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Sorry about that, I was working on the Teco O&M costs. Thanks
Ben ---------------------- Forwarded by Benjamin Rogers/HOU/ECT on 03/21/2000 10:41 AM --------------------------- From: Christopher Smith on 03/17/2000 09:57 AM To: Yvan Chaxel/Corp/Enron@Enron, Benjamin Rogers/HOU/ECT@ECT cc: William S Bradford/HOU/ECT@ECT, Randy Petersen/HOU/ECT@ECT, Donald M- ECT Origination Black/HOU/ECT@ECT Subject: TECO Please send me an excel spreadsheet which depicts the value that you see associated with the heat rate spread option. I want to make sure that I understand exactly how you propose valuing the transaction and how this value would be booked. As such, please provide the following detail: Will we be valuing/booking a series of monthly call options or a series of daily call options? What power curve are we valuing the deal against - PJM East or West Hub? Please send me the current fuel curve that you are converting to $/MWh to value the deal? What volatilities are you using to value the options - monthly volatilities or intra-day volatilities or a blend of the two (if blending please show me what formula you using to blend the two vols)? What expiration date are you using, i.e.: for monthly call options the 15th of the relevant month, and for daily options? What correlation are you assuming, 15% flat for twenty years? Are you deducting all operating expenses from the value of the option? Are you using the "SPRDOPT" Exotic Options function to value the option? Are you using the $/MWh VOM dollar amount as your strike? Has Don provided the fixed payment stream? This stream should be covering both P&I and not just principal. Yvan, and Ben, please provide answers to these question via written correspondence so that their is limited probability of misunderstanding. Thank you both very much for your time and help thus far. Furthermore, I would like to reiterate that RAC's goal, prior to quoting any credit reserve, is to be 100% confident that: (i) the methodology that is being employed is consistent among the internal groups; and (ii) the inherent value of the price risk management contracts matches. This enables RAC to manage the associated risk during the life of the transaction both effectively and appropriately. Regards, Christopher
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