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2000 Analyst Meeting Introduction
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Today’s Agenda 7:30 A.M. – 11:30 A.M. Morning Session
Introduction & Performance Summary Business Unit Reviews Transportation & Distribution Wholesale Energy Operations and Services Enron OnLine 11:30 A.M. – 12:30 P.M. Lunch & Break 12:30 P.M. – 5:00 P.M. Afternoon Session Business Unit Reviews Enron Broadband Services Retail Energy Services Conclusion
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Wholesale Volumes Marketed
Enron Corp. A Decade of Growth Natural Gas Pipeline Throughput* (BBtu/d) Wholesale Volumes Marketed (BBtue/d) Retail Energy Contracting (Billions) Employees 11,800 32,429 $8.5 17,900 10,054 6,985 7,800 6,800 8,130 1,140 1989 1994 1999E 1989 1994 1999 1989 1994 1999 1989 1994 1999 *Includes 100% of Worldwide Pipeline Volumes
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Enron Corp. A Decade of Growth
Total Assets (Millions) Total Revenues (Millions) Net Income (Recurring, Millions) $35,000 $40,112 $957 $453 $11,966 $9,105 $8,984 $226 $4,631 1989 1994 1999E 1989 1994 1999 1989 1994 1999
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Fourth Quarter Results
Net Income (Millions) Earnings Per Share (Diluted) 31% Increase in EBIT from Wholesale Energy Operations and Services Successful Introduction of EnronOnline Positive Earnings Contribution from Retail Energy Services Signed $2.6 Billion of Retail Energy Service Contracts Announced Agreement to Sell Portland General Electric $259 $0.31 $0.24 $171 51% 29% 4Q98 4Q99 4Q98 4Q99 *Before Non-Recurring Items
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1999 Earnings Summary* (Millions) Increase 1998 1999 IBIT:
Transportation & Distribution $ 637 $ % Wholesale Energy Operations , % Retail Energy Services ( 119) ( ) 43% Exploration & Production NM Corp. & Other ( ) NM Total IBIT $1,621 $1, % Interest & Subsidiary Pfd. Dividends ( ) ( ) Minority Interest ( ) ( ) Taxes ( ) ( ) Total Net Income $ $ % Earnings Per Share (Diluted) $ $ % * Recurring
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Total Return to Shareholder*
1999 57.7% 21.0% 7.2% Enron S&P 500 Peer Group *Dividends Reinvested in Security
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Total Return to Shareholder*
1998 – 1999 120.9% 55.6% 1.2% Enron S&P 500 Peer Group *Dividends Reinvested in Security
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Total Return to Shareholder
January 1990 to December 1999 700 Enron Pipeline Avg E&P Avg Utility Avg S&P 500 704% 173% 33% 148% 432% 600 500 400 300 200 100 -100 Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 *Dividends Reinvested in Security
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Performance Review
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Energy Businesses New Business
Wholesale Energy Transportation & Distribution Retail Energy Broadband Services
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Key Messages at Last Year’s Meeting
Expect Continued Strong Growth in Core Wholesale Energy Businesses Expect Watershed Year For Retail Energy Business Expect Development of Foundation for New Communications Business
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1999 Performance Expect Continued Strong Growth in Core Wholesale Energy Businesses Results: Strong Market Share Gain in North America Break-Out Year in Europe Successful Launch of EnronOnline Penetration of Japanese Market Broad-Based Asset Start-up in Developing Markets
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Wholesale Energy Operations and Services
1999 Performance (cont.) Wholesale Energy Operations and Services Income Before Interest and Taxes (Millions) Physical Volumes (BBtue/d) $1,317 32,429 27,308 $968 17,970 $654 12,392 $466 $401 8,966 1995 1996 1997 1998 1999 1995 1996 1997 1998 1999 35% CAGR 38% CAGR
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1999 Performance (cont.) Expect Continued Strong Growth in Core Wholesale Energy Businesses Expect Watershed Year For Retail Energy Business Results: Established Commanding Lead in End User Market Put Finishing Touches on Execution Network and Capability Expanded Franchise To Europe
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Increasing Retail Contracts and IBIT
1999 Performance (cont.) Increasing Retail Contracts and IBIT Customer’s Total Energy Expenditures Contracted (Billions) Income Before Interest, Minority Interest and Taxes (Millions) $8.5 $75 ($107) ($119) ($68) $3.8 $1.2 1997 1998 1999 1997 1998 1999 2000E
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1999 Performance (cont.) Expect Continued Strong Growth in Core Wholesale Energy Businesses Expect Watershed Year For Retail Energy Business Expect Development of Foundation for New Broadband Services Business Infrastructure of Fiber, Servers, Pooling Points and Software Effectively in Place Building Strong Momentum on a Clear, Unique Strategy That Plays Directly to Enron’s Fundamental Strengths and Capabilities Now Ready to Break “Radio Silence”
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Broadband Network Development
1999 Performance (cont.) Broadband Network Development Fiber Miles Servers Deployed Total Employees 15,000 1,500 775 12,325 490 5,538 222 1,755 89 25 1997 1998 1999 2000E 1997 1998 1999 2000E 1997 1998 1999 2000E
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Key Messages For Today’s Meeting
Expect Continued, Strong Growth in Core Wholesale Energy Businesses Expect Break-Out Performance from Retail Energy Business Potential for “Critical Mass” Roll-Out of Broadband Services Strategy Expect Increased Emphasis on Capital Efficiency and Redeployment
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Key Actions Taken in 1999 to Increase Return on Invested Capital
Completed Sale of Enron Oil & Gas Generated $1 Billion of Proceeds Lowered Capex Requirements Eliminated Commodity Price Exposure Announced Sale of Portland General. Will Redeploy Proceeds ($1.7 Billion Est.) to Higher Return Businesses Continuing to Actively Evaluate Returns Versus Cost of Capital on New and Existing Assets
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Valuation Considerations
Energy Businesses Transportation and Distribution Transportation and Distribution One of the Largest, Most Innovative and Cost Effective Pipeline Networks in North America. High Level of Earnings and Cash Flow and Sustained High ROE Wholesale Energy Businesses Consistently High Growth Rate in Earnings. No Commodity Risk Rapidly Deploying Technology North America: The Leading Merchant Energy Company. Widening Competitive Advantage Europe: Early, Leading Merchant Energy Position In Key Continental Markets Developing Markets Well-Positioned to Apply Core Merchant Skills in Rapidly Deregulating Markets Retail Energy Businesses The Only Comprehensive, Nationwide Provider of Energy Outsourcing Services Rapidly Increasing Contracting Level and Profitability Scale Advantages Clearly Evident
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Valuation Considerations (cont.)
Broadband Services Uniquely Positioned to be the Broadband Platform in Enormous New Market Enron Intelligent Network will be the Industry Standard Opportunity in Bandwidth Intermediation Directly Parallels Enron’s Energy Track Record and Fits our Skill Sets Content Delivery Applications Revenues and Customers Expanding Rapidly
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Valuation Considerations (cont.)
Summary Continued High Growth in Wholesale Operations, Breakout- Potential of Retail, Combined with Enormous Potential of Broadband Services will Lead to a Large Increase in Shareholder Value
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Energy Businesses - Introduction
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Key Messages For Today’s Meeting
Expect Continued, Strong Growth in Core Wholesale Energy Businesses Expect Break-Out Performance from Retail Energy Business Potential for “Critical Mass” Roll-Out of Broadband Services Strategy Expect Increased Emphasis on Capital Efficiency and Redeployment
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Energy Businesses Transportation & Distribution Wholesale Energy
Services Retail Energy Services Gas Pipelines Portland General Developed Regions - North America - Europe Developing Regions - Asia/Pacific - India - Latin America - Other Enron Energy Services
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Capabilities Required to Be a Successful Energy Company in Today’s Economy
Qualified, Experienced People Control of Strategic Assets Broad Scale and Scope of Operations Network of Information Strong Risk Management Skills and Systems Financial Strength Market-Making Capabilities Track Record of Success
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Qualified and Experienced Workforce Analyst/Associate – New Hires
Enron Employees Enron Employees Enron Employees Analyst/Associate – New Hires 393 17,900 Employees Worldwide 3,560 Employees have Advanced Degrees 7% Growth in New Jobs Expected in Year Average Enron Experience Over 50 Languages Spoken 323 209 1997 1998 1999
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Engineering and Construction
Creation of an Enron Network Network Market Making Contract Access Physical Assets Price Risk Management Contracts Engineering and Construction Physical Delivery Contracts Peaking & Storage Services Finance Applications Utility Facility Operations & Management Fuel Management Services Energy Outsourcing eCommerce Applications
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Present Position of Enron’s Wholesale Businesses
Network Business Components Physical Assets Contract Access Market Making North America Europe Asia/Pacific India Latin America
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Wholesale Contribution to Enron Income
(Estimated Percent of Net Income) 5% 40% 75% 1989 1994 1999 Wholesale Other Businesses
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Global Energy Markets Natural Gas and Electricity (Tcfe)
67.0 41.4 13.9 7.9 4.6 India Latin America Asia Pacific* Europe North America Source: EIU, IEA, CERA, Enron *Japan and Australia
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By Commodity and Region
Physical Volumes By Commodity and Region (BBtue/d) 32,429 32,429 Europe North America Power & Other Gas 27,308 27,308 17,970 17,970 12,392 12,392 8,966 8,966 1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
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Enron’s Wholesale Energy Businesses Risk Management Skills
All of the Capabilities Are in Place to Continue at a Very High Level of Growth People Assets Technology Information Risk Management Skills Broad Scale and Scope Financial Strength Marketing Skills Systems
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