Contrary to rumors, Enron Corp. plans to revitalize its producer financing efforts, which are part of affiliate Enron North America, rather than get out of that business altogether. Houston-based ENA experienced a slowdown in the last two years because the finance team had to focus mostly on managing and/or unraveling E&P deals that had gone sour as oil prices collapsed. Producers and financial intermediaries were complaining that Enron would not look at any of their proposals, and that personnel they were used to dealing with had moved on. That will apparently change. Enron North America is revising its organization and deal structure and hiring new people, according to C. John Thompson and Scott D. Josey, vice presidents and comanagers of the finance unit formerly known as Enron Finance Corp., a unit of Enron Capital & Trade Resources. The pair left Enron a couple of years ago to form Sagestone Capital, a private Houston-based capital provider that managed some oil and gas investments for The Common Fund, a group of college endowments. When they heard rumors that Enron might be getting out of producer financing, they approached the company to see about taking over some of the accounts. Instead, after some negotiation, they found themselves shutting down Sagestone and returning to Enron. They will manage a group of 20 to 25 financial and technical people. They plan to offer the full range of equity, mezzanine and debt financing. "We'll start with the people first and then look at transactions second," says Thompson. "We're interviewing within Enron now. We want to build a new team and bring the technical side into the group, whereas before it was separate. Many of the ones who had been at ECT transferred to other parts of the parent company." ENA will look at start-ups and start-overs, but deals of less than $5 million probably will not get funded. Says Josey: "The market will dictate what we will push, but we think this is a great time to do volumetric production payments, something the Enron was a leader in for many years." The company invested more than $3 billion in VPPs and other financings during its heyday in the early 1990s. "Realistically we'd like to do $100- to $300 million per year, but we can do all the production payments we want." The California Public Employees Retirement System (the so-called CalPERS) is still on board as an investor, as are various banks to which Enron syndicates its deals, he adds. Capital is not an issue. One of Enron's biggest investment disappointments was Midland-based Costilla Energy, in which it had invested $50 million (and which was forced to file Chapter 11 last year). Enron also has equity investments in two small-caps, Queen Sand Resources and Carrizo Oil & Gas, both of which recently closed private placements to recapitalize. And finally, ENA owns about 98% of Mariner Energy, an offshore deepwater E&P company in Houston that filed for an initial public offering last year, but has not been able to get it priced due to negative market sentiment toward the E&P sector. -Leslie Haines