Message-ID: <6391141.1075840152741.JavaMail.evans@thyme> Date: Thu, 26 Apr 2001 18:56:00 -0700 (PDT) From: agapefndg@enron.com To: jeff.skilling@enron.com Subject: OCTANE ENHANCEMENT SYSTEMS, USA Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Agapefndg X-To: jeff.skilling X-cc: X-bcc: X-Folder: \jskillin\Inbox X-Origin: SKILLING-J X-FileName: jskillin.pst Attn.: Mr. Jeffrey K. Skilling, Chief Executive of Enron Corporation Below you will find the EXECUTIVE BRIEF for the referenced project for your perusal. Attached to this email you'll find the following MS Word files: 1. "OES Mgmt Bios" 2. "OES Exec Brief " containing Proforma & Use of funds information. Please indicate interest via fax and email furthermore, the following confidential information from the Directors/Promoters are available, upon request, for your perusal: ? Detail Business Plan. We look forward in hearing from you to further facilitate the funding consideration of this project(s). For more information send inquiries via fax (1-212-208-2954) or e-mail (Agapefndg@aol.com). Thank you, Mr. Higgens H. Hyacinthe, Managing Director AGAPE FUNDING 575 Madison Avenue, 10th Floor New York, NY (USA) 10022 Direct contact: 1-917-945-1656 Tel: 1-212-605-0409 Fax: 1-212-208-2954 Email: Agapefndg@aol.com ------------------------------------------------------------------------------ --------------------------------------------- EXECUTIVE BRIEF FOR OCTANE ENHANCEMENT SYSTEMS, USA Loan Amount: $60,000,000 USD Type of Project: Manufacturing Facilities Loan Term (maturity): 10-15 years Project Venture Share: Between 30 and 50%, depending on the Lender's proposed split between equity investment and loan. Funding Stage: Straight-debt funding, equity investment or a combination of both for a start-up without a financial history requiring capital for facility construction. Objective: The employment of its technology in a world-class refinery to upgrade low value petroleum feedstocks into aviation fuel and marketable ultra high octane blending stock for unleaded gasoline. Market: The Client Company's process for making unleaded gasoline has been operated on a semi-plant scale for several months and the products successfully sold to independent gasoline distributors. Company Investment: The Client Company's project team members have invested six years and in excess of $1.5 Million USD in developing the technology. In addition, the management team is comprised of eight individuals who have between them over 200 years of successful experience in the petrochemical industry in R&D, project management, and refinery management. Total Asset Value: At the time of the completion of loan draw down will be in excess of $153,000,000 US. (See 'Asset Value with Facilities') Purpose: Phase I - Ammonia fertilizer Phase II - Reclaimed solvents Phase III - Pollution Free Gasoline 1. Company Introduction - The Client Company was formed specifically to commercialize its proprietary technology and the expertise for: 1) The conversion of low BTU natural gas in ammonia for fertilizer. 2) Specialty refining and reclamation of spent solvents and rafinates from plastics manufacturing in order to convert these streams into products that can be sold as unleaded gasoline and diesel fuel. 3) The refining of low value petroleum feedstocks into pollution free aviation fuel and marketable ultra high octane blending stock for unleaded gasoline. 4) The reclamation/refining of spent chlorinated solvents in order to market these streams as unleaded gasoline and diesel fuel. 5) The employment of its technology in a world-class refinery to upgrade low value petroleum feedstocks into aviation fuel and marketable ultra high octane blending stock for unleaded gasoline. In order to minimize the overall risk and the time required to achieve a positive cash flow, the Client Company has developed a multi phase Strategic Production Plan Phase I is the smallest of the phases and will employ the Client Company's expertise in ammonia production from low BTU natural gas. Phase I can be completed and show a profit within seven months of initial funding. Phase II is somewhat larger than phase I and will employ its own unique proprietary technology and a separate geographical facility location. Phase II can be completed within about twelve to fourteen month after funding and the will show a profit about two months after startup. The future of this phase of the Client Company's strategic plan is somewhat less clear today than it appeared several months ago when the plan was developed. The recent dramatic rise in energy prices in the US has caused some generators of the spent solvents that will be the feedstock for this facility to begin using these streams for fuel. A reevaluation of this situation is underway at the present time and the decision as to the future of this phase will be made in late first quarter of 2001. Phase III, although much more capital intensive than phase II, has been separated from phase IV for several reasons: 1. Environmental permits - the Phase III facility will be purely a petroleum processing facility similar in principle to several hundred other petroleum processing facilities in the State of Texas, and therefore, obtaining an air emissions and operating permit should not take over six months. In contrast to this, the permits for the reclamation of the hazardous chlorinated solvents, Phase IV, will require between ten and eighteen months if all goes well. 2. Equipment deliveries - the technology to be employed and the absence of corrosive compounds in the processes for Phase III will allow the equipment and piping to be fabricated out of common carbon steel rather than the exotic alloys, which will be required for the Phase IV, chlorinated solvent reclamation process. 3. Transportation - the handling of the petroleum feedstocks and products for Phase III are much simpler than the chlorinated solvent feedstocks for Phase IV. Phase IV will utilize a location in the US while Phase V will probably be located in the Caribbean. 2. History of Project: The project team members have invested six years and in excess of 1.5 MILLION DOLLARS US in developing the technology and the business opportunities which are described herein. 3. Mission Statement: The Client Company's mission is to capitalize on the business opportunities it identifies, profitably employ its proprietary technology, and where possible assist in solving environmental problems. 4. Funding Stage: Is a start-up without a financial history and is seeking capital for facility construction and startup - straight debt funding, equity investment or a combination of both. 5. Project Ownership? / Management THE MANAGEMENT TEAM The management team is comprised of eight individuals who between them have over 200 years of successful experience in the petrochemical industry in R&D, project management, and refinery management. In addition the team includes another individual with in excess of 25 years of financial experience in banking, investment banking and financial management. THE SCHEDULE From the point of the first financial draw approximately 6 to 7 months will be required to construct the phase I plant, go through startup and be ready to commence full-scale production. The other phases will follow as indicated above. 6. Unique Features (Key Considerations) of Project: Ammonia production - This phase of the Client Company's strategic plan will commercialize its principals' expertise in fertilizer production and marketing and their successful experience in adapting proven processes to unique opportunities. The Client Company is in the process of finalizing a gas purchasing agreement with a firm that has acquired the mineral rights to large area of land in west Texas under which is located a significant deposit of low BTU natural gas. The Client Company can purchase this gas at very attractive pricing. While this gas is not suitable for sale as "pipeline" quality gas it is suitable for the production of ammonia. Solvent reclamation - This phase of the Client Company's strategic plan will commercialize its proprietary technology and its principals' expertise in reclaiming spent solvent streams and rafinates, and refining them into usable fuels. Some of these are currently being incinerated as hazardous waste and others are being blended into low value products. The Client Company's proprietary refining technology has the ability to process these materials and convert them into value added products. Pollution free gasoline - This Phase of the Strategic Production Plan will commercialize its proprietary technology for the refining of low value petroleum feedstocks into pollution free aviation fuel and marketable ultra high octane blending stock for unleaded gasoline. The Client Company will utilize ABC Industries to broker its products and assist in feedstock procurement. ABC Industries currently arranges for the supply of feedstock to DEF Fuels, one of the Client Company's major customers, and brokers their products. ABC Industries will also broker/market to other customers any left over high-octane blend stock and all of the aviation gasoline. The Client Company plans to offer its unleaded gasoline at a price of one-half to one cent below the locally posted rack price. Rack price is the price that a distributor pays for products at the terminal loading rack and varies somewhat from day to day and though out the year as gasoline demand and crude oil prices vary. FEEDSTOCK SUPPLY - The feedstock for the ammonia facility will be low BTU natural gas from the gas field directly under and surrounding the facility. The feedstock for the solvents reclamation will be obtained directly from the generators of the spent solvents. The feedstock for the gasoline production facility will be obtained from several LPG producers in the West Texas area. The cost of the majority of the Client Company's feedstocks have historically tracked the price of crude oil as has the price of gasoline at the rack and retail pump. The solvent feed stocks will be procured from the generators with the aid of several brokers who normally deal in these materials. These spent solvents will be shipped to the Client Company facility at the port by truck, railroad tank car and barge. THE TECHNOLOGY - The Client Company has developed its own proprietary technology for: 1. The refining/reclamation of spent solvents and rafinates and their conversion into value added products. 2. The production of ultra high octane blend stock for use in unleaded gasoline and aviation fuel. 3. The reclamation of chlorinated solvents. The possibility of patent protection for these technologies is being explored with one patent already filed. Initial patent searches do not indicate any potential infringement of existing patents, but the Client Company makes no representation as to the ability to secure patent protection. However, every effort will be made to protect the confidentiality of the nature of the processes that the Client Company will employ in its facilities. The Client Company process for making unleaded gasoline has been operated on a semi-plant scale for several months and the products successfully sold to independent gasoline distributors. The plants will be designed to meet all of the current standards including EPA, API, OSHA, ASME and good engineering practice. THE COMPETITION - The Phase I operation will face very limited competition because the ammonia plants which in the past have served the west Texas, New Mexico, and western Oklahoma area have all been shut down during the past several years. Therefore, all of the ammonia consumed in the region is being shipped in by truck or railcar. The Client Company believes that freight considerations alone will provide sufficient cost differential to insure that it can successfully sell its 50,000 tons per year of product into the local market. The Phase II operation will face very limited competition because we have been able to identify only one dedicated facility that is doing work similar to what the Client Company will be doing. The main advantage the Client Company will enjoy is the ability to assure the generators of the spent solvents and rafinates that their waste will be processed in such a manner, and with the high level quality control which only a dedicated facility can maintain, that the end products will be of such quality that the generator will no longer face the present contingent liability caused by product failure in their final application. For the Phase III facility at Dallas Texas, the Client Company will face very little local competition for its ultra high-octane blend stock and reasonable competition for its aviation fuel. At the present time there does not exist any local producer of ultra high-octane blend stock and it along with aviation fuel is being shipped in from the Gulf Coast and other more distant suppliers. Others who might attempt to duplicate the Client Company's approach will not have access to the Client Company's proprietary technology and will be at a distinct economic disadvantage. At the present time the Client Company is not aware of competition that might tend to drive up prices for the petroleum feedstocks (i.e., normal and isobutane) that will be used in its Phase II process. These feedstocks are available in more than adequate quantities at the prices used to calculate the proforma's. 7. Overview of Market: - The overall nationwide market for unleaded gasoline is in excess of 342,000,000 gallons per day. The overall nationwide market for aviation fuel (100 octane gasoline) is in excess of 67,000,000 gallons per day. The local Dallas Texas market for aviation fuel is in excess of 750,000 gallons per day. This market is expected to grow about 2% per year for the foreseeable future. The Client Company has set as its corporate objective to capture 15% of the Dallas aviation gasoline market over the next five years. Approximately six billion gallons per year solvents are used in the US for various cleaning applications. The disposal of the resulting hazardous waste is a major cost for the user. The Client Company will use these spent solvent blends as a feedstock and thereby remove the "hazardous waste" designation from the material. At a processing rate of 100,000 gallons per day the Client Company will process about 0.6% of the solvents that are available for recycle or reclamation in the US. 8. Financial Overview (USD) - see the attached proforma. 9. Use of Funds - see the attached sources and uses statement. (The numbers are solid to use at project. In the loan amount, we have add the pre-funding cost) ASSET VALUE OF the Client Company W/FACILITIES TECHNOLOGY - Within 18 months of initial funding the Client Company will have the following patent applications filed and assigned to the Client Company: 1. Composition of matter patent covering its butane isomerization catalyst. 2. Composition of matter patent covering its structured/ solid alkalation catalyst. 3. A process patent covering its chlorinated solvent reclamation catalyst. 4. A process patent covering its process for the optimum dispersion of light hydrocarbons in ethanol. 5. A process patent for its process for the reclamation of an existing waste solvent. 6. A process patent for its process for benzene destruction in Platformate. 7. Several (3+) process patents for the reclamation of spent solvents and rafinates. The patent searches for all of these have been completed and in the informal opinion of our patent attorney all of these patents will probably be granted. Number 1 & 2, above, can currently be obtained from UOP and Phillips Petroleum, for example, for about a million dollars per year (royalty or technology fee) each. Once we have fully proven these two in long-term plant performance tests, the Client Company may well elect to market this technology. By present day appraisal methods, (i.e. actual and estimated royalty values) these patents will be worth between five and seven million dollars per year to the Client Company. Using standard "future value" calculations (ten years, 3% inflation) the asset value of these patents is $67,800,000. LAND - Dallas Texas - It is the Client Company's intention to purchase approximately 100 acres of land in Texas as the site for the Dallas / Ft Worth facility. A portion of this land will be purchased - OES Mgmt Bi05.ZIP