|
|
Enron Mail |
---------------------- Forwarded by V Charles Weldon/HOU/ECT on 01/09/2001
03:08 PM --------------------------- To: V Charles Weldon/HOU/ECT@ECT cc: Subject: Re: Hurricane Warning Derivatives Sunbeam (generator division) is also very pro-hurricane Enron North America Corp. From: V Charles Weldon 11/02/2000 03:13 PM To: Mike A Roberts/HOU/ECT@ECT, Mark Tawney/HOU/ECT@ECT, Claudio Ribeiro/Corp/Enron@Enron, Gary Taylor/HOU/ECT@ECT, Todd Kimberlain/NA/Enron@Enron, Joseph Hrgovcic/HOU/ECT@ECT, Jose Marquez/Corp/Enron@ENRON, Vince J Kaminski/HOU/ECT@ECT, Milind Pasad/HOU/ECT@ECT cc: william.smith@enron.com, Stephen W Bennett/HOU/ECT@ECT Subject: Hurricane Warning Derivatives Folks, This note is intended to update all who may be concerned on our progress toward developing a commercial hurricane warning derivative product or line of products. It is clear that numerous entities have underlying exposures to hurricane warning frequency and/or duration. It is our objective to develop derivative products that will enable these entities to effectively hedge this exposure. We have generated a partial brainstorm-style list of whom natural counterparties might be according to their underlying exposure: Pro-Hurricane Anti-Hurricane The Weather Channel Resorts Home Depot Cruise Ships Lowes Riverboat Casinos CNN Chemical Plants and Refineries Local TV Stations U.S Armed Forces Dry Ice Manufacturers Athletic Teams Chainsaw Manufacturers City Governments Insect Repellant Manufacturers State Governments It is obvious that there are numerous naturally offsetting parties but it is important to note that the pro-hurricane entities are more macro in nature while the anti-hurricane entities are typically more regional. Thus, we have documented the frequency and duration data by regional location with the thought that the anti-hurricane entities would be interested in regional products and the pro-hurricane entities would likely be more interested in bundled regional products depending on their exposure. Thus far, we have collected and documented all U.S hurricane warning data from 1980-2000 in the form of an Excel database. The data can be sorted by year, storm, or location on the U.S coastline. Total hurricane warning duration as well as number of discrete hurricane warnings are the primary data sets of interest for any given location (or year or storm). The U.S coast has been divided into 11 different geographic regions of roughly similar size. These regions are: New England, Mid-Atlantic, Virginia, North Carolina, Georgia/South Carolina, East Florida, West Florida, Florida Panhandle, Orleans/Miss/Bama, Lousiana, and Texas. While this data set may not yet be sufficient for price modeling purposes, it has confirmed our expectation that hurricane warning frequency and duration is quite volatile and unpredictable. It is believed that this volaility, when graphically depicted and mathematically represented, could be used to effectively demonstrate to would-be customers the impact of hurricane warning frequency on their business financials. In many cases, businesses may be well aware of their exposure but may not have quantified it and certainly probably felt as if this was a risk they would have to wear themselves. As we move forward on the modeling front, the data will certainly need to be scrutinized to correct for any skewing factors such as political trends, satellite availability, population trends, etc. Additionally, we need to go further back in time so long as the accuracy doesn't decline. On the marketing front, I am certainly open to ideas. It is believed the Weather Channel would be the most natural party for such a product. Given our positive relationship that we currently have with them, they might be the easiest sell. Any and all ideas are welcome with regard to how and when we should approach customers. Please respond with any questions, comments or concerns on this project. Thanks, Charlie
|