-----Original Message-----
From: 	Collonges, Remi  
Sent:	Friday, August 03, 2001 5:05 PM
To:	Lavorato, John
Cc:	Kishkill, Joe; Gonzalez, Orlando
Subject:	Duke transaction

We have closed tonight the following transaction:

We Sell to Duke Energy a series of 12 monthly options (July 2001 to June 2002), volume 10 MW, delivery Southeast center of gravity;
Strike : R$140/MWh for July to December 2001, and R$120/MWh for January to June 2002;
Strike payable 5th of month following month of delivery;
The options are automatically exercised when and if MAE ex-ante price is greater than strike (Duke has not the option not to exercice if MAE is not settling);

Price per MWh: floor + upside

Upside: 35% of (MAE ex-ante price - floor)
Payable by Duke at the earliest of 1) MAE invoicing date (regardless of MAE agent payment) or 2) July 5th, 2002;
We do not take MAE credit risk, but only Duke's;  Duke takes MAE credit risk;

We receive a premium of R$5 million upfront.

As a result, the deal is ATM against our power curve.  However we know that we are in rationing AT LEAST until November of this year.  As a result, the MAE ex-ante price will be R$684/MWh.  If we take the most conservative scenario and assume that we collect upside in July 02 only, MTM is about US$6 million.  The more rationing last, the higher in the money will the deal be (of course, immediate settlement at MAE at R$684 of all long position would take us OTM, but we do not expect this to happen very soon).

I hope that this is clear.  Credit is on board, I'm talking to Martha Stevens and her new boss Stacy White to validate my assumption on the MTM.

Have a great WE,

Remi