ENRON WHOLESALE Asset Management Services

1. ENRON WHOLESALEAsset Management Services September 17, 2001

2. DISCUSSION AGENDA • Asset Management Services Overview • Benefits and Risks for Enron • Asset Management Services Background • Customer Characteristics • Deal Structure and Examples • Market Potential and Projection • Organizational Structure • Asset Management Services Keys to Success

3. ASSET MANAGEMENT SERVICES OVERVIEW Objective • Leverage off • Customer retains control and decision making • Can engage in third-party transactions • Easy exit with a breakage fee • Customer benefits from the relationship • Navigate through the complexity of evolving electricity market (eg. RTOs, bidding rules) • Acquire trading, marketing and support infrastructure – “virtual trading desk” • Focus on core capabilities Compensation • Monthly fee covers Enron expenses for account management and operations • Performance bonus tied to customer’s net margin provides incentive and earning potential for Enron

4. ASSET MANAGEMENT SERVICES CAN CONTRIBUTE TO ENRON’S BUSINESSES AND LONG-TERM STRATEGY Enron Wholesale Services • Provide additional annuity revenue per year for Enron Wholesale Services through existing and new Services deals • Increase origination opportunities with Services clients and their affiliates • Increase Fundamental information flow to Enron Wholesale Services • Maintain knowledge on assets without asset ownership Enron Energy Services (EES) • Aggregate and find cover for open EES retail positions through Services customers • Aggregate and manage EES customers’ distributed generation and load curtailment products into the grid • Provide transaction and load scheduling services to EES Long-Term Enron Strategy • Scalable earnings proportional to number of customers with upside from Enron performance • Stable accrual earnings with no price risk (can act as a hedge against volatile trading business) • Act as a bridge and improve communication between various Enron groups (origination, trading, structuring, gas, legal, IT) • Contribute to PR efforts through public announcements of highly transparent, value-added services deals (eg. TECO, Cogentrix, Alcoa)

5. ASSET MANAGEMENT SERVICES CAN CONTRIBUTE TO ENRON’S BUSINESSES AND LONG-TERM STRATEGY Enron Wholesale Services • Provide additional annuity revenue per year for Enron Wholesale Services through existing and new Services deals • Increase origination opportunities with Services clients and their affiliates • Increase Fundamental information flow to Enron Wholesale Services • Maintain knowledge on assets without asset ownership Enron Energy Services (EES) • Aggregate and find cover for open EES retail positions through Services customers • Aggregate and manage EES customers’ distributed generation and load curtailment products into the grid • Provide transaction and load scheduling services to EES Long-Term Enron Strategy • Scalable earnings proportional to number of customers with upside from Enron performance • Stable accrual earnings with no price risk (can act as a hedge against volatile trading business) • Act as a bridge and improve communication between various Enron groups (origination, trading, structuring, gas, legal, IT) • Contribute to PR efforts through public announcements of highly transparent, value-added services deals (eg. TECO, Cogentrix, Alcoa)

6. BUSINESS RISKS CAN BE CONTROLLED Sources of Risk for Services Issues Mitigation Legal Risk Failure to perform. Conflict of interest Enron “sleeves” all of customers positions Enron has MTM exposure of customers net transactions • Customer maintains decisional authority, can transact independently and can terminate with nominal breakage fee • No fiduciary duty • Separate and distinct books with independent audit rights • Autonomy of Account Managers (they do not manage EPMI positions) • Focus on short term management where market is transparent and liquid • Enron controls who we transact with • Enron maintains all our current credit management tools • When possible, we will pass through 3rd party defaults • Customer provides credit support satisfactory to Enron • May be limiting when customer wants a firm commitment for credit support Third Party Credit Risk Counterparty Credit Risk

7. CUSTOMER CHARACTERISTICS VARY BY SEGMENT IPPs, QFs Industrials MUNIs and Coops Asset Description Mostly gas-fired merchant or contracted generation with varying merchant cover Value Proposition Provide trading and marketing skills at a time when IPP margins are shrinking Benefit to Enron Large asset positions Portfolio of assets in various locations, NERC regions Strong operational capability High profile deals Asset Description Small positions to supply industrial load with varying fuel types and load profiles – some capacity available Value Proposition Lower energy costs and allow customer to focus on own business Benefit to Enron Assets in various locations, NERC regions High profile deals Synergies with EIM Asset Description Small positions to supply local load with varying fuel types – some capacity available for marketing Value Proposition Provide trading and marketing skills, increase revenues Benefit to Enron Increased deal flow from large customer base Information and position in some illiquid markets

8. STRUCTURE OF TYPICAL ASSET MANAGEMENT DEAL Service Contract with Independent Audit Rights Existing Enron Agreements / Processes Existing Enron Agreements / Processes Outside Entity or Internal Enron Desk e e Customer Services Book Market $ $ ng-oil-coal ng-oil-coal Confirmations/ Settlements Product Marketing - energy - ancillary service - capacity (if applicable) Margin Calculation

9. KW Time EES/EWS SERVICES MODEL EES Retail Customer Physical Opt Desk DG Desk LC Desk EES Retail Ops Cntr Market e6 dg/curtailment e6 E5,6 negawatts DG $ e5 LC curtailment e5 $ LC $ DSM Desk Energy Savings DSM Projects Hunting License, Shared Energy Savings e3,4 fixed qty e3,4 full req’s EES Site Profile Risk Desk e3,4 fixed qty $ Commodity $ $ EWS EES Commodity Desk $ EWS Services Gen Co e non-curtailable e4 fixed $ e3 fixed EES Retail Customer EWS Term/Cash Desk (Blocks) e1,3 fixed e1 fixed $ $ e5,6 fixed EWS Wholesale Customer E5,6 fixed EWS Hourly Desk E1,2 full req’s $ $ e2,4 fixed e2,4 fixed $ $ $

10. ASSET MANAGEMENT DEAL EXAMPLES Frontera Generation L.P. (TECO Power) Mississippi Delta Energy Agency (MDEA) • Customer: • Joint action agency for City of Clarksdale MS and City of Yazoo City, MS. • Term: • Two years (Jul. 2001 – Sep. 2003) • Structure: • Asset management for 85 MW and 110 MW capacity with outside supply contracts of 26 MW • EPMI makes wholesale market suggestions to MDEA • Upon MDEA’s request, EPMI acquires fuel, buys/sells power and schedules all energy to maximize net revenue • EPMI assumes no fuel or delivery risk • MDEA retains all decision making Fees: • EPMI receives greater of $13,000 monthly fee, or 40% of savings/profits from purchasing/selling power • Estimated Margin: • $0.5MM – $1.0MM annual goal • Customer: • Frontera Generation (480 MW CC facility in ERCOT) wholly-owned subsidiary of TECO Power • Term: • 21 months initial term (May 2001-Dec 2002) • May be extended for one year at the option of Frontera. Each party can terminate if various standards are not met • EPMI sell price >94% of MW Daily ERCOT • Frontera on-peak availability > 90% • Structure: • Asset management for 480 MW capacity - 330 MW marketable due to 150 MW option contracts • EPMI makes wholesale market suggestions to Frontera • Upon Frontera’s request, EPMI acquires fuel, buys/sells power and schedules all energy to maximize net revenue • EPMI reports position and VAR daily • No downside price risk • TECO retains all decision-making • Fees: • Minimum annual fee of $50,000 or annual performance bonus based on net margin (REVISE – ADD MARGIN!)

11. LARGE CUSTOMER BASE PROVIDES GROWTH POTENTIAL Current Services Position (Number of Accounts 3 mo. into Operation) Potential Market Size (by Number of Accounts) IOU-Muni-Coop-IPP Industrial 3 ___ 3 1 5 ___ 50+% average coverage ratio across regions ___ ___ 11 1 Source: East Power Origination Performance Metrics

12. ASSET MANAGEMENT SERVICES GROWTH PROJECTION Region Midwest Southeast ERCOT Northeast Total 2001 (to date) 2002 Number MW Revenue($) Number MW Revenue($) 3 1,400 700K TBD TBD TBD 4 790 700K TBD TBD TBD 5 500 50K TBD TBD TBD ___ ___ ___ TBD TBD TBD 12 2,690 1,450 5-10 mm 20 10,000 Note: Above values include 1700 Mw and ~$1MM from Allegheny for Control Area Services

13. Origination Boxes indicate Services Note: Arrows indicate linkages and partnership ASSET MANAGEMENT SERVICES ORGANIZATION Manager Customer Reporting Account Managers Technical Sales Fuel Manager (Gas/Oil/Coal) Control Room Forward Trade Execution Trading Northeast Northeast Northeast Midwest Midwest Midwest Real Time / Cash/ Term Mid-Market / Orig / Structuring Southeast Southeast Southeast ERCOT ERCOT ERCOT EES / EWS