FW: Services Company

Just to keep you in the loop. I can't wait for Greg to jump into action!
-----Original Message-----
From: Perlman, Beth=20
Sent: Friday, January 25, 2002 2:22 PM
To: Muller, Mark S.; Piper, Greg; Golden, Jeff; Dietrich, Janet; Daniels, E=
ddy; Schuler, Lance (Legal); McMahon, Jeffrey
Cc: Hall, Bob M
Subject: FW: Services Company

As many of you are aware, we have been kicking around an idea relating to a=
services company that would perform middle/back office services to the ene=
rgy industry. This was being considered for the following reasons...
=20
1. Reduce expenses to the estate and Newco
2. Revenue opportunities relating to licensing software
3. Career opportunities for estate staff (retention)
=20
The memo to Jeff McMahon below outlines the opportunity. This has been dis=
cussed for the past 3 months. We are currently engaged in discussions with=
Accenture. They are the only service provider who could perform the outso=
urcing and provide the channel for a service bureau type company.
=20
It has come to my attention that there may be limitations in the UBS deal t=
hat preclude the estate from performing in the capacity of a service compan=
y in the areas of gas and power trading. My questions are (1) what is the=
interpretation because there seems to be conflicting in the master and sub=
license agreements? (2) what was actually agreed upon? and (3) if the answ=
er is not favorable, is there an opportunity to negotiate? disagree? argue?
=20
Greg Piper and I have been working on this and he may have contacted you co=
ncerning these points. I'm not sure how to proceed, but I do need to know=
what I can and cannot do with Accenture. Jeff Golden and I spoke yesterda=
y and Jeff thought that if the processing areas that I am concerned about d=
o not constitute a majority of the cost of the operation - that it may be O=
K.
=20
Thank you for taking the time to assist. Any help is greatly appreciated.
=20
Beth
-----Original Message-----
From: McMahon, Jeffrey=20
Sent: Saturday, January 05, 2002 5:50 PM
To: Beck, Sally
Cc: Perlman, Beth; Piper, Greg
Subject: RE: Services Company

Great work!! Absolutely proceed to the next level. Please check with Mark=
Muller re any potential non compete on this...I am certain, though, there =
will not be one. In fact, Netco could be our biggest customer! Proably ne=
ed someone from corp devt involved once you bring in the the consulting fir=
m. I would suggest that the reorganized Enron could provide these services=
to Netco, the Estate, the consulting firm, etc. =20

-----Original Message-----=20
From: Beck, Sally=20
Sent: Fri 1/4/2002 7:19 PM=20
To: McMahon, Jeffrey=20
Cc: Perlman, Beth; Piper, Greg=20
Subject: Services Company=20

Beth Perlman has fleshed out an idea for maximizing value for creditors of =
the Enron Estate that I believe has a lot of merit. As you may know, one o=
f our business goals within Enron Net Works in 2001 was to commercialize mi=
d and back office services. With the money and talent that has been poured=
into Enron's trading operations systems and processes, we believed that th=
ere could be market demand for these services. Ironically enough, we had s=
ecured our first services customer and were to begin providing these servic=
es on December 1. Understandably, the customer became concerned during Nov=
ember and the deal was shelved. Our experience was that there was much int=
erest in mid and back office services (coupling our systems and our people)=
, but that the major drawback in the marketplace was that it was indeed Enr=
on that was offering these services. The market place didn't want us to "w=
in again" as Enron. =20

Obviously, the world has changed. While effort is currently focused on the=
formation of Netco and how to realize value from remaining contracts withi=
n EGM, EIM, EA, EES, etc., I think that we would short-change the Estate if=
we did not bring the idea of a services company to at least the proposal s=
tage in order to evaluate its potential value for the Estate. The idea wou=
ld be to form this services company with a consulting firm, which could pro=
vide some capital, additional resource pool and a ready sales channel. Wit=
h the potential of spin-off companies from Enron and with former Enron empl=
oyees taking jobs with other firms, many doors would be opened for this "in=
dependent" services company to provide services. Servicing the Enron Estat=
e could be the first engagement for this services company. Depending upon =
the structure of the deal, benefits to the Enron Estate could be reduced co=
sts for systems and services, perhaps a cash inflow from the purchase of th=
e CommodityLogic tools, the possibility of some revenue stream from other =
services engagements, etc. Another important aspect of this idea is that f=
or the systems and operations professionals, this would create a true caree=
r opportunity - a service bureau offering through an established consulting=
firm - making it much more likely that these people could be retained. =20

Beth and I met with a consulting firm today to explore the concept. There =
is definite interest, so we discussed the idea with Greg Piper today. We a=
sked him for clarification around the Netco agreement regarding systems, an=
d I believe that he has copied you on a note to Anne Koehler regarding this=
. Our ability to process transactions is one of Enron's assets, and our ho=
pe would be that we are not limiting the full realization of value around =
that asset in the way that the Netco agreement has been drafted. =20

The next step would be to have the consulting firm conduct a short due dili=
gence process so that a proposal could be presented for the Estate's consid=
eration. Beth and I would like to move forward with the proposal stage. I=
t would be helpful to know your view on the process which would have to be =
followed to consider the proposal. If we as Enron felt that there is merit=
to the proposal, would there simply be an approval process with the Credit=
or's Committee and the Court? Would there have to be some sort of open bid=
ding process on the proposal? To set expectations within the consulting fi=
rm, it would be good to be able to give them a feel for the process. =20

Your thoughts on this idea in general would be welcomed as well. --Sally