============= Page 1 of 27 ============= Project Summer E0004391537 =XH005-00837 ============= Page 2 of 27 ============= Business Update E0004391538 EXH005-00838 ============= Page 3 of 27 ============= Enron Second Quarter Performance E0004391539 :XH005-00839 ============= Page 4 of 27 ============= EOO04391540 yI XH005-00840 • Natural Gas • Marketing and • Energy Outsourcing • Bandwidth • Expansion Vehicle Transportation Delivery of Energy to Commercial and Management for New Commodity Electric Distribution Products Worldwide Industrial Customers and Broadband Industry Penetration • Delivery Services ============= Page 5 of 27 ============= e Marketing and Delivery of Energy Products Worldwide E0004391541 N :XH005-00841 ============= Page 6 of 27 ============= Wholesale Energy Operations and Services Income Before Interest' and Taxes (Millions) $437 ® Commodity Sales and Services ® Assets and Investments E0004391542 XH005-00842 z zcaluu ============= Page 7 of 27 ============= North America Natural Gas Volumes Second Quarter (Bcf/d) 23.0 E0004391543 + *.0 XH005-00843 1yJf "IUUO "1Uvw Luuu ============= Page 8 of 27 ============= Enron's Wholesale Gas Network Canada West Marketing Offices - Owned and Leased Capacity NYMEX Owned Gas Storage -  Leased storage i Gas Marketing Activity Texas Central East Volumes Counterpartie! (Bcftd) 7.0 337 3.5 230 2099 2000 2099 2400 E0004391544 ~Yy 0 XH005-00844 ============= Page 9 of 27 ============= North America Power Volumes Second Quarter (Million MWh) 124 E0004391545 y'Fo :XH005-00845 1997 1998 1999 Luuu ============= Page 10 of 27 ============= Enron's Wholesale Power Network E0004391546 XH005-00846 ============= Page 11 of 27 ============= Regional Valuation Breakdown CS First Boston CONSOL. COMPCO VALUE RANGE LOW HIGH ($ in Millions) Region Southern Cone CALME EGEP INDIA APACHI EREC Trakya Total $6,300 $8,420 ULT. DERIVED EQUITY VALUE RANGE LOW HIGH DCF EQUITY VALUE RANGE LOW HIGH ENRON RAC VALUE RANGE LOW BASE HIGH $3,850 $4,300 $3,500 $3,900 $1,525 $2,956 $4,289 $800 $950 $900 $1,100 $421 $631 $945 $600 $700 $600 $700 $492 $511 $533 $750 $950 $900 $1,100 $612 $695 $774 $500 $600 $550 $650 $581 $749 $823 $750 $950 $550 $650 $700 $907 $957 $150 $200 $150 $200 $209 $209 $209 $7,400 $8,650 $7,150 $8,300 $4,540 $6,658 $8,530 NOTE: Valuation does not include regional overhead APACHI businesses exclude Hainan and Japanese and Australian trading groups E0004391547 (H005-00847 ============= Page 12 of 27 ============= Valuation Project Summer Valuation (Dollars in Millions) IMPLIED EQUITY VALUE AS A MULTIPLE OF 2000 REFERENCE RANGE CONSOLIDATED NET INCOME COW— BASE HIGH LOW SAS E HIUR- CS First Boston Valuations Consolidated Compco $6,300 - $8,420 23.6x - 28.3x DCF by Asset $7,150 - $8,200 27.1 x - 30.4x Compco/Compacq by Asset $7,400 - $8,650 27.3x - 32.4x RAC $4,540 $6,658 $8,530 15.9x 23.4x 30.Ox awes as OT uecemoer NOTE: Valuation does not include regional overhead APACHI businesses exclude Hainan and Japanese and Australian trading groups RAC multiples based upon 2000 plan net income E0004391548 KHO05-00848 ============= Page 13 of 27 ============= Valuation Sale is attractive for the following reasons: • Total package solution for assets and employees • Opportunity to consolidate sale into one transaction • Reduces time, effort and resources necessary to sell each business separately • Purchaser assuming significant risk on transfer (except for Elektro) E0004391549 XH005-00849 ============= Page 14 of 27 ============= Loss and Cash from Transaction ($s in millions) Loss on Transaction Proceeds $67080 Basis (6,026) Transaction Expenses* 344 Pre-Tax Loss (290) Tax Benefit Net Loss $ (208) Cash from Transaction Proceeds Cash Taxes Cash Proceeds Transaction Expenses* Payment of Off-Balance Sheet Debt & Min Interests Net Cash Proceeds * Includes the fund for benefits, transfer costs, third party fees, and prorata bonuses E0004391550 $ 6,080 (9) 6071 (344) (1.5021 $4,225 KH005-00850 ============= Page 15 of 27 ============= Pro Forma Financial Impact (No Change in Dividend Policy) 2000 2001 2002 Base Plan Earnings per Share $1.38 $1.59 $1.83 Average Return on Equity 11.7% 12.3% 12.7% Scenarios - Use of Proceeds Reduction of Debt Accretion/Dilution Per Share $ 0.00* $0.01 $(0.04) Average Return on Equity 12.3% 12.4% Reinvestment of Funds at 10% After-Tax Return Accretion/Dilution Per Share $ 0.00* $0.26 $0.20 Average Return on Equity 13.8% 13.5% Repurchase of ENE shares at $75 Accretion/Dilution Per Share $ 0.00* $(0.14) $(0.18) Average Return on Equity 15.5% 16.8% * Assumes 4th quarter closing, work-out of transition economics. E0004391551 XH005-00851 ============= Page 16 of 27 ============= Dividend Recommendation E0004391552 =XH005-00852 ============= Page 17 of 27 ============= Common Stock Dividend • Current Dividend Rate - $.50 Per Share • Total Dividend Payment (approx.) - $370 Million* • Comparable Dividend Yields Enron Corp. 0.7% S&P 500 1.1% NASDAQ 0.2% "Now 50" Index 0.6% • Current Payout Ratio - 35% • Dividend Increased Annually from 1991 to 1998 (About 5% Per Year) • Total Dividend Payment Increasing as Shares Outstanding Increase Due to Options, Acquisitions, and Offerings. * Excludes Convertible Preferred (J) Stock Which Will Continue Paying $17 Million Annually E0004391553 XH005-00853 ============= Page 18 of 27 ============= Current Investor Dividend Perceptions • An "Afterthought" for Almost All New Investors • No Negative Investor Reaction to Lack of Increase in Dividend in October 1999 • Dividend Cut Will Definitely be Noticed • Informed, Astute Investors Will Understand Action Immediately and Applaud Decision • Individual Investors (including employees) Will be Disappointed, But Not a Likely Impact on Stock Price E0004391554 (H005-00854 ============= Page 19 of 27 ============= Largest Shareholdings With Some Dividend Sensitivity Morgan Stanley Dean Witter Dividend Growth Securities Morgan Stanley Dean Witter Utilities Fund Citibank Global Asset Management (U.K.) Putnam Fund for Growth & Income Smith Barney Large Cap Value Fund Fidelity Equity - Income II Fund Estimated Total Shareholders with some Dividend Sensitivity E0004391555 ENE Position (Shares Held) 5,500,000 1,364,000 2,300,000 1,060,000 3,100,000 1,925,000 10% KHO05-00855 ============= Page 20 of 27 ============= Share Repurchase Authorization • Current Repurchase Authorization for Up to 5 Million Shares in Place Since Early 1996 • Proposal to Increase Repurchase Authorization to 40 Million Shares - Represents 5.5% of Outstanding Common Shares - Approximates 40% of Expected 3-Year Employee and - Executive Options and LTIP Grants - Sends Strong Positive Market Signal in Conjunction With Project Summer -- Within Rating Agencies' Tolerances E0004391556 (H005-00856 ============= Page 21 of 27 ============= Recommendation • No Real "Good" Time to Announce Dividend Cut • Take Opportunity to Reduce Dividend Now as a Large Portion of Regulated Businesses (El & PGN) are Disposed. • Announcing Cut with $6-7 Billion Cash Proceeds from Asset Sales Will Dispel Any Concerns About a Cash Shortfall. • Recommended Actions: -- Cut Dividend to 5¢ Per Share - Will Result in Annual Savings of $350 Million • Communicate Dividend Cut and Increase Share Repurchase Authorization Simultaneously With Announcement of Large Asset Sale E0004391557 XH005-00857 ============= Page 22 of 27 ============= Use of Proceeds E0004391558 EXH005-00858 ============= Page 23 of 27 ============= Summer, Portland General & Dividend Reduction Allocation Options • Overview Pending transactions will provide Enron with $6.2 Bln in net cash proceeds: Sources ($s in millions) Portland General Sale $ 1,700 Summer Sale (net of costs and retirement of El related financings) 4,225 Dividend Reduction 296 Available for Reinvestment $ 6,221 • Opportunity to Pursue Improved Credit Rating E0004391559 XH005-00859 ============= Page 24 of 27 ============= Projection Results Funds Flow/Interest Pre-tax Income/Interest Funds Flow/Total Obligations Total Obligations/Total Capital Implied Rating Pro Forma 2001 100% Debt Recom- Plan Rating Buyback Rating mendation Rating 4.03x 2.78x 24.5% 42.3% BBB+ BBB+ BBB+ A- BBB+ 7.15x 5.22x 52.5% 21.2% AA AA AA+ AA+ AA 5.00x 3.68x 32.0% 36.1% * Recommendation BBB +/A- 131313+ A- A BBB+/A- $3.3 BIn used to reduce debt $2.9 BIn reinvested in operations E0004391560 =XH005-00860 ============= Page 25 of 27 ============= Advantages/Requirements for "A-" • Advantages - Increased counterparty credit capacity - Reduced liquidity volatility - Increased balance sheet flexibility - $2-3 Bln increase in capital markets capacity • Requirements* - Maintenance of four key ratios: • Funds Flow/Interest Coverage Ratio 5.5x • Pre-tax Incomelinterest Coverage Ratio 4.5x • Funds Flow/Total Obligations Ratio 35% • Total Obligations/Total Capital 42% * Standard & Poor's and Fitch. Moody's upgrade will lag 12-18 months due to recent upgrade to Baal. E0004391561 :XH005-00861 ============= Page 26 of 27 ============= Rationale • Not clear that the benefits of an upgrade are necessary at this time • Cost is clear: - Must maintain lower debt level and improve coverage ratios - There is a trade-off between paying down debt to achieve a higher credit rating and reinvesting the funds to achieve higher earnings per share ($0.20/share per year impact) Note: Assumed $3.3 Bin reinvested at 15% per annum (pre-tax). Marginal cost of debt assumed to be 7.5% per annum (pre-tax). E0004391562 =XH005-00862 ============= Page 27 of 27 ============= Recommendation • Maintain BBB+ rating • Reducing debt to $6.5 Bin gives the option to management standards receive an the Company if commits to higher credit • If management concludes in the future that an A- rating is not necessary then debt levels could be increased without adversely impacting the rating E0004391563 v upgrade :XH005-00863