Texas Gas Origination 2001 Tactical Plan Enron North America Texas Gas Origination 2001 Tactical Plan July 2001

Tactical Plan Overview ENA Orientation Tactical Plan Overview Re-staff Texas gas origination team: Leverage existing internal resources with knowledge of TX Leverage internal knowledge of structured transactions Re-fill the deal pipeline: Mid-market deals to establish information flow Energy and asset management deals to obtain a market position Develop a flexible/decentralized gas network of commodity, transport and storage positions Develop a track record to demonstrate Enron’s “asset-neutral” value proposition Work with producers, customers, and regulators to increase price transparency and transport liquidity Participant Guide

Networks, Upstream Services, ECR ENA Orientation Resource Plan Define customers and products – work closely with ERCOT Orig., Upstream Services, ECR, and Networks: Transactional: Trading and mid-market activities Structural: Structured commodity/capacity transactions Services: EOL, Producer One, and other fee based activities ERCOT Power Orig. Texas Gas Orig. Power Utilities & IPPS D. Tingleaf Industrial Users & Gas LDCs Intl/Ext. Hire Pipelines & Storage Cos. J. Schwieger Producers & Gatherers Internal Hire Transactional Products Trading & mid-marketing gas/power Trading & mid-marketing of transport & storage Trading & mid-marketing of gas Structured Products Gas supply, power offtake, generation, energy/asset mgmt, capital Gas supply, power offtake , generation, energy/ asset mgmt., capital, Transport and storage capacity purchases and capacity mgmt. Offtake, risk mgmt., asset mgmt., capital Service Products EOL, Networks EOL, Upstream Services, Networks EOL, Upstream Services, ECR Texas Gas Orig. Networks, Upstream Services, ECR Participant Guide

Establish team and assign coverage responsibility: ENA Orientation Resource Plan Establish team and assign coverage responsibility: Each customer segment will have a lead “coordinator” and each customer will have a dedicated account manager Develop analytical competence in each market segment Coordination with power origination and service products groups to transfer product knowledge between customer segments Participant Guide

Secure access to commodity positions: ENA Orientation Producers/Gatherers Secure access to commodity positions: Target smaller gathering companies or producers with limited marketing resources (once 3 month HPL non-compete period expires). Target producers with limited physical access to markets. Bundle products to aggregate supply dedicated to Enron: Work with Networks, Producer Services, and ECR to aggregate supplies Investigate ways to use 3rd party funds to own gathering assets and provide Enron with marketing rights Biggest impediments/issues: Ability to transport gas from wellhead to pooling points Ability to process wellhead gas for delivery to pipelines Initial targets to pursue: Conoco – Extensive production in S. Texas; owns some firm transport on 3rd party pipes; possibly ally for developing transport trading market Mitchell Gas Holdings – Extensive production/gathering system north of Houston – limited access to Ship Channel market Sulphur River Gathering – Production in N. Texas with limited pipeline position Participant Guide

Pipelines & Storage Operators ENA Orientation Pipelines & Storage Operators Obtain access to transport/storage capacity between supply and market areas: Convince pipelines/storage operators to market capacity via EOL. Contract for transport/storage capacity that we can trade around. Purchase/structure capacity that can be re-marketed via EOL. Biggest impediments/issues: Resistance to unbundle transportation from commodity products Resistance to use EOL vs. “competing platforms” being developed to trade capacity (e.g., ICE, Williams). Initial targets to pursue: MidCon (KN): provide MidCon with a physical HSC market El Paso (Valero, Channel): Valero competes directly with HPL (50% JV partner) to sell capacity on the A/S line – may be open to using EOL to market this capacity Duke Energy Field Services – has significant production that it now sells to Duke Energy or markets at pooling points; potential for Enron to add value by providing trading/marketing expertise or EOL services Participant Guide

Biggest impediments/issues: ENA Orientation Gas LDCs Position Enron as an “asset neutral” alternative to pipeline marketing affiliates: Demonstrate how Enron can add value through energy outsourcing or supply management deals. Position EOL as a way for LDCs to rate Enron’s performance vs. market. Potential opportunities for “Peoples Energy” structures where LDCs bring assets and Enron brings trading expertise. Biggest impediments/issues: Many LDCs currently wrapped up in term supply agreements LDCs are conservative buyers – limited incentive to increase profitability. Initial targets to pursue: NET secured Corpus supply contract and has limited ability to source swing volumes City Public Service may be interested in Enron as a fuel manager. Work with Texas Railroad Commission and PUC to institute incentive-based rate making. Participant Guide

Biggest impediments/issues: ENA Orientation Industrial Customers Provide sophisticated end-users with unbundled services; Provide smaller end-users with energy mgmt. Differentiate ourselves from pipelines by unbundling products. Position EOL as a tool to increase liquidity and price transparency Focus on cross selling / bundling gas and power services (total energy management). Overcome resistance to using Enron to supply gas without having HPL as a physical transport hedge Biggest impediments/issues: Physical access to customer through 3rd party pipelines Demonstrate that we can provide a secure gas supply Initial targets to pursue: Highly competitive, multi-connected customers: Dow Chemical, Exxon-Mobil, Dupont, Shell – focus on market making for these purchasers Smaller less competitive players: Formosa, Air Liquide, Solvay, Javelina – focus on providing total energy management services (power/gas) for these customers Participant Guide

Biggest impediments/issues: ENA Orientation Power Utilities / IPPs Provide energy management services to smaller utilities/IPPs with limited marketing resources; Provide market liquidity to larger utilities and IPPS: Position EOL as a tool to increase liquidity and price transparency for sophisticated gas purchasers. Position Enron to provide total energy management services. Work with utilities/IPPs to increase gas delivery options through contract transport or new interconnects Develop mid-market business with IPPs as long term gas contracts end. Biggest impediments/issues: IPPs are looking for term deals to enable project finance; IPPs want Enron to participate in power offtake at favorable rates Utilities are looking for secure supply; requires Enron to first establish its contractual transport, storage and commodity network. Initial targets to pursue: Highly competitive multi-connected IPPs: Texas Indep Energy, SkyGen, Sweeney, Constellation/Pace, Donohue Paper IPPs with limited connections: ANP, Coastal/FPL, Tractabel Participant Guide

Target Industrials, IPPs and Utilities ENA Orientation Target Industrials, IPPs and Utilities Participant Guide

Biggest impediments/issues: ENA Orientation Network Development Develop a flexible network of commodity, transport, and storage positions to serve customers concerned about supply and/or offtake reliability: Acquire control or access to pipeline capacity to serve demand. Acquire storage capacity to serve swing markets – IPPs and others Establish direct access to both suppliers and end-use customers Position Enron to take advantage of expected increase in price volatility and basis tightening: Increase flexibility by being able to layoff contract positions Minimize capital invested in hard assets to increase ROCE Biggest impediments/issues: Establishing a capacity position without significant capital investment Forcing the industry to unbundle transportation and commodity products. Participant Guide

Initial targets to pursue: ENA Orientation Network Development Integrate EOL into Texas market to get access to power and gas information; Key points of presence: Trading Hubs – King Ranch, Katy, Carthage Supply Zones – Agua Dulce, Thompsonville Market Areas – Houston Ship Channel, Beaumont Intrastate Transportation – HPL, Midcon/KN, Tejas, El Paso, Oasis Biggest impediment/issue: resistance of pipelines to price unbundling; Competition to EOL from other platforms Initial targets to pursue: Joint presentations w/ Networks to customers and the Texas Railroad Commission to push for unbundled services: Consolidate market constituents who are pushing for enhanced price transparency and market liquidity Position EOL as a tool to increase liquidity and price transparency Re-enforce implementation of Code of Conduct for intrastate pipelines Aggressively pricing of EOL service offering to develop a track record and force industry to unbundle Participant Guide

Establish origination team: ENA Orientation Summary Establish origination team: Leverage internal knowledge of Texas market and structured products Get quality origination resources who can complete energy/asset management deals Define and develop products – force market changes: Transport and storage products – unbundled from delivered gas. Commodity risk management products – bundled or unbundled. Outsourcing and asset management products Service products Overcome resistance to dealing with Enron without HPL Establish and demonstrate the ability to link serve suppliers and end users in Texas without ownership of physical assets Show benefits of being an “asset-neutral” service provider Get contractual access to strategic capacity positions Build customer relationships on market expertise: Demonstrate how Enron can “create and share” value with customers Distinguish Enron from other marketers, traders, transporters in Texas Develop a “non-HPL” track record Participant Guide