RATING AGENCY MEETINGS
Talking Points Memorandum
For Internal Distribution Only
October 26, 2000

Enron Update

•	Ratio Update – Enron currently in position to substantially achieve rating agency expectations for 2000 key financial ratios:
Target		Proforma
	Funds Flow to Interest Expense			 4.03x		  4.03x
	Pre-Tax Interest Coverage				 2.78x		   2.29x
	Balance Sheet Debt to Balance Sheet Capital		40.7%		  40.6%
	Total Obligations to Total Capital			42.3%		  43.4%
	Funds Flow to Total Obligations			24.5%		  25.5%

•	Portland General Sale Pending - $1.0B in debt will be assumed by Sierra Pacific and $1.6B in cash will be paid to Enron upon the financial close of the Portland General sale.  Anticipated closing date is February 2001.  
•	Announced Asset Divestiture Plan – Enron currently negotiating the sale of South American business operations for approximately $3.2B.  Anticipated closing date is March 2001.  Additional asset sales in 2001 may result in proceeds in excess of $5B.
•	Conclusion –Asset sale proceeds realized during the first quarter of 2001 to provide Enron with tremendous flexibility to restructure balance sheet.  Enron management provided with opportunity to dramatically reduce leverage.  Board level discussions about proceeds allocation ongoing.

Azurix Situation Overview

•	Depressed Stock Price - Azurix stock price of $3.50 (at 10/26/00) represents an 80% decline from June 1999 IPO price of $19 per share.
•	Business Strategy Revision – Stock price decline primarily associated with earnings issues from slower than anticipated growth in the privatization of water utilities.  Revised focus to services business which has slower growth opportunities.
•	Asset Value Exceeds Aggregate Debt – Wessex Water Ltd. with 2000 RAB of $1,786MM times and $90MM in 2000 capex [plus value of other assets] has sufficient asset value to cover debt.
•	Liquidity Being Preserved – Overhead reductions coupled with reduced capital expenditures ensure sufficient liquidity is available for the next 20-24 months.

Proposed Enron Action

•	Enron Funding – Enron will fund approximately [$300MM] to buy-out the public minority.  
•	Public Announcement– Enron and Azurix announce on October 27 that Enron has offered to fund buy-out of public at [xx] per share.
•	Share Purchase Finalization – Shares to be delivered and payment made in 2001.
•	Overhead Reductions – Azurix overhead will be reduced. 

Azurix Benefits

•	100% Private Equity Holders – Enron’s stock purchase will allow Azurix increased flexibility in its actions due to decreased focus from public equity market.
•	Increased Enron Management Involvement – Azurix management team to be supplemented with experienced Enron personnel.
•	Reduced Earnings Pressure – Lack of public equity base frees company from market expectations as to revenue and earnings growth.
•	No Bondholder Trigger – Purchase of the public equity will not trigger high yield bondholders’ rights to call debt.

Marlin Water Trust Impact

•	Continued 50% Equity Stake in Atlantic Water Trust – Marlin Water Trust ownership not impacted by public stock buy-out.
•	Marlin Noteholders Not Impacted – The Marlin structure will remain in place in the near term.  August 15, 2001 deposit date not impacted.
•	Sources of Marlin Repayment Remain Intact – Marlin noteholders continue to rely on the original sources of repayment.

Backup Information

Post-Marlin Equity Issuance:
•	Issuances related to benefit and dividend reinvestment 	$1,071MM
•	Sale of common stock					$   839MM
•	Issuances of common stock for business acquisition		$   730MM
Total Post-Marlin Equity Issuance				$2,640MM

Option Vesting Schedule:
•	2001 restricted share vesting estimate – 1.9MM shares	$   156MM
•	2001 stock option vesting estimate – 25MM shares		$2,001MM
•	2002 stock option vesting estimate – 22MM shares		$1,724MM
•	2003 stock option vesting estimate – 14MM shares		$1,132MM
Total Value vesting in next three years (@$80)		$5,013MM

Proceeds from Sales of Merchant Assets Post-Marlin:
•	1999 merchant asset sales					$2,217MM
•	2000 YTD merchant asset sales				$1,880MM
Total Post-Marlin merchant asset sales			$4,097MM

Potential Proceeds from Sales of Assets/Businesses in 2001:
•	EREC – Enron Wind Corp					$   386MM
•	Elektro							$2,002MM
•	SA Gaspart LDC’s						$   450MM
•	Portland General						$1,600MM
•	NEPCO							$   100MM
•	Dabhol							$   605MM
•	Global E&P							$   460MM
•	SK								$   271MM
•	TGS								$   406MM
•	Cuiaba							$   428MM
•	Ventane							$   169MM
•	Promigas							$   154MM
•	Transredes							$   154MM
•	Copel								$   131MM
•	EccoElectica							$   116MM
•	Sichuan							$   111MM
•	Bahia								$   101MM
•	Other								$   486MM
Total 								$8,130MM