
Date: Thu, 28 Sep 2000 03:33:00 -0700 (PDT)
From: chris.gaffney@enron.com
To: elizabeth.sager@enron.com, william.bradford@enron.com
Subject: Revised NSTAR WPSA
Cc: mark.haedicke@enron.com, jeffrey.hodge@enron.com, jklauber@llgm.com
Bcc: mark.haedicke@enron.com, jeffrey.hodge@enron.com, jklauber@llgm.com

Elizabeth and Bill - As you are aware the NSTAR transaction has been split
into a one year deal with a potential long term (3 year) deal to follow as
NSTAR felt the structure of the long term deal was complex and would require
certain regulatory approvals (which had long lead time and were potentially
difficult to obtain).  The one year deal will not require such approvals and
will be structured like the current 6-month deal with which NSTAR is
comfortable.

This structure eliminates certain issues including the physical/financial
netting issue.  This is because the financial swap and put is eliminated and
in its place is simply a fixed energy offset amount which reduces the volumes
Enron is required to deliver.

The short term structure was set up whereby EPMI would be obligated to supply
each of the NSTAR operating subs (Boston Edison, Cambridge, and Commonwealth)
under one agreement.  There are embedded cross defaults in the agreement
(e.g. a ratings drop by any NSTAR sub results in a MAC).  However, the
agreement also included a provision that each of the NSTAR subs is severally
but not jointly liable.  Thus, in a NSTAR default termination scenario EPMI
would likely need to stream volumes and calculate 3 separate termination
payments and subsequently pursue each sub separately notwithstanding the
obligation to pay the termination payment is set up as a collective
obligation of the NSTAR subs.

Unlike the 6-month deal, the attached draft provides that NSTAR is obligated
to deliver a parent guarantee.  This was resisted by NSTAR on the short term
deal as each of the NSTAR subs has an above investment grade (I believe A-)
credit rating.  I will leave it to Bill to determine whether a parent
guarantee is required or appropriate; however, provision of the guarantee
would provide somewhat of a fix to the several liability structure.

I have been advised that NSTAR has a board meeting on Monday and would like
to see the draft tomorrow.  In this regard it would be greatly appreciate if
you could provide comments on the document by tomorrow morning.

Regards
CJG


