Please see the attached spreadsheet for the estimated value to be received for delivering power in the East for the period 12/27 to 12/31 (we will be working on the post 12/21 periods this week).  In summary, the total is approx. is $2.7MM net.  The total cost of power is approx. $15.3MM.  It is broken down $4.5MM for PJM, $5.5MM for NEPOOL, and $5.3MM for Others outside PJM and NEPOOL.  We are working separate arrangements for NEPOOL and PJM, having wired NEPOOL in excess of $8MM on Friday to prepay for power in an effort to be able to do business in that pool through 12/26.  We are working with PJM, and should have resolution by the 27th (they have $31MM of our pre-bankruptcy cash in escrow).  

Outside of PJM and NEPOOL, Kevin is going to go into the bilateral market and prepay for power (similar to what we are doing in the West).  As such, Kevin will need approximately $5.5MM  to prepay for power in the East through 12/31.  The value outside of NEPOOL and PJM is a little over $700M.  Kevin has a number of customers that are in NEPOOL and /or PJM , as well as other regions and you need to serve in all regions to get the full value from the contract.

Having spoken with Tim DeSpain this morning, it appears Ray and Tim are on board for this course of action given that it is consistent with our mandate to preserve the value of the estate (and entering into these positions is ancillary to winding down the existing positions, and not some new speculative trade).

As such, Leslie and her team should expect to begin receiving the wiring instructions early Wednesday morning for Kevin's prepayment deals.

Kevin, I will work with you to explain the form of request that we have been using in the West.

RISKS:
HEDGING: As this juncture, our ability to hedge longer term is limited.  We are therefore limited to daily spot transactions in PJM and NEPOOL.  Outside PJM and NEPOOL, Kevin may have limited ability to buy forward for a few days. We recognize this risk, and the next step in the analysis is to determine at what cost (prepay) can we hedge some of these contracts.  However, it is generally believed that when we begin to serve some of these counterparties, they will terminate the contracts, which will crystallize the in-the-money-value of the contract.

OFFSET RIGHTS: We are still working through all the positions in Enron to determine which parties have master netting agreements that would allow someone to offset one position with another.  A quick review of the East Power positions indicates this risk should be limited.  Additionally, we are still working through net payable/receivable issues and therefore we may owe some of these counterparties money which they may try to offset with the delivered power.  We are working through these issues, and again it is generally believed that the potential returns outweigh the risk, and that there is a high probability that some of these counterparties will terminate the contracts and crystallize the in-the-money-value to us.  

Please call me at 713-412-8967 or 713-529-6280 if anyone has any questions.  Otherwise, Kevin and his team will begin to purchase power in the non PJM/NEPOOL markets on Wednesday.