Message-ID: <8055969.1075852647757.JavaMail.evans@thyme> Date: Wed, 8 Aug 2001 08:05:27 -0700 (PDT) From: kevin.garland@enron.com To: jeff.skilling@enron.com, andrew.fastow@enron.com Subject: Enron Principal Investments Presentation Issues (Advance Notice) Cc: patrick.hickey@enron.com, kevin.kuykendall@enron.com, steven.sheldon@enron.com, richard.lydecker@enron.com, barbara.paige@enron.com, andrew.marsden@enron.com, greg.whalley@enron.com, ken.rice@enron.com, david.delainey@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: patrick.hickey@enron.com, kevin.kuykendall@enron.com, steven.sheldon@enron.com, richard.lydecker@enron.com, barbara.paige@enron.com, andrew.marsden@enron.com, greg.whalley@enron.com, ken.rice@enron.com, david.delainey@enron.com X-From: Garland, Kevin X-To: Skilling, Jeff , Fastow, Andrew X-cc: Hickey, Patrick , Kuykendall, Kevin , Sheldon, Steven , Lydecker Jr., Richard , Paige, Barbara , Marsden, Andrew , Whalley, Greg , Rice, Ken , Delainey, David X-bcc: X-Folder: \JSKILLIN (Non-Privileged)\Deleted Items X-Origin: Skilling-J X-FileName: JSKILLIN (Non-Privileged).pst Jeff and Andy, I wanted to make you both aware of a component of Enron Principal Investments' proposed strategy, prior to presenting to you next week. We are proposing to raise a traditional private equity fund to provide the capital for EPI's investing efforts. I have been researching the pros and cons of a fund (including talking with Bill Brown, Michael Kopper and others who have worked on these at Enron in the past). In this case, I believe the positives sufficiently outweigh the negatives. Of course, if EPI pursues this fund, it would be done in-conjunction with the finance group. Here are my assumptions: Fund Structure* Total Fund Size $500 million Enron's Commitment $125 million Institutional Investors $375 million Enron's Management fees 1.5% - 2.0% Enron Carried Interest 20%-25% LP Preferred Return 6%-8% Investment Period 3-4 years Fund Life 8-10 years * This would be structured as a traditional private equity fund structured using normal market terms. Negatives Reduced flexibility Manage for IRR not earnings Exclusivity issues Positives Reduces Enron's ongoing capital requirements Greater capital availability to EPI Secure a dedicated funding source Generate a leveraged return for Enron and annual management fees Allow for retention of key personnel over the long term We can discuss this at length in our presentation, but I wanted to give you advanced notice. Thanks, Kevin Garland