Enron Broadband Services

Jeff Skilling

President & CEO-Elect

Enron Corp

2AA-Basic

1990 1995 2000

Enron Annual Sales

5.5B9.2B

100.8B

3AA-Basic

1990 1995 2000

2.7B9.6B

72.1B

Enron Market Value

4AA-Basic

Enron Price/Earnings Ratio

1990 1995 2001

16.4 17.4

46.4

*Continuing operations

5AA-Basic

Enron Assets

1990 1995 2000*

10B 12B

53B

* As of Q3 2000

6AA-Basic

200

1600

1400

1200

1000

800

600

400

-200

0

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

Au

g 0

0

Enron Corp.

S&P 500

Pipeline Avg.

Utility Avg.

E&P Avg.

1,415%

383%

545%

281%

217%

Nov 00Dec 99Dec 98

Note: Calculated to December 31, 2000

Dec 00

Total Return to ShareholdersJan 1, 1990 to Dec 31, 2000

7AA-Basic

Enron

Energy

Services

Enron

Energy

Services

EnronTransportationServices

EnronTransportationServices

Enron

Wholesale

Services

Enron

Wholesale

Services

EnronBroadbandServices

EnronBroadbandServices

®

8AA-Basic

$0

$10

$20

$30

$40

$50

$60

$70

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

EnronOnline Introduced

Largest U.S.Gas Pipeline Company from HNG/InterNorth Merger

Leading European Wholesale Gas & Power Marketer

Leading U.S. Wholesale Power Marketer

Enron Broadband Services Established

Leading U.S. Wholesale Gas Marketer

World’s Largest Gas-Fired Power Plant Completed in the U.K.

Enron Energy Services Established

Enron Oil & Gas Company IPO

Market Capitalization (Billions)

9AA-Basic

Cost ofInteraction

Value ofSpecialization

$

Economic Trade-Off

Volume

10AA-Basic

BarterEconomy

Creation of Money

Evolution of Economic Trade-Off

1300’s

$

Volume

11AA-Basic

BarterEconomy

Creation of Money

Transportation &Communication

Evolution of Economic Trade-Off

1300’s

1800’s

$

Volume

12AA-Basic

BarterEconomy

Creation of Money

Transportation &Communication

Internet &InfoTech

Evolution of Economic Trade-Off

1300’s

1800’s

2000’s$

Volume

13AA-Basic

Types of Interaction Costs

Price ofSuccessfulEconomicTransactions

Legal &Regulatory

InformationSeeking &Gathering Inventory

Payments

Logistics

Credit

14AA-Basic

Cost of Interaction

Mining FinancialInstitutions

U.S.

India

30-40% 60-70% 55%

40-50%

Source: McKinsey

Business Structure

.95 1.10 1.20 1.10.20 .20 .20

TransformationCosts

InteractionCosts

TotalCosts

4.35 .60 4.95

FinishedProduct

15

.90

1.0 1.0 1.0

.85

.80

.90

3.45 3.00 6.45

FinishedProduct

Transformation

Interaction

TransformationCosts

InteractionCosts

TotalCosts

16AA-Basic

Cost of Teller Transaction

$1.50

$0.30

$0.01

1985(Bank)

1995(ATM)

2000(Internet)

17AA-Basic

Length of Time to Provision Bandwidth

6-8 months

2-3 months

< 1 second

1995 Today NextYear

18AA-Basic

Length of Time to Execute a Long-Term Gas Contract

9 months

2 weeks

< 1 second

2-3 years

1981 1989 1997 2000

.95 1.10 1.20 1.10.20 .20 .20

TransformationCosts

InteractionCosts

TotalCosts

4.35 .60 4.95

FinishedProduct

19

.90

.85

.80

.90

3.45 3.00 6.45

FinishedProduct

Transformation

Interaction

Change in Economics of Business Structure

1.0 1.0 1.0

19

.10 .10 .10

3.45 .30 3.75

TransformationCosts

InteractionCosts

TotalCosts

Where’s the Opportunity?

20

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

Where’s the Opportunity?

21

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

NotCostCompetitive

Where’s the Opportunity?

22

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

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

Where’s the Opportunity?

23

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

Creating low cost, dependablemarket interfaces

• Market making• Logistics• Back office• Trade finance

Where’s the Opportunity?

24

.95 1.10 1.20 1.10.20 .20 .20

.90

.85

.80

.90

.10 .10 .10

“Virtual” Integration

Providing packaged turnkeysolutions for customers

• Complex structures• Differentiation• Customization

25AA-Basic

Enron Opportunity

TraditionalBusiness Model

NewBusiness Model

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

• Brain power intensive• Networked• Oriented toward “real

options”• Fast moving• Entrepreneurial

26AA-Basic

Enron–Accelerating Market Development

1985 1990 1995 20001991 1992 1993 1994 1996 1997 1998 19991986 1987 1988 1989

Commodity

Product

Financial

Australian Power & Gas

Bandwidth

Metals

NaturalGas

Electricity

UK Power & Gas

Financials (interest rate, equity)

Emissions

Plastics

Scandinavian Power & Gas

Weather

Coal

Pulp & Paper

Currencies

* Lighter shading indicates a developing market Darker shading indicates a mature market

27AA-Basic

EnronOnline – Changing the Way Commodities Are Traded

Free, Reliable Transaction System with Enron as Principal

Transactions per day

28AA-Basic

Enron Efficiency Gains

Marginal Cost Per Transaction

(Indexed)

25

100

Transactions Per Market Maker

1999 2000

672

3,084

1999 2000

®