Message-ID: <10900696.1075843905288.JavaMail.evans@thyme> Date: Wed, 25 Apr 2001 10:12:00 -0700 (PDT) From: joseph.hirl@enron.com To: john.sherriff@enron.com Subject: Re: Draft Organizational Announcement about Japan Cc: mike.mcconnell@enron.com, jeffrey.shankman@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: mike.mcconnell@enron.com, jeffrey.shankman@enron.com X-From: Joseph P Hirl X-To: John Sherriff X-cc: Mike McConnell, Jeffrey A Shankman X-bcc: X-Folder: \Mark_McConnell_June2001\Notes Folders\All documents X-Origin: MCCONNELL-M X-FileName: mmcconn.nsf John, A couple of thoughts to follow on from yesterday. If your prime motivation in completing shutting down the merchant power effort versus turning it down is to send a strong signal to the government, then I believe the message will be undermined by Enron's continued efforts through EPower. In order to be most effective and show commitment to the "message" strategy then it would be consistent to shutdown the efforts of EPower (something none of us believes makes sense). While METI would understand that EJ reducing its efforts is significant, they will breathe a sigh of relief that Enron is not pulling out of power since EPower efforts are continuing. As many in the market still believe that EPower will be marketing and retailing power as well as building power plants, it will look as though not much has changed regarding Enron. In fact, many of the other new entrants, Marubeni, Ennet, Nippon Steel, etc have indicated to us that they will reduce efforts now and look to the future for further change (in effect exactly what we are talking about doing). Many of these companies are looking at building 100 Mw stations that could be available in the next 12-18 months. METI is undoubtedly aware of this and is working to bring pressure on the utes and further development to the market structure as soon as they are able (timing uncertain). In summary, I believe that you would be able to send the same message through reducing EJ's efforts down to a slow boil, but allow us to keep abreast of what is going on and pushing initiatives in the 12-18 month range (Ahlstom initiatives, Ennet merchant power plant financing proposal, etc.). Imagine EJ commercial team of approx 2 with some percentage of senior commercial oversight. While not a prime motivating factor, having a small team working this effort will also allow us to manage the existing relationships with the customers. As an aside, Air Liquide told us that they had been warned by their people in the US that Enron often backs out of deals at the last minute. I don't bring this up as a reason to do an uneconomic deal, but just to give an indication of the relationship factor. Backing out of this deal and reducing our power efforts are the right things to do. You also mentioned that if Enron wanted to look at the 12-18 month type projects then we could accomplish this through EPower. Based on the midterm deals that we have reviewed to date, I think successful accomplishment here is unlikely. I think that you have been made aware of most of these issues. If EPower was operating in isolation, then these projects would be continuing without any real insight on the commodity value/risk proposition. I believe that we have agreed on this point before and that value delivered for these types of projects is effectively 85% EJ/15% EPower. On your suggestion of leaving this as a draft, I believe this makes real sense. Also I'd like to make the announcement formal on 7 May. Next week is a holiday week in Japan and therefore very few people will be here. Also I imagine that Morten Erik should likely have made a decision by then so the note can be adjusted accordingly. This will help with the Japanese staff as they will have a much better idea of what the future will look like. Jonathan's toing and froing a couple of months ago caused a great deal of anxiety amongst the staff up until he was ready to give formal notification. I have also made a couple of comments or suggestions below as well. I hope this has been helpful. regards, Joe Joseph P. Hirl Enron Japan Corp. 81 3 5219 4500 81 3 5219 4510 (Fax) www.enron.co.jp John Sherriff@ECT 04/24/2001 02:55 PM To: (713) 529-7757, Ken Rice/Enron Communications, Kevin Hannon/Enron Communications, Mark Frevert/NA/Enron, Greg Whalley/HOU/ECT, Mike McConnell/HOU/ECT@ECT, Steven J Kean/NA/Enron@Enron, Mark Palmer/Corp/Enron@ENRON, Joseph P Hirl/AP/ENRON@ENRON, Jeremy Thirsk/AP/Enron@ENRON, Morten E Pettersen/AP/Enron@Enron, Nicholas O'Day/AP/Enron@Enron, Jackie Gentle/LON/ECT, Richard Shapiro/NA/Enron@Enron, Jeffrey McMahon/HOU/ECT, Jeffrey A Shankman/Enron@EnronXGate, Raymond Bowen/enron@enronxgate, Joe Gold/LON/ECT@ECT, Bryan Seyfried/LON/ECT@ECT, Jeff Kinneman/HOU/ECT, Rebecca McDonald/ENRON_DEVELOPMENT, Carey Sloan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Brian Stanley/EU/Enron, Michael R Brown/LON/ECT, Mark Evans/Legal/LON/ECT, Fernley Dyson/LON/ECT, Ted Murphy/LON/ECT@ECT, Rick Buy/HOU/ECT, Richard Causey/Corp/Enron, Mark E Haedicke/HOU/ECT@ECT, Drew C Lynch/LON/ECT, David Oxley/HOU/ECT@ECT, John J Lavorato/Enron@EnronXGate, lkitchen@enron.co.uk cc: Subject: Draft Organizational Announcement about Japan May I please have your comments if any on this draft by close of business Wednesday. We hope to have agreed on the Q&A's by then and to send it out the announcement on Thursday. John To be sent to: All Enron Europe, all employees in Japan, all Global Markets and all VPs and up around the company Enron has established several wholesale businesses in Japan in the last year including Metals, Power marketing, Power Plant Development (via our investment in EnCom), Coal, LNG & Weather. While we have been able to close power transactions and there is real interest from customers for Enron-type power solutions, Japan has not yet removed some significant barriers to make progress towards a full scale liberalized electricity market. The regulators and key politicians are very much in favor of further liberalization and the benefits this would provide, but the timing in uncertain. Until further tangible steps are taken to improve third party access for electricity in Japan, we will significantly reduce our power marketing efforts and focus on the significant opportunities that currently exist in our other wholesale businesses. Once the necessary regulatory changes have been completed we expect to aggressively pursue Enron's traditional position as the leading buyer and seller of electricity in every deregulated market. Based on these changes Joe Hirl our President of Enron Japan will move to the Global Markets group and lead a team made up of Enron Japan staff that will focus on developing all our Global Markets opportunities in Japan especially Weather, Oil, LNG, Coal, and Shipping. We expect to continue our general recruiting of Japanese nationals and as President of Enron Japan, Joe will continue to provide the overall business leadership for Enron Japan and this will also include recruiting and the Analyst and Associate program in Japan. The Finance origination team headed by Jeremy Thirsk will continue to report to Joe and also move to Global Markets. Morten Erik Pettersen is still evaluating possibilities inside and outside of Japan and will decide shortly on his direction. (if we make this announcement on 7 May as suggested above, then we can make the previous sentence more precise) The Equity/FX/Interest rate team which is a part of Global Markets has two employees in the Tokyo office today and they expect to expand their efforts throughout the year. The EnCom group, which is our power plant development business (with minority partners) and headed by Carey Sloan will continue its efforts in developing power plants in Japan. We are pleased with the progress we are making on a number of sites and EnCom will continue to report to the Enron Europe Office of the Chairman. Our Metals team headed by Kazunari Sugimoto will continue to report through Enron Metals in London. By May we expect Enron Credit to have two to three employees in Tokyo pursing the Credit Derivative business. These employees remain in Enron Credit , a part of Enron Europe. EBS has two employees headed by Jim Weisser and this team expects to expand by year end. The Industrial Markets team also expects to have two employees in the Tokyo office in the next couple of months. In the last seven months the commercial support services for Japan have been transitioned to London for support and this is not changing. Jane McBride heads the legal team and will continue to functionally report to Mark Evans, General Counsel in London. The RAC function will continue to report to Ted Murphy, head of RAC for Enron Europe. The Risk Management and Accounting team is headed by Jan-Erland Bekeng will continue to functionally report to Fernley Dyson in London. The IT, HR, Tax and real estate teams will also continue to functionally report to London. Nick O'Day who heads both the Public Affairs group (Government & Regulatory Affairs and the Public Relations) in Japan will report to the Enron Europe Office of the Chair with a Public Relations functional reporting to Jackie Genle in London and a Government Affairs functional reporting to Rick Shappiro in Houston. We anticipate that his team's efforts will be primarily directed to supporting the EnCom power plant development team but he will also continue to provide support for Global Markets, EBS & Industrial Markets. We have already made considerable progress in breaking into the Japanese markets across a wide range of Enron businesses and we anticipate that this will be a major profit center for profit growth for years to come. Through these current changes we can demonstrate our ability to be flexible and target our resources where they will realise the most immediate value for the company.