============= Page 1 of 3 ============= (~ Moodye Invesu)m Services Global Credit Rsmarch Rating Action 16 OCT 2001 _Rating Action: Enron CiDltol L" _ MOOOY'S PLACES ALL LONG T1RM DEBT OBLIGATIONS OF ENRON CORP ON REVIEW FOR DOWNGRADE; SENIOR UNSECURED AT Baal Q hpproxlmatsly $ 13 anion of Debt a.eurtties Affected. Moody's investors Service placed all the long term debt obligations of Enron on review for downgrade following the. announcement by Enron of significant write- downs and charges, reflecting substantially reduced valuations In several of Its businesses. These actions affect Enron's broadband operations, Its merchant portfolio and the Azurix water company holdings. The company's Prime-2 rating for commercial paper Is confirmed. Moody's has previously commented on the challenges Impacting a number of Enron's businesses but the magnitude of the announced charges will reduce Enron's equity base and Increase nominal financial leverage to somewhat over 50.0% while slashing earnings. The company's previously announced sale of Portland General, however, will result in cash proceeds approximating $1.8 billion which management is earmarking for debt reduction. In addition, the sale will remove approximately $1 billion of debt obligations from Enron's balance sheet. Moody's notes that, while this transaction will go a long way to help restore Enron's balance sheet, it requires regulatory approval and is likely to take up to a year to complete. 'In its review, Moody's will focus on Enron's strategic direction and In particular on the earnings and cash Mow outlook for Its core gas and power wholesale businesses. We will also review management's progress In dealing with problem areas such as Its exposure to the California energy markets and its Dhabol project In India. In addition, Moody's will analyze further restructuring efforts and the potential for further asset write-downs as well as for future asset sales that can generate cash for debt reduction. Debt securities under review Include: Guaranteed Senior Notes A3 Senior Unsecured Baal Senior Secured or Conv./Exch. Sr. Sec. Shelf (P)A3 / (P)Baal / (P)5aa3 Senior Subordinated Baa2 Guaranteed Cum. Trust Preferred Saa2 ANARPT009109 EXH 021-00122 GOVERNMENT EXHIBIT 1728 Crim. No. H-04-25 (S-2) ============= Page 2 of 3 ============= Guaranteed Trust Preferred Baa2 Senior Subordinated Shelf (P)Baa2 Cum. Guaranteed Preferred Stock Saa3 Cum. Guaranteed Preferred Stock Shelf (P)Baa3 Commercial Paper P-2 Also Impacted by the review will be the following issues: Marlin Water Trust Baal Osprey Trust (I & II) Baa2 European Power Umited Company (Margaux) Bat Enron Credit Unked Notes Trust (I & II)(Yosemlte Baal Enron is one of the world's largest energy companies with approximately $63.4 billion in energy assets. The company produces electricIty and.transports natural gas, develops, constructs and operates energy facilities, and markets and delivers physical commodities and financial and risk management services. It Is headquartered in Houston, Texas. "' New York John Diaz Managing Director Corporate Finance Moody's Investors Service New York Stephen G. Moore VP - Senior Credit Officer Corporate Finance Moody's Investors Service a CmvrIoht 2002 by MOOdy'a lnr+ttors S.rvka, 99 Church Sbreat, Now York, NY 10007. Ail rights navarv.d. 0 ALL INFORMATION CONTA1NEO MER?IN 13 COPYRIGMTeo IN THE NAME. 01 MOOOYS INVESTORS SN*VIC2, INC. f'MOOOY'S'I, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTH/RWISa RFPROOUC1O, RLPACXAGIlD, FORT r.R TRANSMm'tO, TRANSFERRED, OIS$lMINATIO, RIDISTRINUTEO OR RISOLD, OR STORED FOR SUISeQU!NT USE FOR ANY SUCH PURPOSE. IN WHOLE OR LN PART, LN AllY FORM OR MANNIIR OR SY ANY MEANS WHAT301VER, BY ANY PIRSOM WITHOUT MOODY'S PRIOR WRITTEN CONSENT, -An Information conc$(ntd heron Is ob_ainad dy MOOOY'S (ram sourCR belINad by C Cc be accurate ar:a rally l , B,CJusa of ;ha p01L5II:1Y of human and c.etrmnlcal error as wall U o filer factorl, ndwsver, such Information is prov,cad 'as II" w,vlauc warranty of any kind and MOODYS, In oarti uI r, makes no rooresantsoon or Warranty, axprasa or implied, ai ZO Cta accuracy, ::rnmimesa. compltunpa, marchar t,Cddy or Nbieas for any parccIar purposa a( any such information.. Undo .,0 ANARPT009110 EXH021-00123 ============= Page 3 of 3 ============= GrCUmitsnct shall MOODY'S have any IlaOlllty to any person ar nt,Cy for (a) anv lots Or damage n whole or in part cbuled by. resulting from, or relating to any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODrS or any of its OIrectors, on'IUr7, employees or agents In Connection wi:h me procurement, collecIOn, Camailalon, intarpretatlon, communication, publleatlan or delivery of any such inrormation, or (b) any direct, indir,C. spec,., conaaquantlel, :Amoensatory or incidental damages whatsoever (Including without hrn:Ca00n, loft profits), even it MOOOY'S is advised in aavance of the p0aai0dlty of turn oamagsts, resulting from me use of. or inability to use, ary sucn information. The ratings, if any. conot toting part of me information Cont1med harem are. and must to construed safety as. statement) of O piioon and not statements of sect or recommendapons to purchase, sell or hold any satunafa. NO WARRANTY, EXPReSS OR MPU D, AS TO THE ACCURACY, TIMEtttllSS. COMPI.fTCNESS. MlRCHANTA{1UTY OR FITNESS FOR ANY PARTICULAR, URPOSE Of ANY SUCH RATING OR OTHER OPINION OR INFORMATION 15 GIVEN OR MAOE 6Y MOOOY'S IN ANY PORM OR MANNER WMATSOEYER. Each rating or Other opinion must tie weighed solely as Omit factor in any investment a.ciaron mane by or on behalf of any user of the Information contained herein, and aacn such user mug eccoroingly make its own study and evaluation or QeOr security and of each iuuaf and guarantor tf, and *{CM provider Of Credit su000rt far. each tlCunty that it may consider purenaarng, holding or Selling. Pursuant to Section 17(b) of the SKUnties Act & 1933, MOOOrs hereby discloses net most issuers of debt aecunoae (including corporate end aiuriwcrpal bonds, d/Oentur s, notes and commercial oaoa-) and preferred stock rated oy MOODY'S have, prior to aisrgnment at any rating, agreed to pay MOODY'S for the appraisal and racing ac-vices rendered by It feel ranging from 51.000 to $1.500.000. ANARPT009111 EXH 021-00124