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Surviving and Prospering in the New Economy Arthur Andersen 21st Annual Energy Symposium Jeffrey K. Skilling President and COO Enron Corporation Houston,

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Presentation on theme: "Surviving and Prospering in the New Economy Arthur Andersen 21st Annual Energy Symposium Jeffrey K. Skilling President and COO Enron Corporation Houston,"— Presentation transcript:

1 Surviving and Prospering in the New Economy Arthur Andersen 21st Annual Energy Symposium Jeffrey K. Skilling President and COO Enron Corporation Houston, Texas November 29, 2000

2 2 Total Return to Shareholders Jan 1, 1990 to November 2000 200 1600 1400 1200 1000 800 600 400 -200 0 Dec 97 Dec 96Dec 95 Dec 94 Dec 93 Dec 92Dec 91 Dec 90 Enron Corp. S&P 500 Pipeline Avg. Utility Avg. E&P Avg. 1383% 400% 466% 291% 174% Nov 00Dec 99 Dec 98 Note: Calculated to November 17, 2000

3 3 Price Earnings Ratios Enron vs. Peer Groups (as of 11-20-00) EnronEnergy Peer Group S&P 500

4 Enrons PE Multiple Growth UK Power and Gas Trading Begins Dabhol Phase I Financial Close Acquisition of PGE EES First Commercial Transaction EBS Introduces Enron Intelligent Network Enron Online reaches $1 billion day 20.95 57.30 23.70 23.89 28.53 37.61 4

5 5 Cost of Interaction Mining Financial Institutions U.S. India 30-40% 60-70% 55% 40-50%

6 6.90 1.0.85.80.90 Business Structure Transformation Interaction

7 7.90 1.0.85.80.90 3.453.006.45 Finished Product Transformation Costs Interaction Costs Total Costs Business Structure Transformation Interaction

8 .951.101.201.10.20 Transformation Costs Interaction Costs Total Costs 4.35.604.95 Finished Product.90 1.0.85.80.90 3.453.006.45 Finished Product Transformation Costs Interaction Costs Total Costs Business Structure Transformation Interaction

9 9 Cost of Teller Transaction (Bank)(ATM)(Internet)

10 10 Length of Time to Provision Bandwidth 6-8 months 2-3 months < 1 second

11 11 Length of Time to Execute a Long-Term Gas Contract 2-3 years 9 months 2 weeks < 1 second

12 Change in Economics of Business Structure.951.101.201.10.20 Transformation Costs Interaction Costs Total Costs 4.35.604.95 Finished Product.90 1.0.85.80.90 3.453.006.45 Finished Product Transformation Costs Interaction Costs Total Costs Transformation Interaction 3.45.303.75

13 13 Wheres the Opportunity?.951.101.201.10.20.90.85.80.90.10

14 Not Cost Competitive Wheres the Opportunity?.951.101.201.10.20.90.85.80.90.10

15 Commoditized Overcapitalized Globalized Cant make compensatory return in traditional asset business Wheres the Opportunity?.951.101.201.10.20.90.85.80.90.10

16 Creating low cost, dependable market interfaces Market making Logistics Back office Trade finance Wheres the Opportunity?.951.101.201.10.20.90.85.80.90.10

17 Virtual Integration Providing packaged turnkey solutions for customers Complex structures Differentiation Customization.90.85.80.90.10.951.101.201.10.20 Wheres the Opportunity?

18 18 Traditional Energy Model New Energy Model Asset intensive Vertically integrated Slow moving and rigid Hierarchical Brain power intensive Networked Oriented toward real options Fast moving Entrepreneurial Creating a New Energy Model

19 E nron E nergy S ervices E nron T ransportation S ervices E nron W holesale S ervices E nron B roadband S ervices

20 20 Applications Utility Facility Operations & Management Energy Outsourcing Fuel Management Services eCommerce Applications Physical Assets Contract Access Market Making Physical Delivery Contracts Price Risk Management Contracts Settlement Services Peaking & Storage Services Finance The Energy Network Model

21 21 Traditional Suppliers Commodity Management Energy Information Management Capital Management Energy Asset Management Facilities Management Light Consultants Software Vendors Control Manufacturers Architects Engineers Mechanical Contractors HVAC Svc Companies Equipment Manufacturers Specialty Contractors Utilities Internal Treasury Lenders Electrical Contractors Conditioned Air Managed Facilities Enron Customer Needs Total Energy Outsourcing

22 l First national provider of energy and related services to residences and small businesses in deregulated markets l A partnership of industry leaders: Enron, AOL, IBM l Initial investment of $120 million l First customer sign-up in Pennsylvania and New Jersey later this year TM The New Power Company 22

23 23 Be the Worlds Largest Provider of Premium Broadband Delivery Services Be the Worlds Largest Buyer and Seller of Bandwidth Deploy the Most Open, Efficient Network with Broad Connectivity Enron Intelligent Network Content Services Bandwidth Intermediation l Fiber l Servers l Pooling Points l Network Control l Bandwidth Marketing & Trading l Comprehensive Bandwidth Management l Broadband Content Management & Delivery l Data Management Services Enron Broadband Services

24 222 0 415 1,500 15,848 2000E Route Miles Typically Include 12 Fiber Pairs 19991998 12,325 5,538 3 0 2000E19991998 13 ServersPooling Points 2000E19991998 Fiber (Route Miles) Asia Fiber Servers Pooling Points The Enron Intelligent Network

25 l Over 50 Transactions Effected YTD with 17 Counterparties l 60 Counterparties Reviewing Contract Terms EnronOnline Offerings Recently Expanded to Over 30 Products in 14 City Pairs London Amsterdam Frankfurt Boston Philadelphia Washington D.C. New York Miami Atlanta Seattle Denver Dallas Chicago Houston Los Angeles Tokyo San Jose San Francisco Portland Las Vegas Salt Lake City Boise New Orleans Detroit Toronto Montreal Calgary Vancouver Added in 2Q Bandwidth Intermediation 1Q00 Committed for Delivery Before Year-End 432 5,170 2Q00 985 2000 Target DS-3 Month Deliveries

26 26 EIN Content Provider ISP Internet High Quality Low Quality Our streaming media applications allow larger on-screen windows, stereo sound and error-free imaging for TV- quality video that can be delivered simultaneously to large audiences, live or on-demand. Content Services

27 27 l 20-Year Exclusive, Worldwide Agreement l Enron Provides End-to-End Connectivity to Deliver Blockbusters Movie Library via the EIN u Enron Paid for Services Based on Number of Movies Rented u New Broadband Distribution Agreements Enable DSL Delivery to the TV; Additional Partners and Cable Targeted l Service Available in Multiple U.S. Markets by Year-end; Rapidly Moving Toward Implementation l Significant Expansion Opportunities Content Enrons Intelligent Network Blockbusters Customers Enrons Distribution Partners Encoding Storage Bandwidth Management Streaming Control Enron and Blockbuster

28 28 l Free, Reliable Transaction System with Enron as Principal l Fully Integrated into Enrons Established Risk Management and Logistic Processes l Utilizing Site to Offer Energy- Related Auction Capabilities l Expands Enrons Information Base and Market Knowledge l Tried and Tested Platform for Expanding Enrons l eCommerce Activity EnronOnline Extending Enrons Products to the Internet

29 29 EnronOnline Transactions Per Day

30 Enron Net Works Clickpaper Enron Credit Enron Direct Deal Bench EnronOnline

31 31 Coal Energy B2B Backoffice Metals Paper Data Storage Telecommunications Natural Gas Broadband Weather Electricity Enron Today vs. Enron Tomorrow ? ?

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