fw : london - lpg book lousie ,
i would be grateful if you could review the transaction below , which will require your approval . as outlined below the client ' borealis ' wishes to change the terms of the contract given our current situation . rac is comfortable with the changes , as it will result in a significant saving in storage costs and allow the lpg trader to flatten his book . further , whilst there maybe the potential of mtm movement between the $ 180 purchase price from borealis and the subsequent sale ( index related price ) back to the counterpart , this will be netted out . rac has significant risk appetite for this counterpart , which is a sound credit , rated e 5 . the only issue is whether houston has sufficient resources or are willing to pay the storage costs early , which could range between $ 1 , 200 , 000 - ? 1 , 400 , 000 . if this is feasible i will recommend that we negotiate a discount of $ 15 on storage costs ( saving $ 600 , 000 ) as opposed to $ 10 .
kind rgds ,
nish
- - - - - original message - - - - -
from : petersen , bo
sent : 27 november 2001 17 : 45
to : patel , nish
subject : london - lpg book
enron put 40 , 000 mt of propane in storage under a term agreement ( contract qa 8318 ) in a facility
in sweden , managed and owned by a company called borealis . enron , under the contract , agreed
to pay $ 45 per mt for the right to utilize the storage .
due to swedish law , enron can / could not have title to the product in sweden and borealis paid enron ,
under a pre - agreed price formula , $ 186 per m / t . upon enron ' s sale of the product and subsequent
lifting a payment of the $ 186 + $ 45 ( storage fee ) would become due to borealis . the likely timeframe
for selling the product would be jan . 2002 as that is the highest otc swap price mkt which in turn
would mean payment to borealis would be due on 30 days past b / l . ie early feb .
borealis are very concerned about enron ' s ability to meet it ' s payment obligation and has suggested
a transaction that in several ways would suit the lpg book .
pls let me know if you need further information .
bo petersen
1 . an upfront payment ( this week ) of the storage payment with a reduction of
$ 10 - $ 15 dollars for the storage fee . $ 400 , 000 - $ 600 , 000 savings
2 . borealis would purchase the product in tank at an indexed related price
which would fit the london lpg book very well
3 . the contractual obligations to lift the storage tons would be further complicated
by the fact that the one physical trader most likely will not be here much longer .
pls let me know if you need further information .
bo petersen