Message-ID: <16547051.1075840359175.JavaMail.evans@thyme>
Date: Sun, 6 Jan 2002 13:43:14 -0800 (PST)
From: w..delainey@enron.com
Subject: NewCo
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X-From: Delainey, David W. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=DDELAIN2>
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 Dear NewCo employees:
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I wanted to send a note giving you my views on the NewCo opportunity and ne=
xt steps.=20
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What are those opportunities?  In short, to date no competitor has taken En=
ron's dominant market position.  In most cases, competitiors are retrenchin=
g from an aggressive expansion of their deregulated business in order to pr=
otect their key regulated franchises or balance sheets. Market liquidity an=
d activity is extremely fractured and highly diminished from 2000 levels.  =
This will create opportunities as bid/offers expand and customers have less=
 choices to manage key long-term risks. This lack of transparancy and liqui=
dity will also provide numerous opportunities, in the commodity, asset and =
capital markets, to take advantage of key arbitrages across the North Ameri=
can grid.   We are faced with an energy asset overhang, in the short run, w=
hich is unprecedented since the early nineties.  This coupled with market p=
articipants selling assets to protect balance sheets will provide many oppo=
rtunities to acquire attractive energy assets at good value. However, in th=
e long-run, as we emerge from the recession and as highly energy intensive =
technology investment resumes, increasing asset values, demand for energy a=
nd energy price volatility are highly likely. On the services side, there a=
re numerous un-met needs in the market place at this point including demand=
 side management, distributed generation amongst others that only Enron peo=
ple have the complete value chain understanding to make feasible. I also be=
lieve that innovation in the energy capital markets can provide value to Ne=
wCo and our customers given the blight of liquidity in capital markets. In =
short, we are at the eve of an opportunity in the energy markets which has =
not been seen since the early nineties.
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What is NewCo?  NewCo will be a private company that will focus on the ener=
gy merchant business in North America which will capitalize on the opportun=
ities detailed above.  These businesses will stretch from production to mar=
ket, wholesale through retail primarily in natural gas and electricity in t=
he United States and Canada. It will be a portfolio of several key business=
es, services and assets supported by a common infrastructure.  It will be m=
ajority owned by Enron but will have significant outside investment to ensu=
re liquidity and legitimacy. It will be re-branded and be operating and sol=
vent by mid Q2 at the latest.  It will be seeded with a number of Enron ass=
ets and contracts that we think add value to our business or provide key cr=
edit support. Those assets are conservatively valued at approximately $500 =
million to one billion. With asset and new cash investment, NewCo should be=
 at least a billion dollar company. It will emerge as a non-debtor company =
and should be an investment grade rated company. NewCo will employ approxim=
ately 100 to 200 people depending on the mix of businesses and assets under=
 control.  These people will be sourced from the existing pool of talent in=
 Enron and ex-employees. NewCo will have access to all Enron's existing sys=
tems and infrastructure. It will be in the market of buying and selling ene=
rgy albeit not market making which will be restricted under the non-compete=
 with Netco.I would expect that we would have a strong business and transac=
tional relationship with Netco.
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What will be NewCo's culture? It will have the benefits of being a small pr=
ivate company which will measure success by cashflow generation.  It will b=
e a small company atmosphere where everyone knows each other.  It will be a=
 group that celebrates success together and works hard towards shared objec=
tives.  It will have an attractive employee compensation plan particularily=
 for long term value creation.  We will build an organization of integrity =
of which people can be proud. It will center its objectives around our cust=
omers and the satisfying un-met needs in the market.  NewCo will value cust=
omer relationships.  It will be a partnership and employ an atmosphere of o=
pen communication. NewCo will be innovative, agile and nimble.
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What is next? There will be a meeting in 30C2 at 4:00 PM on Monday to discu=
ss issues, questions and comments.  There will also be a dinner set up for =
6:30PM on Tuesday at the Capital Grille to provide us an opportunity to spe=
nd additional social time to discuss NewCo. NewCo will be located on the 30=
th floor.  The immediate tasks in hand can be broken into the following: a)=
 opportunity and business definiton including fully vetted business plans f=
or opportunities identified around specific assets or independent of these =
assets; b) setting up infrastructure necessary to cure defaults and start p=
erforming to key operating assets including managing out of the bankruptcy;=
 c) modelling cashflows, operating costs, capital requirements and proforma=
's for NewCo; d) working through the NewCo structure and path through bankr=
uptcy to solvency, rating and operation; e) scouring Enron for other valuab=
le assets not yet identified for NewCo; f) detailed market research;  g) as=
set acquisition target definition; h) financing and capitalization plan inc=
luding raising external investment and i) additional hiring and recruitment=
.
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On a final note, we will need to identify a new name for the company so let=
 me know your ideas! I look forward to working with you towards reaching sh=
ared goals and celebrating the inevitable success. =20
=20
Respectfully,
Dave Delainey