Article

February/March 2001 Issue Enron Unveils Storage Trades Enron Broadb=
and has completed a series of deals in the data storage market, commoditisi=
ng this fast-growing area for the first time. It acted as a market maker, p=
urchasing storage capacity from StorageNetworks - which was then sold on to=
Best Buy, a retailer of electronics products. Crucially, both contracts we=
re based on Enron's standard contract and included firm delivery with liqui=
dated damages. In the last few years the storage market has moved from bei=
ng a self-managed and owned business to one where storage is served up from=
a standard metro network. Enron's involvement will be bring flexibility of=
contract offering and imbedded optionality, according to Ravi Thuraisingha=
m, a senior trader at Enron. "When we sell the product to the customer we r=
emain in the market to buy the capacity back should they wish to unwind the=
ir position later. That is unprecedented," says Thuraisingham. The storag=
e market has historically been more flexible and more committed to firm del=
ivery than the bandwidth market, but these trades mark a significant develo=
pment. Rather than dated damages the storage market has tended to favour di=
scounts on future purchases. "There is a premium in the price for firm deli=
very," says Thuraisingham. He says that a number of other market participa=
nts are eager to commit to Enron as a market maker. In addition, equipment =
vendors are excited by the possibilities of the market. "most storage equip=
ment at the moment is supplied to the enterprise market. This development o=
pens up the wholesale storage capacity market," says Thuraisingham. =09