1. Project Doorstep - London Preliminary Findings 17th April, 2000

2. Project Doorstep - London Preliminary Findings Product Type UK Gas10 Continental Gas5 UK Power10 Continental Power15 Global Liquids Petrochems2 Crude6 NGL2 Resid3 Refined2 Plastics1 Total Deals Tested56 Number of Deals Tested

3. Project Doorstep - London Preliminary Findings Effective Controls  Trading P & L and positions reported to Enron management in Houston on a daily basis  Taped trader phone lines  Clear segregation of duties exist between Trading Support functions  Top Commercial & Commercial Support personnel are very controls-minded and are knowledgeable about their roles within the controls process  Power traders input deals directly in the system and review confirmations for accuracy  Coordination group implemented in Global Products to act as a liaison between Trading & Trading Support and ensure proper controls are maintained over operational data  Invoices and payments are reviewed by Settlements Management before being sent to counterparties to ensure proper support is in place for invoiced terms

4. Project Doorstep - London Preliminary Findings Observation  Significant positions (spread options) are being valued in Excel models  Gas and Power Scheduling reports directly to Commercial  No established procedures in place for legal review of confirmation templates or new deal types requiring documentation  Continental Power documentation process is manually intensive and requires a large number of resources to ensure documentation requirements are met Action Step  Finalize and complete Socrates system which will capture and value deal optionality in a more robust and controlled manner  Implement Coordination group within Gas and Power to serve as a liaison between Trading and Trading Support that will be responsible for deal entry into operating systems and related reconciliations involving operational and trading information  Formalize and document procedures and requirements for legal review of transaction documentation  Implement DCAF II for Continental Power which will reduce the risk of manual errors and enhance the efficiency of the Documentation process

5. Project Doorstep - London Preliminary Findings Observation  No front-end deal capture process for UK & Continental Gas Trading - Documentation inputs deals into system via Gas Trading written deal log - No subsequent review of system deal ticket or confirm by trader  Incomplete credit exposures captured by Credit Aggregation System  Continental Power utilizes Excel spreadsheets for power scheduling purposes  Inconsistent use of “New Counterparty” designation in deal capture Action Step  Require Gas Trading to input deals directly into Trade Blotter from which Documentation will validate deals  Develop IT solution and streamline processes to ensure all counterparty exposure is captured by credit Aggregation System  Enhance Empower to meet the scheduling requirements of Continental Power  Require compliance with credit policies regarding deals transacted with new counterparties to ensure proper credit approval