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ENRON ANNOUNCES FIRST COMMODITY TRANSACTION USING WEATHER PROTECTION PRODUCT
FOR IMMEDIATE RELEASE: Tuesday, August 12, 1997
HOUSTON -- Enron Capital & Trade Resources (ECT), a subsidiary of Enron Corp., announced today that it has introduced a risk management product using weather as an index which is tied to the price of a commodity. ECT has recently completed a 50 megawatt transaction with an eastern U.S. utility where the price of the energy is linked directly to weather conditions in the utility's service territory. As temperatures rise or fall, the energy price will be adjusted accordingly.
"This transaction exemplifies Enron's ability to offer unique risk management solutions," said Kevin P. Hannon, president of ECT-Commodity & Trade Services. "We fully expect trading in weather-indexed commodity transactions to develop as markets consider alternative means of marketing natural gas and power."
As an alternative, ECT can also use weather-related risk management products to help customers protect their revenues. "A natural gas utility in the northeast may see its sales volumes fall dramatically when winter weather conditions are milder than normal. ECT is offering a market-based product designed to help companies maintain revenue levels consistent with pre-defined temperature conditions," added Hannon. As an example, for a premium a customer would receive payments from Enron when temperatures have an adverse effect on energy volume-related revenues.
Enron Corp. is one of the world's largest integrated natural gas and electricity companies with approximately $17 billion in assets. Enron Capital & Trade Resources Corp. (ECT), the merchant arm of Enron Corp., is a leading provider of physical and financial energy products worldwide. Enron's internet address is www.enron.com and its common stock is traded on the NYSE under the ticker symbol "ENE."
For additional information please contact:
Terrie James
713-853-7727
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