============= Page 1 of 43 ============= Lim INVESTMENTS Annu al. Partnership Meeting October 26, 2000 EXH029-00052 GOVERNMENT EXHIBIT 1680 Crim. No. H-04-25 (S-2) ============= Page 2 of 43 ============= LJM Investments Introduction: Meeting Agenda MOEN e • Introduction • LJM Rationale • LJM Strategy • Activity Summary • Valuation • Sample Investments • Other Issues • Sununary • Guest Speakers: Jeff Skilling, Enron Gene Lockhart, The New Power Company Bill Jacobs, The New Power Company Will Byers, The New Power Company ]Lim Confidential 2 INVESTMENTS EXH029-00053 ============= Page 3 of 43 ============= Introduction L.Jm Confidential INVESTMENTS ============= Page 4 of 43 ============= LIM Investments Introduction: Meeting Attendees 1.) LJM Investments 3.) LJM2 Limited Partners 4.) Guests - Andrew Fastow - Chase Capital Enron - Michael Kopper - World Air Lease - Jeff Skilling - Kathy Lynn - GE Capital TNPC - Michael Hinds - J.P. Morgan Capital - Gene Lockhart - Anne Yaeger - Mer ill Lynch - Bill Jacobs - Joyce Tang - C&I Partners - Will Byers - Chris Loehr - Dresdner - Ace Roman - AON 2_) LJM Consultants - Rho Management Kirkland & Ellis - CSFB - Michael Edsall - Ulysses Partners - Martha Stuart - Fort Wash. Private Equity Price Waterhouse Coopers_ - Morgan Stanley - Ian Schachter - First Union Investors L J~ Confidential 4 IN\%EST1vf ENTS EXH029-00055 ============= Page 5 of 43 ============= mom LJM Rationale L~ Confidential INVESTMENTS ============= Page 6 of 43 ============= LJM Investments LJM Rationale • Fund created and managed by the CFO of Enron - Andrew S. Fastow • Focused on acquiring energy and communications assets primarily owned by Enron ]Lim Confidential 6 t'N V ESTM EfV T5 ============= Page 7 of 43 ============= LJM Investments LJM Rationale: Why does Enron need private equity? • Energy and communications assets typically do not generate earnings or cash flow within the first 1-3 years - Investments are dilutive to Enron's current EPS - Investments are dilutive to credit rating ratios • Solutions - Enron must deconsolidate assets - Enron must create structures which accelerate projected earnings and cash flows This leads to opportunities for LJM L J1~ Confidential 7 [N\'EST2vSENTS ============= Page 8 of 43 ============= LJ.M.Investments LJM Rationale: Why does Enron need private equity? sio,oo4 Enron Corp. 1 ($ millions) 560,000 $50,000 $40,000 530,000 $20,000 $10,000 11,504 11,966 13,239 9,849 10,072 10,312 so 64 31 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 -+ -Total Assets & Combined Assets of Unconsolidated Affiliates -o--Total Assets ILJM- Confidential 8 I J'- X 0 ST 4ENTS EXH029-00059 ============= Page 9 of 43 ============= LJM Investments LJM Rationale: Why does Enron need private equity? • Additional applications of private equity have been developed - Risk management - Nature of earnings - Earnings generation L~ Confidential 9 I"",F-STkIIENTS ============= Page 10 of 43 ============= LJM Strategy LJM Confidential to Ih7I.,ESTMENTS ============= Page 11 of 43 ============= LJM Investments LJM Strategy: Overview • Maximize risk-adjusted spread over nominal return • Provide services in addition to capital • Create proper incentives for sponsor • Ensure multiple exits LJM Confidential 11 II 'L STMENTS ============= Page 12 of 43 ============= LJM Investments LJM Strategy: Maximize risk-adjusted spread High Private Equity LJM Funds Return Public Equity Debt Low EJI\4 Risk Confidential High 12 r 4 vTas 1 ENTS ============= Page 13 of 43 ============= LJM Investments LJM Strategy: Provide services in addition to capital • LJM offers a different product than traditional equity providers - Speed Certainty of execution - Structured equity capability - Confidentiality - Knowledge of company's objectives and reliability - Ability to play GP role LJM Confidential 13 INVESTMEN ms ============= Page 14 of 43 ============= LJM Investments LJM Strategy: Create proper incentives for sponsor • Sponsor typically retains an ongoing economic interest in investment • Sponsor typically benefits by assisting LJM in liquidation of investment LJ Confidential 14 I N\'ESTM ENTS ============= Page 15 of 43 ============= LJM Investments LJM Strategy: Multiple exit routes • Self - liquidating • "Effective" put • S ale • Securitization LJIt\/1I Confidential - 15 INVESTMENTS ============= Page 16 of 43 ============= Activity Summary LJM Confidential 16 1 VESTMENTS EXH029-00067 ============= Page 17 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Closing • First close on December 22, 1999 • Final close on April 5, 2000 • Total capital comnutments of $394 million - 42% financial institutions and insurance companies (Rated A- or higher) - 36% individual investors and private equity funds - 22% pension funds J~ Confidential 17 INVESTMENTS ============= Page 18 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Overview 23 investments have been made • $511 million committed to investments / $438 million invested • 6 investments liquidated on schedule at target returns ($108 million) • 5 investments partially realized ($123 million) $245 million of Partners' capital has been funded • $135 million of debt used for investments • Projected Net Limited Partner IRR* - 69% Cash multiple - 2.3X *See Valuation: Key model assumptions slide EJIvI Confidential 18 INVESTMENTS EXH029-00069 ============= Page 19 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Investments Investment Activity 25 20 15 A H A L w 10 O 5 0 Realized J~ Confidential 19 IN VESTMEtJ rS Invested Realized Partially Unrealized ============= Page 20 of 43 ============= LJM2 Co-Investment, L .P . Activity SuTrimary:, Investments Asset Cash Projected Current Invettmenl Amount Outlook Rrcrlved Current Cash Projet/ed Asset Date Gtvtsted (+/0!-) to Date MR Multiple IRR Unrealized Investments Subordinated Debt ENA CIA Trust I - Debt 22-Dec-99 19.600.000 0 -100% 1.85 14fo Total Debt 19,600,000 Equity Backbone 30-Jun-00 29,990,763 0 -1001/. 1-18 18% ENA CLO Trust I - Equity 22-Dec-99 12,900,000 0. -100% 3.10 32% Fitntl,loionCLO 29Sep-00 25,200,000 0 -100% 2.42 24% 141gaux 1241JI-d0 10.000,000 0 -100% 1.84 16% Osprey (2-Jul-00 26,000.000 0 -100% 1 53 20% Osprey 2 11 Sep-00 6,500,000 0 -100% 3.10 75°% Raptor I-A 19Sep-00 6,000,000 0 -100% 1-42 12-5% Raptor 11-A 13-Oct-00 1.100,000 0 -100% 141 125% RaptarIV 21-Stp-00 30.000.000 0 -100% 2 31 125'% Resco 6-Ian-00 673.200 0 -10016 1.32 25% TNPC 12-Jut-00 38,000-000 0 -100% 189 133% Zenith 8-Aug-00 21,000,000 0 -100°% 185 21% Total Equity 207,363.963 Total Unrealtzed Investments 226,963.963 Irareielly Realized Investments GE 7EATurbiocs (2-May-00 8,226,975 0 846.378 -100% 109 40% Raptor 4-41ay-00 29.500.000 0 40166.667 156% 2.37 193% Raptor II 6 Jul-00 30,000.000 0 -11.050-000 248% 2 37 278% Raptor III 28Sep-00 30,000,000 0 39,550.000 2500% 2.32 25001/. Rawhide 28-Maz-00 12,500,000 0 830,730 -100% 1.52 18% Total Partially Realized Investments 110,226,975 122.643.775 Reatiud ioveutaents Basgero 29-Jun-00 7,525,000 8,235,000 30% 1.09 Bob West Treasure 29-D c-99 2,953,125 rt!a 3,246,649 21% 1.10 Coyote Springs 7--Jn1-00 - as 3,557,000 - - Pluto 29-Dec-99 26,113,610 da 26,794,115 8% 1-02 Poland 22-Dcc-99 30,000,000 n/a 32,641,500 41% 1.09 Yosemite"" 28-Feb-00 33,750.000 OR 33,950,000 194% 1.003 Total Realized 100,541,735 108,324,264 Total Invested 437,732,673 Total Portfolio IRR 51% 1LJM Confidential 20 _ L t41fES T A+t 13 I~r TS ============= Page 21 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Investments LJ1412 Deal Flow 25 20 r IS CA ca c 10 w 0 5 Tinie Period El Current Quarter Investments ® Aggregate Investments i L_J1\'f Confidential 21 INVESTMENTS EXH029-00072 12/31 i99 3131100 6..130100 10/26100 ============= Page 22 of 43 ============= LJM2 Co-Investment, L.P. Activity Summaiy: Portfolio Transaction Counlerparty Enron Corp. 4 F% Eru-on North America 14% Non - Enron 11% Enron Asia/Pacific/Africa - 2% Enron Energy Services 9% Enron Europe 9°!%% ron Broadband Services EE&CC -7% 2% 1I_JIN'I Confidential 22 rl'J VSSTMEIVTS EXH029-00073 ============= Page 23 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Portfolio Investment Portfolio (by Type) Investments ou(side of Enron III Short tern / Warehousing Facilities 25% Co-Invest in Enron Businesses 9% %es(in2 %xith Enron in Projects 7% Structured Finance Vehicles 48% LJ~ Confidential 23 LiV VESTMENTS ============= Page 24 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Portfolio Investment Portfolio (by assel) Zenith 6% Resco 0% Rawhide 4% Raptor IV 9% TN PC tl% Raptor (II, 94k, Raptor li-A i 0% Raptor II 9% ENA CLO Trust l 6'.6 Backbone 9% 2% ENA CLO Trust I 4% First Union CLO 7% GE 7EA Turbines 2% Maryaa\ 3% Osprey Osprey 2 2% J~ Confidential 24 I N VE ST t.4 E N TS EXH029-00075 ============= Page 25 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Cash flows Transaction Length <6m 234 > 36 months 12-3b. months 20% 17% 12 months 400'9 63% of LJM's investments are projected to pay out in less than one year EJIvI Confidential 25 INVESTM EIVTS ============= Page 26 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Cash flows CLO-Debt Backbone CLO-Eq. First Union GE-Turb. Margaux Osprey Osprey 2 12/31199 (19,600,000) - (12,900,000) - - - - - 3.131!00 - - - - - - - 61301190 - (29,990,763) - - (3,006,422) - - - 9/30/00 - - - - (4,400,475) (10,000,000) (26,000,000) - 12/31100 - - 1,296,603 (25,200,000) 8,326,975 450,000 - (6,500,000) 3/31/01 2,861,466 - 1,233,307 552,832 - - 1,657,500 414,375 6/30/01 - 35,389,100 - 1,335,990 - 600,000 - 9/30101 1,392,580 - 1,260,668 1,381,846 - - 1,657,500 828,750 12,31 i 0l - - - 1,640,130 - 600,000 - - 3/31/02 1,392,580 - 2,599,150 1,591,359 - - 1,657,500 828,750 6.30102 - - - 1,6)1,779 - 1,066,667 - - 9'30.'02 1,392,580 - 2,254.686 1,633,661 - - 1,657,500 828,750 12:31:0? - - - 1,632,259 - 1,066,667 - - 331.03 1,392,580 - -2,431,131 1,586,804 - - 33,099,273 16,398,372 b/30i03 1,607,756 - 766,667 - - 9.,30%03 1,392,580 - 2.296,841 1,628.742 - - - - 12131/03 - - - 1,627,715 - 766,667 - - 3 31 `0, 1,392,580 - 2,420,769 1,604,704 - - - - 6 0.0. - - - 1,604;I06 - 766.66 - - 9.30:04 1,392,580 - 2,011,623 1,626,117 - - - - I2,'31104 - - - 1,625,718 - 766,667 - - 3/31/05 1,392,580 - 1,837,535 1,550,860 - - - - 6/30/05 - - - 1,561,573 - 766,667 - - 9130/0S 1,392,580 - 1,345,985 1,586,127 - - - - 1213 !/OS 20,767,478 - 19,026,735 24,659,058 - 10,782,456 - - Total Profits 16,562,164 5,398,337 27,115,033 28,449,435 920,078 8,399,122 13,729,273 12,798,997 IRR 14% 18% 32% 24% 40% 16% 21% 72% Cash X* 1.85 1.18 3-10 2.13 1.09 1.84 1.53 2.97 *Equals (profit+invested capital)/invested capital Bold cash flows have been realized ]Lim Confidential 26 INVESTL~fENTS EXH029-00077 ============= Page 27 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Cash flows Raptor Raptor I-A Raptor 11 Raptor 11-A Raptor III Raptor IV Rawhide Resco TNPC Zenith 12/31/99 - - .Y31/00 - - - - - - (12,883,717) (673,200) - - 6130100 (29,450,000) - - - - 410,803 - - - 9/30100 40,316,667 (6,000,000) (29,950,000) - (29,950,000) (29,950,000) 419,927 - (38,000,000) (21,000,000) 12/31170 - - 41,000,000 (1,100,000) 39,500,000 - 421,875 - - 1,700,000 3/31171 - - - - - 41,000,000 421,875 - - 6/30/01 - - - - - 421,975 889,098 71,649,000 - 9130/01 - - - - - 421,675 - - - 12/31101 - - - - - - 421,875 - - 3,400,000 3/31102 - - - - - - 421,875 - - 6130/02 - - - - - - 421,875 - - - 9130102 - - - - - - 421,875 - - - 12/31/02 - - - - - - 421,875 - - 3,400.000 3131103 - - - - - - 14,927,467 - - - 6/30103 29,500,000 - 30,000,000 - - - - - - 9.`_0-16; - 5,542,969 - 1,550,021 30,000,000 30.000;000 - - - 12131/03 - - - - - - - - 3,400,000 3-31; 61 - - - - - - - - 6`30'1)-1 - - - - - - - 26_v 14 286 9,10,04 - - - - - - - - - - 12131ftN - - - - - - - - - - 3/31/05 - - - - - - - - - - 61304)5 - - - - - - - - - - 913t1/US - - - - - - - - - - 12/31105 - - - - - - - - - - Total Profits 40,366,667 2,542,969 41,050,000 450,621 39,550,000 41,050,000 6,671,355 215,898 33,649,000 17,814,286 IRR 193% 12% 278% 12% 2503% 125% 18% 25% 133% 21% Cash X" 2.37 1.42 2.37 1.41 2.32 2.37 1.52 1.32 1.89 1.85 *Equals (profit invested capital)linvested capital Bold cash flows have been realized LJM Confidential 27 rNVES'ri..iE NTS ============= Page 28 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: Cash flows Divested Bargeco Bob West Coyote Pluto Poland Yosemite Total 11:'31!94 (2,953,125) - (26,313,610) (29,250,000) - (91,016,735) 3131.00 - - - 26,794,115 31,891,502 100,000 45,228,700 6130/00 (7,525,000) 3,246,649 - - - - (66,314,733) 9/30/00 - - 3,557,000 - - - (150,956,881) 121.31/00 8,205,000 - - - - - 68,100,453 3131/01 - - - - - - 48,141,354 6/30/01 - - - - - - 110,285,064 9/30/01 - - - - - 6,943,219 12/31!01 - - - 6,062,005 3/31/02 - - - - - - 8,491,214 6/30102 - - - - - - 3,100,320 9/30/02 - - - - - - 8,189,052 12/31/02 - - - - - - 6,520,801 3.'-11:03 - - - - - - 69,835,627 6/30,103 - - - - - - 61,874,422 9.'30103 - - - - - - 75,41 1,753 12/31/0.3 - - - - - - 5,794,381 111,174 - - - - - - 5.418.051 6-?0 •n4 - - - - - 202S5358 9.•;0.04 - - - - - - 5.030,320 131104 - - - - - - 2,392,384 3/31105 - - - - - 4,780,975 6/30105 - - - - - - 2,328,240 9/30./05 - - - - - - 4,324,692 12131/05 - - - - - - 75,235,727 Total Profits 680,000 293,524 3,557,000 480,505 2,641,502 100,000 344,485,767 1RR 29% 21% [NF 8% 41% INF 51% Cash X* 1.09 1.10 INF 1.02 1.09 INF *Equals (profit+invesled capital)/invested capital Bold cash flows have been realized L J~ Confidential 28 INVESmsi -4 TS EXH029-00079 ============= Page 29 of 43 ============= LJM2 Co-Investment, L.P. Activity Summary: LP Capital Calls and Disbursements Capital Calls Drawn Capital by Final Close $ 19,027,446 June 26 Capital Call $ 92,565,093 June 29 Capital Call $ 72,835,848 Sept. I9 Capital Call $ 37,620,037 Oct. 1 1 Capital Call $ 21,285,021 Oct. 26 Drawn Level $243,333,445 Oct. 31 Scheduled Distribution Distributions $ 97,376,617 LJ~ Confidential 29 IN VESTMENTS EXH029-00080 ============= Page 30 of 43 ============= Valuation ]Lim Confidential 30 INVESTMENTS ============= Page 31 of 43 ============= LJM2 Co-Investment, L.P. Valuation: Overview • Current portfolio of investments projected to yield IRR = 51 % • Leverage at LJM2 projected to increase yield to IRR = 69% • Projected average life of investments = 2.25 years • Cash multiple projected = 2.3X LJ J_ V 1 Confidential 31 INVESTMENTS EXH029-00082 ============= Page 32 of 43 ============= LJM2 Co-Investment, L.P. Valuation: Projected Profits LJM2 Valuations (as of 10122/00) Transactions Invested ($) Realized 6 100,541,735 Partially Realized' 5 110,226,975 Unrealized 12 226,963,963 Total 23 437,732,673 Realized Proceeds ($) 108,324,264 122,643,775 230,968,039 Remaining Value** ($) 117,660,042 441,023,426 558,683,468 Total Value ($) 108,324,264 240,303,817 441,023,426 789,651,507 Total Profits ($) 7,782,529 122,643,775 214,059,463 344,485,767 "Raptor 1,11,111, Rawhide, GEIEE&CC Turbines **Expected Future Cash Flows LJ]\4 Confidential 32 *. VES T-Me N TS EXH029-00083 ============= Page 33 of 43 ============= LJM2 Co-Investment, L.P. Valuation: Key model assumptions • Key investment assumptions impacting LJM2 projected return: - Osprey structure assumes a 15% growth in Enron stock to 1/15/03 - The model assumes a full recovery of the capital invested in all Raptor structures based on the overcollateralization displayed in Raptor Daily Position Reports - TNPC assumes liquidation 6 months after IPO at $21 per share • Debt level of $120 million Available debt invested ($50 million) at expected portfolio return for the length of the commitment period 1LJm Confidential 33 1N VESTMENTS ============= Page 34 of 43 ============= LJIV2 Co-Investment, L.P. Valuation: Return distribution LJM Projected Investment Performance 1910 160 141) 120 Equity nested 100 (S millions) .ri ati ?it !RR Overall projected asset IRRof 51 % 1I_J1,'l Confidential 34 1NVESTMEPITS EXH029-00085 0-15% 20-50% 50-200% 200%+ ============= Page 35 of 43 ============= LJM2 Co-Investment, L.P. Valuation: Leverage facilities • LJM2 currently has two credit facilities - $65 million revolver from Chase - $14.1 million from SE Acquisition, L.P. (Enron affiliate) • The Chase revolver is fully drawn • All outstanding debt will be repaid by the new $120 million credit facility expected to close November, 2000 Assuming the $120 million credit facility is fully drawn and invested at the current projected IRR, then the projected 51% asset IRR translates into a 69% net IRR to the LPs Confidential 35 INVESTNIEiVTS EXH029-00086 ============= Page 36 of 43 ============= Sample Investments LJM Confidential 36 1"N-11T=S 1-MF- 4 r ============= Page 37 of 43 ============= LJM2 Co-Investment, L.P. Sample Investments: Raptor I Raptor is a structured finance vehicle, capitalized with an Enron stock derivative and LJM equity, that will enter into derivative transactions with Enron related to investments in Enron's merchant investment portfolio • Raptor helps Enron manage the impact of the price volatility of its merchant investment portfolio on its income statement Major risk to LJM is that Enron stock price drops below $48.00 per share. (43% decline) six months after closing LJM's return is projected to be 84% T..TM used for speed; flexibility, complexity of transaction, and confidentiality L J Confidential 37 I N\Z ES TIvi ET7TS ============= Page 38 of 43 ============= LJM2 Co-Investment, L.P. Sample Investments: Osprey Osprey is a partner in an investment vehicle that purchases merchant assets from Enron; it is capitalized, with 50 million shares of Enron stock + assets + equity, including $26 million from LJM • This structure created a synthetic multibillion dollar balance sheet for Enron to deconsolidate assets and to generate funds flow e Major risk to LJM is a decrease in Enron stock price below $47.00 per share coupled with a deterioration of asset values to zero • LJM's return is 12.75% on the certificates with limited upside potPt~flal .~'f ~iilf_1t'1pates serunitizing this assef akmg \vlth sim Fiar :1 portfolio assets in order to enhance Partners' returns LJM used for structured finance expertise and speed L J~ Confidential 38 IN VES-I'M EN TS ============= Page 39 of 43 ============= LJM2 Co-Investment, L.P. Sample Investments: Osprey Capitalization $ 4.1 billion Enron stock + $ 2.4 billion cash and Enron merchant assets $ 6.5 billion total assets - $ 2.4 billion debt $ 4.1 billion available to cover equity $ 220 million of equity = 19 X coverage Confidential 39 INVESTMENTS EXH029-00090 ============= Page 40 of 43 ============= LJM2 Co-Investment, L.P. Sample Investments: TNPC $ 1.0.75 2nd Round Private Placement (LJM's cost basis per share) $ 21.00 IPO price $ 28.50 Opening trading price - 10/5/00 $ 19.31 Current Price - 10/24/00 $ 21.00 Expected case in model 133% IRR at expected case when lock-up expires 1.9X Cash multiple for expected case when lock-up expires L J~ Confidential 41 j -.) ES E?4SNTS EXH029-00091 ============= Page 41 of 43 ============= Other Issues EJIvI Confidential 42 INVECT NIEN TS ============= Page 42 of 43 ============= Summary ]Lim Confidential 43 IN V)-=S-rmEE"TS - ============= Page 43 of 43 ============= LJM2 Co-Investment, L.P. Summary - -- --- - - - 7-7-7--7 - - -- - ---- _A.-7-- - --, • As expected - Types of transactions - Strategic importance to Enron - Velocity (quick conversion to cash) - Rates of return - Use of leverage Not as expected - Higher level of deal flow - Greater ability to manage risk More "permanent" investments ILJN4- Confidential 44 1113 V Ea-r m S"TS EXH029-00094