Subject: capital book
was the internal ownership policy attachment omitted from this e - mail ? it seems to deal only with capital charge although the internal ownership policy is referenced in paragraph 2 .
- - - - - - - - - - - - - - - - - - - - - - forwarded by richard lydecker / corp / enron on 04 / 18 / 2001 08 : 59 am - - - - - - - - - - - - - - - - - - - - - - - - - - -
enron americas - office of the chairman
from : enron americas - office of the chairman on 04 / 17 / 2001 01 : 05 am
sent by : enron announcements
to : ena employees
cc :
subject : capital book
to further the process of reaching the stated objectives of increasing enron america ' s velocity of capital and associated return on invested capital , we have decided to create a capital book . the capital book will have no profit target associated with it and will be managed by joe deffner . the purpose of creating this book is to ensure that all transactions within enron americas , with any form of capital requirement , are structured correctly and are allocated the appropriate cost of capital charge .
the previous numbers used in the business plans at the beginning of this year will remain for all transactions in place and where we hold assets . therefore , on any assets currently held within each business area , the capital charge will remain at 15 % . internal ownership of these assets will be maintained by the originating business unit subject to the internal ownership policy outlined below .
the cost of capital associated with all transactions in enron americas will be set by joe . this process is separate and apart from the current rac process for transactions which will continue unchanged .
capital investments on balance sheet will continue to accrue a capital charge at the previously established rate of 15 % . transactions which are structured off credit will receive a pure market pass through of the actually incurred cost of capital as opposed to the previous 15 % across the board charge . transactions which are structured off balance sheet , but on credit will be priced based upon the financial impact on enron america ' s overall credit capacity .
on transactions that deploy capital through the trading books , the capital book will take a finance reserve on each transaction , similar to the way the credit group takes a credit reserve . this finance reserve will be used specifically to fund the capital required for the transaction . as noted above , the capital book will have no budget and will essentially charge out to the origination and trading groups at actual cost .
by sending market - based capital pricing signals internally , enron america ' s sources of capital and liquidity should be better optimized across the organization .
questions regarding the capital book can be addressed to :
joe deffner 853 - 7117
alan quaintance 345 - 7731