Re: Indicative request to buy

I must have neglected to copy you on the disapproval rationale for Duke
Energy Trading & Marketing, LLC. This entity does not prepare (for the
public anyway) independent financial statements. S&P has assigned its rating
based on affiliation with and implied support and capitalization from Duke
Energy, Inc. Financial statements have been a requirement for all reference
cps.

I would think that pricing such a credit would be extremely difficult, since
this would essentially require estimating the probability that Duke Energy
would honor this entity's obligations in the event of financial distress. In
addition, the probability that such support would be needed is completely
unknown, since no financials are available for Duke Energy Trading &
Marketing.

Rod

John Metzler
03/04/2000 07:43 AM
To: Mark Taylor/HOU/ECT@ECT
cc: Edmund Cooper/LON/ECT@ECT, Rod Nelson/HOU/ECT@ECT, Bryan
Seyfried/LON/ECT@ECT
Subject: Re: Indicative request to buy

Mark & Rod:

If I read correctly the earlier note from Rod, there are questions about
Duke Energy Trading & Marketing as a reference entity -- there has been no
decision of disapproval.

I f you have decided not to approve them, then please inform me directly.
And please tell me why.

In general, what drives the approval decisions? This is important to know to
make the front end of transactions more intelligent about these affairs, and
to forestall any antagonism within the firm.

Also, bear in mind this is an off-line reference entity

To: Edmund Cooper/LON/ECT@ECT
cc: John Metzler/LON/ECT@ECT, Rod Nelson/HOU/ECT@ECT

Subject: Re: Indicative request to buy

Edmund:

Rod Nelson has just informed me that Credit will not be approving Duke Energy
Trading & Marketing as a reference entity. I don't think it makes sense to
review the various Duke confidentiality agreements at this point. Please let
me know if the situation changes.

Mark

Edmund Cooper
03/03/2000 01:40 PM
To: John Metzler/LON/ECT@ECT
cc: Mark Taylor/HOU/ECT@ECT
Subject: Re: Indicative request to buy

There are a variety of CAs with U.S. Duke Energy entities.

Mary J. Heinitz has provided me with a list of these which I'll forward to
Mark for his consideration under the cover of a separate email.

Thanks, Edmund.

John Metzler
03/03/2000 02:27 PM
To: Edmund Cooper/LON/ECT@ECT
cc:

Subject: Re: Indicative request to buy

Edmund,

Please review the CA implications, as stated below.

Thanks
John

---------------------- Forwarded by John Metzler/LON/ECT on 03/03/2000 14:26
---------------------------

Tomas Valnek
03/03/2000 13:29
To: Martin McDermott/LON/ECT@ECT, John Metzler/LON/ECT@ECT
cc:

Subject: Re: Indicative request to buy

---------------------- Forwarded by Tomas Valnek/LON/ECT on 03/03/2000 13:30
---------------------------
From: Rod Nelson on 02/03/2000 10:01 CST
To: Tomas Valnek/LON/ECT@ECT, Bryan Seyfried/LON/ECT@ECT
cc: Paul Simons/LON/ECT@ECT, Mark Taylor/HOU/ECT@ECT, William S
Bradford/HOU/ECT@ECT, Edmund Cooper/LON/ECT@ECT, Debbie R
Brackett/HOU/ECT@ECT

Subject: Re: Indicative request to buy

Unfortunately, it's not quite that simple. Duke Energy Trading & Marketing
is a marketing sub and does not prepare separate financials. The S&P rating
is based on an implied guaranty from Duke Energy. Legal would also need to
review this counterparty from the standpoint of confidentiality agreement
violations.

Also, as a trading counterparty, Sempra Energy Trading is not authorized for
credit derivative trading, because the existing guaranty does not explicitly
cover this type of transaction. If Sempra wishes to transact out of this
entity, we can look into amending the guaranty to cover this product. This
will require legal efforts and approval.

Rod

Tomas Valnek
03/02/2000 08:36 AM
To: William S Bradford/HOU/ECT@ECT, Debbie R Brackett/HOU/ECT@ECT, Rod
Nelson/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Paul Simons/LON/ECT@ECT, Edmund
Cooper/LON/ECT@ECT
cc: John Metzler/LON/ECT@ECT, Martin McDermott/LON/ECT@ECT
Subject: Indicative request to buy

Both of these entities have an E-rating of 3. Any issues?

Tomas

---------------------- Forwarded by Tomas Valnek/LON/ECT on 02/03/2000 14:36
---------------------------

John Metzler
01/03/2000 15:41
To: Martin McDermott/LON/ECT@ECT, Tomas Valnek/LON/ECT@ECT
cc:

Subject: Indicative request to buy

Reference Name: Duke Energy Trading & Marketing (sub of Duke energy -- he
claims they have their own debt)
Counterparty: Sempara Energy Trading
Term: 2 years
Notional Amount: $2 million (I made that up)

John