Dear NewCo employees:
 
I wanted to send a note giving you my views on the NewCo opportunity and next steps. 
 
What are those opportunities?  In short, to date no competitor has taken Enron's dominant market position.  In most cases, competitiors are retrenching from an aggressive expansion of their deregulated business in order to protect their key regulated franchises or balance sheets. Market liquidity and 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 liquidity will also provide numerous opportunities, in the commodity, asset and capital markets, to take advantage of key arbitrages across the North American grid.   We are faced with an energy asset overhang, in the short run, which is unprecedented since the early nineties.  This coupled with market participants selling assets to protect balance sheets will provide many opportunities to acquire attractive energy assets at good value. However, in the long-run, as we emerge from the recession and as highly energy intensive technology investment resumes, increasing asset values, demand for energy and energy price volatility are highly likely. On the services side, there are numerous un-met needs in the market place at this point including demand side management, distributed generation amongst others that only Enron people have the complete value chain understanding to make feasible. I also believe that innovation in the energy capital markets can provide value to NewCo 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.
 
What is NewCo?  NewCo will be a private company that will focus on the energy merchant business in North America which will capitalize on the opportunities detailed above.  These businesses will stretch from production to market, wholesale through retail primarily in natural gas and electricity in the United States and Canada. It will be a portfolio of several key businesses, services and assets supported by a common infrastructure.  It will be majority owned by Enron but will have significant outside investment to ensure liquidity and legitimacy. It will be re-branded and be operating and solvent by mid Q2 at the latest.  It will be seeded with a number of Enron assets and contracts that we think add value to our business or provide key credit 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 approximately 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 systems and infrastructure. It will be in the market of buying and selling energy 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 transactional relationship with Netco.
 
What will be NewCo's culture? It will have the benefits of being a small private company which will measure success by cashflow generation.  It will be a small company atmosphere where everyone knows each other.  It will be a group that celebrates success together and works hard towards shared objectives.  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 customers and the satisfying un-met needs in the market.  NewCo will value customer relationships.  It will be a partnership and employ an atmosphere of open communication. NewCo will be innovative, agile and nimble.
 
What is next? There will be a meeting in 30C2 at 4:00 PM on Monday to discuss 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 spend additional social time to discuss NewCo. NewCo will be located on the 30th floor.  The immediate tasks in hand can be broken into the following: a) opportunity and business definiton including fully vetted business plans for opportunities identified around specific assets or independent of these assets; b) setting up infrastructure necessary to cure defaults and start performing 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 bankruptcy to solvency, rating and operation; e) scouring Enron for other valuable assets not yet identified for NewCo; f) detailed market research;  g) asset acquisition target definition; h) financing and capitalization plan including raising external investment and i) additional hiring and recruitment.
 
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 shared goals and celebrating the inevitable success.  
 
Respectfully,
Dave Delainey