CONFIDRNTIAL Ta: Distiibution Date: January 17, 2000 From: Paula Rieker RE: Enron Corp. Fourth Quarter 1999 Earnings Release Draft Attached is a draft of the earnings release scheduled to be released tomorrow morning, Tuesday, January 18. Please provide your comments by 2:00 p.m. today. Please call me at ext. 37209 to discuss; or fax your comments to 713/646-3002. 'Thank you in advance ftr your prompt response. Distribution: Jim Bannantine Carolyn Banett Cliff Baxter Sanjay Bhatnagar Bob Butts Rick Buy Rick Causey Diomedes Christodoulou *anda Curry Jim Derrick Pernlcy Dyson John Echois Andy Fastow Peggy Bawler Mark Frevert Kevin Hannon Ken Harrison David Hang Rod ffayslctt Joe Hirko Stan Horton Kurt Huneke ,** #' ~2atda~ LsayJzz Steve K~an Mark Koenig Ken Lay Tad Iindholm Rebecca Mark Mike McConnell Rebecca McDonald Jeff MoMahon Murk Metta Cindy Olson LanPal Mark Palmer * KenRice Rex Rogers JolmSherriff, Jeff Sherrick Jeff Skilling Sac Sutton Mary Turina Rob Walls * Greg Whalley Tom White A- - - -. EC 002191379 M1210329 4 S - - .4 - 0 ENRON CORP. CONTINUES STRONG EARNINGS GROWTh: REPORTS FOURTH OUARTER 1999 EARNINGS OF $0.30 PER DILUTED SHARE FOR IM1VIEDIATE RELEASE: Tuesday, January 18,2000 HOUSTON - Enron Corp. announced today very strong financial and operating results for the DalI year 1999, including: a 30 percent increase in revemacs to $41 billion; * a 37 percent increase in net income to $953 million; * a 17 percent increase in earnings per diluted share to S 1.17; * a 19 percent increase in marketed volumes to 32 trillion British thennal units per day (Tlitue/d); and * a more than doubling of new retail energy services contracts to $8.5 billion, The financial results exclude nonrecurring items. "Our strong results in both the fourth quarter and the Dill year 1999 reflect excellent performance in all of our operating businesses. Our wholesale business again registered stmng profitability and growth in the rapidly expanding, deregulating energy industry worldwide. Our retail business in flow profitable. This business has reached critical mass in contracting activity and service capabilities, and profitability is expected to accelerate rapidly," said Kenneth L. Lay, Enron chairman and chief executive officer. "In addition, Enron continues to develop innovative, high-growth ne* businesses that capitalize on our core skills, as demonstrated by the early success of our new broadband services business. Overall, a great year - one in which our shareholders received a total return of 58 percent." Enron also announced a very successfiul fourth quarter of 1999, generating earnings of $0.30 per diluted share, an increase of 25 percent from $0.24 a year ago.. FULL YEAR RESULTS Enron's businesses include Whole sale Energy Operations and Services (including broadband services), Retail Energy Services, and Transportation and Distribution. Wholesale Energy Operations and Services: Enron's wholesale group consists of two primary lines of business: Commodity Sales and Services (marketing energy commodities and services and managing the associated contract portfolios) and Energy EC 002191380 M 12 10 329 Assets and Investments (investing in, developing, constructing and operating energy and other assets.) The.wholesale group increased income before interest, minority interests and taxes (lEVI) 36 percent in 1999 to $1.3 billion. Strong earnings in Commodity Sales and Services were reflected in a 55 percent increase in BIT to $636 million for 1999. Total deliveries of energy commodities increased 19 percent to 32 TBtue/d, including increases in North America and Europe of 17 percent and 48 percent, respectively: Volume growth reflects expanding, comprehensive supply management contracts for large, regional gas and power utilities. Natural gas volumes increased 22 percent, largely driven by the North American operations. Total power volumes worldwide declined slightly to 391 million megawatt hours due to a single period ot' unusual activity in the U.S. during the third quarter of 1998. Baron's strong early lead in large, key power markets and the successful launch during 1999 of EnronOnline, Enron's innovative global Internet-based transaction system, are expected to continue contributing significantly to growth in Commodity Sales and Services. Energy Assets and Investments reported a 19 percent increase in IIBIT to $846 million. The earnings reflect a balanced contribution from Enron's growing energy networks worldwide, diverse energy and conununications investments, and sales of power plants developed and constructed to meet energy demands worldwide. In 1999, Enron began commercial operations of ten wholesale j~ower plants - r ~ totaling over 4,000 megawatts of capacity. Certain of these new facilities complement Enron's power marketing capabilities and frovide customers in North America and Europe with valuable power in periods of high demand. Enron's plants also deliver new sources of electricity to developing markets, such as South America and India. Retail Energy Services: Enron Energy Services offers comprehensive products to reduce en&gy costs for business customers throughout the U.S. and Europe. Enron Energy Services has built a strong sales and implementation team to capture the lead position in the energy outsource market and now manages over 16,500 facilities worldwide. -- During 1999, Enron Energy Services entered into contracts representing $8.5 billion of customers' fbture expenditures for natuM gas, power and energy services, M1210329 EC002791381 4 more than double the $3.8 billion contracted in 1998. The loss before interest and taxes of $68 million for 1999 represents a significant improvement over the $119 million loss for the prioi year and reflects the results of the increased delivery of energy commodity services under outsource contracts. Enron Energy Services was profitable in the fourth quarter of 1999 ($7 million of lB~ and is expected to generate Significantly increased profits in 2000 and beyond. Transportation and Distribution: This group includes lEmon's Gas Pipeline Group and Portland General Electric. During 1999, Transportation and Distribution generated $685 million of WIT versus $635 million last year. The Gas Pipeline Gioup reported WIT of $380 million for the full year 1999, compared to $351 million in 1998. Total volumes transpbrted increased by 4 percent to over 9 billion cubic feet per day. Noitliew Natural Gas settled its rate case, providing volume and rate flexibility for its customers. Florida (las Transmission Company tiled its application with the Federal Energy Regulatory Commission far the piļoposed Phase V expansion, which will increase firm transportation by 400 million cubic fret per day to 2.1 billion cubic feet per day including Phase IV. During the foifrth quarter of 1999, Enron entered into an agreement to sell Portland General Electric. The transaction is expected to close in late 2000. FOURTH QUARTER RESULTS Enron earned $0.30 per diluted share in the fourth quarter of 1999, an increase af25 percent from $0.24 last year. Revenues increased significantly to $12 billion. Earnings forthe fourth quarter of 1999 were led by: * a 36 percent increase in wholesale 1817 as marketed volumes increased 20 percent to 34 TBtue/d and * $7 million IBIT from Enron Energy Services, compared to a loss of $26 million in - the fourth quarter a year ago. In addition, new contracts of $2.6 billion were onginated in the most recent quarter. OTHER INFORMAflON For the flill year 1999, Enron reported $1.09 of earnings per diluted share comj,ared to $1.01 in 1998, alter nonrecurring items.. EC 002791382 M1210329 The results for 1999 include nonrecurring charges totaling $0.08 per diluted share. The net result included after-tax income of $345 million, or $0.45 per diluted share, reflecting Enron's sale of its ownershipin Boron Oil & Gas Company. Alter-tax charges included $278 million and $131 million, or $0.36 and $0.17 per diluted share, related to Enron's MTBE asset and the cumulative effect of accounting changes, respectively. Please see attached tables for additional financial information. This press release includes forward Looking statements withi~i the meaning of Section 27A of the Securities Act of 1933 and Section 218 of the Securities Exchange Act of 1934. Although Huron believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important lbctoxs that could cause actual results to differ materially from those in the tbrward looking statements herein include political developments in foreign countries, the ability to penetrate new retail natural gas and electricity markets in the United States and Europe, the timing and extent of changes in prices for crude oil, natural gas, electricity and interest rates, the timing and success '}f Elitods efforts to develop international power, pipeline and other infrastructure projects, and conditions of the capital markets and equity markets dining the periods covered by the fbnvard looking statements. C--- - EC 002791303 0 M1210329 ENRON CORP. Table I - Earnings Summary (Ur.audlt$d: in miflions except per sham data) Quarter Ended Dec~mber 31, 1999 1998 Year Ended tecehiber 31, 1990 1998 ReVenues Transportation and Listribution: Gas Pipeline Group Portland General Wholesale Energy Operations and Services Retail Energy Services Exploration arid Pruduction (a) Corporate arid Other (Including intercompany elimInations) Total Revenues - $ 181 $ 110 377 327 10,774 6,618 468 322 230 (145) 35 $ 11,855 $ 7,702 t - $ 853$ 653 1.379 1496 37,125 27,725 1,720 1.072 526 884 (609) (270) $ 40,794 $ S1260 After tax results Net Income excluding nonrecurring Items Nonrecurring Items: Gain on sale of EGG stock Charges related to MTBE asset Cumulative effect of accounting changes Net Income $ 255$ Ill - 45 - (40) $ 255$ 176 $ 053$ 698 345 45 (278) (40) (131) ________ $ 689$ 703 I Earnings (loss~ per share (diluted) (b) EPS (diluted) excluding nonrecurring ItemS Nonrecurring brasi Gain on sale of EOG stock Chairs related to MTBE asset Cumulative effect of edocunting changes tiPS (diluted) Average shares outstanding (diluted) (b) $ 0.30 $ 024 0.07 (0.06) $ 0.30 $ 0.25 - n 779.1 718.4 $ 1.17 $ 1.0o* 0.45 0.07 (0.38) (0.06) (0.17) - $. 1.09 $ tOl 789.0 895.3 - (a) Reflects results of Enron Oil & Gas Thruugh August16, 1999, date of share exchange transaclica (b) Shares outstanding and EPS amounts have been restated to reflect the tNo-ftr-one common stock spilt that was olfectiveAugust 13, 1999. EC 002791384 ) M1?10329 I Fourth QuarteriSSE ENRON CORP. Table 2b - Results by Segment (Unaudited: In millions, except per share amounts) Non. Recurring Recurring Ian: Transportation and Distribution: Gas Pipeline Group Portland General Wholesale Enemy Operations and Service Retail Energy Services Exploration and Production Corporate and Other 1911 - Interest and Related Charges, net Dividends on ProfelTed SecuritIes of Subsl(wries Minority Interests Interns Tax Provision (Benefit) Net Income Preferred Dividends: Second preforred stock Earnings on Common Stock Average Nwiter of Shares boat Basic Diluted Earnings per Common Share: Basic Diluted $ 84$ 84 201 (26) 31 26 400 152 19 17 41 171 (39) .5 4 .. 4 $ 167 $ 5 $ 172 - 661.8 #7164 7164 716.4 = = $ 0.28 $ 0.24 $ 0.01 $ 0.25 54 84 201 (26) 31 (13) 381 152 19 17. (3) 176 Note: Shares outstanding and EPS amounts have been restated to reflect the two-for-one common stock spiltthat w~ effectivt August13, 1999. - M1210329 'EC 082791886 I Total I. ENRON CORP. Table 2c - Results by Segment (Unauditod: In millions, except per share amounts) Non- Recurring Recurring 1999 Year wiT: Transportation and Distribution: Gas Pipeflne Group Pwiland General WhoIesa]~ Energy Operations and Services Retail Eneruy Services Exploration and Production (a) Corporate and Other iBfl* Interest and Related Charges, net Dividends on Preferred Securities of Subsldlades Minority Interests Income Tax Provision (Benefit) Income before Cumulative Accounting Changes Cumulative Effect of Accounting Changes, net ot tax Net income (Loss) Preferred OMdends: Second profaned stack Series A and Series B Preferred Stock (b) Earnings (Loss) on Common Stock $ 380 305 1,321 (68) 65 1,980 669 77 135 $ 13- 13 156 953 953 - $ 360 * 305 - 1,321 - (68) 65 (10) 1.993 - 659 77 1.35 87 (131) (84)' 17 - - $ $ (64) '102 1,020 (131) 889 * 17 * 49- $ 823 Average ~Jumbsr of Shares Used: (c) Basic Diluted Earnings (Loss) per Common Share: (c) Basic Diluted 705.3 TGaO 769 0 789.0 - = $ 1.17 a $ 1.17 $ (O,08~ $ 1.09 - a (a) Rall&ots results of Enron Oil & Gas trough hagust 16, 1999, date of share exchange tzannctlcn. Q,) The Series A end Series B Preferred Stock are sntldiluttrn and therefore havobeen excluded from the calculation of diluted earnings per share. (a) Shares outstanding and EPS amounts have been restoted to reflect the two-for-one corrrmon stock spiltthatwas effectiveAugust 13, 1999. ECODZ1S1BBl M1?10329 1 Total 2 ITranspcflafionl and Distribution ENRONCORPA Table 3a - Corq BuslnessHighlights (Unaudite~ Quarter Elided December31,. -. 1999 1998 loas Pipeline Group (In Wilons) Net Revenues Operatg Expenses Depreciation & Amcr*atiwi Equity In Earnings Other Income, net 1611 Total Volumes Transported (BBtvId) (a) Northern Natural Gas Tranawestem Pipeline Florida Gas Tea nernisatori Northern larder Pipeline Year Ended December 3i, v19~ 1098 $ 176$ 167 .$ 628$ 640 74 71 264 276 14 20 66 70 8 4 38 32 1 4 46 25 $ 97$ 84 $ 380$ 351 - == * 3,738 1,460 1,538 2,406 4,252 1,492 1,310 1*781 3,817 1,462 1,493 2,405 4,098 .1,607 1,324 1,770 Portland General (It, Millions) Revenues Purchased Power & Fuel Operating Expenses Depreciation & Amortization Other Income, net ma $ 377$ 327> - 179:> 129 61 65' 444 47 32 ~ $ 105 S 84 = $ 1,379 $ 1,198 639 461 304 295 181 183 50 19 $ 305 $ 286 Retail Customers (end of period, thousands) 719 704 ElectrIcity Sales (Thousand MWh) Residential Commercial Industrial Total Retail Wholesa)a Total Sales 2,004 1,879 1.198 5,081 8,381 * 2,052 1,725 921 4,698 6,935 719 704 7,404 7,392 1%259 12,612 7,101 6,761 17.444 (a) Reflects 100% of each entity's tinughput volumes. EG8D279lSB9 ,~2 1210329 a Wholesale Energy * Operations * and Service& ENRON CORP. Table Sb - Gore Business Highlights (Unaudited) Quarter Ended December 51, 1999 1995 IWhotesaIe Energy OperatL~hs and Services (In Mililons) Commodity Sales and SMvioes Energy Assets and Investments Unallocated Expenses IBIT 145 140 $ 267 $ 201 Year Ended December31, 1299 1998 $ ~636$ 840 $ 1,321 S Commodity Sales and Services Physical Volumes (BBtueJd) (a) Gas~ Unhd States Canada Europe Other Transport Volumes Total Gas Volumes On Ltiulds Electrivlty (b) Total Physical Volumes (BBtue/d) (a) Ejeofricity Vohmas Markeiod (Thousand MWh). Unfted States Europe & Other Total Financial SeWements (Notonal)(B8tuefd) 10,219 4,406 1,604, 26 16,265 693 16.948 6,877 941 .10,134 33905 7,941 4,101 1,605 4 13,651 510 - .14,181 4,923 586 * 8,609 * 28.279 I.. 86,665 6564 109,872 76,969 242 79.211 79,879 (a) Indudes third-party transactions of Erwon Eflegy Servlces (b) Represents e!ect,icity frensacilon volumes marketed, corworted to B8tueld. M1?10329 4 N EC 411 709 (152) 958 8,982 4,398 1,5-49 23 14,952 576 15,627 6,407 753 10,699 7418 3,486 1,243 8 12,155 559 12,714 2,950 610 11.024 378,930 11 576 99,337 401,843 529 402,372 - 75,266