Commodity Derivatives
 
 
 
 
 
 
 
 
 
 
 
Mark Taylor, Assistant General Counsel
Enron Capital & Trade Resources Corp.


 

I.       Documentation Issues


A.    Cross-defaults

"Specified Transactions"
Keep physical and financial trading separate or tie together?

B.     Calculation of termination amounts

Market Quotation or Loss?

C.    Adequate Assurance provisions


D.    Credit considerations

Recent price volatility - dramatic swings in exposure

E.     Documents to be delivered

Resolutions may tell you more than you need to know
Authorized trader lists are a two edged sword

F.     Dispute resolution mechanisms

Waiver of jury trial, arbitration?

G.    Confidentiality


H.    Market Disruption Events

De Minimis Trading?
Tax disruption?
Trading limitation - definition

I.        Market Disruption Fallbacks

Get Commercial Input!
Postponement
Fallback Reference Price
Negotiated Fallback (specify period to negotiate)
Dealer quotations
No-fault termination?

II.     Counterparty Issues


A.    Issues


1.                  Authority of signer


2.                  Power of Counterparty


3.                  Bankruptcy


B.     Counterparty Types


1.                  Governmental and Quasi-Governmental Entities


a)                 Municipalities


b)                 Municipally owned utilities


c)                  Crown corporations (Canada)


2.                  Regulated Entities


a)                 Utilities


C.    Solutions


1.                  Documentation

Additional representations and warranties
"Incipient Illegality"
Automatic early termination?

2.                  Due diligence


3.                  Legal opinions, advice of local counsel


4.                  Resolutions, officers' certificates




III.  International Trading


A.    Choosing Local Counsel


B.     Local Law Issues


1.                  Capacity & authority


2.                  Credit support matters


3.                  Exchange controls


4.                  Licenses


5.                  Choice of law, enforcement of judgements & arbitral awards


6.                  Sovereign immunity


7.                  Gaming statutes


8.                  Marketing restrictions


9.                  Tax matters


a)                 Withholding


b)                 Value-added


c)                  Stamp


d)                 Turnover


10.             Insolvency - netting


11.             Oral contracts


12.             Setoff


13.             Usury