DRAFT February 21-23, 2000 PROJECT DOOR STEP Oslo Office Visit- February 21-23, 2000 Report Issued- February ___, 2000 Confidential

DRAFT February 21-23, 2000 Project Doorstep - Oslo Review Highlights Project Objective: We performed an on-site review of processes, procedures and controls that support the trading and origination business activities within the Oslo office. Our procedures included interviews with key commercial and accounting personnel. We also performed a test of commodity transactions from deal execution through settlement. Team Members:Office Personnel Interviewed: Brent PriceThor Lien - Vice President Bjorn HagelmannStefan Fastesson - Options Trader Nic Swingler - AA Jan-Erland Bekeng - Local Office Controller Rebecca Morrill - AA Trond Branem Hansen - Risk Management Socrates Paschalis - AA (London)Simen Jakobson - Risk Management Lise Edvardsen - Settlements Bjarne Schildrop - Modelling Annette Schneider - Documentation (London) Project Objective: We performed an on-site review of processes, procedures and controls that support the trading and origination business activities within the Oslo office. Our procedures included interviews with key commercial and accounting personnel. We also performed a test of commodity transactions from deal execution through settlement. Team Members:Office Personnel Interviewed: Brent PriceThor Lien - Vice President Bjorn HagelmannStefan Fastesson - Options Trader Nic Swingler - AA Jan-Erland Bekeng - Local Office Controller Rebecca Morrill - AA Trond Branem Hansen - Risk Management Socrates Paschalis - AA (London)Simen Jakobson - Risk Management Lise Edvardsen - Settlements Bjarne Schildrop - Modelling Annette Schneider - Documentation (London)

DRAFT February 21-23, ,857 active deals, 13.5% financial OTC, 6% physical OTC, 80.5% exchange traded Term generally for less than1 year; 10 deals with a term of years Published daily exchange prices up to 2 years ahead * DEAL TEST- Tested 25 deals and a further 5 deals reviewed by exception Project Doorstep - Oslo Current Portfolio Power NOP (159,114MWh) YTD P/L 5.9MM

DRAFT February 21-23, 2000 Project Doorstep - Oslo Office Analysis Framework Market Structure - Power Physical and financial market environment with high liquidity and good price discovery Cross border co-operation with efficient and reliable power transmission across Norway, Sweden, Finland & Denmark Power generation almost 100% hydro in Norway; Sweden & Finland – hydro/nuclear/thermal; Denmark – thermal Nordic power production capacity approximately 420TWh; annual production around 360TWh Competition introduced via legislation Norway 1991, Sweden 1996, Finland 1997; Denmark - formal legislation will follow the pace of deregulation within the European Union Generation is fully deregulated however grid operators normally government owned monopolies Enron is largest market maker on the NordPool exchange Market Structure - Power Physical and financial market environment with high liquidity and good price discovery Cross border co-operation with efficient and reliable power transmission across Norway, Sweden, Finland & Denmark Power generation almost 100% hydro in Norway; Sweden & Finland – hydro/nuclear/thermal; Denmark – thermal Nordic power production capacity approximately 420TWh; annual production around 360TWh Competition introduced via legislation Norway 1991, Sweden 1996, Finland 1997; Denmark - formal legislation will follow the pace of deregulation within the European Union Generation is fully deregulated however grid operators normally government owned monopolies Enron is largest market maker on the NordPool exchange Strategy Continue to exploit trading opportunities Continue to take advantage of arbitrage opportunities in the options market Increase transaction count on EnronOnline Expand mid markets business Expand market for volumetric swaps Expand market for temperature swaps Explore possibilities to develop a market for precipitation swaps Explore entering into partnerships with generators Strategy Continue to exploit trading opportunities Continue to take advantage of arbitrage opportunities in the options market Increase transaction count on EnronOnline Expand mid markets business Expand market for volumetric swaps Expand market for temperature swaps Explore possibilities to develop a market for precipitation swaps Explore entering into partnerships with generators Management Both management and operational staff are control oriented and aligned to Enron’ business culture Commercial and operations group staffed by local employees Commercial staff all have 2-3 years of Enron work experience Management supportive of rotating key employees through similar functions in London to further develop knowledge and experience Oslo used as a training ground for other Enron traders and business developers Management Both management and operational staff are control oriented and aligned to Enron’ business culture Commercial and operations group staffed by local employees Commercial staff all have 2-3 years of Enron work experience Management supportive of rotating key employees through similar functions in London to further develop knowledge and experience Oslo used as a training ground for other Enron traders and business developers

DRAFT February 21-23, 2000 Project Doorstep - Oslo Office Analysis Framework Information Daily position and P&L reports prepared and reported to management in Oslo Above reported to London on a daily basis and included in daily Enron Europe P&L summary VAR and prudency calculated in Oslo Annual budgets prepared in consultation with London Information Daily position and P&L reports prepared and reported to management in Oslo Above reported to London on a daily basis and included in daily Enron Europe P&L summary VAR and prudency calculated in Oslo Annual budgets prepared in consultation with London Systems Online trading on the NordPool exchange via the exchange’s trading system (PowerKlick) installed on a dedicated terminal All transactions are captured onto and valued by Power 99 – a London developed system adapted to support Nordic markets PCKraft system to support physical trading Invoicing (95%) via BOSS (Back Office Settlement System) which interfaces with Power 99 and LOM (London Office Manager) Counterparty and banking details maintained on LOM which interfaces with BOSS and SAP Financial information captured in newly installed SAP Nordic Power & Weather Model developed by local office to collate information such as river flows, infiltration & snow levels and precipitation forecasts from various real time data feeds Systems Online trading on the NordPool exchange via the exchange’s trading system (PowerKlick) installed on a dedicated terminal All transactions are captured onto and valued by Power 99 – a London developed system adapted to support Nordic markets PCKraft system to support physical trading Invoicing (95%) via BOSS (Back Office Settlement System) which interfaces with Power 99 and LOM (London Office Manager) Counterparty and banking details maintained on LOM which interfaces with BOSS and SAP Financial information captured in newly installed SAP Nordic Power & Weather Model developed by local office to collate information such as river flows, infiltration & snow levels and precipitation forecasts from various real time data feeds Business Processes Back-office coordination between: Oslo functions - Deal Capture, Risk Management, Logistics, Settlements and Financial Reporting; and London functions - Documentation/Confirmation, Treasury Position reports prepared for distribution to London Risk Management on a daily basis Credit approval coordinated with and obtained from London Credit Local legal representative who liases closely with London Legal Cash requirements and funding monitored and managed by Corporate Treasury in London Business Processes Back-office coordination between: Oslo functions - Deal Capture, Risk Management, Logistics, Settlements and Financial Reporting; and London functions - Documentation/Confirmation, Treasury Position reports prepared for distribution to London Risk Management on a daily basis Credit approval coordinated with and obtained from London Credit Local legal representative who liases closely with London Legal Cash requirements and funding monitored and managed by Corporate Treasury in London

DRAFT February 21-23, 2000 Project Doorstep - Oslo Office Analysis Framework Competitors Norwegian - Statkraft - Hafslund Delta Swedish – Vattenfall - Sydkraft - Birka US - Dynergy - Morgan Stanley Competitors Norwegian - Statkraft - Hafslund Delta Swedish – Vattenfall - Sydkraft - Birka US - Dynergy - Morgan Stanley Counterparties NordPool ASA – more than 70% of inception to date volume have been traded via this exchange RingeriksKraft AS – 4.5% Kotkan Energia OY – 1.4% Birka Energi AB – 1.3% Sydkraft AB – 1.2% Counterparties NordPool ASA – more than 70% of inception to date volume have been traded via this exchange RingeriksKraft AS – 4.5% Kotkan Energia OY – 1.4% Birka Energi AB – 1.3% Sydkraft AB – 1.2%

DRAFT February 21-23, 2000 Project Doorstep - Oslo Review Highlights 25 deals were selected for detail testing; selection included full requirement, exchange traded, physical and financial transactions Summary of findings Oslo significantly involved in London Documentation function Inadequate support for credit approval of one new counterparty Signed confirmations received from counterparties for all transactions selected except one recent transaction London IT Department amended transaction details in live risk books in Power99 Manual invoice not reviewed and signed by person other than the preparer Two test deals with offsetting positions and value have remained in Power99 since October deals were selected for detail testing; selection included full requirement, exchange traded, physical and financial transactions Summary of findings Oslo significantly involved in London Documentation function Inadequate support for credit approval of one new counterparty Signed confirmations received from counterparties for all transactions selected except one recent transaction London IT Department amended transaction details in live risk books in Power99 Manual invoice not reviewed and signed by person other than the preparer Two test deals with offsetting positions and value have remained in Power99 since October 1996

DRAFT February 21-23, 2000 Project Doorstep - Oslo Observations EFFECTIVE CONTROLS Trading P&L and positions calculated and managed on a daily basis all within a single system (Power 99) Trading P&L and positions reported to Enron management in London and Houston on a daily basis Taped trader phone lines London Credit group responsible for counterparty approval Clear segregation of duties exist between Trading and Trading support groups Top Commercial & Commercial Support personnel are very knowledgeable about the Nordic Markets and are controls - minded in their approach to managing the business Strong communication lines exist between Oslo and London for both Trading and Trading Support Cash requirements and funding managed by Corporate Treasury in London Deal Documentation is complete and easily accessible in both Oslo and London Foreign Currency transactions executed directly with Enron Europe Mid-Market origination deals approved via CACS Sheet by Oslo Office Head and the following London groups: Credit, Legal, Tax and IBS EFFECTIVE CONTROLS Trading P&L and positions calculated and managed on a daily basis all within a single system (Power 99) Trading P&L and positions reported to Enron management in London and Houston on a daily basis Taped trader phone lines London Credit group responsible for counterparty approval Clear segregation of duties exist between Trading and Trading support groups Top Commercial & Commercial Support personnel are very knowledgeable about the Nordic Markets and are controls - minded in their approach to managing the business Strong communication lines exist between Oslo and London for both Trading and Trading Support Cash requirements and funding managed by Corporate Treasury in London Deal Documentation is complete and easily accessible in both Oslo and London Foreign Currency transactions executed directly with Enron Europe Mid-Market origination deals approved via CACS Sheet by Oslo Office Head and the following London groups: Credit, Legal, Tax and IBS

DRAFT February 21-23, 2000 Project Doorstep - Oslo Observations

DRAFT February 21-23, 2000 Project Doorstep - Oslo Observations AREAS FOR FURTHER REVIEW Development of Nordic Power functionality within Empower system for use by Oslo Trading Involvement of London Operations in the controls process On-site RAC personnel in Oslo AREAS FOR FURTHER REVIEW Development of Nordic Power functionality within Empower system for use by Oslo Trading Involvement of London Operations in the controls process On-site RAC personnel in Oslo