SECTION: FINANCIAL NEWS

DISTRIBUTION: TO BUSINESS AND ENERGY EDITORS

LENGTH: 3500 words

HEADLINE: Enron Reports Recurring Third Quarter Earnings of $ 0.43 Per Diluted Share; Reports Non-Recurring Charges of $ 1.01 Billion After-Tax; Reaffirms Recurring Earnings Estimates of $ 1.80 for 2001 and $ 2.15 for 2002; and Expands Financial Reporting

DATELINE: HOUSTON, Oct. 16 (See http://www.enron.com/corp/pressroom/releases/2001/ene/68-3QEarningsLtr.html)

BODY:
Enron Corp. (NYSE: ENE) announced today recurring earnings per diluted share of $ 0.43 for the third quarter of 2001, compared to $ 0.34 a year ago.  Total recurring net income increased to $ 393 million, versus $ 292 million a year ago. 
    "Our 26 percent increase in recurring earnings per diluted share shows the very strong results of our core wholesale and retail energy businesses and our natural gas pipelines," said Kenneth L. Lay, Enron chairman and CEO.  "The continued excellent prospects in these businesses and Enron's leading market position make us very confident in our strong earnings outlook." 
    Non-recurring charges totaling $ 1.01 billion after-tax, or $ (1.11) loss per diluted share, were recognized for the third quarter of 2001.  The total net loss for the quarter, including non-recurring items, was $ (618) million, or $ (0.84) per diluted share. 
    "After a thorough review of our businesses, we have decided to take these charges to clear away issues that have clouded the performance and earnings potential of our core energy businesses," said Lay. 
    Enron also reaffirmed today it is on track to continue strong earnings growth and achieve its previously stated targets of recurring earnings per diluted share of $ 0.45 for the fourth quarter 2001, $ 1.80 for 2001 and $ 2.15 for 2002.

                          PERFORMANCE SUMMARY 
    Enron has recently expanded the reporting of its financial results by both providing additional segments and expanding financial and operating information in the attached tables.  Enron's business segments are as follows:

-- Wholesale Services 
       -- Americas 
       -- Europe and Other Commodity Markets

-- Retail Services

-- Transportation and Distribution 
       -- Natural Gas Pipelines 
       -- Portland General 
       -- Global Assets -- Broadband Services

-- Corporate and Other

Wholesale Services:  Total income before interest, minority interests and taxes (IBIT) increased 28 percent to $ 754 million in the third quarter of 2001, compared to $ 589 million in the third quarter of last year.  Total wholesale physical volumes increased 65 percent to 88.2 trillion British thermal units equivalent per day (Tbtue/d) in the recent quarter. 
    Americas -- This segment consists of Enron's gas and power market-making operations and merchant energy activities in North and South America.  IBIT from this segment grew 31 percent to $ 701 million in the recent quarter from $ 536 million a year ago, driven by strong results from the North America natural gas and power businesses.  Natural gas volumes increased 6 percent to 26.7 Tbtu/d, and power volumes increased 77 percent to 290 million megawatt-hours (MWh). 
    Europe and Other Commodity Markets -- This segment includes Enron's European gas and power operations and Enron's other commodity businesses, such as metals, coal, crude and liquids, weather, forest products and steel.  For the third quarter of 2001, IBIT for the segment remained unchanged at $ 53 million as compared to last year.  Although physical volumes increased for each commodity in the segment, the low level of volatility in the gas and power markets caused profitability to remain flat. 
    Retail Services:  Enron's Retail Services product offerings include pricing and delivery of natural gas and power, as well as demand side management services to minimize energy costs for business consumers in North America and Europe.  In the third quarter of 2001, Retail Services generated IBIT of $ 71 million, compared to $ 27 million a year ago.  Retail Services continues to successfully penetrate markets with standard, scalable products to reduce consumers' total energy costs.  Enron recently added new business with large consumers, including Wal-Mart, Northrop Grumman, the City of Chicago, Equity Office Properties and Wendy's in the U.S. and Sainsbury and Guinness Brewery in the U.K.  To date in 2001, Enron has completed over 50 transactions with large consumers.  Enron is also successfully extending its retail energy products to small business customers, completing over 95,000 transactions in the first nine months of this year. 
    Transportation and Distribution:  The Transportation and Distribution group includes Natural Gas Pipelines, Portland General and Global Assets. 
    Natural Gas Pipelines -- This segment provided $ 85 million of IBIT in the current quarter, up slightly from the same quarter last year.  Pipeline expansions are underway in high growth areas and include a 428 million cubic feet per day (MMcf/d) expansion by Florida Gas Transmission and a 150 MMcf/d expansion by Transwestern. 
    Portland General -- Portland General Electric, an electric utility in the northwestern U.S., reported an IBIT loss of $ (17) million compared to IBIT of $ 74 million in the same quarter a year ago.  Portland General entered into power contracts in prior periods to ensure adequate supply for the recent quarter at prices that were significantly higher than actual settled prices during the third quarter of 2001.  Although the rate mechanism in place anticipated and substantially mitigated the effect of the higher purchased power costs, only the amount in excess of a defined baseline was recoverable from ratepayers.  Increased power cost recovery was incorporated into Portland General's new fifteen-month rate structure, which became effective October 1, 2001 and included an average 40 percent rate increase. 
    Last week, Enron announced a definitive agreement to sell Portland General to Northwest Natural Gas for approximately $ 1.9 billion and the assumption of approximately $ 1.1 billion in Portland General debt.  The proposed transaction, which is subject to customary regulatory approvals, is expected to close by late 2002. 
    Global Assets -- The Global Assets segment includes assets not part of Enron's wholesale or retail energy operations.  Major assets included in this segment are Elektro, an electric utility in Brazil; Dabhol, a power plant in India; TGS, a natural gas pipeline in Argentina; Azurix; and the Enron Wind operations.  For the third quarter of 2001, IBIT for the segment remained unchanged at $ 19 million as compared to last year. 
    Broadband Services:  Enron makes markets for bandwidth, IP and storage products and bundles such products for comprehensive network management services.  IBIT losses were $ (80) million in the current quarter compared to a $ (20) million loss in the third quarter of last year.  This quarter's results include significantly lower investment-related income and lower operating costs. 
    Corporate and Other:  Corporate and Other reported an IBIT loss of $ (59) million for the quarter compared to $ (106) million loss a year ago. Corporate and Other represents the unallocated portion of expenses related to general corporate functions.

                          NON-RECURRING ITEMS 
    Enron's results in the third quarter of 2001 include after-tax non-recurring charges of $ 1.01 billion, or $ (1.11) per diluted share, consisting of:

-- $ 287 million related to asset impairments recorded by Azurix Corp. 
       These impairments primarily reflect Azurix's planned disposition of its 
       North American and certain South American service-related businesses;

-- $ 180 million associated with the restructuring of Broadband Services, 
       including severance costs, loss on the sale of inventory and an 
       impairment to reflect the reduced value of Enron's content services 
       business; and

-- $ 544 million related to losses associated with certain investments, 
       principally Enron's interest in The New Power Company, broadband and 
       technology investments, and early termination during the third quarter 
       of certain structured finance arrangements with a previously disclosed 
       entity.

                           OTHER INFORMATION 
    A conference call with Enron management regarding third quarter results will be conducted live today at 10:00 a.m. EDT and may be accessed through the Investor Relations page at www.enron.com .

Enron is one of the world's leading energy, commodities and service companies.  The company makes markets in electricity and natural gas, delivers energy and other physical commodities, and provides financial and risk management services to customers around the world.  The stock is traded under the ticker symbol "ENE."

    Please see attached tables for additional financial information.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by Enron or on its behalf.  These forward-looking statements are not historical facts, but reflect Enron's current expectations, estimates and projections.  All statements contained in the press release which address future operating performance, events or developments that are expected to occur in the future (including statements relating to earnings expectations, sales of assets, or statements expressing general optimism about future operating results) are forward-looking statements.  Although Enron believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved.  Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include success in marketing natural gas and power to wholesale customers; the ability to penetrate new retail natural gas and electricity markets, including the energy outsource market, in the United States and Europe; the timing, extent and market effects of deregulation of energy markets in the United States and in foreign jurisdictions; development of Enron's broadband network and customer demand for intermediation and content services; political developments in foreign countries; receipt of regulatory approvals and satisfaction of customary closing conditions to the sale of Portland General; and conditions of the capital markets and equity markets during the periods covered by the forward-looking statements.

                              ENRON CORP. 
                          Table 1 - Earnings Summary 
               (Unaudited: in millions, except per share data)

                                        Quarter Ended    Nine Months Ended 
                                           September 30,      September 30, 
                                           2001     2000      2001     2000

Revenues                              $ 47,613  $ 30,007  $ 139,692  $ 60,038 
    Cost of Sales                          45,713   28,280   133,735   55,480 
    Operating Expenses                        910      929     3,106    2,705 
    Depreciation and Amortization             229      256       682      620 
    Equity in Earnings (Losses)               (51)      46       (67)     365 
    Other, net                                 63       78       259      301 
      IBIT                                $    773  $    666  $   2,361  $ 1,899 
    Interest and Related Charges, net         201      247       617      604 
    Dividends on Preferred Securities          21       20        57       59 
    Minority Interests                         33       35       103      109 
    Income Tax Expense                        125       72       381      208 
      Net Income Excluding 
      Non-recurring Items                $    393  $    292  $   1,203  $    919

Non-recurring Items Relating to: 
      Azurix                                 (287)      --      (287)      -- 
      Broadband Services                     (180)      --      (180)      -- 
      Investing Activities (a)               (544)      --      (544)      -- 
      Cumulative Effect of Accounting 
       Changes                                 --       --        19       -- 
      Net Income (Loss)                   $   (618) $    292  $     211  $    919 
    Preferred Dividends (b): 
      Second Preferred Stock                    4        5        12       13 
      Series B Preferred Stock                 16       16        49       49 
      Earnings (Loss) on Common Stock     $   (638) $    271  $     150  $    857

Earnings (Loss) Per Share (Diluted):

EPS Excluding Non-recurring Charges     $ 0.43    $ 0.34     $ 1.35    $ 1.07 
    Non-recurring Items                     (1.11)      --     (1.11)      -- 
    Effect of Anti-dilution                 (0.16)      --     (0.05)      -- 
      EPS (Diluted) (c)                    $ (0.84)   $ 0.34     $ 0.19    $ 1.07

Average Shares Outstanding (Diluted) (c)  761      870       810      861

(a)  The amount also reflects costs associated with Enron's termination 
         of certain structured finance arrangements with a previously 
         disclosed entity.

(b)  The Second Preferred Stock and the Series B Preferred Stock are both 
         anti-dilutive in the third quarter of 2001 and the nine-months ended 
         September 30, 2001.  The Second Preferred Stock and the Series B 
         Preferred Stock are both dilutive in the third quarter of 2000 and 
         the nine-months ended September 2000.

(c)  The conversions of preferred shares and equity instruments to common 
         shares for purposes of the diluted earnings per share calculation 
         were anti-dilutive.  However, in order to present comparable results, 
         per share amounts for each earnings component were calculated after 
         considering conversion.  The total average number of shares used to 
         calculate each component of earnings per share was 913 million and 
         892 million for the third quarter and nine months of 2001, 
         respectively.

                              ENRON CORP. 
             Table 2a - Business Highlights - Wholesale Services 
                      (Unaudited:  dollars in millions)

                                           Quarter Ended  Nine Months Ended 
                                              September 30,     September 30, 
    Wholesale Services                        2001     2000     2001     2000

Total Wholesale Services 
      IBIT                                 $    754  $    589  $ 2,180  $ 1,336 
      Total Physical Volumes (Bbtue/d) (a)  88,220   53,459   77,441   47,362

Americas 
      Revenues                             $ 29,519  $ 21,655  $ 85,888  $ 41,467 
      Cost of Sales                         28,554   20,987   83,130   39,812 
      Operating Expenses                       142      106      624      746 
      Depreciation and Amortization             53       24      132       73 
      Equity in Earnings (Losses)              (67)      21     (127)     232 
      Other, net                                (2)     (23)      (4)       3 
       IBIT                                $    701  $    536  $ 1,871  $ 1,071

Physical Volumes (Bbtue/d): 
      Gas                                   26,659   25,253   26,787   23,152 
      Power                                 31,507   17,777   25,642   14,287 
        Total                               58,166   43,030   52,429   37,439

   Power (Thousand MWh)                 289,853  163,556  700,007  391,459

Europe and Other Commodity Markets 
      Revenues                             $ 16,447  $ 7,168  $ 48,520  $ 15,161 
      Cost of Sales                         16,139    6,917   47,501   14,475 
      Operating Expenses                       217      194      682      400 
      Depreciation and Amortization             22       16       66       51 
      Equity in Earnings (Losses)               (6)      (9)      10        3 
      Other, net                               (10)      21       28       27 
       IBIT                                $     53  $     53  $    309  $    265

Physical Volumes (Bbtue/d): 
      Gas                                    9,338    3,595    8,438    3,192 
      Power                                 11,306    1,080    7,798    1,086 
        Total                               20,644    4,675   16,236    4,278

   Power (Thousand MWh)                 104,006    9,932  212,906   29,777

Physical Volumes: 
      Crude Oil and Liquids (MM Bbl)           157      105      434      300 
      Coal (thousand tons)                  24,953    9,942   70,392   28,643 
      Weather (notional value $ MM)             304      164      779      512 
      LNG (Bbtue)                            8,874       --   17,664       -- 
      Metals (thousand tons)                 2,362      969    6,904    2,946 
      Forest Products (thousand tons)          899      101    2,094      182 
      Steel (thousand tons)                    648       --      887       --

(a)  This amount Includes total physical gas, power and crude oil and 
         liquids for Americas and Europe and Other Commodity Markets.

                              ENRON CORP. 
       Table 2b - Business Highlights - Transportation and Distribution 
                      (Unaudited:  dollars in millions)

                                         Quarter Ended  Nine Months Ended 
                                            September 30,     September 30, 
    Transportation and Distribution         2001     2000     2001     2000

Total Transportation and Distribution 
      IBIT                                $    87   $   176   $   415   $   654

   Natural Gas Pipelines 
        Net Revenues                      $   136   $   132   $   500   $   499 
        Operating Expenses                    75       74      236      232 
        Depreciation and Amortization         17       17       51       50 
        Equity in Earnings                    19       28       49       45 
        Other, net                            22       14       33       27 
         IBIT                             $    85   $    83   $   295   $   289

Total Volumes Transported (BBtu/d) (a) 
      Northern Natural Gas                 2,770    3,009    3,139    3,464 
      Transwestern Pipeline                1,823    1,746    1,847    1,639 
      Florida Gas Transmission             1,927    1,649    1,578    1,601 
      Northern Border Pipeline             2,295    2,420    2,362    2,438

Portland General 
      Revenues                            $   905   $   729   $ 2,503   $ 1,557 
      Purchased Power and Fuel               823      522    2,029      976 
      Operating Expenses                      68       85      229      239 
      Depreciation and Amortization           32       59      138      152 
      Other, net                               1       11        1       51 
       IBIT                               $   (17)  $    74   $   108   $   241

Electricity Sales (Thousand MWh) 
      Residential                          1,432    1,444    5,151    5,285 
      Commercial                           1,870    1,964    5,475    5,605 
      Industrial                           1,207    1,249    3,546    3,653 
        Total Retail                       4,509    4,657   14,172   14,543 
      Wholesale                            4,062    5,703    9,836   14,893 
        Total Sales                        8,571   10,360   24,008   29,436

Global Assets 
      Revenues                            $   424   $   382   $ 1,134   $ 1,125 
      Cost of Sales                          286      221      719      646 
      Operating Expenses                     107      132      352      370 
      Depreciation and Amortization           46       50      134      134 
      Equity in Earnings                      25       23       48      120 
      Other, net                               9       17       35       29 
       IBIT                               $    19   $    19   $    12   $   124

(a)  Reflects 100% of each entity's throughput volumes.

                              ENRON CORP. 
     Table 2c - Business Highlights - Retail Services, Broadband Services 
                           and Corporate and Other 
                      (Unaudited:  dollars in millions)

                                        Quarter Ended    Nine Months Ended 
                                           September 30,      September 30, 
                                           2001    2000       2001      2000

Retail Services 
      Revenues (a)                      $    501  $    535    $ 1,751    $ 1,269 
      Cost of Sales                         261      406     1,084       932 
      Operating Expenses                    142      115       474       284 
      Depreciation and Amortization          10       10        29        28 
      Equity in Earnings (Losses)           (17)     (15)      (45)      (38) 
      Other, net                             --       38        52        92 
       IBIT (a)                         $     71  $     27    $   171    $    79

Broadband Services 
      Revenues                          $      4  $    162    $   103    $   345 
      Cost of Sales                           8        8        59        64 
      Operating Expenses                     58      123       213       249 
      Depreciation and Amortization          19       52        49        63 
      Equity in Earnings (Losses)            (4)      (1)       (1)        1 
      Other, net                              5        2         2         2 
       IBIT                             $    (80) $    (20)   $ (217)   $   (28)

Corporate and Other 
     IBIT                               $    (59) $   (106)   $ (188)   $ (141)

(a)  Beginning in 2001, risk management activities associated with 
         Enron's North American retail customers are managed by Wholesale 
         Services.  Prior to the restatement, Retail Energy Services' reported 
         revenues and recurring IBIT were $ 1,476 million and $ 30 million, 
         respectively, for the third quarter of 2000 and $ 4,615 million and 
         $ 103 million, respectively, for the full year 2000.  Restated full 
         year 2000 revenues and recurring IBIT were $ 1,766 million and 
         $ 111 million, respectively.

CONTACT:  Mark Palmer 
              713-853-4738

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SOURCE Enron Corp.
 
CONTACT: Mark Palmer of Enron Corporation, +1-713-853-4738
 
URL: http://www.prnewswire.com

LOAD-DATE: October 17, 2001