This is just an example of how Enron got affected by ANEEL's decision to lower the spot price from R$684/MWh to R$336/MWh.  This Eucatex deal involved both a fixed payment and a variable payment (the latter based on a % of the spot price).


---------------------- Forwarded by Sami Arap/SA/Enron on 10/11/2001 01:47 AM ---------------------------


Marcelo Parodi
10/10/2001 08:39 PM
To:	Brett R Wiggs/SA/Enron@Enron, Remi Collonges/SA/Enron@Enron, Joao Carlos Albuquerque/SA/Enron@Enron, Britaldo Soares/SA/Enron@Enron, Sami Arap/SA/Enron@Enron, Rubens Parreira/SA/Enron@Enron, Karla Azevedo/SA/Enron@Enron, Roberto Schloesser/SA/Enron@Enron, Ricardo Szlejf/SA/Enron@Enron, Guy Ishikawa/SA/Enron@Enron
cc:	Orlando Gonzalez/SA/Enron@Enron 

Subject:	Eucatex deal renegotiated

We've re-negotiated the Eucatex deal in order to extract more value out of the transaction for Enron. According to the new structure the value of the deal will move from a negative U$1.1million to a positive U$0.1million. The old vs. new conditions are as follow:

Old deal (existing contract)
structure	: PPA (Enron buys the power)
volumes	: 12MW (6MW firm + up to 6MW interruptible)
pricing	: R$155/MWh (floor price) + 40% of the upside against MAE prices
term	: November 2001 to March 2003 (October 2001 on interruptible basis)
guarantees	: R$3.0 million surety bond issue by Malucelli Insurance Co. (Brazilian company)

New deal
Structure	: Call Option (Enron buys the call)
Volumes	: 11.5MW (9.0MW firm + up to 2.5 MW interruptible)
pricing	: R$60/MWh premium + R$107/MWh strike. Premium will be paid upfront to Eucatex (R$6.6million)
term	: same as above. Interruptible power generated in October will be purchased for R$220,00/MWh (fixed price).
guarantees	: surety bond of R$6.6million + commercial exposure (to be calculated by RAC). We are also considering to switch Mallucelli for an international insurance company, depending on RAC's view. Cost of the insurance will be paid by Eucatex. It is also important to stress that obtaining a solid surety bond is a condition precedent on executing the deal, and Eucatex is aware of that.

Rgds,

Marcelo