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Enron Annual Report 2000 Enron Annual Report 2000 Enron manages efficient, flexible networks to reliably deliver physical products at predictable prices. In 2000 Enron used its networks to deliver a record amount of physical natural gas, electricity, bandwidth capacity and other products. With our networks, we can significantly expand our existing businesses while extending our services to new markets with enormous potential for growth. CONTENTS 1 FINANCIAL HIGHLIGHTS 20 FINANCIAL REVIEW 2 LETTER TO SHAREHOLDERS 53 OUR VALUES 9 ENRON WHOLESALE SERVICES 54 BOARD OF DIRECTORS 14 ENRON ENERGY SERVICES 56 ENRON CORPORATE POLICY COMMITTEE 16 ENRON BROADBAND SERVICES 56 SHAREHOLDER INFORMATION 18 ENRON TRANSPORTATION SERVICES FINANCIAL HIGHLIGHTS 2000 (Unaudited: in millions, except per share data) Revenues 1999 Net income: Operating results Items impacting comparability Total 1996 $ 31,260 $ 20,273 $ 13,289 1,266 (287) 979 957 (64) 893 698 5 703 515 (410) 105 493 91 584 $ 1.47 (0.35) 1.12 1.18 (0.08) 1.10 1.00 0.01 1.01 0.87 (0.71) 0.16 0.91 0.17 1.08 Dividends paid per common share $ 0.50 0.50 0.48 0.46 0.43 Total assets $ 65,503 33,381 29,350 22,552 16,137 Cash from operating activities (excluding working capital) $ 3,010 2,228 1,873 276 742 Capital expenditures and equity investments $ 3,314 3,085 3,564 2,092 1,483 Earnings per diluted common share: Operating results Items impacting comparability Total NYSE price range High Low Close December 31 $ 1997 $ 40,112 $100,789 1998 $ $ $ 90 916 41 38 83 18 1,266 100.8 29 38 19 116 28 1732 44 78 28 34 44 38 22 916 17 12 20 2532 23 34 17 516 21 916 1.47 1.18 957 40.1 31.3 20.3 98 99 00 99 00 99 Income ($ in millions) REVENUES 00 Earnings Per Diluted Share (in dollars) OPERATING RESULTS 1,415% 350% 89% S&P 500 Enron S&P 500 129% Enron 383% (9%) S&P 500 One Year Five Years CUMULATIVE TOTAL RETURN (through December 31, 2000) Enron Ten Years ENRON ANNUAL REPORT 2000 97 ($ in billions) 1 TO OUR SHAREHOLDERS Enron's performance in 2000 was a success by any measure, as we continued to outdistance the competition and solidify our leadership in each of our major businesses. In our largest business, wholesale services, we experienced an enormous increase of 59 percent in physical energy deliveries. Our retail energy business achieved its highest level ever of total contract value. Our newest business, broadband services, signicantly accelerated transaction activity, and our oldest business, the interstate pipelines, registered increased earnings. The company's net income reached a record $1.3 billion in 2000. Enron has built unique and strong businesses faster, exible and more reliable connectivity. Enron that have tremendous opportunities for growth. is in a unique position to provide the products and These businesses wholesale services, retail energy services needed in these environments. Our size, services, broadband services and transportation experience and skills give us enormous competitive services can be significantly expanded within advantages. We have: their very large existing markets and extended Robust networks of strategic assets that we own to new markets with enormous growth potential. or have contractual access to, which give us At a minimum, we see our market opportunities greater exibility and speed to reliably deliver company-wide tripling over the next ve years. Enron is laser-focused on earnings per share, and we expect to continue strong earnings performance. We will leverage our extensive business networks, market knowledge and logistical expertise to produce high-value bundled products for an widespread logistical solutions. Unparalleled liquidity and market-making abilities that result in price and service advantages. Risk management skills that enable us to offer reliable prices as well as reliable delivery. Innovative technology such as EnronOnline to increasing number of global customers. deliver products and services easily at the lowest Competitive Advantages possible cost. Our targeted markets are very large and are These capabilities enable us to provide highproviders cannot. We can take the physical compo- are driving demand for reliable delivery of energy 2 value products and services other wholesale service lation and liberalization continue, and customers ENRON ANNUAL REPORT 2000 undergoing fundamental changes. Energy deregu- nents and repackage them to suit the specic needs at predictable prices. Many markets are experienc- of customers. We treat term, price and delivery as ing tighter supply, higher prices and increased variables that are blended into a single, compre- volatility, and there is increasing interdependence hensive solution. Our technology and fulfillment within regions and across commodities. Similarly, systems ensure execution. In current market envi- the broadband industry faces issues of overcapacity ronments, these abilities make Enron the right and capital constraint even as demand increases for company with the right model at the right time. The Astonishing Success of EnronOnline In late 1999 we extended our successful busi- wholesale services income before interest, minority interests and taxes (IBIT) increased 72 percent to $2.3 ness model to a web-based system, EnronOnline. billion. Over the past ve years, as physical volumes EnronOnline has broadened our market reach, have increased, wholesale IBIT has grown at a com- accelerated our business activity and enabled us pounded average annual rate of 48 percent, and we to scale our business beyond our own expectations. have had 20 consecutive quarters of year-over-year By the end of 2000, EnronOnline had executed growth. We have established core wholesale busi- 548,000 transactions with a notional value of $336 nesses in both natural gas and power in North billion, and it is now the world's largest web-based America and Europe, where we are market leaders. eCommerce system. With EnronOnline, we are reaching a greater In North America, we deliver almost double the amount of natural gas and electricity than the number of customers more quickly and at a lower second tier of competitors. Our network of 2,500 cost than ever. It's a great new business generator, delivery points provides price advantages, exibility attracting users who are drawn by the site's ease of and speed-to-market in both natural gas and power. use, transparent, rm prices and the fact that they Natural gas, our most developed business, has seen are transacting directly with Enron. In 2000 our substantial volume growth throughout the United total physical volumes increased signicantly as a States and Canada. In 2000 our physical natural gas direct result of EnronOnline. volumes were up 77 percent to 24.7 billion cubic feet per day (Bcf/d). Physical power volumes were up 52 left page: Jeffrey K. Skilling President and CEO right page: Kenneth L. Lay Chairman percent to 579 million megawatt-hours (MWh). We are building a similar, large network in Europe. In 2000 we marketed 3.6 Bcf/d of natural gas and 53 million MWh in this market, a vast increase over 1999. As markets open, we tenaciously pursue the difficult, early deals that break ground for subsequent business. We are the only pan-European EnronOnline has enabled us to scale quickly, soundly and economically. Since its introduction, EnronOnline has expanded to include more than player, and we are optimizing our advantage to conduct cross-border transactions. We are extending Enron's proven business 1,200 of our products. It also has streamlined our approach to other markets, and integrating back-ofce processes, making our entire operation EnronOnline into all our businesses as an accelera- more efcient. It has reduced our overall transaction tor. Our growth rates are rising in areas such as costs by 75 percent and increased the productivity metals, forest products, weather derivatives and coal. of our commercial team by ve-fold on average. We expect these businesses to contribute to earnings We are not sitting still with this important new even more signicantly in 2001. business tool in September 2000 we released Enron Energy Services EnronOnline 2.0, which added even more customer Our retail unit is a tremendous business that experienced a break-out year in 2000. We signed attracted more customers. contracts with a total value of $16.1 billion of cus- Enron Wholesale Services tomers' future energy expenditures, almost double The wholesale services business delivered the $8.5 billion signed in 1999. We recorded increas- record physical volumes of 51.7 trillion British ing positive earnings in all four quarters in 2000, and thermal units equivalent per day (TBtue/d) in 2000, the business generated $103 million of recurring IBIT. compared to 32.4 TBtue/d in 1999. As a result, Energy and facilities management outsourcing is ENRON ANNUAL REPORT 2000 functionality and customization features and 3 now a proven concept, and we've established a businesses and offer viewers at home an additional protable deal ow, which includes extensions of convenient way to choose and receive entertain- contracts by many existing customers. Price volatility ment. Enron provides the wholesale logistical services in energy markets has drawn fresh attention to our that bridge the gap between content providers and capabilities, increasing demand for our services. No last-mile distributors. Full-length movies-on-demand other provider has the skill, experience, depth and service has been successfully tested in four U.S. versatility to offer both energy commodity and metropolitan markets. price risk management services, as well as energy Enron Transportation Services asset management and capital solutions. In 2001 The new name for our gas pipeline group accu- we expect to close approximately $30 billion in rately reects a cultural shift to add more innovative new total contract value, including business from customer services to our efcient pipeline operation. our newest market, Europe. To serve our customers more effectively, we are Enron Broadband Services increasingly incorporating the web into those rela- We have created a new market for bandwidth tionships. Customers can go online to schedule nomi- intermediation with Enron Broadband Services. In nations and handle inquiries, and they can transact 2000 we completed 321 transactions with 45 coun- for available capacity on EnronOnline. The pipelines 16.1 51.7 32.4 27.3 8.5 3.8 Other Electricity Natural Gas 98 99 00 98 WHOLESALE SERVICES - PHYSICAL VOLUMES (trillion British thermal units equivalent per day) 99 00 ENRON ENERGY SERVICES - VALUE OF CONTRACTS ORIGINATED ($ in billions) terparties. We are expanding our broadband inter- continued to provide strong earnings and cash ow mediation capabilities to include a broad range of in 2000. Demand for natural gas is at a high in the network services, such as dark ber, circuits, Internet United States, and we're adding capacity to take Protocol service and data storage. Our opportunities advantage of expansion opportunities in all markets. are increasing commensurately. New capacity is supported by long-term contracts. Part of the value we bring to the broadband field is network connectivity providing the Strong Returns Enron is increasing earnings per share and Recurring earnings per share have increased of capacity between independent networks. We steadily since 1997 and were up 25 percent in operate 25 pooling points to connect independent 2000. The company's total return to shareholders third-parties 18 in the United States, six in 4 continuing our strong returns to shareholders. mediation skills to enable the efficient exchange ENRON ANNUAL REPORT 2000 switches, the network intelligence and the inter- was 89 percent in 2000, compared with a negative Europe and one in Japan. At least 10 more are 9 percent returned by the S&P 500. The 10-year scheduled to be completed in 2001. return to Enron shareholders was 1,415 percent Enron also has developed a compelling compared with 383 percent for the S&P 500. commerical model to deliver premium content-on- Enron hardly resembles the company we were demand services via the Enron Intelligent Network. in the early days. During our 15-year history, we have Content providers want to extend their established stretched ourselves beyond our own expectations. We have metamorphosed from an asset-based EnronOnline will accelerate their growth. We plan pipeline and power generating company to a to leverage all of these competitive advantages to marketing and logistics company whose biggest create signicant value for our shareholders. assets are its well-established business approach and its innovative people. Our performance and capabilities cannot be compared to a traditional energy peer group. Our results put us in the top tier of the world's corpora- Kenneth L. Lay tions. We have a proven business concept that is Chairman eminently scalable in our existing businesses and adaptable enough to extend to new markets. As energy markets continue their transformation, and non-energy markets develop, we are poised to capture a good share of the enormous Jeffrey K. Skilling opportunities they represent. We believe wholesale President and gas and power in North America, Europe and Japan Chief Executive Ofcer 380 391 236 351 59 23 3 98 99 00 ENRON TRANSPORTATION SERVICES REPORTED INCOME BEFORE INTEREST AND TAXES ($ in millions) 1Q 2Q 3Q 4Q ENRON BROADBAND SERVICES - 2000 BANDWIDTH TRANSACTIONS will grow from a $660 billion market today to a $1.7 trillion market over the next several years. Retail energy services in the United States and Europe have the potential to grow from $180 billion today to $765 billion in the not-so-distant future. Broadband's prospective global growth is huge it should increase from just $17 billion today to $1.4 trillion within ve years. Taken together, these markets present a $3.9 trillion opportunity for Enron, and we have just scratched the surface. Add to that the other big steel, coal and air-emissions credits and the opportunity rises by $830 billion to reach nearly $4.7 trillion. Our talented people, global presence, nancial strength and massive market knowledge have created our sustainable and unique businesses. ENRON ANNUAL REPORT 2000 markets we are pursuing forest products, metals, 5 In Volatile Markets, EVERYTHING CHANGES BUT US ENRON ANNUAL REPORT 2000 When customers do business with Enron, they get our commitment to reliably deliver their product at a predictable price, regardless of the market condition. This commitment is possible because of Enron's unrivaled access to markets and liquidity. We manage flexible networks with thousands of delivery points, giving us multiple options and a distinct service advantage. Our extensive daily market activity keeps us on top of price movements, so we can manage our customers' price risk. We offer a multitude of predictable pricing options. Market access and information allow Enron to deliver comprehensive logistical solutions that work in volatile markets or markets undergoing fundamental changes, such as energy and broadband. This core logistical capability led to our best year ever in 2000 because physical volumes drive our wholesale profits. We see ample opportunities for further volume growth in existing and new markets. Enron's ability to deliver is the one constant in an increasingly complex and competitive world. 6 Enron blends these four elements together to deliver premium logistical solutions. >> Knowledgeable Pricing Enron's market activity captures massive amounts of pricing information. Pricing information helps Enron effectively manage its customers' price risk and its own. Enron allows customers to choose the optimal way to set a predictable price. Technology Advantages Information systems quickly distribute real-time information. EnronOnline extends Enron's reach to increase volumes and market share. Enron's sophisticated systems track prices, register exposures and monitor customer credit. Scalable Fulllment EnronOnline integrates seamlessly into delivery fulllment systems, reducing transaction costs. Existing systems scale readily as volumes increase. Standardized legal and tax compliance speed business. Systematic risk assessment and control protect Enron. ENRON ANNUAL REPORT 2000 MAKES MARKETS Extensive Market Networks Enron manages large, exible networks of assets, contracts and services that provide unrivaled liquidity. Liquidity allows Enron to move products in and out of markets so it can maximize opportunity and margins. Because it has broad physical access, Enron reliably executes contracts. 7 ENRON WHOLESALE SERVICES Wholesale services is Enron's largest and fastest created liquidity on a scale never seen before. It is a dynamic business accelerator: It took nearly a decade for Enron's daily gas transactions to reach growing business, with sustainable growth oppor- 13.9 Bcf in 1999. Just 12 months later, EnronOnline tunities in each of its markets. In 2000 income before had helped to practically double daily transactions interest, minority interests and taxes (IBIT) rose 72 to 24.7 Bcf. percent to $2.3 billion, with record physical energy EnronOnline magnies the success of our volumes of 51.7 trillion British thermal units equiv- existing business, which springs from the scale and alent per day (TBtue/d) a 59 percent increase scope of our established networks. We touch more over 1999. parts of North America's energy system than any For the past ve years, wholesale services other merchant, with access to upwards of 2,500 earnings have grown at an average compounded distinct delivery points each day. The widespread growth rate of 48 percent annually, and our com- delivery options and possibilities of our network petitive position is growing stronger. Customers give us a price and service advantage. Our networks transact with Enron because we offer products and and presence in nationwide energy markets also services few others can match. With our exible enable us to capture and distribute massive amounts networks and unique capabilities in risk manage- of information about real-time market supply and ment and nance, we deliver the widest range of demand, grid constraints and bottlenecks. When reliable logistical solutions at predictable prices. the market moves, we are able to conduct business Enron delivers more than two times the natural gas and power volumes as does its nearest energy while competitors are still fact-nding. Our people also make a difference. We are marketing competitor. Our formidable lead comes able to attract the best and the brightest and place from our willingness to enter markets early and them in an entrepreneurial atmosphere in which serve as a market-maker to build liquidity and price they can thrive. With our intellectual capital, we transparency. Breakthrough technology applications, develop premium high-margin structured products such as EnronOnline, accelerate our market penetra- that draw on our liquidity and market knowledge. tion. These competitive advantages have made us A good example is the gas-marketing-services hub the most successful energy marketer in the two in Chicago we launched with People's Energy in largest deregulating energy markets, North America March 2000. Known as Enovate, this venture opti- and Europe. We expect to achieve a similar leader- mizes People's 30 Bcf a year of Chicago-area storage ship position as we extend our business approach capacity and related transportation. It played a role to new regions, products and industries. in increasing our gas volumes in the central United Our business has ourished with EnronOnline. Launched in November 1999, EnronOnline handled 548,000 transactions in 2000 with a gross notional States by 156 percent, the largest increase in our 2000 North American physical volumes. We continually assess the necessity of adding value of $336 billion. EnronOnline is unquestionably or owning assets in a region. Sometimes it is less the largest web-based eCommerce site in the world expensive to own an asset than to replicate the and dwarfs all other energy marketing web sites asset in the market through contracting and mar- combined. By the fourth quarter of 2000, it account- ket-making. We are developing generation plants ed for almost half of Enron's transactions over all to sell merchant power to high-demand markets, business units. EnronOnline has pushed productivity including proposed facilities in California, Florida, through the roof: Transactions per commercial person Texas, Louisiana and Georgia. But as liquidity rose to 3,084 in 2000 from 672 in 1999. EnronOnline increases, asset ownership may no longer be neces- Version 2.0, launched in September 2000, has attract- sary. We plan to sell Houston Pipe Line Company, ed more users with its additional functionality (see and Louisiana Resources Company is now held by \"EnronOnline\" next page). Bridgeline Holdings, L.P., a joint venture in which Enron North America Enron retains an interest. Additionally, in the second In North America, Enron's physical natural gas quarter of 2001 we expect to close the sale of ve of the six electricity peaking generation units in feet per day (Bcf/d) in 2000 from 13.9 Bcf/d in 1999. operation. The result is the same earnings power Power deliveries increased 52 percent to 579 million with less invested capital. megawatt-hours (MWh) from 381 million MWh the year before. EnronOnline has been a runaway success in Mexico's move toward liberalizing its energy markets should gain intensity and speed with its new government. Increased cross-border electricity North America. It accounted for 74 percent of transactions between Mexico and the United States North American volume transacted in 2000, and seem inevitable. Our activities in Mexico seek to ENRON ANNUAL REPORT 2000 volumes increased 77 percent to 24.7 billion cubic 9 optimize both the Mexican electricity market and mediaries such as Enron to hedge their fuel and cross-border activity between the two countries. power prices. Enron also is active in South America, where On the Continent, our power volumes we own and develop assets to help create an increased to 50 million MWh in 2000 from 7 million energy network. MWh in 1999. We are transacting at all major Enron Europe country interconnections, benefiting from cross- We are rapidly extending Enron's market- border opportunities. We closed our first-ever making approach into the deregulating European transaction in France and are an active player in markets, focusing on the U.K., the Continent and Germany and Switzerland. We are beginning to the Nordic region. The Continent is still in the early partner with utilities to offer comprehensive port- stages of liberalization. Although the European folio management services, such as our agreement Union has mandated liberalization of the power and to purchase and distribute power jointly with Swiss natural gas markets, each country is responding at Citypower AG, which controls 19 percent of the its own pace. The velocity of transactions is rising on Swiss electricity market. the Continent, however, and Enron expects to raise the level of liquidity to make the markets work. Our business throughout Europe is growing rapidly. Natural gas and power volumes more than doubled to 10.3 trillion British thermal units equiv- EnronOnline alent per day (TBtue/d) in 2000 from 4.1 TBtue/d in 1999. We enjoy several competitive advantages in EnronOnline successfully leverages Enron's core Europe: We are the only pan-European player; we market-making capabilities, benefiting both our have a proven business strategy; we entered the customers and Enron. The web-based system market early to build a presence; and we have makes it easier to do business with Enron. It attracted a talented and skilled local workforce. also accelerates the growth of Enron's existing Our cross-border capabilities are becoming businesses and facilitates quick and efficient increasingly important as markets interconnect. entry into new markets. U.K. gas can now be transported to Belgium, and subsequently to the rest of the Continent, giving us the opportunity to develop innovative transactions on both sides of the border. The resulting increase in price volatility has nearly doubled U.K. gas prices, which, along with more volatile electricity prices ahead, has signicantly improved demand for the U.K. risk management products we offer, both now and over the long term. Just as in North America, EnronOnline is increasing Enron's reach and volumes in Europe and is a prime driver of liquidity. Its simple con- In Spain, electricity demand is growing faster tracts, multi-currency capabilities, transparent and than anywhere else in Europe, and there are limit- competitive prices and easy accessibility have won ed import and export capabilities. Enron is respond- EnronOnline rapid acceptance. ing to this opportunity by developing a 1,200- In the U.K., power and gas volumes more than doubled, with power rising to 113 million MWh in 2000, and gas volumes climbing 119 percent to reach megawatt plant in Arcos, south of Seville, that should close nancing in 2001. Continental gas liquidity is just starting to feet per day (MMcf/d) in 2000 from 53 MMcf/d in Trading Agreements, which replace the existing 1999. While the market is in its early stages, Enron U.K. power pool, are scheduled to be implemented 10 increase. Our volumes grew to 472 million cubic more business for us. The U.K.'s New Electricity ENRON ANNUAL REPORT 2000 3.2 Bcf/d. Several market factors are likely to create has managed to increase weekly transactions from by the second quarter of 2001. The agreements about 5 to 100 over the course of a year. In will result in increased price volatility, and Enron October we initiated the first gas supply deal in is well-positioned to help customers manage this Germany to the local utilities of Heidelberg, risk. Additionally, lower power prices are shrinking Tuebingen and Bensheim. We also are delivering profit margins for U.K. merchant power plants, natural gas to some large users in the Netherlands which increasingly need to turn to market inter- and France. opportunities to support our market-making activi- We continue to set records in the Nordic region, where we are the largest power marketer. ties, including inside-the-fence power generation. Electricity volumes increased nearly 150 percent Under consideration are a number of sites, which to reach 77 million MWh in 2000 from 31 million may be fueled by gas, liqueed natural gas or coal. MWh in 1999. Enron's Oslo office also is now Enron Australia the base of our European weather risk manage- Enron's market-making ability has been successfully extended to Australia, where Enron is a ment business. As more Nordic companies outsource energy leading provider of logistical solutions in the coun- supply and management, Enron's products and serv- try's power market. During 2000 we introduced ices including advanced technology applications weather risk management products in the region, are eagerly sought. In December Enron entered offering temperature-based products for Sydney, into a two-year portfolio management agreement Melbourne, Hong Kong, Tokyo and Osaka. The with UPM-Kymmene Corp., one of the world's Sydney ofce also provides a strategic platform for largest forest products companies. Enron will assist the extension of Enron's coal, metals and broad- MAKING MARKETS Enron's networks of assets and contractual relationships allow us to make markets and offer realtime pricing for more than 1,200 products on EnronOnline. This tremendous market liquidity attracts customers and further increases Enron's volumes and market share. CUSTOMER RELATIONSHIPS EnronOnline provides customers with a more convenient way to discover prices and do business with Enron, which increases transaction volumes and attracts new customers. The system automatically taps into Enron's sophisticated customer-credit proles to protect Enron from credit risk. INFORMATION SYSTEMS EnronOnline is fully integrated with Enron's proprietary information systems, which provide critical market information, process thousands of deals and help assess and manage market and other risks. As a result, Enron manages risks instantaneously even in the most volatile markets. SCALABILITY Enron's well-tuned back-ofce system, integrated with EnronOnline, has proven its ability to scale as Enron's total transactions have grown from an average of 650 a day at EnronOnline's November 1999 launch to an average of 7,900 a day by year-end 2000. As EnronOnline expands products and volumes, Enron's scalable back-ofce will continue to be a competitive advantage. UPM-Kymmene in optimizing its Nordic power port- band businesses, as well as providing support for folio of approximately 14 terawatt hours. Enron's operations in the Asia-Pacic region. Enron Japan Extending to New Markets Enron Japan formally opened its Tokyo ofce Enron's durable business approach, which has driven our success in the natural gas and electricity opportunity: Its electricity rates are the highest in markets, is eminently applicable to other markets the world, and electricity consumption is second and geographical regions. While we are remaining only to the United States. We have attracted top focused on increasing earnings and opportunities talent to develop wholesale and joint venture possi- in gas and power, we also are extending Enron's bilities, and have introduced our rst product for method to large, fragmented industries and prod- large electricity users three- to ve-year contracts ucts, where intermediation can make markets that will reduce electricity bills immediately by up more efficient and responsive to customer needs. to 10 percent the rst year, with the possibility of We expect these new businesses to contribute to further reductions in subsequent years. Our rst earnings in 2001. contracts were signed in early 2001. Through joint ventures with several Japanese companies, Enron is exploring merchant plant Enron Metals was launched in July 2000 when Enron acquired the world's leading merchant of nonferrous metals, MG plc. Together, MG and Enron are ENRON ANNUAL REPORT 2000 in October 2000. Japan represents an enormous 11 Coal intermediation moved to a new level in a powerful team. Enron's nancial resources and eCommerce abilities add a new dimension to MG's 2000. The industry has been radically affected by the widespread physical merchant skills and excellent worldwide deregulation of the electricity industry. customer relationships. The early results are right on Like natural-gas-fueled generation, coal-burning target, with physical volumes up 31 percent in 2000. generators require exible terms and risk-management protection. Enron is able to provide unrivaled Enron Metals opens an additional door to large energy customers. Cominco Ltd., a zinc pro- logistical support. Our coal business has led us to ducer and an Enron Metals customer in Vancouver, participate in sea and land logistics as well. British Columbia, worked with Enron to halt zinc Weather has never been better for us. Our production for six weeks and sell its power into the weather risk management business is up about Northwestern power market, where it was needed. ve-fold to 1,629 transactions in 2000 from 321 Enron North America protected Cominco by struc- transactions the year before. As in all of our mar- turing a fixed-price swap to guarantee the sale kets, we bring cross-commodity capabilities to our price of the power, and Enron Metals arranged to weather products. For instance, we closed a three- One Coal Contract Covers All Logistics The process of sourcing and delivering coal to an electricity generator is a complicated process. Enron provides a single, comprehensive solution to manage all logistics and risk, whether the coal is sourced domestically or abroad. In some cases, we have reduced the customer's cost of coal by as much as 10 percent. COAL PRICE AND SUPPLY RISKS Enron allows generators to purchase coal at exible terms, such as long-term xed rates or a maximum price. Supply and price are assured because Enron has access to multiple sources all over the globe. Enron is on its way to becoming the world's largest wholesale coal merchant. TRANSPORTATION RISKS Imported coal travels by sea and land, and the consumer usually makes each arrangement separately and bears the risk if prices or capacity change. Enron delivers a complete logistical solution for its customers, managing both the process and risk as part of just a single contract for the coal. Enron also provides complete domestic logistics. CURRENCY RISKS Like oil, imported coal is denominated in U.S. dollars. A British generator, however, collects electricity payments in pounds sterling. When appropriate, Enron includes currency hedges in its contracts to protect customers if the value of the pound drops against the dollar. supply a portion of the zinc required to fulfill year precipitation transaction that provides finan- Cominco's obligations. Cominco's profit from the cial compensation linked to natural gas prices if deal exceeded the annual profit it makes from precipitation falls below a pre-determined mini- producing zinc. mum. The weather unit worked with several other Enron Credit is a new business with strong mar- Enron groups to transfer Enron's risk, ultimately ket potential. Enron has leveraged its internal risk transacting with 10 external companies in three management processes and systems to create a real- markets (natural gas, weather products and insur- time, market-based online credit evaluation system. ance). The bundled end-product resulted in an The idea is simple: Existing credit ratings and scoring effective hedge for the customer. mechanisms are not market-based and cannot Crude oil. We now average crude deliveries of ENRON ANNUAL REPORT 2000 respond in real time to credit events. This means 12 7.5 TBtue/d to 240 customers in 46 countries. We creditors must gure out their credit risk exposure have introduced the first-ever 24x7 commodity on their own. Enron Credit posts the cost of credit market of a West Texas Intermediate crude product as a simple interest rate for more than 10,000 com- on EnronOnline, allowing our customers to respond panies on its web site, www.enroncredit.com. Enron to market-changing events at any time, day or Credit also gives corporations the ability to hedge night. We also concluded our biggest physical jet their credit risk via a bankruptcy product. fuel contract, providing 100,000 barrels for one year at the exible and market-based prices that costs competitive with fossil fuel-generation for the customer needed. the rst time. This cost competitiveness, together LNG. Enron is establishing a liqueed natural with government policies supporting renewable gas (LNG) network to create merchant LNG opportu- energy in most key markets and growing consumer nities and to bring more gas to areas of the world demand for green energy, have fueled 30 percent that need it. Our LNG-related assets in operation annual growth over the past ve years. and development in the Caribbean and the Middle With focused efforts in the world's three key East form part of this network. We source surplus wind power markets Germany, Spain and the LNG from the Middle East and Asia and currently United States Enron Wind completed 2000 with market it in the United States. revenues of approximately $460 million. Strong Forest Products. Enron has offered pulp, paper growth in both the United States and Europe will and lumber nancial products for several years, and account for a projected sales increase of approxi- now we are marketing physical volumes. In 2000 we mately 100 percent in 2001. acquired Garden State Paper Co., which gives us access to 210,000 tons of newsprint a year and four recycling centers in key markets. In January 2001 we agreed to purchase a newsprint mill and related assets in Canada. With this acquisition, Enron will become the seventh-largest producer of newsprint in North America, giving us the physical liquidity necessary to quickly grow this business. Enron's Clickpaper.com is powered by the EnronOnline platform but is totally customized for the forest products industry. It offers more than 100 nancial and physical products and features news and information tailored specically to forest products industry customers. Steel. In some markets, such as steel, we believe we can run our network with minimal assets. The industry currently suffers from overcapacity, but lacks a market mechanism to efciently market the surplus. We will offer a core commodity baseline product that can be indexed against almost all other products in this $330 billion industry. The outlook is promising we have transacted our first steel swap. This year we will build liquidity, improve pricing efficiency and gain contractual access to the physical product to provide comprehensive logistical support. Enron Global Assets Enron Global Assets manages and optimizes Enron's assets outside North America and Europe. Enron has a solid portfolio of asset-based businesses. However, with the higher returns available in the company's other businesses, we expect to divest some interests in a number of these assets. The remaining asset businesses will continue to focus on performance and complementing our marEnron Wind Corp. The economics of wind power are more promising than ever, creating signicant growth for Enron Wind. Technological advancements and lower costs associated with today's larger, more efcient wind turbines have made wind power ENRON ANNUAL REPORT 2000 ket-making and services businesses. 13 ENRON ENERGY SERVICES Enron Energy Services is the retail arm of Enron, serving business users of energy in commercial and versatility to provide a comprehensive solution to address uncertain, rapidly changing markets. Customer Relationships The core of Enron's retail business is developing industrial sectors. Our comprehensive energy out- long-term, multi-year relationships with our cus- sourcing product has proven an exceptionally tomers. The value at contract signing is only a part effective way for companies to reduce their costs, of the potential value that can be realized when manage risks of energy price volatility, improve satised customers seek to add additional Enron their energy infrastructure and focus resources services to their contracts. on their core businesses. Enron Energy Services recorded its rst prof- Of the $16.1 billion in total contract value signed in 2000, approximately $3 billion came from itable quarter as expected at the end of 1999, and expansions of existing contract relationships. For continued to grow rapidly through 2000, with example, in 1998, we signed a ve-year, $250 million increasing prots in all four quarters of 2000 and contract with World Color Press, which later merged aggregate recurring income before interest and with Quebecor Printing. In 2000, based on Quebecor taxes (IBIT) of $103 million for the year. The value of our contracts in 2000 totaled more than $16 billion, increasing Enron Energy Services' cumulative contract value to more than $30 billion since late 1997. This success reects growing acceptance of Enron's energy outsourcing product acceptance Measuring Performance that has meant an increasing rate of new contract- Companies can't improve what they can't measure. ing. Our retail energy success in 2000 also reects That's why Enron has developed a state-of-the-art our strong emphasis on contract execution and Performance Measurement Center (PMC) that moni- implementation and on excellence in customer tors, predicts and changes customer energy consump- service. Additionally, 2000 was marked by increased tion. Powered by a exible Internet-based link that activity in Europe an untapped market for connects customers' building controls to the PMC, energy outsourcing. and operated by a team of energy management pro- We are positioned to dramatically increase our protability in 2001. Retail energy earnings will be fessionals, the PMC is a unique resource, enabling genuinely proactive energy management. fueled by the rapid growth of our U.S. and European businesses and the strong execution and extension of existing contracts. Market Volatility The U.S. energy sector experienced unprecedented challenge and opportunity in 2000. In national terms, steady movement toward a functioning deregulated energy marketplace continues. More than half the country's population is scheduled to be able to choose their electricity supplier by World's satisfaction, the relationship was extended 2004. The ongoing energy crisis in California has and expanded to a 10-year, $1 billion agreement focused everyone's attention on the complexities including not only commodity supply, but also over- of incomplete deregulation, the risks of unreliable all energy management, including the design and supply and the costs of unmanaged energy demand. implementation of improvements in energy asset Enron provides commercial and industrial energy infrastructure in more than 60 facilities operated customers with the solutions they need, bringing by Quebecor World. reliability and price-risk management to a market otherwise fraught with uncertainty. ENRON ANNUAL REPORT 2000 The volatility of energy prices across the coun- 14 We value our long-term customer relationships, and the health of these relationships can't be left to luck, instinct or vague impressions. Our try has heightened the value of energy management Customer Satisfaction Program continually cap- and increased the demand for retail services. With tures our performance against expectations and our series of capabilities energy commodity and benchmarks those results. Further, it is designed price risk management capabilities, energy asset to ensure identication and resolution including management and capital solutions we remain prompt escalation to the executive level if needed the only rm with the skill, experience, depth and of any issue that might arise. Medium-size Business Market In the rst three years of U.S. operation, Enron Energy Services has been squarely focused on Fortune 1000 customers. But U.K.-based Enron Direct has successfully penetrated the immense medium-size business market, proving that we can sell energy to smaller enterprises in a truly open retail market. Since gaining regulatory approval in February 1999 through the end of 2000, Enron Direct has acquired more than 130,000 gas and power customers, and continues to grow at a substantial rate. The protability of these smaller accounts comes from Enron's long-term price risk management capability and Enron Direct's low-cost sales channels. Our high expectations for medium-size businesses are SENSIBLE INVESTMENTS PMC data identify opportunities to improve efficiency through equipment upgrades or through changes in processes, without adversely affecting a client's operations. The PMC's sophisticated modeling systems calculate a cost-benefit analysis for every potential investment in energy assets. This analysis includes a real-time correlation with the price of commodities to help companies not only make decisions but also to show them that there are decisions to be made. REDUCING PEAK DEMAND The cost of energy varies widely over the course of the day. The PMC uses real-time pricing information, and the stream of data coming from the customer site, to automatically and remotely reduce customers' low-priority energy use when the price of energy is highest ensuring that the customer gets maximum benet for every dollar spent on energy. DIAGNOSTIC MEASUREMENTS Most energy users don't realize something is wrong until the energy bill comes, and then it is much too late. But with the Enron PMC, real-time monitoring means that unusual changes in energy demand are tracked instantaneously, enabling Enron and the customer to identify and address problems before energy costs get out of hand. MINIMIZING DOWNTIME When repairs are needed, PMC personnel can help control the costs of vendor calls and on-site repairs through diagnostic data, and through best-practice management of a network of thousands of service providers. We work with service providers to categorize and analyze the actual cost of repairs. With Enron's expertise and scale, we can improve response times, reduce downtime and cut the cost of repairs and maintenance. reected by the rapid expansion of the European operation. Enron Directo already is active in Madrid, Spain, and similar businesses will be launched in other countries as well. It is our strong belief that Enron is uniquely positioned to benet both in the United States and Europe from the world's steady shift toward deregulated energy markets. We will continue to provide sensible market solutions for the effective managedynamic global retail business to drive company prots and sustain our reputation for innovation. ENRON ANNUAL REPORT 2000 ment of energy costs, and will continue to build a 15 ENRON BROADBAND SERVICES Enron Broadband Services made excellent progress executing its business plan in 2000. The bandwidth: dark ber, circuits, Internet Protocol (IP) services (transporting data packets according to IP standards) and storage capacity. To date we have transacted with 45 counter- build-out of Enron's 18,000-mile global fiber parties, including U.S. and international telecom- network is near completion, bandwidth interme- munications carriers, marketers and resellers and diation transaction volume is growing exponen- network service providers. In 2001 we expect to tially, and we are testing the first commercially deliver 570,000 terabytes as we grow both the sound premium content-on-demand service. breadth and the depth of our network and prod- Clearly, the Enron business model is working in ucts. We offer 32 bandwidth-related products on the broadband market. EnronOnline. Enron Broadband Services' goals are to: Deploy the most open, efcient global broadband network, the Enron Intelligent Network. Be the world's largest marketer of bandwidth and Enron's ability to provide bandwidth-ondemand at specied service levels and guaranteed delivery enables customers to access capacity without necessarily building, buying or expanding their network services. Be the world's largest provider of premium content delivery services. The Enron Intelligent Network We expect to be the first to provide broad- The Value of Bandwidth Intermediation band connectivity on a global basis through the Enron Intelligent Network (EIN). The EIN operates Enron's bandwidth intermediation business gives the as a \"network of networks,\" providing switching broadband industry new tools standard contracts, capacity between independent networks for low- liquidity, price transparency, connectivity, quick provi- cost scalability. We will continue to add pooling sioning and exibility to help industry participants points, which physically interconnect third parties' optimize assets and opportunities. networks and serve as reference points for bandwidth contracts. We currently operate 25 pooling points: 18 in the United States, and one each in Tokyo, London, Brussels, Amsterdam, Paris, Dusseldorf and Frankfurt. We expect to add at least 10 more in 2001. EIN's embedded intelligence, provided by Enron's proprietary Broadband Operating System (BOS), gives Enron unique, powerful multi-layer network control. The Enron BOS enables the EIN to: Dynamically provision bandwidth in real time. Control quality and access to the network for Internet Service Providers. Control and monitor applications as they stream own networks. Our bundled intermediation package over the network to ensure quality and avoid includes IP transport over land, under the sea, and congested routes. via satellite, at both xed and peak-usage terms. The BOS automates the transaction process For example, we are working with i2 Technologies, to connect with customers in six cities, including With the BOS, Enron has created the first scalable, four overseas. i2 has provisioned local-loop and fully integrated transaction processing platform long-haul capacity through Enron, and has low- for delivering bandwidth capacity. cost access to our network's equipment as if it Bandwidth Intermediation 16 a global provider of intelligent eBusiness solutions, provisioning, electronic billing and funds transfer. ENRON ANNUAL REPORT 2000 all the way from the initial request for capacity to were its own, but it now has the flexibility to We exceeded our expectations by delivering more than 72,000 terabytes of network services in 2000, demonstrating rapidly growing industry quickly add or discard capacity as day-to-day needs change. Data storage is a $30 billion-per-year business, acceptance of our exible services. We are creating and we know customers would like to purchase it the risk management building blocks to manage on an as-needed basis. In January 2001 we com- almost every element of the network in addition to pleted our rst data storage transactions with a leading provider of managed storage services, StorageNetworks, and a large retailer, Best Buy. Best Buy is buying off-site storage capacity to save money and gain exibility to accommodate changing storage needs. Content Services In April 2000 Enron signed an agreement with a U.S. video rental retailer to deliver movies over the Enron Intelligent Network. The trial service is up and running in Seattle; Portland, Ore.; Salt Lake City and New York City. Additionally, we have established relationships with other high-visibility content providers. Over the next two or three years, we plan to deliver on-demand not only movies but sports, educational content, games, music and CONNECTIVITY Enron is facilitating network connectivity by establishing pooling points in major metropolitan areas to switch bandwidth from one independent network to another. The pooling points help optimize network capacity by creating common physical delivery points and access to multiple locations. DYNAMIC PROVISIONING Enron's pooling point infrastructure allows companies to provision bandwidth quickly, eliminating the long lead times associated with circuit provisioning in the past. Enhanced connectivity and dynamic provisioning allow bandwidth users to take advantage of bandwidth market opportunities on short notice. NETWORK CONTROL Within Enron's Broadband Operating System (BOS) lie several unique capabilities that monitor switching activity between networks and control the provisioning of circuits. The Enron BOS can measure performance in real time at every layer of the network and ensure quality of service and delivery. SCALABILITY The Enron Intelligent Network (EIN) has extensive reach throughout the continental United States and connects to Europe and Asia. With its broad connectivity, the EIN is designed to scale without the cost of building additional infrastructure. Leveraging the EnronOnline platform provides additional reach and gives customers a new, easy option for their bandwidth needs. applications not yet imagined. Market Innovator Enron's innovative approach is as valuable in broadband as it is in energy. Our proven intermediation skills are creating new value for the industry and giving it a exibility it has never enjoyed. We have combined our business model with readily available technologies to deliver premium content over the Enron Intelligent Network in a very comparticular technology. We use the best solution at the best time for our customers, delivering the most reliable product at the lowest available cost in the marketplace. ENRON ANNUAL REPORT 2000 pelling commercial model. We are not tied to any 17 ENRON TRANSPORTATION SERVICES needs. Northern Natural Gas, for example, has used interruptible storage products that extend its capability to meet the growing demand for services to The Gas Pipeline Group formally changed its manage physical positions. Transwestern Pipeline name in September 2000 to Enron Transportation Company is offering shippers increased service Services to emphasize its ability to deliver innovative exibility by accessing third-party storage. Across solutions to its customers. These emerging services all pipelines, web-based applications have been augment our core competency: operating interstate introduced to allow customers to better manage pipelines safely and efciently. In 2000 we continued transactions and allow the pipelines to maximize our record of strong returns with consistent earnings their capacity offerings. Northern Natural Gas, and cash flow. Income before interest and taxes Transwestern Pipeline and Florida Gas Transmission reached $391 million, up from $380 million in 1999. began to sell available capacity on EnronOnline Cash flow from operations rose to $415 million in 2000 to give customers the convenience of in 2000 from $370 million in 1999. Throughput eCommerce transacting (see \"Purchasing Capacity remained relatively unchanged in 2000 at 9.13 Through EnronOnline\" on this page). Purchasing Capacity Through EnronOnline Enron Transportation Services has introduced several innovative customer services, including the use of EnronOnline. Northern Natural Gas, Transwestern Pipeline and PRICE DISCOVERY Knowledge helps customers make better decisions. Prices are fully transparent and instantly accessible, which allows buyers to know what their transportation costs will be when they are buying their gas. Florida Gas Transmission are selling available rm and interruptible capacity on OPTIMIZING THE ASSETS When a pipeline is not totally subscribed, EnronOnline lets the market know it is available. Pipelines also can auction off highly desirable capacity by accepting sealed bids. EnronOnline gives Enron Transportation Services the ability to put more product in front of more of its customers than ever before. EnronOnline in addition to selling capacity through traditional methods. Customers already using EnronOnline to transact gas can now arrange transportation at the same time. billion cubic feet per day (Bcf/d), compared to 9.18 Bcf/d the previous year. Together, our interstate pipelines span approxi- Northern Natural Gas Northern Natural Gas, Enron's largest pipeline, has approximately 16,500 miles of pipeline extendLakes, providing extensive access to major utilities demand. We connect to the major supply basins in and industrials in the upper Midwest. The pipeline the United States and Canada, and we continue to has market area peak capacity of 4.3 Bcf/d. It inter- increase capacity from those basins to our major connects with major pipelines, including Great markets. We have added 840 million cubic feet per Lakes, Transwestern, El Paso, Northern Border and day (MMcf/d) over the past two years, and nearly 1 18 ing from the Permian Basin in Texas to the Great Bcf/d. We transport 15 percent of U.S. natural gas ENRON ANNUAL REPORT 2000 mately 25,000 miles with a peak capacity of 9.8 Trailblazer, to offer excellent northern, southern Bcf/d is scheduled to enter service in the next three and western ow capabilities. Ninety-ve percent years. At the same time, our expense per MMcf/d of market area capacity is contracted through 2003. has declined by 26 percent from 1992 to today. Enron Transportation Services pipelines have Market area demand is expected to increase considerably with the development of approximately brought to market a variety of new products and 2,000 megawatts of gas-red generation over the services specifically tailored to address customer next three years. The pipeline has developed innova- tive and exible services to meet the transportation, under long-term agreements with an average term storage and balancing needs of power producers. It of six years. Its Project 2000 extension 34 miles of completed construction in October 2000 of a link to pipe from Manhattan, Illinois, to a point near North 445 megawatts of peaking power operated by Great Hayden, Indiana will provide 544 MMcf/d to River Energy in Minnesota. The link will transport up industrial markets in Indiana with a targeted in- to 120 MMcf/d of gas. service date of late 2001. Transwestern Pipeline Transwestern operates approximately 2,500 Late in 2000, Northern Border Pipeline settled its rate case, allowing it to switch from a cost-of- miles of pipe with 1.7 Bcf/d of peak capacity. With service tariff to a stated-rate tariff, which will provide pipeline originating in the San Juan, Permian and rate certainty to customers, increase competitiveness Anadarko Basins, Transwestern can move gas east and allow exibility in services provided. to Texas or west to the California border. To respond Northern Border Partners also owns interests to increased gas demand in California, Transwestern in gathering systems in the Powder River and Wind Pipeline added compressor facilities near Gallup, River Basins in Wyoming, and recently signed a letter New Mexico, in May 2000 to increase mainline of intent to purchase Bear Paw LLC, which has capacity by 140 MMcf/d to the California border. extensive gathering and processing operations in The new capacity is completely subscribed under the Powder River Basin and the Williston Basin. long-term contracts. In 2000 the pipeline also added The partnership also owns Black Mesa Pipeline, a several major interconnects to tap into growing 273-mile coal-water slurry pipeline running from markets east of California. Kayenta, Arizona, to Mohave Power Station in The Transwestern system is fully subscribed for western deliveries through December 2005 and for eastern deliveries through December 2002. The sys- Laughlin, Nevada. Portland General Electric The sale of Portland General Electric (PGE) to tem has the potential to quickly increase throughput Sierra Pacic Resources has been delayed by the capacity. An expansion project is expected to be led effect of recent events in California and Nevada on this year and completed in 2002. the buyer. In 2000 the Portland, Oregon-based elec- Florida Gas Transmission tricity utility performed well in the face of regional Florida Gas Transmission serves the rapidly wholesale price volatility. IBIT rose approximately 12 growing Florida peninsula and connects with 10 percent to $341 million. Total electricity sales reached major pipelines. It has maintained a competitive 38.4 million megawatt-hours (MWh) compared to position by staging expansions to keep pace with 31.9 million MWh in 1999. We will continue to drive demand as it grows. With current peak capacity performance while we pursue the utility's sale. of 1.5 Bcf/d, Florida Gas Transmission will add 600 MMcf/d of capacity when its Phase IV and Phase V expansions are completed. The Fort Myers extension, part of a 200 MMcf/d Phase IV expansion, went into service on October 1, 2000, and the remainder is scheduled to go into service in May 2001. The 400MMcf/d Phase V expansion has received preliminary approval from the Federal Energy Regulatory Commission and is expected to be completed in April 2002. The 4,795-mile pipeline currently is evaluating supply connections to two proposed liqueed natural gas facilities. Northern Border Partners, L.P. Northern Border Partners, L.P. is a publicly traded partnership (NYSE: NBP), of which Enron Partners owns a 70 percent general partner interest in Northern Border Pipeline, which extends 1,214 miles from the Canadian border in Montana to Illinois. The pipeline, a low-cost link between Canadian reserves and the Midwest market, has a peak capacity of 2.4 Bcf/d and is fully contracted ENRON ANNUAL REPORT 2000 is the largest general partner. Northern Border 19 FINANCIAL REVIEW CONTENTS 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 27 FINANCIAL RISK MANAGEMENT 29 INFORMATION REGARDING FORWARDLOOKING STATEMENTS 29 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING 30 REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS 31 ENRON CORP. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT ENRON ANNUAL REPORT 2000 31 ENRON CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 20 32 ENRON CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET 34 ENRON CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS 35 ENRON CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 36 ENRON CORP. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 52 SELECTED FINANCIAL AND CREDIT INFORMATION (UNAUDITED) The following review of the results of operations and nancial condition of Enron Corp. and its subsidiaries and affiliates (Enron) should be read in conjunction with the Consolidated Financial Statements. RESULTS OF OPERATIONS Consolidated Net Income Enron's net income for 2000 was $979 million compared to $893 million in 1999 and $703 million in 1998. Items impacting comparability are discussed in the respective segment results. Net income before items impacting comparability was $1,266 million, $957 million and $698 million, respectively, in 2000, 1999 and 1998. Enron's business is divided into five segments and Exploration and Production (Enron Oil & Gas Company) through August 16, 1999 (see Note 2 to the Consolidated Financial Statements). Enron's operating segments include: Transportation and Distribution. Transportation and Distribution consists of Enron Transportation Services and Portland General. Transportation Services includes Enron's interstate natural gas pipelines, primarily Northern Natural Gas Company (Northern), Transwestern Pipeline Company (Transwestern), Enron's 50% interest in Florida Gas Transmission Company (Florida Gas) and Enron's interests in Northern Border Partners, L.P. and EOTT Energy Partners, L.P. (EOTT). Wholesale Services. Wholesale Services includes Enron's wholesale businesses around the world. Wholesale Services operates in developed markets such as North America and Europe, as well as developing or newly deregulating markets including South America, India and Japan. Retail Energy Services. Enron, through its subsidiary Enron Energy Services, LLC (Energy Services), is extending its energy expertise and capabilities to end-use retail customers in the industrial and commercial business sectors to manage their energy requirements and reduce their total energy costs. Broadband Services. Enron's broadband services business (Broadband Services) provides customers with a single source for broadband services, including bandwidth intermediation and the delivery of premium content. Corporate and Other. Corporate and Other includes Enron's investment in Azurix Corp. (Azurix), which provides water and wastewater services, results of Enron Renewable Energy Corp. (EREC), which develops and constructs wind-generated power projects, and the operations of Enron's methanol and MTBE plants as well as overall corporate activities of Enron. Net income includes the following: (In millions) After-tax results before items impacting comparability 2000 1999 1998 $1,266 $ 957 $ 698 - - Items impacting comparability: (a) Charge to reect impairment by Azurix (326) Gain on TNPC, Inc. (The New Power Company), net 39 Gains on sales of subsidiary stock MTBE-related charges Cumulative effect of accounting changes Net income $ 979 345 (278) (131) $ 893 45 (40) $ 703 (a) Tax affected at 35%, except where a specic tax rate applied. Diluted earnings per share of common stock were as follows: 2000 Diluted earnings per share (a): After-tax results before items impacting comparability 1999 1998 $ 1.47 $ 1.18 $ 1.00 Items impacting comparability: Charge to reect impairment by Azurix (0.40) Gain on The New Power Company, net 0.05 Gains on sales of subsidiary stock MTBE-related charges Cumulative effect of accounting changes Diluted earnings per share $ 1.12 0.45 (0.36) (0.17) $ 1.10 0.07 (0.06) $ 1.01 (a) Restated to reect the two-for-one stock split effective August 13, 1999. Income Before Interest, Minority Interests and Income Taxes The following table presents income before interest, minority interests and income taxes (IBIT) for each of Enron's operating segments (see Note 20 to the Consolidated Financial Statements): (In millions) Transportation and Distribution: Transportation Services Portland General Wholesale Services Retail Energy Services Broadband Services Exploration and Production Corporate and Other Income before interest, minority interests and taxes 2000 1999 1998 $ 391 341 2,260 165 (60) (615) $ 380 305 1,317 (68) 65 (4) $ 351 286 968 (119) 128 (32) $2,482 $1,995 $1,582 Transportation and Distribution Transportation Services. The following table summarizes total volumes transported by each of Enron's interstate natural gas pipelines. 2000 Total volumes transported (BBtu/d) (a) Northern Natural Gas Transwestern Pipeline Florida Gas Transmission Northern Border Pipeline 1999 1998 3,529 1,657 1,501 2,443 3,820 1,462 1,495 2,405 4,098 1,608 1,324 1,770 (a) Billion British thermal units per day. Amounts reect 100% of each entity's throughput volumes. Florida Gas and