Message-ID: <7156233.1075840359264.JavaMail.evans@thyme>
Date: Sat, 5 Jan 2002 15:49:33 -0800 (PST)
From: jeffrey.mcmahon@enron.com
To: sally.beck@enron.com
Subject: RE: Services Company
Cc: beth.perlman@enron.com, greg.piper@enron.com
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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