. To faciliate the aggregation= =20 and reporting of Enron's consolidated exposure to commodities, the limit=20 structure was modified to provide for aggregation of North American Natural= =20 Gas and Electricity, with EES's NA Gas and Power positions included, and wi= th=20 a separate business unit sub-limit for EES. Policy amendments were as follows: u Clarify the cross-commodity trading policy to specify that trading limits= =20 are to be applied against Enron=01,s consolidated commodity positions on an= =20 individual commodity group basis; Enron=01,s consolidated Daily Position R= eport=20 should provide required market risk disclosures by primary commodity group;= =20 (for example, Enron=01,s exposure to the North American Natural Gas market = shall=20 be aggregated across the company). =01) Delegate cross-commodity trading approval among established commodity= =20 groups to the respective Business Units Offices of the Chairman, with=20 appropriate reporting to the Enron Corp. Chief Risk Officer. u Specify the operational control requirement that all trades executed over= =20 the telephone must be recorded electronically. Cross-commodity trading authority was not automatically pre-approved for=20 anyone in the company. Authority to trade a commodity for which you are not= =20 the authorized trader must be obtained from the Business Unit Office of the= =20 Chairman for the commodity group that is authorized to trade that commodity= ,=20 with appropriate reporting as noted below. =20 =20 North American Cross-Commodity Limits =20 VaR Limit None (terminated the $5MM VaR limit) North American Natural Gas Net Open Position 500 Bcf Maturity / Gap Risk Limit 200 Bcf VaR Limit $61 MM (EES - $1 MM) ** North American Electricity Net Open Position 90 Twh Maturity / Gap Risk Limit 25 Twh VaR Limit $54 MM (EES - $4 MM) ** ** EES's $5MM VaR was allocated between Gas and Power for purposes of=20 calculating consolidated NA Gas and Power limits. From a business unit=20 perspective, the $5MM VaR limit will continue to be monitored for EES in=20 total. Below are relevant excerpts from the revised policy addressing the=20 cross-commodity trading guidelines. I will distribute the entire updated= =20 policy as soon as we incorporate the BOD's comments. V. Operations and Controls. B. Position Reporting. "...For purposes of limit monitoring and aggregati= on=20 of Enron=01,s consolidated trading results, Enron=01,s consolidated Daily P= osition=20 Report should include the Net Open Position, Maturity/Gap Position, profit = or=20 loss, and potential exposure (VaR) for approved Commodity Groups consolidat= ed=20 across the company without regard to which business unit undertook the=20 trading activity. In those instances where limits are granted to a business= =20 unit for a basket of commodities, reporting for individual commodity risk= =20 books shall be maintained to facilitate aggregation of Enron=01,s actual=20 consolidated commodity specific exposure. Management reporting may=20 separately provide business unit sub-limit monitoring and trading results= =20 aggregated according to management lines." E. Transaction Approval and Execution. "Only those employees designated by= =20 the Enron Corp. Chief Risk Officer or his designee(s) will be authorized to= =20 enter into Transactions on behalf of Enron. The Chief Risk Officer must al= so=20 maintain a record of those employees responsible for the individual Commodi= ty=20 Groups (Commodity Group Manager) as specified in the Appendices. Individua= ls=20 will be assigned as commodity leaders to manage Enron=01,s aggregate positi= on=20 across the company as determined necessary by the Chief Risk Officer..." VI. Policy Amendment Authority B. Cross-Commodity Position Authorization. If in the ordinary course of it= s=20 business an Enron Business Unit or trading desk incurs an exposure to an=20 underlying commodity or financial instrument for which it does not have=20 explicit authority to carry, this exposure should be hedged internally with= =20 the appropriate Enron desk(s), with appropriate notification to the Chief= =20 Risk Officer or his designee(s). Hedge positions should be in instruments= =20 that have an observable correlation with the underlying exposure, and shoul= d=20 be rebalanced regularly to substantially neutralize the underlying exposure= . =20 Upon notification to the Chief Risk Officer or his designee(s), the Enron= =20 Business Unit Office of the Chairman who has authority for that commodity= =20 group may authorize a specific trader in a different commodity group to tak= e=20 speculative positions with other Enron trading desks in commodities and/or= =20 financial instruments other than those which that trader has explicit=20 authority to trade (i.e. the Business Unit Office of the Chairman for North= =20 American Natural Gas may authorize a trader in the Coal group to trade gas= =20 with the North American Natural Gas desk). For limit monitoring purposes= =20 of Enron=01,s consolidated trading results, these cross-commodity positions= =20 shall be captured by individual commodity to facilitate aggregation and=20 reporting of Enron=01,s consolidated exposure by commodity in the Daily Pos= ition=20 Report (Coal desk=01,s gas position will be aggregated with the North Ameri= can=20 Natural Gas commodity group.) If you have any questions, feel free to call Vlady at x36954, me at x30429,= =20 or David Port at x39823. Regards, Cassandra Schultz.
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