Oboe'.. ow Os' Finance Committee Meeting October 8, 2001 I Committee Members Mr. Herbert S. Winokur, Jr., Chairman Mr. Robert A. BeIftr Mr. Norman P. Blake, Jr. Mr. Ronnie C. Chan Mr. Paulo V. Penax Pereira Mr. Frank Savage EC4U4Mom71 I CONFIDENTIAL I :xH064-00002 EndIin pmsibIIWe.'~ EXHIBIT 4614 CmnNo If 04.0025 I: 6 C 4 EC4049A0638186 EXHOG4-00003 Herbert S. Winokur, Jr., Chairman Robert A. Belfer Norman P. Blake, Jr. Ronnie C. Chan Paulo V. Ferraz Pereira Frank Savage AGENDA Meeting of the Finance Committee of the Board of Directors of Enron Corp. 4:00 p.m. (CDT), October 8, 2001 50k" Floor Boardroom, Enron Building Houston, Texas I Approval of August 13, 2001 Finance Committee Minutes Chief Financial Officer Report / rreasurer Report 4. Chief Risk Officer Report Quarterly Risk Update - Audit & Compliance and Finance Committee Roles - Trade Credit Update - Market Risk Update - Post Transaction Reviews 5. Projects and Amendments A) Revision to the Risk Management Policy - Approve for Recommendation to the Board B) Pi~oject Southwood - Approve for Recommendation to the Board Mr. Winokur Mr. Fastow Mr. Glisan Mr. Buy Mr. Buy 6. Other Business 7. Adjourn 9,. 0#b See Addendum for Deal Approval Sheets approved between Board meetings ECASGM0lU FYHfl~A-flflflOA Page 1-1 2-1 3-1 4-1 4-2 4-4 4-15 4-26 5-1 5A-1 Mr McMahon 58-1 6-1 7-1 E 4- U 1' a a 4 EC46ug~~ EXHOS4-00005 1 1 -. 1 Enron Corp. Finance Committee Minutes from August 13, 2001 meeting EC4g4g~~~ EXHOO4-OOOOG DRAFT EXHOS4-00007 MINUTES MEETING OF THE FINANCE COMMITTEE OF THE BOARD OF DIRECTORS ENRON CORP. AUGUST 13, 2001 Minutes of a meeting of the Finance Committee ("Committee") of the Board of Directors of Enron Corp. ("Company"), noticed to begin at 5:00 p.m. C.D.T., but actually begun at 5:50 p.m., C.D.T., at the Enron Building in Houston, Texas. All of the Committee members were present as follows: Mr. Herbert S. Winokur, Jr., Chairman Mr. Robert A. Belfer Mr. Norman P. Blake, Jr. Mr. Ronnie C. Chan Mr. Paulo V. Ferraz Pereira Mr. Frank Savage Directors John H. Duncan and Kenneth L. Lay, Messrs. William S. Bradford, Richard B. Buy, Richard A. Causey, Timothy A. DeSpain, Andrew S. Fastow, Ben F. Glisan, Jr., David G. Gorte, Mark E. Koenig, and Theodore R. Murphy, and Ms. Rebecca C. Carter, all of the Company or affiliates thereof, also attended the meeting. Director Jeffrey K. Skilling and Mr. Richard N. Foster, of McKinsey & Company, mc, joined the meeting in progress as noted below. The Chairman, Mr. Winokur, presided at the meeting, and the Secretary, Ms. Ceder, recorded the proceedings. Mr. Winokur called the meeting to order, noted that a draft of the minutes of the meeting of the Committee held on April 30, 2001 had been distributed to the Committee members, and called for any corrections or additions. There being none, upon motion duly made by Mr. Savage, seconded by Mr. Chan, and carried, the minutes of the meeting of the Committee held on April 30, 2001 were approved as distributed. Mr. Winokur called upon Mr. Fastow to present the Chief Financial Officer's report, a copy of which is filed with the records of the meeting. EC4894W0W1' Mr. Fastow discussed total return swaps that had been completed in June and July and noted that the ending balance shown in the presentation materials did not reflect recent activity, which had led to an ending balance of zero. He also reviewed recent treasury stock purchase activity. He then presented a chart depicting the Company's interest rate exposure in different areas and noted the dollar amounts at fixed and at floating interest rates. He stated that the chart now reflected all elements of the balance sheet, and while the overall amount had increased, the fixed- floating ratio remained fairly constant. He then discussed other asset monetizations. Mr. Fastow then noted that the Company was diversifying its funding sources and compared the percentage of funding the Company had received from banks, U.S. capital markets, and non-U.S. capital markets over the last three and one-half years. He then commented on the Company's liquidity and net margin activity. Messrs. Foster and Skilling joined the meeting. Mr. Fastow then presented a summary of the status of asset dispositions. He stated that the new accounting rules relating to goodwill could impact the Company's debt to total capital ratio and commented that the Company would be closely monitoring the sale of assets and the impact on the ratio. Mr. Winokur called upon Mr. Glisan to present the Treasurer Report, a copy of which is filed with the records of the meeting. Mr. Glisan reviewed the Company's active letters of credit and discussed the changes since year end. He presented the Company's guarantee portfolio as of June 30, 2001 ahd noted that guarantees continued to increase due to the significant increase in activity by the Wholesale group. He then presented the liquidity forecast and commented on the sources and uses of funds. He reviewed the Company's key financial ratios and noted that the Company was on target to meet the year end goals. He then discussed the Company's ratings by the rating agencies and provided comments on the views of each of the agencies. Mr. Winokur called upon Mr. Buy to present the Chief Risk Officer's report, a copy of which is filed with the records of the meeting. Mr. Buy stated that he would only be reviewing the overall portfolio summary and that he would be avaijable to answer any questions on the other material provided in the report. He stated that the Risk Assessment and Control group had expanded the portfolio summary to include additional EC45949M930791 EXHO64-OOOO8 international assets. He then reviewed the assets in each of the four performance categories, comprised of exceeding expectations, meeting expectations, below expectations, and troubled. Mr. Skilling joined him in answering questions from the Board regarding the assets in the troubled category. Mr. Winokur called upon Mr. Glisan to discuss a proposed resolution relating to brokerage account authorizations. Mr. Glisan discussed the proposed resolution and following a discussion, upon motion duly made by Mr. Savage, seconded by Mr. Ferraz Pereira, and carried, the proposed resolution relating to brokerage account authorizations, as presented at the meeting, was approved for recommendation to the Board. There being no further business to come before the Committee, the meeting was adjourned at 6:20 p.m. C.D.T. Secretary APPROVED: Chairman K:',s Minutes',2001 Minutes\OBI$O1F.doc EC46949A9030192 EXHOG4-OOOO9 N I '1 "S £ C 4 *15 EC4694uJ7u EXH0S4-0001 0 Enron Corp. Chief Financial Officer Report October 8, 2001 EC4680M038794 EXHOO4-COO1 1 2-1 Finance Issues * Enron Stock Activity * Interest Rate Exposure * Liquidity - Margin Activity * Finance Related Asset Sales * Outstanding Financings and Debt * Summary Asset Dispositions * Restructurings 2-2 EC4a49MLW?n EXHO64-00012 Enron Stock Activity Stock Trading Activity - MTM Description Opening Balance Total Return Swaps Ending Balance Stock Purchase Activity (Treasury) Description Opening Balance Repurchases Other Activity Ending Balance 400 $37.95 ($5,154) 400 Shares (000) 577 7,079 (3,646) Avg Price Amount (000) $78.21 $553,662 4010 Autt,orizatn, Sttject to ~n DerrOs ap~rovaI Activiy 7078,501 includes Stock Option Exercises Stock Option Swaps (Non-Oualified}, and oIhe~ miscellaneous EC4U49A803O796 Shares (000) Avg Price Qtr P&L (000) ~uky Fbstion Lit VOR ttbnal open Livii ($Ws~ $1000 Orent posion (SIvM ~.38 .%shtc ~1Is exehide mA poadion which S 'sitbeted .i ~A okpot~ontepo4 -t,aides 60% of JO) K an open posilon $30000 $11.32 EXHOO4-00013 2-3 Interest Rate Exposure 45, 000 , 000 40.000000 35,000,000 30.000,000 25.000.000 20,000,000 15.000,000 10.000,000 5,000,000 0 Notes: 1. Current OP Balance of $1987 MM represents 23% of floating rote debt. 2. FO$Z goal of 80/20 IWfit composition. 2-4 2,443.605 601,202 9.563,546 $39,827,S89 8,01,54 DFIoaUng-22% L EFo~ed - 78% Projects- P~epays 140's LTD-Off OP Projects- LTD-B/S Leases ENE Hedges Total Oft B/S B/S On B/S Liabilities EXH0O4-00014 EC46S4wg~g7 Liquidity - Margin Activity as of September 26, 2001 Current Liquidity ($MM~ Normal Disaster Market Market (P50) (P99) 1,524 Cash & ST Lines Inventory PRM Asset Net ARIAP Debt Shelf Equity Shelf Operational OF Whitewing Vehicle Capacity 7,665 1,634 260 29.6 3.0 Board ADDroved LiquidIty Factor Margin 10 day MeUc Actual Coverage Factor Required Coverage Factor LiquidIty Factor wI largest Historical Monthly Maroin Out Max Monthly Margin Out Actual Coverage Facto! 996 7.7 636 2.0 1.5 996 1.6 2-5 EC4U4gA.g93708 1,524 1,134 300 3,242 1,000 375 (50) 160 (50) 160 Total EXHO64-OOO1 5 Finance Related Asset Sales Prepays and 140 Sales ($MM) 12/31/98 &'3W99 12/31/99 &'30/00 12/31/00 $ 1,258 $ 2,239 $ 2,489 $ 2,962 $ 4,016 $ 6/30/01 9/30/OlE 5,031 $ 5,665 $ 573 $ 683 $ 1,316 $ 772 $ 1,521 $ 1,533 S 1,687 $ 1,831 $ 2,922 $ 3,805 $ 3,734 $ 5,537 $ 6564 5 7,252 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 12/31/98 6/30/99 12/31/99 6130100 12/31/00 6/30/01 9130/OlE z~t / y~o«= ~'f2~~Y~9fr1 -b FA«= /4'9% (~«=s) 3tC55/A! 2'~ k7ChPV aowt yk~Jt(t - EC4IY48MOM1e9 Prepays Pasb 140 E E 0 'S a S .5 2-6 Outstanding Financings and Debt ($MM) o Capital Nkts - Non-Usi * Capital lvkts - US I. - -r m 2000 Bank Cap Mkt-US Cap Mkt - Non US Total 1998 Year End % of Outstanding Total 11,330 61% 7,229 39% - 0% $ 18,559 100% 1999 2000 3Q '01 E Year End % of Year End % of Quarter End % of Outstanding Total Outstanding Total Outstanding Total 14,453 56% 17,933 52% 19,961 50% 10,224 40% 12,897 38% 16,390 41% 1 037 4% 3,550 10% 3,477 9% $ 25,714 100% $ 34,380 100% $ 39,828 100% 2-7 E046949A00wrn I, Bank 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 C- K. t~t 1998 1999 r 3QOIE ($ in millions) Summary Asset Disposition Status Disposition Status Said Sale Pending 2001 Active Negotiation 2001 High Priority 2002 Active Negotiation - PGE - Carnhusker 2002 High Priority Number of Assets 30 7 9 19 I 1 21 Book Value On BIS $1,878 626 1,132 158 1,589 0 1,176 Book Value Off 815 $124 585 99 306 0 2~ 0.0 252 Total 88 $6,669 $1,666 -8 c-s. 4 4 .12 .1 1< EC46949M030601 Restructurings ,~ tlod&o'«=u a. Oabhou&cky1~, tM ~ ~&Ld I tnoP * Raptoy car- r~ .~ cda~t A, Whitewi,,g .7 ~ (/fl ~9%( 4 a .7, a witA oAr <.~ + 2-0 EC4eg4 PAoo3o~g2 Summary of Major Non-Plan Divestitures ($ millions) Timing Assetjsusiness Probability Book Value EGEP India Ecoelectrica CEG/CEG-Rio Azurix North America Enron Wind (preferred) Medium High Medium High Low $ 378 146 247 197 200 $ 390 $ 266 247 150 200 2002 PGE Europe (Turkey/Poland) SK Enron GAS PART Trans redes EOTT Units COPEL GAIL Other Azurtx** High Low Low Low Low Low Low Low Low $ 1,368 266 294 213 138 127 108 70 295 $ 1,878 $ 240 220 205 146 127 90 51 136 $ 4.047 $ 4.346 $ 3.599 * Includes Canoun and IASA Mexico, Madera Ranch, Geoplan and Mendoza. ~AYV ,bot gr - (Lt&A9. 'k/k! /4 '~~4 I 'ii ~--19 - L4~ V 07(1:; (h A ci 11 4/ ,J{y /7 Si) 2 4'6 ~t»=' 23 tIE- )BoJt 94t («=cfl EC4 09 49 AG 0 30 003 <"-"A <720011Q4 6 Price tEst. VaIue~ Net Cash Proceeds 307 254 247 200 Total 1,517 240 220 205 141 127 90 51 C iv ½ C, o2~2j 2~J t #7 ~~ff- ft' / (/ nA&J 46.6 ii 41 - A> ~ 1<) 2' A'~k- 4'?! ~zhow Lt/4?-. .54j, 6 ~kAc~4V C, ~§/( fry/n) Sv~J YtA&S.', EC46949A9030804 C-- A- 0' l9kntJAv 6 ~ '2 96O&~ OAZ2t#) ~/dti Aki5W~ by - /01 &~/ c-c (6%/tat /0 zA goc Aaenda Item 3 EXHO64-00022 Enron Corp. Treasurer Report October 8, 2001 8C4949AU38U8 EXHOG4-00023 3-1 Enron Corp. Active Letters of Credit by Category ($000) 09/21101 12131100 I 2131/99 Bids Debt EOTT Lea sos Other Other Third-Party Performance1 Trade' $ 7,766 65,932 139,055 12,871 18,833 25 980,403 863,585 $ 6,321 24,241 102,089 12,750 280,179 6,605 425,210 634,300 $ 5,968 52,946 150,310 15,604 80,071 24,078 522,006 76,269 Grand Total $ 2,088,470 $ 1,491,695 $ 927,252 'irs or 58 15,622 posted as Margin are included in the Trade and Performance ealegonies 3-2 EC4694u.go7 EXHO6A.00024 Enron Corp. Guarantee Portfolio (000's) 08131101 Trade (Payment & Performance) EOTT Trade Swap Agreements (Master & Individual)1 Projects (Non-Debt)2 Debt $23,009,811 544,7" 13,222,421 6,627,145 3,338,969 $21,197,904 544,744 10,878,431 4,632,739 3,422,444 $17,316,817 440,375 7,148,443 4,756,470 2,493,049 Grand Total $46,743,090 1 Increased counterparty activity. 2 Increase primarily due to6 NEPCO projects $1.B18MM $40,676,262 $32,155,154 EC4694eA~~ggjg 12131100 12/31199 EXHO64-00025 3-3 Enron Corp Liquidity Forecast & Sensitivities As of September 26, 2001 ($000) Sources Available: Overnight 2-IC Days lI-SO days Total Commercial Paper (Backed by committed Bank Revolver) 1233,000 1233000 Uncommitted Bank Lines & Loan Sales Lines 2 255,000 255000 teller of Credit Facilities 36,530 36530 Inventory 1,134,000 1,134,000 Net Accounts Receivable/Accounts Payable 3,242,000 3,242,000 Net PRMA 300,000 300,000 Operational Cashflows (50,000) (50,000) Shell Registration for Public Debt Issuance 1,000,000 1,000,000 Shelf Registration for Public Equity Issuance 375000 375,000 Whitewing Vehicle Capacity 160,000 160,000 Merchant Portfolio Available for Monetization 490,883 490,883 Scheduled Asset Monetizations 120,000 120,000 Total Sources Available $1,524,530 $6,161,000 $610,883 $8,296,413 CP Program Capacty is $3,350 maior 2 Lear, Sales capacity is $550 million [IC Lines Capacty total$2,125 miller A/R Sale Proceeds comprise less than 10% of Trade Receivables Available ($tI.IB) IS mikion shares at 125 per share 3-4 EXHOG4-00026 Enron Corp Liquidity Forecast & Sensitivities As of September 26, 2001 ($000) Forecasted Outflows: 0/WiG Days 11-90 days Total General & Administraliw Expenses 50000 405,000 455,000 Debt Maturities 1312,000 1,400.000 2,712,000 Total Forecasted Outflows $1,362,000 $1,805,000 $3,167,000 Contingencies: O/N-10 Days 11-90 days Total Margin Acti~4ty (Postings & Deposits Returned) 1 836,000 836 000 Total Contingencies $836,000 $836,000 Forecasted Inflows; 0/N-jO Days 11-90 days Total 10 Year Benchmark 1,000,000 1,000,000 Recei'able Monetization 250,000 500,000 150.000 Contract Monetization 1,400,000 1,400,000 Prepaid Contracts 350,000 400,000 750,000 Eon Monetization 185,000 185,000 Total Forecasted Inflows $785,000 $3,300,000 $4,085,000 Represenls 99% confidence interval on 10 day V@R based on h~toricaI trsrgin. ECAIO4eAJPJB1O 3-5 EXHOG4-00027 Crisis Funding Breakdown ($MM) Normal Process CP Dealer CP Direct Date Placement Placement Week I 11-Sep 12-Sep 13-Sep 14-Sep Week 2 17-Sep 18-Sep 19-Sep 20-Sep 21-Sep 305 865 435 507 403 220 216 Rank Loans 74 125 103 190 70 67 85 2 80 28 91 Crisis Bank Lines Total Funding Comments 50 671 721 NoOP Market bnplemented Bilateral Loans with Cifi, Chase, and BofA 512 512 Marketopenbutverylight Covered $354MM of crisis borrowings from 9/11 379 Treasuries resume trading Covered additional $266 of crisis borrowings 1,093 Begantooverfund Repaid $15OMM of WestLE BL 695 Stock reopen, Fed cuts 50 bps Repaid final $1 00MM on WestLB BL 659 403 302 335 Slow paid large receivables. Stepped up Direct CP placement efforts. Over funded when possible. Sept 11-14: Longest term available 6 weeks at 100 bp wider than before. Sept 17-21: Longest term available 6 weeks at 50 bp narrower than prior week. 3-6 EXHO64-00020 B Financings Completed Since September 11 Amount Transaction ($MM) Market Prepay Receivables Mon etization 250 Conduit EOTT 140 Master Lease Program Prepay Extension Inventory Sale ServiceCo. 140 Sale $1,375 EC46949A0030612 /~ VI 'I 34-~ 0 IE&V £~0W &e.A 2' ~ 2 ~ ~ ~h ~ ~ O~ *(f*tt~ _ Sale 350 Bank 185 Bank 150 150 150 Bank Bank Bank 140 Bank t A N Enron Financings in 2001 Completed to Date: Amount Type # Deals ($ billion) Bank 24 6.29 Capital Markets 5 4.75 Total 29 $11.04 6 Syndications (Closed in 2000) 2.1 To be Completed - AFt t) AKL' At -/P'3*) S C' I i~~1, t Cl Amo~ud't~~ # Deals f$-biilion) Type Bank Capital Markets 1.80> (2> - -1.50- Relinancings Total 10 <(5.05 Projected Total 2001: $15.09 %,<' DC-i v K-It .oY~; 0, 0.2 9 EG4694gAooao8la 3-8 mci Cr e ~ - t <-5-, ft - ,-, <~~1 0~ CV' 1-' t a 'C>t co-ic NJ ci. 4- r&~ t«=QD ii,-' A s- u-'~ '-~ Key Financial Ratios Focus - K! ~ ct1wLj - or- £u~-. ~4-7 V $ 4.07 4.16 4.02 3.52 3.69 ½ 7 K> &t -4 (flmr IC! -c>.w F'' - - ;~ F> 9 - (01w; ,J 9~ ~nc Remaining 2001 Transactions to AIR Sale Contract Monetization Prepaid Contracts C 2 / O~ P~rC Si-i'> Meet Plan $500 $1,400 $400 -~ 3.36 3.08 2.62 2.54 EC46949A0030814 Other 2001 Finance Activity Ten Year Benchmark $1,000 -4-- Funds flow Interest Coverage ---- Into rest Coverage Kit' C A 4~* ~/b~IJ. L~ ¾ /61/2 ,fx Dt-~ $&j-* o ~Q4~ -1 & ~(4¼/< 3-9 I / / ~4J? ~ > <-/ -/ I.- .11 ~,7 46/> J(\7r'. 'Vt) y 5 4 2.18 I 1998 1999 2000 2Q '01 2001 P '4- 2' 1v~ C AAJ-'r ~ Rating Summary Rating Agency Long Term Commercial Paper Standard & Poors Mood Fitch IBCA R and I (Japan) BBB+ Baa 1 BBB+ A-. A2 P2 P.2 n/a Stable Stable Stable Stable 3-10 EC45949M030615 EXHO64-00032 Outlook Net Investment Activity ($MM) Pro form a 2001 Operating Results Q3&Q4 Iden tilled Transactions Funds Flow from Operations 1804 374 2526 2,900 Change in Working Capital (3,142) (3,797) (1) 1,426 (2) (2,371) Proceeds from Asset Sales 1,423 1535 738 2,273 (3) Investing Activities (2,583) (4) (3,379) (350) (3,729) (I) Includes $426 MM in margin deposit refunds. (2) Includes $1 B in Accounts Receivable Sales, $500 MM posted and $2SOMM ofinventorymonetizations. (3) Primarilyproceeds from sale of Peaking Power Plants. (4) June YTD includes $347 MM related to Sithe intangibles, $487 restructuring, $326 MM for Azurix privatization. {~ (~( of LICs replacing cash margin MM forsithe >,c $0~~A~2 v/c 5tOu~ \J £r>v~ ) EC46y4gMoao8i6 3-11 Actual June VTD Pro form a 2001 Cost of Capital 5 year annualized return Equity Analyst Forecasted Stock Prices ENE WACC 35.0% 30.0% - 25.0% 20.0% 15.0% - 10.0% - 5fl% - 0.0% Itr-98 Sep-98 IMr-99 Sep-99 I~r-00 Sep-00 Iv~r-01 After Tax Debt Equity % of Capital Cost Structure WACC 3.8% 10.2% C' C' C~ V 45% 55% Sep-01 1.7% 5.6% 7,3% ry .~cr Finn Recommendation 12 Month Target Price AG. Fdwards Accumulate 55 CIBO Oppenheimer Buy 80 CSFB Strong Buy 84 Goldman Sachs Buy 68 Howard Well Accumulate 76 Menill Lynch Buy 75 Morgan Stanley Outperform 85 Pwdential Buy 55 Simmons Buy 55 Average 70.3 Closing Implied Current Stock Price Date Price Equity Return 9/26/2001 25.150 179.7% V. of Capital Cost of Capital Cost Structure After Tax Debt 3.8% 45% 1.7% Equity 179.7% 55% 98.8% WACC 100.5% Closing Implied $35 Target Price Date Price Equity Return 9/26/2001 25.150 39.2% ¶4 of Capital Cost of Capital Cost Structure After Tax Debt 3.8% 45% 1.7% Equity 39.2% 55% 21.5% WACC 23.3% iv' rr Ri OK ocu-t> p ½-~ EC46g494o9~081y 3-12 Cost of Capital Pr U -WI '.ffi v-J L~j L.J uU U-i L4 12-2 ~-~-j ~-~-J k____ II] w Estimated New Issue Cost As of September 26, 2001 Enron Estimated New Issue Cost USD lv 3y 5y jOy Capital Markets 3.88% 5.93% 6.35% 7.33% BankMarket L+125 L+150 USD Equivalent libor Funding Spreads USD Sterling Euro 1.76% 1.12% 1.08% 1.76% 1.12% 1.08% 1.55% 1.31% 1.24% 1.80% 1.50% 1.47% Qo~.04 pt; S I e V 24 3-13 EC45949M089318 k-~ Lit LA Lw Lw &S Ut 4W LJ.~J L-2 L~~9 ~ t-J c-~----i LW W Comparison of Funding Spreads Marketers and Producers 375 325 275 225 175 126 01/02101 ytjw ~M o &YLor 5~4A o ~oYZ eA5i4 S 3)") - cc~t~+ fUfc'O~-1 o&fEtI & pssdt rh~ Uj tAt -NIR8.300% due 05/01/11 -Calpine 8.500% due 02/15111 -FSR3 R~wer 7.750% due 04/01/11 - Enron 6.75% due 08/0 1/09 NRG 8.250% due 09/15/10 Allegheny Energy 7.600% due 03/15/11 -6 Paso 7.000% due 05/15/11 -'~%iB 7.125% due 09/01/11 3-14 EC46o4guoaooi9 0. .0 V a I a. &0 02/11/01 03/23/01 05/02/01 06/11/01 07/21/01 08/30/01 L~. '---- C> ~ &---i L-L cJ4 Q2 W LI) L~ Market Structure Sector Spreads As of September 21, 2001 9 8 7 5 4 S HISTORICAL 5-YEAR YIELD HISTORICAL 3-YEAR YIELD 9 -Treasury 8 - Enron 7 Duke -Dy negy S El Paso 5 -Mirant Reliant 4 -Williams 3 g~~g~gSgggggg goOO 000 ='o~n~nfeo~.o-.nenr-o~ Historical 3-Year Treasury Spread (bps) ENE (BBB+/BaaI) OUK (A/fl) DYN (S88+IBaa2) EPO (BBS/Baa2) PAIR (BBB-/Baa2) REt (B88~/Baa2) WMB (RBS-/Raa2) Treasury Rate 912112001 190 135 185 210 275 215 205 3.37% 9/1/2001 156 106 191 163 251 241 174 3.89% 612912001 148 143 198 168 248 263 180 4,60% 3/30/2001 139 143 205 180 290 240 4,39% ~ikt&r6)r c~ -Treasury -Enron Duke -Dynegy El Paso --Mirant Reliant -Williams K) LjiiCcc~ ~ Lov~i \;ru 4}' - I U t&J dr.Am-~ S Wv 64 3-15 N -k4,rt EC4949~0306~ dear aYt&A w~Qt q,\fl ~ - flfA -. r~-~-,A ~4~L I----- ---I %r) V it A- N 44~> ~ HISTORICAL 10-YEAR YIELD 9 - Treasury -Echos Duke - . -Dynegy - ElPaso -Mired -Retant ---Williams 3 _____ ogg2gsgQgog Sn 0000000000 0000000000 Historical 5-Year Treasury Spread (bps) Historical 10-Year Treasury Spread (bps) 9/21/2001 9/7/2001 6/29/2001 313012001 9/21/2001 9/7/2001 6/29/2001 3/30/2001 ENE (2884-/Ba ) ~ ~ 225 168 159 161 ENE (BOB+/Oaal) 220 183 15$ 173 DUK (A/AS) - 122 109 114 104 DUI< (A/A31 146 135 133 188 DYN (BDB+/Baa2) ,' 195 155 163 186 0Th (BBB+/Baa2) 210 IRS 183 208 EPS (B6B/Eaa2) / 226 195 183 172 EPO IABR/8aa21 238 232 218 188 PAIR (BBB./Ba ) 270 218 238 N/A PAIR (RBB4Baa2) 290 265 276 N/A REI (8 */Baa2) 225 205 219 221 REI (BBB+/Baa2) 235 230 263 268 WMB (BEB-/Baa2) 220 178 184 176 WMB (BBE-/Baa2) 228 207 198 198 Treasury Rate 3.83% 430% 4.95% 456% treasury Rate 4.70% 4,79% 5.41% 4.92% __ &w WA ~t tic w kit wi Market Indicators As of September 26, 2001 YTD Max Interest Rates YTD Mm YTD Change 1213112000 30 Day A21P2 CP 3 Yr Treasury 5 Yr Treasury 10 Yr Treasury Libor (3M) Equities Dow Industrials S&P Index NASDAQ Commodities Natural Gas (Henry Hub) Crude (NYMEX) 3 Year Sovereign Spreads YTD Max 'flD Mm YTD Change 1213112000 Argentina (B-ICaal /B-) Brazil (BB-IB1/BB-) o LQ\erky a>> EC4eg49Mo~B21 912612001 6.45% 5.14% 5.05% 5.52% 6.40% 11,338 1,374 2,859 10.50 32.19 2.83% 3.29% 3.77% 4.55% 2.59% 8,236 966 1,423 1.89 21.81 -3.37% -1.84% -1.2 1% -0.48% -3.81% (2,247) (317) (1,005) (8.61) (4.75) 6.40% 5.13% 4.98% 5.11% 6.40% 10,787 1,320 2,471 10.50 26.80 3.03% 3.29% 3.77% 4.63% 2.59% 8,540 1,003 1,466 1.89 22.05 26.10% 9.40% 4.96% 4.4 1% 15.68% 4.3 1% 9126)2001 7.00% 5.02% 22.68% 9.33% I(ot~2. 3-16 I S S 3 b Enron Corp. Chief Risk Officer Report October 8,2001 4-I EC4694eAoo3gn'jj EXI1064-OOQ4O Audit & Compliance and Finance Committee Roles EC449M030824 A EXHOGA-00041 4-2 Roles For Monitoring The Risk Management Policy Audit and Complianc9 Committee ~ Review internal controls as it relates to the operation of the Risk Management Policy > Review limit violations and determine that actions taken by management are consistent with the Policy Finance Committee r Approve risk management framework and review policy issues r Determine appropriateness of limits, correlations, profitability and liquidity based on the Company's risk appetite as ratified by the Board ~- Review corporate liquidity and funding plans r Review investment returns achieved relative to expectations 4-3 2 EXHOB4-00042 EC4uqjs,no~ Trade Credit Update 4-4 EXHOB4-00043 Trade Credit Update Table of Contents * Trade Credit Portfolio * Net Credit Exposure by E-Rating * Major Trading Relationships * Top 25 Net Credit Exposures for August 31, 2001 * Collateral * Change in Cash Collateral * Top 5 Country Net Credit Exposures * California Update * Bankruptcy Update 4-5 EC4UWN2? EXHO64-00044 Trade Credit Portfolio 66% 34% $1092 311.47 $5.67 54 84 m Gross Exposure $16.69 $1621 75% 25% as of August 31, 2001 In $Bns ($1.16) ($1.15) ($0.50) ($0.59) 68% 32% ($0.38) ($0. 25) * Investment Grade * Non-Investment Grade ($0.23) ($0.18) 65% 35% Cash Collateral ($1.54) ($1.40) Other Collateral (including monetizations) ($0.73) ($0.75) $9.26 $9.73 $5.06 $4.43 Net Exposure $14.32 $14.18 Numbers in italics represent comparable amounts at June 30, 2001. 4-c EC4U4IANNSZI EXHOS4-00045 Net Credit Exposure by E-Rating Investment Grade Non- Investment Grade 70% - 60% 50% - 40% - 30% - 20% - 10% - 0% - 1 2 3 4 5 7 8 9 10 11 0813112001 $14.32 Bn 4-7 EC46s4eAa0 EXHOO4-00046 100% 90% 00% 0 0 a- 0 1 2 3 4 5 S 7 8 9 10 0613012001 $14.16 Rn Major Trading Relationships as of August31. 2001 Total Net Exposure $14.32 Bn Parent E*Rating Major Relationship~ 40% / / / RelationshIp 4 tXJtorp. 5 Sierra Pacific Resources rnPG&E Corporation 4 Dynegy Inc. 4 El Paso Corporation 2 Bonneville Power Administration 3 Coral Energy Holding, L.P. I Government Of The United States 1 Koch Industries, Inc. 1 BP p.l.c~ 11 Edison International 4 TransAlta Corporation [F] calpine Corporation [flEOTT Energy Partners LP 2 FPL Group Inc. 3 Westcoast Energy Inc. 4 Petro-Canada 3 T~af15Ca~da Pipelines Limited 5 Canadian Natural Resources Ltd. I American International Group. Inc. S Avists Corporation 3 Sempra Energy 2 Duke Energy Corporation ~CMS Energy Corporation 4 Dominion Resources Inc. 5 Williams Companies, Inc., The 4 Reliant Energy Inc. Major Relationships Total Gross Exposure In SUM'. 1,615 542 505 268 340 229 222 216 197 274 196 162 258 133 131 118 90 84 81 75 70 154 175 90 82 33 161 Net Collateral Exposure In 5MM. In SUM's (101) 1,514 - 542 - 505 - 288 (100) 240 - 229 - 222 - 216 - 197 (88) 186 (34) 162 - 162 (100) 158 - 133 - 131 - 116 - 90 - 84 - 81 - 75 - 70 (86) 66 (118) 57 (34) 56 (29) 53 - 33 (141) 20 6,521 (833) 5,688 Count.rp.flJ.s now to 'Major R.Iatlonships list Non-Investment Gmd. Credit Exposures 4-S EC4349A330m EXHOO4-00047 Top 25 Net Credit Exposures for August 31, 2001 In $MM's E-Rating Counterparty Name (Legal ~ntlty) June 30, 2001 August 31, 2001 4 TXU Europe Energy Trading Ltd. 1554 1,476 12 Pacific Gas & Electric Company 474 505 5 Nevada Power Company 422 373 2 Bonneville Power Administration 105 229 1 United States Department of Energy 188 205 3 Coral Energy Holding, L.P. 193 191 2 Koch Petroleum Group, [P. 393 180 4 Dynegy Power Marketing, Inc. 196 177 rSouthern California Edison Company 145 156 ~~~jCalpine Energy Services, L.P. 160 154 5 Sierra Pacific Power Company 149 145 rEOTT Energy Liquids, LP. 132 4 TransAlta Utilities Corporation 172 131 3 El Paso Merchant Energy, LP. 214 131 3 IBM Corporation 102 120 2 Florida Power & Light Company 134 120 3 Public Utility District No. 1 of Snohomish County 98 116 4 Engage Energy Canada LP. 71 98 1 BP Energy Company 163 93 4 Coastal States Trading Inc 154 93 3 SBC Services Inc. 89 3 City of Santa Clara California, Silicon Valley Power 45 88 4 Petro-Canada Oil and Gas 79 83 4 Canadian Natural Resources 82 72 rOwest Communications Corp. 70 70 Top 28 Total 5,227 Other Net CredIt Exposures 9,092 Total Net CredIt Exposure 14,319 Coant.qmflMs flew to Top 28' list j22J Non-investment Grade Cr.dlt Exposures EXHO64-00048 Collateral In $MM's 813112001 913012001 Counterparty 0&3112001 09/3012001 CASH POSITIONS The Chase Manhattan Bank (1) Duke Energy Trading and Marketing, L LC Sempra Energy Trading Corp. Reliant Energy Services, Inc BP Corporation North America Inc. The New Power Company El Paso Merchant Energy, IP. Morgan Stanley Capital Group Inc. PSEG Energy Resource. & Trade LLC Goldman Sacha Capital Markets, L.P. Calpine Energy Services, UP. UtiliCOtp United Inc. Other Cash - Incoming Other Cash - Outgoing Aquta RiSk Management Corporation Mirant Americas Ene*gy Marketing. L.P. Bank of America, National Association Enlergy-Koth Trading, LP Credit Suisse First Boston International Merrill Lynch Capilal Services, Inc. I-less Energy Trading Company LLC Pllibro Inc Reliant Energy Services. Inc. El Peso Merchant Energy, IP. Matron,. Ltd Morgan Stanley Capital Group Inc. Williams Energy Marketing & Trading Company J. Aron & Company Duke Energy Trading and Marketing, L.L C. Net Outgoing Cash Tot.I Incoming Cash Total OutgoIng C~.h Bank oI&tontra.l OUTGOING SECURITIES INCOMING LETTERS OF CREDIT 377 255 Abegheny Energy Supply Company. LLC 118 190 C$,ine Energy Services, L.P. 67 168 TXU Energy Trading Company 169 160 Constelation Power Source, Inc. 88 130 EPCOR Energy Services (Albetta) Inc. 109 tog The Prerneor Refining Group. Inc. 100 100 Select Energy, Inc. 100 96 SempraEnergyTradingCorp. 49 53 Southern California Edison Company 33 52 Entergy-Koct Trading, LP 50 50 Other 48 48 Total Incoming Letters of Credit 233 267 156) (122) 64) 0 (200) 0 (26) (48) 120) (50) 1t7) (59) 145) (60) (43) (681 (72) (781 1135) (921 (100) (100) (145) 11231 1119) 11361 (296) (186) t61) (210) (521) (330) (579) 16 1,541 1,678 (2,120) (1.5621 Counterpertv OUTGOING LETTERS OF CREDIT Duke Energy Trading and Marketing, LL.C. California Power Exchange Corporation Pack Gas & Electric Company Wilierns Energy Marketing & Trading Company Mirant flnericas Energy Marketing, L.P. Aquila Risk Management Corporation The Caitfomia Independent System Operslor Conporabon Arjufa Enes~y Marketing Corporation Oman Liquefied Natural Gas. LLC. Sate R Finanoal Products Corporation Powerex Cow. Duke Energy Marketing LiMed Partnership Other Total Outgoing Letters of Credit Mahonia Ltd ISO Now England Inc. Total Outgoing Surety Bonds (93) (125) OUTGOING SURETY BONDS 127 122 50 III 101 110 76 76 40 40 11 35 50 32 21 31 23 23 44 0 328 364 671 944 08/3112001 (200) (200) 1107) 1107) 1100) (tOO) 0 (tOO) o (55) o ISO) (36) (36) 0 (30) (231 (19) (181 (18) (27) 0 (181 0 IA) (5) (533) 1720) (981) (9811 (40) (45) (1,021) 11,028) (1) Includes amount related to prepay structure with Mahonia Ltd. 4-10 EC45049AN30832 EXHO64-00049 Cournti.rparty Change in Cash Collateral In $MM's Major Cash Positions - Incoming Cou,flarp.rty IncomIng Cat, Outgoing C.t -4-- Mat CaSt The Chase Manhattan Bask Duke Energy Trating and Marketu,g. LI. C Senpra Energy TradIng Cap Reliant Energy Senices, Itt OP Cowaba NOV91 M,e~ce itt The Nee Power Can pany El Paso M.rchan( Energy. L.R I) Morgan Stanley Capita) Group Inc P560 Energy Resowces & Trade ITO Goldman SC,. Capita Maskats. LP. Capine Energy SONICOS, IP. Utilcap Uneled Inc 1,544 El 06/30/2001 08/31/2001 09/30/2001 03 Change 566 3?? 255 (331) 66 118 190 124 42 67 188 126 135 189 160 25 92 88 130 36 70 109 109 39 0 100 100 100 120 IOU 96 24) 32 49 53 21 10 33 52 42 o 50 50 50 0 48 48 48 246 233 257 22 Tobsi incoirikig ~ 1 541 lATh 260 Major Cash Position. - Outgoing Coijntagma,ty Diii. Energy Traifrg and Merketing. L L C. I ken & Coin peny WIlsa Erergi Marketing & ?TS6IIQ Cci eny Moegan Statey Capital Group no Mahonw LW S Paso Merchant Energy. L P. (3) Reliant Energy Serhicos, Itt Phbo Inc Hess Energy Trading Ccinpany LIC Fkrri) Lynch Capital Senices no CvOI Sue.. First Boston Irterriabo-isl Fntingy-tcoch Trackg, IP Bank of Ainedca, Nebasi Assodabon M'rantAsnesicas Energy Mai*etng. L P A~.als Risk Maragasnert Carpasboc 06/30/2001 08/31/2001 09/30/2001 03 Change (35)) (521) 330) 21 (63) (161) (210) (1471 (10) (296) (186) 1170) 442) 11191 (1361 6 14421 11451 (1231 319 0 (lCD) 11001 (lOU) 124) (135) (92) 32 (54) 721 78) 24) (I) 43) 68) 67) 491 45) (601 Ill) (SI (171 (591 (50) o (201 (501 50) o 126) (48) (48) (101) 12001 0 lOt (112) (64) 0 112 (184) 1156) (122) 82 (lii Total Outgoing 1.548) (2,120) ff~i~f Nat Cab 1250) 579) II 258 (1) I'I008* and outgoing coQateml posted in the same rount for a - cesh POSlIOO equal to zero EC45949A9fl0533 4,760 3,~? ~~lt 2 633 4,000 3.- taco I,- 0 1.000) (2,000) (3.-) (4.000) 1)10/2000 1213112003 343111001 UlXl2901 8/31)2001 EXHO64-00050 4-11 Top 5 Country Net Credit Exposures In $MM's Other Net Credit Exposures Czech Republic E-Rating Country June 30, 2001 1 USA 1 United Kingdom 1 Canada 1 Germany flMexico Top S Total Other Not Credit Exposures Total Net Credit Exposure Calculated based on country of incorporation. August 31, 2001 10,399 1,874 1,270 98 % of Total 73% 13% 9% 1% 54 13,895 824 14,319 Sweden Switzerland France Netherlands Australia Slovakia Norway Spain China Trinidad & Tobago Italy Bermuda Croatia Belgium South Korea Panama Cayman Islands Brazil Japan Slovenia Hong Kong Liberia Colombia Finland Austria Ireland Philippines Argentina Other Total 48 43 40 39 36 36 29 27 26 23 23 21 19 19 18 17 16 12 10 10 9 9 a 8 7 6 6 5 5 49 624 EC4SB4IAMW EXHO64-00051 % of Total 10,246 1.833 1,356 127 72% 13% 10% 1% N/A Counterpadles new to Top rust m Non-Investment Grade Credit Exposures 4-12 California Update as of August 31, 2001 In $MM's Utility Exposure Enron PGE Net Exposure Pacific Gas & Electric Company ("PG&E") 505 72 577 Southern California Edison Company ("Edison") 156 40 196 Total Utility Exposure 773 * The Edison "bailout" bill stalled in the California Senate and support is weak. * PG&E filed its Plan of Reorganization ("POW') on September 2gth, which would pay accepted claims in full, plus interest. * PG&E's unsecured creditors would be paid 60% cash and given 40% in restructured debt. * PG&E's POR faces numerous legal challenges from the State of California and if successful, will take from 1.5 years to 3 years to achieve consummation. * Of $577MM in Enron exposure to PG&E (includes $7'2MM at PGE), $403MM is related to negative CTC claims that PG&E is disputing. 4-13 ECAUGMOSOW EXHOO4-00052 Total Exposure $71 7(1) 107 counterpartles (I) Amount represents exposure before any recovery. Bankruptcy Update as of August 31, 2001 In $MM's * As a result of Enrons migration into the retail sector and declining credit markets, current bankruptcy rates represent a significant increase from historical Enron experience. * Total bankruptcies from 1994 to 1999 were fewer than twenty counterparties and $3OMM. Bankrupt Counterparty Exposures over $IOMM Counterparty Name Business Unit Exposure Pacific Gas & Electric Company EES, ENA, PGE 36onetworks, inc Sub-Totat Exposures over $IOMM EAS % of Total Exposure 577 81% 87 664 Other Exposure 12% 7% 53 717 Total Exposure 414 ECS4IAN EXHO64-00053 Market Risk Update EC4U4Mc37 EXHOO4-OOO54 4-IS Market Risk Update Table of Contents * Risk Profile * Risk Profile by Market Concentration * Risk Profile by Business Unit * Backtesting of Enron Corp. Aggregate VaR * Utilization of VaR Limits * Market Risk Limit Violations * Scenario Analysis * Liquidity Risk Ratio Analysis * Brazilian Foreign Exchange Exposure Update 4-16 EC4U4SMOUUO EXHOO4-00055 Risk Profile Eight Months Ended August 31, 2001 and 2000 Trading PM. ($MA4) it, fl807 677 ~flj 826 LULL r Antedc.. America. Ga. Pow. L YTD 8131101 P&L = $2.2 B YTD 8131100 PAIL = $1.8 B 28 ~ 58 ~g ____ rn European Products Financial. Emerging Ga. & Business.. Power Business Unit Comparison YTD Trading P&L = $2.2 B Trading P&L ($MM) 1,658 "4 NI 2~ Americas 107 I 13 42 Euro~ Global Industrial Markets Markets Average VaR fl YTD 8131/01 Avg VaR = 879 MM Average VaR {TO Average VaR = 879MM ($A4M) YTD 6131200 Avg VaR = $38 MM ($MM) II -~ A (2) (6) (3) (3) (4) (7) (II) 20) fIG) (18) 141) (4I( ISA) (Sal (60) ia~ Arn.vica. Avn.rlcas European Products Financial. Emerging Americas Europe Globl Industrial Power Get & Susinem. Power Markets Markets Return on VaR - Eight Month. Endad August 31 2001 128% 140% 141% 21% 2000 210% 189% 092% 72% Enron 168% 210% ~4% 157% 49% 352% J Return on VaR - Eight Month. Endd August 31 2001 191% 188% 78% 2000 281% 116% 139% (1) Comn,odltles aggre2St.d par ConcentratIon Limit Categories Market Concentrationci EXHO64-00056 4-17 Enron 201% 214% 114% 352% EC4SSUADOSD83I Risk Profile by Market Concentration Eight Months Ended August 31, 2001 and 2000 Americas Americas Gas Power European Gas & Power Products Financials Emerging Businesses Trading P&L S YTD 8/31/01 PAL=$2.2B Y1D 8131100 PAL = $1.8 B 48 (9) (22) 4 ___ ~ NA Gas Am$css NA Power Am.flcas UK Power Emso~nn Co,tlrwq,tsI Noidic GM Pow., GM Power Power Odier Ott., SI' 24 2 Co.' GIobM Credit Flnmnlars Sti Products Tr.dIn~ 0th" Selsis W.a.' Em.JWng .4-" at- Rsurn on VaR - Eight Month. End.d AogusI 31 2001 121% 65% 141% 32% 115% 99% 107% (7s%~ 175% (14%) 98% 127% 244% 82% 135% 85% 2000 207% 295% 110% iUA~ 167% (22%) 111% 30% 53% 63% 11% 185% NA 43% 53% 105% EC4349A130840 EXHOO4-00057 (5MM) 975 725 415 225 (25) (5MM) a (18) (32) (48) (64) Average VaR YTO 8/31/01 Avg VaR = $79 MM~ YTD 8131/00 Avg VaR = $38 MMJ Risk Profile by Business Unit Eight Months Ended August 31, 2001 and 2000 Global Markets Industrial Markets Average VaR YTD 8131101 Avg VaR = $79 MM YTD 8/31/00 Avg V.A = 538MM fttum on VaR - Eight Mont. En~d August31 2001 104% 157% 12% 115% 99% 82% 107% 05% 2000 207% 400% 227% 487% (22%~ 43% 161% 11% Total Enron RoVaR YTD 8131101 = 214% t 135% (75%) 188% 122% 135% 3% 244% 59% 30% 63% 164% 63% 23% WA Total Enron RoVaR YTD 8/31/00 = 352% 4-ID EC4U4flpI EXH004-OOO58 Americas Europe 269 (SMM) 875 660 425 200 (16) (32) (4B) (64) [Trading P&L YTD 8/31/01 P&L = $2.2 I. ________ YWSflhIOOP&L$1.8B (251 NA Ga ISA Power Am.&a. A~ power Ewopeen Metal. OcetnantS Creelt A,wfraNa~ Nordit Coal Global water Global ~ (SUM) Power Ott", barber 0 34% 114% Backtesting of Enron Corp. Aggregate VaR 12 Months Ended August 31, 2001 - Curve Shift PIL - VaR - VaR Limit - Expected Tail Lou (ETL ETL Advisory Limit 12 Month Corn. UmitEvolutiogi: 06/01/00 10/07/00 12/07/00 12/28100 02/13/01 08/14/01 (MM) $75 $100 5140 $100 $125 5150 4-20 (1150 MM) ......(5820MM) EC4U49A30342 (SAW) 600 200 100 0 (100) (200) (300) (400) 12/4/00 - 1485MM 2/00. (1551 MM) Kupieclest sets out sccwtable TSflQS 01 instances ( where cuiveahifi profit a rid loss exceeds VaR. Al 95% I confidence and for the 251 trading days shown, the acceptable rang. is between 6 and 2ltirnes. Adual occurrences are 17, indicating that the VaR model is acceable. EXHO64-00059 Utilization of VaR Limits Quarterly Comparison ~v;age VaR 21 2L2L21 24 QLQLUI 24 2L9L22 24 QL2LSI 21 2L2L21 21 2L2L21 21 SISLSA 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 Americas Americas European Products Financials Emerging TOTAL ENRON Gas Power Gas & Power Businesses TRADING Not. I: QJ 2001 r.p,.s.nMd by July 1-August31. Not. 2: Utltlzstton calculatIons we,. band on Commodity Group Limits, not Concentration Limits. ConcentratIon Limits we,. not established until 8114101. 4-21 EC441Mfl EXI406A-00060 Percentage of VaR Limit 100% 78% - 60% 26% - 0% - Market Risk Limit Violations July Ito September 26, 2001 o No Violations of Board Approved Portfolio Limits o No Violations of Board Approved Concentration Limits o No Violations of Business Unit Limits La Commodity Group Limits are established conservatively to act not as traditional "limits", but as triggers for management decision making, thereby ensuring compliance with Concentration Limits. Commodity Group Limits may be adjusted frequently in response to business needs and maricet dynamics. Commodity Group Limit Violations INVSR U Maturity/Gap uNet Open Position 50- 40 - 30- Number of Violations 20 - 10- 0- Globat R.gulat.d UK Powar Product. Portfolio (PGEI I M*talsttt European Gas Sr ax (1) Steal tAiniber I) Violations were the resub of booking errors. EOL. Crud. North Arn.rlcan Gas EXHOO4-OOOG I 4-22 EC4UBANIOW Scenario Analysis as of September 2001 What if... War in the Middle East Breaks Out * Most militant Middle Eastern countries declare an oil embargo; crude prices rise to $42 for the next four months * A majority of the Middle Eastern countries declare an oil embargo; price of crude spikes to $75 for the next four months * Terrorists destroy a gas pIpeline in the Gulf; gas prices Increase an average of $1 per month for the next 12 months Recession * Recession and war foam cause a credit crunch, reduction In volumes and foregone profits * In addition to above, Enron realizes losses from an Increase In bankruptcies Prolonged and Unexpected Winter Freeze in the U.S. * Gas and power prices rise due to an increased demand as a result of colder weather ($MM) Potential Lasses (100) (200) (300) - ($82)* ($274) ($200) ($250p* ($1BO)k ($160) ($70) ($230) * Worst Case, assumes Instantaneous impact on current positions. Losses incurred or income foregone over a 3 month period. 4-23 K Crude Natural Gas Loss In Potential Profits Credit Losses Power 1 EC4U4IAOOIO4I (400) EXHO64-00052 Liquidity Ratio = Liquidity Risk Ratio Analysis Ten Day Forward Time Horizon Future Available Cash + Borrowing Capacity Trading Portfolio's Potential Future Cash Requirements .1 05/20/01 05/27/01 00/03/01 00/1 0/01 00/1 7/01 0S/24/O1~2 Liquidity Ratio - P50(1) Potential Margin Exposure 45.0 45.0 - - - - - - - - 42.0 35.0 fl.o 33 .0 30.0 27.0 24.0 2 1 .0 15.0 15.0 12.0 * .0 * .0 3.0 0.0 05/13/01 05/20/01 08/27/01 05/03/01 'I inciuen f4.t Account. R.c.lveb/. and Debt and Equity Sh.ifR.glstratlon. - P50 Advisory Limit = 3.0 - - - Lk~uidity Ratio ........... 05/1 0/01 05/17/01 05/24/01 .2 4-24 EC4s4g~a~6 EXHO64-OOO63 Liquidity Ratio - P99 Potential Margin Exposure P99 Advisory Limit = 1.5 - - - Liquidity Ratio I 5.0 1 3.5 1 2.0 1 0 .5 * .0 7.5 5.0 4.5 * .0 1 .5 0.0 00/Is/ol Brazilian Foreign Exchange Exposure Update Brazilian Reals ("BRL") Cumulative Translation Adjustment (CTA) Current and Forecasted Balances * Historical OTA Balance * Forecasted CTA Balance - BRL Historical Rate 1,600 *~ - BRL Forward Rate 1,488 1,547 A.60 1,420 1,400 -L 1,224 - 4.00 1,200-- 1,004 350 '4' t2 C a ci, 800 - 3.00 600 - - 2.50 400 - 2004 -+- -+-- -p--- - -i--- -+--- - Mar-01 Jun-01 Sep-Cl Dec41 Dec-02 Dec-03 Dec44 4-25 EC44018647 - tOO 1,164 EXHO64-00064 Post Transaction Reviews 4-25 ECUI4SMCSOI4S EXHO64-DOOG5 Procedure: Post Transaction Reviews * Post transaction reviews for transactions over $200 Million will be performed at a minimum of 18- and 36-month intervals after closing. Additional transaction reviews will occur as directed by the Chief Risk Officer or in response to Board questions. * "Merchant" investments will continue to be monitored by RAC and quarterly portfolio performance reported to the Finance Committee at regularly scheduled meetings. * Compliance related issues resulting from transaction reviews will be evaluated and discussed with the Audit and Compliance Committee. All other issues resulting from transaction reviews will be discussed with the Finance Committee. * Major strategic implications resulting from transaction reviews will be presented to the full Board. 4-27 2 EC4U4egjnJp~ EXHOO4-OOO66 An~.n.¾. lion, ~ EXHO64-00087 I {~sr '.1 8W5/EEIAA&ALS EW&IOWOSO& 1(51,111 EWS'EOM&MO (ES (ES