Enron is offering via its Internet trading platform a structured weather note that gives investors financial exposure to the weather in 19 U.S. cities. Mark Tawney, Enron's Houston-based head of weather derivatives who was in London last week, said the note mirrors the weather risk element of the Kelvin weather bond Koch Energy Trading issued in November 1999. Tawney believes that by guaranteeing to make a secondary market in the note, more pension funds, hedge funds and mutual funds will invest in weather derivatives. The note is most likely to be traded by bond holders, Axia (the product of a merger between Koch Energy Trading and Entergy Trading and Marketing) and speculative accounts. A weather derivatives official at Axia declined comment.
Although the timing was not influenced by the downturn in equity markets, Tawney said investor appetite for instruments with low correlation to the equity markets should boost demand for the product.
