Message-ID: <15702005.1075854499578.JavaMail.evans@thyme>
Date: Sun, 17 Dec 2000 10:32:00 -0800 (PST)
From: david.delainey@enron.com
To: wes.colwell@enron.com
Subject: 4Q Earnings from ENA Principal Investments
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fyi
---------------------- Forwarded by David W Delainey/HOU/ECT on 12/17/2000 
06:32 PM ---------------------------


Michael L Miller@ENRON
12/15/2000 03:53 PM
To: David W Delainey/HOU/ECT@ECT, Jeff Donahue/HOU/ECT@ECT
cc: Wes Colwell/HOU/ECT@ECT, Roger Ondreko/HOU/ECT@ECT, Hope 
Vargas/HOU/ECT@ECT, Charles Vetters/HOU/ECT@ECT, Kevin Kuykendall/HOU/ECT@ECT 
Subject: 4Q Earnings from ENA Principal Investments

We have now refined our initial estimates for potential 4Q fair value 
earnings on each of our portfolio investments:

Dais-Analytic ($8.27 MM) - DAC has signed an agreement with Lucky Goldstar of 
Korea which includes a $5 MM minority equity investment at a pre-money 
valuation equal to $147.9 MM.  The agreement has been signed, is legally 
binding, can not be unilaterally terminated by LG and transfer of money will 
happen as soon as LG receives Korean central bank approval.  (Note:  We could 
take an additional $3.55 MM gain, or $11.8 MM aggregate, if we chose to 
exercise our option to invest $4.5 MM in DAC prior to year end)

Encorp ($14.1 MM) - Encorp has received a term sheet from Ballentine Capital 
which values the company at $100 MM pre-money.  Beacon Capital and Goldman 
Sachs have both passed on making an investment at $100 MM.  Given current 
market conditions, we believe a pre-money valuation of $90 MM is more 
realistic and closer to what Ballentine will ultimately do the deal at.  The 
$14.1 MM figure corresponds to a valuation of $90 MM.   

Solo Energy ($1.5 MM) - the downturn in the equity markets has had its effect 
on Solo's fund raising.  Chase H&Q has solicited a number of investors in the 
market, including Beacon, Perseus, Stephens (Little Rock) and Ballentine and 
all are interested and reviewing.  Charlie's sense is that the term sheets 
that we should receive by year end will be at a valuation lower than the $80 
MM that H&Q has been advertising to the company (and us).  The $1.5 MM figure 
corresponds to a pre-money valuation of $60 MM, which we view as more 
realistic.

Metering Technology Corp. ($1.0 MM) - Aqua International Partners has agreed 
to invest $15 MM at a pre-money valuation of $45 MM.  

Power Systems Mfg LLC ($0.72 MM) - the principals of PSM have agreed to sell 
the company to Calpine for $43 MM, making our warrant worth $1.72 MM.  Enron 
will receive cash for the warrant upon closing of the deal.  PSM's proceeds 
will be paid out over a 2-3 year period.

Utiliquest - we learned in November that Utiliquest had lost its bid to 
retain the Atlanta area locating business of BellSouth, Atlanta Gas & Light, 
Metromedia (Cable TV) and Georgia Power.  This was obviously disappointing to 
us - and symptomatic of the performance which led me to replace Utiliquest's 
CEO just prior to the award of Atlanta bid (which went to STS, a subsidiary 
of Dycom).  The initial indication from the company was that - while Atlanta 
represented $20 MM in revenues (roughly 20% of total revenues) - there would 
be a proportionately smaller change in EBITDA and the bottom line.  After 
further analysis - conducted in connection with our planned divestiture - we 
have determined that there will likely be a $2-3 MM reduction in EBITDA for 
2000.  Our anticipated EBITDA exit multiple is 6-7x 2000 figures.  I need to 
discuss a revaluation of Utiliquest in more detail with Kevin, Wes Colwell 
and Andrea Reed.

Total comes to $25.6 MM plus whatever we determine is achievable on 
Utiliquest. 

Please call if you have any questions.

MLM