Press Release

ENRON CORP. REPORTS INCREASE IN RECURRING EARNINGS PER SHARE FROM CORE BUSINESSES IN 1997; COMPANY ESTABLISHES PLATFORM FOR GROWTH IN 1998

FOR IMMEDIATE RELEASE: Tuesday, January 20, 1998

HOUSTON -- Enron Corp. announced today its 1997 total year and fourth quarter results and noted that its financial and operating activities in 1997 have positioned the company for strong growth in 1998 and beyond. Recurring earnings from Enron's core businesses were very positive in 1997, the new Enron Energy Services business -- which markets directly to end users in deregulating markets -- established a very strong platform for future growth and critical issues such as the J-block gas contract settlement and charges for depressed MTBE prices were resolved so that the company can focus on strong growth opportunities in each of its businesses.

Full Year

Enron reported 1997 net income of $105 million compared with $584 million in 1996. The corresponding diluted earnings per share were $0.32 and $2.16 for 1997 and 1996, respectively. Basic earnings per share were $0.32 and $2.31 for 1997 and 1996, respectively.

"Our 1997 results reflected extremely strong operating performance in virtually all of our business units, offset to a significant degree by a number of non-recurring charges," said Kenneth L. Lay, Enron Corp. chairman and CEO. "These charges allow us to clear the decks for future growth."

Fourth Quarter

Enron reported net income for the 1997 fourth quarter of $169 million compared with $131 million in 1996. The corresponding diluted earnings per share were $0.53 and $0.48 for the fourth quarter of 1997 and 1996, respectively. Basic earnings per share were $0.55 and $0.52 for the fourth quarter of 1997 and 1996, respectively.

Full Year

Enron's core businesses generated recurring after-tax earnings of $585 million in 1997 compared with $493 million in 1996. Corresponding diluted earnings per share increased to $1.98 in 1997 compared with $1.82 in 1996.

Core businesses include Exploration & Production (Enron Oil & Gas Company), Transportation and Distribution (Gas Pipeline Group and Portland General Electric), and Wholesale Energy Operations and Services (Enron Capital & Trade Resources and Enron International).

"These business units demonstrated strong performance in 1997, particularly the wholesale energy operations of Enron Capital & Trade Resources and Enron International, both of which increased earnings in excess of 40 percent," Lay said. "We are the market leader in each of our businesses, and each segment is positioned to significantly increase recurring earnings in 1998."

Fourth Quarter

The core businesses also demonstrated a strong performance in the fourth quarter of 1997, increasing after-tax earnings to $136 million compared to $112 million a year ago. Corresponding diluted earnings per share were $0.43 and $0.41 for the fourth quarter of 1997 and 1996, respectively.

Results by Core Business Segment

The following discussion reflects full year and fourth quarter recurring earnings before interest, minority interest and taxes from each of Enron's core business units:

Exploration and Production: Exploration & Production includes the operations of Enron Oil & Gas Company (EOG) and the impact of corporate hedging of EOG's exposure to commodity prices. Exploration & Production generated earnings before interest, minority interest and taxes of $183 million in 1997 compared with $200 million in 1996. In the 1997 fourth quarter, Exploration and Production generated earnings before interest, minority interest and taxes of $62 million compared with $44 million in the 1996 fourth quarter. The 1997 results reflected increased production volumes and increased average natural gas prices. Full year results also reflect losses recognized by EOG early in the year associated with its natural gas price hedging activities at the separate company level. For 1998, Enron has hedged at the corporate (parent) level all of the natural gas price exposure associated with its investment in EOG at levels significantly above current prices.

Transportation and Distribution: This group primarily includes results from Enron's North American interstate natural gas pipelines (Gas Pipeline Group) and its electric utility serving northwest Oregon (Portland General Electric).

Enron's Gas Pipeline Group (GPG) generated earnings before interest and taxes of $402 million in 1997 compared with $462 million in 1996. In the 1997 fourth quarter, GPG generated earnings before interest and taxes of $96 million compared with $120 million in the 1996 fourth quarter. During 1997, GPG continued successful expansion of its existing pipeline systems and achieved positive regulatory decisions on Northern Natural Gas Company's rate matters and the expansion of the Northern Border Pipeline. These developments not only enhanced 1997 results, but also laid a strong platform for 1998. The decline in income for both periods was largely attributable to lower results from Transwestern Pipeline and natural gas liquids asset operations that contributed earnings during 1996, but were sold in the first quarter of 1997.

Portland General Electric Group (PGE) generated earnings before interest and taxes of $114 million for 1997 and $63 million in the 1997 fourth quarter. No results were included in Enron's earnings for the 1996 period as the merger of the two companies was completed in July 1997. PGE's strong results reflected the addition of 17,000 customers in one of the fastest growing service territories in the U.S. and the successful integration of its capabilities within Enron's other businesses. Additionally, in the fourth quarter of 1997, PGE filed its Customer Choice Implementation Proposal with the Oregon Public Utilities Commission, which serves as Enron's model for competitive electricity markets.

Wholesale Energy Operations and Services: This group includes Enron Capital & Trade Resources (ECT) and Enron International (EI). These businesses provide energy commodity sales and services, risk management products and financial services to wholesale customers. Additionally, they develop, own and operate power plants, natural gas pipelines and other energy related assets. ECT conducts its activities in North America and Europe, while EI conducts its activities primarily in South America and India.

Enron Capital & Trade Resources generated earnings before interest and taxes of $400 million in 1997 compared with $280 million in 1996. In the 1997 fourth quarter, ECT generated earnings before interest and taxes of $120 million compared with $56 million in the 1996 fourth quarter. The 1997 results reflected strong volumes and continued market share increases in its natural gas and power marketing businesses, which supported the company's strong cash and physical results. Physical natural gas volumes for 1997 increased 19 percent to 11.0 trillion British thermal units of energy equivalent per day, and power marketing volumes for 1997 increased more than three fold to 192 million megawatt hours. Additionally, ECT reported strong origination activity, particularly in Europe, and a significant increase in the value of its finance portfolio, including the positive impact of the conclusion of Enron's initial investment with CalPERS.

Enron International reported earnings before interest, minority interest and taxes of $217 million in 1997 compared with $152 million in 1996. In the 1997 fourth quarter, EI generated earnings before interest, minority interest and taxes of $52 million compared with $35 million in the 1996 fourth quarter. The 1997 performance reflected strong operating results from EI's growing asset base; ongoing development activities, most recently including the financial closing of the Puerto Rico power project; and the successful introduction of energy services into international markets, particularly in South America, where Enron is making significant investments in a network of gas pipelines, electric transmission capacity, distribution businesses and power plants.

During 1997, Enron created a new business segment, Enron Energy Services (EES). EES is developing energy products and services to sell directly to end use customers as deregulation opens this enormous market to competition. EES is placing particular emphasis on commercial and industrial customers, leveraging Enron's existing expertise in the wholesale natural gas and electricity marketplace.

Enron's investment in EES resulted in an after-tax loss of $9 million and after-tax earnings of $33 million for the full year and fourth quarter 1997, respectively. These results reflect losses associated with significant investments in building the business offset by a $61 million non-taxable gain on the fourth quarter sale of a 7 percent interest in EES. EES believes it is at the maximum annual investment level in building a world class sales force, developing products and services and in supporting EES's regulatory efforts. The company continues to make significant progress in expanding its customer base. As of year-end 1997, future revenues associated with its contracts completed were in excess of $1 billion.

"We have made significant progress in building this business, and the losses we have incurred are fully a result of building the infrastructure and not related to serving current customers," Lay said. "We are very pleased to have established a total enterprise value of $1.9 billion (approximately $5.50 per diluted share) for EES as of year-end 1997 and to have raised additional capital to help fund the start-up costs for this new high potential business."

Full Year

Enron's 1997 results included a $537 million after-tax non-recurring charge associated with the J-Block gas contract settlement and depressed MTBE margins and a $66 million after-tax gain on the sale of liquids assets. Each of these items relates to Enron's efforts during 1997 to resolve its major contingencies and focus on growing its core businesses. In 1996, non-recurring items netted to $91 million after tax, reflecting gains on the sales of EOG stock and gathering assets, partially offset by the establishment of certain reserves.

Fourth Quarter

Enron's 1996 fourth quarter included non-recurring after-tax items totaling $19 million associated with the sale of EOG stock, partially offset by certain reserves.

Enron is the world's leading integrated energy company. The company, which owns approximately $23 billion in energy related assets, 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:

Diane Bazelides

(713) 853-6285