C 4 t 4. 196C-HO-59147 Date: 03/23/200 1 Time: 12:00 pm cst EC000299946 KLHIeIh - Revised 1/1 1/2006 .9 >4- K I I + 4 4 '.1 .4 I - JEFF SKILLING UNIDENTIFIED FEMALE - RAYMOND NILES' 3 - DONATO EASSEY,~ - DAVID FLEIISCHER - - RON BARONE - CURT LAUNER 4 4 -. CAROL COALE - ED RESNICK - - MARKKOENIG - UNINTELLIGIBLE HAIMES - BARRY HAIMES KEAN COALE RESNICK KOENIG U' 1 OPERATOR 2 3 5. - STEVE KEAN ¼ Todays date is March K Al Ia 'I V. S. '1 I. 4 I, 4, .4. -a * Ia 'a 4 -a - ..~ I , *-1 *~i 4. I I 4 '.4' 23, 2001. This is a recording of the ENRON I. . , conference call. Please standby we are about to begin. Good day ev&yohe 1 and wNcome to the ENRONs conference call. This call is being recarded. At 'a. ja' this time I would like~to tur'n the call over to the President and Chief Officer, Mr. JEFF SKILLING. Please go - -I a I ahead Sir. 2 * 4 -. 4 - .--Th Executive 4K GOVERNMENT U EXHIBIT U 4437 U Cnm No H 040025 L SKILLING OPERATOR hALES EASSEY FLEIS CHER BARONE LAUNER t -A 4< 196C-HO-59147 Date: 03/23/2001 Time: 12:00 pm est EC000299946 KLHIeIh - Revised 1/1 1/2006 1 S. 1 1~* I - Thank you very much. This is JEFF SKILLING President and Chief and Executive Officerof ENRON CORP. With me here in Hbuston I have MARK KOENIG, who's ~xecutive VP of Investor Relations. And RICK. t. - CAUSEY who's our Executiv~ VP and Chief Accounting Officer: Thank you very much for joining the call today. Ah to be quite honest I wish we didn't r ~1 have to have this call, but with whats going on in the stock market we thought ~ - I it was probably a good idea. Ijust came in from South America this morning, nidodl got in at 5:30 50 I'm in a really lousy So I hope, I hope we get the ) message across pretty quickly today, because ah, I think this will be ah short 1 '4 and sweet. Ah, I'm not gonn&, or don't plan to give you any surprises this - morning. We're not pre-releasing first quarter financial results. Wearejust I t * 4 going to giYe you an update on whats going on in the company 'relative to the 1~ .4 discussions we had at our analyst meeting in January and ab other discussions weve had externally and with analysts subsequent to tat time. ENRON's business is in great shape. Ah, what I'm going to do is I'm going to go through ''A each of air core b~sin~ssas very quickly and just give you a status update of 2 1i~' how the businesses are doing. 56 am going ib g&through our Transportation busine~ our Wholesale business, our Retail busine~s and ENRON * 4 * ...'t I .4 1~ -t 4 . *. i SKILLING I 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 - t - *1 A I 196C-HO-59147 S Date: 0312312001 -~ Time: 12:00 pm cst EC000299946 KLH/e]h - Revised 1/11/2006 1 BROADBAND SERVICES. And ten I'&going to address four ~reas or 4 4 2 areas of noise that we've heard about. One is the PORTLAND GENERAL I- 3 SALE. The other is INDIA The other is CALIFORNIA and the last one is I 4. 4 the balanc&sheet and the status of th~ balaAee sheet. And then Iii going to I 5 come back at the end and talk about some other things that are going on inside 44 6 the company which I think are important. Let me start first with the core r + .4. 4 7 businesses: Starting first with our Transportation business. Ah, th~e jilpelines r 8 and PORTLAND GENERAL as you know have very strong earnings and cash t. ~ 4 t 1< 9 flow. Ab, they are doing great. Urn, the pipelines are continuing toekceedah I- 4.' * 10 their budgets for th~ ~uarter. PORTLAND GENERAL is just slightly behind 11 due to some higher power costs in the west,1 but fully expected and baked into 1 'a 12 our plan. Ab, our wholesale business, which is our second business is having 1~ 1 1- 13 an outstanding quarter. Ah, volumes are very strong. We are seeing the 2* j$. -.4 14 impact now of this enormous construction program tat W&TC seeing in North "4 15 America. We arg becoming a major factor in providing gas supplies to these 16 facilities and we are b&bming a major factdr in selling the power out of these ii, 17 facilities. Ah in terms of volumes. Our gas volumes are up signific~nt1y. 4t 18 We're running just slightly below what we saw in the fourth quarter which was 4 .4 - .4 4 . * <4 j +4 .9 ~2 .4" - 4- 4 4 4 196&HO-59147 Date: 03/23/200 1 - I Time: 12:00 pm cst' EC000299946 ¶ t -. KLHIeIh -~*Revised 1/11/2006 4 1 uall an unusy high quarter but you will see a year over year increase probably 2 in the twenty-five to thirty percent range. Financial volumes have had almost 2 3 'doubled a year ago to today. Ah, our physi6al power volumes. We don't 4 know exactly, we will see how this month comes out, but I wouldn't be 0¶j I t -.' 5 surprised if they're up in the t(venty-five to'fifty percent range, eli, year over 4 - 4 6 year and a significant increase over the fourth quarter of last year. Europe 7 continues as it has been to show very strong growth. ENRON ONLINE is 1 8 running somewhere around five thousahd, forty-five hundred to five ihousand I. 9 . transactions a day. Tx'('o-and-a-half to three billion dollars a day of business. 10 Ali, ver/good performance on ENRON ONLINE. So our wholesale business 11 is having an outstanding quarter aft consistent with the oJtstanding year they ~0 12 had last year and I would expect that to continue. Ali, in our retail business 13 we have already announced four billion dollars of new contracts. We are * I 14 highly confident in our target for th7e year of two hundred and twenty five $ 15 million of income and thirty billion dollars of new originated contracts. Ah, I 16 interestingly we are seeing I think the positive effect of~ the the, ali, eli, the 17 chaos tat's going on out in California, in that a; we mentioned before there is 18 tremendous interest in the product that we ~e offerihg through our retail 4 I- 4 I- 4 I. 1. I .4 196C-HO-59147 Date: 03/23/2001 Time: 12:00 pm est EC000299946 KLH!elh - Revised 1/1 1/2006 I:' 1 business. And we are seeing an increased interest among utilities in out- I - 2 sourcing or moving out of the merchant finiction as they see the risks tat that I 3 can entail when its in a regulated entity. Ali, I will, urn, point you to an I 4 interesting vote we got in California ah yesterday. The California Assembly ab 5 confirmed direct access or has a proposal for direct access and got through the a 6 Assembly seventy to zero. Ah which just says that I think a lofof people see I 1. 7 that the fi.iture is a non-regulated open competitive market for retail power and .3 8 ENRON is perfectly positioned ab for that business. Alt and finally in the ah 9 operating businesses SNRON BROADBAND SERVICES. There have been t 10 some rumors out there that we ha~e teminated our INTERMEDIATION + . S. 11 business. That is absolutely not true. We aie having a great quarter in the I 12 Intermediation side of the Bandwidth business. I'll remind you that we have 13 an enormous lead over the other players in this industry. Ah, to give you a 14 sense of that I think WILLIAMS has five people in this business, we have V 15 eight or AQUILLA has eight. We have eighty-five people. My expectation is ...1.~ 16 that well see over four hundred maybe ovei five hundred transactions this I 17 quarter ah which shows that this business is absolutely developing. It is ahead 18 of plan. And ah I expect this to be a good biisiness for us moving forward. 5 a 4., 196C-HO-59Ti47 Date: 03/23/2001 Time: 12:00 pmcst EC000299946 KLHIeIh - Revised 1/1 1/2006 i .' -.4.. p 1~ 1. Our Content Services Business is still a core area of the business. We are '1 working very hard to provide a video on demand service and content for that video on demand service. Ah, urn, the BLOCKBUSTER contract ~is we've discussed with you was a contract that ah was not providing us the~ content we I needed for video on demand and we're out gettixi~ the content ourselves. And I am very optimistic about the outlook for that and over the next several months I think we'll have, ah, specific contf acts to show you. There has been - 4 some talk that we are laying off people. We are moving some people around '-.4 inside of EBS. This is very good neWs. And let me tell what we are doing in 4. EBS fight now. It is our view given what's going on in the communications business in general that there is more access to contra6t availability of* 4 -1 ~ bandwidth than we would have expected afthis early stage of the, the 1 developm'ent of the marketplace. We will not have to make as large an .4 investment in our network as we had expected because we are going to be able ., 'I to have access to third party networks much more easily and at lower cost than .t & we expected. Ah, one very positive output of this is that we are expecting that *1 our capitM budget in this business, which we had told people would be 4, .. I. running on the order of seven hundred and fifty million dollars this year to be 6 '~1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 .4 to 196C-HO-59 147 Date: 03/23/200 1 Time: 12:00 pm cst EC000299946 KLH/elh - Revised 1/11/2006 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 ~rr~r - ,. A - 2 -. V -. A Cl probably closet to the two hundred fifty million dollar range and might even 1, I be lower th6n that if we're able to getcontract access to the extent that we t think we can get contract ac6ess this year. So, ah we are very comfortable ah + 1 4 t t~*'* I with the projections on volumes and the taigets and the benchmarks that we set for ah EBS. Ah, but we believe we can do that with less capital employed I ;~' than we thought in the past. And with less investment in network activities.. ¼!. So EBS is coming along just fine. Ah, verg important foi-us and we're 1 4. committed to it and I'm personally ~'ery, very comfortable 0with where we .21 stand. In fact, pretty optimistic about it. And again our strategy in the bandwidth business ab was predicated 6n a surplus of supply and a decIiR~ in prices. Ah, we are in a situation where we ~learly have a surplus in supply and F we have real fast declining prices. So that~ good. In fact, that's better for us 7- as time goe~.oxi. So EBS is looking good. We look at our core businesses ah * I * . . we told people a dollar seventy'to a dollar seventy five for this year. We are very comfortable with the dollar seventy fox~ to a dollar seventy five for this * I 04 .01 -~ .3 year and for the quarter as-I mentioned in each of those businesses ah we feel 4 4 Cl- - *1 we've made great progress. NOW let me address some of the noise. Ah one ~: ~I piece, of ndise was well the PORTLAND GENERAL sale. That is true. Ah, I .4 I V 7 0~' ~.0* 4. '4 0] e -0< ~~1 I: I A 196C-HO-59147 Date: 03/23/2001 Time: 12:00 pm est EC000299946 KLI{1elh - Revised 1/1112006 t .4 would give only about a five percent probability that the SIERRA PACifIC purchase of PORTLAND GENERAL will be consummated. There is still I I - some work being done on it, There's a chance that that will happen. If it does I. not happen, and this is very important, that:is in fact credit positive to ENRON. Ab, if you lo6k at the c~sh generation of PORTLAND GENERAL A I it is credit positive to ENRON so I'm not ir>a particular rush to get it done. I LI think strate~ically it would hive been helpful; but in terms of balance sheet 4. ¾ - performance and earnings performance it Ms no impact. In fact, ah it would 4 t be ah somewhat positive ah if the transactioui does not occur. India ah, at the 4 .7. [ ah analyst conference in January, ah if you remember I said that we were I q going to have a lot of noise about India. Ah, we have aituation where the alt 1-' the ah off-take ah contract is undei pressure. We have a government 1. guarantee for the off-take ah as you would expect when that happens there's a t'. . ". I: lot of noise. And there \vill be more noise, but again we do not feel that we 4 are in a bad position ther& We have strong contracts and guarantees and ah I. I ~e believe that we will prevail in India. 'And i'm very coiifident of that. Ah, 4 California. The California situation continues in terms of credit exposure. * .4 Our Credit expdsure in California has actually dropped. Ah, we continue to. - . 1- .4 * r ' * *1-~' ~ I I.. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 I I -. *1 * i ~ S 196C-HO-59147 * - Date: 03/23/200 1 Time: 12:O0pmcst I K EC000299946 KLH/elh - Revised 1/1 1/2006 1 have urn more than ample reserves in our opinion to support thiit position. 2 And so regardless of what happens in California the dollar seventj to a dollar I 3 seventy five number for the year I think looks great. Uh, balance sheet. As* K 4 some people say, well does ENRON have to issue equity? Ah, I think Jean be t 5 absolutely conclusive on it, on this from a Aredit s&ndpoint there is absolutely 6 no need to issue additioxial equity either this year or for the foreseehble future. I. 7 Now I will tell you, there is some stock options and things that get 'triggered, t 1 4-. 8 so there will be some additional shares ab related there., We have some A 9 financing vehicles with 4e minimus share requirements, but who knows if 6 6.. I. 10 there's an acquiMtion we might put som& stock into an acquisition. Not that '~ 11 there's ahything planned b~it that, who knov~,rs what can happen during the year. - 12 But ftom'a credit standpoint there is no need for us to issue equity this yeir or 13 - the foreseeabl6 future, uh; to meet our credit targets. So that's the comments 1 - 4 14 on the noise. Now Ltbink within the noise gets hidden sonic thing~ that are I .1 15 think some very positive things that are going on inside the company that ah I .16 ah Ijust wanted to share with ~oiz tht ah kind of surprised me ds upsides ad 4 - t 17 we look forward. Th~ LNG maiket looks very attractive. Ah, we're making I - - -. '.4 * h. A' 18 think a lot of progress there. We-have actually transact~d ah thus far this year, 4. ' ' -., t * .-- - 4. t ~A4 9 4 -t~. 4 I- I 6 196C-HQ-59147 Date: 03/2312001 Time: 12:00 pm est EC000299946 KLLHIeIh - Revised 1/1 1/2006 I I I I fifteen sjiot cargos of LNG. Ah, this is up from virtually nothing ah last ~er. I We are very interested in this business Ithink it has a great future. Ab, people j *1 may not know this but we actually have access, We have options in ownership, the t6tul bf three ships, one Lurrently, two more that will be available within the next year. We have a gasification facility in Venezuela ab that is well 1 along in the development process. Ah, the Bahama~ project that you probably heard of looks, I think very attracti'&e and we will in fact start listing ab LNG, various LNG contracts on ENRON ONLINE later this year. Ah, so that's a .1 whole new industry that given what's going on in the energy markets of North LI America I think can be very attractive and ENRON's got a great position there. We've talked about pulp add paper, steel and some other ones that were new businesses that we're going into. On the pulp and paper I can announce 4 that we are making good progress. Ub, we ~re noW the seventh largest - *-1 newsprint manufacturer in the country. We>re seen strong volumes and good >* profitability in that business. Really just starting on steel, ah but Isee good I prospects and possibilities ther~. Weather'd looking very good. As.I* 4 mentioned, I just came back from South Anerica. Ah, the envirom~ent in South America I think is very good Ah ah in fact, thdre was a newspaper 4 .4 - -10 K ¾ 7 I. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 S 196C-HO-59147 Date: 03/23/2001 Time: 12:00 pm cst EC000299946 KLH~e1h - Revised 1/1 1 - ~'rryrT~Y<~ 4 'C- /2 006 "- article, front p4e in the newspaper yesterday ah that they are proj&ting severe ab power shortages or short falls in Brazil.j We are breaking ground on Tuesday after the groutidbrtaking cerenion& outside of Rio de Janeiro for a five hundred niegawatt ah facility. Ifs called, ah the project is called Electro 1~ Volt. We have a number of others that we~ are working on down there. I think we are well positioned to become a big player as those markets need I additi6nal electricity supp1ie~ in South America. So in general, core business '1 K is in great shape. Good quarter. Ah, we are hitting our numbers, we're on I plan. In tenns of the noise, the issues rel~t~d to the noise, PORTLAND -. *1 -~ GENERAL,'not an i~sue; India: we told you there would be noise, there will -. I -> 4 1 be continued noise. We believe we will prevail there. California: ah at least L from ENRON's standpoint, ah we feel that we are improving our position I. relative to ah credit and just the regulatory playout in California. Balance i sheet: we have a strc%g balance sheet. ENRON's in great shape on the 'II balance sheet which is a good p6sitibn to be in given this market place. And -& ½ 4 then w&continue as We always do to develop new busines~es ab where wd '1 have expertise and where we think we can make ah a big impact. So overall, ah you know Iah I have ab no understhnding as why the stock price would ali 4 1- .1 - 11 4. P ~ I I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 .4 4 I 196C-HO-59147 I Date: 03/23/2001 f Time: 12:00 pm est EC000299946 I KLH/elh - Revised 1/1 1/2006 C I 1 - would be in the, or was in the fifty-three, fifty-four dollars, thats just ab crazy 2 ah giv5 the comparables and given what's going on in the rest of the 3 marketplace. I know this is a bad stock maYket but ENRON's in good shape. 4 So with that I will, ah I will keep quiet ~d~we'll open it up to any questions 5 you have. -~ I - I -t 6 OPERATOR - At this time anyone wishing to ask a question may do so by pressing starone V 7 on yoUr t&ich tone telephone. We'll pause a moment to give ev&Tyone an I - 8 opportunity to signal. And again if you have any qhastions please press star I-- 9 one. We'll go to RAYMOND NILES, SALOMON SMITh BARNEY. I 10 NILES - - Uli, good afternoon JEFF. Ah, thanks for that update! AM, I just wanted to f 11 ask about ah, in the BaAdwidth trading, it's very encouraging to see such I A 12 %lunie growth. Ab, beating all of the volumes for all of last year in the first I 13 quarter. Do you want to diveinto that in a little more detail. Just maybe talk p. I 14 to us about who you'rCcdunter-parties are ah ah franldy and maybe just any * I, I 15 change in sense of how the carriers are responding or participating ~h in this 16 market? ~1 17 SKILLING - Ah sure RAY, let me, Ill take a shot at that.' I actually, ah I didn't bring the * 2 18 information that has the breakout of 'of ah the transaction counter- ~arties. .1 ~ $ I - 4 12 - A -Al '4 It -, "-4 1 1 I '-K 44 196C-HO-59147 ~. Date: 03/23/2001 Time: 12:00 pm est I EC000299946 KLHIe1h - Revised 1/11/2006 1* 1 But my ~ecol16ction is that it was split pret{y evenly about a quarter were ah - I 2 carriers, a quaffer were international telecom companies, a quarter were I 3 marketers, and another quarter were ah various network service providers. i 4 And I think; that's, that's about the split. We've transacted with virtually '6 .4 4 5 everybody in the industry at this point. Ah$ maybe for 4ome of them it's just- 1 .4 -~ 6 they want to see hox~ this works. Ah, but I think for most of them they see 1 in the northwest in general, the west half of the United States. You know, V assuming that it's not sold to SIERRIA PACIFIC I'm certain there js a laundry I list of folks still interested in it. But has y6'ur philosophy about keeping it at '+~+1 this point in time ah changed in any way, ah, you know, given the situation out Ii west, is it long is it short? You know where do we stand there? Thanks, -4 JEFF. It is ah strategically it is not ne~essaxy for us, I 17 { I 1~ , '4 for tin to o~ PORTLAND 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 196C-HO-59147 Date: 03/23/2001* Time: 12:00 pm cst EC000299946 KLHIeIh - Revised 1/11/2006 * -t '4 -. 11 EASSEY OPERATOR FLEISCHER GENERAL to conduct our business in the West. Ah and so now it's purely a t I. question of price and the terms of the transaction. If we can get an attractive 1~ price to where it's worth more to us to sell it than to keep it, ah I would, I I would entertain those offers. Ab, PORTLAND GENERAL's position.. $ PORTLAND GENERAL was flat ab in their position for the next two years ah~ '1 through purchases on the open market and then they've got about a 450 I megawatt short position going forward in time and ah ah we believe that that I + position is probably ah, ah, well, I mean we could close it tomorrow if we wanted to. It's just a question of looking at the, the market conditions. ¾. $ Thank&a bunch. DAVID FLEISCHER, GOLDMAN SACHS. Hi JEFF, ah couple of things. Let me just a follow up on the previous 4 *1 4' question. See if I can pin you down a little bit more there because 'I think everyone bought into your, youf redeployment of of assets ah thought process -. 4, 1 ah, you know, from, from the physical sidel Some of the physical sides where 4 1 you emphasized that you ifientioned South'America works. Where you had a lot, have a lot of assets in a lot of commitrAents to to build and creMe there and I guess, you know, the PORThAND GENERAL-ah you know transaction * II 1* 18 ½ 1* 4 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 4. I ,~ 4 -I 4. 4 196C-HO-59147*~ Date: 03/23/2001 Time: 12:00 pm.cst EC000299946 KLHIeIh - Revised 1/11 SKILLING I I /2006 ~1 4 * 4 - *1 assets around the world that ah, you know) thAt that add up to a lot of assets. 16 You know, maybe my question is ah, you know, what thight &e't14 timing you .4 - >1~ know as we try to, you know, independently figure out, you know, what your balance sheet Will look like ~ forward ~nd what capital you do have to reallocate into the intellectual capital business? And that would be my first * . I. * 6 #4 question. . . -I Yeah, ab, well, as you know DAVID I am yery anxious to ab monetize a~sets where we're not earning the rates of return that we heed to earn. And that's that quite ftankly givefi the financial environment ~r6und the world is taking 'S ii 6 longe~r than I would like. Ali, but I can just say tat that is discretionary for us. * I ' 66 * * - Our balance sheet is in ~~at shape now. That's all fipside of the balance sheet moving forward. Ah so vJe don't have to do it. I don't have to do anything tr that is not economic. Ah so we are going to look at the deals that we*re' I,. offered~ We've turned doWn a number of people b&ause' we haven't gotten the kinds of prices that we think are reasonable ab for the assets. And we will 6 t continue to entertain offers bn a whole range of a4sets. Ah, it's my guess that - over the next couple of years there, there's kveral billion dollars of~ssets that .4 we're gonna, that we will find ah that we get good offers for, but ah right now * it. 4 .4. -. 19 I t ~S* 1 2 3 4 5 6 7 8 '9 10 11 12 13 14 15 16 17 18 6' * ~. 196C-HO-59147 Date: 03/23/200 1 Time: 12:00 pm cst EC000299946 KLLH!elh - Revised 1/1112006 FLEISCHER - SKILLiNG FLEISCHER SKILLING OPERATOR BARONE SKILLING 1 V 1. U 4.' I just want to wait and just get the best price. - -t. Okay, well, uh, that sounds like a good iea~on to n6t sell assets. Ah, if you I have that stiength and you db. Ah, and then my next question is, given how 'strong. ~h it absolutely appears that you're doing in~ wholesale in particular but I really across the board ab and, and we're hearing from same of your that th' b they 1be competitors e num ers that may reporting the first quarter might I. be even better, a lot better than, than estimates out there ah I wanted to give 1 ¼ you the opportunity to also tell us why you maybe even should be raising your 1.. "S targets here and the"dollar seventy and seventy five is very conservative? NicetryDAVID. ~* - - . ' Thanks JEFF........................I t You're welcome. F RON BARONE, UBS WARBURG.. I - A' j Hi Jeff There's been sdme talk oh the street about the possibility of some I -' - Senior Management reassignn?~nt~ at ab ENRON. Can you comment on any 1- changes? b Ah, let me, whoa. Oh, there's one. Ah actually this ab y'all might be -1 -' - ti - interested in this. 'Ah LOU PAL, Ah who started up ENRON ENERGY F- -j * 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 * A. -t 4 196C-HO-5914T Date:. 03/23/2001 Time: lZOOpmcst . - EC000299946 KLHIelh - Revised 1/11-/2006 -I SERVICES. Actually LOU'S been with me really from the beginhing. LOU was involved in the start up of our natural gas business. Started up our wholesale electric business. Then I asked LOU to run, to go over and start up -4 - I ENRON ENERGY SERVICES, back in 1996, Iguess it was 1996 or 1997,1 guess 1996. Anyway, I've asked LO~ to head up something called the ENRON ACCELERATOR. And what this is RON, is we have a lot of new business development activities going on around ENRON. We've got a lot of, people wit some great ideas. And I want to get that a little focused. Make it a little ~nore efficient. So ~vhat II have told LOU to do is to put in ~1ace this concept called the ACCELERATOR. We'ie going to take the six best ideas inside of ENRON and '~Ve're going to create businesses out of them and that's what LOU likes doin~ and tat is what LOU'S very good at doing and he's very enthusiastic about it and I think. We'll tell you more about it later, we're not ready really to show you too much of what's going in there. But [think it's going to be a really good ab upside ah for the stock moving forward. We have moved DAVE DELANEY. DAVE was running our North American business into ah EES to he ad up EES. DAVE ah really started our Canadian office and made our Canadian office the succe~s it is~nd we moved DAVE -21 1 2 3 4 5 6 7 8 9 10 11 12 13 '4 15 16 17 18 t ¶ 4 196C-HO-59147 Date: 03/23/2001 Time: 12:00 pmcst EC000299946 KLHIe1h - Revised 1/1 1 /2006 down to Houston to head up North America. We've asked DAVE to move 4 over to ENRON ENERGY SERVICES ah to head that up so tat will help us. DAVE's got a great perspective. He was involved in the retail business development up in Canada and he also has a good linkage into the wholesale 4t business which helps as EES grows so quickly to ensure that we've got the power and gas available for the ah retail business. Then we moved JOHN LAVARATo; who was DAVE'S number two in Canada and was Chief Operatinj Officer, North America. "Made him head of North America. And then, I guess I can go through the whole cascade. .Then\ve took LOUISE KITCHEN, who started ENRON 6NLINE and we asked her to become Chief 4~ Operating Officer of ENRON NORTH AMERICA, actuallj ENRON AMERICAS, which includes our South American activities too. And then 4-t 4,~ PHILIPPE BIBI, who ui%si of you know who has been our Chief Infoiniation A Officer, he took over from Louise is Head of ENRON NETWORKS. So there's been a little bit of~ I guess you'd call it a domino effect there. But the real intent was to get LOU working on these new businesses and bring DAVE over to help better bind together our wholesale and retail businesses and help us push forward the retail business. But it's very positive. These are ah, these 22 it k I 1 2 3 4 5 6 '7 8 9 .10 11 12 .4 13 14 15 16~ 17 18 4, *4~ r .7. -U 1 96C-HO-59147 Date~ .03/23/2001 Time: 12:00 pm est - EC000299946 KLHIeIh - Revised 1/1 1/2006 BARONE SKILLING OPERATOR LAUNER are some really talented people. The only thihg that scares me a little, I'm forty seven years old now and I think ah DELAINEY's thirty six and LAVARATO is thirty four and LOWISE is thirty one. You know they're coming. I-Ia, ha. Okay great now, the'ACCELERATOR sounds like some fertile territory. We'll wait to hear more about that. Thanks a lot JEFF. Thanks, ROW CURT LAUNER, CS FIRST BOSTON. * - Ye4 thank you. Just a couple of unrelated questions if I could. First, there's - - I 4 been some discussion relative to mdvement towards standards for bandwidth trading within the industry. This is something I think would accelerate the amount of transactions, and how they can be ~rovisi6ned which gets talked I about a lot. If you could discuss that just a little bit? Second, any reaction on the eve of.the NETA rules going into place in the U.K. How are you positioned for that as of March 27th? Any changes in the business or th~ outlo6k there? And third, just if you can give us an update with the change in the EBS capital allocatibn into the total capital expenditure budget you have 4. . for this year? 23 4 S 1 2 3 4 S 6 7 8 9 10 11. 12 13 14 15~ 16 17 18 It 196C-HO-59147 Date: 03/23/200 1 Time: 12:00 pm est EC000299946 KLHIe1h - Revised 1/1 1 /2006 SKILLING LAUNER SKILLING KOENIG SKILLING Give me the last one. The capital ekpenditure budget for this year in light of ah changing around BBS capital from seven hundred and fifty to two hundred and fifty in light of the contract access of the networks. I.. Ab okay. Lets see CURT.' The first one was ah.. 1,, Standardizing bontracts. Oh, standardizing contracts in ah BBS. You know, there is a lot of talk about J that and they're having a' whole bunch of meetings on'it and I, I really doA't see * them making a whole lot of progress in coming up with a single standardized form. Because the, Ijust,dotVt think all of the players are yet ready to commit to a standard form. And part of that is I think they still want to see how the -4 bandwidth intermediation business comes alongf We ha~'c a standard, our standard and we are conducting business based on that standard today and well see how the test of it plays out. I think as these volumes grow CURT, and we're seeing strong volume growth. They'll have to finally, you know, get off of the eli, urn, off of the fence and 6ome down on some specific structures. Ah but right now we have one and we're contracting based on that.~ And it's like in the gas business, when we started out we set the contract and we I - 24 ~rrrr%. { "I 1 2 3 4 5 6 7 8 .9 10 11 12 13 14 15 16 17 18 4 4. 4 4 t 196C-HO-59147 Date: 03/23/200 1 Time: 12:00 pm c~t EC000299946 KLH/elh - Revised~1/l 1/2606 LAUNER - SKILLING - transacted and ten let tern come along later. And I remember meetings that we had when the NYMEX was starting up and we were trying to come up .4 with a standardi~ed contract. And this was like the United Nations getting together, y5 know everybody's you knoW, got fifty thousand different irrelevant comments to add tote bucket. But, uh, tat was in 1990 before we had a contracfon the NYMEX and we just said, well forget it here's our contract and we started doin~ business. And that's where we are today. 4-. But do you agree that the business if you use that natural gas analogy really4 - - 5 -. took off after the NYMEX started trading in April of 1990 and we knew where HENRY HUB was arid ~ knew that there was a million BTLJ's tat 4 .. 4 - you could put as a standardiied coAtract arid figure out basis, differentials and V - things like that? . .~ Well y6u know, I don't; [remember '88 and '89 we were doing a lot of business then and I really'didn't see it picktup. I tink at that point you could - draw in a lot of players who hadn't traditionally bden in the industry. Ah, but - A for those of us that were in the industry, I look at kind of'86, '87 time frame when we really started getting liquidity.- Ah, and that was based on bilateral -'4,-. contracts and it worked just fine back then. Ab, so I don't think it ida big2 * .,- ., S 4 25 I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 A 'S U 4; 196C-I-IO-59147. Date: 03/23/2001 Time: 12:00 pm est EC000299946 KLHIe1h - Revised 1/1 1/2006 ~LAUNER SKILLING LAUNER issue one way or the other Curt. It will come and when it comes it makes it easier for abr~ader range of players to play. Ali, but I, you know, even today in the natural gas busixiess you .have a HENRY HUB contract but probably ninety percent of our business and ninety eight percent of our profitability comes from contracts that are outside of th~t settlement location. And ah those ate all pretty much custom designed ENRON cdntracts. And the *1 . - industry has picked that up as a standatd but ah I don't think it will be any different in the telecom business. - Okay. On NETA and UK this is great news. This is moving toward a market that we are much more comfortable with. We've been pushing very hard for the adoption of these new rules and so we're up and running. You'll see I think a significant increase in volume, of ENRON volume in ah, the U.K. as a result * of the a&,ption of the new exchange rules. And then cap. ex., now probably what you can do is just whatever we don't spend in ab bandwidth, I'll probably -t just kn6ck it off the total number because we don't need to spend it. S Is there a revised total number you could give us to make sure we got the right I - stuff in the model. - A. A 26 A - A- * . 4 1 2 3 4 .5 6 7 8 9 10 11 12 13 14 15 16 17 18 * r 4 - ,Th ~rsv~~-- - r -t 4 196C-HO-59147 Date: 03/23/200 1 Time: 12:00 pm &st EC000299946 KLHIelh - Revised ill KOENIG LAUNER OPERATOR HAIMES 1/2006 1t - Curt, this is MARK. We did file of course our'8K with the financial 4 statements. We had a billion and half as our estimate for total cap. ex. this year, so if you took fivb hundred off thafwould be a billion estimate for cap. Ii r 4 ex. now. Of course we have equity investments that some of you kind of 1; -4 include in that total and that has ranged anywhere from haifa billion to a billion. So it ~vill be ala somewhere in that same range ah, this year. ,- 4- - Okay, thank you. 4 - DENNIN CALLAN (PH); CCW INVESTMENT MANAGEMENT. DENNIN CALLAN your line is 6pen. Hearing no response, we will go to BARRY & I HAIMES, SAGE ASSET MANAGEMENT - Hi JEFF, I had a question about California? . The situation there seems like it is going from bad to worse and you know when you are getting blackouts on the. 4 shoulder period, you know, one can only imagine what the summer might be 4 like and, you know, from th& individual company point of view as you point out you're well positioned and ala, you know it might e4en help EES, etc.- But ---I 4-.., urn from an overall industry point of view ala you know in terms of 1-~ deregulation versus regulation mid so on., Ah, I just want to get your view 3m .4 ah, you know, what a sumnier hill of blackouts might mean and ala you know, 4 -I. S t 27 4. *1 t 1 2 3 4 5 6 7 S 9 10 11 12 13 14 15 16 17 18 4 4 4 .4 4 N 196C-HO-59147 Date: .03/23/200 1 Time: 12:00 pm cst EC000299946 KLHIeIh - Revised 1/1.1/2006 SKILLING HAIMES SKILLING 4. what if anything ah you know you as part of the industry can do to, ahyou know make sure that the whole urn you know free market deregulatiotV movement stays on track? Thanks. Well, BARRY I mebn,~I don't, I guess I can't answer the whole question but I 1 will tell you that if there are continuing problems and it looks like there will be. This is just a real wake up call to everybody that you do have tomanage + S risk and it's a Wake up aaii ~o everyone that you've g~t to have effe'ctive markets fimetioning. And I think that's the direction it will go. You-almost * -4 A. S 4. can't go backwards right now. And so if people jealize they have a problem I think this will push forx\rard to'niore open competitive markets and that's, you know I think that's the way we would like to see, it come out. You know it's inteiesting they are changihg the term though. It's not bl«=~kouti any more. I ,-1- don't know if you saw the Sacramento Beat today but they are calling them grayouts . (Laughs): That's great. -Just by way of follow up urn in terms of the upcoming administration proposal in terms of energy bill. Ah, are there sorne~ things iii 4 there that you think will see ab that would affect electricity? You know, BARRY, Ijust got back from South America today and Ireally, I I -. 28 - 4. '.4 I 1' 4 1 2 3 4 --5 6 7 8 9 10 11 12 13 14 15 16 17 18 4 A d 4 196C-HO-59147 Date: 03/23/200 1 Time: 12:00 pm est EC000299946 KLHIelh - Revised 1/11/2006 KOENIG SKILLING KEA1~ 1. SKILLING OPERATOR COLE 4 -4 - '4.. )ecifics. Do you know MARK? really haven't seen what any more of the S No. .4 STEVE KEAN just wandered in, who runs you have any? Yeah, I think from what we're hearing cert iinly it appears that the BUSH administration is g6ing tobe taking a muck mope ab active ah active role and I we would expect id see' I mean, we've seen speeches coming out of the Sectetary of Energy for example. I would expect to seca much mbre active and; and, and a presumably much more ma ket oriented role or approach to ah the k~ J iii California. So we would epec see some, some pretty critical elements of the energy plan includii1ig electricity in' California. Okay, just two more 4u~tions, if that's bka ? CAROL COALE with PRUDENTIAL SE URiITIES. 'I,, Hi, good morning. Ah i wanted to clari~ a few things when you were talking about some of the ah noise and I know you ddressed this at the ah'conference in January but if you could just remind us a ainof what the INDIA situation is and, you know, exactly what the problem is I know it's a coftflict between the ah state electric board and the government fMaharasha. And I knbw they are V 4 - - I 29 our government. What, STEVE do 4 1 2 3 4 5 r 6 r. 8 9. 10 11 t 13 14 15 16 17 18 V - 196C-HO-5~147 Date: 03/23/200 1 Time: 12:00 pm.cst EC000299946 KLHIeIh - Revised 1/11/2006 in a political standoff. But if you could ju~ be great? Ah, second eli, in the broadband actually from some of your competitors thi which would make inti~iitive sense in a bus rapidly, that there would be 'more sellers di were sensing the same type of tend amo4 and if so urn what would be the general let signing? Are they, are they thirty days, urr year type of deals? Th~n third, um in then Azurix.. As I recall, I think that you have c note with MARLIN WATER TRUST that convertible preferred stock that I think the I was just wondering if you could commeni Sure CAROL, let me start first with what's there is identical to California. You have a rates. Ah, the price of whol4sale power ha and the rupee has gone down. So they are position. ~They just don't have any money. 30 t refresh our memories, that would trading business, urn this is coining Lt the market has been one sided ness where the price is falling '4 an buyers. I just wondered if you. t your market and your customers gth of the contracts that you are sixty days or you able to do'one Dise category again,relAted to )llateralized a one billion dollar un may require either cash or, or a :ollateral is due on September 15th. of those three things. Thanks. I going on in India. The situation distribution company that has fixed gone up betause oil prices Went up n a really, really tough liquidity 6~ Just change the name of SOCAL 1 2 3 4 5 .6 7 8 9 10 11 12 13 14 15 16 17 18 SKILLING I .4 . 4»= A '4 .1 - I.4~ I *1 4, 'I 196C-HO-59147 Date: 03/23/2001 Time: 12:00 pm cst EC000299946 KLH!elh - Revised 1/11/2006 -t 1 EDISON, the picture's just about dead ott NoW the difference here is that the 2 contract that we have with the Maharasha tate el&ctricity board ali-has a 4 ¶ 3 guarantee. So this'would be like the state fCMifornia and the Federal 4 -4 4 Government guafanteed our contract with outhern California Edi~ons. We -I - 5 have a guarantee from the Maharasha state state government anda guarantee -. 9 .4 '; 4 .4 6 for the first phase from the Indiahgove nt, federal government. And so' 7 it's, basically where the nois~ comes' from i that the buyer, the payer has no - 4 8 cash. And what we have t&do is \4 have t keep triggering the cr5dit * goLemment ~ 9 guarantees to get the state or the Federal cough up the money: 10 And that's, that's kind of where it stands, so every month it's just noisy and it *1 nLn~ we 11 will continue to be noisy and can do about it. They, - there's just 12 have alot of newspapers in India.and they say a lot of things and you canjust * I 4 13 eipect noise, but we ha~'e gtArantees and will continue to get paid. It's just 14 been just a little more difficult to get the paper converted into money thah 4 4- 4' 4 15 might have been typical. On Broadband tra ing, one sided markets absolutely. - ' .4-v '4 16 Everybbdy's a ~e11er. I mean there is unbeli vable amdunt of capacity that's out 17 there that2s looking for a home: Ah, there is a huge ah supply overhahg in the 18 mark'et place., tins is ah this is the na gas business in 1986. You have '31 4- t -It '4. ->4 196C-HO-59147 Date: 03/23/2001' Time: 12:00 pm cst EC000299946 KLHIeIh - Revised 1/11/2006 people that are desperate to sell capacity ft is, is finding buyers and figuring out howy with those sellers that are so desperate to si structuje, I would say th6rnajority of the t three to five to six month range. Ah, there' transactions. Or virtually no long term trar executed. So again it's like the gas busines ah there's Azurix, theres some debt on Azu paying 6ff with equity, we also have the ab pay it off in cash when it comes due or we' Okay, thanks for the update. One more question theAl think we will call We'll take our last qi.iesfion from ED RESN ADVISORS. - 'A- Yeah, hi, actually a lot tf my question has I 4 Bandwidth trading. But if you eduld just cc rumor of layoffs in Bandwidth tradir4 Bec I * growth there has been on your targets ~tnd a] 32 COLE SKILLING OPERATOR RESNICK S'4 4 4 4- -A r cash'. And the real challenge here ou can wire t6gather th'e buyers ah ill capacity. In terms of term ansactions on avenge are in the virtually no very long term S - '1 sactions currently ah being back in '86 and '87. On Azurix, rix which we have the Option of ~ lity to pAy off in cash and we will * vill roll it. 4 it-off. ICK, FERGAMENTS &xi answered. It was in * .z - '1 mm~nt maybe a little bit on the ause it seems like the volume the need to r~deploy kind of 4-' 4. 1 2 3 4 5 6 7 8 '4 9 10 11 12 13 14 15 16 17 18 I. 196C-I-iO-59147. Date: 03/23/2001 Time: 12:00 pmcst EC000299946 KLHIeIh - Revised 1/1 1/2006 seems counterintuitive to tat. -. Yeah, agaih, the you know, the two P&L BANDWIDTH INTERMEDIATION. We count thereAs growing fast. CONTENT SI j growing fast. And that'; gur video on dem basically content aggre~ation services. WI thought is on the network side. Ah, we exj continue to spend enoniious ~mounts Qf mi We're finding that we don't have to do that to liquidity and access to bandwidth withot we're, we1re reducing, we just don't have as we are taking a number of people out of ou them to other parts of the company. This i~ the last year. I would imagine that we've it within ENRON several, at lea~t a thousand It's one of the real sttengths of ENRON. 'N people from one unit to another as the mark growth on the intermediatiofi side strong gi 33 A 4 -~ :enters that we have, one is are growing that fast and our head 4 ?LRVICES, the other P&L center, is md and ah we're out marketing ere we have less need than what we ected that we would have to iney to build out the network. right now. - That we can get access i t having to build it our~elves. So big a need for cap. ex. as we had so network organization and moving not unusual within ENRON over deployed between business units probably several thousand people. e can move very ~quic1dy to move ets change. But essentially, strong owth oh the Content Services side, SKILLING 4 1 3 4 6 L~7 8 p 10' 11 12 13 14 15 16 17 18 V ¾~ * 1~ .4 196C-HO-59147~ Date: 03/23/2001 Time: 12:00 prn cst EC000299946 KLHIeIh - Revised 1/1 1/2606 RESNICK OPERATOR - SKILLING OPERATOR - 4 r 4- ~. And a reduction in the amount of rate riduction of the number of in termsof people budgets, the whole thinj capital we have to spend with a commensu people we heed to spend that capital. Okay, thank you. Thats all the time We have for questions tc day. [11 turn things back over to moderator for any additional or'closing remarks. Great, thank you very much. Again thanks veiy niuchfor listening to the A, phone call, ah if you take one thing out of this meeting today ah everything's 4 on track. The company's doing well. A dollar seveniy, a dollar seventy five were very comfortable with. We're having a good first quarter. Ah, we're seeing some good things happening' in a nuLber of our markets. At, We do have the PORTLAND GENERAL issue, In dia, California, the balance sheet, ah that I believe we've addr~ssed and so at S and we can get this thing baak on track. B~ t time. - This concludes our coxifei~nce for today. '1 participation. lEND OF CON VERSATIC ~ L 34* -h r 4 our hope that answers the questions t ab, thank you very much for your hahk you for, thank you for your N] I 1 2 3? 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18