UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 Commission File Number 1-13159 ENRON CORP. (Exact name of registrant as specified in its charter) Oregon 47-0255140 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) Enron Building 1400 Smith Street Houston, Texas 77002 (Address of principal executive (Zip Code) offices) (713) 853-6161 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at October 31, 1997 Common Stock, No Par Value 298,960,846 shares 1 of 30
ENRON CORP. AND SUBSIDIARIES TABLE OF CONTENTS Page No. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Statement of Income - Three Months Ended September 30, 1997 and 1996 and Nine Months Ended September 30, 1997 and 1996 3 Consolidated Balance Sheet - September 30, 1997 and December 31, 1996 4 Consolidated Statement of Cash Flows - Nine Months Ended September 30, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 29 ITEM 6. Exhibits and Reports on Form 8-K 29
<TABLE> PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS ENRON CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (In Millions, Except Per Share Amounts) (Unaudited) <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 <S> <C> <C> <C> <C> Revenues $5,806 $3,225 $14,401 $9,240 Costs and Expenses Cost of gas, electricity and other products 4,927 2,472 12,270 7,124 Operating expenses 418 378 999 956 Oil and gas exploration expenses 22 24 68 62 Depreciation, depletion and amortization 169 116 418 346 Taxes, other than income taxes 45 29 114 98 Contract restructuring charge - - 675 - 5,581 3,019 14,544 8,586 Operating Income (Loss) 225 206 (143) 654 Other Income and Deductions Equity in earnings of unconsolidated subsidiaries 57 35 138 106 Other income, net 29 21 197 182 Income Before Interest, Minority Interests and Income Taxes 311 262 192 942 Interest and Related Charges, net 122 66 271 200 Dividends on Company-Obligated Preferred Securities of Subsidiaries 19 8 50 24 Minority Interests 22 17 58 55 Income Tax Expense (Benefit) 14 48 (123) 210 Net Income (Loss) 134 123 (64) 453 Preferred Stock Dividends 5 4 13 12 Earnings (Loss) on Common Stock $ 129 $ 119 $ (77) $ 441 Earnings (Loss) Per Share of Common Stock Primary $ 0.44 $ 0.48 $ (0.29) $ 1.79 Fully Diluted $ 0.42 $ 0.45 $ (0.29) $ 1.68 Average Number of Common Shares Used in Primary Computation 294 247 264 246 <FN> The accompanying notes are an integral part of these consolidated financial statements. </TABLE>
<TABLE> PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) ENRON CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In Millions) (Unaudited) <CAPTION> September 30, December 31, 1997 1996 <S> <C> <C> ASSETS Current Assets Cash and cash equivalents $ 194 $ 256 Trade receivables 1,755 1,841 Other receivables 823 414 Assets from price risk management activities 1,127 841 Other 865 627 Total Current Assets 4,764 3,979 Investments and Other Assets Investments in unconsolidated subsidiaries 2,305 1,701 Assets from price risk management activities 1,930 1,632 Goodwill 1,666 87 Other 3,116 1,626 Total Investments and Other Assets 9,017 5,046 Property, Plant and Equipment, at cost 13,476 11,348 Less accumulated depreciation, depletion and amortization 4,447 4,236 Net Property, Plant and Equipment 9,029 7,112 Total Assets $22,810 $16,137 <FN> The accompanying notes are an integral part of these consolidated financial statements. </TABLE>
<TABLE> PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) ENRON CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In Millions) (Unaudited) <CAPTION> September 30, December 31, 1997 1996 <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 2,036 $ 2,035 Liabilities from price risk management activities 839 1,029 Other 750 644 Total Current Liabilities 3,625 3,708 Long-Term Debt 6,931 3,349 Deferred Credits and Other Liabilities Deferred income taxes 2,270 2,290 Liabilities from price risk management activities 1,556 980 Other 1,629 740 Total 5,455 4,010 Minority Interests 767 755 Company-Obligated Preferred Securities of Subsidiaries 993 592 Shareholders' Equity Second preferred stock, cumulative, no par value and $1 par value, respectively 134 137 Common stock, no par value and $0.10 par value, respectively 3,755 26 Additional paid in capital - 1,870 Retained earnings 1,750 2,007 Cumulative foreign currency translation adjustment (129) (127) Common stock held in treasury (306) (30) Other (including Flexible Equity Trust) (165) (160) Total 5,039 3,723 Total Liabilities and Shareholders' Equity $22,810 $16,137 <FN> The accompanying notes are an integral part of these consolidated financial statements. </TABLE>
<TABLE> PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) ENRON CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In Millions) (Unaudited) <CAPTION> Nine Months Ended September 30, 1997 1996 <S> <C> <C> Cash Flows From Operating Activities Reconciliation of net income to net cash provided by (used in) operating activities Net income (loss) $ (64) $ 453 Depreciation, depletion and amortization 418 346 Oil and gas exploration expenses 68 62 Deferred income taxes (193) 163 Gain on sales of assets (129) (177) Changes in components of working capital (427) 111 Net assets from price risk management activities (198) (240) Amortization of production payment transaction (32) (33) Other, net (31) (199) Net Cash Provided by (Used in) Operating Activities (588) 486 Cash Flows From Investing Activities Proceeds from sale of investments and other assets 441 348 Capital expenditures (953) (518) Equity investments (692) (664) Business acquisitions, net of cash acquired (see Note 4) (77) - Other, net (215) (58) Net Cash Used in Investing Activities (1,496) (892) Cash Flows From Financing Activities Net increase in short-term borrowings 723 466 Issuance of long-term debt 2,059 172 Repayment of long-term debt (419) (142) Issuance of common stock - 102 Issuance of company-obligated preferred securities of subsidiaries 372 15 Dividends paid (255) (206) Net (acquisition) disposition of treasury stock (396) (19) Other, net (62) 8 Net Cash Provided by Financing Activities 2,022 396 Decrease in Cash and Cash Equivalents (62) (10) Cash and Cash Equivalents, Beginning of Period 256 115 Cash and Cash Equivalents, End of Period $ 194 $ 105 Changes in Components of Working Capital Receivables $ (95) $ 235 Payables (124) (86) Other (208) (38) $ (427) $ 111 <FN> The accompanying notes are an integral part of these consolidated financial statements. </TABLE>
PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) ENRON CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The consolidated financial statements included herein have been prepared by Enron Corp. (Enron) without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these statements reflect all adjustments (consisting only of normal recurring entries) which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods. Certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although Enron believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto incorporated into Enron's Annual Report on Form 10-K for the year ended December 31, 1996 (Form 10-K). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made in the 1996 amounts to conform with the 1997 presentation. "Enron" is used from time to time herein as a collective reference to Enron Corp. and its subsidiaries and affiliates. In material respects, the businesses of Enron are conducted by the subsidiaries and affiliates whose operations are managed by their respective officers. 2. PRICE RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS As more fully discussed in Notes 1 and 3 to the Consolidated Financial Statements included in Enron's Form 10-K, Enron engages in price risk management activities for trading and non-trading purposes. Derivative and other financial instruments utilized in connection with trading activities are accounted for using the mark-to-market method, under which changes in the market value of outstanding derivatives and other financial instruments are recognized as gains or losses in the period of change. Derivative and other financial instruments are also utilized for non-trading purposes to hedge the impact of market fluctuations on assets, liabilities, production and other contractual commitments. Hedge accounting is utilized in non-trading activities when there is a high degree of correlation between price movements in the derivative and the item designated as being hedged. In instances where the anticipated correlation of price movements does not occur, hedge accounting is terminated and future changes in the value of the derivative are recognized as gains or losses. If the hedged item is sold, the value of the derivative or other financial instrument is recognized in income. Gains and losses on derivative financial instruments used for hedging purposes are recognized in the Consolidated Income Statement in the same manner as the hedged item and are recognized in the Consolidated Balance Sheet as other assets or liabilities. The cash flow impact of derivative and other financial instruments used for trading and non-trading purposes is reflected as cash flows from operating activities in the Consolidated Statement of Cash Flows. 3. SUPPLEMENTAL CASH FLOW INFORMATION Net cash paid for income taxes for the first nine months of 1997 and 1996 was $43 million and $78 million, respectively. Cash paid for interest expense for the same periods, net of amounts capitalized, was $282 million and $205 million, respectively. 4. BUSINESS ACQUISITIONS Effective July 1, 1997, Enron merged with Portland General Corporation (PGC) in a stock-for-stock transaction. PGC, through its wholly-owned subsidiary Portland General Electric Company (PGE), serves retail electric customers in northwest Oregon as well as wholesale electricity customers throughout the western United States. Enron issued approximately 50.5 million common shares, valued at $36.88 per share, to shareholders of PGC in a ratio of 0.9825 shares of Enron common stock for each share of PGC common stock and assumed PGC's outstanding debt of approximately $1.1 billion. The acquisition of PGC by Enron has been accounted for using the purchase method of accounting as of the effective date of the merger. Accordingly, the purchase price has been allocated to the assets and liabilities acquired based upon the estimated fair value of those assets and liabilities as of the acquisition date. The excess of the aggregate purchase price over estimated fair value of the net assets acquired, approximately $1.5 billion, has been reflected as goodwill in the Consolidated Financial Statements and is being amortized on a straight-line basis over 40 years. Additionally, in January 1997, Enron acquired certain renewable energy businesses for $119 million in cash, Enron and subsidiary stock and notes. Assets acquired, liabilities assumed and consideration paid as a result of businesses acquired were as follows (in millions): <TABLE> <S> <C> Fair value of assets acquired, other than cash $ 3,494 Goodwill 1,588 Fair value of liabilities assumed (3,086) Common stock of Enron and subsidiary issued (1,919) Net cash paid $ 77 </TABLE> The allocation of purchase price related to the determination of reserves for certain contractual obligations, estimated environmental and other obligations and the effect of PGE's disaggregation plan filed with the Oregon Public Utilities Commission (OPUC), as discussed below, on the value of PGE's generating assets is preliminary pending completion of Enron's final studies and evaluations. The following summary presents unaudited pro forma consolidated results of operations as if the business acquisitions had occurred at the beginning of each period presented. The pro forma results are for illustrative purposes only and are not necessarily indicative of the operating results that would have occurred had the business acquisitions been consummated at that date, nor are they necessarily indicative of future operating results. <TABLE> <CAPTION> Nine Months Ended September 30, (In millions, except per share amounts) 1997 1996 <S> <C> <C> Revenues $15,078 $10,034 Income Before Interest, Minority Interests and Income Taxes 350 1,158 Net Income (Loss) (12) 529 Earnings (Loss) per Common Share (0.08) 1.75 </TABLE> PGE applies accounting standards that recognize the economic effects of regulation, and accordingly, has recorded regulatory assets and liabilities related to its operations. At September 30, 1997, net regulatory assets of PGE were $539 million. On September 2, 1997, pursuant to the OPUC's condition to its approval of the Enron/PGC merger, PGE submitted to the OPUC a Customer Choice Plan to open its service territory to competition. This plan will separate PGE's potentially competitive businesses, primarily generation, from its regulated businesses and allow customers to choose their energy provider. Enron is unable to predict what changes may be required by the OPUC for approval or when the OPUC will approve a Customer Choice Plan. Trojan Nuclear Plant. PGE is a 67.5% owner of Trojan Nuclear Plant (Trojan). In early 1993, PGE ceased commercial operation of the nuclear plant. Since plant closure, PGE has committed itself to a safe and economical transition toward a decommissioned plant. PGE has received approval of its decommissioning plan submitted to the Nuclear Regulatory Commission and Oregon Energy Facilities Siting Council. PGE's remaining cost to decommission and close Trojan of $343 million has been reflected in other non- current liabilities in the Consolidated Balance Sheet at September 30, 1997. In March 1995, the OPUC issued an order authorizing PGE to recover all of the estimated costs of decommissioning Trojan and 87% of its remaining investment in the plant. At September 30, 1997, PGE's regulatory asset related to recovery of Trojan costs from customers was $519 million. Amounts are to be collected over Trojan's original license period ending in 2011. The OPUC's order and the agency's authority to grant recovery of the Trojan investment under Oregon law are being challenged in state courts. Enron believes that the ultimate resolution of this matter will not have a materially adverse impact on its financial position or the results of operations. 5. SETTLEMENT OF CONTRACTUAL ISSUES On June 2, 1997, Enron announced the settlement of all contractual issues involving the J-Block contract in the U.K. North Sea with the J-Block producers, Phillips Petroleum Company United Kingdom Limited, BG Exploration & Production Limited and Agip (U. K.) Limited. As reported in the Form 10-K, the J-Block contracts are long-term gas contracts that an Enron subsidiary entered into in March 1993 with the J- Block producers. As a consideration for the settlement, Enron made a cash payment of approximately $440 million to the producers. Enron recorded a second quarter non- recurring contract restructuring charge of $675 million ($450 million after tax), primarily reflecting the impact of the amended contract under current market conditions. Under the terms of the settlement agreement, the former take-or-pay depletion contract was amended to become a firm long-term supply contract, and the fixed contract price for J-Block gas has been reduced to reflect current market conditions for long-term gas sales contracts in the U.K. gas market. The settlement concluded all J-Block litigation between Enron and the J-Block producers. 6. LITIGATION AND CONTINGENCIES On June 3, 1997, the London Commercial Court ruled in favor of the "CATS" parties in their dispute over the availability of the CATS (Central Area Transmission System) transportation facilities. As reported in the Form 10-K, the CATS parties sued Teesside Gas Transportation Limited (TGTL), an Enron subsidiary, and Enron (on the basis of its guaranty of TGTL's obligations under the transportation agreement between TGTL and the CATS parties) for allegedly failing to make quarterly "send-or-pay" payments under the transportation agreement. TGTL had refused to make these payments based upon its position that the transportation facilities were not available as required by the contract. The effect of the Court's decision is that TGTL has released withheld "send-or-pay" payments to the CATS parties in the amount of approximately 81 million Pounds Sterling, plus interest and costs. This judgment has no effect on the above referenced settlement of the J-Block gas sales agreements. Enron is appealing the decision of the London Commercial Court in the CATS litigation. Enron believes that the ultimate resolution of this matter will not have a materially adverse effect on its financial position or results of operations. As reported in the Form 10-K, in 1995 several parties (the Plaintiffs) filed suit in Harris County District Court in Houston, Texas against Intratex Gas Company (Intratex), Houston Pipe Line Company and Panhandle Gas Company (collectively, the Enron Defendants), each of which is a wholly-owned subsidiary of Enron. The Plaintiffs were either sellers or royalty owners under numerous gas purchase contracts with Intratex, many of which have terminated. Early in 1996, the case was severed by the Court into two matters to be tried (or otherwise resolved) separately. In the first matter, the Plaintiffs alleged that the Enron Defendants committed fraud and negligent misrepresentation in connection with the "Panhandle program," a special marketing program established in the early 1980s. This case was tried in October 1996 and resulted in a verdict for the Enron Defendants. In the second matter, the Plaintiffs allege that the Enron Defendants violated state regulatory requirements and certain gas purchase contracts by failing to take the Plaintiffs' gas ratably with other producers' gas at certain times between 1978 and 1988. The Court has certified a class action with respect to these ratability claims. The Enron Defendants have appealed the court's decision to certify a class action. The Enron Defendants deny the Plaintiffs' claims and have asserted various affirmative defenses, including the statute of limitations. The Enron Defendants believe that they have strong legal and factual defenses, and intend to vigorously contest the claims. Although no assurances can be given, Enron believes that the ultimate resolution of these matters will not have a materially adverse effect on its financial position or results of operations. The Environmental Protection Agency (EPA) has informed Enron that it is a potentially responsible party at the Decorah Former Manufactured Gas Plant Site (the Decorah Site) in Decorah, Iowa, pursuant to the provisions of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, also commonly known as Superfund). The manufactured gas plant in Decorah ceased operations in 1951. A predecessor company of Enron purchased the Decorah Site in 1963. Enron's predecessor did not operate the gas plant and sold the Decorah Site in 1965. The EPA alleges that hazardous substances were released to the environment during the period in which Enron's predecessor owned the site, and that Enron's predecessor assumed the liabilities of the company that operated the plant. Enron contests these allegations. The EPA is interested in determining whether materials from the plant have adversely affected subsurface soils at the Decorah Site. Enron has entered into a consent order with the EPA by which it has agreed, although admitting no liability, to replace affected topsoil and remove impacted subsurface soils in certain areas of the tract where the plant was formerly located. To date, the EPA has identified no other potentially responsible parties with respect to this site. Enron believes that expenses incurred in connection with this matter will not have a materially adverse effect on its financial position or results of operations.
PART I. FINANCIAL INFORMATION - (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ENRON CORP. AND SUBSIDIARIES RESULTS OF OPERATIONS Third Quarter 1997 vs. Third Quarter 1996 The following review of Enron's results of operations should be read in conjunction with the Consolidated Financial Statements. CONSOLIDATED NET INCOME Enron's third quarter 1997 net income increased to $134 million ($0.44 per share) as compared with $123 million ($0.48 per share) during the third quarter of 1996. Net income in the third quarter of 1997 benefited primarily from strong performances in the capital and trade resources and international operations and development segments. In addition, results from Portland General Electric are included in the 1997 period as a result of the merger effective July 1, 1997 (see Note 4 to the Consolidated Financial Statements). These increases were partially offset by decreased earnings from Gas Pipeline Group, losses in the retail energy services segment and increased interest expense, dividends on company-obligated preferred securities of subsidiaries and minority interests. 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 (in millions). <TABLE> <CAPTION> Third Quarter Increase 1997 1996 (Decrease) <S> <C> <C> <C> Regulated Operations: Gas Pipeline Group $ 71 $ 86 $(15) Portland General Electric 51 - 51 Ventures Group 9 12 (3) Capital and Trade Resources 98 74 24 Retail Energy Services (25) - (25) International Operations and Development 65 38 27 Exploration and Production 49 49 - Corporate and Other (7) 3 (10) Total $311 $262 $ 49 </TABLE> REGULATED OPERATIONS The regulated operations segment consists of Gas Pipeline Group, Portland General Electric and Ventures Group. Gas Pipeline Group includes Enron's interstate natural gas pipelines. The Portland General Electric group reflects results since the July 1, 1997 merger. Ventures Group includes construction of power, pipeline and liquids projects, management and operation of pipelines and clean fuels plants and Enron's investment in crude oil marketing and transportation operations conducted by EOTT Energy Partners, L.P. (EOTT). Gas Pipeline Group IBIT for Gas Pipeline Group decreased $15 million in the third quarter of 1997 as compared to the same period in 1996. <TABLE> <CAPTION> Third Quarter 1997 1996 (In Millions) <S> <C> <C> Net Revenues $143 $163 Operating Expenses 77 79 Depreciation & Amortization 16 17 Equity in Earnings 11 8 Other Income, Net 10 11 Income Before Interest & Taxes $ 71 $ 86 </TABLE> Revenues, net of cost of sales, of Gas Pipeline Group decreased $20 million (12%) during the third quarter of 1997 as compared to the same period in 1996, primarily due to the turnback of certain capacity at Transwestern Pipeline Company (Transwestern) beginning in November 1996. Portland General Electric Results for Portland General Electric have been included in Enron's Consolidated Financial Statements beginning July 1, 1997. For the third quarter of 1997, Portland General Electric realized IBIT of $51 million, as follows: <TABLE> <CAPTION> Third Quarter 1997 (In Millions) <S> <C> Revenues $386 Purchased Power & Fuel 221 Operating Expenses 69 Depreciation & Amortization 45 Income Before Interest & Taxes $ 51 </TABLE> Statistics for Portland General Electric (including amounts for the third quarter of 1996 for comparative purposes only) are as follows: <TABLE> <CAPTION> Third Quarter 1997 1996 <S> <C> <C> Electricity Sales (Thousand MWh) Residential 1,391 1,358 Commercial 1,831 1,741 Industrial 1,093 1,004 Total Retail 4,315 4,103 Wholesale 8,556 2,913 Total Electricity Sales 12,871 7,016 Resource Mix Coal 7% 13% Combustion Turbine 5 14 Hydro 4 6 Total Generation 16 33 Firm Purchases 77 54 Secondary Purchases 7 13 Total Resources 100% 100% Average Variable Power Cost (Millions/KWh) Generation $ 8.8 $ 7.4 Firm Purchases 19.2 14.7 Secondary Purchases 13.0 8.7 Total Average Variable Power Cost 17.7 12.9 Retail Customers (end of period, thousands) 681 661 </TABLE> Ventures Group IBIT for Ventures Group decreased $3 million in the third quarter of 1997 as compared to the same period in 1996. This decrease is primarily due to losses incurred by EOTT as a result of lower crude oil gathering margins compared to earnings reported in the third quarter of 1996. CAPITAL AND TRADE RESOURCES Enron Capital & Trade Resources (ECT) conducts energy commodity marketing, purchasing and financing activities and manages the portfolio of commitments arising from these activities. ECT's services can be categorized into three business lines: cash and physical, risk management and finance. The capital and trade resources segment's IBIT for the third quarter of 1997 increased $24 million from the same period in 1996. The following discussion analyzes the contributions to IBIT for each of these business lines. Statistics for ECT (including intercompany amounts) are as follows: <TABLE> <CAPTION> Third Quarter 1997 1996 <S> <C> <C> Physical Volumes (Bbtue/d)(1) Gas: United States 7,321 6,935 Canada 2,353 1,445 Europe 748 817 10,422 9,197 Transport Volumes 456 600 Total Gas Volumes 10,878 9,797 Oil 684 289 Liquids 858 1,187 Total Physical Volumes 12,420 11,273 Electricity Volumes Marketed (Thousand MWh) 72,257 18,713 Financial Settlements (Notional) (Bbtue/d) 51,953 35,965 Fixed Price Contract Market Activity (Tbtue)(2) 741 328 Production Payments and Financings Arranged (Millions) $ 364 $ 175 <FN> (1) Billion British thermal units equivalent per day. (2) Trillion British thermal units equivalent. </TABLE> Cash and physical operations include earnings from physical contracts of one year or less involving marketing and transportation of physical natural gas, liquids, electricity and other commodities, earnings from the management of ECT's contract portfolio and earnings related to the physical assets of ECT. Also reported in this business are the effects of actual settlements of ECT's long- term physical and notional quantity-based contracts. The cash and physical operations' earnings before overhead expenses were $10 million in the third quarter of 1997 and $19 million in the same period in 1996. This decline was primarily attributable to decreased earnings from North American commodity marketing and contract portfolio management. These declines were partially offset by increased earnings from the management of ECT's portfolio of European contracts and increased earnings from natural gas assets. The risk management operations consist of market origination activity on new long-term contracts (transactions greater than one year) and restructuring of existing long-term contracts including income from development activity related to such contracts. Third quarter earnings before overhead expenses from this unit were $72 million in 1997 compared to $40 million in 1996. Earnings from this unit increased primarily due to originations and related activities in the European market. ECT's finance operations provide capital to customers through various product offerings, and equity participation to third parties in various merchant banking investments. The finance operations had earnings before overhead expenses of $55 million in the third quarter of 1997 as compared to $42 million in 1996. The increase in earnings relates primarily to increased activity in the Canadian market. ECT's overhead expenses such as rent, systems expenses and other support group costs were $39 million in the third quarter of 1997 and $27 million in the same period in 1996. This increase is primarily due to continued expansion into new markets and an increased volume of transactions. RETAIL ENERGY SERVICES Enron's retail energy services are provided by Enron Energy Services (EES), which was formed in late 1996 to serve the U.S. retail natural gas and electricity markets. EES has participated successfully in selected natural gas and electric retail marketing pilots. EES reported a loss of $25 million in the third quarter of 1997 as a result of significant investments in the product development, regulatory and branding efforts of positioning EES to aggressively compete at the retail level. Enron expects that losses in the fourth quarter of 1997 will approximate those incurred in the third quarter. While no assurances can be given, Enron is evaluating the potential sale of up to 10% of its retail energy business in a private transaction in the fourth quarter of 1997, to offset these losses and in an effort to establish a valuation benchmark. An additional percentage may be sold in 1998. INTERNATIONAL OPERATIONS AND DEVELOPMENT Enron's international operations and development activities are conducted by Enron International (EI). Such activities include the development of power, pipeline and other energy infrastructure in emerging markets. EI also manages and operates the projects once commercial operation has been achieved. In addition, EI provides merchant and finance products and services for third parties, including equity participation in energy infrastructure projects. The segment includes results of Enron Global Power & Pipelines L.L.C. (EPP) and Enron Americas, Inc. The segment's third quarter IBIT increased $27 million in the 1997 period compared to the same period in 1996, as follows: <TABLE> <CAPTION> Third Quarter 1997 1996 (In Millions) <S> <C> <C> Net Revenues $ 79 $ 30 Operating Expenses 30 17 Equity in Earnings 16 19 Other Income, Net - 6 Income Before Interest, Minority Interest & Taxes $ 65 $ 38 </TABLE> The following discussion analyzes the significant changes in the segment's results. NET REVENUES Revenues, net of cost of sales, for the international operations and development segment increased $49 million to $79 million in the third quarter of 1997 as compared with 1996, primarily reflecting an increase in earnings from EI's portfolio of capital investments and increased international merchant activities. The increase also reflects management fees earned in connection with the operation of power plants, which previously had been reported in the capital and trade resources segment. COSTS AND EXPENSES Operating expenses increased $13 million (76%) in the third quarter of 1997 compared with the same period in 1996 due primarily to expenses related to the operation of power plants, which previously had been reported in the capital and trade resources segment. OTHER INCOME AND DEDUCTIONS Equity in earnings of unconsolidated subsidiaries declined by $3 million (16%) in the third quarter of 1997 compared to the same period in 1996 due primarily to the 1996 sale of a portion of Enron's interest in Teesside, partially offset by earnings from Enron's increased ownership of CIESA. EXPLORATION AND PRODUCTION Enron's exploration and production activities are conducted by Enron Oil & Gas Company (EOG). The exploration and production segment's IBIT was $49 million in both the third quarter of 1997 and the same period of 1996, as follows: <TABLE> <CAPTION> Third Quarter 1997 1996 (In Millions) <S> <C> <C> Net Revenues $193 $175 Operating Expenses 51 41 Oil & Gas Exploration Expenses 22 24 Depreciation, Depletion & Amortization 72 60 Other Income (Expense), Net 1 (1) Income Before Interest, Minority Interest & Taxes $ 49 $ 49 </TABLE> The following discussion analyzes the significant changes in the segment's results. Wellhead volume and price statistics (including intercompany amounts) are as follows: <TABLE> <CAPTION> Third Quarter 1997 1996 <S> <C> <C> Natural Gas Volumes (MMcf/d) (1) North America (2) 748 670 Trinidad 115 104 India 34 - Total 897 774 Average Natural Gas Prices ($/Mcf) North America (3) $1.91 $1.70 Trinidad 1.04 1.00 India 2.93 - Composite 1.84 1.60 Crude Oil/Condensate Volumes (MBbl/d) (1) North America 14.8 10.8 Trinidad 3.4 4.5 India 2.4 2.4 Total 20.6 17.7 Average Crude Oil/Condensate Prices ($/Bbl) North America $18.88 $21.29 Trinidad 18.91 19.73 India 18.21 19.60 Composite 18.81 20.67 <FN> (1) Million cubic feet per day or thousand barrels per day, as applicable. (2) Includes 48 MMcf per day for the three-month periods ended September 30, 1997 and 1996 delivered under the terms of a volumetric production payment agreement effective October 1, 1992, as amended. (3) Includes an average equivalent wellhead value of $1.14/Mcf and $0.91/Mcf for the three-month periods ended September 30, 1997 and 1996, respectively, for the volumes described in note (2), net of transportation costs. </TABLE> NET REVENUES The exploration and production segment's revenues, net of gas sold in connection with natural gas marketing, increased $18 million (10%) during the third quarter of 1997 as compared to the same period in 1996. Wellhead revenues increased 28% to $192 million in the third quarter of 1997 as compared to $150 million in the third quarter of 1996. This increase primarily reflects increased worldwide natural gas volumes and increased average wellhead prices for natural gas, partially offset by lower crude oil and condensate volumes in Trinidad and lower overall crude oil and condensate average wellhead prices compared to the third quarter of 1996. Other marketing activities associated with sales and purchases of natural gas, natural gas and crude oil price hedging and trading transactions and margins related to the volumetric production payment reduced net operating revenues by $2 million during the third quarter of 1997, compared to an $18 million increase in the third quarter of 1996. This decrease reflected revenue reductions of $5 million related to natural gas commodity price hedging activities in the third quarter of 1997 compared to a $17 million increase in the comparable prior period, as well as a decrease in margins due to higher costs of natural gas delivered in 1997. COSTS AND EXPENSES Operating expenses, including taxes other than income taxes, increased $10 million (24%) in the third quarter of 1997 as compared with the 1996 quarter, primarily due to continually expanded operations and increases in production activity. Depreciation, depletion and amortization (DD&A) expense increased $12 million (20%), primarily reflecting the increase in production volumes previously discussed. CORPORATE AND OTHER The corporate and other segment realized a loss of $7 million in the third quarter of 1997 compared to IBIT of $3 million in the third quarter of 1996. The third quarter 1996 results include an $11 million gain from the sale of 0.6 million EOG shares held by Enron. INTEREST AND RELATED CHARGES, NET Interest and related charges, net increased from $66 million in the third quarter of 1996 to $122 million in the third quarter of 1997, primarily due to the increase in debt, including the assumption of $1.1 billion of debt in connection with the PGC merger and debt incurred for payments made in connection with the J-Block settlement and CATS send-or-pay payments. DIVIDENDS ON COMPANY-OBLIGATED PREFERRED SECURITIES OF SUBSIDIARIES Dividends on company-obligated preferred securities of subsidiaries increased from $8 million in the third quarter of 1996 to $19 million in the same period of 1997, primarily due to the issuance of $587 million of additional preferred securities during 1996 and the first nine months of 1997. Company-obligated preferred securities of subsidiaries also increased by $29 million at July 1, 1997 for securities of PGE. MINORITY INTERESTS Minority interests increased to $22 million in the third quarter of 1997 from $17 million in the comparable prior period, primarily due to increased earnings from EPP. INCOME TAX EXPENSE (BENEFIT) Income taxes decreased during the third quarter of 1997 as compared to the third quarter of 1996 primarily as a result of decreased pretax income and tax benefits recognized from differences in financial and tax basis in assets. RESULTS OF OPERATIONS Nine Months Ended September 30, 1997 vs. Nine Months Ended September 30, 1996 The following review of Enron's results of operations should be read in conjunction with the Consolidated Financial Statements. CONSOLIDATED NET INCOME Enron reported a net loss of $64 million ($0.29 per share) for the first nine months of 1997 compared with net income of $453 million ($1.79 per share) during the same period in 1996. Included in the results for the first nine months of 1997 are non-recurring charges of $675 million (pretax) primarily to reflect the impact of Enron's amended J-Block contract and $100 million (pretax) to reflect depressed MTBE margins on committed production. The capital and trade resources and international operations and development segments contributed improved income before interest, minority interests and income taxes for the nine months ended September 30, 1997. In addition, results from Portland General Electric are included in the 1997 period as a result of the merger effective July 1, 1997 (see Note 4 to the Consolidated Financial Statements). These increases were offset by decreased earnings from Gas Pipeline Group, Ventures Group and the exploration and production segment, losses realized by the newly formed retail energy services segment and increased interest and related charges and dividends on company-obligated preferred securities of subsidiaries. An income tax benefit partially offset the effect of the non-recurring charges. INCOME BEFORE INTEREST, MINORITY INTERESTS AND INCOME TAXES The following table presents IBIT for each of Enron's operating segments (in millions). <TABLE> <CAPTION> Nine Months Increase 1997 1996 (Decrease) <S> <C> <C> <C> Regulated Operations: Gas Pipeline Group $381 $393 $ (12) Portland General Electric 51 - 51 Ventures Group (73) 39 (112) Capital and Trade Resources 280 224 56 Retail Energy Services (64) - (64) International Operations and Development 165 117 48 Exploration and Production 121 156 (35) Corporate and Other (669) 13 (682) Total $ 192 $942 $(750) </TABLE> REGULATED OPERATIONS Gas Pipeline Group Gas Pipeline Group realized a $12 million decrease in IBIT for the first nine months of 1997 as compared to the same period in 1996, as follows: <TABLE> <CAPTION> Nine Months Ended September 30, 1997 1996 (In Millions) <S> <C> <C> Net Revenues $488 $537 Operating Expenses 226 245 Depreciation & Amortization 50 51 Equity in Earnings 29 25 Other Income, Net 140 127 Income Before Interest & Taxes $381 $393 </TABLE> The following discussion analyzes the significant changes in the various components of IBIT for Gas Pipeline Group. NET REVENUES Revenues, net of cost of sales, of Gas Pipeline Group decreased $49 million (9%) during the first nine months of 1997 as compared to the same period in 1996. The decrease primarily reflects the turnback of certain capacity at Transwestern beginning in November 1996. COSTS AND EXPENSES Operating expenses of Gas Pipeline Group decreased by $19 million (8%) during the first nine months of 1997 as compared to the same period in 1996. The decrease primarily reflects a reduction of regulatory surcharges and timing of field operations expenses at Northern Natural Gas Company. OTHER INCOME AND DEDUCTIONS Equity in earnings of unconsolidated subsidiaries increased by $4 million to $29 million during the first nine months of 1997 as compared to the same period in 1996, reflecting increased earnings from Citrus Corp. Other income, net, increased $13 million to $140 million, primarily due to gains related to the disposition of non- strategic natural gas processing and gathering facilities. Portland General Electric Portland General Electric contributed $51 million in IBIT to the nine months 1997 consolidated results, following the merger on July 1, 1997. See Note 4 to the Consolidated Financial Statements. For information regarding the Portland General Electric results, see "Results of Operations" for the third quarter. Ventures Group Ventures Group reported a loss before interest and taxes of $73 million for the first nine months of 1997, compared with IBIT of $39 million in the comparable prior year period. The 1997 results reflect primarily the $100 million charge to reflect depressed MTBE margins on committed production. In addition, earnings from EOTT decreased due to lower crude oil gathering margins in the first nine months of 1997. CAPITAL AND TRADE RESOURCES The capital and trade resources segment reported a $56 million increase in income before interests, minority interests and income taxes for the nine months ended September 30, 1997 as compared to the same period in 1996. The following discussion analyzes the contributions to IBIT by each of the business lines in this segment. Statistics for ECT (including intercompany amounts) are as follows: <TABLE> <CAPTION> Nine Months Ended September 30, 1997 1996 <S> <C> <C> Physical Volumes (Bbtue/d) Gas: United States 7,749 6,894 Canada 2,195 1,330 Europe 594 275 10,538 8,499 Transport Volumes 451 537 Total Gas Volumes 10,989 9,036 Oil 600 292 Liquids 1,061 1,187 Total Physical Volumes 12,650 10,515 Electricity Volumes Marketed (Thousand MWh) 144,185 39,589 Financial Settlements (Notional) (Bbtue/d) 45,865 33,513 Fixed Price Contract Market Activity (Tbtue) 1,894 1,407 Production Payments and Financings Arranged (Millions) $ 434 $ 647 </TABLE> Cash and physical operations earnings before overhead expenses were $166 million and $149 million in the first nine months of 1997 and 1996, respectively. This increase was primarily attributable to increased earnings from the management of ECT's European contract portfolio, partially offset by a decrease in North American commodity marketing and contract portfolio management. Earnings before overhead expenses for the risk management business were $133 million in the first nine months of 1997 and $100 million in the same period in 1996. Earnings from this unit were generated primarily from originations and related activities in the European market, partially offset by lower originations from long-term contracts in North America for both gas and power. ECT's finance operations had earnings before overhead expenses of $79 million in the first nine months of 1997 compared with $56 million for the same period in 1996. The 1997 earnings related primarily to increased earnings from ECT's investment portfolio and increased activity in the Canadian market. ECT's overhead expenses were $98 million in the first nine months of 1997 and $81 million in the same period in 1996. The increase is primarily due to continued expansion into new markets and an increased volume of transactions. RETAIL ENERGY SERVICES EES reported a loss of $64 million in the first nine months of 1997 as a result of significant investments in the product development, regulatory and branding efforts of positioning EES to compete at the retail level. INTERNATIONAL OPERATIONS AND DEVELOPMENT The international operations and development segment's IBIT increased $48 million in the first nine months of 1997 compared to the same period in 1996, as follows: <TABLE> <CAPTION> Nine Months Ended September 30, 1997 1996 (In Millions) <S> <C> <C> Net Revenues $176 $ 94 Operating Expenses 84 60 Equity in Earnings 59 65 Other Income, Net 14 18 Income Before Interest & Taxes $165 $117 </TABLE> The following discussion analyzes the significant changes in the segment's results. NET REVENUES Revenues, net of cost of sales, for the international operations and development segment increased by $82 million (87%) in the first nine months of 1997 as compared with 1996. This increase primarily resulted from an increase in earnings from EI's portfolio of capital investments, increased international merchant activities and earnings from the development of the Guam power project. The increase also reflects management fees earned in connection with operation of power plants, which previously had been reported in the capital and trade resources segment. COSTS AND EXPENSES Operating expenses increased $24 million (40%) during the first nine months of 1997 as compared to the first nine months of 1996 due primarily to expenses related to the operation of power plants, which previously had been reported in the capital and trade resources segment. OTHER INCOME AND DEDUCTIONS Equity in earnings of unconsolidated subsidiaries decreased $6 million to $59 million in the first nine months of 1997, primarily as a result of the 1996 sale of a portion of Enron's interest in Teesside, partially offset by earnings from Enron's increased ownership of CIESA. EXPLORATION AND PRODUCTION The exploration and production segment's IBIT decreased to $121 million in the first nine months of 1997 from $156 million in the same period of 1996, as follows: <TABLE> <CAPTION> Nine Months Ended September 30, 1997 1996 (In Millions) <S> <C> <C> Net Revenues $545 $533 Operating Expenses 155 131 Oil & Gas Exploration Expenses 68 62 Depreciation, Depletion & Amortization 204 182 Other Income (Expense), Net 3 (2) Income Before Interest, Minority Interest & Taxes $121 $156 </TABLE> The following discussion analyzes the significant changes in the segment's results. Wellhead volume and price statistics (including intercompany amounts) are as follows: <TABLE> <CAPTION> Nine Months Ended September 30, 1997 1996 <S> <C> <C> Natural Gas Volumes (MMcf/d) North America (1) 756 695 Trinidad 114 126 India 11 - Total 881 821 Average Natural Gas Prices ($/Mcf) North America (2) $2.09 $1.72 Trinidad 1.04 1.00 India 2.93 - Composite 1.96 1.61 Crude Oil/Condensate Volumes (MBbl/d) North America 13.8 11.0 Trinidad 3.5 5.6 India 1.8 2.8 Total 19.1 19.4 Average Crude Oil/Condensate Prices ($/Bbl) North America $19.72 $20.09 Trinidad 18.88 18.95 India 20.78 19.09 Composite 19.66 19.62 <FN> (1) Includes 48 MMcf per day for the nine-month periods ended September 30, 1997 and 1996 delivered under the terms of a volumetric production payment agreement effective October 1, 1992, as amended. (2) Includes an average equivalent wellhead value of $1.61/Mcf and $0.86/Mcf for the nine-month periods ended September 30, 1997 and 1996, respectively, for the volumes described in note (1), net of transportation costs. </TABLE> NET REVENUES The exploration and production segment's revenues, net of cost of gas sold, increased $12 million (2%) during the first nine months of 1997 as compared to the same period in 1996. Wellhead revenues increased 24% to $587 million in the first nine months of 1997 as compared to $472 million in the same period of 1996. This increase primarily reflects increased average wellhead prices for natural gas, crude oil and condensate and natural gas liquids and increased North America volumes compared to the first nine months of 1996. Other marketing activities associated with sales and purchases of natural gas, natural gas and crude oil price hedging and trading transactions and margins related to the volumetric production payment reduced net operating revenues by $55 million during the first nine months of 1997, compared to a $29 million increase in the first nine months of 1996. This decrease reflected revenue reductions of $47 million related to natural gas commodity price hedging activities in the first nine months of 1997 compared to a $17 million increase in the comparable prior period, as well as a decrease in margins due to higher costs of natural gas delivered in 1997. COSTS AND EXPENSES Operating expenses, including taxes other than income taxes, for the exploration and production segment increased $24 million (18%) during the first nine months of 1997 as compared to the same period in 1996, primarily reflecting continually expanding operations and increases in production activity. DD&A expense increased $22 million (12%) primarily reflecting increased North America production volumes. CORPORATE AND OTHER The corporate and other segment's IBIT before non- recurring charges decreased $7 million to $6 million in the first nine months of 1997 as compared to the first nine months of 1996. As discussed in Note 5 to the Consolidated Financial Statements, included in the results for the first nine months of 1997 is a non-recurring charge of $675 million, primarily reflecting the impact of Enron's amended J-Block contract in the U.K. The 1996 amount includes gains of $56 million related to the sale of 3.2 million shares of EOG stock held by Enron, partially offset by a $25 million reserve established for litigation contingencies. INTEREST AND RELATED CHARGES, NET Interest and related charges, net, increased $71 million in the first nine months of 1997 compared to the same period a year ago, primarily due to the increase in debt, including the assumption of $1.1 billion debt in the PGC merger and debt incurred for payments made in connection with the J- Block settlement and CATS send-or-pay payments. DIVIDENDS ON COMPANY-OBLIGATED PREFERRED SECURITIES OF SUBSIDIARIES Dividends on company-obligated preferred securities of subsidiaries increased from $24 million in the first nine months of 1996 to $50 million in the same period of 1997, primarily due to the issuance of $587 million of additional preferred securities during 1996 and the first nine months of 1997. Company-obligated preferred securities of subsidiaries also increased by $29 million at July 1, 1997 for securities of PGE. MINORITY INTERESTS Minority interests increased $3 million in the first nine months of 1997 from the comparable 1996 period, resulting from higher net income from EPP, partially offset by lower net income from EOG. INCOME TAX EXPENSE (BENEFIT) Income taxes decreased during the first nine months of 1997 compared with the same period of 1996 primarily as a result of pretax losses due to the non-recurring charges for the restructuring of Enron's J-Block contract and for depressed MTBE margins on committed production. FINANCIAL CONDITION Cash used in operating activities totaled $588 million during the first nine months of 1997 as compared to $486 million provided during the same period last year. The 1997 amount reflects payments made in connection with the J-Block settlement and higher working capital requirements. Partially offsetting the impact of these payments were lower funds used in price risk management activities. Cash used in investing activities totaled $1,496 million during the first nine months of 1997 as compared to $892 million during the same period in 1996. The increase primarily reflects increased capital expenditures in the exploration and production segment, reflecting increased acquisitions and developmental drilling activities in North America, as well as CATS send-or-pay payments. Cash provided by financing activities totaled $2,022 million during the first nine months of 1997 as compared to $396 million during the same period in 1996. During the first nine months of 1997, net issuances of debt totaled $2,363 million. Additionally, $372 million of company- obligated preferred securities of subsidiaries were issued. Proceeds from these issuances were used primarily to fund payments made in connection with the J-Block settlement and CATS send-or-pay payments and for capital and other expenditures. These amounts were partially offset by net repurchases of $396 million of Enron and EOG common stock in the open market during the first nine months of 1997. Enron is able to fund its normal working capital requirements mainly through operations or, when necessary, through the utilization of credit facilities and its ability to sell commercial paper and accounts receivable. On August 18, 1997, Enron and the Oversight Committee of the Board of Directors of EPP agreed to a merger whereby Enron would purchase all outstanding EPP common shares not already owned by Enron. Under the proposal, the shareholders of EPP other than Enron would receive Enron common stock having a market value (based on the average trading price of Enron common stock for a 20 trading day period prior to the completion of the merger) of $35 per share. The merger proposal has been sent to, and will be submitted to a vote at a meeting of, the EPP shareholders, which meeting is scheduled for November 18, 1997. A lawsuit was filed on November 10, 1997 by one of EPP's shareholders seeking to enjoin the merger with Enron. EPP and Enron believe that the lawsuit is without merit and does not take into consideration the lengthy and careful arm's length negotiating process which led to the approval of the merger agreement by a unanimous vote of EPP's independent Oversight Committee, which is composed of independent directors on EPP's board. EPP and Enron intend to vigorously defend against the allegations in the litigation. Total capitalization at September 30, 1997 was $13.7 billion. Debt as a percentage of total capitalization was 50.5% at September 30, 1997 as compared to 39.8% at year-end 1996 and 46.8% at June 30, 1997. The increase primarily reflects increased debt, partially offset by the issuance of 50.5 million common shares in connection with the PGC merger (see Note 4 to the Consolidated Financial Statements). Assuming the mandatory conversion in late 1998 of 10.5 million Exchangeable Notes into EOG shares held by Enron, the pro forma debt to capitalization percentage would be approximately 49.4% at September 30, 1997. INFORMATION REGARDING FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q 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. 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 political developments in foreign countries, the pace of deregulation of retail natural gas and electricity markets in the United States, the timing and extent of changes in commodity prices for crude oil, natural gas, electricity and interest rates, the extent of EOG's success in acquiring oil and gas properties and in discovering, developing and producing reserves, the timing and success of Enron's efforts to develop international power, pipeline and other infrastructure projects and conditions of the capital markets and equity markets during the periods covered by the forward looking statements.
PART II. OTHER INFORMATION ENRON CORP. AND SUBSIDIARIES ITEM 1. Legal Proceedings See Part I. Item 1, Note 3 to Consolidated Financial Statements entitled "Litigation and Contingencies," which is incorporated herein by reference. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit 10 Remarketing Agreement, dated as of November 6, 1997, by and between Enron Corp. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated Exhibit 11 Calculation of Earnings Per Share Exhibit 12 Computation of Ratio of Earnings to Fixed Charges (b) Reports on Form 8-K Current Report on Form 8-K filed July 15, 1997 to report the completion of the merger with Portland General Corporation as of July 1, 1997. Current Report on Form 8-K filed August 29, 1997 to present June 30, 1997 pro formas for the merger with Portland General Corporation as of July 1, 1997. Current Report on Form 8-K filed September 17, 1997 to include financial statements of Portland General Corporation as of June 30, 1997.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENRON CORP. (Registrant) Date: November 13, 1997 By: RICHARD A. CAUSEY Richard A. Causey Senior Vice President and Chief Accounting and Information Officer (Principal Accounting Officer)