Vince,

Good morning.

As you may know, last Thur. Enron honored this year's recipients of the
Enron MBA Excellence Fund Scholars at a dinner in Austin.  In addition to
the three recipients, Business School Dean May and several of my
colleagues, Enron attendees included Sally Beck, Cindy Justice, Karen
Marshall (newly-appointed coordinator of higher education initiatives for
Enron Community Relations Dept.) and Rick Causey.

I write you at this time to advise you I had occasion to discuss two
current Enron/UT issues with Rick:
I.  Spring 2001 Conference Participation by Jeffrey K. Skilling
II.  UT Participation in EnronTraining Activities
Per my conversation with Rick last Thur., I followed up on that discussion
with an e-mail this morn that touched on those two topics.

I.  With respect to the first, I wrote Rick this morning that:

1.  We at the UT Center for Energy Finance Education and Research (CEFER)
are planning a practitioner-industry Conference in Spring 2001 (late Feb.
or early March) to discuss four topics:  Risk management, Deregulation,
Real options, and International/globalization.
2.  The Conference will kick off with a dinner/keynote address Thur.
evening, then continue all day Fri.
3.  I have had several discussions with you regarding Conference timing,
structure, participation and content.
4.  Further to Rick's agreement to do so during our discussion last Thur.,
in today's e-mail I asked Rick to extend an invitation to Jeff Skilling to
be the keynote speaker at the Thur. evening dinner.

II.  With respect to the second topic, Rick and I also discussed UT
partcipation in Enron Corp. internal training for incoming Enron Corp.
analysts and associates.  Consequently, I e-mailed Rick this morning a
specific set of issues -- "Valuation and Risk Management in Energy Markets"
-- which my UT colleagues and I have covered in public as well as
customized exec ed settings, and which we would be pleased to customize for
presentation at Enron.  FYI, I am enclosing a copy of said topics at the
end of this e-mail.

I look forward to seeing you again soon, and to your UT visit on 10/11.  Best,
Ehud


Training Program:  "Valuation and Risk Management in Energy Markets"

Target Audience:  Associates, Analysts, Traders, Marketing/Sales, Risk
managers, Financial analysts

Program Objectives:
1.  Understanding the physical and financial U. S. markets for electricity
and natural gas
2.  Understanding the structuring, reverse engineering and valuation of
exchange-traded and OTC energy derivatives, including "exotic" options,
structured products, and spread and basis products
3.  Promoting a common language between trading and marketing personnel
regarding valuation and hedging of structured products
4.  Risk-management

Program Contents:
I.  "Electricity 101"
-- Problems in pricing
-- Spot markets
-- Forward markets
-- Trading:  Basis, fixed-price, volatility
-- Markets:  Characteristics and participants

II.  Valuation/Structuring/Hedging
1.  Fundamentals of Forwards and Futures Contracts:
-- Forward Contracts:  Definition, Payoff Diagram, Pricing by Arbitrage
-- Futures vs. Forwards
-- Commodity Futures
-- Swaps
-- Constructing Forward Curves:  Contrast with price forecast; Using the
spark spread; Incorporating regional bases

2.  Introduction to Option Pricing:
-- Payoffs
-- Put-Call Parity
-- Binomial Model
-- Black-Scholes Formula
-- Option "Sensitivities" (the "Greeks"); Delta and Gamma

3.  Uniqueness of Energy Derivatives:
-- "Term Structure" of Volatility
-- Convenience Yield / Seasonality
-- Basis

4.  Estimating Volatility in Energy Markets:
-- Estimating Volatility in Financial Markets
-- Hourly vs. Daily Vols
-- Historical or Implied Vols?
-- Characterizing the Volatility "Surface" Across Time and Strike

5.  Design and Valuation of Structured Products in Commodity Markets:
-- Valuation of European Call Options in Energy Markets
-- Average Options on Oil Futures Contracts
-- Spread and Basis Products
-- "Swing" Options in Power Markets
-- Weather Derivatives

6.  Risk-Management
-- Motivation for Structured Trades
-- Valuation of real options (e.g., valuation of power plant or gas field)
-- Value-at-Risk (one- and multi-factor models)
-- Repowering option

7.  Advanced Topics (for qualified audiences)
-- Relationship between forward prices and expected spot prices
-- The Importance of Hedging Volatility Changes
-- Consistent Method for Estimating Hourly, Daily and Monthly Term
Structures of Volatility
-- Practical Alternatives to Vega-Hedging
-- Applying Options Theory to the Valuation of Power Plants
-- Valuation of "Swing" Options under Ruthless and Non-Ruthless Exercise

==============================================
     Ehud I. Ronn
     Professor of Finance and Jack S. Josey Professor in Energy Studies
     Director, Center for Energy Finance Education and Research
     McCombs School of Business
     University of Texas at Austin
     Austin, TX. 78712-1179
     Voice:  (512) 471-5853
      FAX:   (512) 471-5073
      Internet:  eronn@mail.utexas.edu
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