Surviving and Prospering in the New Economy

Arthur Andersen 21st Annual Energy Symposium

Jeffrey K. Skilling

President and COO Enron CorporationHouston, Texas November 29, 2000

2

Total Return to ShareholdersJan 1, 1990 to November 2000

200

1600

1400

1200

1000

800

600

400

-200

0

Dec 97Dec 96Dec 95Dec 94Dec 93Dec 92Dec 91Dec 90

Enron Corp.

S&P 500

Pipeline Avg.

Utility Avg.

E&P Avg.

1383%

400%

466%

291%

174%

Nov 00Dec 99Dec 98

Note: Calculated to November 17, 2000

3

Price Earnings Ratios Enron vs. Peer Groups(as of 11-20-00)

23.725.9

57.3

0

10

20

30

40

50

60

Enron EnergyPeer Group

S&P 500

Enron’s PE Multiple Growth

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

1995 1996 1997 1998 1999 2000

UK Power and Gas Trading

Begins

Dabhol Phase I Financial Close

Acquisition of PGE

EES First Commercial Transaction

EBS Introduces Enron Intelligent Network

Enron Online reaches $1 billion day

20.95

57.30

23.70 23.89

28.53

37.61

4

5

Cost of Interaction

Mining FinancialInstitutions

U.S.India

30-40% 60-70%

55%40-50%

6

.90

1.0 1.0 1.0

.85

.80

.90

Business Structure

Transformation

Interaction

7

.90

1.0 1.0 1.0

.85

.80

.90

3.45 3.00 6.45

FinishedProduct

TransformationCosts

InteractionCosts

TotalCosts

Business Structure

Transformation

Interaction

.95 1.10 1.20 1.10.20 .20 .20

TransformationCosts

InteractionCosts

TotalCosts

4.35 .60 4.95

FinishedProduct

.90

1.0 1.0 1.0

.85

.80

.90

3.45 3.00 6.45

FinishedProduct

TransformationCosts

InteractionCosts

TotalCosts

Business Structure

Transformation

Interaction

9

Cost of Teller Transaction

$1.50

$0.30

$0.01

1985 1995 2000

(Bank) (ATM) (Internet)

10

Length of Time to Provision Bandwidth

1995 Today Next Year

6-8 months

2-3 months

< 1 second

11

Length of Time to Execute a Long-TermGas Contract

1981 1989 1997 2000

2-3 years

9 months

2 weeks

< 1 second

Change in Economics of Business Structure

.95 1.10 1.20 1.10.20 .20 .20

TransformationCosts

InteractionCosts

TotalCosts

4.35 .60 4.95

FinishedProduct

.90

1.0 1.0 1.0

.85

.80

.90

3.45 3.00 6.45

FinishedProduct

TransformationCosts

InteractionCosts

TotalCosts

Transformation

Interaction

3.45 .30 3.75

13

Where’s the Opportunity?

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

NotCostCompetitive

Where’s the Opportunity?

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

• Commoditized• Overcapitalized• GlobalizedCan’t make compensatoryreturn in traditional assetbusiness

Where’s the Opportunity?

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

Creating low cost, dependablemarket interfaces

• Market making• Logistics• Back office• Trade finance

Where’s the Opportunity?

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

“Virtual” Integration

Providing packaged turnkeysolutions for customers

• Complex structures• Differentiation• Customization

.90

.85

.80

.90

.10 .10 .10

.95 1.10 1.20 1.10.20 .20 .20

Where’s the Opportunity?

18

TraditionalEnergy Model

NewEnergy Model

• Asset intensive• Vertically integrated• Slow moving and rigid• Hierarchical

• Brain power intensive• Networked• Oriented toward “real options”• Fast moving• Entrepreneurial

Creating a New Energy Model

Enron

Energy

Services

Enron

Transportation

Services

Enron

Wholesale

Services

Enron

Broadband

Services

20

Applications

Utility FacilityOperations

& Management

EnergyOutsourcing

FuelManagement

Services

eCommerceApplications

Physical Assets

Contract Access

Market Making

Physical DeliveryContracts

Price RiskManagement

Contracts

SettlementServices

Peaking & Storage Services Finance

The Energy Network Model

21

Traditional Suppliers

Commodity Management

Energy Information

Management

CapitalManagement

Energy AssetManagement

FacilitiesManagement

Light

Consultants

Software Vendors

Control Manufacturers

Architects

Engineers

Mechanical Contractors

HVAC Svc Companies

Equipment Manufacturers

Specialty Contractors

Utilities

Internal Treasury

Lenders

Electrical Contractors

Conditioned Air

Managed Facilities

EnronCustomer

Needs

Total Energy Outsourcing

First national provider of energy and related services to residences and small businesses in deregulated markets

A partnership of industry leaders: Enron, AOL, IBM

Initial investment of $120 million

First customer sign-up in Pennsylvania and New Jersey later this year

TM

The New Power Company

22

23

Be the World’s Largest Provider

of Premium Broadband

Delivery Services

Be the World’sLargest Buyer andSeller of Bandwidth

Deploy the Most Open, Efficient Network with

Broad Connectivity

Enron Intelligent Network

ContentServices

BandwidthIntermediation

Fiber

Servers

Pooling Points

Network Control

Bandwidth Marketing & Trading

Comprehensive Bandwidth Management

Broadband Content Management & Delivery

Data Management Services

Enron Broadband Services

222

0

415

1,50015,848

2000ERoute Miles Typically Include 12 Fiber Pairs

19991998

12,325

5,5383

0

2000E19991998

13Servers Pooling Points

2000E19991998

Fiber(Route Miles)

Asia

Fiber

Servers

Pooling Points

The Enron Intelligent Network

Over 50 Transactions Effected YTD with 17 Counterparties

60 Counterparties Reviewing Contract Terms EnronOnline Offerings Recently Expanded to Over 30 Products in 14 City Pairs

London

Amsterdam

Frankfurt

Boston

Philadelphia

Washington D.C.

New York

Miami

Atlanta

Seattle

Denver

Dallas

Chicago

Houston

Los Angeles

Tokyo

San Jose

San Francisco

Portland

Las Vegas

Salt Lake City

Boise

New Orleans

Detroit

Toronto

MontrealCalgary

Vancouver

Added in 2Q

Bandwidth Intermediation

1Q00 Committed for Delivery

Before Year-End

432

5,170

2Q00

985

2000Target

DS-3 Month Deliveries

26

EIN

ContentProvider

ISP

ISP

Dallas

London

Paris

Copenhagen

Munich

Amsterdam

Rome

Omaha

San Francisco

San Jose

Los AngelesSan Diego

TokyoPhoenix

AlbuquerqueLas Vegas

HoustonSan Antonio

Orlando

Miami

New Orleans

Seattle

Portland

Sacramento

Boise

Chicago

Minneapolis

Kansas City Washington D.C.

Charlotte

JacksonAtlanta

Boston

Detroit

Albany

Salt Lake City

Cleveland

St. Louis

Toronto

New York

DenverPhiladelphia

InternetHigh Quality

Low QualityOur streaming media applications allow larger on-screen

windows, stereo sound and error-free imaging for TV-quality video that can be delivered simultaneously to large

audiences, live or on-demand.

Content Services

27

20-Year Exclusive, Worldwide Agreement Enron Provides End-to-End Connectivity to Deliver

Blockbuster’s MovieLibrary via the EIN

Enron Paid for Services Based on Number of Movies Rented New Broadband Distribution Agreements Enable DSL Delivery

to the TV; Additional Partners and Cable Targeted

Service Available in Multiple U.S. Markets by Year-end; Rapidly Moving Toward Implementation

Significant Expansion Opportunities

Content Enron’s Intelligent Network

Blockbuster’sCustomers

Enron’s Distribution

Partners

Encoding Storage Bandwidth

Management Streaming Control

Enron and Blockbuster

28

Free, Reliable Transaction System with Enron as Principal

Fully Integrated into Enron’sEstablished Risk Managementand Logistic Processes

Utilizing Site to Offer Energy-Related Auction Capabilities

Expands Enron’s Information Base and Market Knowledge

“Tried and Tested” Platform for Expanding Enron’s

eCommerce Activity

EnronOnlineExtending Enron’s Products to the Internet

29

EnronOnline Transactions Per Day

Enron Net Works

Clickpaper

Enron Credit

Enron Direct

Deal Bench

EnronOnline

31

CoalCoal

EnergyEnergy

B2B BackofficeB2B Backoffice

MetalsMetals

PaperPaperData StorageData Storage

TelecommunicationsTelecommunications

Natural GasNatural Gas

BroadbandBroadband

WeatherWeather

ElectricityElectricity

Enron Today vs. Enron Tomorrow

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