Message-ID: <9239890.1075854531526.JavaMail.evans@thyme> Date: Fri, 9 Feb 2001 10:01:00 -0800 (PST) From: david.delainey@enron.com To: richard.lydecker@enron.com Subject: Heartland Industrial Partners Cc: brian.redmond@enron.com, wes.colwell@enron.com, raymond.bowen@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: brian.redmond@enron.com, wes.colwell@enron.com, raymond.bowen@enron.com X-From: David W Delainey X-To: Richard Lydecker X-cc: Brian Redmond, Wes Colwell, Raymond Bowen X-bcc: X-Folder: \David_Delainey_Jun2001\Notes Folders\Discussion threads X-Origin: Delainey-D X-FileName: ddelain.nsf Richard, it is my understanding that this investment is currently in Ray Bowen's business. In my ENA shoes, I would say we would have no interest in taking on that responsibility. In my EES shoes, I would like to take a closer look at the possible connections. Please send me some info on the investment fund and their current investments portfolio. I have also heard that Tom White has been talking to you about EES taking on the Catalytica investment. With my EES shoes on, no way!!!! Regards Delainey ---------------------- Forwarded by David W Delainey/HOU/ECT on 02/09/2001 05:56 PM --------------------------- Richard Lydecker@ENRON 02/07/2001 09:01 AM To: David W Delainey/HOU/ECT@ECT cc: Brian Redmond/HOU/ECT@ECT, Wes Colwell/HOU/ECT@ECT Subject: Heartland Industrial Partners Dave, in May 2000 Enron North America committed to invest up to $30 million in Heartland Industrial Partners L.P., a private equity fund. The terms of the fund investment are fairly typical (and not particularly exciting for a limited partner such as we). The deal was "sold" on the basis of ENA getting exclusive rights to provide energy management services to companies owned by the fund if these were cost effective. The claimed benefits for the energy management tie were calculated at $20 - 50 million. The deal was originated by Brad Dunn who now is in EIM. Ownership of this commitment had been assigned to Jim Ajello. The kinds of energy management services associated with this deal are now provided by EES. While they are happy to exploit any opportunity, their business plan does not contemplate investment substantial capital in this kind of deal. In short, they have no interest in picking up the commitment (and capital employed) via an intercompany transfer. Private equity funds such as this are highly illiquid by design and the normal investment cycle is at least 5 - 7 years. The Heartland partnership has a 10-year life, Enron did negotiate the right to sell its LP interest after 3 years. As a practical matter, that right guarantees neither a fair price or even a market. There is no logical home for this investment that I know of in ENA except in my portfolio. Question: is this an ENA responsibility or would it move to EIM's balance sheet? If we (ENA) have no choice but to retain the investment, my group will take responsibility for it and do our best to monetize funds invested to-date (about $6 million) and sell the remaining commitment. Since the fund itself is still marketing limited partnership interests, however, it will be extremely difficult to get out of our investment/commitment in the foreseeable future. Under any circumstances finding a buyer will be time-consuming and expensive. (This is a poster child for "patient" investment capital). I want to ensure that you are aware of the situation in case your view is that the obligation should be transferred to EIM which I believe has assumed the charter of the ENA group that formerly managed this investment. Dick.