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I have not received any response yet from Dave Delainey to my Feb 21 memo w=
hich forwarded additional information about the investment and the energy s= ervices agreement . I intend to followup with him next week. Dick. Louise Kitchen@ECT 03/01/2001 12:56 PM To:=09Richard Lydecker/Corp/Enron@ENRON cc:=09=20 Subject:=09RE: Heartland Industrial Partners =20 Sorry it took me a while to repond. Has EES picked this up? If so what is= the financial implication on the $6m already invested to date? Thanks Louise Richard Lydecker@ENRON 02/13/2001 04:32 PM To:=09Louise Kitchen/HOU/ECT@ECT cc:=09=20 Subject:=09RE: Heartland Industrial Partners Heartland Industrial Partners is one issue we did not discuss this morning.= These e-mails summarize the situation. I have not been able to get resol= ution yet on who provides the home for this investment. It doesn't fit ENA= . Bowen doesn't want it in EIM. EES does not want to invest this kind of = capital (although Delainey did ask for some additional information). ---------------------- Forwarded by Richard Lydecker/Corp/Enron on 02/13/20= 01 03:39 PM --------------------------- Richard Lydecker 02/12/2001 01:42 PM To:=09David W Delainey/HOU/ECT@ECT cc:=09Brian Redmond/HOU/ECT@ECT=20 Subject:=09RE: Heartland Industrial Partners With respect to your questions concerning the Heartland Industrial Partners= fund and current investments: Heartland is a private equity buyout fund with $1.2 billion in commitments.= The targeted size of the fund is $2 billion. The fund is headed by David= Stockman, former managing director at The Blackstone group. Stockman was = director of OMB under Reagan. Heartland's objective is an IRR of 30% gross (26% to the limited partners).= The limiteds get an 8% preferred return after which the GP gets a 20% car= ried return. The GP also receives a 1.5% management fee. In my experienc= e these terms are consistent with most private equity funds. The fund's objective is to acquire and expand industrial companies "in sect= ors ripe for consolidation and growth." These "industrial platform scaleup= s" are targeted to be in sectors such as aerospace components and materials= , automotive suppliers, capital goods, chemicals, plastics conversion, meta= l working, etc. The fund has two investments currently: MascoTech is a merger of three fund companies. It is a leading global desi= gner and supplier of high quality, low-cost metal formed components, assemb= lies and modules for the transportation industry. Products include noise v= ibration and harshness products, transmission and transfer case components,= engine components, wheel end and suspension components, axle driveline com= ponents. Estimated revenues were $1.9 billion in 2001. The company has 50= facilities in 11 countries. 9,500 employees. An agreement to purchase Collins & Aikman Corporation was signed in January= 2001. C & A is a leader in automotive floor and acoustic ceilings and a l= eading supplier of automotive fabric, interior trim and convertible top sys= tems with 2000 sales of $1.9 billion. The original DASH in April 2000 predicated that "ENA will receive the exclu= sive right to provide all energy-related products and services to each plat= form company owned by the fund...ENA will submit a comprehensive, long-term= , energy managment plan for each platform company. HIP will be obligated t= o accept and implement the plan as long as the plan provides a cost benefit= relative to the platform company's current practices after accounting for = switching costs. The expected value of this business to ENA is about $20 -= 50 MM." ---------------------- Forwarded by Richard Lydecker/Corp/Enron on 02/12/20= 01 01:04 PM --------------------------- From:=09Raymond Bowen/ENRON@enronXgate on 02/09/2001 07:04 PM To:=09David W Delainey/HOU/ECT@ECT, Richard Lydecker/Corp/Enron@Enron cc:=09Brian Redmond/HOU/ECT@ECT, Wes Colwell/HOU/ECT@ECT, Raymond Bowen/HOU= /ECT@ENRON, Jeffrey McMahon/ENRON@enronXgate=20 Subject:=09RE: Heartland Industrial Partners Dave, Congrats on your new role. Heartland Industrial Partners was an investment= pursued solely for the purpose of providing deal flow for energy outsourci= ng opportunities when ENA's Industrial Group was following a broad based en= ergy outsourcing business plan. It has zero relevance to EIM's business. = In fact, Heartland has been reflected on ENA's balance sheet ever since the= creation of EIM last August. Brad Dunn has administered the relationship = as a transitional matter in the intervening months. Brad has attempted to = get EES to take on the transaction, but they have expressed no interest in = the capital commitment. However, EES wants the option to look at the energ= y outsourcing opportunities in the transaction. If I thought I could get a= free option, I would take the same position. If Enron is to get anything = out of Heartland Industrial Partners beyond the return on our invested doll= ars, that value will come to EES. Since there is no paper or steel aspect = to Heartland, it doesn't belong in EIM and I don't want it. I would be hap= py to discuss. On a different note, there are lots of opportunities for EES and EIM to wor= k together on (i) energy opportunities in EIM's pulp & paper and steel cust= omer base and on (ii) paper or steel opportunities in EES' client base. Je= remy Blachman and I had agreed on a revenue sharing plan to incent the grou= ps to cooperate, but I assume you will want to understand it now. Janet an= d I talked about it today and she was going to follow up with Jeremy. =20 Take Care, Ray -----Original Message----- From: =09Delainey, David =20 Sent:=09Friday, February 09, 2001 6:01 PM To:=09Lydecker, Richard Cc:=09Redmond, Brian; Colwell, Wes; Raymond Bowen/HOU/ECT@ENRON Subject:=09Heartland Industrial Partners Richard, it is my understanding that this investment is currently in Ray Bo= wen's business. In my ENA shoes, I would say we would have no interest in = taking on that responsibility. In my EES shoes, I would like to take a clo= ser look at the possible connections. Please send me some info on the inve= stment fund and their current investments portfolio. I have also heard that Tom White has been talking to you about EES taking o= n the Catalytica investment. With my EES shoes on, no way!!!! Regards Delainey ---------------------- Forwarded by David W Delainey/HOU/ECT on 02/09/2001 = 05:56 PM --------------------------- =20 Richard Lydecker@ENRON 02/07/2001 09:01 AM To:=09David W Delainey/HOU/ECT@ECT cc:=09Brian Redmond/HOU/ECT@ECT, Wes Colwell/HOU/ECT@ECT=20 Subject:=09Heartland Industrial Partners Dave, in May 2000 Enron North America committed to invest up to $30 million= in Heartland Industrial Partners L.P., a private equity fund. The terms o= f the fund investment are fairly typical (and not particularly exciting for= a limited partner such as we). The deal was "sold" on the basis of ENA ge= tting exclusive rights to provide energy management services to companies o= wned by the fund if these were cost effective. The claimed benefits for th= e energy management tie were calculated at $20 - 50 million. The deal was = originated by Brad Dunn who now is in EIM. Ownership of this commitment h= ad been assigned to Jim Ajello. The kinds of energy management services associated with this deal are now p= rovided by EES. While they are happy to exploit any opportunity, their bus= iness plan does not contemplate investment substantial capital in this kind= of deal. In short, they have no interest in picking up the commitment (an= d capital employed) via an intercompany transfer. Private equity funds such as this are highly illiquid by design and the nor= mal investment cycle is at least 5 - 7 years. The Heartland partnership ha= s a 10-year life, Enron did negotiate the right to sell its LP interest af= ter 3 years. As a practical matter, that right guarantees neither a fair p= rice or even a market. There is no logical home for this investment that I know of in ENA except i= n my portfolio. Question: is this an ENA responsibility or would it move t= o EIM's balance sheet? If we (ENA) have no choice but to retain the invest= ment, my group will take responsibility for it and do our best to monetize = funds invested to-date (about $6 million) and sell the remaining commitment= . Since the fund itself is still marketing limited partnership interests, = however, it will be extremely difficult to get out of our investment/commit= ment in the foreseeable future. Under any circumstances finding a buyer wi= ll be time-consuming and expensive. (This is a poster child for "patient" = investment capital). I want to ensure that you are aware of the situation in case your view is t= hat the obligation should be transferred to EIM which I believe has assumed= the charter of the ENA group that formerly managed this investment. Dick.= =20 <Embedded StdOleLink< <Embedded Picture (Device Independent Bitmap)<
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