Enron deliveries of energy commodities grew 47% from the secondquarter of last year, including a 10% increase in gas deliveriesand a more than 100% increase in power marketed. However, resultsof the gas pipeline group and exploration and production were offslightly, and the retail business, Enron Energy Services (EES),lost more money than it did a year ago.

Enron Corp. had 1998 second quarter earnings of $0.42 perdiluted share, compared to $0.38 (before non-recurring charges) inthe second quarter of 1997. Results were led by growth in thecompany’s largest business, Wholesale Energy Operations andServices. “These results confirm the operating strength of eachEnron business unit and our ability to produce consistent,predictable earnings in spite of rapidly changing, highly volatileenergy markets,” said Kenneth L. Lay, CEO. “In addition to thestrength of our traditional businesses, our newer activities arefirmly established, particularly the U. S. wholesale powermarketing business and Enron Energy Services. Combined with a verysubstantial backlog of projects and opportunities, our businessoutlook is the strongest in the company’s history.”

Edward Jones analyst Zach Wagner continues to rate Enron a”buy.” He said he wasn’t concerned by EES’ second quarter losses of$43 million. “As they bring in and sign on more and more newcontracts, you can expect expenses associated with that toincrease.” EES is ahead of schedule in signing up customers. So farthis year, EES has signed contracts worth about $1.5 billion, morethan half of its $2.4 billion target for 1998, Wagner said.

“The electricity trading continues to be a huge contributor interms of improvement quarter over quarter. It was profitable againthis quarter for the second consecutive quarter. I think we’rereally seeing Enron’s experience and market position come intoplay. Even though electricity trading is relatively new, Enron’sbeen trading natural gas for years and years, so that’s wherethey’re kind of getting all their experience.”

Wagner said transmission and distribution and exploration andproduction results weren’t troublesome given warm weather and thelow commodity price environment. In fact, considering thesefactors, the results are impressive, he said.

Enron’s core businesses, Wholesale Energy Operations andServices, Transportation and Distribution, and Exploration andProduction, realized earnings per diluted share of $0.50 for thesecond quarter of 1998 compared to $0.44 for the second quarter of1997.

Enron’s wholesale business including development of energyinfrastructure, commodity sales and services, risk managementproducts and financial services generated income before interest,minority interests and taxes (IBIT) of $241 million in the secondquarter, an 85% increase over the $130 million of IBIT reported inthe second quarter of 1997.

In the second quarter, physical deliveries of all energycommodities increased 47% from a year ago to 24.2 trillion Btu/d.This included a 10% increase in gas deliveries and a more thandoubling of electricity marketed to over 86 million MWh.

Despite warmer weather in the upper Midwest service area, theGas Pipeline Group generated $72 million of IBIT in the secondquarter compared with $73 million in the second quarter of 1997. Inthe second quarter, Portland General generated $62 million of IBIT.Because the merger with Enron was effective in July 1997, PortlandGeneral was not included in Enron’s earnings during the secondquarter of 1997.

Enron Energy Services in the second quarter signed contractsworth about $650 million in future revenues from energy delivery.The contracts include energy services, such as in one case, a fulloutsourcing of a customer’s nationwide energy requirements. EESreported an operating loss before interest and taxes of $43 millionin the second quarter compared to a loss of $25 million in thesecond quarter of 1997, or $(0.08) and $(0.06) per diluted share,respectively. The losses reflect start-up costs, Enron said.

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