Andy:
 
Would you please look into this structure. The intention is to price the structure at the money. The time when they started - the basis diff was 25 cents. I propose to price it as shown below and one at NGI SoCal border minus  IFERC San Juan minus  market price.
 
I have included the LAX (Los Angeles Airport) weather data summary for your info.
 
Please call me if you need additional information.
 
Thanks,
 
Sanjeev
 
 
Payout in USD:
( maximum ( HDD LAX Nov-Mar  minus 1025  , 0 ) times 1700 )
times
( max ( NGI SoCal border (January)  minus  IFERC San Juan (January)    minus  .25 , 0)
plus
( max ( NGI SoCal border (Feb)       minus  IFERC San Juan  (Feb)          minus .25 , 0)
plus
( max ( NGI SoCal border (Mar)       minus  IFERC San Juan  (Mar)          minus .25 , 0)
divided by 3
 
Max payout: $2,000,000.
 
HDD LAX WBAN : 23174
November 1,2001- March 31,2002
Cumulative Heating Degree Days using a 65 degree Fahrenheit
 
NGI SoCal border- is the price of natural gas as reported for the applicable month as the "Bidweek Average" price for the Southern Cal. BorderAvg. as listed in the table entitled "Spot Gas Prices", published in the first issue in such month Natural Gas Intelligence Weekly Gas Price Index. The price is quoted in USD per MMBtu.
 
IFERC San Juan - is the price of natural gas as reported for the applicable month in Inside Ferc's Gas Market Report in the section "Prices of Spot Gas Delivered to Pipelines" under the heading El Paso Natural Gas Co.,San Juan Basin. The price is quoted in USD per MMBtu.