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				 F

						     ENRON CORPORATION
						       Moderator..Jeff Skilling
						       01-22-0119:00 a.m. CT
						       Confirmation # 543966
								  Page 1
							  Revised 1111/2006

		   -     ENRON CORPORATION
						    I.
		       '4Moderator: Jeff Skilling!
			   January 22, 2001
				9:00 a.m. CT
									 p

				-<

						    *1*                          .
		     -    .,                        1

Operator: Good rhorning, everyone, and welcorte to the Enron's fourth quarter earnings release

conference call, miscall is being recorded. At this time, I would like to turn the call over to
						    1                                      4
President and Chief Operating Officer, Mr. Jeff Skilling. Please go ahead, sit.

Jeff Skilling: Thank you very much, dud good mornin~, everyone. This is Jeff Skillinj President

								 1*
and Chief Operating Officer of Enron Corporation. With me hete today in Houston, I have Mark
						    I.
Koenig, who is Executive Vice President of Investor Relations, Paula Reiker, who is theManaging
						    i
Director of Investor Relations, Hick CauseV; who is an Executive VP and Chief Accoufiting.,      *

Officer, and Steve Ke~,. who i~ the Exe&utive VP and Chief of Staff.           -

	      *                         -           j

But thank you very much forjoining us on the call and W~b broedcast this morning. Earlief todAy -
						    .1*~
we reported bur fourth quarter and fUlI-y~ar2000 results. We hope .ybuve had a chance to see

:the release. In summary, we had atreuiendous year in the year 2000. Str6ng results reflectwhat~     ~ -
		                              4.4

we believe is breakout performance in all of our operations: The results also further demonstrate  -

our leading market positioha ineach of our major businesses. I                               *

					       jj.i                          .,<
Our wholesale business led our strong-financial results, achieving r~cord levels of profitability-
							      I
and physical energy deliveries. 2600 was our first full year of reaping the ben~lits of Enron
						    4 1            -

Online, which has not only extended our market reach-but has also enabled us to significantly
scale and ~row our business. Our retail energy servicesgroup also had an outstanding year. The
			 -      -         .~*-                  .4   .                     -,

business showed increasin~ profitability in each quarter during the year 2000 and almost
			   '<--it       -
					4                                      4

												     4

											       .4

													  y



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				   .4

							   -    ~  '4

						     ENRON CORPORATION
						      -~ Moderator Jeff Skilling
						       01-22-01/9:00 am. CT
						       Confirmation #543966
								- - Page2
							   Revised 1/11/2006

doubled its new outsourcing contracts.                       V

							     t
Enron Broadband Services substantially completed its flexible, scaleable broadband network. The
							     V
business also gained traction in both its - in both of its major basinesses - bandwidth intermediation
	      <

and content services.                                        1-~

			     .4

2000 was also another~xcellent yearfor our shareholders~ Enron shareholders had a total return of

1998 return of4O percent.                       ..               .
89 percent forthe year, and this strong return ison top of Enron's 1999 return of 58 percehi, and our

Ouring today's call, I will summari~e the financial highlights for both the full year 2000. and the fourth

quarter, and then ~~tell take your que~tions. Lets start with the first - or with the full year.

       full  2000, we        rtd total
							     .3'
For the   year           repoc          revenues of $1 01 billion'o, we broke the $100 billion mark.

A.2&per~ent incr~ase iii earnings per share to $1.47. and that's compared to $1.18 a year ago. A
			     *        4.                          .7        7

32-percent increase in net income to $1 3 billion, up from $957 million in 1999. ASS percent incMase
							      I      -
in wholesale marketed volumes to 52 trillion ETU equivalents perday, and an almost doubling of new
energy services contractsto.$16.1 billion for the yeai   :.
							*1.

Fourth quarter numbers, we reported excellent recurring results, indt~ding revenues at 41 billion. A
32 percent increase in earnings to 41 cents per diluted share, compared to 31 cents a year ago. A 34
			     - ..                             ~;. 4   - .   -

percetit increase in net income to $347 million,.versus $259 million a year ago. A 90 percent increase

in wholesale marketed volumes to 65 billion 8TU's, and a 73percent increase in new, retail energy

services contracts to $4.5 billion.                           j

							*    . t   I

I'm going to walk through eadh of our different business areas, and giv~ you more detail on

perforrn~nce starting with our wholesale services. Our wholesale business is our fargest
							      I.
		      - . '             .                  .7
operation. ~f'continues to grow at-a very, very strong rate. Earnings in this business have grown

at a 48 percent average annual rate for the pastflve years and including a 72 percent increase in year
							     .4          4

2000:                                         .*      .

								 V

							       I

		A
       7

	       4

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       '4

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					     *        ENRON CORPORATION
							Moderator Jeff Skilling
							01-22-01/9:00 am. CT
							Confirmation #543986
								   Page 3
							   Revised 1/1112008
					     'I.
During 2000, Enron further widened its strong leading market position in the wholesale energy

markets in North America and Europe. We built a tremendous m~rket franchise that has significant
					     4-

sustainable competitive advantage. A very distinct advantaje for us is Enron Online, ivhich has

enabled several key benefits. First, Enron Online has provided a huge. new market reach for us. In

the fourth quarter we had over 3,000 online customers. Equally important, the internal features of
					       I
Enron Online have launched us into a new level of efficiency, scale, information and liquidity. We

executed 548,000 tra6sactions online during the year 2000, totaling $336 billion of gross
					       i
transaction value.
					       V
						      I
					       I
For the quarter, our wholesale earnings were strong in everyregion, worldwide. We built a
				     -       ~1
broad-based business that is operating in multiple, fast-growing markets in both North America and

Europe. In this past quarter, the wholesale business reported total income before interest,
				     *     ~*I
minority interest and taxes, or BIT, of $777 million, compared to $263 million last year. We report

our wholesale business in two categories - commodities, sales and services, where we market

energy commodities and services and manage the associated contract portfolios, and the
					       -S
secondary is assets and investments, where we invest in, develop, construct, and operate energy
and other assets, worldwide.

IBIT for the commodities, sales and ser~ices 6omponent of the wholesale business, was $538
						      K

iiiillion for the fourth quarter, led by an almost doubling of worldwide energy deliveries. Total

physical volumes delivered for the quarter grew to 65 BCF per day, versus 34 BCF equivalents
per day a year ago.
		 t                             1

					       .1-

Let me go through each of thecommodities in that commodities, sales and services area, to give

you a sense for how each of the-commodities did. Our natural gas business made a very

significant contribution to fourth quarters results. We are experiendng both growing overall

market demand, and increasing market share, and again, our growth is very broad-based. Total

physical natural gas volumes doubled in the fourth quarter, toe record 34.2 BOF per day, from

16.9 8CF a day in 1999.

						I



4
			      4                      N

	       t                                                   ENRON CORPORATION
								     Moderator Jeff Skilling
								    01-22-0119:00 a.m. CT
								    Confirmation #543966

								       Revised .Page4

							   I

							   I
	     In North America, fourth quarter volumes grew 92 percent. to 29.3 BOF a day. These results

	     included U.S. gas volumes at 22.3 BOF a day, with growth in every region of the United States. The
							   1
	     largest volume increases were in the Eastern U.S. - excuse me - followed by strong increasbs in

	     the Central U.S. and Canada.

							   V
							   k
	     Gas volumes in Europe inaea~ed three-fold, to 4.9 BOF a day in the *fourthquarter. On the continent,
							   I
	     where the gas directh'e was implemented in August, we'Ve seen the number of customers

	     accelerate very quickly. Excuse me. I've got a lot of material to go through here. We're

	     expanding our presence at ne%gas marketing hubs every few weeks, extending our markets well

	     beyond our initial markets of the Netherlands, Belgium and Getmany.

							   t
	     Let me turn now to the power business. Total physical power volumes increased 124 percent

	     during the quarter, to 2122 million mega-watt hours; from 94.8 million mega-watt hours a year

	     ago. In North America, power volume~ iribieased i14 percentin the fourth quarter, to 188.8-
							   IA
	     million mega-watt hours. Our North American power business is also very broad-based. During
							   it
	     the fourth quarter, U.S. volumes were split ap*oximately40 percent in the Western U.S., and 60
	     percent in the East. Excuse me. Let m6 just take a little sip of Coke, here.
						       K,  f

										    4
	     We've recently signed agreements to sell some of our assets related to our North American
								    A
	     commodity business. These assets include Houston Pipeline ~and five of our Peaker power

	     plants. These sales are expected to close in the year 2001, and no financial impact of

	     these sales is included in today's results. With the greaterliquidity in the marketplacerand
					      -                 =   I

	    <the success of Enron Online~weno longerneed to own these physical assets to ensure
				    -            .~            :.

	     reliable delivery to our customers. Enron can uniquely replicate these physical assets

	     through our very broad contracting and market-making actMties.    -

						      4,
	     Let me talk for just a second about Europe. Our power volumes outside of North America
								    'I
	     increased over 250 percent from a year ago, to 223 I'm sorry, to 23.4 million'mega-watt
								    1-
	     hours. Just as in gas, Enron is establishing power marketing hubs across Europe, and the*
									     r -
	     greater liquidity is allowing us to extend cur business to originating longer-term products for
	     these customers. Excuse me. Now Irti going to-suck on cindy for a minute.
								    r
								    I-
								    -4

	  4*   -.

S.



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   -         2'-                                                      ENRONCORPORATION
								    r * 01-2201/900 a.m. CT
									ConfIrmation #543966 -
						       j.                          Page5

						       [ii.                Revised 111112006

In terms of new businesses, in addition, we continue to build new businesses within our
						     -i
wholesalebusiness such as metals, and pulp and paper, where we can use Enron Online

to rapidly penetrate markets and build market share. The value of these businesses

contributes to our significant wholesale earnings groWth. I                      -
						       I.

(no convbrsation)                                      t
						       -t

						       'I
So that's a summary of the commodities, sales and services side. I really apologize. lam

- I am gagging. I stood outside in the rain in Washington, DC, watching the inauguration, and I
				    4                        --                       -

I'm paying for it.               t                     j
						       U>
				      4 *4i.                .            .  4

Let me move to assets and investments onthewholesale side. BIT, attributable'to our
							      4                    4

assets and investments business for the fourth quatter, was $309 million versus last

year's level of $149 million. This business includes our stand~alone energy assets, and 4
						      '1-
our merchant energy investmentsThe increase in IBIT from*~~ the pilor year is primarily due to
				   4     >4
      44.                   4
							   t '4:
the incteased value of our merchant investments end monetization of certain European
				      ..               ~1               .
energy upwiuii~.
				    44                             4.

					 .         4       4. ... .         .   -

							   ti           .               444

In summary, let me reiterate that we continue to see phenomenal opportunfties in the wholesale
			-4. ,.     4

business all acroasthe world, in all commodity segments.
						    A

							   I
(no conversation)                                      j
						  4.

						       4.              1
Operator:' Ladies and gentlem~n, please stand by.          I
							   ij
				   44' 44...

							   4
Jeff Skilling: Excuse me. We've been on nut6 for justa minute Let me eerie back and finish up>
							   1->
our: assets and investments category for the conimodity sales group.    '
				    ~                      1

								    -           ..'  4.

In assets and investments, the IBIT attnbutable to our assets and Investments businesstr the fourth
			  4.    4....,-.                   4-

quarter was $369 million, v6rsus last years level of $149 million This business includes our
			  .   - -.4 44                                     '  ..-..

							   t        .  .4~

   it.

	 f

 4    4,

	  1



								ENRON CORPORATION
				       I                          Moderator Jeff Skilling
								  Oi-22-0119:OO am. CT
-t  s-      -.                                          4  .      ConfIrmation #543966.
							I.................................2  Page6V.
								     Revised 1/11fl006,*

						       I

    certain European energy operations.                 I
    stand-alone energy assets,and our merchant energy investments. The increase in,IBIT from the
    prior year is primarily due to the increased value of our merchant investments and monetization of

							i[
    But in summary, and I'm sorry for that dead air, there. I was boughing, and we put the thing on -.

    mute. I apologize. We were standing in the rain at the inaug~iration in Washington, and I'm
						       -1

    reaping the unfortunatebenefits of that. BQt the wholesale business has just dane great. We had
						       *1
    a just a fantastic, quarter; a fantastic rar, and we're looking forward to a great 2001.
    *                                  I  fr-c.       *1*-*

						      *>1
    Now, before I go on and discus~ our other businesses, let me comment for just a minute on

    California, because I know it's on evetybody's mind. We are all aware of the reasons for
					 -. ..        . 3

    California's current situation. Excuse me. There is a sev~r~ supply/demand irnbalande in

    California. The way the state strudured der&gulation, they have exc~ssive reliance on the spot

    market, by the State's utilities, and finally, they failed to frilly deregul~te retail mark6ts, that there

    are no price signals beinQ sent to retail customer that there i~, in fact, a shortfall of available

    supply.                            -.

    Now for Enron, the situation in California had little impact on fourth quarter results. Let me repeat
							it
    that. For Enron, the, situation in California h~d little impact on fourth quarter results. Because we're

    not a                                                                            generators
	genera or in California, we, numberone, do not invite the same accusations the,       have
				   *         .,.- ,L.. **i~

    faced regarding excessive profits. And number two;.we do not have significant investMents

    which are captives to State. Our-profits are derIvedfrom the merchant activity that we elect to
							 I
    conduct in the state. We are closely monitoring our exposure to all of our customers. Now, we do not

    expect the California situation to have any significant impact on Enron a financial outlook, specifically,

    ourabilitytoliit200i targets.                        t
					  *              I

    Enron's wholesale business generated $2 3 billion of worldwide earnings in 2000. Earnings were
						               4.

    broadly generated across the U.S., Canada, Europe, and other countries. California's amud,
							 t

    smaller percentage of our overall 6a1nings thbn some of the other ener~y.com~anies, particularly
						   j
    generators. We have a policyof not disclosing specific credit positions, but as many of you know,
    evaluating credit, and monitoring credit, has beer a key part of our control function since we started

						      2                                   <2..

4



							      *                                4

										  ENRON CORPORATION
							      *                      Moderator jen bKIiiIflg
										    01-22-01/9:00 a.m. CT
	 .4
												Page 7
						       j                            Confirmation # 543966
										       Revised 1/11/2006

						       I,
						       r
										    -  -          4

	 marketing gas and power over 10 years ago. We believe that we have adequate reserves for all of

	 our counterparties. The bottom line is this - we are not overexposed in California, or anywhere
						       4.
	 else for that matter. Ken Lay, and other senior management members have participated in key
						       t
	 meetings to ensure that a solution to this situation is completed in a manner that ensures that

	 power is reliably delivered to California consumers. Gut, in summary,. we are not overexposed in

	 California. Our earnings were riot significantly impacted by California in the fourth quarter, and we
				  4.  ~4*
	 don't expect them to be significahtly impacted itioving forward in time~   - -

				   K'      ~.          4

	 So with that, we leave the wholesale business, and let's move now to our retail energy services

	 business. Another great story in the retail energy business. Forthe fourth quarter, retail
				   4                   '44

	 revenues were $1.7 billioti: Fourth quarter IBIT was 33 million, compared to seven million a year

	 ago.                         .    .      ,     I-

						       *1
	 For thefulI year we reported $103 million of IBIT, compared to a 1999 loss of 68 million. We
						       *1
	 continue to see very strong lev~lsof ne~ contracting. New energy contracts during the
							4,,
	 quarter totaled $425 bitlion2including alO-year agrebmentwith the Masterich Company, a
							4 .                         .     .

	 publicly-traded REIT and Pilkington the'North American arm of a British glass rfiaker.

	 For the year, Enron energy services contracted $16.1 billion of new, energy contracts,
					   t           . .i.~                               A.
	 right on target, and almost double 1999 ievel~. Enroui continues-tb? lead the market in
						  .4    4
							4.
	 providing nationwide, comprehensivb energy'otitsburcing in the U.S. We-have rapidly

	 gained presence in Europe, both extending r~Iationshi~s With existing customers, and

	 acquiring new European customers. .

				      V.                  j

	 The current environment of high energy prices and unprecedented volatility, presents
					   ,t,.       ~'t.

	 tremendous opportunities for Enron with its retail business customers. We are actively

	 marketing our price risk-management services in conjunction with reliable physical deliv~ryof

	 energy, to provide an extremely valuable service to these customers. -Enron is uniquely'

	 situated, with all the skills and tools necessary to be the provider of energy services to
					*                 I                      -
	 businesses in today's market

							  4

* 1:   - -
       C-.

1'

	       4

	       4

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								 ENRON CORPORATION
								   Moderator Jeff Skilling
								   01-22-01/9:00 am. CT
								   Confimiation # 543966
									      Page 8
								      Revised 1/11/2006

Later this week, we'll be announcing our contracting target for the year 2001. We are

already off to a great start this year, as demonstrated by the recently announced major

energy management agreement with Owens-Illinois, for $2.2 billion of new contract Value.

Just incidentally, that is now our largest contract signed to date in the retail energy business.

So the retail energy business; great quarter, great year, great outlook for the year 2001.
	      I                                       ,  p.

Let me move to our transportation distribution business. That business includes Enron

transportation services, which represents ourinterstate gas pipelines and Portland General

Electric,' The group's fourth quarterIBIT was $203 million, and combined full-year IBIT

increased seven percent to $7.32 million.

							 t.
All of our major pipelines continue to report solid earnings and cash flow. Planned pipeline

expansions across our system are progressing on schedule, and the stable earnings and cash are
							 I..
expected to cbntinue.        .

And last, but not least, our Broadband Services business. Our newest business, EBS, reported

an IBIT loss of $32 million for the fourth quarter. They also r~ported a full-year loss of $60

million, which is right on track with our expectations, reflecting the costs to establish the business,

offset by a successftil monetization of a portion of our Broadband delivery platform.

During the year, Enron substantially completed our low-cost, Ilexible aid scaleable broadband    9

network. We have 25 pooling points inoperation, surpassing our full-year target of 13. With
												 4
							  z

these pooling points in place, we've effectively created the first network of networks that will enable
						      .1
wide, third-party network connectivity.' Now we are building commercial businesses and

contracts, very similar to our energj model.       '     - I

							  4
							  K
Enron is actively making markets and transacting in bandwidth intermediation. Inthe year 2000,

we completed over 320 bandwidth transactions, including 236 in the fourth quatter, up from 59    -

transactions in the third quarter. So we noW have a market for bandwidth in North America, and
							  t
increasingly in Europe and Asia. We are also phy&ically delivering bandwidth against these

contracts. We report these deliveries in terms df D83 month to equivalent, which is a common

							  I



							      ENRON CORPORATION
								Moderator Jeff Skilling.
								01-22-01/9:00 am. CT
								Confirmation 543966
4                                                                          Page9
								   Revised 111112006
						      I
						      I

denominator that we use for different sizes of bandwidth. In the fourth quarter we delivered 2,393

DS3 month equivalents, and 5,209 for the full year, exceeding our 2000 target of 5,000. So we

do have a market now, and we are actively engaged in that market for bandwidth.

Our other major broadband business, which is content services, we also hada successful fourth
						  *   .1
quarter, where we launched the first phase of our content-on-demand product. As the

wholesale service provider, we are delivering movies on demand in select areas of Seattle,

Portland, Salt Lake City, and New York City. We believe that we have a very unique and

powerful commercial proposition that, packaged with this proven technology, creates an
									     A

enormous opportunity in one

of the world's fastest growing markets.               I

Just a few other items corporate and other. In corporate and other we reported it WIT

loss of 134 million for the fourth quarter of 2000. This segments earnings decreased

primarily due to expenses associated with our corporate-wide growth. NonrecUrring items.

In addition to the results Ne discussed, Enron reported n'onrecurring charges totaling 35

cents per diluted share. Major components included a $326 million after-tax charge principally

for Enron's portion of impairments reported by Azurix related*to assets in Argentina. We

also repoded$39 million in net after-tax inc~me; reflecting the issuance of stock by the New

Power company, partially offset.by certain costs of Enron's retail energy business.

So, in summary, we are certainly pleased with our fourth quarter and full-year results.

We're very excited about the continuing positive business developments across the

company and remain confident that our strong performance will continue increasing
						       I
profitability and expanding returhs to shareholders. And, again,] apologize for the throat, but
with that we will move on to questions.                         +

						       I....

Operator: Thank you, sir. The question-and-answer session today will be conducted
electronically. If you would like to ask a question, simply press the star or asterisk key on

your telephone pad followed by the digit one. We will take as many of your questions today

as time permits. Once again, if you would like to ask a question, press stir, one on your

						       17



						     ENRON CORPORATION
						       Moderator Jeff Skilling
						       01-22-01/9:00 a.m. CT
						       Confirmation #
								 Page 10
							  Revised 1/11/2006

					    .1
					     A
telephone keypad now. We will pause momentarilyto assemble our roster.
					     I
And we'll take our first question today from Raymond Niles with Salomon Smith .Bard~y.
					     I

Raymond Niles: It looks like, I mean, just, very good results. Butt the qtiestion is, on the margin&, ,~
						       * I
						       ;1~
it appears that margins are up for the second half at the year and can you associate

that with any

particular factor and what do yau expect.. I'm talking about unit profit margins, what do you

expectto see in'O1?                                  ,   1
							 I
Jeff Skilling: Thanks, Ray I think in the early pa~t of the year, the margins were a little bit
			A                                S
compressed just becausewe had this enormous fly-up in ~ctivity due to Enron Online. And-
							 4.
as I mentioned at the time, I fully expected that the profitability wduld follow along with the
volume increases that were seeing from Enron Online. I think that's what happening.

				    *                    I
As I took out to next year, Ray, I think the margins look very good. We're in a period of time

when what we sell is what the market wants: Predictable prices and reliable delivery carries

a premium right now, so if anything I'd expect to see margins strengthening over the next

year.

Raymond Niles: And then a question on bandWidth. It looks like the transaction volumes took off

considerably this quarter. Is there any particular factor you can attribute that to? And we still

hear in the industry about debatingon terms and conditions-for contracts, Seems like that, is

that pretty much a non-istue at this paint? -       -- ., .

Jeff Skilling: Well, Ray, you know, it's just like when .we started the gas markdt. It took probably
							 .1
four orfive years in thelate 1980s to settle on speciflestandards, settle on delivery
	      '4. . -    .        .             .         I.

iocation~. But in the interim, there was a lot of businessbeing tond&cted as people
							  <V

							 - I
created their own contracts, their own tertns and conditions, and transacted bilaterally in the
			     ...,* .                      I

market place. So, rio, I don't think it's~oing to slow down the market at all. I think we're
							  I.
seeing what we expected to see. It takes a little while to get it going, but once you get that
							  I>

I



I.

	4

V

		V

curve, it tal es off very, very quickly.

Raymond Niles: OK, great. Thanks a lot.

	    - ENRON CORPORATION
		Moderator Jeff Skilling
    4          01-22-0112:00 am. CT
	       Confirmation #543966

      *  -        Revised Page 11'
			 1/1112006 t
.4,. V.

     I

     -U

		   Operator:We'll take our next question from Linda McDonough with Manchester Growth.

								   A
									   t
		   Linda MoDonough: Hi, yes. I wonder if yau bbuld just - youtalked about yourexposure in Califom~a,

		   as far as geographic exposur& Row about - is there any possibility, for example, if the Power

		   E*change goes bankrupt just as sort of a draconian measure, how would *that impact your
								   .1~
		   business?     -                       .  .

				   *             ,' $ .       .    I
								   S.................4
						     4.                              S
		   Jeff Skilling: Linda, this is Jeff Skilting again. We~otVt talk about specific credit exposures, but I

		   can say.unequivoc~lIy that if you take the consensus earnings e~tirna
					>.4~~*      ~*~-           ,   tefornextyear,whichis$1.6Sto
								,j~j.
		   $1.70. There 'nothing can happen in Califorfila thatvould jeopArdize that kind of earnings
								   P
		   performance next year.

										   .4

								   I

		   Linda MeDonough: OK. So, it's that small for you?

		   Jeff Skilling: Yes.. -

										 .4

		   Linda Mooonough: OK. Thank you very much.
						      '4.   -
								   4,

		   Operator: We'll next go to David Fleisch6rwithGoldman Sachs.       -

				       -.           ..  - ,

		   David Fleischer: Hi, Jeff. A couple of-item reIated~uestions First, in and-around energy

		   services, how much of the $16 billion, 16.1 last year; of new contracts represents contract

		   extensions versus new contracts? Specifically, you had announced earlier in the year, you know,
								   J           ~

		   an initial contract with IBM as an example. You know would you haveadded substantial.
								   f
		   volumes, you know, from a contract like that, youknow over the balance of the year, or not?~

							    *      it-
							    A      .4            j'~      I

		   Jeff Skilling: David, I'd have to go back and get the specific numbers: buttiew contracts would be
							      .j.J-.
							      .,  ,d.            I

'44
    4

 * 



   4

t..   -

probably on the order of 85 percent of that number.

4.

	   F

	  a,
   - I ,~
   Vt      --

'.4-
     1-
     1

ENRON CORPORATION,
  Moderator Jeff Skilling
 01-22-01/9:00 a.m.CT
 Confirmation #543966
	    Pagel2   -
    Revised 1/1112006
	    1.

			       4.   .4

extensions in future p~riods to add to that, clearly.
David Fleisoher: OK. So, there's a lot of room given what you've said inthe past for
						   ~1.
						  .4
Jeff Skilling: Absoltitely.-l think, urn, we're expecting that; urn, from the contracts that we
			   - .  .      .       .~

have in-house now, that we should see over some period of time something over two times
						     4
the total amount of business from those customers, as we get signed up under the original
						  * A

contracts. So, there's a lot of room for expansion.

						     I
David Fleischer: Why doesn't that happen oVer a relatively finite period of a year or two? It seems
		   -                               ei~
like a lot of it should be up front. We should see an awful lot, you know, of your volumes or

revenue increases next year contract& you know, signing this year.from extensions.
				     *     - 4       1.
				     4, -            :1

Jeff Skilling: Well, if you look at 15 percent of $16 billion, it's still a lot of money relative to the

contract if it's going on thepast.l feel real good abotit out progress in extendi
									 ngthe.
contracts.
						     *1
						     I..
David Fleischer: OK. Second question, you know, you're selling your Houston pipeline,
				tr

power plants,
what do these sales and others say about,your ability to monetize, you know, some larger

amount           .              .                    4

of assets and what is the offset invest6,ent reqUirement in, you know, intellectual capital
									   I.
					      4      1

related                                     4

businesses, let's say, and as we look out over the next several years. Is it going to be partial?
						     I                      4.

Is                            .*.-'       .4   7.    t

it going to bQfully, what you monetize out of this? Will we start seeing, I guess the question
						  .1
iswill   .                           .   -                .
					      .4

we start seeing more, or less, net investment and more disinvestment anda strengthening

balance sheet come out of alrofthis?.    -~   -      I

						     PC

-t



										    i

						   ..,~ $-

						     -~                     *1

						  *    ENRON CORPORATION
							 Moderator Jeff Skill ing
							 01-22-0119:00 am. CT
							 Confirmation #543966
								   Pagel3
							    Revised 1/1112006

							...'--"4

Jeff Skilling: Well, there is, thereis absolutely no question, and) will be totally unequivocal,

whatever that word is. We have a lot of room to lighten up our asset positions inside this

company. andwe are working on it very hard. And probably.- my only frustration with the

last year was the slowness of our progress in monetizing some of our international assets.

And that is coming along and I commit to you that we are going to be continuing that. So, you
						I
should see, over the next several yeats, a significant strengthening ef the balance sheet as we
						 I
monetize some of the lower return assets and have that capitalavailable to deploy into the new
						 1
businesses. But if you look longer term, David, look at'the three big businesses, outside of our

broadband business; the transportation services business, our pipeline business; is cash
		I   .~          .  -. .          I         *-
positive. We don't.in'~est as much in that business as it throws 60 in cash, the wholesale business,
						 I
believe it or not even with the huge growth rates We're seeing in -that business, our incremental return

on invested capital in that business is so high that we can grow at a 40 to 50 percent rate in that
						 I
business with no additional capital infrnsion to support that growth.
			       <.7., . .
			     'a

The retail business, as we all know, is basically cash

investments in  stomer facilities a(n; prenises - .a?~ca~.f otheextent that there are capital.
					re~uired, that can be securitized. So, my

expectation is that having turned the corner on profitability in that business, we would expect it to be

cash positive moving forward as well.

							   44
So, the only business, really, that we have kiture investment requirements in is our broadband
							   'U
business. We told people what we would be investing in the year 2000 and we actually kind of
							   I
undershot that number in the year 2000, My expectation for the next year would beat a similar
							 -1                       . -
capital number to what we were projecting last year. So, overall, we should be cash positive and

improving the balance sheet over the next co pie of*yea~~

David Fleisoher: So, your biggest problem is what to do with all this cash?-Thanks.Jeff;
							    I            ,
							    I-
							   t
						     u2v1u
Jeff Skilling: That's always the bi~ Aoblem. Thank~,       j
			 S.,  t .4,

Operator: We'll take our next question from dL~ri Launer with CS First Boston.'
				    '4                      V

							    I   ,*       *
							   -t
							    -1

							    I.

 '4

A'



							      ENRON CORPORATION
							       Moderator Jeff Skilling
							       01-22-01/9:00 am. CT
						      * .      Conflmiation #543966
									    Page 14
						    I             Revised 1/1112006
						    4.
						    I
						    *1
Curt Launer: Good morning Two unrelated questions, if I could: First ,just itlative to California, I
						  *1<
know you don't want to provide details of how you look at risk management there, but is mere

anything you can say relativeto diffe~ences inpe~rttagesof rserves taken against certain
						  -1
contracts compared to other parts of the country, based upon what~ goin~onin California right

now~                                              <'.1
						    1<
						     t.       4

						     4     . .            .  -.

And second, I'd liketo extend the question reIati~eto Enron Energy Services byaskin~specifically
						     I
about the Owens-Winds new contract $2.2 billion, and how that compares to the original
Owens-Illinois contract and what it might represent in terms of increasing margins for EES, because
	  -. . .,                     - .            A A

it's probably-the most significant up-selling you've had to date. 4<

						     1-
Jeff Skilling: Thanks, Curt. First, on the whole-California thing. I can just assure you - I can't go
						 *  -.1
into all the specifics of how we reserve and the calculations, btit you've beenhere, you've seen the   -
						     I.        .  -~
mechanics that ~e go through to do that. We feel that we haVe properly reserved, fully reserved,
						     t  -.        -,...   .

for anything that can go on in California githis point.

On the Owens-Illinois contract, I guess we're pulling a little bit of a tough one on here because this is*
				     N                                  different
Owens-Illinoi~.gthe originalcontractis-Owens Coming, and so these are two vetry

companies. -The contract structure is similar in both cases, though.

Curt Launer: OK. So, there's really no 6alculation we could make relative to improving margins
						     '1
because they're-different companiest I'm sorry I didn't reAlize that.
				     -   ,n,     **~* ~   V

Jeff Skilling: Yes, I'm sorry abdut that. It gets a little confusing around here, too.

						      1-'
Curt Launer: OK. Thank you.                    1.. ;..                -"

Jeff Skilling: Thanks, Curt.                          I
					       -      I

					      4
Operator: We'll go nav~ to a question from Bret Connor with Commerce Bank

							"4

								4

							   4-

								4-

				   )

A



							     ENRON CORPORATION
							       Moderator Jeff Skilling
							       01-22-01/9:00 a.m. CT
							-.     Confirmation #543966
									 Page 15
								  Revised 1/11/2006
						  - t

Bret Cannot: Higood morning. Congratulations on a good quarter. A couple of quick questions for
						     I
you. First on Enron Broadband Services just a couple of questions. I noticed, first of all, that
						     I-
there were some dark fiber sales this quarter, also some monetization of the network. I'm wondering if

you can give us a sense for how big of a contribution that made to the earnings for EBS in the quarter?
						     V

And also, is that something we should continue to see going for4,ard until the business starts to break

even, or is the network largely where it needs to be?

Jeff Skilling: OK. Let me turn that over to Mark Koenig. He's got the specifics here.

Mark Koenig: Yes. 8ret~ there were no dark fiber sales in th~ quarter and the monetization that
						     I
we referred to was fairly small, we don't disclose the specifics of those transactions, but clearly it

offset some of the kind of normal operating costs of Enron Broadband Services. And we'll have
						     I
some of those, just as we've had in wholesale and retail throughout this year. But its a fairly small
						     j
amount.

Jeff Skilling: And Ken Rice, who runs EBS, just walked in and, Ken, where do we stand on, just,
						     V

network basically installed?      '                  j

Ken Rice: Yes; I think for all intents and purposes, our long-haul netwbrk is basically installed.

We've got a couple of air gaps to close up and things like that, but you won't see us adding anj'

significant long-haul fiber. What we're going to focus on is w&king the ends, and continuing to
						     4
install the switches and pooling points and interconnects witkother networks, because we've
						      I
been able to demonstrate that that's obviously, at least for our business model, a much more

efficient way to go and to build our trading and intermediation business.

So, over the next couple of years, unless there are very specifics 1?ojeds, there will not be very much

long haul fiber, and most of our network expenditure will be putting in pooling points and

connectivity.

						      1
Bret Connor: OK. Now, looking at the 053 month delivered and content services contract

value, it looks like you did a pretty good job of hitting your targets for the year, although it also looks



				 I

						     ENRON CORPORATION
						       * Moderator Jeff Skilling
						       01-22-01/9:00 am. CT
						       Confirmation # 543966
								  Page 16
							   Revised Ill 1/2006

like you've got pretty huge growth targets for next year, if I remember the numbers right from the

analysts ~onference last year. Obviously, this market is taking a (vhile to develop. Does it look
		 4-f.                             I.

like things are still on track for the type of DS3 month delivery vblumes and the volume of content

services contract value for 2001 that you previously expected7

Ken Rice: Yeah. We're goinb to annoUnce that later this week, exactly what our targets are, but

we are right on track withwhat.we talked about last year and I would add.on&editorial comment.

I think the transaction volume and really the acceptance of the industry is right ontarget with what we
						  I
expected and in some ways faster in some areas: But, we'll get into that in a little more detail-
					     -          *0

later on this week at the analysts conference, but this is like light-speed compared to the electric
and the gas industry.

Bret Connor: OK. And then, you said that your network is largely in pl~ce and Jeff had said that
						  1- -
cap-ex this coming year will be pretty sirnilaitto what it h~d donelast year. After this ye~r,will -
						  2       -
the cap-ex start to come down a bit or will there still be sigflificantinvestments in pooling point&

and sewers and things like that? What kind of outlook beyond this year dowe have for cap-ex.
				     4   4~

						  I.
				    *  -t

						  I  -~
Ken Rice: Well, ziiy perspective is cap-ex will probably ramp down after this year.We don't, we
						  I
don't know for sure what's going to be but there in terms of adding pooling points, but it will be
						  I
more of an incremental decision after 2001, because we will have the major cities all
						  I
friterconnected with our pooling points in 2001. Then it's a fairly easy mathematical DCF analysis
of whether we add one in the next city. So, they may continue;to be capital investment in getting

connectivity,                                     j

		    .4<            ,              .4'

but it won't be to get that initial scale, it will be incremental decisions to add pooling points in -

cities that look like theV have a lot of traffic for us.

						   f
				   4.          -4

					      '.

Jeff SMIling: And right now, I thinkoneofthe bigopportunitiesandthebigbottleneclcsinthe
						 '-A

system is getting more access to local corihectivityi And that's basically getting your switches in
						   a
place, getting the servers out and located and so that Will continue at a relatively high rate for the next
several years.                                 -   - I

4*



				 'I
				 -I

						      ENRON CORPORATION
							Moderator Jeff Skilling
						       01-22-0119:00 a.m;CT
						 r     Conlirrnation #543966
							 ~<Reised 1/11/2006
						      V

									    4
									      C.

 Brat Conrior: OK. lappre&iate that. I do have two others non-related questions-First, on Enron
							     -I
 Online, it sounds like things Went yew well for the year and it sounds like you're continuing to add
											-A
							       'U
													  -V
 volumes. I'm curious though; obviously, there have been some, new competitors who have entered
										  .......
 the scene. You know, you're still in great position, but.what is your outiook iight now on Enron

 Online's ability to maintain-the-volumes and the g~owth thatits had?.And also, what should we
							       'V
 look forward to in terms of Enron Online maybe interfacing with some of the other online
							      -'K
 exchanges? Will there be anything happening there, or what types of thing's might we expect?.;
							      *Sr,
	       *                 (~. .    K

							       t.                   .                   -  C

 Jeff Skilling: Well, you know, again, I ftknkly have been kindbf surprised by it. We have seen a  -

 couple of neW platforms come up, but our growth rates have stayed similar. In fact, well shoW'

 a chart that shows transaction volumes by day and we dontinueto hit 6ew records. So. I gued~
				     .-,. .                  . -1-
							     *    ;.'~          -
 my expectation is we'll contintie to sed growth there. -4-                -*'  ..    .      K
												     3,.

		   -              .                           .1           -.*~
							       .1
							       4.
 Bret Connor: Ok, and then just a final ~uestion: On Europe, it l6oks like your gas volumes did
									       p:

 increase substantially there as well. I know the gas market has tended to be pretty illiquid in
							       A-
 Europe. I'm mostly curious, just, more broadly Europe is one of those markets where there's not
													      4
					    4                   1                                      -
				     *                                       -

 quite as much liquidity as in the U.S., it seems and your strategy has oftenteen to enter a region
			     -       **)                     S                                   4

 with assets first and then ~et out as the market gets liquid   $

								1.
 Is it -are things at the stage in Europe right now where there s enough liquidity that you don t need
								p.                                     A,
													 4
 to have assets them? Or do .you'think-that, you-know, it might make sense for you to build new

 facilities, new power plants, or new, gas assets.in the region? Just general comments on that.

- Jeff Skilting: OK. There's reilly two markets-inEulope. Thereithe, kind of,the core markets;

 actually a reasonably good                                  . -1          .t                .
						-'--.4
- Germany and all of the surrounding countries, U.K. and Scandinavian. In those markets: there is
							     4  4' "
			    liquidity~ituation ight kow-and w~ don't believe ft's necessary to own or

 develdp assetain those areas. As youmove to the rim of Europe, Spain; Italy, Greece, the former
										    '-K.
 Yugoslavia, them is a need for                                                     th  markets we
			       additional kiter-connectivity and capacity and so, in ose

 are in the process of developing sites; and working to develop facilities.    K
						 -~

'-4.



		  'C                        .,          -
													    F -

							  ENRON CORPORATION.
			      -~                             Moderator Jeff SIding
							    01-22-0119:00 am. CT
						       $               543966
			 -                        t         Confirmation #Page 18
							       Revised 111112006
									 I

						I
Now, I will say that this is a different kind of development program than what we had, for example, in
		     -                            *I     -.

South America or India. It's our expectation that we'll deveiJp these projebts: Once they're

developed, we think that there are opportunities to monetize or sell those assets and yet still retain

the ability to tap info Iicjuidity from some of those facilities. So, Europe will be much less capital
						  t
intensive than what -the original assumption was. Weseem to be able to create liquidity. And, by
						  -I
the way, the main thing that matters-as you go into those care are~s, not absolute liquidity, its           '  -
						  I
really relative liquidity. What is your liquidity position relative to the people you're competing against,   -
						  I
and we-are in an awesome position right now that we hive a huge head start in Europe. And that                -
				       V

				   ........
gives us a very, very strong market position..
						  ii     .4
Bret Connor: OK, Great. Thanks, I appreciate it.

					       --*1*
Operator: We'll take our next question from Anatol Feygin with J:P. Morgan.

	       *           .. .    .    .         I

Anatol Feygin: Good morning, everyone..A oduple of questions. One, Jeff, as you lookforward,~

obviously, you're extremely well positioned right now; but what impacts db you guys ~ee the:
						  A.
Califomiaderegulatidn havingon the pie on sort of th&wholesale energy pie, growing. Especially,

we've seen it play 6ut -it, Alberta most recently, where they kii~d of retrenched. And, how do you
				       *   1;

see that effecting yaW business on the wholesale side, especially, going foiward?

Jeff Skilling: Well, Anatol, I think its probably going to improve our - or, improve the overall pie on

the wholesale level, because everybodythats looked at this riiarket has said that one fix, all across
					     t    :4
the country, is we have to improve transmission accAss. And I thinkwith the change in
				     ?.      **~t'       j*j,         -. .
				   -              t

administration, the change in the composition of the FERC, I would expect to see signi1I~ant
		       *            .   .

improvement in the availability of transmissioncapacity. So, at the wholesale level: I'm
			       t -          ..& K

convinced its going to be very po~itive for the future development auid growth of -that market.
			 *.................*

					       ~AI           -
Now, on the retail level, you know, there's no questidn that if a state has not-ddregulated yet,
			 -A .-#--       -il

does not have legislation or regulatory order in place, the~ am going to be very hesitant to move
						    I
						    A

in that direction. So, on the retail level, it would be my expectation that we're not going to-see
								      -4
					   '. .'    I
many more states, or maybe even any more states, move forward toward a der~gulated

  4,

  4

  *

4

j



							  F        ENRON COaPORATION
							  -           Moderator Jeff Siding-.
								     01-22-01/9:00 am. CT  v
								     Confirmation # 543966
										Page 19
									Revised 1/11/2006

							   t                     -
      market. But, again, you know, we've got about 50 percent of the U.S. population in jurisdictions

      where there is deregulatory process underway. So, it's still a gigantic market that we've

      really just scratched the surface of. So, I think we've gota lbt of running room there,.but
							   I

      there is no question that the local and state regulators arei little gun-ihy about this whole
							   1-                         S
							   1~
      thing right now.
							 .1

      Anatol Feygin: Great, thanks. A quick update-on Portland, where the sale stands there, on

      Portland General?                          -         11.

							   I   -                    :--r
										    4,
      Jeff Skilling: Yes, we are still projecting by the end of this quarter.
				       *                   I
							   I
						-         '-I
      Anatol Feygin: OKMd one quick question on retail in terms tithe numbers that you guys -
							   4
      reported of 33 ongoing and 62 one-time gain from New Power. Lastquarter, there was a-37 ~

      million gain that wasih other incorte. Was that from New Power as well?
					      -            P

      Mark Koenig: That: Anatol, this is Mark. There was in~on~e re~ognition in earlier quarters from

      some sales of some warrants that we disclosed: There were, none of those income items in the
		     -                                t      I                           ,
      foUrth quarter. In fact, as you know, we have to record our share of th~ New Power companies equity
					    *          4.. -4

      earnings, or losses in their case, they will be announcing their earnings in Febtuary. But, as you
		       -              -                      I         -

      can imagine, we have a provision in-our recumng earnings forthat business,-wtiich is off to a good
      start.
							     I
							     I
 *    Anatol Feygin: OK. So, the 37 rnillioA gain in 03 was not related to New Power?
				       *                     1%
 * ,  Mark Koenig: It was related to Enron's investment in the company. The nonrecurring item in the
						  -          I

      fourth quarter represents the increase of our basis for the issuance of New Power for thestock
							--4
 *    offering they did on October 2nd.  .-                        -

					             r*   :1
      Anatol Feygin: Right. The thing that I'm trying to reconcile is the 37 million gain in Q3, which was
					    *        4

      included in ongoing IBIT.                        :
							     1                          N
							     -S
											  N.



'-.7   V

				     I.

Mark Koenig: That's right.

 * ENRON CORPORATION
     Moderator Jeff SkiIIin~
    01-22-0119:00 ant C
    Confirmation #543966
	     - Page2O
       Revised 1/1i/2006t

I,

  Anatol Feygin: And the 62 million gain in the fourth quarter, whit was not included lookedlike

  kindofsimilart~i~~s.      .                       I

						    4'         -
  Jeff Skilling: Well, technically they were different and th~i~ different o~ners. So, Anatol, if you'd
						    .1- -

  like...

  Anatol Feygin: OK. Sure.
	       A.   -

  Mark Koenig: I can give you a cal!.

				    I
				    I
				  A
				    4..

  Anatol Feygin: Thanks. Mark.

  Anatol Feygin: Thanks, Mark.

  Mark Koenig: Butyfor the most part, the item that youl Were talking about in the third
						 A
  quarter-first of all, all 37-of that other income was not related to New Power. Only a portion,
				      -     .
  a smaller portion of that was. But, the point is, in the fourib-quarterthere were none of those
						 I

  income items resulting from that. But, give me a call and we'll go through that.

						 I
						 I
					    *    I

						 I
						 A

  Mark Koenig~ It's very, very small.,

  Anatol.Feygirt Thaiik you very much, g~ntlemen~
				-4

  Operator: We'll take our next-question from WilliarA Maze with Bank
		     '4     .*          .          A.

				    A
				    .      - .     . - t
						  .4,
						   I   {
						      .4

				4  -'
					             *1

  Operator: Sorry, sir:Mr. Maze seems to have com~ o6t of the queue. Mr. M&ze, if you can

  hear me, if-ybu would like to queue up again, we will goto.your question. We'll go now to~

						 >4.

  Jeff Skilling: Hello? Hello?

						      of America.

'4

4



Andre Meade with CommerCe Bank.

Jeff Skilling: Hellot

Operator~ Mr. Meade?

Jeff Skilling: Hello?

					    ~1        ENRON CORPORATION
							Moderator Jeff Skilling
					    K           01-22-0119:00 am. CT

					   - I          Confirmation #543966 -~
								  Page 21
					    I           - '~Revised~ 1/11,2006

					    I.
					    *
					      I

			   *1

						  1*..'
					  .     . '1.
			      * d

Operator: Gentlemen, l'rh sorry. Were having a little bit of a problem with our QAA. We'll
						A'

take a question now from Brian Chu with Highfields Capital.tJ~.
						   *
					   /       V
				       IL

Richard Grubman: Yes, hi. Gabd m&ning. jt's Richard Grubrnan. I waswondering if you

could tell us what assets and liabilities from price risk managemeht activities were at year
					   ........ I
end, both current and non-current, so those four balAnce amounts. Thanks.
					    ,'..  1-

Jeff Skilling: Gee, I don't have that information with incA                 .~.    -

				       .           I                  ~'            -

Rieker: The question had to do with price risk management and that comes out with the

balance sheet, which -will be disclosed
				   in our 10K. In terms of impact on overall cash flow,

we wouldexpect, you know, for the full year 2000 thatearnings would roughly equal cash
		-         -         7.     4.      .4.
flow.           --       .                  .
				    K

						   1
Richard Grubman: I guess I don't understand why we can't get sort of seminal balance

sheet data now.-                                  -t

Mark Koenig: Well, this is Mark Koenig. And Ridk Causey is here, our accountant. We~
				    '4.         . -- I

have not finalized        balance sheet-data and we'll disclose that as we put that
					 '.4 -,-.

together with-the associated notes that are important toaccampany that. That's thereason.
				       r

Richard Grubman: OK. Thanl&you.       .



							    -   ENRONCORPORAllON
								* Moderator Jeff Skillit,g
								  01-22-0119:00 a.m. CT
								  Confimiation #543966
									    Page 22
								     Revised 1/11/2006
									  I'>.

						       I    I
 Operator: Gentlemen, we'll go to a question now from Paul Tice with Deutsche Bank.

						       *11.~
 Paul Tice: Good morning. Just a handful of questions. First, in tertns of asset sales, you
						       I.
 mentioned that th~ pipes are throwing off cash flow right now. How do you see continued
						    >1
 ownership of the pipelines within your business mit going forward, which is increasingly
 more asset free?

 Jeff Skilling: Well, they'd be - the exerciteAhat we're going through, here, is to look at, all of
						   *    I
 our assets and identify which assets are not earning a rate of return that's adequate for the
						   * -  t.
			      V                      (4
 company and the pipelines, in contrast to that, are earning very good returns, and so the pipes are

 going to be in the mix, I think as long as I'm at Enron Corporation. We have lots of other

 assets though, that aren't going to make ~he cut           -,
							~1
							1~
 Paul Tice: Any more details you can give in terms of geodraphical concentration of those
							I
* assets that aren't going to make the cut?*           -.

							4.
 Jeff Skilling: No, it's, you know, across all of our businesses we're just working very hard to
							 I.                                         .,
 identify places that - for example, the Peaking facility sales these are basically brand new assets  *

 inside of the company and, just givenour expectation of what the future market looks like, this
							1~                     .
 was a great opportunity for us. And-so we will be continuin to do that across all the assets.
							*i.
 So, I - it's going to be on a case-by-case, project-by-project,asset-by-asset anaty&is.

						       .1
 Paul Tice: And what's the consolidated 6ap-etnumberfdr2001?
							 I

							 t.
 Mark Koenig: The consolidated captex and et~uity and investments would probably be

 two-and-a-half to $3 billion, very similar to what we've had the last se~eraI yeas.

 Paul tice: And, In terms of stated leverage targets that you have, are therean~~ numbers that
							 r
 your.                          . .               .    -
					      j                   .        ~.

 Mark Koenig: The leverage targets haven't changed much-Obviously, to maintain the - -

							 '1



			    a
							   ENRON CORPORATION              ..
						   4          Moderator Jeff SkiUing
							   -. 01-22-01/9:00 a.m. CT
						   A         Conflrrnation#543966
									Page 23
					      .  91             Revised 111112006

						   *1. --

						 .4
financial condition, we want to see leverage targets alon~ with operating .cash flow and
		 *                                 S
other measures, In fact, they haven't changed much a all, and I thinkwe should expect to     'I
						   A
see those look fairly similar with some impact of the assets sales that we talked about
						   I.
throughout next year
						   I

						 A1~1i.U
Paul Tice: And two quick 6nes;Any targets that you have currehtly in terms of Enron Online,
			    =7      A;  ..         k
for 2001? Whether volume or number of tr~nsactiohs.

	       A,                                  I
						 .~j   .4.
Jeff Skillling: We really don't have any right now. Wdre just lettihg it roll, letting it rip.
				 2               V             ,      .  .
						   Lb
Paul Tice: OK. And thelast questionzOan you just give us the status onwhereyou stand~
				   t.
				 4-.
						   I,
with the rating agencies?   .

			    2      .         '      1K            . .     .
A
Jeff Skilling: Gee, I guess werejust in great shape with the rating agenti&s. Went up and
						    t
met with them in October. Th~y all seemed to be re~l happy; so, I guess things are jutt
fine.
						    1~
Paul Tice: OK. Great. Thanks... C"                  I          -

						    I          ~.

Operator: We'll take a question now from Sam Nangia with Credit Lyonnais Securitids.
				       -, K  .               .

						    V.
Sam Nangia: Congratulations on a great result; Just had a quick follow-up question on unit

margins and volumes. lmean, you know, again; we saw this time that your volumes went
			       4   ..               4

up, unit margins went up for you guys, and they seem td be much higher than they are

for, let's say, even the number two or n(imWer three c6mpanies in terms of trading volumes,

and I was wondering if you could just comment on that and just what you see going

forward with ICE and, you know, sorWe bf the other exchanges taking away, perhaps,
						    I

some of your volutne.    *            I

					       ~ .1.         . -
Jeff Skilling: Well, again, I h~ve no expectation that they will take away volLi'me. I exped Enron
					    K       <j: *

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				      -                            ENRONCbRPORATION
								    al-22-0119:oo am
    4    *                                                          Confirmation #. 543966
								     *  Revised Page 24.
							  V
							  I
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Online to continue to gro*. It might impact the rate of growth, but that, to date, has not been -
						      -4
the case. We've continued to see very, very strong growth in Enron Online.
							  4
							  I
Now, as far as margins, and our margins versus the next player in the industry, P11 tell you
						      -1
what my feeling is~ MV theory on this is that the economics of our business are, teplicate

network economics.                                         
							   1
			      >IP
							   1>
The broader our reach is the more o~tions that we have fosupply power, supply natural gas, supply
						 C        *1           -
		      I                                             -~
bandwidth to customers. The inore options we have is a direct function of the scale and scope of our
						    ~1
network. And if you believe that, network econortiics would tel! you that telative network ecnomics
							  * 1.t
are a geometric function; And if you look at our relative size, compared to the number two, number

three players, we'r about at any give time we're a little over twice as big as the next player. And if you
					 4.
							   I
use that exponential telatonship, you'd expect pur long-term earnings to be something on the order of

four-timestheeamings power of th'os~ other companies. And I think, and so far, magically, that
					 *                 I
seems to be the case.                                      4
					       *1~*

	      4.                        .' .               .1       .         -'

Sam Nangia: That's great. Thank you; And just aq~iick.follow-ufr could you comment at all
					       *  .-.~          .7

regarding                                     . .     .
							   I
what margins were like in Europe versus the U.S. versu~, you know, which part of the U.S. were
perhaps more profitable thkn others? -       ~..   '
						      *                                   A
							    4                                 '4

Jeff Skilling: We really don't publish that information +1  i

							    r
Sam NangiaxOK. Thank you.                                   ~
				 *         - t*

	      4                       -

Jeff Skilling: Yes. -                      .U ~             1

												       4
Operator: We will now go to a question from Mr Andre Meade with Commerce Sank.
		     :4          -4
					 -                  4       .                               4
							   4"-

Andre Meade: Hi, can you hear me this time'?          -
					 *

					 *            -<1..
				*     .                     t*



						 '9,

						       ENRON CORPORATION     -
					      9          Moderator Jeff Skilliy
							 01-22-01/9:00 a.m..C
					      I          Confirmation # 543966
								     Page 25
						    -       Revised 1/11/2006
					      I,   -        -9   -.
							   '999~9     -

					      1>   ~'  - .  -

Jeff Skilling: Yes.                                9j

						   49
Andre Meade: All right, great. Two quick questions. One is a follow-up on the assets and
								-'I

investment sales. Looks like you sold down some assets in Europe and:that goes into your.
						   1~
recurring IBIT for the quarter. Looking forward to 2001. you've announced same sales of turbines

to Allegheny, some turtine~to Synergy, pipes to AP, barges to AES, and then I've seen press about
						 *1
									       A'
selling down Dabhol, Indian Oil and Gas assets, international power plants gas distribution and

perhaps Azurix: WIll you be bdokihg those sales in recuning IBIT going forward, of is thi~ more a

significant shift In your assets and investments category and you'll book that as non-recurring gain? A
				.9.9%-             ?9            ,    9        9

				     9             1      '

Jeff Skilling: Let me have Rick Causey, who's our chief accounting officer, address that question.
				     *9

			  '9                       1

Rick Causey: Yes, typically, you know as is clear, we havesh ongoin~ process of looking at our
						   -I
portfolio, optinilzir~g the level of capital investment, and what not, and so we consider that recurring
					 9'        1

activity-and mostof those items you mentioned have orwould be in the future in thatasset and
					 -   7.    1'.
						   9         -   4
investment bucket, and it's been that way for really a number bf.quarters or years at this point.

				     *        9    1

				     t    -        1:'
Andre Meade: Ok it just s&ems like a more, more a shift in -your strategy in trying to-get less
						   .1
asset inte~isive. I know you said there is plenty of room to lighten upon assets. You've been
						   I
disappointed you haven't sold off as many: I mean, is this, can you see a buildup back on the
			   -9-'

assets side forthcoming or is this: and, if not,thei~, how is this recurring, I guess?
		       --            - 9                           -

			      -      $        - ~,. 9- - I -
Jeff Skilling: Well, what our business is, we're packaging energy supplies for customers, and
		    .9                      -      9 i-                        -  -

contracts look an awful jot like assets to us. So, we're-buying and sellin'~ contracts, we're
				 -    -            -9'            .  -           -

packaging those for the customer. If a component ii better offjred througha physical asset than --
					    9- -   .4       -           -

through a contract, thenwell do the physical asset. So, it's really just a question at any given.
					  9-   --  I           -           *99~4
moment, whats the best way to put it together forthe customer. 'ou know, if you think about a
				      - 4,

power plant, a power plant isjust a whole bunch of 30'day power sales in a-row for a long period
of time. And so, it's typical that when a customer comes-in and has a need, we will slice and dice
					       t        4
eitheran asset or slice and dice a contract to put that together, package itforthem, in9 the-
							    -:

form that they wantit. And so, it's all a part of one single business model and that'swhy.

		    F;.

	     k

-9.9

	t

		 99

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					       7. -             ENRON CORPORATION
						       I         01-22-0119:00 am.
								 - Confirmation #543966
						       1                     Pdge 26
								     Revised 1(11/2006

						       -I               -    -~
						       F.
						       I
Andre.Meade:.OK, question on a related or a non-related topit,~ Retail energy services If I
						       V -

understand how you account for the contracts, if ybu can lock id a gain over the entire
						       1~
length of the contract with forwards and so forth, you will book that in year one. is that
correct?
						       I.
						       1--
Koenig: On retail we use the same methodology for contracts that require price risk

management accounting, as we do inwholesale.           1
						       r
			      -        .4.
						       t

Andre Meade: OK: Do you have - you ha'v  103 million- rec~rring IBIT for 2000. Do you
								  .4

have a comparable cash flow figure for retail energy services 2000?
			       4 .

				  .4
Koenig: We don't, yet, Andre; but again, there is very little capital there, so the DD&A
					  ~   :t-~             --.
numberis pretty small: There is some interest and taxes that woUld come off-of-that number,
						       f
so it's slightly less than the 1811 number.
						       I
						       I
				       4               1

Andre Meade: Slightly less, but in the same ballpark?  t          .
					4              -~ -
			       4          .    .4~1
			   *                           I.

			   * 'A                        1     *-  .1
Koenig: Well, there would be; again, the tax rates you'd apply to it; but there is not a lot of
				  *                    '4        -
capital so there is not either a lot of interest expense or DD&A that you'd adjust to it, so -
						       4,

take 70 percent of it.

Andre Meade: OK. OK. Thanks.

				       -t

					 I
					 I
					 -.4

Jeff Skilling: I think we'll take just one mare question...   I
			       4                           .

					      *               I.

Operator: Thank you, sir. Our last question today will conie~frbm William Maze with Bank of
America.          -       - 4-,--           .                 I
							      -i

							      [7

William Maze: Yes, good afteinoon folks Canyouhebr'me thistime?

							      -1

    44
.4

I

K,.

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				       *   4                   A

						      ENRON CORPORATION
						     *  Moderator Jeff Skilling
						       01-22-0119:00 am. CT
					      4        .Confirmation #543966
							   Revised Page27

								  1/1112006

					      I                     7

Jeff Skilling: Yes.

					    the
William Maze: OK, great. Just a follow-up on   previous question on the asset and investment.

i'm wondering  ioU could give usa breakdownofho~much was actually asset sales
							I
			4
versus the increase in value of your merchant energy operations, and what are the variabl~s

that go into the in&rease br decrease in value of the energy merchant?
			    -                  .        it

						 ..jv
Skilling: OK. The numbers are, it's about one-third bf the total was an increase in valu~,

two-thirds was from sale of ass~ts~And, basically, what's-dohe, we have assets there - the

assets in the merchant portfolio are heavily oriented toward en&rgyassets, primarily natural gas
								       .7

assets, as it turns out. And what we do is~e just recognize the value of those bathe balance.
						   -H
sheet and for incame purposes-based on what the prices ate for those, if they're a security or
							'I
if they're an equity, just recognize based on what the quarter end mark~tplace values are.
							j

William Maze: OK, great. And then ju~t lastly, on Portland Gen6tal, there's obviously an
						    -.  I                       V

increase in activity there year-over-year and I was wondering if you can just comment on that?
									-7'-.-.
Koenig: On their ihcome, Will, or on the...

							I..,
		       -        ...

William Maze: On the revenUe and the gross margin line .
						       .7*

Koenig: They had an excellent year in the pure regulated business and they've handled very well
							 I
the volatile prices and earnings o~portunities in some of their wholesale business, but its a very

solid year for Portlantd General.

			       4.

William Maze: Ok, great. Thanks, and we look forward to seeing you.
						    K
						   *   . It

						   ijj.--                      .
Skilling: Ok, great, with that I think we'll close it out~ we sUre-appreciate everybody calling in Again,
to summtize, just absolutely,-outstanding year, outstanding quarter-for the company. And as we
							    $
look forward to the year 2001; the enviionm~nt and our position in that environment look great. So,
were feeling very gadd about things right now. So thank you Very much.    , -,
							'4..'



								   S  4'

						       ENRON CORPORATION -
							 Moderator Jeff Skilling
					      -         01-22-0119:00 a.m. CT
							Confirmation #543966
					      I
								   Page 26~
					      I            Revised 1111(2006

  A

Operator: This concludes today's conference call. Thank
					  you'

END

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everyone, forjoining us.

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