============= Page 1 of 203 ============= ---_ X14 y ' r~yr • r a nrdn PA'T EXH061-00332 t v GOVERNMENT EXHIBIT 3987 Crim. No. H-04-25 (S-2) ============= Page 2 of 203 ============= ฃฃฃ00-690HX3 --- - r .... .. I ', ' .7n can ~f ============= Page 3 of 203 ============= 17 s L 77 i ov~ /f kA f Lillo- ~11 --------- -- EC3?349p0030692 EXH061-00334 ============= Page 4 of 203 ============= 'rr1 ------------- I g ~~ r. I--,- E-' r :.~ r r / F^` F I ~ f F EXH061-00335 ============= Page 5 of 203 ============= 1 v T a J 4 1 i o i Cs 1 1`~ i i 3 W 1 f J i fl. 1 j 1` a i ;- ============= Page 6 of 203 ============= l 0 0 EC37349AO030095 EXH061-00337 ============= Page 7 of 203 ============= A 2V h i ~ dJ n /k' i "a' J 1 r - -__ EC37349A0030696 EXH061-00338 ============= Page 8 of 203 ============= V fWv~~ - -- mi 77 ,722 I u~ ============= Page 9 of 203 ============= _ --- J ll,.;In :~ s - ============= Page 10 of 203 ============= .E1 s G - r t j r -_ ~r r hA III G l! l IIf r -------- -- - ___----- ... __ ._ {'T - EC37349AOD30699 d --------------- -"I V 4 N - 4 /S 3 t Al EXH 061-00341 ============= Page 11 of 203 ============= ...... ---- -- . . ............. . .. . ------------ . . . ....... . - --- - ------------- . ......... - --------- ============= Page 12 of 203 ============= r~ 4 v 0 d '69 r~ C L/ P c PC L _ V iEU i:fi/p ~) 4 vt~ kGl'1 au J r~,G+ ' ~tlt - ~ I 114 1 jr, `- EC37349AO030526 EXH061-00343 ============= Page 13 of 203 ============= -17 J { VI) ~wiw r { IT TT777 J -- f ============= Page 14 of 203 ============= f n i S EXH061-00345 ============= Page 15 of 203 ============= a+~ Na1~ BOARD OF DIRECTORS' MEETING October 9, 2001 EC37349AO030444 EXH 061-00346 ============= Page 16 of 203 ============= Non-Recurring Earnings Third Quarter-2001 Recurring Earnings $ 521 $ 396 Non-Recurring Items: Azurix Asset Sales a- , 310 Broadband (281) Loss on investing Activities* (711) Total Non-Recurring Items ($ in millions) Pre-tax After-tax (1,302) (310) (183) (462) (955) Anti-dilution Total Earnings ($781) ($559) * Pending New Power market movement E.P.S. $0.43 (0.34) (0.20) (0.51) (1.05) (U:11) ($0.73) EC37349A0031614 CH061-00347 ============= Page 17 of 203 ============= /U., Third Quarter - Recurring Earnings by Segment ($ in millions) Third Quarter !Vine Months 2001 2000 2001 2000 Enron Transportation Services $83 $83 $293 $288 Portland Generals (~,Xo, (3) 74 122 241 Global Assets- 16 26 34 140 D , 4' Americas YJ4/ 646 548 2,567 1,134 Retail Risk Management 43 - (665) - Europe and Other Energy Mkts n r 67 40 265 216 Energy Service )Y _ ~ 71 27 171 79 Broadband Services (80) (20) (217) (28) Corporate & Other (67) (111) (206) (170) Interest, MI, & Income Tax (380) (375) (1,158) (981) Recurring Net Income $396 " $ 292 $ 1,206 $919 EC37349A0031615 XH061-00348 ============= Page 18 of 203 ============= Enron Corp. Reserves ($ millions) Allowance for doubtful accounts 355 559 480 106 California AIR reserves at 60% 30; 80% 2Q Credit 450 350 323 288 Reevaluated monthly Valuation - gas and power 87 277 401 435 EES Specific Deal Reserves 415 248 - - PG&E Credit Claims 50 111 - - Other specific transactions 87 98 143 58 California and N. West political risk 21 47 47 47 Bammel monetization reserve - 35 35 35 California tariff risk - - 319 - Reserve used in second quarter TVA settlement - - - 253 Settled first quarter 2001 G 9/30/01 6130/01 3131101 12/3`1100 PGE Sullivan plant reclamation reserve 20 20 20 20 Allowance for doubtful accounts 25 22 19 10 North America Europe Credit Global Exploration and Production Allowance for doubtful accounts South America Credit CALME Dom Rep hotel litigation & AIR reserve Madosa sale - deferred revenue EIM 1,465 1,725 1748. 1,222. f~~„ yy,~ ~~ J (lv~ So e X a> G3o r Cr4rCa4 f /A-' . rri'2~ ts.. 104 114 117 131 Reevaluated monthly ~jqz p1 Btu c t c7 . w -- 6 O 11 11 17 17 33 Reevaluated monthly C ~xh ~ti~ l~ ~to Credit Corporate Tax reserve related to years under audit (a) (a) Tax years under audit are 1996 forward. 3 AIR written off following renegotiation of PPA - 13 13 13 Amortization of call option 25 14 - - 30 '17 285 285 285 285 o w"41 ,,, c~ 0Qa- EC37349A0031616 XH061-00349 ============= Page 19 of 203 ============= Financial and Earnings Report EC37349AO030142 :XH061-00350 ============= Page 20 of 203 ============= y'Pat, . Previous Organization L-vu, u~ranuuuu 14%) =XH061-00351 ============= Page 21 of 203 ============= Revised Organization i o C~I~b IJ~>> EC37349AO030144 :XH 061-00352 ============= Page 22 of 203 ============= Additional disclosures Earnings. Release • Previously disclosed for Wholesale and Retail segments: Revenues Income Before Interest & Taxes (IBIT) • New disclosures for every segment: Revenues Cost of sales V/ Operating Expenses Depreciation and Amortization Equity in Earnings Other, net Income Before Interest & Taxes (IBIT) EC37349AO030145 :XH 061-00353 ============= Page 23 of 203 ============= Additional Disclosures 10-Q • Previously disclosed for every segment: IBIT (including detailed components) Total Assets • New disclosures for every segment: IBIT Allocated Interest Cad Allocated Taxes Net Income CG c Total Assets Management's Estimate of Capital. Deployed Return on Capital Deployed EC37349AU030146 :XH 061-00354 ============= Page 24 of 203 ============= Recurring Earnings Per Share Plan Third Quarter 2001 Actual EC37349A0030141 XH061-00355 ============= Page 25 of 203 ============= Recurring Earnings Per Share Nine Months Ended September 30, 2001 Plan Actual EC37349AO030148 EXH061-00356 ============= Page 26 of 203 ============= Third Quarter Estimated Recurring Net Income by Segment ($ in millions) Third Quarter Nine Months Plan Actual Plan Actual Enron Transportation Services $31 $32 $120 $121 vI3 Portland General (13) 48 43 ly-,- - Global Assets 10 (3) 153 (10) y S S U((as sA 216 404 700 1,638 Americas -a); '~, ax ?1 . WV 0 . ' 21 (439).~Retail Risk Management (24 , and Other Energy Mkts 123 , sz 37 320 152 Europe )(>tN 39 41 90 90 Energy Services Broadband Services (23) (50) (59) (137) Corporate & Other 35 (73) (261) (252) @- rj~ p,- Q_ Ca,Q ; OP ~w Recurring g Net Income l) $361 $ 396 $ 1,111 $ 1,206 EC37349AO030149 EXH061-00357 ============= Page 27 of 203 ============= Non-Recurring Earnings Third Quarter X001 ($ in millions) Pre-tax After-tax E.P.S. Recurring Earnings $ 521 $ 396 $0.43 Non-Recurring Items: Azurix Asset Sales (310) (310) (0.34). Broadband (281) (183) (0.20) Loss on Investing Activities* (711) (462) (0.51) Total Non-Recurring Items (1,302) (955) (1.05) Anti-dilution (0.11) Total Earnings ($781) ($559) ($0.73) * Pending New Power market movement EC37349AO030150 !XH 061-00358 ============= Page 28 of 203 ============= Earnings Per Share Third Quarter 2000 2001 $(0.73) El Recurring  Non-recurring Anti-dilution EC37349AO030151 =XH061-00359 ============= Page 29 of 203 ============= Earnings Per share Nine Months Ended September 30, H 2000 2001 11 $0.32 EC37349AO030152 :XH 061-00360 D Recurring tNon-recurring ============= Page 30 of 203 ============= Third Quarter - Recurring Earnings by Segment ($ in millions) Third Quarter Nine Months 2001 2000 2001 2000 Enron Transportation Services $83 $83 $293 $288 Portland General (3) 74 122 241 Global Assets 16 26 34 140 Americas 646 548 2,567 1,134 Retail Risk Management 43 - (665) - Europe and Other Energy Mkts 67 40 265 216 Energy Services 71 27 171 79 Broadband Services (80) (20) (217) (28) Corporate & Other -~ ~ ~ ~t(6) (111) (206) (170) Interest, MI, & Income Tax (375) (1,158) (981) Recurring Net Income 96 292 1 206 19 9 G EC37349AO030153 !XH 061-00361 ============= Page 31 of 203 ============= Balance Sheet Debt ($ in millions) 2001 2000 3rd Qtr Estimated June YTD Activity Sept YTD Sept YTD Opening Debt Balance $(109229) $(109229) $(89152) Funds Flow from Operations 1,804 461 65 288 Change in Working Capital * (800) (526) '`(1,326) 9(729) Changes in Deposit / Margin Activity 2 342 (185) C~ X2,527) 1 Cash Flow from Operations $(13338) $(250) $(11588) $100 ~) d y 40 II~t~.Q~jZi ~~~ 14 l~nJ2 (- IC: w.. * Excluding Deposit/Margin Activity EC37349A0030154 XH 061-00362 ============= Page 32 of 203 ============= Balance Sheet Debt ($ in millions) Opening Debt Balance Cash Flow from Operations Proceeds from Sales of Assets Capital Expenditures Equity Investments Cash Used in Investing June YTD $(101229) (1,338) 2001 3rd Qtr Activity (250) Estimated Sept YTD $(109229) (1,588) 2000 Sept YTD $(83152) 100 1j hW) 1 423 224 ` ~ 1, 647 222 (1,200) 0 ) (414 0 (1,614) (1,549) 1 383 , 82 1,465 2,275 $(19160) $(272) $(11432) $(39602) I v EC31349A0030155 :XH061-00363 ============= Page 33 of 203 ============= Balance Sheet Debt ($ in millions) Opening Debt Balance Cash Flow from Operations Cash Used in Investing June YTD $(109229) (1,338) (1,160) 2001 3rd Qtr Activity (250) (272) 2000 Sept YTD $(89152) 100 (3,602) Dividends (increase)/Decrease in Cash on Hand Other Period Activity (256) 528 (357) (2,583) $(129812) (143) 495 (399) 1,023 14811 .(396) (409) (1.3221 Period Ending Debt Balance Funds Flow I Interest (124) (294) Estimated Sept YTD $(101229) (1,588) (1,432) (2,877) 4.76 ~ 4.21 (f_67g1 1.40 EC37349AU030156 XH 061-00364 ============= Page 34 of 203 ============= Balance Sheet Debt ($ in millions) 2001 Sept YTD Opening Debt Balance $(109229) Funds Flow from Operations 2,265 Change in Working Capital * (1,326) Changes in Deposit I Margin Activity (2,527) Cash Flow from Operations $(19588) * Excluding Deposit/Margin Activity Full Year Estimate $(105229) Revised Plan $(101229) 2,900 2,925 55 1,000) y 24" $1,875 U0 t".) EC37349AO030157 =XH061-00365 ============= Page 35 of 203 ============= Balance Sheet Debt ($ in millions) 2001 Opening Debt Balance Cash Flow from Operations Proceeds from Sales of Assets Capital Expenditures Equity Investments Cash Used in Investing Sept YTD $(105229) (1,588) Full Year Estimate $(109229) 241 Revised Plan $(105229) 1,875 1,647 (1,614) (1.465) $(19432) i e r'~ Ir! 2,274 1,939 (1,888) 1,310) J (1,841) ? 0,228) $ (1,455) (1,599) EC37349AO030158 EXH 061-00366 ============= Page 36 of 203 ============= Balance Sheet Debt ($ in millions) 2001 Full Year Revised Sept YTD Estimate Plan Opening Debt Balance $(105229) $(109229) $(109229) Cash Flow from Operations (1,588) 241 1,875 Cash Used in Investing (1,432) (1,455) (1,599) Dividends (399) (538) (540) (Increase)/Decrease in Cash on Hand 1,023 1,023 - Other (481) (482) (532) Period Activity (2,877) (1,211) (796) Period Ending Debt Balance $(139106) (11,440 $ (11,025) 0- Funds Flow I Interest 4.21 (4.02) 4.07 LVI EC37349AO030159 EXH 061-00367 ============= Page 37 of 203 ============= Capital Deployed September 2001 Estimate ETS L Net Assets 2,677 c t1.j s `' Allocated Debt 2,141 Min Int., & Pref. Equity Capital 536 Debt/ Total Capital 80% ($ in millions) ~~ Europe / Corp & PGE EGAS Americas Other EBS Retail; Other Total 2,550 5,738 12,399 2,144 698 1,103 (1,351) 25,958 . t.A 1,108 1,454 6,195 308 - 439 4,759 16,404 1,442 4,284 6,204 42% 13% 50% 1,836 698 664 (6,110) 9,554 13% 0% 40% 50% EC37349AO030160 :XH 061-00368 ============= Page 38 of 203 ============= Capital replayed September 2001 Estimate ($ in millions) Equity Capital Net Income Return on Equity Europe I Corp & ETS PGE EGAS Americas other _ 9-_ Retail _Other Total 536 1,442 4,284 121 43 (10) 30% 4% t 6,204 1,836 698 664 (6,110) 9,554 1,199 152 (137) 90 (252) 1,206 26% 11 % - 18% - 17% r 0>, L~ ~~ c`s to EC37349A0030161 I~ ,~/.-,~ EXH061-00369 ============= Page 39 of 203 ============= boodwill Summary o (in millions) June 30, 2001 Reporting Units Goodwill Portland General Global Assets & Services Elektro Enron Global Power & Pipelines LLC Ecoelectrica Other Industrial Markets - Pulp, Paper, & Steel Europe (MG Metals) Americas Enron Energy Services Enron Broadband Services Enron Wind Azurix-Wessex Azurix-Other Total fi-t- - o fD a Proposed Amounts Write Transferred Off 583 ~165 (165) 165 (a) 846 372 364 45 627 Q0 N ! 187 0 ,-97 (b) 213 (a) 1) $ 5,727 1,648 EC37349AO030162 $ (55) 5' I-P-P (144)-~ a Amount considered in sales occurring prior to adoption of the standard (61 2002) (b) Evaluation ongoing At -7 G) (11 -All ~dFSr~. C. At` \n('i~i*t.'r{ l n. C~h. U EXH061-00370 ============= Page 40 of 203 ============= Balance Sheet Debt Minority Interest Preferred Stock of Subs Shareholders Equity Total Capital Debt / Total Capital r01 Total Capital ($ in millions) Dec 2000 $ 10,229 2,414 904 11,470 Estimated Sept 2001 $135106 2,395 903 9,554 $25,017 $25,958 40.9% 50.5% ~3 J 1 '~ r roforma Estimated Sale of Dec PGE & 2001 Goodwill $ 11,440 $8,645 2,395 2,395 903 873 9,836 9,692 $24,573 $21,60:5 6.6%a 40.0% EC37349AO030163 XH061-00371 ============= Page 41 of 203 ============= Financial and Earnings Report EC37349A0030164 =XH 061-00372 ============= Page 42 of 203 ============= Investor Relations Report EG37349030165 EXH061-00373 ============= Page 43 of 203 ============= 2001 YTD Total Return to Shareholder (Through 1015101) Enron DJIA S&P 500 Energy Peers NASDAQ EC37349AO030166 Broadband C q~._. t =XH 061-00374 C~ -84% ============= Page 44 of 203 ============= Peers Merchant Energy 2001 YTD Total Return (Through 1015101) Enron Kinder Duke Morgan Mirant Williams Dynegy El Paso NRG Calpine 0 EC37349AO030167 AES EXH061-00375 ============= Page 45 of 203 ============= rU ~ Relative Valuation (PIE Ratio*) December 31, 2000 ;63 7-6 @ 50x *Based on 2001 EPS Estimates October 5, 2001 24x 18x 14x Enron S&P 500 Peer Group EC37349030168 XH 061-00376 Enron S&P 500 Peer Group ============= Page 46 of 203 ============= Largest Shareholders* Name P'Uanus Capital Corporation , A - . ~,,_,~ i( Alliance Capital Management Putnam Investment Management Smith Barney Asset Management Northern Trust Global Investments Fidelity Management & Research Government of Singapore Investment Corp AIM Management Group Goldman Sachs Asset Management Rorer Asset Management Rittenhouse Financial Services Morgan Stanley Advisors Dresdner RCM Global Investors American Express Financial Advisors MFS Investment Management Deutsche Asset Mgmt. Group Ltd. Credit Suisse First Boston Asset Management Oppenheimer Funds Shares Held Banc of America Capital Management *Excluding Index Funds \'t i1 s '?1- 44,000,000 35,000,000 24,500,000 16,000,000 9,200,000 8,500,000 8,400,000 8,000,000 7,700,000 7,100,000 6,800,000 6,800,000 6,700,000 6,627,000 6,100,000 5,300,000 4,800,000 4,700,000 4,507,186 Location Denver New York/Minneapolis Boston New York Chicago Boston Singapore Houston New York Philadelphia Philadelphia New York San Francisco Minneapolis Boston London New York New York St. Louis/New York 1,900,000 700,000 277,000 300,000 240,000 EC37349AO030169 Change From 8/1101 2,000,000 13,000,000 (4,000,000) 1,400,000 (4,500,000) (2,100,000) (4,800,000) 950,000 XH 061-00377 ============= Page 47 of 203 ============= Largest Potential Shareholders Name a Total Equity Assets Location (Millions) Capital Research & Management Los Angeles $224,000 Nellington Management Boston 157,000 Dppenheimer Capital New York 24,000 J.P. Morgan Investment Management New York 106,000 Fayez Sarofim Houston 43,000 State Farm Insurance Chicago 45,000 T. Rowe Price Baltimore 85,000 Davis Funds New York 40,000 Barrow Hanley Dallas 30,000 ~4) Primary Investment Style Value Value Value Growth Growth Growth Growth Growth Value EC37349AD030170 XH061-00378 ============= Page 48 of 203 ============= Analyst Recommendations A.G. Edwards Bank of America Montgomery Securities Bear Stearns Bernstein CIBC Oppenheimer Commerzbank Securities CS First Boston Dain .Rauscher Wessels Edward Jones First Albany Goldman Sachs Howard Weil J.P. Morgan Lehman Brothers Merrill Lynch Prudential Securities Salomon Smith Barney Sanders Morris Simmons & Co. U.B.S, Warburg John Olson Jeff Dietert Ron Baron_e Buy Strong Buy Attractive Buy Buy Accumulate Strong Buy Strong Buy Buy Strong Buy Buy Buy Buy Strong Buy Buy Buy Buy Strong Buy Attractive Strong Buy EC37349A0030171 Mike Heim Will Maze Robert Winters Duane Grubert Bill Hyler Andre Meade Curt Launer Mark Easterbrook Zach Wagner Bob Christensen David Fleischer Rebecca Followill Anatol Feygin Richard Gross Donato Eassey Carol Coale Ray Niles XH061-00379 ============= Page 49 of 203 ============= Investor Relations Planned Fourth Quarter Meetings* 0 Milwaukee San Francisco ($725) river Los Angeles ($570) San Diego ($85) Kansas City Dallas ,ustin ($60) ($85) Houston Amounts Indicates Total U.S. Equities Under Management (in Billions). Atlanta A 10 V5, A- L A1 EC37349AO030172 urich ($60) :XH061-00380 ============= Page 50 of 203 ============= Current Investor Concerns 0 1A I • Cash Flow From p • Earnings Composition and Disclosure-1\0 • Balance sheet strength and Liquidity 0 • Progress on Asset sales --' 1_~_ • Effects of Lower Natural Gas and Power Prices, and Lower Volatility • Financing Vehicles and Potential Equity Issuance Requirements • California • India EC37349AO030173 EXH061-00381 ============= Page 51 of 203 ============= Enron common Stock Dividend ~ • Currently $0.50 Per Common Share • Dividend on Convertible Preferred Tied to Common Share Dividend 5 • Total Annual Cash Payment (Including Convertible Preferred) is Approximately $400 Million (i~o W No Increase Since October 1998 • Current Yield is 1.6% - Current Payout is 23% EC37349AO030174 XH061-00382 ============= Page 52 of 203 ============= Common Stock Dividend Payout Ratio 3o% 13%: Enron S&P 500 Peer Group EC37349AO030175 EXH061-00383 ============= Page 53 of 203 ============= Common Stock Dividend Yields ~~ ALL f -Le~,)0_ C~J. F a EC37349AO030176 (H061-00384 Energy Peer Group ============= Page 54 of 203 ============= Investor Relations Report EC31349A0030111 =XH061-00385 ============= Page 55 of 203 ============= EXH061-00386 ============= Page 56 of 203 ============= gฐaihs an V&E Presentation to Truman Goldman, Sachs & Co. Vinson & Elkins L.L.P. 09-Oct-2001 ~31349AD030350 - E EXH061-00387 ============= Page 57 of 203 ============= ~aman Table of Contents V&E I. Merger Market Overview II. How Vulnerable is Truman? Ill. Anti-Raid Preparation Appendix A: Expanded Structural Defense Discussion Goldman Sachs does not provide accounting, tax or legal advice. In addition, we mutually agree that, subject to applicable law, you may disclose any aspects of any potential transaction or structure described herein that are necessary to support any U. S. federal income tax benefits with no limitations imposed by Goldman Sachs. EC37349AO030359 XH061-00388 ============= Page 58 of 203 ============= EXH061-00389 ============= Page 59 of 203 ============= gaacns an V&E I. Merger Market Overview EC37349A0030361 Merger Market Overview 3 =XH061-00390 ============= Page 60 of 203 ============= oldman Overview ฐ~ Merger Market 2001 YTD Highlights V&E Global M&A Volume _  Top 20 Deals  All Other Deals $3,461F? $3,280 a r, d 2000 YTD E $2,491 0 9 ar $1,632 c $1,307 o $1,109 c c rQ 0 21% 19% 25% . Interest Rate and Equity Market Performance 1750 1500 > 1250 d g 1000 rn .y 750 0 U 500 'As of 250 Sep-1991 9% 8% 7% a 6% 5% 4% Sep-1993 Sep-1995 Sep-1997 Sep-1999 Sep-2001 Monthly from Sep-1991 to Sep-2001 X5;7 M&A Volume by Industry Sector Health Care 5% Technology 11% 13b/. ~~ Medial Entertainment 9% l S&P~500 Companies Compared to 52-Week Highs' Trading at 100% 2% p at EC37349AO030362 Merger Market Overview 4 EXH061-00391 1996 1997 1998 1999 2000 2001 YTD ============= Page 61 of 203 ============= 9a 16, San Hostile / Unsolicited Initiatives G V&E .  There is a resurgence in hostile activity - not all hostile activity becomes public  Structural and other defenses are not stopping raiders - Strong structural defenses do enable tactical responses  Size and intellectual capital are no longer defenses in themselves~c C4, '&2 r3/: .f, u .2•zTr~% } (-C j„r a y`7LP', rc t.  Generally, only 1 out of 3 companies that are raided stay independent ( ~y r In y,~ r 0 IN I C(' Global Hostile / Unsolicited Activity? 34% Source: Thomson Financial Securities Data Through 30-Sep-2001. Merger Market Overview 5 EC37349AO030363 EXH061-00392 1988 1989 1990 1991 1992 1993 1994 1995 1996 1991 I yiD I"ZI LVVV ""'' ============= Page 62 of 203 ============= ~pQa30364 EXH061-00393 ============= Page 63 of 203 ============= :XH061-00394 ============= Page 64 of 203 ============= ฐachs an V&E III. Anti-Raid Preparation EC37349AD030370 Anti-Raid Preparation 10 :XH 061-00395 ============= Page 65 of 203 ============= Saachs an V&E Potential Approaches of an Unsolicited Acquiror 2 aJ If y", ?1/_)~ EC37349AO030371 Anti-Raid Preparation 11 EXH061-00396 ============= Page 66 of 203 ============= e cman Review of Structural Defenses V&E Currently in Place Other Possible Defenses Federal and tOregon Utility Regulatory Constraints - G.z  Effective Elimination of Shareholder Ability to Act by  Written Consent  Advance Notice Requiremer I for Shareholder Proposals and Notifications yE r, f0 ~.  r ~! 'Oregon Other Constituency Statute II-/ Q e  C 0  Fair Price Charter Provision  Oregon Business Combination Statute (Comparable to Delaware ง203)  Blank Check Preferred Stock  Denial of Cumulative Voting  Hostile Change of Control Provisions in Employee Benefit Plans EC3734000303T2 Shareholder Rights Plan Staggered Board Prohibit Removal of Directors without Cause Strengthen Cap On Size of the Board Deny Shareholders the Right to Call Special Meetings (only after reincorporation)  Reincorporate c ,CG 7 av,~ d7, ~a 2-r.> Anti-Raid reparation 12 /T70FU (0'1, ,)1. 1 no, XH061-00397 ============= Page 67 of 203 ============= ~as t Strengthening Structural Defenses =f~ - V&E  Shareholder Rights Plan 1, O661r;h (,c,C( y 14~,j. - Can be adopted by Board on short notice - Does not require shareholder approval - Caesider having it "on the shelfs _>r:r;a (t oG', -,.ad % ' C Limitleliminate ability for shareholders to call a special meeting - Not possible to limit under Oregon law but can indirectly achieve goal by director removal and board size provisions - Default provision under Delaware law ~u >Js 1 r' Staggered Board - .kv Difficult to implement due to shareholer sensitivity - Many peers don't have a staggered Board - As a result of shareholders' ability to call a special meeting Truman is more vulnerable than peers - and effectively vulnerable at all times during the year 2 Reincorporate in Delaware In conjunction with PGE transaction  Consider approving reincorporation at next annual shareholders meeting subject to closing PGE or PUHCA exemption  No ability for shareholders to call special meeting under '~ law unless specially provided for Stay Incorporated in Oregon  Consider two charter amendments - Eliminate ability of shareholders to remove directors without cause or to increase board size - Staggered Board 0 Consider staggered Board as part of reincorporation EC37349AO030373 Anti-Raid Preparation 13 ? l ~72 4 ~ /Jai u..~ r r_ c7rf ot /I XH061-00398 ============= Page 68 of 203 ============= ~ama0 Potential Acquirers of Truman V&E l ~cIire (US$ in millions, except per share amounts) Company Equity Value' Enterprise Value' Calendarized PIE Multiples2 2002 Debt to Cap. Truman $26,247 $42,510 15.6x 53.1% Strategic Interest General Electric $379,582 $577,231 23.7x 77.8% Exxon Mobil 273,744 275,625 18.6 13.3 Royal Dutch/Shell 190,395 190,919 15.4 10.6 BP Amoco 182,641 237,914 16.0 42.4 AIG 183,466 228,998 22.9 53.3 El Paso 23,920 41,286 12.3 59.6 Possible, but Unlikely Strategic Interest Total $99,706 $110,394 13.4x 32.7% Tyco 90,502 144,555 13.7 64.1 Chevron/Texaco 91,275 104,896 16.2 30.3 ENI 50,047 60,605 10.3 31.4 E.ON 42,011 47,248 17.9 32.8 Suez 34,847 71,002 18.9 61.4 Duke 30,882 46,875 14.1 50.4 RWE 22,677 51,113 18.2 72.3 Repsol 17,382 39,753 8.9 52.8 EC37349AO030374 ' Source: Latest publicly available financial statements. Equity value based on fully diluted shares outstanding and closing stock prices on October 3, 2001. 2 Source: IBES median estimates unless otherwise noted. Anti-Raid Preparation 14 XH061-00399 ============= Page 69 of 203 ============= r aacns an V&E o if Someone Makes an Approach What to d F Board of L Directors No _37349AO030375 Anti-Raid Preparation 15 EXH061-00400 ============= Page 70 of 203 ============= an baths V&E Are You Prepared?  Most battles are won or lost before they are fought - Preparation is the key - Identify your Team - Know who your shareholders are - Review your financial and strategic plan - Continue to evaluate options that drive shareholder value - Plan your response to an unexpected approach  Strengthen structural defenses - Ready Shareholders' Rights Plan viS ' v` - Address ability to call special meeting/removal of directors - Leave board configuration as is (no staggered board) i P1" s51 `9 37(( EC37349AOO3O377 Anti-Raid Preparation 17 KH061-00401 ============= Page 71 of 203 ============= EXH 061-00402 ============= Page 72 of 203 ============= 9aฐchs V&E Appendix A: Expanded Structural Defense Discussion EC37349AO030379 Expanded Structural Defense Discussion 11 (H061-00403 ============= Page 73 of 203 ============= 9a man Structural Defenses in Place V&E Federal and Oregon Utility Regulatory Constraints  Description Because of Truman's ownership of PGE, under the Public Utility Holding Company Act of 1935 (PUHCA), the Federal Power Act and Oregon law, an acquisition of Truman would require prior approval by the Federal Energy Regulatory Commission and the Oregon Public Utility Commission and, for many potential buyers, the Securities and Exchange Commission. In addition, PUHCA would impose substantial restrictions on some potential acquirers.  Effect As long as Truman owns PGE, (1) an acquisition of Truman (more than 10% of Truman voting stock) will be slowed considerably by the required regulatory approval process; (2) potential acquirers already owning a U.S. gas or electric utility may have difficulty satisfying PUHCA regulatory requirements; and (3) U.S. or foreign energy companies without a U.S. gas or electric utility would be best situated to avoid PUHCA regulation. However, these approval requirements would not necessarily prevent or delay a proxy fight to replace the Truman Board as an initial step in a hostile acquisition attempt. Effective Elimination of Shareholder Ability to Act by Action by Written Consent  Description Prohibits actions by written consent other than by unanimous consent.  Effect Prevents acquiror from bypassing stockholder meetings as a forum for shareholder action. EC37349AO030380 Expanded Structural Defense Discussion 19 XH 061-00404 ============= Page 74 of 203 ============= ~e~s8ฐ Structural Defenses in Place (Continued) vas Advance Notice for Director Nominations and Shareholder Proposals  Description Requires advance notice before shareholder can present director nominations or proposals at shareholder meetings. With respect to an annual meeting, shareholders notice must be received not less than 120 days prior to an anniversary date of the proxy statement for the previous year's annual meeting. With respect to a special meeting, shareholder's notice must be receive not later than 10 days after the date on which the notice of the meeting was mailed.  Effect Prevents surprise nominations and solicitations for shareholder proposals at an annual meeting. Oregon "Other Constituency" Statute  Description Statutory provision that authorizes the Board, in evaluating a potential acquisition, to consider a range of social, legal and economic effects on employees and other constituencies, as well as both the long-term and short-term interests of the corporation and its shareholders, including that these interests may be best served by the continued independence of the corporation.  Effect May enhance the Board's ability to "just say no" to a potential acquisition or to choose among competing bidders. EC37349AO030381 Expanded Structural Defense Discussion 2( XH061-00405 ============= Page 75 of 203 ============= ~emaฐ Structural Defenses in Place (Continued) V&E Fair Price Charter Provision  Description Any business combination with a 10% + shareholder must be approved by at least 80% of Truman's voting stock unless (i) the transaction is approved by at least 80% of Continuing Directors who constitute a majority of the Board (ii) certain fair price and procedural requirements are met or (iii) the transaction occurs more than 5 years after last acquisition of stock by the 10% + stockholder.  Effect Discourages two-tiered offers. Oregon Business Combination Statute  Description A corporation generally may riot engage in a business combination with an interested stockholder (owner of 15% or more of Truman voting stock) unless (i) the Board approved the transaction which resulted in the shareholder becoming an interested shareholder, (ii) upon the consummation of such transaction, the interested shareholder owned at least 85% of the outstanding voting stock (excluding certain insider holdings), (iii) the business combination is subsequently approved by the Board and holders of 2/3 of disinterested voting stock or (iv) business combination occurs more than 3 years following the date the shareholder became an interested shareholder. (Substantially similar to Delaware General Corporation Law ง203).  Effect Discourages hostile tender offers which bypass the Board, do not obtain a high stockholder tender percentage and which are dependent upon quick access to the target's assets for financing or other purposes. EC37349AO030382 Expanded Structural Defense Discussion 2- H 061-00406 ============= Page 76 of 203 ============= Sa hs18ฐ Structural Defenses in Place (Continued) V&E Blank Check Preferred Stock  Description Authorization in Charter for Preferred Stock with terms set by Board without shareholder action.  Effect Gives the Board the flexibility to raise capital, issue stock to a white squire, effect a defensive recapitalization or otherwise respond to a hostile bid. Denial of Cumulative Voting  Description Prohibits shareholders from cumulating their votes, which reduces the number of shares required to obtain individual Board seats.  Effect Prevents minority shareholders from obtaining Board seats. Hostile Change of Control Provisions in Employee Benefit Plans  Description Stock option plans generally provide for automatic acceleration of vesting and a cash-out in the event of a change of control that is not approved by the Board.  Effect May encourage a potential acquiror to negotiate with the Board rather than pursue a proxy fight in order to preserve existing employee incentives and minimize acquisition costs. EC37349R0030313 Expanded Structural Defense Discussion 22 XH 061-00407 ============= Page 77 of 203 ============= ~a man Possible Additional Structural Defenses V&E Shareholder Rights Plan  Description Plan providing for a distribution of stock purchase rights to all holders of common stock, which rights have nominal value and are not exercisable until triggered. Rights are triggered if a potential raider acquires a significant percentage (10-20%) of the Company's voting stock, unless the Board redeems or nullifies the rights. If triggered, the rights allow each shareholder other than the acquiror to acquire a significant number of shares of common stock at a substantial discount to the current market value, causing extreme dilution to the acquiror.  Effect Effectively prevents an acquisition of a significant block of stock without Board approval- 0 Process Can be adopted by the Board without shareholder approval. Staggered Board  Description Divides the Board into three classes elected for staggered three year terms, so that only one- third of the Board is up for reelection at each annual meeting.  Effect If coupled with director removal protection, effectively requires an acquiror to wait two years before it can obtain a majority of the Board through proxy contests.  Process Under Oregon law, the board could be classified without shareholder approval, but shareholder approval of a charter amendment would be required to prohibit removal of Board members without cause. EC37349AO030384 Expanded Structural Defense Discussion 2: (H061-00408 ============= Page 78 of 203 ============= 9ec"Ms8ฐ Possible Additional Structural Defenses (Continued) V&E Prohibit Removal of Directors Without Cause  Description Change the default provision in Oregon, which permits the shareholders to remove directors without cause at any meeting called for that purpose (by a majority of votes cast if a quorum is present).  Effect Would eliminate right of shareholders to call special meeting and remove and replace the Board and, if coupled with a staggered board, would effectively prevent an acquiror from taking control of the Board in a single proxy contest.  Process Would require shareholder approval of a charter amendment (by a majority of votes cast if a quorum is present). Strengthen Cap on Size of Board  Description Charter amendment to limit the maximum size of the Board in a way that cannot be changed without Board approval.  Effect Prevents an acquiror from "packing" the Board to circumvent director removal protections.  Process Would require shareholder approval of a charter amendment (by a majority of votes cast if a quorum is present). EC37349A0030385 Expanded Structural Defense Discussion 24 XH061-00409 ============= Page 79 of 203 ============= Saacdhs an vas Possible Additional Structural Defenses (Continued) Deny Shareholders the Right to Call Special Meetings  Description Change the current ability of 10% shareholders to force a special meeting.  - Effect Limits any shareholder proxy activities to the annual meeting.  Process Not possible under Oregon law, but would be the default provision under Delaware law. Reincorporate  Description Merge Truman into another corporation domiciled in another jurisdiction such as Delaware.  Effect Although Oregon may have certain advantages over Delaware from a structural defense perspective (Oregon Other Constituency Provision), reincorporation into Delaware may provide a better opportunity to eliminate shareholder right to call a special meeting and possibly implement staggered board.  Process Shareholder approval of a merger would be required (by a majority of outstanding voting stock). If PGE then owned, would have to address PUHCA issues. EC37349030386 Expanded Structural Defense Discussion 25 XH 061-00410 ============= Page 80 of 203 ============= I Sachs an vas harrys\Antiraid\07 Presentation to Truman.doc aitrueblood 6 Oct 2001 23:06 1/26 (~Jlcf Draft Presentation to Truman Goldman, Sachs & Co. Vinson & Elkins L.L.P. 09-Oct-2001 r C t.~ ,~ r P u~ ~C7(\11nJ r I r \D ` Lee..: EC37349AO030549 EXH 061-00411 ============= Page 81 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 2/26 Saman Draft Table of Contents I. Merger Market Overview II. How Vulnerable is Truman? III. Anti-Raid Preparation - Appendix A: Expanded Structural Defense Discussion Goldman Sachs does not provide accounting, tax or legal advice. In addition, we mutually agree that, subject to applicable law, you may disclose any aspects of any potential transaction or structure described herein that are necessary to support any U. S. federal income tax benefits with no limitations imposed by Goldman Sachs. JC31349ROD30550 =XH 061-00412 ============= Page 82 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 1/26 Draft oidman [aths U&ฃ I. Merger Market Overview EC37349A0030551 Merger Market Overview 1 --- XH061-00413 - ============= Page 83 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 2/26 baachs an U&ฃ Draft Merger Market Overview 2001 YTD Highlights Global M&A Volume  Top 20 Deals s All Other Deals w m E 3 $2,49 0 .p d v C 7 O C C Q t0 a O Interest Rate and Equity Market Performance 5% 1750 -S&P 500 9% m 1500 -110 Year US Treasur y 8% m y ` 1250 0 7/0 1000 CL rn 6% o . 750 y 5% U 500 250 4% Sep-1991 Sep-1993 Sep-1995 Sep-1997 Sep-1999 Sep-2001 Monthly from Sep-1991 to Sep-2001 M&A.Volume by Industry Sector _gg~111111h, Technology Health Care 5% ledia/ tainment 9% S&P 500 Companies Compared to 52-Week Highs' Trading at 100% 2% EC37349AO030552 ' As of September 30. Merger Market Overview 2 $3,280 $3,461 :XH 061-00414 1996 1997 1998 1999 2000 2001 YTD ============= Page 84 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 3/26 Draft ~oacman Hostile / Unsolicited Initiatives V&E  There is a resurgence in hostile activity - not all hostile activity becomes public  Structural and other defenses are not stopping raiders Strong structural defenses do enable tactical responses  Size and Intellectual Capital are no longer defenses in themselves  Generally, only I out of 3 companies that are raided stay independent EC37349A0030553 Merger Market Overview 3 KH061-00415 ============= Page 85 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 4/26 Draft Sacdhs 811 U&E tl. How Vulnerable is Truman? EC37349AO030554 How Vulnerable is Truman? 4 :XH 061-00416 ============= Page 86 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 5/26 Draft lama" Is Truman Vulnerable? Factors Affecting Vulnerability V&E  Slowing M&A activity  Larger/more hostile deals  Use of stock in hostiles  Large size V  Limited number of activists  Attracted by undervaluation and underperformance  Few real raiders  Can support only limited amounts of incremental debt '3 Factors Indicating higher vulnerability  Industry consolidation/pressure to add Truman-type skills  Truman has highly-attractive asset base  Regulatory approvals  Recent Stock Price underperformance relative to Peers and S&P 500  Concern over credibility of earnings Truman  Valuation in-line with Peers 12  A few activist shareholders  No Classified Board own stock  No rights plan  High institutional ownership  Limited ability to call special  Low insider ownership meeting  Directors can be removed without cause V ฎ Factors indicating moderate vulnerability  Ability to unlock value quickly?  Stock price and leverage may limit opportunities Factors indicating lower vulnerability EC37349A0030555 How Vulnerable is Truman? 5 XH 061-00417 ============= Page 87 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 6126 Draft + 'addman Truman's Relative Stock Price Performance Indexed Common Stock Price History Since January 1, 2000 V&E 250% Truman 200 150 a v X v 100 50 0 31-Dec-1999 28-Mar-2000 22-Jun-2000 18-Sep-2000 13-Dec-2000 09-Mar-2001 05-Jun-2001 30-Aug-2001 Daily from 1-Jan-2000 to 4-Oct-2001 41. L1EI1 (25.4)% (27.0)% EC37349AO030556 ' Energy Convergence Composite includes: Aquila, Dominion, Duke, Dynegy, El Paso, Williams and Potomac Electric. How Vulnerable is Truman? 6 :XH 061-00418 -Energy Convergence Index' -S&P 500 ============= Page 88 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 7/26 Sacks an V&E Draft Truman's PIE Multiple Truman versus Energy Convergence Index versus S&P 500 280% `m 250' c W w 0 e 220' fd W O O 4f a 190' :! 3 W 160' C s d co ai o > 130' LL. C C L d y 100' c O c 0 70' W 40' 1-Jan-2000 1 -Apr-2000 1-Jul-2000 1-Oct-2000 1-Jan-2001 1-Apr-2001 1-Jul-2001 1-Oct-2001 Daily From 11112000 to 101612001 -Truman/Energy Convergence Index' -Truman/S&P 500 EC37349A0030557 ' Energy Convergence Composite includes: Aquila, Dominion, Duke, Dynegy, El Paso, Williams and Potomac Electric. How Vulnerable is Truman? 7 XH 061-00419 ============= Page 89 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 8/26 Saehs an vas Draft Truman Shareholder Overview Investor Base Profile Momentum 3.5% Specialty 5.5% California Public 3,045,798 / 0.4 Activists Employee Retirement System Other 0.3% Top Institutional Investors' Institution Shares Held % of Total Janus Capital Corporation 42,817,526 5.7% Putnam Investment Management 26,481,742 3.5% AXA Financial, Inc. 25,204,587 3.4% Barclays Bank 22,952,744 3.1% Citigroup Inc. 18,519,153 2.5% Fidelity Management & Research Co. 16,496,906 2.2% State Street Corporation 15,560,486 2.1 % AIM Management Group, try- 12,813,667 1.7 % Taunus Corporation 12,303,790 1.6% Vanguard Group 11,381,738 1.5% Northern Trust Company 10,407,533 1.4% MSDW & Company 10,286,390 1.4% Goldman, Sachs & Co. 9,747,871 1.3 % UBS Warburg Llc 7,664,912 1.0% Rorer Asset Management 7,097,052 0.9% Top Fifteen Total Total Identified Institutions Total Insiders Total Unidentified Institutions and Reta7 Total Outstanding 249, 736,127 537,851,318 9,111,984 202,894,086 749,857,388 13.3% 71.7% 1.2% 271% 100.0% ' Source: Prism. Shareholder Activism Type of Share Holder Shares Held I % of Total Activist Barclays 22,952,74413.1% New School College Retirement 6,169,553/0.8 Activists Equities Fund Activist Characteristics  Activists offer shareholders resolutions; use other forms of activism such as "no" votes. Unlikely to challenge board control, but may endorse dissidents' slate or agenda  New School or passive-aggressive activists are likely to support dissident initiatives - some may be vocal. Unlikely to act as ring leader EC37349AD030558 How Vulnerable is Truman? 8 XH 061-00420 ============= Page 90 of 203 ============= Saths an V&ฃ harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 9/26 III. Anti-Raid Preparation Draft M1349A0W55% Anti-Raid Preparation 9 EXH 061-00421 ============= Page 91 of 203 ============= Goldman achs V&E harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 10126 Draft Potential Approaches of an Unsolicited Acquiror 1 i EC37349AO030560 Anti-Raid Preparation 10 EXH 061-00422 ============= Page 92 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 11/26 Draft Sฐachsan Review of Structural Defenses V&E Currently in Place Other Possible Defenses  Federal and Oregon Utility Regulatory Constraints  Effective Elimination of Shareholder Ability to Act by Written Consent N Advance Notice Requirements for Shareholder Proposals and Notifications N Oregon Other Constituency Statute e Fair Price Charter Provision  Oregon Business Combination Statute (Comparable to Delaware ง203)  Blank Check Preferred Stock  Denial of Cumulative Voting  Hostile Change of Control Provisions in Employee Benefit Plans  Shareholder Rights Plan  Staggered Board s Prohibit Removal of Directors without Cause  Strengthen Cap On Size of the Board  Deny Shareholders the Right to Call Special Meetings (only after reincorporation)  Reincorporate EC37349A003 056r Anti-Raid Preparation 11 XH 061-00423 ============= Page 93 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 12/26 Draft 9acnsaฐ Strengthening Structural Defenses V&Ey_`  Shareholder Rights Plan - Can be adopted by Board on short notice - Does not require shareholder approval (' C) C - Consider having it "on the shelf" Limit/eliminate ability for shareholders to call a special meeting fฐ(foe - Not possible to limit under Oregon law but can indirectly achieve goal by direc Lremaval and board size provisions - Default provision under Delaware law  Staggered Board - Difficult to implement due to shareholder sensitivity - [Most peers don't have a staggered Board] - As a result of shareholders' ability to call a special meeting Truman is more vulnerable than peers - and effectively vulnerable at all times during the year Reincorporate in Delaware  In conjunction with PGE transaction  Consider approving reincorporation at next annual shareholders meeting subject to closing PGE or PUHCA exemption  No ability for shareholders to call special meeting under law unless specially provided for  Consider staggered Board as part of reincorporation Stay Incorporated in Oregon  Consider two charter amendments - Eliminate ability of shareholders to remove directors without cause or to increase board size - Staggered Board EC37349AO030562 Anti-Raid Preparation 12 :XH 061-00424 ============= Page 94 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 200123:06 13/26 Draft SaGisan Potential Acquirors of Truman Vex (US$ in millions, except per share amounts) Calendarized PIE Multiples2 Company Equity Value' Enterprise Value' 2002 Debt to Cap. Truman $26,247 $42,510 15.6x 53.1% Strategic Interest General Electric $379,582 $577,231 23.7x 77.8% Exxon Mobil 273,744 275,625 18.6 13.3 Royal Dutch/Shell 190,395 190,919 15.4 10.6 BP Amoco 182,641 237,914 16.0 42.4 AIG 183,466 228,998 22.9 53.3 El Paso 23,920 41,286 12.3 59.6 Dynegy 13,621 18,591 15.7 45.5 Kinder Morgan 5,886 10,680 20.1 58.0 Possible, but Unlikely Strategic Interest Total $99,706 $110,394 13.4x 32.7% Tyco 90,502 144,555 13.7 64.1 Chevron/Texaco 91,275 104,896 16.2 30.3 Vivendi 47,664 82,615 29.3 36.9 EN I 50,047 60,605 10.3 31.4 E.ON 42,011 47,248 17.9 32.8 Suez 34,847 71,002 18.9 61.4 Duke 30,882 46,875 14.1 50.4 RW E 22,677 51,113 18.2 72.3 Repsol 17,382 39,753 8.9 52.8 AES 6,973 28,695 8.1 75.6 ' Source: Latest publicly available financial statements. Equity value based on fully diluted shares outstanding and closing stock prices on October 3, 2001. E C37349A0030563 2 Source: IBES median estimates unless otherwise noted. Anti-Raid Preparation 13 =XH 061-00425 ============= Page 95 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 14126 Draft ~a~,man Responses to Unsolicited Offers V&E  Responses to Inquiries - Always respond that "Company policy is not to comment on rumors"  Responses to Casual Offers - No duty to discuss or negotiate - Only one Company representative should be authorized to respond in any fashion - General responses should be that the Company is very comfortable with its current structure and strategies - Specific response to any particular approach must be structured on a case-by-case basis; team should confer to decide proper response  Responses to Specific Offers - No response other than "will call you back" - No immediate response needed - Call war list and assemble team No press release or statement other than "stop-look-and-listen" and call of special Board meeting to consider offer - Determine response from Board after considering duties and issues for the Board EC37349AO030564 Anti-Raid Preparation 14 (H061-00426 ============= Page 96 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 15126 Draft WPM'San Are You Prepared? U&ฃ  Most battles are won or lost before they are fought - Preparation is the key  Who is the Team?  Do you know who your shareholders are?  Have you reviewed the financial and strategic plan?  What value are you creating for shareholders?  What is your response to an unexpected approach? EC37349AO030565 Anti-Raid Preparation 15 (H061-00427 ============= Page 97 of 203 ============= harrys\Antiraid\07 Presentation to Truman.doc altrueblood 6 Oct 2001 23:06 16126 Draft ~aedt~san Preparatory Activities V&E  Assemble team  Conduct comprehensive due diligence  Valuation tools prepared and accessible  Review and evaluate structural means  Review and evaluate financial restructuring alternatives  Review and evaluate asset restructuring alternatives  Review and evaluate important relationships  Market watch s Recommendations to management h ~„~ • cry s A-, EC37349AO030566 Anti-Raid Preparation 16 $'10MM • High Packaging 0 A (o mm- • National Footprint C • EnronSales Force • Dedicated Service Manager YTD Results Transactions Gross Margin (Millions) $172 Q :XH 061-00449 $83 EC37349AO030457 00 01 Manufacturing ============= Page 119 of 203 ============= fiat Portfolio Origination - U.S. • Upsell Engine • Mines the Existing Customer Portfolio for Value-Added Transactions 'Old - STAF HOTELS & SESO [A.F, IINNC YTD Results Transactions Gross Margin (Millions) $2--~ $72 17 1 $5 00 01 00 01 Commercial / Manufacturing vie EC37349AO030458 :XH061-00450 ============= Page 120 of 203 ============= U.S. Small Consumer Business . • Annual Energy Spend -<$10MM •J Commissioned Sales Force}~~? • Highly Standardized - J • Call Center Support p~ r • Regional YTD Results Transactions Gross Margin (Millions) 12 031 ' $20 ) 8,471' $149 1,803 $36 1,164 $30 6 00 01 00 01 ~~ East ~~ N West d a 3,009 $172 Channels ~.VlJ+1 $13 6,439,E $ 1'6 Telesales Agent Direct -~ 064,Y1 n 4 Transactions Gross Margin (Millions) EC37349AO030459 t EXH 061-00451 ============= Page 121 of 203 ============= Enron Direct - U.S. Agent-Based Business Metrics Agents at Month End f `"1 460 June July Aug Sept =XH 061-00452 Number of Deals Closed by Month YTD = 6,439 i M1 t 1.587 290 17 June July Aug Sept Iti1 i 5 5 ~ ~-, l_-k~ t7e 14 LC, Gross Margin by Month (Millions) $11.3 YTD=$16MM 5~~1 EC37349AO030460 $3.9 Y a` g $0.1 June July Aug Sept>~ '3 ============= Page 122 of 203 ============= Large Consumer Business - Europe • Annual Energy Spend >$10MM • High Packaging • National Footprint N G1JI1ESS • Enron Sales Force-.~~ ~..)~ Dedicated Service Manager YTD Results Transactions Gross Margin (Millions) 4j $7 1 $20.4 , 2.5 00 01 00 01 Commercial / Manufacturing EC37349AO030461 =XH 061-00453 ============= Page 123 of 203 ============= Small Consumer Business - Europe Channels • Annual Energy Spend <$10MM • Commissioned Sales Force • Highly Standardized • Call Center Support • Regional YTD Results Netherlands Spain S UK 228,380 40 $2.2 $87.9 Transactions Gross Margin (Millions) EC37349AO030462 =XH 061-00454 Agent Direct ============= Page 124 of 203 ============= Small Consumer • Annual Energy Spend <$10MM • Highly Standardized • Regional Business - Canada • Commissioned Sales Force • Call Center Support YTD Results Transactions 161 17 Gross Margin (Millions) $2.85 Channels 144 $2.75 17 Ontario ( oo c / Alberta Transactions Gross Margin (Millions) EC37349AO030463 =XH061-00455 00 01 Direct 00 01 ============= Page 125 of 203 ============= Global Product Mix Percent of Gross Margin Third Quarter Fourth Quarter (E) 8% 8% 7% 5% 7% J r 7% 13% 5% 9' 62% 1 ,1 J  Power DSM qO 3 Natural Gas  Facility Services Tariff 3' e-  Construction Services ~f !r- EC37349AO030464 EXH 061-00456 ============= Page 126 of 203 ============= O Services Y "41 • Client Management • Billing • Contract Compliance • Customer Enrollment and Set-up • Customer Issues Management • Call Center Management Customers (ODDS) • Ensures Customer Satisfaction • Manages Maintenance Costs Customer Satisfaction._. 194 170 _ Sm2~1 3 1 66 5 1 2 0 20 20 Q101 Q201 Q301  EES U.S. EFS EES Europe 4.30 i 4.19 4.05 4.14 2000 Average  Q2 2001 Average EC37349AO030465 :XH 061-00457 228,000 Overall Identify Follow-up Executive Solutions Support ============= Page 127 of 203 ============= Jr/ Energy Asset Management rp" • Products: DSM, Load • Pricing, Delivery, Execution and Verification Curtailment, Distributed • Performance Measurement Generation, Facility Services • Syndication and Sourcing 227 164 EAM Project Status ($ in Millions) 305 264 194 188 173 121 1-,-w 3/31/01 NPV Capital Savings 165 124 6/30/01 NPV Capital Savings 269 189 9130101 NPV Capital Savings Complete In Progress EAM, Facility Services and Construction Services s '.I Facilities I -Sq. Feet (Billions) In 1~ 1; 40,000 4 30,000 3 20,000 2 10,000 1 0 0 1999 2000 9130101 Facilities 4 Square Feet (Billions) EC37349AO030466 =XH061-00458 ============= Page 128 of 203 ============= Enron Facility Services • Engineering and Construction • Facility Management - f` s • HVAC Operations and • HVAC Service Franchising fit... Maintenance u YTD Gross Margin (Millions) $69.7 $64.1 E $18.3 $21.5  Construction Service  EBSI LINC EC37349AO030467 :XH061-00459 2000 2001 ============= Page 129 of 203 ============= L Risk Management , , • Commodity Risk Management Services -- Power -- Gas -- Tariff • Logistics • Back-Office • Risk Analysis • Deal Capture and Validation EC37349A0030468 XH061-00460 ============= Page 130 of 203 ============= Cost Structure Operating Expenditures ($ in Millions) a 750 F-5 523 Operating Expenditures / Gross Margin 128% 99% 81% 67% 291 1999 2000 2001E 2002E 1999 2000 2001E 2002E  U.S.  Europe Canada EFS / TNPC EC37349AO030469 EXH 061-00461 ============= Page 131 of 203 ============= Closing Remarks Q • Clean-up "Legacy" Issues - "Re-tooling Plane In Flight" • Reducing Capital Intensity' 10,- Qk"74, - Lease for DSM - e.r - Clean-up Accounts Receivable • Business Model Implemented: Working • Reducing Costs • Margin Recognition at the Offer and Eliminated the Sales Incentive Program for the Large Consumer Business • Customer Service and Commissions Removed from Margin and Reserved EC37349AO030470 :XH061-00462 ============= Page 132 of 203 ============= Closing Remarks • Driving into New Markets: Geographic and Segment • Driving New Products - Increased Focus on Gas, Energy Services and Other New Products Under Development • Ensuring High Quality and Scalable Execution • Mining the Portfolio • Equals - Increased Customer Satisfaction - Increased Growth - Increased Profitability EC37349AO030471 XH 061-00463 ============= Page 133 of 203 ============= CT J kA~ d cji Enron Energy Services EC37349AO030472 EXH 061-00464 ============= Page 134 of 203 ============= Enron Americas EC37349AO030473 =XH 061-00465 ============= Page 135 of 203 ============= Agenda ~ f • Business Principles • Financial Results • Gas & Power Fundamentals • North America Business Discussion • Retail Risk Management Discussion • South America Merchant Discussion EC37349AO030474 XH 061-00466 ============= Page 136 of 203 ============= i Business Principles (Merchant'Natural Gas and Power Business) • Goals are to expand and enhance our capabilities in:  RECRUIT AND RETAIN THE BEST TALENT  CONSTANTLY EXPAND LIQUIDITY - PRODUCTS AND LOCATIONS  BE THE LEADING MARKET MAKER  COVER ALL THE WHOLESALE CUSTOMERS TO ENSURE SIZEABLE DEAL FLOW  CONTINUALLY EXPAND OUR OUTSOURCING RELATIONSHIPS  CREATE A WORLD CLASS INTERNAL RESEARCH CAPABILITY • ACCOMPLISHING THESE GOALS LEADS TO: • THE ABILITY TO IDENTIFY AND EXECUTE HIGHLY STRUCTURED TRANSACTIONS • THE ABILITY TO SUCCESSFULLY TAKE POSITIONS ON MARKET DIRECTION J EC37349AO030475 :XH 061-00467 ============= Page 137 of 203 ============= Enron North America EBIT Without Reductions ($ in millions) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 ~eservee ($958M) 'EES (~ t,'::r,,1e r~S ($665M) EC37349AO030476 :XH 061-00468 1995 1996 1997 1998 1999 2000 2001 YTD ============= Page 138 of 203 ============= Enron North America EBIT ($ in millions) 2,500 2,000 1,500 1,000 500 0 • EGM and EIM transferred out 3Q 2000 • Includes ($665M) of EES Wholesale 2001 YTD EC37349AO030477 =XH 061-00469 1995 1996 1997 1998 1999 2000 2001 YTD ============= Page 139 of 203 ============= 4,500 4,000 3,500 3,000 Z500 2,000 1,500 1,000 500 0 Enron North America Net Assets (excludes Retail Risk Management) ($ in millions) O Property, Plant & Equipment l ''a" n ? t it `k 01 ~-o Merchant Assets Other Investments $4,279 Y 4 oirk $3,014 $2,190 2000 3Q 2001 Sithe Legacy Assets EC37349AO030478 ~. soo $2,696 ~~ $1,943 Bridgelin HPL Marine :XH061-00470 ============= Page 140 of 203 ============= Financial Highlights ($ in millions) Earnings Before Interest & Taxes Funds Flow Cash Flow from Operations Capital Deployed* *Excludes Goodwill and HPL FV $3.013 Total Year 2000 9/30 YTD 2001 EA EA EES W YTD $19362 $23885 $(665) $29220 $ 937 $29101 $ 30 $29131 $29988 $ (36) $(538) $ (574) $39252 $35194 $ 750 $39944 H~, h.die ~rret I (i=me ) f !"J;( c EC37349AO030479 =XH 061-00471 ============= Page 141 of 203 ============= Key Fundamental Events Gas Market • Gas rig count peaked at 1,058 in July 2001 - Domestic production of gas increased by 2 Bcflday • trial gas demand was lost from 2 Bcf day of industrial March 2000 to January 2001 • Injected 2,130 Bcf this season; 4.9 ay more than last year EC37349AO030480 EXH 061-00472 ============= Page 142 of 203 ============= NG Forward Curve Comparison 5.50 1 4.50 3.50 1 2.50 1.50 s --- Forward curve on January 2, 2001y. r, -- Forward curve on September 28, 2001 t, N N N M M ( d. ' t 'd' L() IC) I!) O CD Cfl O O O O O O O O O O O O O p O O U ~ U ~ o O - o - o - o - o - o ) U. , U. ) ~ ) ~ ) EC37300030481 XH061-00473 - ============= Page 143 of 203 ============= Key Fundamental Events East Power • Supply Factors -- Over 60,000 MW of gas-fired generation came on in the last 21 months - Nuclear generation up by 5.8% over 2000 - 4,364 MW • Demand Factors - Lower than expected load growth - 1-2% actual vs. 4-5% forecast - Slowing economy/ Industrial recession • Stabilizing prices EC37349AO030482 :XH 061-00474 ============= Page 144 of 203 ============= Eastern Interconnect Demand (Average MW/Hour) 2000 - 2001 0 430,000 380,000 d CD 330,000 a 280,000 80,00 60,00 M %40,00 m E 20,00 0 Jan Feb 24,766 2000 Mar Apr May Jun Aug Sep Oct Nov Dec New Gas-Fired Capacity in the East 38,195 2001 6'9,817 2002 EC3134WO30403 EXH 061-00475 ============= Page 145 of 203 ============= U.S. Power Price Volatility -East 140 120 100 80 60 40 20 r O Forward curve in Dec 2000 Cinergy On Peak- 20 day rolling average rt/ EC37349A0030484 XH 061-00476 r T- 0 T~ V" O O O O O O (1) m CL m LL 2 f< 2 -0) Q ) ============= Page 146 of 203 ============= Key Fundamental Events West Power • Supply factors,,: j fi - Added 9,000 MW of gas-fired generation over the last 21 months - Nuclear utilization up 2,300 MW vs. 2000 , - H dro down 8,500 MW vs. 2000 !bI 7 0% rb .1 e.C~r` .t G Net + 3,000 MW more supply • Demand MW due to residential/-commercial - Lost 2,300 conservation - Lost 1,500 MW from load shedding in Pacific Northwest - Lost 1,000-3,000 MW dupe to slowing economy - Added 1 000 MW duIto hotter summer than 2000 );;o. Net 5,000 MW less demand EC37349AO030485 EXH 061-00477 ============= Page 147 of 203 ============= EXH 061-00478 100,000 L = 90,000 2 80,000 0 .94 ~- 70,000 Q 60,000 Jan 9,000- 8,000 7,000 6,000 3 5,000 a, 4,000 3,000 2,000 1,000 0 WSCC Demand (Average MW/Hour) 2000 - 2001 a Feb Mar Apr May Jun Aug Sep Oct Nov Dec New Gas-Fired Capacity in the West 7,874 1,254 2000 2001 ============= Page 148 of 203 ============= 500 400 m 300 200 100 0 Apr-01 U.S. Power Price Volatility -West - Forward curve in April 2001 May-01 Jun-01 Jul-01 Jul-01 Aug-01 EC Th49A0030481 Sep-01 :XH061-00479 NPI5 on peak- 20 day rolling average ; , ~J) ============= Page 149 of 203 ============= Enron North America Commercial Headcount Managing Director` ., Man - ------------------ -------------- ------ ------------------~ ----------- Vice- Presidents_ ---------------------Directors ------------------------- Managers \nalysts & Associat( TOTAL ~~~ ~ftr EC37349AD030488 ----- ON- - - -. =XH061-00480 1999 2000 2001 1998 ============= Page 150 of 203 ============= Employment Agreement Statistics t f { f ~~ (1 CO TY' S r 00), u 0 EC37349AO030489 EXH 061-00481 ============= Page 151 of 203 ============= Enron's Leading Market Position Second Quarter 2000 vs Second Quarter 2001 (TBtue/d) 25.9 Gas 23 n )nnm Power 23.3 [~ 2Q01  2Q00 1 1 I „1 1 r~ U 1t'~.. r 1 EC37349AO030490 :XH061-00482 Enron Mirant Duke Dynegy Sempra Aquila Reliant B Paso BP ABA Enron ABA Reliant PG&E Duke Mirant Dynegy Willams Aquila Cinergy ============= Page 152 of 203 ============= 30,000 25,000 20,000 15,000 10,000 5,000 0 Enron North America Volumes Physical Gas (Bbtue/d) 1995 1996 1997 1998 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2000 2001 ------------------------------------------------------------------------------------------------------------------------------------------------ 300,000- 250,000- 200,000- 150,000- 100,000- 50,000- 0-- 1995 1996 1997 1998 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 ---------------- ---------------------------- 2000 ------------------------------------------------- ------------------- 2001 ---------- --------------------- 30,000 Physical 25,000 Power 3 20,000- 15,000- "-m I 10,000 5,000 1995 1996 1997 1998 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2000 2001 EC37349AO030491 XH061-00483 ============= Page 153 of 203 ============= Volumes in `000s 300,000 250,000 200,000 150,000 100,000 50,000 0 :XH 061-00484 Enron North America Volumes (Bbtueld)  Financial Physical 0 Physical Power  Margin 2,500 2,000 1,500 1,000 500 0 1998 1999 2000 2001 EC37349AO030492 Margin $ in MM 3,000 ============= Page 154 of 203 ============= Enron North A  Non EOL 0 EOL 4000 3500 3000 2500 2000 1500 1000 500 0 merica Gas Transactions Per Day IQ 2Q 3Q 4Q IQ 2Q 3Q 4Q IQ 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 1997 1998 1999 2000 2001 EC37349AO030493 EXH061-00485 ============= Page 155 of 203 ============= Enron North America Power Transactions Per Day  Non EOL 2000 L 1800 A o1 +r L 1600 9 Vol 1400 1200 1000 800 600 400 200 0 1 Q 2Q 3Q 4Q 1 Q 2Q 3Q 4Q 1 Q 2Q 3Q 4Q 1 Q 2Q 3Q 4Q 1 Q 2Q 3Q 1997 1998 1999 2000 2001. EC37349AO030494 EXH 061-00486 ============= Page 156 of 203 ============= Enron North America EOL Counterparties Gas ` Power 300 250 200 150 100 50 4Q 1Q 2Q 3Q 4Q IQ 2Q 3Q 1999 2000 2001 140 120 100 80 60 40 20 0 4Q IQ 2Q 3Q 4Q IQ 2Q 3Q 1999 2000 2001 EC37349AO030495 =XH 061-00487 ============= Page 157 of 203 ============= 1,000,000,000 900,000,000 800, 000, 000 700, 000, 000 F 600,000,000 500, 000, 000 400, 000, 000 300,000,000 200,000,000 100, 000, 000 14,000,000 12, 000, 000 10, 000, 000 8,000,000 6,000,000 4,000,000 2,000,000 EOL vs OTHER PLATFORMS - NA GAS f( Average Volume per Day Apr-01 May-01 Jun-01 Jul-01 Aug-01 0 ICE  EOL NYMEX F EOL vs ICE - TOTAL POWER Average Volume per Day Sep-01 Oct-01 EC37349AO030496 :XH061-00488 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 DICE EOL ============= Page 158 of 203 ============= Origination 'If /j I .. Jo~ 1 EXH061-00489 Power Development (oo1 YTD $700mm (excluding sold peakers) ============= Page 159 of 203 ============= Structured Natural Gas Transactions SunCor Service Agreement Petro Canada Services Agreement -4 'P I-f-AAA Sierra Long term assig of PGT capacity Michigan Gas Utilities 3 year Outsourcing Transaction EPMI provides power for MGU's supply needs MGU releases all upstream gas supply assets to EPMI ~c.p~ trr? CJ Syndication to 7 shippers of Kern River from emergency open season F" f1 i f ~1 Financial Transactions in Mexico `~X- 200 bcf Natural Gas ($4mm Origination) Financial Zinc, Fuel Oil ~. 7i7 f : EC37349AO030498 :XH061-00490 ============= Page 160 of 203 ============= ~. WAPA Edwards WAPA Navy 5 year transactions including `green' er Agency 1't t Structured Power Trns~ci~ns a• '` Purchase of output of 700MW plant for 20 as egas Con 11 '•1J _ years QF expansion anale Turbine Book City of San Antonio 25 year wind PPA entral Maine Power Load following transaction 1 " .E Asset Management Transaction for- MW of load and_90_MW.generating capacity and outside supply contracts of 26 MW J EC37349AO030499 =XH 061-00491 ============= Page 161 of 203 ============= Summary of 2001 Asset Sales t;'.~}off,+~j ($ in millions, excludes items <$10million) Book Sales Basis Proceeds -listorical Assets U 1 HPL ,I fl Development Projects Peakers Pastoria Fountain Valley PSCO j SW Power /Las Vegas_ Coven Heywood Site Turbines - 2 x 7 EAs Power Assets Alamac / NCPH Saguoro $ 364.2 $ 352.5 Forecast Q4 2001 disposals -~ Vitro Sale Onondaga Doyle TOTALS Gain $ (11.7) 1,045.0 1,682.0 637.0 72.5 112.9 40.4 115.6 130.6 18.0 120.1 142.8 22.7 1.0 12.7 11.7 40.3 49.5 9.2 7.5 22.0 14.5 18.5 20.7 1.5 24.0 39.5 14.0 7.9 10.0 2.1 - 4.8 4.7 1 817 $ $ 2,580 $ 764 ffi a r: J Jr EC37349AO030500 =XH061-00492 ============= Page 162 of 203 ============= r ' T f_1 l: ~•(AV all T 1. ! t 'c 4 Risk Management Discussion Retail i1 0 = 'v J6jj CJ .-p"{ T` , ~ EC37349AO030501 EXH061-00493 ============= Page 163 of 203 ============= South America Merchant Discussion pavl . pr t/ 0, COO lqi~~' ~M) 72 f EC37349AO030502 EXH 061-00494 ============= Page 164 of 203 ============= Enron Americas EC37349AO030503 EXH061-00495 ============= Page 165 of 203 ============= Enron Industrial Markets EC37349AO030505 EXH 061-00496 ============= Page 166 of 203 ============= Industrial Markets Global New Markets Market Size Key Market Attributes Forest Products $ 330 Billion • Certain base grade commodity products Steel $ 250 Billion • Capital intensive industries that desire Risk Management products $ 580 Billion • Legacy distribution channels with no price transparency 0 • Receptive to Enron's eCommerce model • Slow moving incumbents EC37349AO030506 H061-00497 - - -- ============= Page 167 of 203 ============= Forest Products -Market Size Global Revenue (Est.) $330 Billion Other Paper & Board $5.3 Tissue $2.9 Packaging & Paperboard $58.0 V Lumber $55.1 Recycled-Paper $6.6 Printing & Writing $83.8 Source: Pulp & Paper N. American Factbook; Int'l Fact & Price Book EC31349A003050i =XH061-00498 ============= Page 168 of 203 ============= Steel -Market Size* Global Revenue (Est.) $250 Billion Asia Other *Flat and Long Products Only -ope EC3134%N%%3*5B =XH 061-00499 ============= Page 169 of 203 ============= Notable Achievements • Excellent deal piippe_I ne in both forest'-products and steel - industry acceptance • Moved 2.7 million tons of physical product through 9/30/01 oie i, • Generated $104 million of gross margin through 9/30/01 C.' I the way newsprint r) p `as "The Market" for is bought and newsprint • "Just-In-Time" steel delivery product now live in Chicago • Fundamentally change( sold in the U.S. rn`~ • EOL/Clickpaper viewed prices • "Enron Effect" cited by the ITC as a market catalyst EC37349AO030509 XH061-00500 ============= Page 170 of 203 ============= Volume Information Thousand Metric Tons 11,031 s\(pf ~` D Physical Volumes  Financial Volumes EC37349AO030510 =XH061-00501 1998 1999 2000 Sep 01 YTD ============= Page 171 of 203 ============= Transaction Activity 7,413 EC37349AO030511 XH061-00502 1998 1999 2000 S e p 01 YT D ============= Page 172 of 203 ============= Financial Highlights $ Millions V Year to Date (9130) Total Year 2001 2000* 2001** 2000* Earnings Before Interest & Taxes $45 $ 2 $ 69 $(18) Net Income $24 $ 1 $ 4 $(5) Cash Flow from Operations $(75) N/A $ (41) N/A Capital Deployed On Balance Sheet $386 $201 $386 $116 Total $761 $201 $761 $116 Equity Deployed On Balance Sheet $317 $95 $317 $95 Total $504 $95 $504 $95 ~ Return on Equity ,, On Balance Sheet 18% 2% 210 Total 11% 2% 11% (19)% (' 1 )e ,Q'r L 1 2 lQvgl~ f EIM formed 11112001, 2000 information based on restated ENA Downstream Industrial te am results and L excludes impact of Pulp and Paper Trading monetization in December 2000 ** Estimated 0030512 r 1.. !XH061-00503 - - ============= Page 173 of 203 ============= ( ~ ~ Oo-4 0 ~YV e ~ 1 Earn in s Growth O ortu nit YC.111r I ~-t~k EBIT ($ millions) I --0- Return on Equity - On Balance Sheet 1'v`*i ($19) 1999 2000 c r i; I `c a ~j ~` 61%A $252 2001 Plan 2002E 2003E EC37349AO030513 =XH061-00504 ============= Page 174 of 203 ============= Forest Products -Asset Investments Including Off-Balance Sheet Capital and Assuming Leaf River Acquisition $ Millions  Leaf River Pulp Mill  Stadacona Newsprint Mill Garden State Newsprint Mill Merchant Investments $762 $487 $275 :XH061-00505 $46 1999 $90 2000 913012001 1213112001 200212003 EC37349A0030514 ============= Page 175 of 203 ============= S Headcount Senior Commercial 140 10 Transaction Development & Other Steel I  Forest Products Asset Operations Total Headcount ~, f 293 Support Depts. • Analysts, Assoc. & Other  Senior Commercial EC37349g0030515 :XH061-00506 1213112000 81112001 Plan 2001 12/31/2000 8/1/2001 Plan 2001 ============= Page 176 of 203 ============= Enron Industrial Markets EC37349030516 =XH061-00507 ============= Page 177 of 203 ============= y t 5si 'K ~ 5-17 Project Southwood Georgia Pacific - Leaf River Enron Industrial Markets. Presentation to Enron Corp Finance Committee For Recommendation to the Board of Directors October 8, 2001 "111494#830 518 EXH061-00508 ============= Page 178 of 203 ============= Project Southwood Why EIM Needs a Pulp Mill? • Market Pulp is a $20B Global Market ($90B including integrated pulp) with significant volatility • Asset ownership increases credibility with industry players • Physical supply enhances marketability of financial products • EIM's ability to contract for tons has been limited to date due to lack of physical presence • EIM's purchase of newsprint assets (Garden State Paper - 3rd Quarter 2000, Stadacona - 1st Quarter 2001) have had a positive effect on EIM's ability to transact business: Trading Hubs Total Notional Value of Trades Counterparties Jan 01 June 01 2 6 $2 MM $70 MM 11 150 EC37349A0030519 Proprietary and Confidential :XH061-00509 ============= Page 179 of 203 ============= Project Southwood Georgia Pacific's Leaf River Pulp Mill High Quality Asset • State of the art facility; one of the largest single-line pulp mills in the world. • Ranks 6th out of 50 North American softwood mills for lowest cash costs. • Extremely well maintained with a history of proactive maintenance. • Greenfield construction in 1984 - clean environmental record. • 99% of energy produced on site with 87% of steam requirements generated from mill byproducts. • High quality, properly incented, non-union workforce. Structure Mitigates Risk • Fixed price, full requirements fiber supply contract for 7 years with Geor ig a_Pacific. (Fiber represents 70% of variable costs and 40% of total costs.) • Mutually agreed upon capex budget with a 3-year risk sharing provision with Georgia-Pacific. • EIM pulp desk pays the mill a fixed price for 50% of the physical output; floating price (based on RISI index) for the other 50%. Separate Financial Pulp Swap Transaction • EIM pulp desk enters into a financial pulp swap with Georgia-Pacific for 277,250 MT/yr (roughly equivalent to 50% of the mill's annual production). GP pays fixed; EIM pays floating. EC3734940030520 1' Proprietary and Confidentiai C EXH061-00510 ============= Page 180 of 203 ============= Project Southwood Mill Purchase Credit Support for repayment of bullet loan Fixed $/ton 7 yr. Physical Pulp 100% Offtake Cash Distribution to GP Transaction Costs =~ Iii" Capital Injection NPV @ 12.5% of Project Cashflows NPV @ 12.5% of Net Terminal Value NPV of Mill Purchase P&l Payments $274.5 MM 0 7 r. Balloon Loan Millions ($265.0) 9.5 ~V ($274.5) (1) $145.5 (2) 113.2 (2) ($15.8) (1) A $30 MM liquidity line will be used to offset any periodic operational cash (2) 12.5% = the RAC Pre-tax Hurdle Rate EC37349AO030521 fc G,;`"'L3 f ~-J Proprietary and Confidential EXH061-00511 ============= Page 181 of 203 ============= Project Southwood Financial Pulp Swap Fixed $5641 MT • Term: 7 years • Notional Volume: 277,250 MT/Yr. NPV @ 8.38% of Financial Swap $75.8 MM (') (1) 8.38% = LIBOR + GP Credit Risk of 3.6% EC37349AO030522 Proprietary and Confidential EXH061-00512 ============= Page 182 of 203 ============= Project Southwood Summary Financial Results 2001 2002 2003 2004 2005 2006 2007 2008 EBIT Mill $1,976 $23,707 $23,918 $23,231 $22,403 $21,101 $20,307 $20,841 Swap 7$ 5,755 $0 ~-O $00 $00 LO 1-0 $0 •1 1 $20,307 Net Income Mill $57 $3,142 $3,276 $2,841 $2,317 $1,494 $991 $1,329 Swap $49,241 $0 $00 $0 $00 L0 $0 $0 i Free Cashflow in? I Mill $1,376 $2,995 $4,397 $3,333 $4,450 $3,955 $3,039 $3,496 Swap L0 1$ 4.252 $8,877 $8,631 $8,383 $8,135 $7,887 $7,638 L V J EC37349A0030523 / ~ Proprietary and Confidential =XH061-00513 ============= Page 183 of 203 ============= Project Southwood Effect on Enron Corp. Ratios 2001 Enron Corp Ratios Earnings Per Share Funds Flow Interest Coverage Pre-tax Interest Coverage B/S Debt to B/S Capital 2002 Enron Corp Ratios Earnings Per Share Funds Flow Interest Coverage Pre-tax Interest Coverage B/S Debt to B/S Capital Enron Corp 2001 Base Case $1.80 4.02 3.31 43.4% Enron Corp 2002 Base Case $2.15 4.02 3.66 43.4% Enron Ratios Including Leaf River Transaction Off B/S Enron B/S Enron B/S 100% Debt 100% Debt 60% Debt/ 40% Equity $1.86 $1.86 $1.85 4.02 4.02 4.02 3.39 3.39 3.39 43.3% 43.9% 43.5% Enron Ratios Including Leaf River Transaction Off B/S Enron B/S Enron B/S 100% Debt 100% Debt 60% Debt /40% Equity $2.15 $2.15 $2.15 4.04 3.99 4.02 3.68 3.62 3.65 43.4% 44.0% 43.5% EC31349NO030524 Proprietary and Confidential EXH061-00514 ============= Page 184 of 203 ============= Project Southwood Valuation Context .a(( - ;. Pulp Prices e • RISI 10-year Historical Average is $546/MT 7 ! ?• RISI 7-year Average Forecast is $556/MT • EIM Valuation uses $516/MT over the 7-year term A Acquisition Price o~P ~n O r • Mill was built in 1984 for $560 MM • Mill replacement cost today is approximately $1.0 Billion • GP asking price was $350 MM • EIM is paying $274 MM Terminal Value • Current Transaction Multiples are 3.3X Peak EBITDA • Enron Purchases Leaf River Mill at 2.13X Peak EBITDA • Terminal Value assumes 2.OOX Peak EBITDA ~;.~~GJ~r_c~~,=~, EC37349A4434525 A~/iil ~UCC ; .u f €ฑl )f Proprietary and Confidential EXH061-00515 ============= Page 185 of 203 ============= Financial and Earnings Report Additional Disclosures Earnings Release Previously disclosed for Wholesale and Retail segments:. Revenues Income Before Interest & Taxes •(IBM New disclosures for every segment: Revenues 1 K, ' Cost of Sales Operating Expenses Depreciationand Amortization Equity in Earnings Other, net Income Before Interest & Taxes (IBM Recurring Earnings Per Share Nine Months Ended September 30, 2001 Plan Actual $1.25 / $1.35 8% Increase EC37349AO030531 :H061-00516 ============= Page 186 of 203 ============= Third Quarter Estimated Recurri ng Net Income by Segment (5 6. ,nlll01n) Third Quarter Nine Months Pies Actual Plan Actual Enron Transportation Services $33 $34 $ $ 130 Portland General (2) 58 Global Assets 7 (9) (85) Americas 186 338 1,543 Retail Risk Management (8) 120 (365) Europe and Other Energy Mitts 133 16 118 Energy Services 36 40 90 Broadband Services (24) (51) (142) Corporate & Other 12 (90) (141) Recurring Net Income S 361 S 396 $ 1,111 $ 1,206 Earnings Per Share Third Quarter 2000 2001 ,. !.•r. r. '41 Third Quarter- Rec urring (E arnings 'by Segment is b.0a ) Third 313ffer Nine Months 2001 2000 2001 2000 Enron Transportation Services $83 $83 $7293 72a8 Portland General (3) 74 122 241 Global Assets 16 26 34 140 Americas 553 533 2,485 1,090 Retail Risk Management 199 - (528) - Europe and Other Energy Mitts 39 50 257 233 Energy Services 71 27 171 79 Broadband Services (801 (20) (217) (28) Corporate & Other (102) (106) (233) (143) Interest, MI, & Income Tax (380) (375) (1,158) .(901) Recurring Net Income $ 396 $ 292 $1206 $ 919 Ir Third Quarter 2001 (S in mill ns) Pre-ta After-tax E.P.S. Recurring Earnings $ 5 1 $ 396 $0. 43-j Non-Recurring Items: ~ ibxurix Asset Sales (31 (310) f (0.34) B adban d everance (69) ~ / 5) (0.05) Ir1~on t~o ~.~ (52) (34) (0.04) _ _•-C~fTltent V&I (160) (104) (0.11) `l:aV9 on Investing Activities (7 (462) (0.51) Total Non-Recurring Items (1,302) (955) (1.05) Anti-dilution (0.11) Total Earnings ($781) ($559) ($0.73) New Accounting Standard for Goodwill Summary of Consolidated Goodwill (1o,okW6 0.quay .0.6644 4v.664.r1.) Pr6pw.d h.0. 30, 2001 AT-d. W.M. R.p0.IYq 0n1. G-WHI 1-1-d Off 001601 a.rvb.. P6d4.40..,.rd 61,409 a(99q 0klw A..N. & 9.0.. E160, 15, 1593) Emon (bb61 Pboo, s PIp.46.. LLC 165 (166) T05 240 E--4 b. 165 9K 60, 117 001rr 306 (s9) ou. 96 j wln4.w Ind.M.l M.r6..-Pulp. P.p.r, & 91..1 372 &ren E6rop. IM0 /MU4) 364 0040. 45 1,667 E- E-,y 6-k.. 677 Em,n sr40db.nd S.rv01.. 55 lxx) E-n Wool 157 murk-W.00.. 697 A-4-M., 213 (2131 T.0.) 51.727 5 $)3571 kd 0 ( r J EC27349AD930532 e,us Key Fundamental Events West Power • Supply factors - Added 9,000 MW of gas-fired generation over the last 21 months - Nuclear utilization up 2,300 MW vs. 2000 - Hydro down B,500 MW vs. 2000 Y Net+ 3,000 MW more supply Demand - Lost 2,300 MW due to residentlalicommercial conservation - Lost 1,500 MW from load shedding in Pacific Northwest - Lost 1,000-3,000 MW due to slowing economy - Added 1,000 MW due to hotter summer than 2000 - Net 5,000 MW less demand Key Fundamental Events East Power Supply Factors -0v er 60,000 MW of gas-Fired generation carne on in the last 21 months -Nuc lear generation up by 5.8% over 2000 - 4,364 MW Demand Factors -L ower than expected load growth - 1-2% actual vs. 4- 5% forecast -Slo wing economy/ Industrial recession Stabilizing prices U.S. Power Price Volatility - East +s, EC37349A003Q538 KH061-00523 ============= Page 193 of 203 ============= U.S. Power Price Volatility - West Enron North America Commercial Headcount i .y .......Ilwl!0!! ... ~tl y 5 ? (, r TOTAL 1988 1499 2000 2001 Enron's Leading Market Position Second Quarter 2000 vs Second Quarter 2001 (TBtueld) . Gas Power 0 2001 0 2001  2000 j  20m ~~Ql1CJ~~~ Enron North America Volumes (Bbtueld) Phy.kal O11 1114 Int 1... 1... m 02 m 0I m m m =I ew*6 G- 1114 1111 11.1 111. 1111 m mY " m 01 \-2i ----- !m m !" " ........ .......................... Physical Poe.r . .............. ................. . ............. .................. ........ 1114 1114 1111 111. 1.11 W m m m A QI m m i i Enron North Am  Non EOL 0 EOL Per Day I 1000 L•11 2000 2000 211 1500 1000 500 s 110 M 3Q 40 10 20 30 /Q 10 20 m 40 10 m 30 40 10 2Q 3Q 1997 1990 1999 2000 2001 EC37300030539 KH061-00524 Employment Agreement Statistics ============= Page 194 of 203 ============= Enron North America Pom ransactions Per Day 0 Non E0l 0 Em 7004 ,004 1200 ,044 12 M 1 1 IQ 2Q 90 w 10 m to 60 70 2Q 3Q Q 10 M 30 J tn0 199 1999 7000 7001 O r Enron North America EOL Counterparties Gas Power u ~IIIII q q 70 q 10 10 q 0 ~qJ p q p q q q q `J T ~ T ~ y 1899 Y- 7000 2001 1999 2000 2001 veq.ro...go~ 2001 rro S700mm ,,,~.......q.....:.~ Structured Natural Gas Transactions . p. C.. 1..N......M a -- - 1p Lq.n O. - F I(1/'r tr 1J ct~~ EC37349AO030540 EXH061-00525 ============= Page 195 of 203 ============= Summary of 2001 Asset Sales (..nlutln ll.m. <610-) 6000 9.1.. N/11ak1/Ana 6..1. P--ft Gin HPL 926/2 8352.6 (611.7) P.M- $1,Wb 61,42 6627 P.~. 6726 6112.6 610.4 Foom0ln V.11.y PaCO $115.6 $120.6 616.0 BW Pem.. ILO. V".. Cogm 6120.1 6142.1 222.7 N.yw.od aN. 91.0 012.T 211.7 Turbinn-2 2 7 EA. $40.3 246.6 $6.2 P..wAna A1.111.. I NCPH 67.6 622.0 $14.6 BM0aO 616.6 620.7 613 Fofw..f $4 2601N.O ($00 5.1. $ $24.0 $66.6 214.0 On0Od.0. $73 910 bit peyb 0 64.6 $4.7 TOTALS 61,517 6 2,600 6764 South America Merchant Discussion Retail Risk Management Discussion Enron Americas EC37349A00305~1 XH061-00526 ============= Page 196 of 203 ============= Enron Energy Services Retail Segment Capital Deployed Year to Date Total Yea 2001E 2000 2001E 2000 Accounts Receivable 14020 926.7 1,402.0 1,157.2 FIX Receivables 513.0 109.5 513.0 272.4 Accounts Payable (303.0) (260.0) (303.0) (356.9) Other Working Capital, Net 93.6 87.9 93.6 102.7. Price Risk Management, Net 671.9 596.3 8426 698.4 PP&E, Net 15&3 126.9 167.0 152.4 Investments 99.6 120.1 91.6 103.6 Other 105.5 117.9 9.6 (12.9) Total Capital Deployed 2,740.9 1,715.3 2,616.4 2,116.9 Deregulation Status - U.S. Power • MS0000 9 L 0501a00rar en MM tit to.uatWMe1nant•d. CN•y Nq.0.400 Co•n•n••bnwd'a 1.W1•Yp•• en WeaIOn p No pprWle•M A•INNyOat,uduee O.,a• • Pace of Deregulation is Choppy Continued Deregulation is Important to long- Term strategy Planned Openings in 2001.2003 Adequate to Meet Near-Tens 0oals California Crisis Nas Reduced Acquisition Cost and Increased Urgency in Marketplace • Total Mxeet Open • $76.5 Blab,, • Total Muket open • 35% • M.rtN Sloe • $212.0 111111o. Financial Highlights ($ in Milions) Year to Date Total Yea Retail Segment Reported 2001E 2000 ZOOtE 2000 Earnings Before Interest & Taxes 172.0 78.5 247.0 110.8• Net income 89.4 14.4 127.3 68.9 Cash Flow tram Operations (101.6) (255.2) (44.9) (344.2) Capital Deployed 1,102.7 682.5 1,097.1 871.2 Retum on Equity 16.4% 5.4% 23.4% 1 &7% Capital Deployed including 6 Retail Risk Management 2,740.9 1,715.3 2,816.4 2,116:' Nooeating ESn.15610MM ` \ 1t 14.; \~ ~1'\y ~'~ Quarterly Resdilts Total Contract Value (dawn.) $30 $211 $15.1---. 55.0 $5.0 $111 $7.2 1$.5 1001 2001 3001E 4001E 2001 Plot, EBrT 1MMw.ui $247 $225 1001 2001 7001E 4001E 2001 Pbn /r rl l Deregulation Status - U.S. Gas • Consumerresponse has been mixed with ` participationvarying drastically • Choicevaries greatly by customer class Lack of urgency in the market  v e• aM tapele.,M•• M w COnpM•n•N• Puc oar /e..e rm wcaganw.: nwwn, ฐ Total Mertet Open • $31.0 aabn ae,.. wtn sa•.na •mau,n„artl., eunsmw. Teen Mattel Opon• 51, Mertet Sire-551.091111o. • u-p.560.IMagla MOrn•, Q 600145y l EC37349A0030542 1 XH 061-00527 ============= Page 197 of 203 ============= Deregulation Status - Europe Power • Diferantkl market opening and regulatory regimes facilitate market distortions • b.cumbema wi h market power joined by consolidated groupings threaten competition in generation and supply Proposed EU Acceleration Diractine would provide signiflunt boost to market opening Proposed EU Regulation in cross-0onler trade it electricity would enhance integrated Mwrork access •• 0 e,yltwoeawaaetrWAe.bl.l • M.Whol Statistics7TT R a.ry ~' at- Deregulation Status - Europe Gas a "P I ` statistics Deregulation Status - Canada Gas e.atrvuoeq usumts.a ee e.....e a.wwo+ao ee.n...D.MVMM. r cs.e+.aw• eW.r se.e.• M.MItWbn o e. sw.aae+A.a.ซraw,wtwee pea.. EC37349AO030543 XH061-00528 ============= Page 198 of 203 ============= yv_~j' C14) / r i/arge Consumer Business f,. • Annual Energy Spend>$10MM • Enron Sales Force HighlyPackaged •Dedicated ClienfManage• 34// f172 ", / Nwrrrvwe. Nฎ $84 /~ S.A„K„5 1 YL III Y~ $85 +s s _;1a .• 1 J b^ ' Quaker ( F irit'; r PARE ,. 7rattaaalbaa I tugm Raytheon WAL*MART' Small Consumer Business - U.S. • Annual Energy Spend <$10M M • Enron/Agent Sales Force • Standard Products • Supported by Call Center ^AlhertsunS Tricon., 110,727 $205 v V@71j$fl 1 ndtll~s TYaYeOaae~ ป,_ J 1 htTC O$tDII~LDbt eaiN0.fF F $371 1803 HST r~JCUU•;rr•"^ W 13oslonProprrlics Small Consumer Business - U.S. Regional and Enron Direct • Annual Energy Spend <$IOMM • EnrordAgent Sales Force • Standard Products • Supported by Call Center 11 Portfolio Origination -U.S. • Upsells andlor Restructures within Existing Contract • Drives Future Investment in New Products -= PACIFICฉBELL. Ovo.WM 22 . $70.8 ฎ REXAM 1 Y $4.6 STARWOOD so s1 at `Margin Enron Direct - U.S. Agent-Based Business Metrics Agents at Deals Closed Cumulative Cumulative Month End t, sstr Deals Closed :sr Margin p,T es.r ~: tsw I as ' f ,, tms - 1o m wxw Aay A" W aw w Jur -w sin M/. Tx xT W TR t/Y E~3-~349A04 `'44 3 KH061-00529 ============= Page 199 of 203 ============= ^U Large Consumer Business - Europe • Annual Energy Spend>S10MM • Highly Packaged • Enron Sales Force logos xx x Sxx xx IN I vv~-or----vv~ v .. nnuenons ~ Merp \1 Small Consumer Business - Europe Channels No Soak U% $xx sxx xx i f' c Eli, xx 5 ~ 'S Mw. o%eet /"et & a of xresseevos 10 M.9w lJ i Small Consumer Business - Europe • Annual Energy Spend