---------------------- Forwarded by Rick Buy/HOU/ECT on 11/03/2000 09:16 AM 
---------------------------


David Gorte
11/02/2000 07:28 PM
To: David W Delainey/HOU/ECT@ECT
cc: Joseph Deffner/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Rick 
Buy/HOU/ECT@ECT, John J Lavorato/Corp/Enron@Enron 
Subject: Re: Commodity / Embedded Finance Deals  

Dave,

As of today, the Transaction Approval Process requires that any embedded 
financing over $500,000 needs to be DASHed.  RAC, however, is close to 
finishing a new process for commodity embedded financings--both prepaids and 
tilted swaps--that would not require a full DASH but an abbreviated approval 
document based upon specified credit ratings, financing amounts, and 
maturities for transactions having standard credit documentation.  For 
example, a $25 million, five-year exposure to a AAA counterparty with 
standard documentation is contemplated to be approved via this abbreviated 
approval document.  This abbreviated approval document would only be 
available for transactions meeting these criteria if:  (i) structured 
financing capacity were available, (ii) the funds flow issue created is 
manageable (both (i) and (ii) as confirmed by EGF), and (iii) the pricing met 
a threshold that included the structured financing cost, an appropriate 
credit spread/reserve, and a syndication risk premium.

The abbreviated approval document is intended to expedite the approval of 
relatively straightforward embedded financings where a full DASH is 
impractical or inefficient.  It is presently contemplated that the 
abbreviated approval document could be approved with two signatures:  the 
Originator's and  a RAC signature (either Bill Bradford's or mine), with 
business unit management and EGF receiving weekly updates on transactions 
approved via this document, but I would welcome your thoughts on this.  In 
any event, I will provide you with the proposed abbreviated process by you 
for your review and concurrence before if it is implemented since the 
preponderance of these transactions are expected to be originated by ENA.

Please let me know if you have any questions or comments.

Regards,

Dave

  



David W Delainey
11/02/2000 09:25 AM
To: Tim Belden/HOU/ECT@ECT
cc: David Gorte/HOU/ECT@ECT, Joseph Deffner/HOU/ECT@ECT, John J 
Lavorato/Corp/Enron@Enron, Mark E Haedicke/HOU/ECT@ECT 

Subject: Commodity / Embedded Finance Deals

Tim, I would argue that we should pursue this business as long as a) we are 
being adequately compensated for the financing and underlying commodity risk; 
b) we have very good paper; c) we are dealing with solid credits and are 
charging an appropriate risk adjusted cost of capital for the underlying 
financing; d) we have the ability to syndicate the capital or funds flow 
position if needed to manage cash issues and e) that RAC is comfortable that 
we are reaching these goals.

Any imbedded financing or $5M or more should be DASHED.  David, Joe and Mark 
should be your key contacts to ensure we are adequately managing these issues 
but I do not see any fatal flaw in the strategy if priced/managed well and we 
watch the funds flow issues.  

Regards
Delainey


---------------------- Forwarded by David W Delainey/HOU/ECT on 11/02/2000 
09:15 AM ---------------------------
   
	
	
	From:  Tim Belden                           10/31/2000 01:54 PM
	

To: David W Delainey/HOU/ECT@ECT
cc:  
Subject: Commodity / Embedded Finance Deals


---------------------- Forwarded by Tim Belden/HOU/ECT on 10/31/2000 10:57 AM 
---------------------------
From: Tim Belden on 10/31/2000 11:54 AM
To: Dave Delainey
cc:  
Subject: Commodity / Embedded Finance Deals


---------------------- Forwarded by Tim Belden/HOU/ECT on 10/31/2000 10:56 AM 
---------------------------
From: Tim Belden on 10/31/2000 11:52 AM
To: John J Lavorato/Corp/Enron, Dave Delainey
cc: Christopher F Calger/PDX/ECT@ECT 
Subject: Commodity / Embedded Finance Deals

We have closed the following deals where we deliver power two a muni in the 
short term and get paid back power later on.  These deals have both a 
commodity and a finance portion:

Counterparty    Loan Period  Repayment Period  Amount Financed

Grant County    7/01 to 7/06   7/06   $4.7 million
Grant County    5/01 to 7/06   7/06   $5.7 million
Avista/Kaiser    7/2000   7/2000 to 7/2006   $31.3 million   
BPA/Kaiser    9/2000   7/2001 to 9/2001   $36 million
Clatskanie    11/2000 to 9/2001 10/2001 to 9/2006  $5 million
Eugene Water and Electric  1/2001 to 3/2002  11/2001 to 4/2002  $4.9 million
Eugene Water and Electric  7/2001 to 12/2002 5/2002 to 12/2002  $7.3 million

We are seeing demand for more of these.  For example, Tacoma City Light is 
looking at $35,000,000 + in this type of structure.  What do you guys need to 
know about this business and how much of an appetite do we have for this?