Enron is the premier integrated energy merchant in the rapidly growing competitive North American wholesale energy market. Enron has the only energy network in North America with a continental scope; strategically located assets; an unparalleled position in electricity, natural gas and coal marketing; state-of-the-art systems and above all, highly skilled employees that have led the recent move to competitive markets.

The move to cleaner, more efficient and more flexible power plant fuels is projected to increase incremental gas demand in North America by 2 to 3 trillion cubic feet per year beginning in three to five years. In addition, the non-regulated electricity market is expected to grow at a rate of 35 to 40 percent per year over the next five years. With a strong platform in place, Enron is focusing on fortifying the scale, scope, flexibility and speed of its North American energy network.

Fortifying the energy franchise

As electricity prices in North America temporarily rose from $20 per megawatt hour to as much as $7,500 per megawatt hour in mid 1998, Enron recognized a need for new, flexible generating capacity that would be able to respond quickly to the market. Enron moved immediately to begin construction on 1,300 megawatts of peaking facilities in Mississippi and Tennessee that will begin commercial operation in the summer of 1999. In addition, Enron recently acquired gas-fired generating assets representing more than 1,000 megawatts, the majority of which is connected directly to, and is located less than 10 miles from, New York City. In addition to strengthening Enron's flexibility in dispatching natural gas, the plants produce reliable electricity for customers in one of North America's most energy-intensive markets.

Enron's unique outsourcing agreement with a Northeast local distribution company (LDC), representing 140 billion cubic feet (Bcf) per year with a peak load of approximately 1 Bcf per day, also illustrates how the company is focused on fortifying its energy network. Enron manages all of the LDC's transportation, gas supply and storage agreements upstream from the city gate. This agreement gives Enron leverage for faster response to changes in the natural gas markets along the U.S. East Coast. Enron is employing this same asset management strategy in other regions of North America where energy markets are expanding.

In addition, Enron's North American franchise is benefiting from increased flexibility at the company's Bammel storage field north of Houston. Enron has increased the field's withdrawal capacity from 890 MMcf/d to 1.2 Bcf/d, and its injection capacity from 365 MMcf/d to 470 MMcf/d (at an inventory level of 80 Bcf). These enhancements give Enron the capability to serve an additional 3,000 megawatts of gas-fired electricity in the Houston area, or, the gas can be delivered into the Texas market or transported to the East Coast or the Midwest on a moment's notice.

With its U.K. and Nordic businesses firmly established through successful gas and power trading operations and the operation of energy assets such as the 1,875-megawatt Teesside and 790-megawatt Sutton Bridge power plants, Enron is uniquely positioned to capitalize on the liberalization of the $300 billion European energy market. Enron is the only new entrant that has the capability to transact in power across Europe, and its pan European approach is unique among existing and potential European competitors.

Strategy for Europe

Enron's vision is to create the leading energy company in Europe. The company's pan European strategy is focused on creating strong power trading operations in Germany, Italy, The Netherlands, Spain and other countries that are moving quickly to open their energy markets to competition. Enron is executing its strategy by integrating its core capabilities across both the asset and commodity sides of the business.

European strategy backed by key regional initiatives

Enron is developing and expanding its leading market position in the U.K. and Nordic countries. The company is one of the top two U.K. wholesale gas traders and has grown that business significantly over the past three years. The company traded almost 500 Bcf of natural gas in the U.K. in 1998 compared to 256 Bcf in 1997. In addition, Enron is one of the top three U.K. and Nordic power traders, with total volumes of 38 million megawatt hours in 1998. The company increased its Norwegian power trading volumes 30 percent in 1998, and is positioned to take a leading role in the rapidly evolving Continental power market with 24-hour trading operations in every key region of Europe. Elsewhere, Enron brought the 790-megawatt, natural-gas fired Sutton Bridge power station into commercial operation in the first quarter of 1999, and acquired a significant utilities and services business at Teesside that gives the company a strong platform for growth in earnings and cash flow for the foreseeable future.

Enron's European business is supported by a long list of 'firsts' that give the company a significant competitive advantage. Enron was the first U.S. company to enter the U.K. market when it began development of the Teesside power project; the first new market participant to obtain licenses to sell electricity in Germany and Spain; and the first to conclude certain financial and risk management transactions such as power swaps and weather derivatives.

Enron's strategy for Europe includes a strong focus on developing alliances and joint ventures. The company is negotiating a significant joint venture agreement with ENEL, the Italian state-owned electricity company, and has an agreement with Petrom, the state oil and natural gas company of Romania, to jointly market its indigenous natural gas production. These alliances give the company a strong presence in key regional markets.

Enron's strategy is to establish fully integrated regional energy businesses throughout the world. From 1990 to 1996, Enron focused primarily on greenfield asset development opportunities that linked fuel supplies with energy demands. Over the past three years, the company has successfully implemented an integrated approach, bringing Enron's entire set of business competencies to different international regions. As a result, Enron's international business, which already is contributing significantly to Enron's income, is now positioned to make significant contributions to its profit growth in the future.

Construction projects transitioning to income generating operating assets

Between late 1998 and early 2000, Enron's wholesale businesses expect to bring 11 energy projects to commercial operation, representing more than 3,500 megawatts of power generation and 1,100 miles of pipelines in markets such as Bolivia, Brazil, Guam, India, Italy, Poland, Puerto Rico, Turkey and the U.K. In addition to projects that are under construction, Enron developed or participated in the privatization of 3,030 megawatts of power plants and 7,554 miles of pipelines that are now operating.

	ENRON HAS A STRONG presence in Oslo, where it is the NordPool market maker, and is continuing to build on its position as a leading gas and electricity marketer in the U.K. As new markets open across Europe, Enron's strategy is to 'be first' in these deregulating markets and to establish competitive advantages for the future.

Enron has a strong presence in Oslo, where it is the NordPool market maker, and is continuing to build on its position as a leading gas and electricity marketer in the U.K. As new markets open across Europe, Enron's strategy is to 'be first' in these deregulating markets and to establish competitive advantages for the future.

The growth potential for the international marketplace is exceptional. Current world consumption of 82,200 Bcf of gas and 12,790 million megawatt hours of electricity is expected to almost double by the year 2015. A significant percentage of this growth will originate in the Southern Cone of South America, India and China -- key markets for Enron's business expansion strategy.

Building strong regional positions

Enron's strategy in the Southern Cone exemplifies its ability to be an integrated energy company in international markets. Enron is acquiring and constructing key assets that create an integrated regional gas and electricity business in Argentina, Brazil and Bolivia. Enron owns interests in the 4,104-mile Transportadora de Gas del Sur (TGS) pipeline system in Argentina, the 3,093-mile Transredes pipeline system in Bolivia and the 1,864-mile Bolivia-to-Brazil pipeline. These systems link huge gas supplies with highly populated demand areas. Enron is using this supply access to create competitive advantages for other asset development projects, including the 480-megawatt Cuiaba power plant and pipeline, which began the first phase of commercial operation in early 1999. Enron's strong asset infrastructure in the Southern Cone also enables the company to participate in significant demand-side opportunities for both gas and electricity. When Argentina became the first country in the region to liberalize its energy market, Enron moved quickly to establish its presence there. The company began trading gas in Argentina in 1997 and was the first non-national company to receive a power marketing license in that country. In addition, Enron owns interests in five local distribution companies (LDCs) in northeastern Brazil and two in the southeastern part of the country. Enron also holds interests in the CEG/Rio LDCs along the coastal states of Brazil and in Elektro, one of Brazil's most efficient utilities and the electricity service provider for the huge Sao Paulo market. With this large energy franchise in place, Enron is pursuing additional opportunities to leverage its physical presence in the Southern Cone.

THE DABHOL POWER PROJECT, developed by Enron and its partners, is the first independent power project in the state of Maharashtra, India. The first 826 megawatts of the project began commercial operation in early 1999. The 1,624-megawatt second phase is scheduled to come on line in 2001.

The Dabhol power project in the state of Maharashtra is the cornerstone of Enron's activities in India and is expected to be a strong contributor to Enron's earnings in 1999 and beyond. Upon achieving full commercial operation in 2001, the 2,450 megawatt facility, which will include India's first-ever liquefied natural gas (LNG) terminal and regasification facility, will be the largest independent power project in the world. The Dabhol LNG terminal will create opportunities for Enron to build a natural gas pipeline and supply gas to other energy and industrial customers along India's west coast, where current gas supplies are short. In early 1999, the first 826 megawatts of the Dabhol facility began commercial operation and the remaining 1,624 megawatts moved into the construction stage. Electricity from the Dabhol facility is being sold through a 20-year power purchase agreement that Dabhol Power Company holds with the Maharashtra State Electricity Board. In addition to the Dabhol project and related activities, Enron is pursuing other power and gas projects across India.