Enron North America

1. Enron North America Texas Gas Origination 2001 Tactical Plan July 2001

2. Tactical Plan Overview • Re-staff Texas gas origination team: • Leverage existing internal resources with knowledge of TX • Leverage internal knowledge of structured transactions • Re-fill the deal pipeline: • Mid-market deals to establish information flow • Energy and asset management deals to obtain a market position • Develop a flexible/decentralized gas network of commodity, transport and storage positions • Develop a track record to demonstrate Enron’s “asset-neutral” value proposition • Work with producers, customers, and regulators to increase price transparency and transport liquidity

3. Resource Plan • Define customers and products – work closely with ERCOT Orig., Upstream Services, ECR, and Networks: • Transactional: Trading and mid-market activities • Structural: Structured commodity/capacity transactions • Services: EOL, Producer One, and other fee based activities ERCOT Power Orig. Texas Gas Orig. Texas Gas Orig. Networks, Upstream Services, ECR

4. Resource Plan • Establish team and assign coverage responsibility: • Each customer segment will have a lead “coordinator” and each customer will have a dedicated account manager • Develop analytical competence in each market segment • Coordination with power origination and service products groups to transfer product knowledge between customer segments

5. Producers/Gatherers • Secure access to commodity positions: • Target smaller gathering companies or producers with limited marketing resources (once 3 month HPL non-compete period expires). • Target producers with limited physical access to markets. • Bundle products to aggregate supply dedicated to Enron: • Work with Networks, Producer Services, and ECR to aggregate supplies • Investigate ways to use 3rd party funds to own gathering assets and provide Enron with marketing rights • Biggest impediments/issues: • Ability to transport gas from wellhead to pooling points • Ability to process wellhead gas for delivery to pipelines • Initial targets to pursue: • Conoco – Extensive production in S. Texas; owns some firm transport on 3rd party pipes; possibly ally for developing transport trading market • Mitchell Gas Holdings – Extensive production/gathering system north of Houston – limited access to Ship Channel market • Sulphur River Gathering – Production in N. Texas with limited pipeline position

6. Pipelines & Storage Operators • Obtain access to transport/storage capacity between supply and market areas: • Convince pipelines/storage operators to market capacity via EOL. • Contract for transport/storage capacity that we can trade around. • Purchase/structure capacity that can be re-marketed via EOL. • Biggest impediments/issues: • Resistance to unbundle transportation from commodity products • Resistance to use EOL vs. “competing platforms” being developed to trade capacity (e.g., ICE, Williams). • Initial targets to pursue: • MidCon (KN): provide MidCon with a physical HSC market • El Paso (Valero, Channel): Valero competes directly with HPL (50% JV partner) to sell capacity on the A/S line – may be open to using EOL to market this capacity • Duke Energy Field Services – has significant production that it now sells to Duke Energy or markets at pooling points; potential for Enron to add value by providing trading/marketing expertise or EOL services

7. Gas LDCs • Position Enron as an “asset neutral” alternative to pipeline marketing affiliates: • Demonstrate how Enron can add value through energy outsourcing or supply management deals. • Position EOL as a way for LDCs to rate Enron’s performance vs. market. • Potential opportunities for “Peoples Energy” structures where LDCs bring assets and Enron brings trading expertise. • Biggest impediments/issues: • Many LDCs currently wrapped up in term supply agreements • LDCs are conservative buyers – limited incentive to increase profitability. • Initial targets to pursue: • NET secured Corpus supply contract and has limited ability to source swing volumes • City Public Service may be interested in Enron as a fuel manager. • Work with Texas Railroad Commission and PUC to institute incentive-based rate making.

8. Industrial Customers • Provide sophisticated end-users with unbundled services; Provide smaller end-users with energy mgmt. • Differentiate ourselves from pipelines by unbundling products. • Position EOL as a tool to increase liquidity and price transparency • Focus on cross selling / bundling gas and power services (total energy management). • Overcome resistance to using Enron to supply gas without having HPL as a physical transport hedge • Biggest impediments/issues: • Physical access to customer through 3rd party pipelines • Demonstrate that we can provide a secure gas supply • Initial targets to pursue: • Highly competitive, multi-connected customers: Dow Chemical, Exxon-Mobil, Dupont, Shell – focus on market making for these purchasers • Smaller less competitive players: Formosa, Air Liquide, Solvay, Javelina – focus on providing total energy management services (power/gas) for these customers

9. Power Utilities / IPPs • Provide energy management services to smaller utilities/IPPs with limited marketing resources; Provide market liquidity to larger utilities and IPPS: • Position EOL as a tool to increase liquidity and price transparency for sophisticated gas purchasers. • Position Enron to provide total energy management services. • Work with utilities/IPPs to increase gas delivery options through contract transport or new interconnects • Develop mid-market business with IPPs as long term gas contracts end. • Biggest impediments/issues: • IPPs are looking for term deals to enable project finance; IPPs want Enron to participate in power offtake at favorable rates • Utilities are looking for secure supply; requires Enron to first establish its contractual transport, storage and commodity network. • Initial targets to pursue: • Highly competitive multi-connected IPPs: Texas Indep Energy, SkyGen, Sweeney, Constellation/Pace, Donohue Paper • IPPs with limited connections: ANP, Coastal/FPL, Tractabel

10. Target Industrials, IPPs and Utilities

11. Network Development • Develop a flexible network of commodity, transport, and storage positions to serve customers concerned about supply and/or offtake reliability: • Acquire control or access to pipeline capacity to serve demand. • Acquire storage capacity to serve swing markets – IPPs and others • Establish direct access to both suppliers and end-use customers • Position Enron to take advantage of expected increase in price volatility and basis tightening: • Increase flexibility by being able to layoff contract positions • Minimize capital invested in hard assets to increase ROCE • Biggest impediments/issues: • Establishing a capacity position without significant capital investment • Forcing the industry to unbundle transportation and commodity products.

12. Network Development • Integrate EOL into Texas market to get access to power and gas information; Key points of presence: • Trading Hubs – King Ranch, Katy, Carthage • Supply Zones – Agua Dulce, Thompsonville • Market Areas – Houston Ship Channel, Beaumont • Intrastate Transportation – HPL, Midcon/KN, Tejas, El Paso, Oasis • Biggest impediment/issue: resistance of pipelines to price unbundling; Competition to EOL from other platforms • Initial targets to pursue: • Joint presentations w/ Networks to customers and the Texas Railroad Commission to push for unbundled services: • Consolidate market constituents who are pushing for enhanced price transparency and market liquidity • Position EOL as a tool to increase liquidity and price transparency • Re-enforce implementation of Code of Conduct for intrastate pipelines • Aggressively pricing of EOL service offering to develop a track record and force industry to unbundle

13. Summary • Establish origination team: • Leverage internal knowledge of Texas market and structured products • Get quality origination resources who can complete energy/asset management deals • Define and develop products – force market changes: • Transport and storage products – unbundled from delivered gas. • Commodity risk management products – bundled or unbundled. • Outsourcing and asset management products • Service products • Overcome resistance to dealing with Enron without HPL • Establish and demonstrate the ability to link serve suppliers and end users in Texas without ownership of physical assets • Show benefits of being an “asset-neutral” service provider • Get contractual access to strategic capacity positions • Build customer relationships on market expertise: • Demonstrate how Enron can “create and share” value with customers • Distinguish Enron from other marketers, traders, transporters in Texas • Develop a “non-HPL” track record