1. John E. Olson, CFA SVP & Director of Research Sanders Morris Harris Houston, TX 713/220-5151 “The Stunning Collapse of the Energy Traders” August 14, 2002 IPAA – Texas Southeast Regional Speakers’ Series The Shape of Things to Come

2. Standard & Poor’s 400 Average Annual Total Returns (%) Year70’s80’s90’s00’s 02.631.9-0.7-15.3 114.5-6.129.7-12.6 219.5 5.6-13.0 3-14.122.18.80.0 4-25.14.13.70.0 535.629.233.70.0 622.018.122.80.0 7-7.79.030.80.0 87.415.433.40.0 917.828.525.70.0 Average7.2%17.2%19.4%-13.6%

3. Investing Credentials 1990s & Next Five Years EPS Growth % Payout % ROE Total Leverage 199212.76810.354.6 199315.16012.455.6 199449.74017.851.6 19958.03917.551.8 199616.13818.651.1 19972.44017.951.5 1998-8.94516.052.7 199931.03518.950.5 20007.23117.347.9 2001-31.34311.048.5 Last Ten Years10.2%44%15.8%51.6% 2002E18.93812.450.0 200320.53213.850.0 20047.53113.650.0 20057.92913.450.0 20067.32813.250.0 Next Five Years12.4%32%13.3%50.0%

4. Market Trading Profile Since 10/15/01 Market Performance: Latest10/15/01Delta % Standard & Poors' 500 904 1090 -186 -17% Standard & Poors' 400 1025 1264 -239 -19% Dow Jones Industrials 8689 9348 -659 -7% NASDAQ Composite 1307 1696 -389 -23%

5. Daily Energy Trading Profile Energy Conglomerates Energy Conglomerates:Latest 10/15/01 Delta % CMS Energy 9.59 21.72 -12.13 -56% Dominion Resources62.30 59.39 2.91 5% Duke Energy26.71 38.32 -11.61 -30 % Dynegy 1.57 42.45 -40.88 -96% El Paso16.10 51.46 -35.36 -69% Kinder Morgan41.35 50.64 -9.29 -18% Williams 2.80 29.15 -26.35 -90% Average22.92 41.88 -18.96 -51% Enron 0.16 33.17 -33.01-100%

6. Daily Energy Trading Profile Merchant Power Independent Power Producers:Latest 10/15/01Delta % AES Corp 2.14 14.87-12.73 -86% Calpine 3.80 26.61-22.81 -86% Dynegy 1.57 42.45-40.88 -96% NRG10.60 23.00-12.40 -54% Mirant Energy 3.40 26.98-23.58 -87% Reliant Resources 4.25 19.10-14.85 -78% Average 3.68 21.86-18.18 -81%

7. “Markets Can Remain Irrational Longer Than You Can Remain Solvent.” John Maynard Keynes

8. “The Efficient Market Hypothesis is the Most Remarkable Error In the History of Economic Theory.” Lawrence Summers Secretary of Treasury President, Harvard College

9. HUB Trading Volumes (MMCFD) Henry HubChicago SoCal Gas Border April5,5602,7501,850 May5,8502,2001,420 June3,7001,240780 July2,7801,770780 Source: Gas Daily

10. The Energy Marketing Industry Dec. Dec. 2001 2002E Sales/Trading 4,000 – 5,000 1,500 – 2,000 Accounting/Systems 6,000 – 7,000 2,000 – 3,000 Specialists (T&E, Etc.) 2,000 – 3,000 500 – 1,500 Total 12,000 – 15,000 4,000 – 6,500 Source: Ben Schlesinger Associates (2001)

11. “ The California Law was One of the Stupidest Laws Ever Passed on Any Subject at Any Time” Congressman Ed Markey (Dem, Mass) Joint Senate House Energy Conference Thursday, July 25, 2002

12. “The Capitalists Are So Hungry For Profits That They Will Sell Us The Rope to Hang Them With.” V.I. Lenin (1920)

13. “ They have failed miserably in their strategy… The Rope we gave them the first time doesn’t have much left to it. Many firms have actually turned it into a noose…. We are not company advocates. We are indifferent.” Standard & Poors Spokesman Thursday, August 1, 2002 Your Friendly Rating Agency

15. LJM Cayman LP GP LJM Swap Sub LP UBS Enron Interest In $100 Interest In $15,000,000 3,377,697 ENE Shares Shares $3,750,000 1.6 MM ENE Put Options Rhythms @$56.125/sh 5 Yrs Consent to Transfer Shares Value ($100 – 140 MM) Value ($170 – 223 MM) $64 MM Note LJM/Rhythms Transaction Structure

22. Revenues ($ Billion)19981999200020012002 Duke Energy8.711.633.642.830.0 Dynegy10.710.521.534.522.7 El Paso19.022.347.153.142.6 Enron27.236.295.4143.10.0 Reliant Resources4.37.919.135.221.9 Total70.188.5216.8308.6117.2 Totals ex Enron42.852.3121.3165.5117.2 Marketing & Trading Results Annual Revenue Trends 1998 – 2002E

23. Marketing & Trading Results 2002 Gross Margins by Quarter 2002 Gross Margin ($mm)Q1Q2 Duke Energy563206 Dynegy107(67) El Paso Energy819307 Reliant Energy327150E Williams Energy355(279) Total2,171317

24. Marketing & Trading Results 2002 EBIT by Quarter 2002 EBIT ($mm)Q1Q2 Duke Energy460196 Dynegy107(67) El Paso Energy72(85) Reliant Energy114(50)E Williams Energy283(349) Total1,036(355)

25. Williams Companies Energy Marketing & Trading Second Quarter Results Marketing Volumes20022001% Gas (bcf/d)3.32.6+27 Crude & Product (00 B/D)743160+365 Power (GWH)97.565.6+49 Equivalents (GWH)168.198.0 +72%

26. The Williams Companies Second Quarter Results Net Trading Revenues:20022001 Gas & Power(81)343 Crude & Product(74)(5) NGL’s183 Other(143)(3) Total Net Revenues(279)338 Operating Expenses21975 EBIT – Reported(498)262 EBIT - Recurring(349)262

27. ONEOK Marketing EBIT 1999-2002E $ MM% 199817 199924+41 200051+113 2001109+114 2002140+28

28. The Issues - I Accounting Mark to Market Accounting Mark to Model Fair Value Accounting Finance Special Purpose Vehicles/Recourse Issues Phantom Equity Performance Bonuses Structured Finance

29. The Issues - II Disclosures Gains on Asset Sales Off Balance Sheet Asset and Capital Structures Cash vs. Paper Earnings Derivative Positions/Recourse Wall Street Investment Banking vs. Securities Research Stock Options

30. El Paso Energy Valuation Matrix – Normal Market Conditions Imputed P/Es:2002E2003E2004E2005E2006E Pipelines13.0 Merchant Energy10.0 Production15.0 Field Services14.0 Other10.0 Total13.013.413.313.413.5 Current P/E’s7.47.97.57.06.6 Delta76%70%77%92%104% Imputed Market Values: Pipelines12.1211.7013.5414.0514.49 Merchant Energy4.473.002.862.872.93 Production8.9610.5010.1812.0213.43 Field Services1.561.400.980.89 Other-0.12-0.50-0.32-0.34-0.36 Total26.9926.1027.2429.4931.39 Current Stock Price15.35 % Upside75.9%70.0%77.5%92.1%104.5% % Yield5.7%5.9%6.1%6.4%6.6% % Expected Return81.5%75.9%83.6%98.5%111.1%

31. El Paso Energy Valuation Matrix – Zero Value to EPME Imputed P/Es:132002E2003E2004E2005E2006E Pipelines13.0 Merchant Energy0.0 Production15.0 Field Services14.0 Other10.0 Total10.811.811.912.112.2 Current P/E’s7.47.97.57.06.6 Delta47%50%59%73%85% Imputed Market Values: Pipelines12.1211.7013.5414.0514.49 Merchant Energy0.00 Production8.9610.5010.1812.0213.43 Field Services1.561.400.980.89 Other-0.12-0.50-0.32-0.34-0.36 Total22.5223.1024.3826.6228.46 Current Stock Price15.35 % Upside46.7%50.5%58.9%73.4%85.4% % Yield5.7%5.9%6.1%6.4%6.6% % Expected Return52.4%56.4%65.0%79.8%92.0%

32. El Paso Energy Valuation Matrix – Marking EPME to Market Imputed P/Es:2002E2003E2004E2005E2006E Pipelines13.0 Merchant Energy-16.0 Production15.0 Field Services14.0 Other10.0 Total7.49.49.710.010.2 Current P/E’s7.47.97.57.06.6 Delta0%19%29%44%55% Imputed Market Values: Pipelines12.1211.7013.5414.0514.49 Merchant Energy-7.16-4.80-4.57-4.59-4.69 Production8.9610.5010.1812.0213.43 Field Services1.561.400.980.89 Other-0.12-0.50-0.32-0.34-0.36 Total15.3718.3019.8122.0323.77 Current Stock Price15.35 % Upside0.1%19.2%29.1%43.5%54.8% % Yield5.7%5.9%6.1%6.4%6.6% % Expected Return5.8%25.1%35.2%49.9%61.5%

33. El Paso Energy Imputed Profitability Profile (December, 2001) Imputed ROEs (%):1999200020012002E2003E2004E2005E2006E Pipelines21.823.125.223.721.619.617.815.9 Merchant Energy4.014.513.716.117.919.621.322.8 Field Services13.018.015.320.726.132.239.547.7 Production9.931.257.752.747.443.540.637.8 Other-7.1-18.3-27.9-26.0-25.0-23.0-21.0-18.3 Composite ROEs12.317.620.321.021.1 21.421.6 % Leverage67.268.968.867.264.561.257.553.3

34. El Paso Energy Imputed Profitability Profile (August, 2002) Imputed ROEs (%):1999200020012002E2003E2004E2005E2006E 2002E- 2006E Pipelines30.323.931.523.019.120.219.318.320.0 Merchant Energy5.615.018.12.50.5-0.4-0.5-0.40.3 Field Services13.732.268.230.720.321.922.521.723.4 Production18.018.618.36.12.41.30.5 2.2 Other-9.8-18.9-28.6-11.4-10.4-10.0 -10.4 Composite ROEs17.018.125.712.38.99.59.7 10.0 Forecast ROE’s (Per SIP) 12.217.018.19.98.79.49.7 9.5 Debt Leverage56.756.355.347.545.644.943.942.3 Preferreds Leverage9.713.712.713.3 12.812.412.1 Total Leverage66.470.068.060.858.957.756.354.4

35. Duke Energy Imputed Profitability Profile (%) (December, 2001) 199920002001E2002E2003E2004E Electric Operations22.522.321.022.521.820.9 Gas Transmission25.622.522.023.422.621.5 Field Services6.210.712.210.911.412.4 DENA7.222.042.934.842.348.3 Global Asset Dev.-3.31.9-0.91.21.52.1 Other Energy Services-47.3-28.61.65.15.26.3 Real Estate Operations36.423.318.219.717.316.2 Other Operations-4.5-8.4-29.4-3.6-2.5-1.5 Eliminations & Minority-38.9-75.5-125.1-84.4-88.7-93.7 Total Consolidated15.416.617.417.0 16.9 % Leverage55.359.857.556.855.953.5

36. Duke Energy Imputed Profitability Profile (%) (August, 2002) 1999200020012002E2003E2004E Electric Operations24.736.732.727.130.229.3 Gas Transmission27.932.431.222.815.715.6 Field Services7.712.19.54.05.05.8 DENA4.10.914.112.616.516.9 Global Asset Dev.-1.416.612.69.59.17.8 Other Energy Services-44.0-38.7-15.826.340.538.0 Real Estate Operations34.826.522.919.717.915.3 Other Operations-35.6-37.1-47.2-46.7-53.4-52.0 Eliminations & Minority-39.3-35.4-32.7-58.6-66.7-71.0 Total Consolidated16.017.518.915.315.715.5 % Leverage16.016.317.915.816.116.0

37. The Williams Companies Imputed ROEs by Business (%) Imputed Average ROEs:200020012002E2003E2004E2005E2006E Energy Marketing & Trading22.423.129.432.033.534.334.5 Gas Pipeline29.121.426.222.620.418.316.6 Energy Services16.49.310.210.49.99.69.4 Other-7.5-6.4-6.9-5.8-4.7-3.8-3.0 Total17.214.017.017.3 17.016.7 cf SIP Profile8.717.417.717.517.116.6

38. Projected Gas Production Needs 2001A – 2005E (Billion Cubic Feet Daily) Year Industry Total Our Total 2001A3.52.6 2002E6.22.7 2003E8.33.0 2004E4.52.9 2005E0.23.1 Total (BCF/D)22.714.3 Current Production (August, 2002)52.7 Imputed Five Year Growth43%27% Average Annual Growth Rate8.5%5.4%

39. Natural Gas Production Average Annual Growth Rates: 1970 - 2000 Annual Change (%) Year70’s80’s90’s00’s 05.91.32.90.8 12.8-1.1-0.62.4 20.0-7.10.8-4.0 30.6-9.71.41.5 4-4.78.54.01.5 5-7.1-5.8-1.21.5 6-0.7-2.41.41.5 70.33.50.31.5 8-0.22.91.5 90.21.2-0.31.5 Average-0.3%-0.9%0.8%1.0%

40. US Natural Gas Production (mmcfd) SMH Tally of Top U.S. Producers % Change 2Q011Q022Q022Q02/1Q02 2Q02/2Q01 ExxonMobil 260924912367-5.0% -9.3% BP Amoco 3550356135650.1% 0.4% Shell 1604156716656.3% 3.8% Burlington Resources 11331031953-7.6% -15.9% ChevronTexaco 278325092504-0.2% -10.0% Unocal 1047 847843-0.6% -19.5% Phillips 884 902849-5.9% -4.0% Conoco 831 733717-2.2% -13.7% USX-Marathon 774 787734-6.6% -5.1% Occidental Petroleum 607 591565-4.4% -6.9% El Paso 150114381424-1.0% -5.1% Anadarko Petroleum 165114581435-1.6% -13.1% Apache Corp. 605 540515-4.8% -14.9% Amerada Hess 474 3944227.1% -11.0% Kerr McGee 669 6276320.8% -5.5% Noble Affiliates 386 351337-4.0% -12.7% Ocean Energy 444 3663845.0% -13.5% SMH Tally of Top U.S. Producers215512019319911-1.4% -7.6% Total U.S. Production reported by EIA5337351267527002.8% -1.3%

41. Natural Gas Futures 2001200220032004

42. Crude Oil Futures 2001200220032004

43. Domestic Wellhead Revenues 1970 – 2005E ($ Billions) Year70’s80’s90’s00’s 015.8107.793.8149.5 116.7151.082.3138.2 216.9145.881.5111.4 319.6136.580.3124.9 431.2142.474.2126.5 535.1131.469.9115.4 638.876.699.90.0 744.682.195.20.0 849.872.568.90.0 968.081.182.80.0 Average33.6112.782.9127.6

44. Natural Gas Industry Asset Base Yearend, 1994 Data ($ Million)

45. Natural Gas Industry Asset Base March 2002 Data ($ Million)

46. Pipeline MLP Asset Growth Total Assets ($ Million) 19992002% Change Buckeye Pipeline Partners67481421 El Paso Energy Partners5842,242284 Enbridge Energy Partners1,4141,74123 Enterprise Products Pipeline1,4952,76985 Kinder Morgan Energy Partners3,2297,906145 Northern Border Partners1,8632,69545 Plains All American Pipeline Partners1,2231,3389 Teppco Partners1,0412,739163 Williams Energy Partners28339540 Totals11,80622,63992

47. Pipeline MLP Asset Growth 2002 Estimates ($ Million) 2002E Earnings 2002E Cash Flow Maintenance CapexDistribution CFFO Balance Buckeye Pipeline Partners68863068-12 El Paso Energy Partners401691013524 Enbridge Energy Partners6313823137-22 Enterprise Products Pipeline98227100190-62 Kinder Morgan Energy Partners30359574556-35 Northern Border Partners1161821214327 Plains All American Pipeline Ptnrs6686595-14 Teppco Partners84166201397 Williams Energy Partners6088202741 Totals8981,7372941,489-46