Enron Energy Services' Gutenberg Strategy

1. Brown Bag PresentationApril 4, 2001 Enron Energy Services Project Gutenberg

2. Agenda • Gutenberg Concepts • EES “Strategy/Themes” Linkage • Gutenberg: Deal Optimization & Control

3. Gutenberg Concepts 1 2 3 4 5 Structure Defined Scope Established Contract Approved Deal Booked Site Profiles Created Site Profile Approximates Reality Curves Predict Future Components Model Value Curve Generation Component Generation Site Profile Generation Product Development Site Profile Owners Desks Operational Data

4. EES Strategy/Themes Linkage • Increased focus on value • Components calculate value, products aggregate value • Significant increase in accountability • Every cost and risk will be mapped to a book through a component • Build a scalable business model: process, components and standardization • Gutenberg enables scalability through standardization • Greater understanding of risk and a more complete accounting for risk and costs in our contract pricing • Consistent, transparent calculation, application and aggregation of risk

5. EES Strategy/Themes Linkage • Respect for process, controls and approvals: the basics of business • Clear ownership, control, and documentation of processes & roles • Better alignment & coordination: one strategy, one agenda and one company • Core business framework that aligns the business end to end • Knowledge-based organization: “packaging” not “heavylifting” • “Hard wiring” of knowledge into components, site profiles & curves • Crisper execution • Planning delivery capability during product development

6. EES Strategy/Themes Linkage • Need to enforce and protect our agreements: protect value and trade up • Standard products and related contract language mean less exceptions • Demand excellence: cultivate high performers - quickly manageperformance issues • Objective accountability and access to costs, margins & positions • Technology is core and strategic • Object-oriented structure makes integrated systems achievable • More market signals moving quicker from the back to the front • Daily re-forecast catches and communicates curve shift impacts

7. EES Strategy/Themes Linkage • Greater velocity and number of new products • Components are shared across all products, speeding innovation • Shorten deal closure cycles and increase deal velocity • Same math for notional valuation, executable pricing, and booked positions • Restructure our pricing, delivery and execution infrastructure • Consistent Gutenberg design application end to end • Low cost provider: best-in-class customer acquisition and maintenance costs • Ability to understand and track all costs of delivery

8. EES Strategy/Themes Linkage • Explore new templates appropriate for our markets that make us more responsive: legal, credit, finance, regulatory and risk • Involvement in business rule & process design and automated workflow • Manage, price and compartmentalize risk more comprehensively • Components will identify, model, track, and calculate all risks in any deal or position • Eliminate hierarchies, flatten the organization - promote a partnership • Gutenberg framework provides common vocabulary and aligned processes • Laser focus on growth, innovation and earnings • Less time coordinating, more time creating value

9. Gutenberg: Deal Optimization and Control Project Update April 4, 2001

10. Gutenberg: Deal Optimization and Control Agenda • Background • Recommendation Review • Implementation Strategy

11. Gutenberg: Deal Optimization and Control EES Operating System Customer Relationship Management Initially Booked Positions Product Qualified Commencement Strategic Performance Executed Prospects Sign-off Direction Feedback Contracts Services Delivery Pricing Services Market Commodity & Delivery Development Booking Set-up Assets & Labor Settlements & Reporting Standardized Products Risk Book Management Qualified Market New/Updated Segments Components New/Updated Curves Product Component Curve Key Development Development Development Gutenberg: Pricing & Booking and and and Gutenberg: Deal Optimization & Control Management Management Management Gutenberg: Product & Market Development

12. Gutenberg: Deal Optimization and Control Project Goals • Improve/exceed external and internal customer satisfaction targets • Ensure compliance with all GAAP accounting and disclosure requirements as well as Enron corporate trading policies • Develop ability to package, price, and sell EES operations capabilities • Validate the unit cost of installation and delivery (deal execution)

13. Gutenberg: Deal Optimization and Control Project Goals • Establish capability to report on performance at a transaction and activity level • Establish full understanding of contracts and related risk and obligations • Build contract compliance capability and assign accountability through the life of the deal • Synchronize operations information systems (risk, billing, etc.) through the use of common ID’s • Develop a process for reconciling risk and billing systems that would highlight discrepancies

14. Why? What’s Happening? What? What & Who? Changes? Who, When & How? Gutenberg: Deal Optimization and Control ProjectStatus 4/4

15. Gutenberg: Deal Optimization and Control Current State – Key Findings • Not understanding the value drivers and the interrelationship of the numbers, economics, business knowledge to analyze the deal P/L. • Lack of meeting / monitoring contractual obligations for Enron and Customer. • No contract administration process or change control process. • Lack of integration and synchronization of information. • Cannot reconcile risk book information to the G/L

16. Gutenberg: Deal Optimization and Control Current State – Information Systems • No interfaced applications • No common data ID’s • Multiple contract & deal data entry points • No contract management system • Limited functionality in risk books (tariffs or options) • No scheduling system for power • No historical information fed back to risk books

17. Gutenberg: Deal Optimization and Control Key Recommendations • Create a “Service Desk” to participate in delivery services related component and curve development in addition to providing input during deal development on EES bill payment, invoicing, and deal reporting capabilities and benefits. INVOICE CONSOLIDATION Value Proposition COMPONENTS BILL MANAGEMENT CUSTOMER Service Desk ENERGY INFORMATION REPORTING

18. Gutenberg: Deal Optimization and Control Key Recommendations • Establish a Service Management Function: • Insures a successful set-up. • Monitors contract compliance over the life of the contract. • Provides transaction scorecard to compare to DASH. Delivery Owners Service Management Obligation to close End of Deal

19. Contract Changes Service Management • Pricing • Commitments are cash settled correctly • Risk Books reforecasted • Contract amendments are documented & warehoused Gutenberg: Deal Optimization and Control Key Recommendations • Establish a formalized Change Notification Process: • Contract amendments are documented and warehoused. • Changes are priced and risk books are re-forecasted. • Commitments are cash settled correctly.

20. Gutenberg: Deal Optimization and Control Key Recommendations - Systems GLOBAL COMMON APPLICATIONS Enron Common Data Codes Curve Management RAC (Market Risk/Credit Rates/ Settle Prices Global Counterparty Contract Management Sites/Facilities Management Bill Payment RISK SYSTEMS SAP Avista TRADE CAPTURE/ Valuation CONFIRMATION Invoicing Position Reporting Scheduling DPR Reporting GNO Union Fenosa

21. Gutenberg: Deal Optimization and Control Key Recommendations • Integrate and implement systems based on shared data that carries consistent customer, deal, contract, and site identifiers which: • Assign a unique contract number to all contracts and amendments. • Link a GCP number to all contracts. • Link all contracts to deals in the risk books. • Assign a unique site number. • Require common ID’s for Customer, Contract, Site, Utility Account, Meter, Rates, and Project. Contract Site Details Master Site List

22. Gutenberg: Deal Optimization and Control Key Recommendations Hold each Delivery organization accountable for component installation. Set-up Delivery Current State Delivery Owners Origination Transition Team Set-up & Delivery Future State Service Management. Delivery Owners Origination

23. Gutenberg: Deal Optimization and Control Key Recommendations • Create a Deal Capture Function • One point of processing for all deals integrated with Contracts, Risk Books, and Settlements. • Formalize process to centralize deal confirmations. Billing & Contract Risk Books Management Invoicing

24. Volumes Settled Gutenberg: Deal Optimization and Control Key Recommendations • Establish Operational Analysis functionality by: • Comparing risk books to actuals at contract level (including site, meter, and project) and setting up a process to analyze variances. • Developing the ability to track statistical information for all contracts (scheduled physical, financial, and non-scheduled physical). • Institute a volume reconciliation process to reconcile volumes booked versus volumes settled. = End of Month

25. Gutenberg: Deal Optimization and Control Key Recommendations • THOU SHALT... • Eliminate capability to define contract terms post-signing. • Require a complete master site list on day of contract signing. • Require contracts to include contract compliance checklists. • Require all deals booked to have an executed contract. • Require all executed contracts be sent to Contract Management No Master Site List = No Contract No Compliance Checklist

26. Gutenberg: Deal Optimization and Control Other Recommendations • Create a Contract Administration Function • Install a Contract Management System and integrate with Risk Books and Settlement System. • Implement a contract compliance process. • Establish a data management function that monitors and enforces a standardized way of identifying common data fields & identifiers. • Create infrastructure to be able to book, value, monitor, and report all risks in a timely and flexible manner. • Improve risk valuation and monitoring to ensure that all risk exposure is captured and re-valued. • Streamline and enhance collections activities.

27. Gutenberg: Deal Optimization and Control BEFORE AFTER Limited delivery input into pricing Service Desk support of deal development Excessive rework from additions/deletions Delivery on documented changes on go-forward basis only No coordinated customer team effort Service Manager, single point accountability Lack of contract compliance monitoring process Service management accountable for contract compliance Inability to share & reconcile data Integrated systems based on common data Operational analysis limited by ad hoc Systematic deal level reconciliation and reconciliation of actuals to risk books (Vols. & $’s) continuous operational analysis No accountability for installation success Clear delivery organization accountability for installation Premature service commencements Coordinated installation process for all deals Incomplete P&L reporting through DPR DPR capable of representing P&L Disjointed & delayed collections activities Streamlined, proactive collections

28. Gutenberg: Deal Optimization and Control Top Priorities • Implement GDOC recommendations and assign accountability • Stabilize existing Risk Infrastructure • Build infrastructure to support • Gas and Power options • Retail Curve Decomposition • Implement new billing application with CSC • Data Clean-up • Assign Common ID’s • Validate terms and positions • with Risk Book • with Settlement systems • Begin Strategic Risk Systems Design

29. STABILIZE New Process Implemented Gutenberg: Deal Optimization and Control Implementation Strategy FIX Historical data cleaned up INSTALL Optimal Operating Platform • Global Counterparty System • Global Contract System • Global Facilities System DESIGN Strategic Solution

30. Gutenberg: Deal Optimization and Control Timeline Beyond 6 months 3 months 6 months Policies & procedures institutionalized New Process implemented Organization & staffing determined Service Desk established Roles & responsibilities determined Data cleaned up Deal P/L capability established Systems Implemented

31. THANK YOU! Enron Energy Services Project Gutenberg