n n n n ri ~ r~ r r r r - r - 7 - r * r Second Quarter 2001 StRaw CORP. NYSE Stock Symbol: StE Conimnon DivIdend: 6.50 Shares Outstmidng (Diluted): 900 MillIon Internet Address: WWWAJWO,LCOEII s~k-c A Investor Relations Cods: Mark E. Koenig. Exec. Vice President (713) 8534981 Paula N. Alter, Managing Director (713) ass-race GOVERNMENT EXHIBIT 4546 040025 0 V to> CA -4 ~0 [ Abbreviations Natmi Gas Measurements She 9c4th iluesmul eat. Tim amount creamy requkud to tube the hapertum darn pound of water on. dope. FahIediut flub. On. slUm' Wan. The standard east of delivmcy for natural gas. mpina~cne.gy cutest. Nd 1.000 cubic feet. A comma muousur. of yoke. for natural gaS. Used Mbrdusigetlp .U UNBID because - Met contains appecxhnatdy on flubs ails enacts of saw gas 39Mb. ed One Si caMe bet Tot One USia. cubic bet. Electuicity Measuremeuts Bandwidth Measurements Bit (b) Shanty digit. The smallest unit of data a computer cani pm-. bps Bits perseccad. Byte(S) A set of bas, usually 8. K Kilo. One thousand unks. * M~a. One mUtton nets. o 131gm. One bUNion, emits. T Tea. One biSon usia. 6TH-i Synchronous Teaupoet Module 1. Bandwidth Conversions KWH lhIowMi-hoer. A standard ug* of ebdd@ ocosumptlona cmmnposdbg to usage of one thousand nfts for one hoer. Alfiocat Ughibut banning Icc 10 bouts cons urns am &ML UWb M.gawatthur. One Ihousand kWh uw Megawatt One mullion wafl - - thousand kW OW Gigawatt One thousand MW tn Teeawtt One mESon MW as-, a-n 05-3 (T-3) 0C4 0CM 00-152 STM-1 Bandwidth Canaejtv 1.5Mbps 44-7 MbpS 165Mbps Z~8 laps 10,000 Mbps 156Mbps Terabute Equivalent 0.48Th ISSTO nra 780 TB awe TO 1618 Energy Conveuloess (Approximate) lEd I Dci I table meterof gas 1-b Ski (ci) 1-fl - Iambi * IAOO.OOOMMBtU - OSSUcI - anti Kwh = SAG MiSty of natural gas * 3.785 lIens SM Banal (of cdl) * Thousand MM Million * Equivalent MUSty. Is caUtion Bluequlvabaut Id Per day: MMStueld Is million Ski oqulvuletat par day MT Meldo Ton lb* flw.fln MeAn. b.wa.dhoAk.g .t.w.Ifl .0W, 0. mu..a.Me .fln*M.. VA Siffie S.ctM Act unaMS.c*s. *95.1- kcettJ.s En bwr Act at In'. A.&qfl 6m h.Ahn 0811w.c%as. .0* a a. anus's aauaydm.. * - vnc .tetsw. e.tJs ~b -u k.cflwd. k,wn.,S Me4 0.' teaM Ctin C1S1 41 Mfl,V awfl*t4 Op.. as's. - - A...etn.g 0'. h~. M~.sin. M in~SflSI p** .nd.oe - ~5M c.'w Es 0 4M j...tin.t dJCddtVS. , - ~y a.aarce en Ma VSS 5 ..d&.,p. a.*fl.w a,Enfl b.a.*.w* s g.sbav jnd MeS4 .dcan.rd .e *.ndan EsaDI sEts ..w.q.aysa. *,e Ernpsds s udtg vs b.~M.uj. .e. L.a -- ~ ml-.- w.~ b~ -~ - a a a S - S C 0 0 o r q,,flv 1< (4 a, 0 Other Fl..aIt ??lJflOOI I 2t41 PM Second Quarter Analyst Reviews Ntw York July 25,200K MEK Pager: 800 901-5209 PAR Pagen 800 957-8467 DL Pager: 800-237.7732 Tuesday, July24 New York 5:00 p.m. Falcon 900, NS731 departs hangar forwowark International Hanger Tel: 281 443-3744/Fax: 281 443-7425 Pilots: Dan'in Mitchell and Andy Hanoi Passengers: Sldll'mg(Prevcrt/Fastow/Koenig'Rieker/Delainey Dinner/Fruit and cheese fly 8:50 pa Arrive Newark Inteniational PSO: Sipatwe Tel: 973 624.1660 Grobnd: Deiroy - Van Passengers (6): SWlhvat/FutowJKoaig~RJeker/Dolahey Tel: 711 292.1010 Confirmation: John ibid: - Pour S~asom Hotel 57 E$57' Street Tel: 212 758-5700 Fax: 212 7584713 Contact Barbara Pam Guest Itoonu Contest: Felicie Doulcet Cr: 212 8934806) (all cha~gea direct billed- 7 rooms covbm.d -room Sirs a-mailed 7/5/0)) Set SIdIlhgftdmt Frevat'Dsve Dahiaeythndy Farnw/M* Koal jiPaula ticku/Da$d Lcboe Delainey (hotel reservation two mghts Jul 24 & 25 out on 26) Proven (out at 5:3D p.m. July 25) Hotel: SL Regis Hotel 2 East 55' Street New York. NY Tel: 212753.4500 Guest Kern Lay Pilot's hotel: Marriott Newark Hotel Tel: 973 6234006 O:corpoeutetvaw. bIaUon.Vthm&aU0312nd Q~ ZOCidoc LAY 000022381 2Q Review NY Marriott World Trade Center New York City 8:00 n.m. Breaklast / Last Name First Name Company Telephone Abevtz Ewioue Stadia Ca hal. LLC 646 521.6991 aisiahini Thorns Skandla Asset Mangeriwni 212 422.3241 Chin Cation. I. IC. Utility Advisory chin Mice INOFtrnmnSelz 2)2 309.5981 Cohen Richard Stan Securiucs Della Voli,e Vincent YMCA Retirement Fund Do (cx Tatynh Menu Lynch Bllloz James Domirrick&Dominicklnc. Pleincher David Goldman. Sacha AGo. 212 902.6018 Picishman Stern MeoW Lynch Capital Mnkqts 2l~2212.6l96 fiasco Robcft BearStuns Freeman Chides t P. Morgan Swiuitles 212 648.7257 .2!! Charlie Bran Brothers Harriman & Co. - Oarvev Michael Macto, Gordon & Cc. 212 692.2007 Onto Eric Goldman. 8gb ACo. 9173434469 Graves Edward Daiwa Secmiries Co.. Led. 2)2 612,6114 Gross Rkbsrd IAhmanflrothm 212 526.3143 Hackett Mask Rinenbouae Financial 610 293.2MB Hammond Gabriel Golda Lath, ACe. 212 357.2399 *{orowi~ Ian inurFunds Inc. 212 323.5103 James Carla Gerard Kituet Mattson & Co. Krn4conen ~ Lord. Abbeit & Co. Kilter Lea Mmiii Lynch & Co. 212449.7803 Kooutz Loch Weiss, Peck & Greet. 14.0. 212 908.9516 Kuuth Joel Ask Am: Management Co. Lancaric Gene DiG Puma Sib 212 309,5900 Mandeiblart Eric Golda SatIn & Concur Mdli. Roderick Mcix. Capital Maxient Me rhoeffir Dde MWenniwn Patton M Jonathan CISc World Markets Cow. 212 667.7256 Pelietchia Ralph Fitch (BOA - .2~Ias............ Stan FrIendulvo Lime 21246G.6703 Ease Madulaine ItO. WeIliagin 12 266.03M Scbntdt Brian Salomon Butt Barney Inc. Shin man Todd Stundud A FooCs Corponi ion Silvesol Ron Mo Stat Vuchedch Kathleen W. H. Reeves & Company, Inc. Wehon Hugh Fitch ISCA Winters Rebut Beat Stearns 212 212.6844 39 LAY 000022382 I 2Q Review The Four Seasons New York City 3:00 p.m. Coffee Break Last Name Fin: Name Company Telephone Ach Lawrence Trainer Wortham & Co. Aurese ~ JL Advisors 212 593.2283 Barbis Mike Fulcrum Global Partners Boone Kevin Bear Stearns 212 272.9660 Bradford William Garrison, Bradford & Mw. Bunyan Michael Sage Asset Management 212 521.0908 - Si~L... Rudolph MacKay.Shields Financial Christensen Bob FirstAlbany Corporadon 212 273.7127 Cohen .g~j., Morgan Stanley 212 761.6709 Common Paul Guardian Life Ins. 212 798.6108 Cummiskey Peter I. Fyi Haitwell L. p. 212 308.3355 Danzzer Mcii 212 852.3092 Day Adrian Global Snhegic Mmnagarna Debbas Paul Value Line Inc. 212 907.1724 Deoulis John Sound Shore Mmnt. Inc. Dewees Net Douglas C. Lane & Assoc. 212 262.1670 Doe p~ tIES Wart Epstein Mutt Morgan Stanley 212 762.96~4 Fisher Rim Stein Roe & Farnham 212 408.9204 Frelinghuyscn George Carl H. Fforzhciiner & Co. 212 223.6500 Gabbay Cii 3.?. Morgan 212 648.9830 Gagliardi Louis John S. Herold, Inc. Gleicher Howard Melropolitan West Capital Mgnit 949 718.9701 Greenspan David Blue Ridgo Grosser Debbie Salomon SmithBarney Inc. Hairnes .A! Sage Asset Management 212 521.0908 Hams Jonathan NLI International 212 403.3430 Higgins Dennis Morgan Stanley Dean Witter 212 761,7819 Ho Teresa Bano of America Securities 212 847.5634 Holmes Kurt Jemnico Investment Mgnit Hove Andes's Deutsche Bank 212 469.5319 Juakowin Philip PA uldes 212 273.7114 Kali Masataka Nitaul Life Asset Nimnagenunt KauBuan Arnie First Union SecuritIes 212 891.5032 IAuner Curt Credit Suisse Firs Boston 212 538.2776 Lee Rafaslina Deutsche Asset Management Lee Jonathan Zurich Scudder Investments 212 326.6325 Leonard Jennifer Merrill Lynch & Co. LAY 000022383 Bear, Stearns & Co., Inc. OwnerShip data as of 12/31/00 2-b': 24$ Pint AvSflhA flew Yoflc. NY 20167 Tel (212) 2712000 Fi~ (212) 272.3097 KEY CONTACTS Name F. jowe Miebels AMrIw Levi KaThryn Booei. KausNic Stwidflarini INDUSTRY WUSGHTINOS Top ±0 Moldings Flnan.bvsfd Nlthcar.OrgS/Ph Commi fquip~' #4uw4ndufly Smnks.Mgoe~ Co Biseonja 0ll&Oas-IJW teIcenIOWWd U.t'MuU.IMt Hit Ca DS-PL Sear. Steams & Co. Its ieain iftflttffitflt banWog end saoarlues lading ahd brOlceriti firm, It Is the major subsidiary' or me Sear Steams Companies Sue. Sear Steams Asset Management Inc. (BSAM) is the invesnwik advisory arm arid also a subsidiary 0! ml Bear Steams Companies Inc with ove,tI2.2 bIlIlwt In assets under rnbllgemeht. Phone rio, ftaCMLaSIOA%n@I1C* Equity (212) fl22429 ftesarh Sear Hunter S~ciaiIiU Senior Managing Diream/5e114146 (212) 6184474 (212) 2724105 SeaJrltyAAuiysVSeIl-SWe (212) 2724382 S&P %Port$Chg (5.3) 10.4 (1.3) 8* (2.0) 56 (0.2) 5,3 (2.5) 5.0 ~ 4.4 (1.0) 4.8 (14.3) 4.6 (IS) 3.4 (3.1) 34 PORTFOLIO CHARACTEKXSUCS Top 5 BuyS Top 5 Sell. Internet HousNd.Nondura aumiu, ties TSC04Th. weal 5va.C*mmcMw P/U Yield MWE5I EM Em-on Corp 63.1 0.9 29.9 SO SOD 2t4 1.2 . 25* Bear. Steams&Co., Inc. 31.1 0.9 29.4 Nat Gas Ostr4L HO WINGS (All Cup) S&P % Port $ Chg SiP % Port tChg (3.3) 0.3 (CA) 0.4 (NA) 0.5 (0.1) 0.3 (1.2) GA Style Odent*tloo PUSsY. Turnover C Of Stocks Held Poflfoilo Turnover Equity Assets (INN) log liweflec Type ftesearch lien, POSITIONAL IIISTOAY Vat. Position Change PEER OWNERSHIP Top 10 12/00 (4MM) En. AIS Total PORT DISTRIBUTION Suflii MId 0% 1% 00 % Out 0.0 0.0 0.0 Large 99% EMS Yr 0, proj jQ~ Debt/&wity p/s Beta 17.1 6.5 82.3 4.1 0.7 15.6 20.7 56.? 4.2 1.0 19.2 itS 39.7 3.9 1.1 Nat Gnu Dstr-PL ADJUSThENTS Proj PS Ptol EPS $ Neid $ Ch9 A Port P/E Thid Growth Buys $ Held $ Cig ¾ Poit P/E Yield Growth tNt 0.0 1.8 63.1 0.t 17.2 ProJ EPS 02016227 0.0 1.4 NA NA NA Sell. $ HeW 5 O~g ¾ Port P/E Yield Growth INVESTMENT APPROACh C Cooyrlght 2000 Thomson AnandavCerbon. AU rlghb rservd. http; f/m,wdrchamzwi.coin LAY ODOO223~4 in:, wC rn/Lehman Brothers Ownership data as of 07/1)/Cl Three Woeld llnenclal Cutter N*i~ You. NY 10285.1400 tel (212) 518.7000 Fee (212) 526.3738 KEY CONTACTS Name )ames Hamion Nahis ARmy Rlchrd Gross Fo,jndad± £850. Lehman Bjcd,en lea global Style inveltlfieot bank with e4Ulty and Ksed income research capablilUeg. The Ito, t'as OflemtatJon offiCes In ?dew You. London and CAicago. The Turnover Investment advISory arm It UIWIM &SIWW Dot Stocks Held POtVblIo Turnover EquIty ASSetS (INN) Title Phone Secuilty Aflhiyst/SeIt4fdt C) £2) $M3225 SWJII4Y AAaJysflsel4lde (212) 5)6-1781 Senior vice Ptgsldmnflhll- Side Associate AAaIytdSeII.Slde (2.11) 526-3896 Peggy Canewty INDUSTRY WEIGHINGS Top 10 HoldIngs SEP % Port $ dig Top 5 Slays Top S Sells PORTFOLIO CHARACTERISTZCS PIG Yield PrIce/Eat SM tnn Corp £8,500 LehnUO freflm 63.1 OS 24.4 L2 Nat Ohs Oetr.PL HOWINOS (All Cap) (222; investor 'Type Aesercl~ Firm POSITIONAL HISTORY Date Position Change PEER OWNERSHIP To~ 10 PORT DISTRISUrbON Small Nit ¶4 PaW VS V 0.0 0 % Out Large ¶4 SEP ¶4 POut S dig SIP ¶4 Port $ Chg 295 it' PYOJ BPS $ Held $ aig ¶4 Put P/S Yield Osowdi EPS S Yr Sr Proj ROE oebVE4uIty 274 6.1 11.6 20.7 Nat Gas Se-FL ADZUStPLIENTS P/B Beta 83.3 4.1 0.7 56.7 4.2 tO Proj EPS Bisyt $ Held $ Cig ¶4 Pv~i PM YieIe Growu~ Proj EM Sells $HMd scho %Port PIE Y1~d GrOMM INVESTMENT APPIGACH C CopyrIght 2000 Thomson flnanclal/Carsofl. £12 tights resiNS. htt*://rwwlrchantcoin @00 22355 704 - Neuberger Berman, LLC jff Ownership data ~s ci 03131/01 605 Third Avenue Net. York, NY 10136.3698 Tel (221) 476-1000 Fax (212) 476.9040 Key CONTACTS Name Leslie weIttleli MICMII K*uhts David Levine INDUSTRY WEhGISTINOS Top 10 HOldings my Bank/Broker ifllcar.0ls/PtI cornpvter f*Cwr p1nan.0v~W MuW-IfidutY Banks-Money Cli' rsanw Finan oMtOas-W 1V. Radio, C*I wILces-Ind title Dructor of £itEMdI 2. Fowided: 1939. The nrm isa NYSE member flrin and an auIlilate of Heuterger Berman Mgnit. Inc.. whit manages the Neuberyt' 6e111fl Fuads, In Cecember 2000, 014 inn &C4ufld VIe private diem business of belts Capital Ngmt. In Mafl 2001. Heuberger acqjired dIe suits of the Fwieno Fund, now die Heuberger Sesvi,sn Pasciano Fund. Phone (212) 476-9816 0,1.1 Investment O0lcer (212) 474-5975 Assistant PedfliO Manager (212) 47H607 SM %PoftSOifTOpSBUyS (1.6) 6.5 197.3 Hftiicat-OrgflPti (0.8) 53 327.1 #4iS-lndusuy (1.1) 4.0 4.9 Siip#rsg (LI) ii 100.2 law BauikJ&cker (0.5) 3.4 253.4 Sanks-lloney W (0.9) 2.9 111.0 TopS Sells (3.3) 2.6 -101.4 AiAOeiobiU (4.6) 2.6 78.2 Svu-CommCcos (3.6) 23 -07.3 conimw P1mM (0.5) 2.4 52.4 MaM-NiVd lv, Radio. CaN S&P % Port $ O~g (0.8) 3.3 327.1 (0.5) 3.4 232.4 (7.9) 0.9 249.7 (1.1) 6.8 197,3 (0.9) 2.9 117.0 98? % Port $ Gig (0.1) 0.2 -Ifl,4 (2.3) 1.0 -107,0 (3,3) 2.1 -l01,4 (1.4) L.4 .101.5 (3.6) tO '97.3 sty'. 0,Ientmncn Turnover GSA' Adive Sot Stocks Held POEVOIIO TurnOver Equty Assets (9MM) Mod 1,302 SI-S 34.933 friwator Type InveItmere Advisofl POS1~ONAt HISTORY Date PousIlon Change % Out -fls,161 0.07 43.920 0.13 -227.122 0.1.4 *45,739 0,17 1.027,538 0.18 44,594 0.04 ~%474 0.04 -2.354 0.04 03)31101 316.019 12)31)00 986,203 09/30100 1,059,223 06/30)00 2,285,345 03/21(00 1,352.084 12/31/99 324,446 09/20/99 279.792 08/30/99 300,176 PEER OWNERSHIP Top 10 EN' Wall flu 1416. ASS DIM C Pw 'a, 03(01 (5MM) 30.1 105.6 94., 39.0 37., l.a 1.9 WOO (5MM) sto 125.1 lot, 13.7 39.2 11-S LU 0.2 0.5 09)00 (5MM) 92.6 151-s 192.5 tO 47.2 p 06/00 (5MM) 83.0 £67.1 119.2 51.3 11.9 . 5.7 0.5 0.2 0,6 0.3 0* 0.0 0.0 1.2 KalE tO 0.2 21.5 6.8 Thtai 287.4 319.9 437.7 354.9 pompouc CHARAnRISUcS P/E Yield met/at vs Enrun Cap 63.1 0.9 29.9 sIp 500 26.4 1.1 15.4 Heuberuer Bennett tiC 35.5 1.1 24.7 Nat Gas hair-Pt HO WINOS (All Cap) "a WHO Oval EN' TPP KNP 1PM tsp vyc 11W $ Held 310.2 205.6 94.0 30.1 lii V.2 13.6 11.3 $Chg 171.6 *29,3 -I.e -21.2 1.3 3.6 9* 11.3 2.1 2.1 2.4 -4.2 % Port 0.6 0.3 0.3 0.1 * 0.1 to oh 0.0 0.0 0.4 Pa 22.0 27.6 30.4 43.1 16.1 49.6 74.2 se-s 12.7 Itt Yield 1.4 1.5 0.6 0.I 7.3 'S 7.0 7.7 4.4 4.4 Prc6 BPS Gmwth 25.5 14* 20.7 £7.2 9,7 12.4 11.0 7.1 7.5 .0 PORT WSTEZBUUON Small Mid 9% 18% Large 73% EPSSYrGrProJ ROE Debt/Equity P/B Bfl 17.2 6.5 83.3 4.1 0.7 15.6 20.7 U.7 4,2 1.0 15.7 19.7 24.8 3.8 1.1 Nat Use Dutr-PL ADSUS11451415 Buys 'pa tsP EPH Ki4P wc Sells Ce- WI'. 'JIM Nut 0Th $ Held 210.2 11.3 11.6 27.3 SOig %Port 172.6 0.6 51.3 0.0 9.8 0.0 3.4 0.0 LI 2.1 0.0 $ Held 0.0 105.4 20.1 1.4 94.0 $Chg -276.1 -29.) -27.2 .4.2 *1.8 Port 0.0 0.3 0.1 P/E 21.0 36.5 74.2 40,6 12.7 PIG NA 17.6 63.1 Yield 1.4 '.7 7.0 5,9 4.6 Yield NA 1.5 0.9 Proj EPS Growth 15.5 7.1 11.0 23.4 7,8 Proj vs U to iv It, NA 14-8 17.1 0.0 13.1 4.6 11.0 0.3 30.6 0.6 20.7 INVESTHENT APPROACH Neuberger Serman. U.C Invests in weE-run coinpaiVet that have stong fundtrnentzl, and appear to be underpriced. Often, these companies' mflngUis ban not been noticed by Urn Slitet, or temporary problems havE bttii enggcrhted. Portfolio managers look toi~ undervalued corpOrate assets, unrecognized earnings recovery prospects and transaction price anomalies. The small-cap product focuses cc companies with market cape of less than $750 million. The eQu)ty portion o( ponfotios are diversified ama,g 3.5% positions upon ptjrchhse and usually passes S~7 ifldkestiv segments. The firm tiles to have no more than 20% coocentiated In arty one lnduafly g*map. investment Criteria: 1) Salle balance sheell 2) Relatively low P/E: 3) RelatIvely low P/C'; 4)1.0W P/B. Oeciulon-Haklng Process: Analysts and portfolio managers cover over 600 companies. of which 250 are Intensively researched. Investment ideas are the result of tIle daily Interaction between the turn's portfolio managers, research analysts and reoular meetingS with the ExecutIve Committee. However, autonomy Is given to the managers. Individual selections are made by senor ocrifoilo nimnsoers usino lie research. Street knott. and their own Ideas sod analysis. Price to owthase. the firm LAY 000022385 1.2.1 ?fr'*L -. jennison Associates LLC LU' Ownership 4318 ~s of 03/31/01 466 UKThOtOft Avenue NewYo*. NV 10017'21Sk Tel ~21234l1-10C0 Fex(212) 612.3149 KEY CONTAC~5 flame Owlet Ovine Pounded: 1969. FMmcrlY leflnlscn A$sOcits s Capital CO'.. the Ann Was re,.amed In 1998 and Ca wholiy'owfltd subuIdf.ry 01 ThO Ofleobtion pnjdenual losurafice Company or Amend. In Turnover 2000, Pnsmnfli invetfitent Corp. combines tar stocks Held most Of ItS equity ope.aooni wibi lennhson. JontolIoThn,cv.r Eqijtv AlIen (4MM) Active Mod Z,Z74 57.' 72.072 Investor Type Investment Advisors Title Phone Mwsgin5 Ol,ecto.flntainatIwai Group (211J 02.0705 Vice President Shiv,, Mono David Keirer INDUSTRY WEIGHflNOS Top 10 HoldIngs Hitbcat.Otgflft mv Sarhjlrokr Ilntnq Coo Mtitl4flduSty Computn Htdwf ttflnaminfl asona -n M%r BJted,nelogy Bati'4-M oney ~ Vice PmiIdeot Haa.gIn~ Director SAP %Pon$Chp TopS Buys (2.2) 83 -8764 8v95-NOAAlcohdi (i~I) 6.4 -2217 tas-HvW-Lln (1.7) 43 .34.2 NSWCMO4II (0.6) 4.2 .244.9 Cotwjinr nnaa (1.1) 4.2 .772.8 Hithe.ar.Ovtd (1.0) 34 .317.1 TopS Belie (3.4) 2.1 227.2 reIean.Cawwn (0.4) 3.0 -73.0 commi Bqulpm (3.6) 2.7 lit? HlSar~0rgVP9~ (0.4) 24 '23#.4.CompAwHrtm Pipe & Fuel POLTPOUO CHAAACTERISTIcS (212) 6334517 (212) 833.0464 (212) 822.0444 S&P%Prnt (1.0) 1.6 (1.0) 2.4 (2.6) 1.1 (5.2) 1.0 (0.5) 1.7 SAP % Port (4.5) 2.5 (5.4) ~I.6 (2.2) 63 (1.1) 4.2 (1.3) 04 $ dig 676.3 452.6 323.6 295.7 261.1 $01 *1,633.t -1,084.9 '676.8 '772.8 .549.6 POSITIONAL 14*570EV Date POSition Chann '4 Out 03/21101 1,564,684 '16,349 0.21 12/31/00 1,393,233 75,409 0.21 09/30100 1,517A24 .261.794 0.20 06/30/00 1,779,618 85,943 0.24 pita OWNEASI$IP 03/0 1 top 10 (5MM) SIt! 90.3 wna 351.5, KIlt 169.4 OVa ±62.; 9W 109.4 OlIN 094 o 41.0 ASS 34.8 'lAO 26.0 MM 1.2 ToW 997.4 12/00 09100 06/00 (4MM) (5MM) (IMMI 132.4 183.1 155.3 79.1 it, 41.2 39.7 0.0 0.7 744.8 PORT D5TRISIJTION Small MId 3% 13% 133.0 1943 146.4 172.1 74* 212-a 34.2 St I 0.1 114.4 196.7 123.6 133.9 26.5 146.3 25.5 Si' .21.6 0.0 690.9 725.3 Isge 84% saps" Jnt.hcfl AflOdatat LLC PIE Yield. P*e/at ifs 63.1 0.9 26.4 1.2 29.4 3.2 Nat Gas Dst-PL 540 WINGS (All Cap) SF6 WMB 'MS Ova EQT S.?' VIE wok BA' McN * 11aM 392,4 251.3 2494 142.6 126.2 944 90.3 #1.1 fl.1 56.6 $ Co 94.6 155.0 *0.2 21.1 0.3 -12.4 *2.2 *1.1 48.0 9.3 #04 0.1 9.3 0.2 0.2 0.2 0.1 0.1 0.1 Li 4.1 pie 21* 17* 40.I 30~6 16.1 14* 0.1 17.3 ILl 33.3 Yield 1.4 1.1 0.4 0.1 2~2 3.) 0.9 0.3 3.7 4.1 Proj EDt Growth 15.1 14.8 17.3 20.7 12.3 9.2 172 lea 7.9 5.5 29,9 25.8 30.0 EPSSVrGe Proj ROt Oeb~Eqijlty P18 Beta 83.3 4.1 0.7 H.? 4.2 1.0 34.5 3.9 1.1 pie *7.4 21.0 £1.4 30.6 32.3 p/fl NA 444 *9.3 as 40.8 17.2 6.5 15,6 20.7 KJ 19,9 Net Gas Dsb.PL ADIUSIN KNIt Suyt 'PG SAD am MOL Sell. CGP.. 'Ta waa In. KNI $ Held 3$1.S 392.4 7t1 112.6 SG.6 $Cl~g 155.0 94.8 48* iLl % P04 0.5 9.5 CA 0.2 9.3 0.1 sHed $01 %Port 0.0 .231,9 0.0 944 *12.6 0.1 61.1 '3.1 0.1 903 .2.2 0.1 LISA 4:i 0.2 I Proj EPS YLeI4 Growth 1.3 14.6 1.4 15.5 3.7 7.9 0.6 20.7 4.3 5.5 Proj flfl Yield Growth NA NA 2.3 4.3 0.1 113 04 0.4 *7.3 INVESTNBMT APPROACH jennlson AssocIates manage Shame producb, Growth Equity, OppOrtunIstIc Equrty/ Growth I Income and tnternatlonat Equity, Invest in estabiWud companies posItioned to grow over time. using a bottom~up, ftsndammntai approach, the fInn condtscb numerous company visits to ldnMly COuIiPII*1 with the most ravoetbi. grovedi prospects and arriving at earnings estimatis. companies are Uiw mofiltorad regulafly to detettnlrie It companies am inflne with growth expeatiocs and veluatlons are consistfl wWi expectatIon. The ODportunistlc Equlty/ Growth & Income. product expends oat thIs ibategy by Investing hi stsbllshed cornoanhms with current or emerging earnings growth that have not been rested by the market The InternatIonal Equity product II Invested In non-U.S. companies with market capltIlIzatIonu over $1.0 bIISon and potentIal for long-tern, secular growth. Investment Critela: 1) Supflor absolute and reistive ear¶tJnga; 2) AttractIvely valued relative to earnIngs expectations. Sell Criterlat 2) Earnings dlsawolritment; 2) Stock has reached an lntermedlate-tarm price objective; LAY 3) Outlook no longer spoon promlsimg; 0000223b7 4) RelatIvely more attractIve stock emerges. oeclslon.Maklng Process: External research is utilized, as analysts devote most of their time to maIntaIning a high level Of knowledge cit companies already owned. Company contact Is essentIal to the Stock selection process. Iu'vtstmttt Ideas are than ,IItneta,1 Ifl An lnvfltment enmmltt,. tnfllvlfl,ol rn't*,iln ntnanan than halt. ullcrr.tinn r,v.r Wwj~.lI fl.tlcInnc else I. Davis Selected Advisers, L.P. j Ownership data as of 03/3 hOt 4 609 flM~ Avenue flew Yort WV 20017 Tel (212) 891-5500 ovnded: 1947. taint Seiedtd MVlJtS LP. (Vormedy Stiecte*Venture Advigori, LP.) Is an owner-onruted company. Shelby MC. Davis Is We wntrollIng shauhoider, The finn IS ttspcnsitle I'M 015 mwlQeneM 0$ The Davis Stieded Funds, Fax (213) 207-1581 KEY CONTACTS flame Kent Whitaker SheIbV N. Cia Menteti, Feinbet Andrew DeC INDUSTRY WEIOH1INGS top 10 HoldIngs any Saflfl&okr Ins-N uiU.LJM Comma £4.dpm Conmiiiw linen BanIW.MIJ P-eQ In. *noacasfty HWnr-DulVPt Compint Hrdwr Holding Cu Title SCet*ltyAflIyit 0,1., iflcuUv. Officer Po,SAIo MhI'SW Preident SSt%Pofl$cho T~5SUyU (2.6) 12.2 173.0 kw.MljU-UM (1.3) 9.1 474.3 CemilE EqWpm (2.4) 1.9 1,13th ltlU.lMUlhv (4.0) 7.3 759.9 NwArDv'd (84) 6.9 169.6 SNIng (1.7) 4.1 47.8 topS Sells (10.6) 2.9 -34.7 I4jthcer.Drgu/Ph (0.4) 19 -L13t4 Mutual F~fl5 (1.0) 2.6 -296.1 C...puwflwr (MA) 1.0 31.7 saces PORTFOLIO CMARACURXSUCS 6-fl C&~p 56P500 De~45 leased A*vlsers, C.P. Nat Gee Dstr-PL HOWINGS (All Cap) Phone (213? 892 .3332 (212) 891.5500 (212) 691-5134 (505) 820.1020 sap % Port (3.4) 7.9 (4.0) 7.5 (1.3) 9.7 (LI) 1.1 (11.5) 1.3 SIP % Port (0.6) ),9 (HA) 0.0 (10) 2.6 (5.6) 2.4 (9.1) 0.3 P/ U Yield Pflcelbt VS 63.1 0.9 24.4 * 1.3 27.2 2.3 29.9 234 21.1 $Oig 1,831.8 759.9 474.3 371.1 285,9 *1,130A -452.4 -2W,) -242.6 -ISO.? OtlEIfltlQIb Turnover Do? Sn na Porvollo Turnover Squlty AWlS ($1414) Active Mod 234 45,4 35,096 rAnger Type Inv.wnent Minion POSITIONAL HISTORY Date Position Change % Out PEAR OWMRRSMIP 02101 12/00 09/00 06/00 Top 10 ($1414) (5MM) (5MM) (5MM) CUlt CA Li 0.8 Total 0.0 2.2 0.8 PORT DISTRIBUTION Small Mid 1% 11% UPS SYrGrProj Aol 17.2 63 15* 20.7 15* 24.6 DebVEnuIty 83.1 It? 22.6 Nat las Dab-Pt ADJUSIMINTS large 88% P/ft Beta 4.1 0.7 4.2 1.0 4.5 1.1 Proj PS Proj UPS 58cM $Chg %Port P/ft Yiuld Growth hays SHed $Gg %Port P/E yield Growth Sills SHaM $Chg %Pot PIE Yield ~ us Growth 00 tO *1.4 0.0 21.0 IA 15.5 INVESTMENT APPROACH The firm utilizes cocojnut top-down end batmup Investment dladpllnes. While Uwutmerb are chosen on a stock- by-stock bails, based on cmdeu1yb~g fundammntela end valuation, the fimi atampb to Identity broad macroeconomIc trends The firm Invests kt high*quullty. well-managed mmpwilea wIth PotentIal fl growdi. The price dIscIpline pays careful attention to the valuatIon and eeink,gs multiples of evety Company considared for Investment. The research team sasesis the universe of large company alcOa for mich diametarists Es Outstanding management, strong returns OIl apb4 Strong baiaaICe sheet mimI umof technoJogy ad cCiuiPbiiIes with a proven record of stategic acquluItlons. The finn relies on judgement and Insight at Ute poVollo management and resernch staff to correctly determine when to buy end Nil Shires eta company. The firm regularly reviews holdioga. Investment Cflterla: 1) SUng sale QVOYMIJZ) Good ran on capItal; 3) SolId balance sheet 4) DomInant within Industry; 5) Low expens~ 6) Management owns company flocIc; 7) TchnoJoglcaI Innovatioaa. Sell Cstterlaa) Pwidamenmls duterlorate; 2) Reaches valuation that Is unjustlfleh4e given Its predIcted future earnings; 3) Improper busIness or managment pracdcei 4) Management or Strategy change. Decision MaIdng Procew Three senior Investment profuslonais make up the finns Investment commIttee, who make all final Invstmejtt decisions. The finn relies solely on Proprietary research and meetings with management when making buy or sell decisions. C CopyrIght 2000 Thomson Plnandaucarson. MI rights reseNed. htt://suwdtclraoael.coIn LAY 000022388 GARP I ' ZNIZTITUTIONAL PROPILS OveRVIEW I tUBS I waitgug I I±iflAJSBY c&fling I smnAmittias I I W1AM I c~t Davis selected Advimers, L.P. PORTFOLIO INFO CONTACT INFO PROFILES Investment Style ~AR2 8L.K*nLWbltnkar WbaS.WJia Equity Assets 35,096 B09 Fifth Avenue (U-IN) Orientation Active New York , NY 10017 * of Stocics Held 234 US Turnover Tei: (212) 891-5552 Turnover (%/yr) 45.4 FBX (212) 207-3581 Type Investment Advisors .v~w.dsvlsfunds.com AFFILIATIONS Pounded: 1947. DavIs Selected Advisers IS. (formerly SMftt@dflenttjm Advisors, L.P.) Is an owrler-operat. Shelby t.1.C. Davis is the controlUng shareholder. The firm is responsible for the management of the Davis S INVESTMENT APPROACH me firm utilizes conwrrent top-down and bottom-up Investment dIscIplInes. While Investments are chosen stock basis, based on underlying fundamentals and valuations, the firm attempts to Identify broad macroec. The firm Invests in high-qualIty, welt-managed companies with potential for growth. The price discipline pa~ I attention to the valuations and earnings multiples of every company considered roe Investment. The resort screens the universe of large company atoch for such characteristIcs as outstanding manaKmiflt, strong r r capital, strong balance shot, smart we of technology and companies with a proven record of strategIc acq' firm relies on judgement and insight of the portfolio management and research staff to correctly determine and sell shame of, company. The flm regularly reviews holdings. Investment Criteria: 1) Strong sales growth;2) Good return on capItal; 3) SolId balance sheet; 4) DomInant Industry; 5) Low expenses; 6) Management owns company stock; 7) Technological innovations. Sell criterlaxi) Fundamentals deteriorate; 2) Reaches valuat)on that is unjustifiable given its predicted futui Improper business or management practIce; 4) Management or strategy change. Decision Making Process: Three senior investment professionals make up the firm's Investment committee, final Investment decisions. The firm miles solely on proprietary research and meetings with management wi buy or tell decisions. LAY. 000022 389 Banc of America Securities LL.C. Ownersilip data as of 06/30/01 600 Montgomery Street Sen FranciscO. CA 94111.2777 Tel (415) 627-2000 Founded: 1971. In Septcwber 1998. NatIeosIa'* CO.pontka and SankAmerica arporedon comDIEcn ma 1M4W to form Sank Of America COrponhlon. NitIotitSinc Nootggmery Secwltes was mourned fine - America 5#CWIflS Cl May 1999. The firm ma cooAdtotlll filer. Pa, (435) 627-Sit I KIT CONTACTS Name William Nice Daniel Tuilt She Thy T.net jurors LoGedo Title Vice fteiIdmnvselI-Slde Senior l4ngutg Dire cia ft Set-Side Vl~e PrUdiflVSBII'SIdS Phone (212) 30-5043 (212) £634030 (212) a47.b0S3 Seemly MIlySVhtlI.SldS (212) 5634523 INDUSTRY WUIGHTINGS Top 10 HoldIngs Elew.Va COn.OVSpOCIaIIty Gaming nmIwodijctors TV, Ladle. Cl Compitw Mw Telcom-InIg rid Entsvtalnmsnt fl5U.car~Dm~4~M 01110140fl S&P %Pout$Chg TogS Buys (94) 12.0 161.1 ileCirvin (75.0) 7.5 108.2 Cotnm.SpeclaiIty (164.7) 1.2 '24.4 Telcam-lntgnfi (1.5) 4.9 -114.9 PaPer & Forest (4.0) 4.3 6.2 RmuS.Po&wea, (0.?) 3.? -30.2 Top 55*113 (tO) 1.6 47.1 tnasm-Dvdd (1.0) 35 -31.3 nl*cu'Noso (0.4) 3.1 19.4 W&,ias'Svu (0.1) 2,4 .45.4 On*Rt, Sva mcot¶,.ceRtwn PORTFOLIO CHARACTWRIS1ICS Corp Sap 500 flood America Seewities LLC. nat ass Dali-pt HOLDINGS (AU Cap) $NSId Scho i~Po.t 6.0 LU 0.3 3.5 .2.9 0,2 3.0 -1.5 0.1 1.3 .O.Z 0.1 0.7 0.4 0,0 P/I 1$., 17A 30.6 53.1 40,6 0.5 0.2 0.0 ItS 0.3 .0.1 0,0 21.0 0.3 0.0 0.0 19.1 0.3 0.0 0,0 40.6 0.1 0.0 0.0 74.2 S&P % Port $ Clig (9.5) 11.0 185.1 (75.0) 74 205.1 (2.9) 2.5 47.5 (2.6) 1.3 24.4 (II,)) 0.9 20.4 SM % Port $ Og (0.6) 1.2 -245.6 0.3) 0.3 '2W.? (1.3) LI -130.1 (0.2) 0,3 .126.9 Style Ovlanuuan IUFMVI * of Stacks 1l~d Po,VCUO Turnover Eguity ASIC ($MM) Investor Type R*natd~ flnn POSITIONAL HISTORY Gate Position Change Od/)0/0t 26.380 .3,380 03/31/01 28,160 .1.194.205 12/33/00 2.222,8B5 1422.66% 09/30/00 0 -7.087 04/30/00 7,087 6,68? 03/3Id00 409 .29.6Cc 12131fl9 30,00* 30.000 00/30(99 0 0 06/30/99 0 -776,600 PEIR OWNERSHIP Topic en VMS ASS own Ott NIB 'en nm 0 total 03/01 12/00 (5MM) (5MM) 1.7 103,2 6.3 *.a 4.8 0,1 5.1 4.4 2.1 0.1 1.7 0.6 0.5 0.0 2-S 0.3 0.0 24.8 4,3 134 PORT clsmrwtrnon Small Mid 10% 13% SoecMlty PasMvu nigh 1.003 247.4 2,331 % Out 8.00 0.00 0.16 0.00 0.00 0.00 0.00 000 0.00 09/00 04(00 (1MM) (5MM) 0.0 0.3 1.5 I.e 0.1 1.4 3.4 Li 0,0 8.5 0.0 0.7 1.9 P/E Yield Aloe/Itt UPS EMS WGrPs*j Rot bebtfIquItv P/B Beta 43.1 0.9 26.4 1,1 28.4 6.6 vied 7., 1.1 0.6 0.9 0.4 7., 1.4 7.2 5.9 7.0 Proj IFS Growth B.? 14.8 30.7 17.2 17.3 7.2 'U.S 9.7 13.4 11.0 U4VISTNINT APPROACH 19.9 17.2 6.5 2Ll ISA 20.1 27.3 30.5 543 Nat ass D*-PL ADJIJSThINTS SMeld big %ftn 6.0 8.0 0.2 0.7 0.4 0.0 0.1 0.2 0.0 0.1 0,1 0.0 0.1 0.0 0.0 $ Meld 0.0 as 3.0 Ert' NB? IN) Ut? 'ira ena Sells HOC WHO 0Th MDIJ tot Pit 317 40.6 38.5 16.5 14.3 $ctig %Po't P/I -9.2 4.0 33.2 .2.9 0.2 174 .1.5 0.1 30.6 0.0 *0.4 0.0 11.9 0.0 -0.1 0.0 14.8 ItS 4.1 0.7 56.7 4.2 ZO 33.3 34 1,1 Yield 7.7 0.4 7,7 3.4 7.0 Yield 4.3 1.5 0.4 2.4 L2 C CopyrIght 2000 Thomico Flnaridai/Carson. All rights reigNed. Itttpd/e,wIrc)waaaeLwm LAY 000022390 4.3 1.4 0.6 0.0 0,7 9.9 I Large 66% NB? QYN gum MN! IMP EPG TPF IMP fUN Proj 191 Orowtl¶ 8.7 '7.3 7,1 8.3 11.0 Proj IFS Growth 5.., 14.8 20.7 10.7 12.) I *1~ 0 C 0 or t3~. U, to SUDES C 0 0 or t-3..4 6) *0 t-) Enron Corp. - Len Slide NEW YORK . Welcome . Introduce: Jeff Skitling, President and Chief Executive Officer - Enron Corp. Mark Freven, Chairman and CEO - Enron Wholesale Services Dave Delainey. Chairman and CEO - Enron Energy Services Andy Fastow. Executive Vice President and CR) - Enrom Corp. Mark Koenig, Executive Vice Presiddn4 Investor Relations - Emon Corp. Paula Rieker, Managing Director, Investor Relation - Enron Corp. David Leboc, Director, Investor Relations - Enron Corp. HOUSTON . Welcome e Introduce: C C 0 o t- t') < LA) .3 U) Jeff Skilling, President and Chief Executive Officer - Enron Corp. Dave Delainey, Chaimwn and CEO - Enron Energy Services Mark Koenig. Executive Vice President, Investor Relations - Boron Corp. Paula Rieker, Managing Director, investor Relations - Boron Corp. and other members of the Investor Relations team Financial Performance Net Income (MuDons) £404 2Q01 --I Earnings Per Share (Diluted) 3034 32% 2000 £045 2Q01 a 0 a N> IA '-0 2000 2"' Quarlet- I fl~Finflrmance * We bad another excellent quarter mall of our businesses. The second quarter results confirm our strong growth and momentum. * Netincomewasup4O%ID$404mi)Iion. * Earnings per share were WAS per diluted share this-quarter, compared to $0.34 last year - a 32% percent increase. Daekgro and: I Ravanue (5 MUte) 4$ MUte) f 102000 IQZOW fl020 102001 202001 flD200l Q. din % Chg flO dig % fig) chel I 13Mb 338 $ 0.40 'U- 25 $ 0.34 ?IIh 50,129 488' $ OA7A 9W 404 OLdS 100189 $ ft92 33.174 115 0.11 1987. 40% 32% 70.158 183 0.19 2347.1. 0 0 C o r' t.3> t..) < LA) a 0' Earnings Performance (Recurring Per Diluted Share) $1.80 1998 18% $1.18 25% 1999 $147 2000 22% -7- 2001E 0 $2.15 $0.81 $1.00 15% ~~1~~ 1997 C C 0 a C-' I-, 'V C, 19% r ~1 2002E ? Qu.Sr-2 Earminn Performance - 3997 throu,h 2002E * Enron has a strong track record of earnings growth. .Our earnings growth rate is cantinuing at very strong levels. * Euron's recurring earnings of S 1.47 per diluted share last year were 25% above 1999 results. * We bad an initial target for 2001 ofSl.70 - $135 per diluted share, which we have increased to $1.80 per share. * Our five-year annualized earnings per share growth tate is 20% - a sustainable level for the Cozno&.y and consistent with die growth sted implied in die recently revised 2002 guictanceof$2i5 perdiluted share. iackgrouud: hEWing £ 107 1398 1959 2000 ZOHE 2002E4 20.273 1.250 40.112 1 ,789 Nstb,caauefRecunlng) S 515 S 898 $ 96? $ 1,266 06 $O.8751.00$1.1B$ 1.47$ 1.805215 4. 0 C, 0 or. t.4b. U, 'a -4 Recent Investor Concerns O California * India * Enron Broadband Services * Cash Flow & Financing Vehicles * "Trading" in Enron's Business Model 0 0 a or IC 'A '0 Co 2' Q,aflo,-3 Recent Investor Contents . Work rrom slide. a 0 0 at? CA, '0 a Cal ifornia o Receivables Exposure - Fully Reserved - Active PG&E Creditors5 Committee Member o Potential Wholesale Refunds - Minimal Enron Amounts Cited - Possible Net Amount Owed to Enron o Contempt Issue - Enron Stance Centered Around Due Process - Near Resolutionl Compliance 0 0 0 0 0 2 Qu.rnr.4 L t4o Immut hnfl~l on ;g93~J~r~jpgs Results California . Work from slide. k Jt~7cActs.t y.sCa..n -Wa - v2* b'e-~a Ct-C 1~~ 7 0 0 0 or-. t'3> 4. 0 India Dabh~ pqwer Update qrq$jqnM;~t4u * 740 MW Phase I MW Phase 1195% Complete; Car ided 4 0 Customer HaLMuMIDIB OsfauIW #ncl Ha; Repudiated $he Contrac&~j.~ * Owners and La Remedies - Declared Poli - Initiated 6-Month - Continued o $875 Million Total Contractual Inveptment by~py~»=p.. -~ 2"' Ouautc,-5 C C C t4>~ 4- 0 0 9o9ractual Rights India - Dabbol Power USate - ~A i& ;,--C iJ Background (ConfidentIal): Termination Guarantees: * Guarantee flow Government of Maharashtra of up to $5 billion. * Guarantee from Government of India of up to $300 million (accrues only tn crnlftnrs' benefit). -o?itC C-' Ar~ ~ 0 0 C o t~. NJ I-c 4-. C) * 4 Enron Broadband Services General & Administrative Costs (Millions) ($73) ($55) 2001 Actual 4001 Est. Target Level Quarterly ($40) 0 0 0 or to)" at- 0 it- r' Qu.il,r.6 'jo-V Enron Broadband Services - General & Administrative Costs * The second quarter JBJT loss o(5102 million incH 573 million of coca's! and adrninislraf cx uses. We have implemented reductions in lx uS at other changes. reduction million inner 2002, which wi a axon o 45% from current (i&A levels. Note: * Third quarter OLGA is likely - e second uniter levels. on 00 Jo md 30s ate Jo howillbctransfcrredto * Wbolesale/Cop. and will continue to provi sowe I o services to S. Company-wide synergies will be aeldeved. Inc nuanctat impact to BBS ol these .kiucdoos wiN not be I:!; a 25- 50% expense reduction is most likely for the suppofl-relatcd reductions. * Intennediation beaacount reduction of 13% which is less than overall reduction in hcadcount of 57% for BBS. - - EBS will continue to focus on longer-teun intermediation opportunities. Note: Area strove Mier ~ CammeacW lnzermediation 63 55 (13%) 00 88 44 (50%) Coscntsevticcs 18 12 3% Nctwwk 208 196 (6%) Structuring & Support 83 84% - TOTAL (a) tnctudcs 230 employ inlStcned to hEron Wbo]tIlfl~ Baron Corp. C C 0 o r to> to'< 4- C U, (a) 7~ Cash Flow From Operations (Millions) - Reported in Financial Statements- - Cash Flow Impact of Deposits -I- 1997 1998 1999 2000 2001E First Half U First Half D hJ $1,880 LSA ($2,300) 1991 1998 1999 2000 2001E First Half Erctuding .LflIocI' SIUWUCIIt 2~ O.nfl.v.7 a C C Cc- C -r -i Cash Flow From ODerations * Elements of o~r normal workiaw canizal and price risk mSnaRCment activities can result in periodic tluczuations in cash flow from operations, as traditionally reported for accounting purposes. The single major element impacting reported cash flow in 2000 and year-to-date 2001 has related to our i~~dsitaciivi. * We receive and provide cash or letters of credit as credit collateral. - During the f~9h quarter 2001 4h~re ~nd nower '~"'~" t~r~awJ uuaprv'I"nted volatility and, as a result, we received ann £1.88 billion of cash Reported cash flow from operations for the year increased to almost $4.8 billion. - For the first half of 2001. the smgrnttcanrdewEtTinflows have revrreeA and, as a result, reported cash flow from operations is expected to be negative for the first half of 2001. 0 0 0 or to)' 0 -1 Cash Flow from Operations Excluding DepOsits (Millions) U First Half $651* , -1 1997 m $2,899 V U 2000 Excludhig J.fllodt S.ftIa.nt $3,000 $1,640 'C 0 0 C o t-* C 0, 1998 1999 2001E 2~' Ouan.r-5 Cash Flow from Oneratiom - Eldudinif Denosits Viewing "Cash Flow from Operations, Excluding Deposits" eliminates the major fluctuations. On this adjusted basis, our cash flow in 200(i was a more normalized $2.9 billion. We estimse that our comparable cash flow fir the first half of 2001 will approximate £1.4 biUidn. and our hill year 200! cash flow will exceed the 2000 level and appmximate $3 bullion. Note 1999 cash flow was impacted by a $1 billion iitreasc in Accounts Receivable. C 0 0 or .p.. C '0 S Off-Balance Sheet Transactions * Funding Cost-Effectively Expands Enron's Credit Capacity - Primarily Reflects Whitewirag and Marlin Issuances o Eliminating Related Party Relationship with LJM * Primarily Supported by Asset Values; Secondary Support from Equity-Backed 0 o Commitments C or' 4. 0 r Onn.r.9 Off-Balance Sheet Transactions * Work from slide. 0 0 0 or I-. Contingent Equity Commitments Components Impacting Share Count 2Q01 vs. 2Q00 (Million Shares) Basic: Option Exercises 24 Diluted: Options - Treasury Method Contingent Equity Commitments Other Total (21) 29 (3) 29 Natural Offset with Stock Price Changes 0 0 0 at4 'V.. I-. ?'Quntor-1O Condnfcnt Eauitv Commitments Note: * Potential tbwr~ shares supporting off-balance sheet transactions are reflected as share equivalents in Enron's diluted share count. * Enron maintains the option to cash-settle some of the commihnents. Funding begins in 2003. C 0 C or t'J ~ I-. 1,J Contrasting Business Approaches Example: Providing Reliable Power Supply Source from Dedicated Plant Merchants c#j Aggregate Power from Market Sources Utility Customer Merchant Role Power Market Aggregate Cheapest Power from Numerous, Deep Market Sources - - - nm - - m - m m m Utilities a a 'U W [Build Up] A a - w Enron Retail Custoriter C C a o r-' NJ> NJ b4 .4 H A, S * Plant 0 Contrastinif Business Approaches - (Buifd-lJp Slide) * Enran's whol~sale business is unique. We can apply our scope, scale and access to market information in many ways to pmvwe our customers the most reliable physical delivery at the lowest available cost. Enron is not a amding compa..,. We are a logistics company. We utilize the markets to source she cheapest energy components and rcliabl4 package and deliver enci~r to our ctastomen. * The value of our extensave network can be seen by contrasting alternatives available to utilities, other merchants and Enron in providing reliable power supply. - Utilities Main power from limited "'urces - typically by direct ownership of plants dedicated to serve a specific group of customers. - Other merchant c.mpnies aggregate supplies from market sources within a given region, including from other utilities with excess power or trom otner merchants. - Enren's vast scovej$sgnigsnahlaus to have many more contacts and market sources both within the region as well as in surrounding regions. We can anregatc the cheonest power from numerous deen market sources. 0 C C o C' U' * [Build Up] Enron's Unique Network Alternatives Example: Providing Reliable Power Supply Aggregate Cheapest Power from Numerous, Deep Sources Contract for Capacity; Aggregate Cheapest Gas Supply Build Plant; Aggregate Cheapest Gas Supply Reduce Consumption Influence Demand -- - a a a a a a Enron C 0 a or-. t~3> i-A 0' A Retail Customer * Utility Customer * Plant o Moithant Role * Power Market * Gas Market 2" (4t,..iIIfl-12 Enron's Unique Network Alternatives - (Build-Us Slide) * Enron's broad capability to ageregate power is revealed bere, along with numerous other ways Enron can source reliable, low-cost power. * We also obtain contract access to third plants throu o in reesnents which rovide us the bencflap of ownership without the capital commitment. The advan scale exiend from ower into gas, as wc can aggregate low-cost gas supply to fuel the niant. Saint at to our sourcing power from many broa sources. * In regions with tight capacity, we develop plants, includi s hUng, perndttin and constna& n activities. We may sell these rights to third nartacs urior to completion, or we source low-cost gas supply for an Enron-owned plant. * We can also work direcil with utilities a tat down when it is cheaper to buy power on thc marks than to produce. Similarly, we can customers to shut down (bear operations when the value ot their is wa - roduce. For plants with fuel switching ~iiiRui~weciiinurce alternate fuel sources when chewer than running with natural gas or other fuels. * With ii business, Enron is distinct Wbein able to work directly with retail business customers to reduce energy consumption wi our range a energy inanaRement services. 0 0 C o c-' "4.-c .t.. '-A -4 Enron's Leading Market Position (Bc feld) 20.2 20.1 19.3 19.0 -r 17.7 Duke Mirant Reliant AEP El Pa5o Aquila I 3.8 13.6 U Power U Gas 12.8 BP Dynegy Sempra -1001-- -2Q01- SOLrCV; Cornpau*y Reports. NGI. Natural G~ Week First Quarter 2001 - - ----- ---- 62.3 64.7 0 C 0 or M H Enron -. r 15.9 -r -r v" Ctl.uto, ¶4 Enron's Leadine Market Position - 1001 This slide presents Enron's competitive posidon relative to U.S.-based energy mercharns. * Enron has significantly distanced its market share from other marketers, The volume resalts continue to demonstrate Enron's more than three-fold lead on our nearest group of competitors. * In addition, Enron has a well-diversified encroy husiness. with gas and power contributing about 60% and 40% to volumes. resneetiv4~. No other merchant a r has so successfully penetrated both markets. Similarly, no other peer has so successfully expand mt~3~ j~ en5rgy ci. * We have built a tremendous m2rket fh,nchise that has significant sustainable competitive advnne~ges We coutinue to build our business with 2Q01 volumes increasing relative to 1Q01. (Note: Not all others have reported 2Q volumes.] NOTE: Physical volumes only: Volumes include Europe to the extent publicly reported. Enmnt Lad MailS Poettlon I ________ 2Q01 Ga Power Total Ga Power Total Duke 13.6 6.6 20.2 11.2 13.0 24.2 ReSent ¶0.8 0.5 19.3 3.5 15.5 190 El Paso 13.8 3.9 17.7 Aqulla 10.4 5.5 15.9 BP 12.5 1.3 13.8 Cynegy tO.? 2.9 13.6 Seinpra 10.8 2.0 12.8 Sown: Company Reports, Matinal Gas WaS. Natural sos inteIligence SI- /4 5/9 C C 0 or-, "3.-c to- Transportation & Distribution Natural Gas Transportation and Electric Distribution Wholesale Services Marketing and Delivery of Commodities Worldwide Retail Energy - Energy Services for Commercial and Industrial Customers Broadband Services Bandwidth Intermediation and Content Services C 0 C or '.4 C 0 Oruaminifon Chart * Transportation and Distribution includes our Our gas pipeline network, which operates as Enron Transportation Services, is one of the lii~st most innovative mid cnn eITt~rtive syjienis in North America. Portland General isowt electric utility in the northwest U.S. Our T&D businesses produce strong, ~iHjs and stable cash flows. * Wholesale Services is our largest business. Enron's wholesale business outlook is veiy strong. Our broad scale and extensive scope enables us to vackaee and reliably deliver energy commodities and provide pnce nsk management services at the lowest available cost. Wc4are also vety successfislly extending into new global and industrial markets. * OurRetallEnergybusinessprovides energy services directly to end-use customers in the commercial and light i!!±iE~~iiZWEm1lie only comprehensive nationwide prrnAA.urnf'energy services in North Amerita and are in Euro . We have a strong history of rn..tractinp success, and we are penetrating new mark toven, standardized products. * In our Brndband Services business, we are very well-positioned to play a lead role in the intermediation market for bandwidth. As mentioned, industry conditions are very weak. Our asset-light stratefty allows us to significantly reduce costs to be more in tune with near-term revenue opportunities. Our focus going forward will be in intenirdiation. mid we wilt 4crv cost effectively retain the option value associated with our network and content business. 0 a C or t.3 .' I-. Transportation & Distribution -v Broadband Services * a~ 3jij(LilI' -II *,,.tI * .t~ C t)~~.if4I tiLl' dl Marketing and Deflvety of Commodities Worldwide E a'sonjy Sri vs. for (t,tiIs.t:a ~.s..I a... a 0 C or. t.3 2~ guaflov-15 Wholesale Retal Services Energy Wholesale Services - Orranization Chart * Wholesale Senfres is our lareest business and has been the main driver o(g~pwth for Enron since its inception decades o. We have Ieadinu market positinn' worldwide in the fast prowinsz. dercnuIatinR worldwide enerav iii~ikets7Wc Mite consistently increased profitability regmdless of commodity market conditions. * We have also extended the Wholesale Services hnginess model to other wholesale markets wizb cnormaus growth powntiai, includint cnn? mi..tak fbrest products and steel. * Through ow Wholesale Scrviccs activities, we have established a fmncbisc with stron2. accelerating, rccurnng growth opportunity. a 0 C o r I. I.,, Enron Wholesale Services Marketing and Delivery of Commodities Worldwide North America Energy * Natural Gas * Power 0 C 0 o t-* Europe & Other * Natural Gas * Power * Global Markets * Industulal Markets Global Assets * International Operations r Quarto,- ¶6 -J Enron Wholesale Services - Marketlnr and Deflverv of Commodities Worldwide North America Energy - * Our North America Eat busin.&c ~ mw mr-st advanced network. We have a ofiwer 2 500 nina I Iocalfl1WRi~3riI~awbcrnfficesnkc~c.niazkcxs..Wc are the leading provider of natura across NodE, America. Europe & Other * We have extended our energy model into other mginn~ onA an other commodilies. * dl E is the only Pan European energy company. We have a large, experienced local workforce of over * Other areas of Wholesale Services include our Clobal and In ets activities we arc re licatin * Our Global Assets business is focused on optimizioR operations and maximizing values of our international assets. C C 0 o t-* N)> NJ < High, Long-Term Correlation in Volumes and Profitability Physical Volumes (B Cf eld) El Oth& * Power UGas 12.4 8.1 9.0 1991 1992 1993 1994 1995 1996 1997 1Q98 1999 2000 31%CAGR Income Before interest and Taxest (Millions) 52,252 $1299 $234 $466 $629 TI $935 J 1991 1992 1993 1994 1995 1996 1997 1996 1999 2000 29%CAGR Eadasdsg Products Such at Steel, Moist and Fottbl ProdtnAt not Cog,,crwfle to Odeld 199T.2008 Have fleca Read4ltd m - - - a a a a a a 6.8 4.4 4*~ Mt 0 0 0 or tQ*4 0~ $330 $372 $401 2"Uttsut,.r- 1/ hub. Lone-Tenn Correlation in Volumes and ProfitabilIty - 10-Years Historical Physical volumes am the best indicator of earnings growth for Enron. Physical Volumes Physical volumes have increased at a compounded annual growth rLtt&f~l%~te 1991. * We have steadily errxnlsa henanA n~.tural gas. Power deliveries have increased rapidly (over 140% annually) since our early may into the wholesale vower market in 1995 * Our volume mix has become increasingly well diversified, with power conaibuting significantly to increasing energy delnveracs. WIT *1ncoxxacJ~pfore interest and taxes has also grown substantially, wit a compounded annualarowib rate of (~3~otIhe ten-year neriod. * LBIT is highly correlated with our physical volumes. * We have consistently grown profits regardless of prevailing commodity oncilig environments. 1901 1902 1993 1994 1996 1906 1907 1598 1999 20001 Power I - - - - 0.2 1.6 . 5.3 11.0 101 17.3J 07 08 0.9 1.1 10 16 17 3.6 6.2 611 K Gas 3.7 4,1 5.7 1.0 7.8 9.2 11.0 12.7 15.5 28.3 WA phi Tq~tvPreimeq ~M1~.MX~J !t ~ ~5t' AA$~M N~ -As ~ ~Jt Incmn.ovsrPrtarYw 11% 35% 23% 11% 38% 45% 62% 19% - 60% I. $ 1991 1902 1903 1904 1995 1996 199? ifS 1990 2000 I WI ~sw. an; era 455$ a $ 935$ ties; ~ *1st P j A fl - -- - 33% tneremoverpdorYear 21% 17% 13% 8% 18% 36% 49% 39% 73% C C a or '.3). t~3I< to -I Volume Growth and Strong Margins Drive Profitability Physical Volumes (Sc reid) Average Per Unit IBIT Margin (Cents per Mcfe) * Europe & other * North America 1991 I 1992 i993 12.4 18.0 771 32.4 1994 1995 1996 1997 1998 1999 51.7 2000 15.7 13.7 17A 1991 1992 1993 10.3 9.6 WA r' I ] 1994 1995 1996 1997 2000 1998 1999 CxcIudcs PtoducIt Suds .s Steci, MoIa*s and Foveit Pioduct. not Conv*viIWw to Sd.Id 2" Qu.t,tcr- 18 - - - m ----- - - S - m a a IA K 449 4-4 6.6 4.9 8.1 9.0 C C C o r' I,., Volume Growth and StroDE Marrins Drive Profltabihtv - 10-Years Historical Physical Volumes * Our consistent growth has also been achieved by expanding into new hiph-2rowth markca. * ot%~sncrgy network provides a strong contzibudcn to increased physical volumes. Average per Unit WIT Margin unit * The sron~ correladoa jul85? and physical volumes translates to very consistent per maridns. * We have increased our Average Unit 181? Margin to 11.9 cents per Mote for 2000. t4wlhAnata 3.7 4.1 5.7 7.0 8.0 10.6 15.6 22.5 244 40.5 Ewope a Gibe- &7 08 0.9 1.1 1.0 1.1 24 4.8 6.0 11.2 ToSbyPwdufl 44 4.3 SI 9.0 1Z4 S 23 32.4 51.7 *YflMS ~. ~ 11% 35% 23% Means over Pilot Var 11% 38% 45% 52% 19% 60% UT (S MNUans~ 1991 1992 1993 1994 lOW 1956 1997 1995 1999 2000 WhdlmeaS e@tST $ 234 S 282 5 230 S 372 5 401 1 466 S 629 $ g35 4 fflg Tzzsz 10-tm CAGR 29% Satins. overpvdcrtw 21% 17% 13% 6% 16% 35% 49% 39% 13% PhysicS Volumes (actuAl) J 1991 IBfl 1993 1994 1995 1996 1997 1998 1999 2000 I I ...~ ;~ :z 1997 iss ;sn - - 0 C Or' (a Second Quarter Performance Physical Volumes (BcfeId) o Other * Power * Gas 46-7 m 2Q00 60% 74.8 77 2Q01 Income Before Interest and Taxes (Millions) 2000 $802 2Q01 Average Per Unit IBIT Margin r (Cents per Mcfe) 2000 11.8 2Q01 - - n - fl a C C C o r C 2'~ V u,sItv. -1*3 Second quarter Ferfonnance * These charts depict the combined Wholesale Services 2roup. * We had an ouldtanding quarter. Total physical volumes we ram last year to 74.8 Bcfe/d. Natural us and wwcr ~ % and 109%. respectiveli,, in lR'~nd quarter from a year ago. As we will discuss, EnronOnline ban bin a .ig.UL.sn* nnamr,ka.snp h' an. awr.n.MA 'tnt. * mIT increas~~from a year ago to 5802 million. - CommodiirDies and Services IBIT increased by 81% to 5762 million, once again primm'ily due to si nificantly North America and Eump~. Our North American pow eYbii~iiiiifl~a1hc - IBIT from assets and investments increased by 144% to 5134 million, reflecting a higher level of earnings from merchant investments and related assets. e.~~ay 31 & S,Mm a- - Pont T.SIn OnIodisa ktiuil) TM.! C...ay Sic. & S.n4t Anita A tswa.a far Vaia,c bwsn~Iw Oba fla*8c.-Mctb.at Mtivido A*W - Dc~cIopant A CoownM Ted Amen & I..n.ce UsuIMnI.d E.pu..n rae sq &r Wh~S. hr*lin M.a~. 4CaU w~~N 240 5 36 3 (204) (SI 190 039 29 (64J (93) 435 162 342 (55) IS 27 (55) Ill 40 43) 6) Ii (5) I 6 55 234 79 (60) (94) (34) 4*5 S SC 5 *7 46.730 74 777 28.047 U US 2.0 aSST4SIflm)-2Q IUVSICAL V04.UMES (adaM) .20 ~t C- US. 14.902 #9.806 33 Canada 7,536 S~8 -23 E~spc aM 0~ 3.193 7290 #03 ToM ?ty.&SSdVL 26.031 32.904 595 319 T.id C.. 26$26 3j323 25 - and Liqadi. 5*48 IOU £hctulddl mISS I va V~ rJmalay 4ThaM *419W U-S. 124.089 211.945 725' Ernic.ndUdwt I2,91Z 72.704 4635' 237,003 256.452 1Q95' 0 C 0 or U) -255. 423% -vat: '5% St. 12~. 4r,. -220% 242% 57*~. *31~ ad),- II,' EnronOnline Average Daily Transactions 6.500 6.000 5.500 5,000 4.500 4.000 3.500 3,000 2.500 2.000 1.500 1,000 0 500 a C - on 0.. Nov 1999 Mar 2000 Jul 2000 Dec 2000 July 2001 Is, I'.) r Qmafl,r-20 EnronOnlime - Average Daily Transactions * EnronOnline has been an 5~~jaccel~jortourbusinesses. * Customers have rapidly embraced EnronOnline. The wide range of Droducts and ease of use are attractin2 an increasing number of both existing and new customers. In the second quarter of 2001, an average of 4.000 customers logged onto our ate each week. * EnronOnhine completes more th41i1~Ic r day worth ove(j~7iiiijon ~bonai value daily. New records tar average weekly volumes continued to be set throughout the secohJ~ii~iter. * We have quickly moved to introduce new products online. We offer ov products onI cunentiy. Products include a Mi range of gas and power products in North America iiidETh5jWiid many other products. such as coal, metals, weather protection and bandwidth. * On May 23, 2001, we completed our one-millionth transaction on EnronOnhine C C 0 o C-' 'A (4 EnronOnline Statistics Products 66 Fiil% 12/31)99 1.855 6130101 Delivery Locations 162 Customers 415% 6/30101 12131199 0 0 0 or NO" bi IC C') 3d 376% hn±n.13nmaflnuinauiihln. Sinniffrant ScM. gcpansion 12131199 8130101 r Quafl.r.2j EnramOsliuc Statistics * Through EnronOnline, we offer a broad array of products and delivery locations. * EOL began operation in November 1999. This chart shows the growib in activity levels from year-cud 1999 to the end of this past quarter. - While the number ofeustomers logged onto van tomers gged an to EOL have increased significantly since inception fro to 335 recentl - 8415% mar - Customers continue to utilize EOL to cx~ute transactions quickly, ~ - In tenns of act of&r'ias.J),e have had huge growth in the dept ann onversaty of our pro offered on LOL Again, since rncent'nn the number of oroducts offered on EOL has increased almos tames E nron can bring new products to market more quickly than any other merchant. The success of ouF~?Mi~z offerings is reflected in the dramatic increase in transaction flow and nhvsical volumes delivered to our custonlen - Through our market-making activities, we have driven liquidity and price transparency deener into the Ras and power markets. Since late 1999, we have increased delivery locations by over almost 5 times. As of the ,zr5riL~~FpUaitCr. we were delivering to over 160 locatinuw around the world * EnronOnline has provided Enron with a very important and distinct business expansion platform. C C C or I~. (a 1~ Enron North America The Most Flexible, Reliable and Valuable Energy Network Largest Market-Maker at Every Major Hub Expanding Market Reach, Scalability, Information and Liquidity C Generating Consistent Growth Regardless of Market Conditions t*' Ot.j,tjiKt: - n a a a a - a a - Volume Growth (BcfeId) Ag-A * Power * Natural Gas 24~7 35% -n 2Q00 2001 C C C at-. t~. 0' a - Enron North America * Enron has established ~ networki orth America We have an unparalleled network of physical assets that enable us to deliver natural us md vower anywhere in the U.S. on shaFt notice. We may own Wese assets, or we may contract for ca ci on lId assets. We use our market makinf skills to secure e av c co sties, and we use our extensive nhnnrk to reliably deliver the commodity. Our cxtensivc scope, access to assets, liquidity and large. capable commercial team provides us tremendous * es were up significantly in cv ncan region, total as and pa * Because we actively operate in evesy area of North America, we have enormous information about gas and power supply and demand and related events. We create value with that market information by adjusting our prices and products on a real-time basis. * We are continuing to see relativel hi h as and wer price volatilit . Customers need a reliable Drovider of incrcasin I corn In e we are experiencing a significant increase in demand for uisk management products and services. 0 0 o 7 o r to> tA -J North America Natural Gas Volumes (Bcfld) C C C at- tJ> t.J~ .t. '4 Delivering to Over 2,000 Customers r Qu.nov-23 North America Natural Gas Volumes -Dv Rnion * Enron has a very sarong, well-established, broad-based North American natural gas business. We deliver gas to over 2,000 customers at over 2.200 poihls across North America * Volumes in each zn@ nra increased in the first the an - fiche West volumes m the sccondontcralmostdoubled to 3.9BcVd. This act u response to rote volatility and tieur mann in' r ihmuohout much of the West. The West' in' smallest ion approxamal I 15% of our Mcdli America pa IXUIDOSL quazterof2001 decreascd23 die mid uarrerof2 loS. Bcf/ DuringZOOO L dial our cuslameas used to liv price risk. With the Alliance Pipe inc an pa y connecting Alberta to other markets, our customers began making we use of COL'. financial NYMEX-hke products as a alternative. During 200!. Enron did not offer the Alberta physical product in an effort to focus ma hielier mnamin croducas. Our Canadian region continues its strong contribution to our total North America gas activities. -in narn CCU*UUI [qpon, secOnd quarter volumes increased 11% over a year SaD ,o 72 Bcf/d. Our strone. broad-based presence in there re ion over the last few . lit addition, our alliance widi Pcopla'Gastodcvelopthcchiaaohubhashuuu r idit totheztgjon. - lnthctas(ourvolu region is our I region, conwdsinz 35% of our North America (las business. - Across oil of our regions. tuaroaOnflne contributed to the saroa~ overall increase in volumes during die quarter. Background: North Amerle* J~.?I,2n2~ J~L IYTDZOOt ~ fli) Chg %VTD Wysi I.? £~, 2.0 IS 3.5 3,9 37 IS 95% rluysLcsIGms(kcOd~ 211 210 220 27.8 25.9 268 29 13% 24] Canada 5.7 7.5 66 8.6 5.1' 72 (17) 23% Central 6.3 6.5 64 7.8 72 75 (Li 11% East 7A 7.0 12 7.9 9.0 85 20 29% 0 0 0 or 13> to '4 (4 .0 North America Power Volumes (Million MWh) 7- East 103% ISR Delivering to Mmost 500 Customers "4 2 Ouattef.24 78 0 0 0 at' 0 2000 2001 North America Power Volumes - By Resion * Like our natural gas business, our power network is also very flexible and broad-based in North America. In the first quarter, our volumes were well distributed across North America. * In the western U.S.. we increased power deliveries to 56 million MWh in the second quarter. This increase has been attributable to our exDanded market rjenetration in the West and to our customer's increq,scdintewg in more proactive risk manaaemcnt. In thc second quarter, the western U.S. accounted for approxi mteIy25¶~urtoaaI North American power acta vines. * The majority of our wholesale mnwr hncin-cs ig cnnd..etM in the eattem U.S.. where vnhrnin ipore than doubled to 158 million MWh. Of particular significance is die tremendous growth achieved in a period of lower volatility. Like in our other businesses, EnronOnhine has positioned Enron as a key provider of liquidity to the marketplace offering a broad-range of power-related products. including hnurly pricing Our transaction flow in the East increased from 280/day to over 600fdav. We are seeing that role translated into large volume increases and new profit opportunities. * The total number of transactions in the quarter totaled over 70,000 with almost 500 customers. Background: INorik America I 6000 5 SILt YTDZOOO UGH IOU 1102001 Gop % Oa no fl.g % VT!) CbuI West 30 76 52 56 lOS 10 22% 32 42/ East 73 '73 151 144 158 302 80 103% 1Sf rcJdv P sInIP.w#r MIllion MWh 73 151 144 I 302 80 103% 151 Iww C 0 0 o r tJ,. H Enron North America Generation Activities Product Components o Sites - High Value Optionality, Low Capital Intensity - 2,215 MW p1 Announced Projects o Turbines - Access Enhances Site Values - Proven Competitive Advantage * Capacity - Owned or Contracted Capacity Access - Evaluating Oppottunities in Key Regions Product Offerings 0 Component Sales - Bite and Permits - Turbines o Bundled Products - Sites, Permits and Turbine Packages - Gas and Power Supplies - Utility Off-Take and Toiling Contracts * Piant Sales - Over 2,600 MW Sold Within Threer Years from Inception C 0 C o r 2 O.a'tee-25 Enron North America - Generation. Activities * With the breadth of our network, we have a knowledge advantage that allows us to identify genemlion development opportunhtiCi. * Although often a less visible area of our business, Enron is involved in multiple asnn"t nV1,nwer ~encration. We have broad access to all key components necessary to site, pennit and comtnict low-costs reliable nueration. * Our generation cacabilides are a key pan of our power fianchise, and we have had a good deal of success over the lasi couple of ycazs including She develooment. onesation and subsequent sale of our pcake~ in the southeast as well as the =le nf seve'nl build" geneuadon skin to IPl"a. Power GeneratIon Activities - - . t.. rt iSUcas ---.4 m~d 3~~~*.0 nfl 2 3 5 750. I 2 3 Pmpla'y I zP,.p.ay I * 2 50' S 7 *1 lAGS 2 2 ~ I - I - 2 2 - 2 3 3 - 3 2 2 * 2 - 2 S - 3 3 . 3 2 - 2 3 1 4 * 8 0 1,2,1 3 3 * U 1,215, CM) ("2 tIE) 2.fl8I sue Psasi.. C.h4SS Nfl A~q Sw P.0w. 0~ lacks t.wnv Cent.. OeM or., Lv C..- sag- h4c4a~ WISI. Ph'. Energy C-Mt Aimw*t C.'nA.ihtI Poad.*o.a PM. ~lwgy 81*404*1 QVa 701*4. OeS4 C*gscks mwi uonuou.dtii.cfty 'db.ItS PPfl ~.abm. tn07 701* COS*ICII4 (MW) NW.. Sneak gnu mat isa *00% 475 475 100% 473 473 SOOt 3M 398 100% 144 SW in - 654 108% 500 584 50% ~340 flo (4753 (546? t4M~ (ME? a * Chl.f9y.CIS..* 500, * Cinsigy .CWna *001 390 Nbc - Sal. parting ASqM.nv .Ctfld 20Cm AScoMoy 'Ct... 200* AB.gl.nv . cts.d 2001 lUS .220 550 25% 75% lit 25% *00% 100% 'MS 5. 00 'S. 27 * 19 263 244 .9 IC 71 p SO 24) 04') to 79 (go) 263 I 137 75* 3a4 40 5.117 3.574 (3044) 557 'eLan I 700 11aM Cecil. Was~'g~. a-.- N-... * N.M wwcon- a- No NoiSs C*tO fluid. pin V.a TOTAL 0 a 0 or to> "a a * EPG - do..~ tOOt(C.thc.n.at) *l Stack Miii - SM pi*O~Q Sod (CO4W.e.UMj Early Integral Role of Enron's Peaker Plants in Reliable Delivery Net Economics Decrease Lower Higher Neutral No Change Neutral * Neutral Neutral Increase Higher Lower Neutral Nt dl Power Price Changes: 0 0 0 or 2" Ouart.r.26 Early Jnteersl Role of Eaton's Peakn Plants in Reliable Delivery * Enron has utilized both owned assets and contracts as sources of power supply to satisfy our nower sales commitments. * We arc not a large generator, but we do own nlant&when we expect capacity to be tight in markets where we operate. Typically, if there7 is light capacity, there is little liquidity to enable sourcing power from the market on contract lenin We expedenced this situation throughout the southeast and Midwest in the summers of 1998 and 1999. Enron moved quickly to install peaking power plains. ~ totaling 1,710 megawatts. * Earon's ziants directly sunnort our contracts to sell nowc, ,just as power purchase contracts support our sales. We have utilized the physical pints as hedues. inst as we usc contracts as hedges. In a market with little liquidity, these plants have quite simply been substitutes for purchase contrric. Because the plants have been ~ to our commodity businest the pints' earnings are recognized within our Commodity Sales & Services segment, lust as those related to contracts providing similar supply functions are reflected. * We view the economics of a plant sale as identical to the ecnnomic~t ors pu.rr'hooa rnntnrj~ In both cases, for a given change in power prices, there is an offset to the value of the sales commitment - resulting in a neutral impact on the overall hedged economics. * With the enormous access to liquidity created by the success of EnronOnline. we can support our sales commitments with market-based contracts and free up the capital associated with asset ownership. C C a to,c 'p. U' Enron North America Regional Transmission Organizations Q Recent FERC Order Very Favorable to Power Industry - Movement Towards Formation of Four Large RTO's - Expedites Moving Northeast & Southeast to Single RTO's * Facilitates More Supplies To More Customers * Drives Deeper, More Liquid Power Markets * Provides New Opportunities for Enron - Ability to Leverage Extensive Power Network g - New Demand for Risk Management Products Cr., - Accelerates Retail Market Development tQ4.e 't- 0' 2' Onrt.r-27 Enrem North America - Re2ional Transmission Ornuizations . Work (mm Slide. C 0 C or -4 Enron Europe The Only Major Pan-European Energy Network 0 C C on t'3> t.3 1< a. * Ollices * Energy hcbanges A Energy Pwtn.nhips Third-Pasty Capacity * Leased Gas Storage !9wfff~nh1 In Operation Sale Pendkig Ci Under Dtvelopment MRkISJIISMtINUY * Gas 0 Coal * Power W Metals o Leading Market Position o Extending Enron's Market-Making Model o Early Entry. Scale, Scope and Local Workforce Tremendous Competitive Advantages Volume Growth (Bcfe Id) * Power 21.8 * Natural Gas -- 2Q01~ 2Q01 Physical and financi.ul Settled Volumes Providing 2"' Oua;lct-28 127% --- - - ---- - m a a - a - a a 9.6 a- Emma Ecu-one * We entered the Ewupean market early and quickly to establish the leading enerRv franchise in Eurone. We have relatively few DhvsIcal assets in the U.K. and Enrone. Just as in North America. our market-making activities are a driving fnrre in creating market liquidity and providing utica trsn5qflrencv. * We have seen increased liquidity across all of our European markets. Volumes were up significantly in the second quarter, with aggregate power and gas volumes increasing 127% to 21.8 BCCCM. * Wehaveanuznberofncwopportimities from the recent implementation of NETA (March 27,2001). The new stnzcture plays to our proven strengths by creatin, a true "hi-lateral" nhvsical flown mmket r~lacinp the pool stntcture. In addition, we expect the demand for forwaul pricing and delivery commitments to significantly increase. * As gas and power markets become more liquid and concentrated. Baron is actively participating in the formation of regional trading hubs on the Continent '. We are also vety well-positioned for increased profit mid erowth ouvortunities as the U.K. and Continent gas and power markets continue their vocwefgence. * Enron is the aerry market-nmkcr in Europe. and BoronOnline has been a positive factor in our growth 30% of our European transactions are currently executed on-line. in Europe. Over Background: oIun* teeth 102000 2Q2OflA. flD2000 102001 202001 'VTD200I OCI~t!ga YTD Cl, % flu Chg Physical Gas 2.411. 3.56?. 2.989 8.595 7.273 7.900 ~7~T~I~W 4,991 167% Finsrjai Gas IT '168 88 T3~ 1W 116 0- 0% 28 . 32% Tctal Gas (UBtusId) 2.428 3,728 3,077 8.768 7.432 8.096 3.7W-' ~t. 89% 5,019 . 153% I . I 6A004k11179% 4,809 441% Physical Power 832. 1.340 1.090 3.967 7.609 5.899 FMancial Power 3.719 4.566 4.143 10,448 6.542 8.404 - 1.976 - ~ 4S% 4.341 105% Total Power (BUtusId) 4.551 5.915 5.233 14.415 14,351 14.383 8.436 143% 9,1W 175% - Total Gas & Power (MetuId) 7.O~J tS 23.2~W 22.5 121 12 % 142 171% t Y.A' . rt -~ wer Uflfl(nSIMeflWftJ 41.4 03.6 95.2 129.7 130.6 260.3 * 77 143% 165 173% 0 C 0 or' a a ~0 Europe Power Volumes (Million MWh) Physical and Financial Settled Volume. 0 C 0 or "a> tJ-c g~. Cr 0 jyjaansacting with Almost 200 Customers] r O.5*rtt.3O Nordic 38.3 U.K. Continent 43.6 24.6 12.8 77% 280% ~1 2Q00 2Q01 2Q00 2001 16.5 132% 2000 2001 Enron Global Markets * Enron has extended our successful wholesale model to several large markets for new growth opportunities. * Liquids (Crude and Products), where we are: - Leveraging our expertise in origination, risk management and finance services; - Ofreriug a 24,0 global market-making service; - Accelerating rowth through EnronOnline; and - Transacting with over 400 customers worldwide. * Coal, where we are: ~~** marketer y - Are die largest U.S. and international oVrnnl - Have a significant presence at major links (Major - Powder fl iver B~in.NYMEX,Amsterdam-Roterdam-Antwetp. Columbia, South Africa, Australia, Indonesia. Alto gut tither hubs - China. Russia and Poland); - Offer unique commercial terms; financial and delivery guarantees; - Originate large contracts; - Utilize EnronOnline to increase market share; and - Serve nearly 200 customers. 0 Weather, - The where we are: Offering p Ut43 VVUAUA5 UULIfl. r world fr. //ks or KY. largest weather market maker in die world; and - acvcioned * LNG, where we are: - Creating a global nctwodc of LNG capabilities; - Leveraging our existing LNO h6ldinn~ and - Positioning Litton to capture potential transatlantic aititrage opportunities. Enron Global Sadists I 102000 - 202000 '~ YTD2000 102001 t202001 YTO200I ..0.C *vt %C .4 nD Chg % no Chg LigWds(MMBBL) 100 ~ ;... 95. 195 112 :. . 185. 277 j. 4 82 42% Con? (Thowand Metric Tons) I 8072 9.229 17.301 20.884 22,174. 43,658 ¶ 13.545 147w 26,357 152% Weather{NoIianaiVakieSMM) 325 t 23' 348 290 j 185. 475 162 7041(~ 127 38% ItO (BOtue) - ,, -. .~ - 2.812 tt.6.9784 8.790 r 6,976 8,790 Enron Industrial Markets Metals (Thousand Tonnos) 1.775 959 2Q00 '5% 2Q01 A Forest Products (Thousand Metric Tonnes) 584 4.392% 13 p 2000 2Q0f' t steel (Thousand Metric Tonnes) 99 0 2000 2Q01 C a 0 or' ci, 2"~ Quarter-fl Income Before Interest and Taxes * Second Ouaner 1131T jn~reageut In tSl milt~tmn, and we remain on target to achieve $225 million in IBIT for the year. * Since we began the retail business in 1997, we have transitioned on schedule from planned npsrating Int~cc in the start-up phase of our business to significant earnings growth. * Today, we have consistently grown revenues through very saccessibi contracting activities. We have also experienced the benefit of very strong onemijirn levera2e. The combined impact is reflected in very strong earnings growth. Background: Mflhhnuwr ScIon Ratalenvet Resisted (119) S (82) 1998 (107) 5 (86 iarr~ 1999 $ (68) JS (50 2000 $ 103 S itt OWE S 225 225 SIT %MIttbons~ Scion Restuleant Resisted QIOC S 16 5 6 QZOO S 24 S 46 Q300 S 30 5 27 Q400 3 33 S 32 Q)0I $ 40 S 40 QZOK S 60 360 Rtcuning 0 0 0 o r t'., '< 'p EN RON ENERGY SERVICES EarnInns (MM) 24)3 2001 Revenues 5 421 £ 557 Cog S 295 £ 327 GrowMargin 5 (26 S 230 GM ama%of Revenue 29.9% 41W. Expenses QncI. DcprccI8thon) £ (Ph) 3 (179 Other $ II $ 9 (SIT S 46 3 60 p. Total Contract Value (Billions) a a C or U. Reflects Customers Energy Expenditures Over Contract Life a" aurnt.r-25 Business Iliulilights Enron Energy Services is the lending provider of energy services to end-use customers in the commercial and light industrial markets. We are the largest manager a energy assets in the world, and we oflbr customers expert commodity risk management Enron remains the sole nationwide Drovider of these energy services in the U.S., while our domestic competitors are more regional in nature. * Product awareness is at an all time high and getting hipher. The ftxndaznental market has changed. Our customers are experiencing volatility in their energy costs, and they are under budget pressure to contain these cods. This environment has further enhanced opportunities, as we are uniquely suited to help customers manage risks associated with increasingly volatile energy prices and energy usage. * We are continuing to expand by penetrating new markets. We haveexpanded ~eonphicallv. as reflected by our veiy successfiul Ut activities. We have penetrated our markets more deeply by going further downstream into a given customer segment. We have rolled out proven, standardized products, which are enabling us to deliver more products in more markets and shorten our sales cycles. * We are achieving significant scale in our operations and in our product offerings. We have a highly developed network for both orinination and delivering energy management services, and we have built extensiVe execution capabilities. * As you have seen from die results, our profitability is acceleratint We are significantly growing our customer base. At the same time, we are concentrating on leveraging our cost structure that is already in place. The W~7Aiing earnings power of this business will be tremend7n't 0 0 0 or IC f-p Is' Core Functions Enron Energy Services o Contract Origination - Marketing/Sales - Product Development - UpsefllPortfolio Management o Customer Services - Customer Relationship Management - Energy Information Services - Demand Side Management - Commodity and Risk Management urn,.. ,.~ J5~IJ4f ~ vtljafl 'r-~ -~ ~ ~ ~ 0 0 0 or4 t'3> C' ,' r ~~EiitO9u5;DiStiflCt,CSP8bilitiOScCPtTIbifleJSkvj? ~.4j4, 2rora Compelling Value Proposition, ~ ~ r au~tar*h7 Eurone Natural Gas Volumes * Our natural gas volumes in our European business increased significantly during the second quarter 2001 to 7,432 MMcI7d, representing a 99% increase over the prior year. '4 * In the U.K.. Enron is the la9est gas marketer in the region. Even though the'U.K. markets are the most mature in Europe, Enron's volumes increased 85% compared with the second quarter of 2000 to 6,090 MMcU/d. * Gas volumes on the Continent a- aloe- rapidly inrrnainE udt~i a 205% increase over the prior year to 1342 MMcfLd We expect this growth to continue as the market continues to develop following the implementation of the Continental Gas Directive, which was effective in August 2Qui~. * We are nusacting with over 100 customers with our Eumpean gas networks. Background; Enron Europe (MM IdI 02000 202 fl02000 102001 202001 flO '-. TWO Fig % ¶70 Chg Physical Gas 2. 49 3,127 2.638 .257, 5.931 5. f .. .' 901k 3,952 150% FlnanclalGas 11 159 88 73~ 169 116 07" 26 32% UK Gas 2.1661 3,286j 2.726 7.330I±~j 8.706 I 2,804 85%] 3,900 146% * C.',- .... Physical Gas 262. 440 351 1*438~ . 1,342 1,390 C 902, /205?$ 3,039 298% FinancialGas Ot 0 0 0 0 rA'~k0%.Ya" 4 a Continent Gas 2621 440 351 1.438LJa5fl 1,390 r 90W~2U~%J 1,039 298% Total Europe Gas Volumes (UMcUd) 2,42 3.7 3.077 8.768 7,432 8.098 r--.-a.7~e: . 5.019 163% Note: - Europe volumes include financial volumes, given market structure and similarity to U.S. physical volumes. a C C at-. ta' .4 U, -J turope rower VO......S (Million MWh) Physical and Financial Settled Volumes 0 a 0 or cn w ~dtI' CII Reflects Customers Energy Expenditures Over i.ontract Lite Transacting with Almost 200 Customers r' Ou.rl.r.30 II ?' Quarter- 35 U.K. 24.6 2Q00 43.6 ~~1 2001 Continent Nordic 491 38.3 16.5 12.8 280% 132% 2000 2Q01 2Q00 2Q01 77% Retail Enemy - Organization Chart * Dave Delainey became Chairman and CEO of liES this past February. Dave is extremely well prepared for this new role, and we look forward to investors getting to know him. Seven years ago, Dave joined Enron Canada. where he led the growth of our Canadian buidnric, then led all of our North American origination activity and most recently ran our entire North America wholesale business. 0 C C o F1 $3). $3 IC tO Income Before Interest and Taxes 346 2Q00 Quarterly $60 2Q01 (Millions) -r ($33) 2Q99 5225 2001E - -r ($50) Sill 2000 0 a a o C' to)' to,< C 1999 Annual W'~ Quaint-Sd EuroDe Power Volumes * We had f,~n,cndous nowth in our overall Eurct,ean vower aclivilies. with 131 million MWhs delivered in the gunner, an increase of over 140% from a year ago. Evolution of the European power maskei continues with the introduction of the Continental Power Directive (February I 509) and NETA (March 27,2001). * In the U.K.. we achieved a 77% increase in power volumes for the quarter to 43.6 million MWh. We are well-nositioned to benefit fran the recent implemenwion ofNETA which pmvide& Rnron with additional oooortnnitiec. 54% of our power voiwucs were physical during the second quarter 2001 as compared to 3% in the odor rear. in Feb of 1999. We expenenced almost ~ volumes in the second quarter o ma son is establishing power-marketina hubs across Europe, and liquidity is increasing. * Enron is the largest power matet-uter in the Noadic Power am. and we saw increasing transaction flow duringJiaacconsLrnm~ter of 2001 in spate of recent low volatility. Huron is ideally nositioned for increased volatiliw. Nordic volumes rosc¶lo38.3rnir~o1) MWhs, an increase of 132% over the second quarter of 2000. Background: Enrun Europe (Million MWh~ 2g2000 2000 001 202fl01 VIE) . . VIE) Cli V. no dig PhysicalPower 2.6 Ii, 35 1.2 23. 24.9 p23.2853 22 632% Financial Power 21,2 23.8 - 45.0 58.8 19.9 78.7 .1-4 - -IOIC 34 75% USC Power 23,8 j 24.61 48.4 80.0 I 43.6 I 103.6 - *fl%~ 55 114% PhysicalPower 4.5- 15.7 34.1 47.1 81.2 ~. t324%' 60 417% Flnnncialpanw 0.8 1.7' 2.3 0.8 tO 2.4 '''-O%~ I) 4 Coallnnt Power 5.2 F ~iZD] IRO 34.9 83.6 ~ ~' 38' 280% .66 384% I. 0.7 * r~ 0.. -28% 0 -13% Physical Power 05 . Os o.e ~~ 0 Financial Power 121 16.1 28.2 34~4 LU 38.0 725 22 136¶C 44 157% Nordic Power 12.5 16.51 29.0 34.8 I 38.31 73.1 r 22 132% 44 152% Total Power Volumes (Million MWhJ 41.5 53.9 j 954 129.1 I 130.6 I 260.3 77 142%' 165 113% a a a o t-' I., ~< Enron Global Markets Liquids (MM Ba) 95 165 14% -, 2Q00 2Q01 Coal (Thousand Metdc Tonnes) 4 22-774 9.229 147% r 2Q01 ~~1 Weather (Notional Value 5MM) 22 704% -1 iQOO 2Q01 LNG (Bfltue) 0 2Q00 5.97 8 2Q01 IRE 0 C C or C'. K) ~1 T' Qoaflwr.31 Enron Industrial Markets * Enwn has also extended its Network business model to industries with very traditional sales channels and little price transparency. * Metals. i.hcrc we eat: - A leading provider of mershant enern and financial services: - Leveraging EnronOaline's capability, with more than 30% of transactions executed online for the first quarter and - Transacting with over 900 custoincs3. * Forest Products, where we ate: - Creating world class logistics. operating and macmI services capabilities' - Creating physical liquidity at key market hubs: and - Levemgingouracccssofvhysical newsorint cagability (Garden State- 2100,000 tones/n; Quebec City Mill - 515,000 toneslycar). * Steel, where we an: - Establishinu a podtinn ~t ~ tnAng nnrt.t* r~"r in the steel industry: - Initially rolling out business in the U.S with plans to build a European capability; and - Creating physical and financial liquidity at market hubs: developing world-class logistics; providing operational and financial servwnc: - Initial industry reception is very encouraging. lEmon Indu*IaI Mm*ets I 192000 292000 YTD2000 1Q2001 202001 YTDZOOI 0. Chug % Chug flU Chg % YTD ChugI ~Metals (Thousand Tons) 835 1.794 2,345 1.775 4.120 816 85% 2.325 130%I - Forest Products (Thousand Metric Tons) 16 13- 29 339,~ 584 923 P1 4392% 894 Istoel (Thousand Metric Tons) I - . - 132' 99 231 99 231 C C C o r' a' La Transportation & Di~tribution 1 -~ I *:.~*) *~ I IA Wholesale Services Nj :11 I(fl tifltj d(tC~ I JC~ IVC (9 of (;ot . sei;odilius Woe klwidc Broadband Services Energy Services for Commercial and Industrial Customers C C C Cc-. rJ> a' Retail Energy r4 oomnw43 Core Functions * EES provides all facets of coruract origination and customer services. * Our markeIin~ and sales tennis trnvet etL~tnm.g and ntn' energy cpfltrgrtt We understand the market and have develoned oroducts with rapid acceptance. In addition to standardHng our products, we have standardized our crocuses- credit Ie8nI f.npnns pie - to quickly and cost effectively expand our business. We continue to actively manqe our contracts thmu~hout their life to maximize the value of imbedded options in the contracts and to capture upset I opportunities to expand the services provided. * BES nrovidn sIP n,nnnw tpndcr nnd relationthir msuisoem~11t We service all aspects of billing and client management. The delivery and execution of our demand side management and load curtailment products are also an integral part of LES. * BES is leveraging Enron's wholesale excertise mm ml'. rMo~ i~~Irekt. Our internal coordination enables EES to offer differentiated commodity products, maximizes Enron's cow competencics and eliminates redundancy. * Enron's distinct capabilities combine for a compelling customer value proposition. 0 C 0 or $3> $3 0' '4, Dimensions of Scale 0 Leveraging Enron's Commodity Capabilities 0 Achieving Significant Operating Scale 0 Standardizing Products; Reducing Sales Cycle 2 Gm,;.. It,,. in - m m - ---- m - m - m - a a a * Enirni Offices A IIVAC Service 0 FicUlty Management & lntiaIiallon U Energy System Design C) Customnet Silts 0 0 C o C-. a' 0' Dimensions of Scale * We have established scale in most of the major niciropolitan areas in North America and the U.K. We sea our competitive position continubig to strengthen. * By offering more comDellino. srnntfrrrlized products on ~a brofader scale and moving down market and nenetrating broad scaleable markets, BES will rapidly and quickly build on the existing, established business. Dackgrouud~ Avcnges lOOsq. £pd'111r as USA El'S 118 UK T,IAP* I Fewer Total iWo Use w/Llue Total £0 I Iincludhw bundled deals } Number of Cuslonun 16,650 1,025 17.675 1,000 20,000 21,000 168.045 No of MelerslSites 29.658 21,177 $1,435 14,564 34,000 48,564 180.000 79.999 Note: The key difference from number of sites previously disclosed is the Enron Direct Excluding Canada and bundled deals in Europe 0 0 0 or C, -.4- U.K. of 180,000. Fadlides Under Sq.Pt. Under Value of Asseb Contract Contract Controlled 1Q98 31,300 300MM 3999 16,600 I Billion $4 Bhllioh 2000 28.800 2.8 Billion £8.5 Billion QI 01 3 3.3 Billion £9 Juan 201 3,700 dIjon * $9 Billion Customer Segments Large National and Multi- National Companies with Multiple Facilities Comprehensive. Packaged Energy and Facuhtin Management Me4 Harrati~ $10 - 30 Million Annual Energy Spend National and Regional Companies with Numerous Facilities Gas, Power and Energy Management Services r~EwOffie JcPenney A KS I [HI AVE NU I Single-to-Multiple Site Businesses Standardized Gas and Power Services Ir Enron Direct USA Canada UK >$30 Million Annual Energy Spend <$10 Million Annual Energy Spend C C C or 0 V' C.wi,r-39 a Customer Se~inents internally, we think of our target customers in three major segments: * Greater (luau 530 anton In total annual energy ~~end iund inc thin WOO sitn These are large companies with facilities across North America and Europe that require highly packaged and comprehensive anreements and service. (Potential numoer or customers: <400) Examples of enemy mananement agreements signed in this segment durinp the first half of 2001 are: Eli Lilly, Owcns-lllinois, llarmh's and Quaker Oats. * Total annual euerrv satEd between 530 and $30 million. and inert than 1110 sites. This is much more of a component-based transaction with lower customization. (Potential rnamber of customers: I .OOOs) Examples of contracts sinned during the first six inonth~ of this year are: Equity Office, Home Depot, JC Penney. and Saks, Incorporated. * less than SIB millioa of total annual enerm' spend. This segment is a component-based transaction with high standardization. (Potential number of customer: I 0~00OA - Enron Direct in the U.K. has over 140,000 customers. We had great success in the U.S. during the most recent quarter with this customer base, including approximately 2,000 new agreements for energy services. We launched Enron Direct in Canada during the most recent quarter as well. Background: 0 0 0 o r' C' ,0 TCV- YIP SEGMENT 6/.10*1 Energy Outsourcing $3.8 million Energy Porfolio Mgmnt $3.8 million Energy Direct (including U.K.) S. million $13.1 million Transportation & Distribution Broadband Services * I * I t.~I *Ii'g lilt I IAai ke,:iiiiq *iiati r)t:It~(t, V tA CUh,IahiotIIt 112 S WnrldwIuc! LTIICftIY b. I Istdti~.cir..4 (,:i .~ is. Bandwidth Intennediatian and Content Services 2' Ouartov.40 'ttS~~s~ Who I e safe Services Retail Energy C C 0 -3 0 j Enron Broadband Services - Orranizatlon Chart * The broadband industry is undergoing major "upheaval". I will address overall industry conditions, and also show indicators of our relatively strong perfonnance. 0 0 0 or- to-c -3 I- Broadband Market Overview A I * Severe Imbalance of Supply and Demand for Bandwidth; Extreme Commodity Price Pressures * Deteriorated Creditworthiness of Major Industry Counterparties * Enormous Slowdown in Industry-Wide Commercial Activities O Long-Term Opportunities for Innovation C C C t~Jbc -1 tO Z Quartnr.41 Broadband Market Overview * There have been dramatic industry changes in communications and bmadband. * Severe supply and demand imbalances, combined with the deteriorating creditworthiness of availabic counterparties (particularly wholesale carriers and CLEC's), have significantly reduced revenue opportunities in the marketplace. * There has been a significant drop-off in the commercial activities across the broadband market. * Our natural customers are in acute distress and some level of industry recovery is necessary to propel the busincss. We continue to believe there are attractive longer-term opportunities to build a very profitable business with Enron's market-based intermediation model and bundled product capabilities. Background: Decline in Market Capitalization (in millions) Current % Change % Change Company 12/99 12/04) 7/23/03 lZIflSoCar I2/OOtoCur Level 3 ~ 3.840 A~L~«=I. Global Crussirig 3 855 12.656 7,020 jfl~, (45%) Qwcst 37.645 68.351 47.794 +27% AT&T Corp. 126.134 50,372 68,49? +36% WorldCom 144,987 39,032 4O.6O91!~MXli +4% Akamal 30,305 2,279 0 0 0 o r -4 (a Enron's Broadband Focus Network B Maintain Functionality to Support Highly Focused Commercial Activities Intermediation * Make Liquid, Transparent Markets for Broadband-Related Products o Provide Reliable Delivery at Predictable Prices Content Services * Provide Bundled Services to Large-Scale Users on Usage-Based Terms Objective: Cost Effectively Maximize Option Value C C 0 or -3 r' Cu.nec-42 Enron's Broadband Focus * In short order* our Enron Broadband will be properly sized for the current environment. The Ibree major components of our business (uetwork, intennediation and content services) are unchanged, but we arc highly focused on our near-term network needs and transactions with associated current gross margin. * Network-Ourcxisting broadband platform continues to provide us with a low-cost, flexible network. Our network is a key differentiation from other entrants into bandwidth intenuediation. We plan to maintain the tiinctionali nec deliver our existin commitments and su ri our hi hi focused commercial activities w cli is demonstrated by limited headcotmrreduction in this area (from 208 to 196 employees). * lutermedistion - We will continue to makcarmrlcets.fnr b~indwidrh prnAnrt~ (circuits. storage and IP) as well as originate bundled services. The market values our reliable delivery and firm once commitments. We continue a strong resource conunzzinent in this business. Our intezmediation commercial team has been impacted the least by our recent initiatives with a reduction of 13%. (Note: Origination commercial team has been reduced by 50%). * Content Services - We have funkier focused our content hu.cine~cc to tlw hsrge players who can have a major impact on die Entenninment-on-flemand market. We have a few (12 employees), very effective commercial employees pursuing a low-cost, high impact approach to the business. * During this period of indushy tuimoil, we have a focus that enables us to actively pursue intermediation opportunities and maximize the option value relaicd to the network and content services. C a 0 o t*1 .3,,. .3. -4 U' Enron Intelligent Network p a Pooling Points Complete C Controtted Capacity ~ Operatbons Center o Low Cost, Interconnected, Scalable Global Network o $1.2 Billion Total Investment Expected at Year-End 2001 o Network Layers Include Dark Fiber, Lit Capacity and PDoIing Points 2'' O~,.,s Ira .1; - - - m - - m - m - a a - a - a a a a ) Tokyo Sat. Inn Sn, Jonj 0 0 0 or- 6)> -J a, Inron Intellirent Network * Enmns network strategy has not bech about owning fiber. Our objective has been to attain extensive reach. This approach has resulted in a low cost, inteteonnetted and salable global network. * WsIa..ks~amiaflysamnjgz~djmrncjwmL We expect to have a ted b ear-end 2001 ncludin ~ ~iII~n ca its tis .This level of investment isa fraction of ihat made by ua iliona * Like in our Wholesale business, we expect our network to continue to evolve as die market evolves. Our network has sevenu! layers. including dark fiber, lit capacity and cur poohag voints. We will seek to optimize each of these components as opporlunhlics present thcmselvct Notes: * Fooling points - We cuwencly operate pooling points in 25 cities through which 63 unique counterpaflies are connected, rij~ from 36 coun(espartics during I TMquarter. * Broadband OperaWing System. Enables Eaton and our customers La provision capacity on the network. Also integrates our mid and back office fiJDCtIOIiS. Posit PSuts Total Today TSaR LipSind (3(3142) .5. Pooling Pours (IS wuquc cities) 2? - Pooling Rt Stw~ed (rowe silts) 4,433 Asia Pooling Pit Total PooSog Pu. In addition. Eiron accesses 30 customer sii~ (I) Represat pacesnge lit ofe*isaingdclivcai ncrwo& (8,299). onnteqraflfrs Connected to Pooling INs. hd via Metro Loop Fiber Sal Connections M-wwity NS& & criers a a C or Sb. -3 --3 o Circuits * IF, Storage and Other 23 0 C 0 o r' Es> Es-C -J 0, Intermediation Transactions 2000 o MarketerslResellers o Traditional Industry 759 Transaction Mix 11% 4¾ '7 21% 1~ / 5% 63% * Carriers * Network Service Providers o Enterprises * MarketerslResellers * Media and Other Typically Opt for Financial Settlements Participants Demand Enron's Reliable Physical Delivery m rn - -- -----rn-rn- rn ---- 2Q01 Customers 45 New 165 Total IntermedIation * We have led develornneni of intcrmediaaion in the industry We have attnc:ed new customers who have found Earan's flexible tam structures to be quite valua~. Capacity holders have realized the vs taco on s mar ct-ma ing ca abcs our ability to pvovidc them with incremental revenue sotaces. * We have seen a ramP~U? in transaction activity for all products. We corn let 759 trausactlens in the s ad uarter u 3 from the fast quader. Cutuit flnsactions remain strong, and we re seeing iou products. * We transact with a knead mnue of customers. including cricaz network services oroviden. enterprises, marketers and media In the second quafla. caniczs and network service providen accounted for lust underAlzM, at our tnnsact 'ens, whale marketers and rcsdka (ptintarily ncnhanl energy canals) accounted for die remaining 6O+%. These levels compare to a quarter spii of 50/50 between tzadtuoaal mdsny players and marketers, reflecting the peneral retreat oftwditional industry varticipar~tt fi.~a 4k. .n.vl.e¶ia.. ott I.. - h~ other marketers to create liquidity in rite busaMss. in me second quai~er, we added 45 eoaantcrparties for a total cr165 customers. * WewiflnnactcnafeciaIbosisw~thothermazkctcrsto I kilt . Becauseofour network, wa a pro o for canieas, iSPa and enterprises mthe mattel recovers, as they generally seek the (Note: All den includes network services, adveflzsing and DRAM ad aciudes ider.compwiy activity.] 1St TB Ta Idoratlou Traussctlos 0.tuIl lift 1 win ADA VtlOOO j~j lOot VTD 7 1Q01 TB Delivered 43,400 Circuits 6 3 22 59 223 307 515 M7 1162 1475 lQOITBDctivcred 98478 II' 2 0 0 0 1 7 18 41 59 624 YTDTBDcIivered 141,878 Storage 0 0 0 0 4 4 9 14 23 27 olloc.iion 14 14 14 1001 DdlvcryCommttmemts 369,9W Porn II II II loOt Ddlvny Target 370000 Sabtetal 8 1 22 59 234 III 542 727 1269 5595 %oIlWITsrget 54% Othet I 0 I 0 2 3 39 32 Il 75 - - -- - - a Tots) 9 3 23 39 236 325 521 759 1340 16741 LTDTB Delivered 214,253 ?uin,sdlyadvenising a Cust*ut& R~mp-I19 12ff 1Q22 299! - 4Qft loot NewCustomers 5 2 7 9 27 70 45 I Tots? Customer 5 7 14 23 30 120 165 cad ZOO! C.sI.er Brcak..4 % *flrtat*tliflg U CPa % olTotal 1Q01 1001 VTDZOOI Sian In, (Lot airier! 69 42% 40% 21% 29% 31% Markeierslkescttcrs 9 5% 49% 61% 5716 16% 40 4% 1% 1% 1% 1% Nci'nrk Service Providers 48 29% 6% 28% 9% 1% Media and Oll,c, 29 18% 3% 5% 4% 4% Total 165 100% 100% 800% 5*0% 1110% C 0 C or. t'3> -3 '0 Enron and MSN msnV o Enron Provides Broadband On-Demand for MSN with Usage-Based Terms o Multi-Year Contract * Combines Enron's Intermediation Expertise and Network Capabilities for Valuable Enterprise Service 0 C 0 or 4- w 0 r QuMtor-45 Enron and MSN * We have a long-temi contract to provide broadband services to MSN. Details of the opportunity have not yet been released, but it is an exciting opportunity for Eaton. With S million customers, MSN is the 2"~ largest - provider of Internet access in the U.S. * In the multi-war senncr cnnhw4 Eg~~ is combining our intennnliatinn evpertke and nur network capabilities ~j~yjdcMSN~yj~h bandwidth on-demand. Our service enables lASH to dynamically provision and pay for bandwidth, as they need it. * We wilt provide morn infonnazion alOnE with MSN at a later date and Enron will demonstrate the financial impact of the new contract as the service is implemented. C a a o t-. t4> I-a Conclusion d * Attentive to Investor Concerns; Some Matters May Be Noisy But All are Well Managed * Well-Positioned Balance Sheet; Expanding Cash Flows * Record First Half Earnings, Volume and Contracting Results Demonstrate Enron 's Very Strong Business Fundamentals * Recent Broadband Initiative Lowers Costs While Retaining Valuable Option on Future Opportunities * Firmly On Track For Continued Strong Earnings Growth rO> .p. to 2 Qvart,r.46 b ~USiOfl Work from Slide. 0 0 0 or g~3> S a' r~ apart.'-A? C 0 C t.3t4 w C C 0 o t-. to)' U, STATISTICS SELECTED FIWCIAI. bATh ECo*aM bbtSwbe is a I 1s10r IMOlf 2'dOu *Ut tW IVOIl IMOII INt ao~ T.u IttOt, ZodOt, Tot b~a.. 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