Enron Broadband Services Jeff Skilling President & CEO-Elect Enron Corp
Mar 26, 2015
Enron Broadband Services
Jeff Skilling
President & CEO-Elect
Enron Corp
2AA-Basic
1990 1995 2000
Enron Annual Sales
5.5B9.2B
100.8B
3AA-Basic
1990 1995 2000
2.7B9.6B
72.1B
Enron Market Value
4AA-Basic
Enron Price/Earnings Ratio
1990 1995 2001
16.4 17.4
46.4
*Continuing operations
5AA-Basic
Enron Assets
1990 1995 2000*
10B 12B
53B
* As of Q3 2000
6AA-Basic
200
1600
1400
1200
1000
800
600
400
-200
0
Dec 97Dec 96Dec 95Dec 94Dec 93Dec 92Dec 91Dec 90
Au
g 0
0
Enron Corp.
S&P 500
Pipeline Avg.
Utility Avg.
E&P Avg.
1,415%
383%
545%
281%
217%
Nov 00Dec 99Dec 98
Note: Calculated to December 31, 2000
Dec 00
Total Return to ShareholdersJan 1, 1990 to Dec 31, 2000
7AA-Basic
Enron
Energy
Services
Enron
Energy
Services
EnronTransportationServices
EnronTransportationServices
Enron
Wholesale
Services
Enron
Wholesale
Services
EnronBroadbandServices
EnronBroadbandServices
®
8AA-Basic
$0
$10
$20
$30
$40
$50
$60
$70
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
EnronOnline Introduced
Largest U.S.Gas Pipeline Company from HNG/InterNorth Merger
Leading European Wholesale Gas & Power Marketer
Leading U.S. Wholesale Power Marketer
Enron Broadband Services Established
Leading U.S. Wholesale Gas Marketer
World’s Largest Gas-Fired Power Plant Completed in the U.K.
Enron Energy Services Established
Enron Oil & Gas Company IPO
Market Capitalization (Billions)
9AA-Basic
Cost ofInteraction
Value ofSpecialization
$
Economic Trade-Off
Volume
10AA-Basic
BarterEconomy
Creation of Money
Evolution of Economic Trade-Off
1300’s
$
Volume
11AA-Basic
BarterEconomy
Creation of Money
Transportation &Communication
Evolution of Economic Trade-Off
1300’s
1800’s
$
Volume
12AA-Basic
BarterEconomy
Creation of Money
Transportation &Communication
Internet &InfoTech
Evolution of Economic Trade-Off
1300’s
1800’s
2000’s$
Volume
13AA-Basic
Types of Interaction Costs
Price ofSuccessfulEconomicTransactions
Legal &Regulatory
InformationSeeking &Gathering Inventory
Payments
Logistics
Credit
14AA-Basic
Cost of Interaction
Mining FinancialInstitutions
U.S.
India
30-40% 60-70% 55%
40-50%
Source: McKinsey
Business Structure
.95 1.10 1.20 1.10.20 .20 .20
TransformationCosts
InteractionCosts
TotalCosts
4.35 .60 4.95
FinishedProduct
15
.90
1.0 1.0 1.0
.85
.80
.90
3.45 3.00 6.45
FinishedProduct
Transformation
Interaction
TransformationCosts
InteractionCosts
TotalCosts
16AA-Basic
Cost of Teller Transaction
$1.50
$0.30
$0.01
1985(Bank)
1995(ATM)
2000(Internet)
17AA-Basic
Length of Time to Provision Bandwidth
6-8 months
2-3 months
< 1 second
1995 Today NextYear
18AA-Basic
Length of Time to Execute a Long-Term Gas Contract
9 months
2 weeks
< 1 second
2-3 years
1981 1989 1997 2000
.95 1.10 1.20 1.10.20 .20 .20
TransformationCosts
InteractionCosts
TotalCosts
4.35 .60 4.95
FinishedProduct
19
.90
.85
.80
.90
3.45 3.00 6.45
FinishedProduct
Transformation
Interaction
Change in Economics of Business Structure
1.0 1.0 1.0
19
.10 .10 .10
3.45 .30 3.75
TransformationCosts
InteractionCosts
TotalCosts
Where’s the Opportunity?
20
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
Where’s the Opportunity?
21
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
NotCostCompetitive
Where’s the Opportunity?
22
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
• Commoditized• Overcapitalized• GlobalizedCan’t make compensatoryreturn in traditional assetbusiness
Where’s the Opportunity?
23
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
Creating low cost, dependablemarket interfaces
• Market making• Logistics• Back office• Trade finance
Where’s the Opportunity?
24
.95 1.10 1.20 1.10.20 .20 .20
.90
.85
.80
.90
.10 .10 .10
“Virtual” Integration
Providing packaged turnkeysolutions for customers
• Complex structures• Differentiation• Customization
25AA-Basic
Enron Opportunity
TraditionalBusiness Model
NewBusiness Model
• Asset intensive• Vertically integrated• Slow moving and rigid• Hierarchical
• Brain power intensive• Networked• Oriented toward “real
options”• Fast moving• Entrepreneurial
26AA-Basic
Enron–Accelerating Market Development
1985 1990 1995 20001991 1992 1993 1994 1996 1997 1998 19991986 1987 1988 1989
Commodity
Product
Financial
Australian Power & Gas
Bandwidth
Metals
NaturalGas
Electricity
UK Power & Gas
Financials (interest rate, equity)
Emissions
Plastics
Scandinavian Power & Gas
Weather
Coal
Pulp & Paper
Currencies
* Lighter shading indicates a developing market Darker shading indicates a mature market
27AA-Basic
EnronOnline – Changing the Way Commodities Are Traded
Free, Reliable Transaction System with Enron as Principal
Transactions per day
28AA-Basic
Enron Efficiency Gains
Marginal Cost Per Transaction
(Indexed)
25
100
Transactions Per Market Maker
1999 2000
672
3,084
1999 2000
®