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CNNFN

SHOW: MARKET CALL 09:30 AM Eastern Standard Time

October 16, 2001 Tuesday

Transcript # 101617cb.l05

SECTION: Business

LENGTH: 826 words

HEADLINE: Enron - Chmn. & CEO, CNNfn

GUESTS: Kenneth Lay

BYLINE: Rhonda Schaffler

BODY:
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: Enron (Company: Enron Corporation; Ticker: ENE; URL: http://.www.enron.com/) out with its third-quarter results this morning. The energy trader earning 43 cents a share, that takes out items. It was in-line with estimates. And 9 cents better than a year ago. Enron expects to earn 45 cents per share in Q4, that's slightly below Wall Street's forecast. It says earnings for this year and next per share earnings are on track to beat expectations. Shares of Enron have fallen from the highs in the 80s, bouncing off a low of 24, trading around the 30s. Joining us from Houston, Texas, to talk about the latest quarter and what's next, Kenneth Lay, chairman and CEO at Enron. Thanks for joining us. Good to have you back on CNNfn.

KENNETH LAY, CHMN. & CEO, ENRON: It's nice to be on CNNfn, thank you.

SCHAFFLER: I guess we should ask for an explanation first because there were some charges in this earnings report that Wall Street's still trying to get a handle on. Explain to us why the charges were made and how that's impacting most importantly, fourth quarter.

LAY: Well, first of all, as to the charges, they related primarily to the Zurich's water business, our broadband business, and the new power company where we have investments and assets and those businesses. And we try to clean all those up in this quarter since they seemed to be providing quite a bit of distraction to the real quality and strong growth of our core businesses.

SCHAFFLER: And let's talk about the core businesses going forward, because for so long we talked about the broadband component of the business. What's key now? what's most important? what's driving future growth?

LAY: Well, primarily our wholesale business, which is growing very strong, in this most recent quarter, our physical volume deliveries in our wholesale business was up about 65 percent. Our earnings were up about 35 percent. Strong growth in our retail business we're - in fact, we're the only company providing nationwide energy services. And again, that had a strong quarter also, adding about 12,000 new customers. We currently have about 40,000 facilities where we manage the energy activity for these customers and about 4 billion square feet of space. And then, of course, finally, our pipeline group, which is always just really strong and can get cash flow and earnings.

SCHAFFLER: You have not held your position for that long. There has been a change at Enron that occurred over the summer. What's been the toughest challenge for you as you sit down and try to figure out which way the company's heading next?

LAY: Well, Rhonda, as you know, I held this position for over 15 years before Jeff Skilling became CEO in February this year. So I'm basically just kind of reassuming that position when Jeff decided he had to leave for personal and family reasons. So I really have not been out of this chair very long. But I think the main thing is just to continue to grow these very solid, core businesses which in the third quarter this year provided about 35 percent increase in net income, to about $400 million and about 26 percent increase in earnings per share. And you're right, I mean, we reconfirmed our earnings for 19 - or 2001 at $1.80, which is what the Street expects, and 2.15 for next year. So it will be one more year of about 20 percent growth in earnings per share. And we've been doing that for the last three or four years.

SCHAFFLER: It's decent growth, especially at a time when the economy, the experts tell us, is in recession, any worries on your part?

LAY: Not really, I'd like to see a stronger economy. And certainly I believe the fiscal stimulus package you just discussed on your program is part of that. But by the same token, we find that we could continue to perform at very strong rates even in this somewhat slower economy that we experience right now.

SCHAFFLER: And very quickly, because we're almost out of time, any prediction on the energy markets going forward, it is a tough business when we talk about commodities?

LAY: Well, I think they'll probably continue to be volatile, just like they have been. Certainly the winter weather will determine in large part what happens to natural gas prices here over the next couple of months. Beyond that, of course, we've got a very soft economy worldwide, which is really impacting the oil markets. So I expect it will remain a little sluggish for a while unless we have a major supply interruption.

SCHAFFLER: Kenneth Lay, chairman and CEO at Enron, great to have you back on, good to see you again.

LAY: Thank you, Rhonda.

SCHAFFLER: Congrats on the quarter.

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LOAD-DATE: October 16, 2001