GOLDMAN SACHS, October 9, 2001 - Recommended List Large-Cap Growth Price: US$33.45 Target price: US$48 S&P 500: 1051 United States Enron Corp. (ENE) Gas & Power Convergence Still the best of the best. With perceptions far below reality, we see major catalysts in third-quarter results and increased disclosure in coming months. We strongly reiterate our Recommended List rating and our conviction in high and sustained growth prospects, even though we have cut 2002 EPS to $2.15 and our price target to $48. We expect Enron shares to recover dramatically in the coming months We view the current period as an extremely rare opportunity to purchase the shares of a company that remains extremely well positioned to grow at a substantial rate and earn strong returns in the still-very-young and evolving energy convergence space. We strongly reiterate our Recommended List rating on Enron stock. We spoke recently with top management including the CEO, CFO, chief accounting officer, and the head of wholesale services. We challenged top management on the wide range of investor concerns that have weighed heavily on the shares and believe that the majority of market speculation is groundless, and that which has some truth to it, to be exaggerated.
Misconceptions abound and perceptions are far below reality, in our view We believe that investors have virtually given up on Enron (down 60% year to date) and its prospects based on the long list of extremely negative stories about the company and its financial condition. The company's limited transparency on its sources of earnings, its cash flow, and financials in general has hurt investor perceptions as management has declined to be more specific in refuting outrageous claims that have assumed a life of their own. We believe Enron's fundamentals are still strong despite the weak economy We view Enron as one of the best companies in the economy, let alone among the companies in our energy convergence space. We are confident in the company's ability to grow earnings more than 20% annually for the next five years, despite its already large base.