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project oz enron global markets presentation to enron corp finance committee october 8 2001 n.
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Project OZ Enron Global Markets Presentation to Enron Corp Finance Committee October 8, 2001 PowerPoint Presentation
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Project OZ Enron Global Markets Presentation to Enron Corp Finance Committee October 8, 2001

Project OZ Enron Global Markets Presentation to Enron Corp Finance Committee October 8, 2001

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Project OZ Enron Global Markets Presentation to Enron Corp Finance Committee October 8, 2001

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Presentation Transcript

  1. Project OZ Enron Global Markets Presentation to Enron Corp Finance Committee October 8, 2001

  2. Project OZ Transaction Overview • Farmland Industries has agreed to sell its Coffeyville, KS refinery to GAF Refining (GAF) via a management buyout • Morgan Stanley is providing a $150 MM acquisition bridge loan and underwriting $150-200 MM 144A (10 yrs, BBB- or higher) bonds as refinancing of acquisition and to raise capital for plant improvements • EGM is proposing to provide the following: • 75-90 MBD physical crude supply (10 yrs) • 45 MBD physical gasoline off-take (10yrs) • 38 MBD physical diesel off-take (10 yrs) • 85 MBD financial crack spread swap (10 yrs) • $40 MM inventory financing (10 yrs) • EGM will manage total position by range trading and liquidating rateably over the term Proprietary and Confidential

  3. Project OZ Strategic Benefits • $65 MM MTM earnings from below market entry price on crack spread • $45 MM MTM from crude optionality • Establishes physical presence in PADD II/Group 3 (“Group”) market via combination of physical long and short positions • EGM will control base crude slate providing ability to arbitrage physical crude markets (i.e.,light/heavy spreads) • Creates physical presence in Cushing crude markets enhancing crude arbitrage, storage opportunities and market information flow • Enhance mid-market capabilities in the Group and capture incremental margin and new origination from products sales • Provides avenue, which doesn’t exist today, for EGM to transact with other companies (Canadian producers, PdVSA, Pemex, Aramco, et al) as sole source supplier to a refinery • Current market offers immediate short-term upside opportunities incremental to the mark • Opportunity to develop long-dated forward market in crack spreads • Opportunity to extend EOL products into the Group Proprietary and Confidential

  4. Project OZ Transaction Economics (estimates) • MTM Value: $110 MM (PV10) • Crack Spread: $65 MM (PV10) • Crude Optionality: $45 MM (PV10) • Accrual Value: • Refined Products Sales: $2.5 MM/yr. • $16 MM (PV10) • V@R: $50 MM • Credit Reserve: $40 MM • Sources/Uses of Cash: $40 MM 10 yr inventory finance • Potential Upside: $50 MM residual cash (not in current MTM) sweep at end of term (80%) Proprietary and Confidential

  5. Project OZ Risks & Mitigants Proprietary and Confidential

  6. Project OZ Recommendation • EGM recommends the Board approve allocating the necessary discretionary V@R (est. $50 MM) required to execute this transaction • EGM recommends the Board grant authority to Office of the Chairman to approve and execute this transaction subject to completion of all conditions precedent/subsequent and definitive agreements within the defined economic scope and risk profile summarized herein and further detailed by the attached DASH Proprietary and Confidential