Subject: NewCo


Dear NewCo employees: =20 I wanted to send a note giving you my views on the NewCo opportunity and ne= xt steps.=20 =20 What are those opportunities?
In short, to date no competitor has taken En= ron's dominant market position.
In most cases, competitiors are retrenchin= g from an aggressive expansion of their deregulated business in order to pr= otect their key regulated franchises or balance sheets.
Market liquidity an= d activity is extremely fractured and highly diminished from 2000 levels.
= This will create opportunities as bid/offers expand and customers have less=  choices to manage key long-term risks.
This lack of transparancy and liqui= dity will also provide numerous opportunities, in the commodity, asset and = capital markets, to take advantage of key arbitrages across the North Ameri= can grid.
We are faced with an energy asset overhang, in the short run, w= hich is unprecedented since the early nineties.
This coupled with market p= articipants selling assets to protect balance sheets will provide many oppo= rtunities to acquire attractive energy assets at good value.
However, in th= e long-run, as we emerge from the recession and as highly energy intensive = technology investment resumes, increasing asset values, demand for energy a= nd energy price volatility are highly likely.
On the services side, there a= re numerous un-met needs in the market place at this point including demand=  side management, distributed generation amongst others that only Enron peo= ple have the complete value chain understanding to make feasible.
I also be= lieve that innovation in the energy capital markets can provide value to Ne= wCo and our customers given the blight of liquidity in capital markets.
In = short, we are at the eve of an opportunity in the energy markets which has = not been seen since the early nineties.
=20 What is NewCo?
NewCo will be a private company that will focus on the ener= gy merchant business in North America which will capitalize on the opportun= ities detailed above.
These businesses will stretch from production to mar= ket, wholesale through retail primarily in natural gas and electricity in t= he United States and Canada.
It will be a portfolio of several key business= es, services and assets supported by a common infrastructure.
It will be m= ajority owned by Enron but will have significant outside investment to ensu= re liquidity and legitimacy.
It will be re-branded and be operating and sol= vent by mid Q2 at the latest.
It will be seeded with a number of Enron ass= ets and contracts that we think add value to our business or provide key cr= edit support.
Those assets are conservatively valued at approximately $500 = million to one billion.
With asset and new cash investment, NewCo should be=  at least a billion dollar company.
It will emerge as a non-debtor company = and should be an investment grade rated company.
NewCo will employ approxim= ately 100 to 200 people depending on the mix of businesses and assets under=  control.
These people will be sourced from the existing pool of talent in=  Enron and ex-employees.
NewCo will have access to all Enron's existing sys= tems and infrastructure.
It will be in the market of buying and selling ene= rgy albeit not market making which will be restricted under the non-compete=  with Netco.I would expect that we would have a strong business and transac= tional relationship with Netco.
=20 What will be NewCo's culture?
It will have the benefits of being a small pr= ivate company which will measure success by cashflow generation.
It will b= e a small company atmosphere where everyone knows each other.
It will be a=  group that celebrates success together and works hard towards shared objec= tives.
It will have an attractive employee compensation plan particularily=  for long term value creation.
We will build an organization of integrity = of which people can be proud.
It will center its objectives around our cust= omers and the satisfying un-met needs in the market.
NewCo will value cust= omer relationships.
It will be a partnership and employ an atmosphere of o= pen communication.
NewCo will be innovative, agile and nimble.
=20 What is next?
There will be a meeting in 30C2 at 4:00 PM on Monday to discu= ss issues, questions and comments.
There will also be a dinner set up for = 6:30PM on Tuesday at the Capital Grille to provide us an opportunity to spe= nd additional social time to discuss NewCo.
NewCo will be located on the 30= th floor.
The immediate tasks in hand can be broken into the following: a)=  opportunity and business definiton including fully vetted business plans f= or opportunities identified around specific assets or independent of these = assets; b) setting up infrastructure necessary to cure defaults and start p= erforming to key operating assets including managing out of the bankruptcy;=  c) modelling cashflows, operating costs, capital requirements and proforma= 's for NewCo; d) working through the NewCo structure and path through bankr= uptcy to solvency, rating and operation; e) scouring Enron for other valuab= le assets not yet identified for NewCo; f) detailed market research;  g) as= set acquisition target definition; h) financing and capitalization plan inc= luding raising external investment and i) additional hiring and recruitment= .
=20 On a final note, we will need to identify a new name for the company so let=  me know your ideas!
I look forward to working with you towards reaching sh= ared goals and celebrating the inevitable success.
=20 =20 Respectfully, Dave Delainey