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Enron Mail |
---------------------- Forwarded by Jeffrey C Gossett/HOU/ECT on 04/23/2001=
=20 10:44 AM --------------------------- Enron Americas - Office of the Chairman From: Enron Americas - Office of the Chairman@ENRON on 04/17/2001 01:05 AM Sent by: Enron Announcements@ENRON To: ENA Employees cc: =20 Subject: Capital Book To further the process of reaching the stated objectives of increasing Enro= n=20 America=01,s Velocity of Capital and associated Return on Invested Capital,= we=20 have decided to create a Capital Book. The Capital Book will have no profit= =20 target associated with it and will be managed by Joe Deffner. The purpose o= f=20 creating this book is to ensure that all transactions within Enron Americas= ,=20 with any form of capital requirement, are structured correctly and are=20 allocated the appropriate cost of capital charge.=20 The previous numbers used in the Business Plans at the beginning of this ye= ar=20 will remain for all transactions in place and where we hold assets.=20 Therefore, on any assets currently held within each business area, the=20 capital charge will remain at 15%. Internal ownership of these assets will = be=20 maintained by the originating Business Unit subject to the Internal Ownersh= ip=20 Policy outlined below. The cost of capital associated with all transactions in Enron Americas will= =20 be set by Joe. This process is separate and apart from the current RAC=20 process for transactions which will continue unchanged. Capital investments on balance sheet will continue to accrue a capital char= ge=20 at the previously established rate of 15%. Transactions which are structure= d=20 off credit will receive a pure market pass through of the actually incurred= =20 cost of capital as opposed to the previous 15% across the board charge.=20 Transactions which are structured off balance sheet, but on credit will be= =20 priced based upon the financial impact on Enron America=01,s overall credit= =20 capacity. On transactions that deploy capital through the trading books, the Capital= =20 Book will take a finance reserve on each transaction, similar to the way th= e=20 Credit Group takes a credit reserve. This finance reserve will be used=20 specifically to fund the capital required for the transaction. As noted=20 above, the Capital Book will have no budget and will essentially charge out= =20 to the origination and trading groups at actual cost. By sending market-based capital pricing signals internally, Enron America= =01,s=20 sources of capital and liquidity should be better optimized across the=20 organization.=20 Questions regarding the Capital Book can be addressed to: Joe Deffner 853-7117 Alan Quaintance 345-7731
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