Press Release

ENRON EUROPE CEO FORECASTS SIGNIFICANT STRUCTURAL CHANGE FOR EUROPEAN GAS INDUSTRY AS PACE OF LIBERALISATION ACCELERATES FOR NEW ENTRANTS AND EXISTING PLAYERS (FLAME: EUROPEAN GAS 1998 CONFERENCE)

FOR IMMEDIATE RELEASE: Thursday, March 19, 1998

LONDON - "Structural change in the European gas market is inevitable and underway," according to Enron Europe's CEO Mark Frevert. "Competition, with its associated benefits for consumers, has been embraced and there is no turning back. The debate is over. The only remaining uncertainty is the timing of the structural change."

Frevert was speaking at "Flame", the 1998 European Gas conference held in Brussels this week. Highlights of his speech follow.

  Catalysts for change

The EU Gas and Electricity Directives are driving structural change, and significant competitive pressures will accelerate the pace. Liberalisation will occur faster than most governments and industry leaders anticipate.

• For the first time competition for gas customers will exist, with non-discriminatory access to customers through transmission systems. However, to the extent member states take a conservative approach to implementation of the EU Gas Directive, this structural change and its many benefits to consumers will be delayed.

• With electricity liberalisation progressing faster than gas in most EU countries, lower power prices will stimulate inter-fuel competition and put pressure on gas suppliers. Increased competition in electricity generation will mean more opportunities for gas, which will become the fuel of choice for economic, efficiency and environmental reasons.

• Consumer awareness of the benefits of electricity liberalisation - lower prices, new service offerings - will push demands for the same benefits in gas liberalisation.

  Key structural changes expected

A number of fundamental industry changes will occur in the transition to a competitive gas market, with profound implications for companies competing in that restructured market:

• Gas and energy will become commodities, and will be traded on both a physical and financial basis

• Spot and forward markets and price volatility will develop, creating a need for risk management products and services

• A whole new industry will evolve, built around financial trading and risk management, with the potential size of the market being as much as eight to 10 times the size of the physical market

• Practices will change significantly as customers demand more creative and flexible contract structures for energy procurement

• Energy markets will converge as gas molecules and electrons become interchangeable.

  Implications

• Creating shareholder value and profits will shift from being asset-based to skills-based

• Customer retention will become dependent on product development and innovation

• Existing suppliers will be forced to compete for market share outside their previous franchise areas, as they experience loss of market share to other suppliers and new third party entrants

• The pace of decision-making will be fast and will require new information management and processing capabilities

• Experience in other liberalised markets suggests there is a significant "first mover " advantage for companies that respond quickly and proactively to these market conditions.

Enron's European activities were established in 1989 and are based in London. Enron Europe today employs more than 500 people, primarily in offices in Frankfurt, London, Moscow and Oslo, and is also present in several other European countries. Enron is the market maker for electricity trades in Norway and is ranked among the leading spot gas and electricity marketers in the UK. In the UK it has developed, part owns and operates the 1875 MW Teesside power station, the world's largest privately-owned CCGT power plant, and is also constructing the 790 MW Sutton Bridge power station in Lincolnshire.

Enron is the world's leading integrated natural gas and electricity company. The company owns approximately $23 billion in energy related assets and delivers physical commodities and risk management and financial services to provide energy solutions to customers around the world. Enron's Internet address is www.enron.com and the stock is traded under the ticker symbol, "ENE."

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For additional information please contact:

Joan Wasylik

44 (0)171 316 6689