Surviving and Prospering in the New Economy
Arthur Andersen 21st Annual Energy Symposium
Jeffrey K. Skilling
President and COO Enron CorporationHouston, Texas November 29, 2000
2
Total Return to ShareholdersJan 1, 1990 to November 2000
200
1600
1400
1200
1000
800
600
400
-200
0
Dec 97Dec 96Dec 95Dec 94Dec 93Dec 92Dec 91Dec 90
Enron Corp.
S&P 500
Pipeline Avg.
Utility Avg.
E&P Avg.
1383%
400%
466%
291%
174%
Nov 00Dec 99Dec 98
Note: Calculated to November 17, 2000
3
Price Earnings Ratios Enron vs. Peer Groups(as of 11-20-00)
23.725.9
57.3
0
10
20
30
40
50
60
Enron EnergyPeer Group
S&P 500
Enron’s PE Multiple Growth
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
1995 1996 1997 1998 1999 2000
UK Power and Gas Trading
Begins
Dabhol Phase I Financial Close
Acquisition of PGE
EES First Commercial Transaction
EBS Introduces Enron Intelligent Network
Enron Online reaches $1 billion day
20.95
57.30
23.70 23.89
28.53
37.61
4
5
Cost of Interaction
Mining FinancialInstitutions
U.S.India
30-40% 60-70%
55%40-50%
6
.90
1.0 1.0 1.0
.85
.80
.90
Business Structure
Transformation
Interaction
7
.90
1.0 1.0 1.0
.85
.80
.90
3.45 3.00 6.45
FinishedProduct
TransformationCosts
InteractionCosts
TotalCosts
Business Structure
Transformation
Interaction
.95 1.10 1.20 1.10.20 .20 .20
TransformationCosts
InteractionCosts
TotalCosts
4.35 .60 4.95
FinishedProduct
.90
1.0 1.0 1.0
.85
.80
.90
3.45 3.00 6.45
FinishedProduct
TransformationCosts
InteractionCosts
TotalCosts
Business Structure
Transformation
Interaction
9
Cost of Teller Transaction
$1.50
$0.30
$0.01
1985 1995 2000
(Bank) (ATM) (Internet)
10
Length of Time to Provision Bandwidth
1995 Today Next Year
6-8 months
2-3 months
< 1 second
11
Length of Time to Execute a Long-TermGas Contract
1981 1989 1997 2000
2-3 years
9 months
2 weeks
< 1 second
Change in Economics of Business Structure
.95 1.10 1.20 1.10.20 .20 .20
TransformationCosts
InteractionCosts
TotalCosts
4.35 .60 4.95
FinishedProduct
.90
1.0 1.0 1.0
.85
.80
.90
3.45 3.00 6.45
FinishedProduct
TransformationCosts
InteractionCosts
TotalCosts
Transformation
Interaction
3.45 .30 3.75
13
Where’s the Opportunity?
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
NotCostCompetitive
Where’s the Opportunity?
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
• Commoditized• Overcapitalized• GlobalizedCan’t make compensatoryreturn in traditional assetbusiness
Where’s the Opportunity?
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
Creating low cost, dependablemarket interfaces
• Market making• Logistics• Back office• Trade finance
Where’s the Opportunity?
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
“Virtual” Integration
Providing packaged turnkeysolutions for customers
• Complex structures• Differentiation• Customization
.90
.85
.80
.90
.10 .10 .10
.95 1.10 1.20 1.10.20 .20 .20
Where’s the Opportunity?
18
TraditionalEnergy Model
NewEnergy Model
• Asset intensive• Vertically integrated• Slow moving and rigid• Hierarchical
• Brain power intensive• Networked• Oriented toward “real options”• Fast moving• Entrepreneurial
Creating a New Energy Model
Enron
Energy
Services
Enron
Transportation
Services
Enron
Wholesale
Services
Enron
Broadband
Services
20
Applications
Utility FacilityOperations
& Management
EnergyOutsourcing
FuelManagement
Services
eCommerceApplications
Physical Assets
Contract Access
Market Making
Physical DeliveryContracts
Price RiskManagement
Contracts
SettlementServices
Peaking & Storage Services Finance
The Energy Network Model
21
Traditional Suppliers
Commodity Management
Energy Information
Management
CapitalManagement
Energy AssetManagement
FacilitiesManagement
Light
Consultants
Software Vendors
Control Manufacturers
Architects
Engineers
Mechanical Contractors
HVAC Svc Companies
Equipment Manufacturers
Specialty Contractors
Utilities
Internal Treasury
Lenders
Electrical Contractors
Conditioned Air
Managed Facilities
EnronCustomer
Needs
Total Energy Outsourcing
First national provider of energy and related services to residences and small businesses in deregulated markets
A partnership of industry leaders: Enron, AOL, IBM
Initial investment of $120 million
First customer sign-up in Pennsylvania and New Jersey later this year
TM
The New Power Company
22
23
Be the World’s Largest Provider
of Premium Broadband
Delivery Services
Be the World’sLargest Buyer andSeller of Bandwidth
Deploy the Most Open, Efficient Network with
Broad Connectivity
Enron Intelligent Network
ContentServices
BandwidthIntermediation
Fiber
Servers
Pooling Points
Network Control
Bandwidth Marketing & Trading
Comprehensive Bandwidth Management
Broadband Content Management & Delivery
Data Management Services
Enron Broadband Services
222
0
415
1,50015,848
2000ERoute Miles Typically Include 12 Fiber Pairs
19991998
12,325
5,5383
0
2000E19991998
13Servers Pooling Points
2000E19991998
Fiber(Route Miles)
Asia
Fiber
Servers
Pooling Points
The Enron Intelligent Network
Over 50 Transactions Effected YTD with 17 Counterparties
60 Counterparties Reviewing Contract Terms EnronOnline Offerings Recently Expanded to Over 30 Products in 14 City Pairs
London
Amsterdam
Frankfurt
Boston
Philadelphia
Washington D.C.
New York
Miami
Atlanta
Seattle
Denver
Dallas
Chicago
Houston
Los Angeles
Tokyo
San Jose
San Francisco
Portland
Las Vegas
Salt Lake City
Boise
New Orleans
Detroit
Toronto
MontrealCalgary
Vancouver
Added in 2Q
Bandwidth Intermediation
1Q00 Committed for Delivery
Before Year-End
432
5,170
2Q00
985
2000Target
DS-3 Month Deliveries
26
EIN
ContentProvider
ISP
ISP
Dallas
London
Paris
Copenhagen
Munich
Amsterdam
Rome
Omaha
San Francisco
San Jose
Los AngelesSan Diego
TokyoPhoenix
AlbuquerqueLas Vegas
HoustonSan Antonio
Orlando
Miami
New Orleans
Seattle
Portland
Sacramento
Boise
Chicago
Minneapolis
Kansas City Washington D.C.
Charlotte
JacksonAtlanta
Boston
Detroit
Albany
Salt Lake City
Cleveland
St. Louis
Toronto
New York
DenverPhiladelphia
InternetHigh Quality
Low QualityOur streaming media applications allow larger on-screen
windows, stereo sound and error-free imaging for TV-quality video that can be delivered simultaneously to large
audiences, live or on-demand.
Content Services
27
20-Year Exclusive, Worldwide Agreement Enron Provides End-to-End Connectivity to Deliver
Blockbuster’s MovieLibrary via the EIN
Enron Paid for Services Based on Number of Movies Rented New Broadband Distribution Agreements Enable DSL Delivery
to the TV; Additional Partners and Cable Targeted
Service Available in Multiple U.S. Markets by Year-end; Rapidly Moving Toward Implementation
Significant Expansion Opportunities
Content Enron’s Intelligent Network
Blockbuster’sCustomers
Enron’s Distribution
Partners
Encoding Storage Bandwidth
Management Streaming Control
Enron and Blockbuster
28
Free, Reliable Transaction System with Enron as Principal
Fully Integrated into Enron’sEstablished Risk Managementand Logistic Processes
Utilizing Site to Offer Energy-Related Auction Capabilities
Expands Enron’s Information Base and Market Knowledge
“Tried and Tested” Platform for Expanding Enron’s
eCommerce Activity
EnronOnlineExtending Enron’s Products to the Internet
29
EnronOnline Transactions Per Day
Enron Net Works
Clickpaper
Enron Credit
Enron Direct
Deal Bench
EnronOnline
31
CoalCoal
EnergyEnergy
B2B BackofficeB2B Backoffice
MetalsMetals
PaperPaperData StorageData Storage
TelecommunicationsTelecommunications
Natural GasNatural Gas
BroadbandBroadband
WeatherWeather
ElectricityElectricity
Enron Today vs. Enron Tomorrow
??
®
Top Related