Advisory Board Meeting September 10, 2001

2 Proposed Agenda I.Rationale for Xcelerator II.Structure III.Talent acquisition IV.Individual board member commitments V.Overview of current projects VI.Areas for investigation

3 Rationale for Xcelerator  Enron should actively pursue growth opportunities outside, but related to, the existing core business.  These adjacent growth opportunities should be pursued in a centralized group.  provides the dedicated resources and attention necessary to attract & develop promising ideas & people  allows the opportunity to create disciplined “seed funding” environment with clear visibility and accountability

4 Structure – Charter & Criteria Charter  Develop new businesses for Enron adjacent to its existing core businesses. Criteria for ideas under development  Potential to achieve $500MM market capitalization within 3 – 5 years (meaningful to Enron)  Potential to fit within expanded Enron corporate portfolio, but outside of existing core (“a different business model”)  Leverage Enron skills, customers, ability to be customer/supplier, market insights, etc.  Able to attract full-time team from inside or outside Enron

5 Idea Sources Internal Ideas: solicited from senior leadership & employees Target Areas: active prospecting by staff with businesses, corp. development & principal investments Outside Ideas: solicited from venture community, entrepreneurs, corporate partners, etc. “Pre-Seed Development” 100 – 200 / yr. “Seed Development” 10 – 15 / yr. “Graduate” 1 – 2 / yr mo mo mo mo. Cumulative Funding$300K$1MM$2.5MM$5MM (not in budget) FTE’s3 – 55 – 1515 – 2525 – 40 Screen Ideas Initial development of idea & team Multiple seed stages (each 1 – 4 months) with follow-on contingent upon success Spin into BU or stand-alone Seed-Funding Growth-Funding - $5MM Round - $8 – 10MM Total “Typical” Early-Stage Trajectory (one company) Structure – Typical Approach

6 Office of the Chairman Dave DelaineyKenneth Lay Jeff DonahueJohn Sherriff Andy FastowGreg Whalley Kevin Garland Advisory Board Kenneth Lay Mark Frevert Greg Whalley VP, Xcelerator 2 – 3 VP / MD Advocates & Advisors to Team (2 directors/VPs) (1 – 2 managers) (2 associates/analysts) (Former Business Team Members) Heath Schiesser Team Advisors champions of Xcelerator approve overall approach, budget, etc. explicit approval of investments over $1MM Bull PenStaff champions of business advise team on strategy and execution 1 – 2 hrs / week Business Team (Full-time commitment internal or external hires) source & develop ideas & people seed-funding decisions < $1MM; recommendations > $1MM guide / manage business teams find business team to join or return to a BU job (2 weeks) assist pre-seed ideas, business teams & staff efforts some “entrepreneur in residence” types may be sponsored for longer stays after 2 weeks – go to redeployment create & grow the business ultimately responsible for success / failure manage seed funding budget Structure - Organization

Budget*FTEs** Staff & Retained Bull Pen$ 5MM~ 9 – 12 Business Teams$15MM~ 30 – 50 on 5 – 7 concurrent teams TOTAL$20MM~ 40 – 60 Performance Metrics  Successful graduations receiving growth funding  ROI (total expenditures vs. est. value at spin-out)  Internal perception 1 st year  1 – 2 (from six mo. & older attempts)  30-40% on 6 mo. & older investments over entire Xcelerator budget  “positive buzz” (e.g., attracting best & brightest; positive feedback from participants) 2 – 3 years  1-2 businesses that are part of the “growth story” 3-5 years  2-4 businesses worth $2-5 billion * does not include funding of ideas beyond 9 months, $3MM level ** costs included in budget Structure – Resources & Metrics

8 Agenda I.Rationale for Xcelerator II.Structure III.Talent acquisition IV.Individual board member commitments V.Overview of current projects VI.Ideas

9 Talent acquisition – compensation & rating for full-time business team members Status / OutcomeCurrent View / PolicyProposed  Base  3 rating/bonus with higher 4 – 5 risk  Base  3 rating/bonus unless extreme  Sign-on options (new hires only)  Base  3 rating/bonus with 1 – 2 possible, but not likely  Base  1 – 2 rating/bonus unless extreme issues  Success bonus paid upon “graduation” 1 yr base in cash 1 yr base in LTIP (full vest if involuntary termination) 6 mo severance if involuntary termination within 1 yr  Lose partial year bonus  Lose unvested options  90 days to exercise  Signing bonus & moving cost pay-back penalties  Pro-rate target (average)  Continued vesting while in Newco  1 year to exercise  Signing & moving forgiven (this is similar to involuntary package today)  3 rating/bonus with higher 4-5 risk  3 rating/bonus unless extreme (like new hire) (Start-over)  45-day redeployment (if eligible)  severance pay of 2 weeks’ pay/yr of service + 2 weeks’ pay/$10K of base  45-day redeployment less ½ day for each day spent seeking funding  Greater of 6 mo severance of involuntary package Severance Business team hire Business unit hire / return Join business under development “Graduate” Max 1 year to go / no-go Funding Stops Secure outside funding within 90 days & go with Newco Bull pen

10 Agenda I.Rationale for Xcelerator II.Structure III.Talent acquisition IV.Individual board member commitments V.Overview of current projects underway VI.Areas for investigation

11 Individual board member commitments  Agreement on charter, approach, metrics & funding  Recruiting help  each name at least 1 Director or VP from own area as candidate for core team (I’ll have an explicit recruiting conversation with each one and have your support if they wish to move.)  recruiting meetings with business team candidates as appropriate  PRC support of supervisors that support business team tours of duty  assistance placing members of business teams which “fail well” previously rated 3+ back in the organization  Communicate support of effort  formal (e.g., brown-bag lunch participation; invitation to present at staff meetings)  informal (e.g., hallway talk, staffing discussions, evaluations)  Attend at least 5 of 6 advisory board meetings in next 12 months  Be a mentor to at least 1 team in next year – 30 minutes / week  Apolitical position in organization that communicates senior support

12 Agenda I.Rationale for Xcelerator II.Structure III.Talent acquisition IV.Individual board member commitments V.Overview of current projects VI.Areas for investigation

13 Current Projects – Xtransco  Provide units which allow nation’s 4.2MM tractor trailers to receive HVAC & power rather than idling overnight, saving as much as $10 – 20/night in avoided fuel and maintenance.  May also offer opportunity to avoid use of inefficient diesel powered refrigeration units while parked, and to capture pollution credits.  Appeal of value proposition to truck owners, especially large fleets  Portion of value which will be claimed by truck stops  Unit installation and operating costs  $500K for 08/20/01 – 10/31/01 NameTitlePrevious Position Jon AdlerManager, OriginationEnron Broadband Services Hamd AlkhayatManager, OriginationEnron Corp Melanie KingAnalystEnron Broadband Services Heriberto MurilloManager, OriginationEnron Broadband Services Joe PhelanSr. Director, Corp. Dev.Enron Energy Services NameTitle Kevin GarlandManaging Director, Principal Investments, Enron Corp Michael J. MillerVice President, Freight Markets Steve WurzelVice President, Enron Energy Services Description Major issues Current funding Team * Advisors * Note: team is larger than ideally wish for this stage – a result of the existing staff work-out.

14 Current Projects – Private Equity Markets  Create market for limited partner interest’s in general partnerships.  Considering initial entry into oil & gas funds (~ $10 – 20BB) with eventual entry into venture capital / LBO funds (~ $1 Trillion+)  Appeal of liquid market to LPs and their willingness to fund and support effort  GP views & ability to resist LP desire to create market.  Investment, timing & partners likely required to begin market development  $100K for 08/20/01 – 09/30/01 NameTitlePrevious Position Ford CooperSr. Director, Corp. Dev.Enron Energy Services Marc PoulsonAssociateEnron Corp NameTitle Kevin GarlandManaging Director, Principal Investments, Enron Corp Andy FastowExecutive Vice President & Chief Financial Officer, Enron Corp Billy LemmonsVice President, Analyst / Associate Program, Enron Corp Description Major issues Current funding Team Advisors

15 Agenda I.Rationale for Xcelerator II.Structure III.Talent acquisition IV.Individual board member commitments V.Overview of current projects VI.Areas for investigation

16 Areas for investigation (starter list)  Distributed generation  Specialized insurance products  Hedging “warranties” for sale with industrial / consumer products  Energy management software

Appendix

18 ENRON EUROPEMichael R. BrownChief Operating Officer John SherriffPresident & Chief Executive Officer ENRON CORPRick BuyExecutive Vice President & Chief Risk Officer Rick Causey*Executive Vice President & Chief Accounting Officer Jim DerrickExecutive Vice President & General Counsel Jeff DonahueManaging Director Andy FastowExecutive Vice President & Chief Financial Officer Ben GlisanManaging Director & Treasurer Steve KeanExecutive Vice President & Chief of Staff Mark KoenigExecutive Vice President, Investor Relations Ken LayChairman & Chief Executive Officer ENRON ENERGY SERVICESDave DelaineyChairman & Chief Executive Officer Janet Dietrich*President Dan LeffChief Operating Officer Mark MullerPresident & Chief Executive Officer COMPANYNAMETITLE ENRON AMERICASJohn LavoratoPresident & Chief Executive Officer Louise KitchenChief Operating Officer, Enron Americas Xcelerator Conversations to Date ENRON GLOBAL MARKETSMike McConnellPresident & Chief Executive Officer Jeff ShankmanChief Operating Officer ENRON INDUSTRIAL MARKETSRay BowenChief Operating Officer Jeff McMahonPresident & Chief Executive Officer * scheduled discussion

19 ENRON TRANSPORTATION SERVICESStan HortonChairman & Chief Executive Officer OTHER STAFFJohn ArnoldVice President, Financial Gas Trading Jeff BartlettDirector, E-Commerce Tim BeldenManaging Director, West Power Trading Wes ColwellManaging Director, Accounting Tim DetmeringManaging Director, Corporate Development Kevin GarlandManaging Director, Principle Investments Patrick HickeyVice President, Principle Investments Vince KaminskiManaging Director, Research Kevin KuykendallDirector, Principle Investments Billy LemmonsVice President, Analyst/Associate Program Jim LoweDirector, Origination / Enterprise Services George McClellanManaging Director, Trading Kevin PrestoVice President, East Power Management Book Trading Hunter ShivelyVice President, Mid-West Gas Trading Scott TholanDirector, Market Intelligence Mark WadlingtonDirector, Global Corporate Development COMPANYNAMETITLE ENRON NET WORKSGreg PiperPresident & Chief Executive Officer ENRON WHOLESALE SERVICESMark FrevertChairman and Chief Executive Officer Jim HughesPresident & Chief Operating Officer, Enron Asia Pacific Greg WhalleyPresident & Chief Operating Officer Xcelerator Conversations to Date (cont.)