Enron Corp/OR – ‘10-K’ for 12/31/98

As of:  Wednesday, 3/31/99   ·   For:  12/31/98   ·   Accession #:  1024401-99-7   ·   File #:  1-13159

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Annual Report   —   Form 10-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                        142±   552K 
 2: EX-10.28    Material Contracts                                     2±     8K 
 3: EX-10.29    Material Contracts                                     2±    11K 
 4: EX-10.41    Material Contracts                                    19±    78K 
 5: EX-10.42    Material Contracts                                    20±    80K 
 6: EX-10.43    Material Contracts                                    18±    71K 
 7: EX-12       Statement Re Computation of Ratios                     1      7K 
 8: EX-21       Subsidiaries of the Registrant                        44±   133K 
 9: EX-23.01    Consents of Experts and Counsel                        1      8K 
10: EX-23.02    Consents of Experts and Counsel                        1     11K 
11: EX-23.03    Consents of Experts and Counsel                        3±    14K 
12: EX-24       Power of Attorney                                     10±    41K 
13: EX-27       Article 5 FDS for 10-K                                 1      7K 

10-K   —   Annual Report
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SECURITIES AND EXCHANGE COMMISSION                    
WASHINGTON, D. C. 20549                   
____________                    
Form 10-K                   
____________                    

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE                        
SECURITIES EXCHANGE ACT OF 1934                                         
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998                             
OR                                                
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF                        
THE SECURITIES EXCHANGE ACT OF 1934                                     

Commission File Number 1-13159                                                  

ENRON CORP.                   
(Exact name of registrant as specified in its charter)                    

Oregon                            47-0255140            
(State or other jurisdiction               (I.R.S. Employer                   
of incorporation or                    Identification No.)              
organization)                                                     

ENRON BUILDING                    
1400 Smith Street, Houston, Texas 77002-7369                    
(Address of principal executive offices) (zip code)                   

Registrant's telephone number, including area code: 713-853-6161                
____________                    

Securities registered pursuant to Section 12(b) of the Act:                   
Title of each class              Name of each exchange on             
                which registered

Common Stock, no par value          New York Stock                    
           Exchange;
               Chicago Stock
               Exchange; and
               Pacific Stock
          Exchange

Cumulative Second Preferred         New York Stock                    
Convertible Stock,                  Exchange and                      
no par value                Chicago Stock             
          Exchange

Securities registered pursuant to Section 12(g) of the Act:                   
None                    

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 by check mark if disclosure of delinquent filers                       
pursuant to Item 405 of Regulation S-K is not contained                         
herein, and will not be contained, to the best of                               
registrant's knowledge, in definitive proxy or information                      
statements incorporated by reference in Part III of this                        
Form 10-K or any amendment to this Form 10-K.                                   
Aggregate market value of the voting stock held by non-                         
affiliates of the registrant, based on closing prices in the                    
daily composite list for transactions on the New York Stock                     
Exchange on February 16, 1999, was approximately                                
$21,923,278,704.  As of March 1, 1999, there were                               
351,041,239 shares of registrant's Common Stock, no par                         
value, outstanding.                                                             

Documents incorporated by reference.  Certain portions of                       
the registrant's definitive Proxy Statement for the May 4,                      
1999 Annual Meeting of Shareholders ("Proxy Statement") are                     
incorporated herein by reference in Part III of this Form 10-K.                 

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TABLE OF CONTENTS                   

PART I                    
                                              Page

Item 1.  Business                                             1                 
General                                             1       
Business Segments                                   1       
Exploration and Production                          2       
Transportation and Distribution                     6       
Interstate Transmission of Natural Gas            6     
Electricity Transmission and Distribution               
Operations                                       9    
Wholesale Energy Operations and Services           10       
North American Markets                           11     
European Markets                                 12     
Other International Markets                      13     
Retail Energy Services                             16       
Other Enron Businesses                             16       
Regulation                                         17       
Revenues by Business Segment                       24       
Current Executive Officers of the Registrant       26       

Item 2.  Properties                                          28                 
Oil and Gas Exploration and Production Properties           
and Reserves                                     28     
Natural Gas Transmission                           31       
International Power Plants and Pipelines           32       
Electric Utility Properties                        32       

Item 3.  Legal Proceedings                                   33                 

Item 4.  Submission of Matters to a Vote of Security Holders 35                 

PART II                   

Item 5.  Market for the Registrant's Common Equity                              
and Related Shareholder Matters                  36     

Item 6.  Selected Financial Data (Unaudited)                 37                 

Item 7.  Management's Discussion and Analysis of                                
Financial Condition and Results of Operations       38        

Item 7A. Financial Risk Management                           58                 

Information Regarding Forward Looking Statements    61        

Item 8.  Financial Statements and Supplementary Data         62                 

Item 9.  Disagreements on Accounting and Financial                              
Disclosure                                          62        

PART III                    

Item 10. Directors and Executive Officers of the Registrant  63                 

Item 11. Executive Compensation                              63                 

Item 12. Security Ownership of Certain Beneficial Owners                        
and Management                                      63        

Item 13. Certain Relationships and Related Transactions      64                 

PART IV                   

Item 14. Exhibits, Financial Statement Schedules, and                           
Reports on Form 8-K                                 65        

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PART I                    

Item 1. BUSINESS                    
GENERAL                   

Enron Corp., an Oregon corporation, is an integrated                  
natural gas and electricity company with headquarters in                        
Houston, Texas.  Enron's operations are conducted through                       
its subsidiaries and affiliates which are principally                           
engaged in the exploration for and production of natural gas                    
and crude oil in the United States and internationally; the                     
transportation of natural gas through pipelines to markets                      
throughout the United States; the generation and                                
transmission of electricity to markets in the northwestern                      
United States; the marketing of natural gas, electricity and                    
other commodities and related risk management and finance                       
services worldwide; and the development, construction and                       
operation of power plants, pipelines and other energy                           
related assets worldwide.  As of December 31, 1998, Enron                       
employed approximately 17,800 persons.                                          

As used herein, unless the context indicates otherwise,               
"Enron" refers to Enron Corp. and its subsidiaries and                          
affiliates.                                                                     

BUSINESS SEGMENTS                   

Enron's operations are classified into the following                  
business segments:                                                              

Exploration and Production - Natural gas and crude oil                
exploration and production primarily in the United States,                      
Canada, Trinidad and India.                                                     

Transportation and Distribution - Regulated industries;               
interstate transmission of natural gas; management and                          
operation of pipelines; electric utility operations.                            

Wholesale Energy Operations and Services - Energy                     
commodity sales and services, risk management products and                      
financial services to wholesale customers; development,                         
acquisition and operation of power plants, natural gas                          
pipelines and other energy related assets.                                      

Retail Energy Services - Sale of natural gas and                      
electricity directly to end-use customers, particularly in                      
the commercial and industrial sectors, including the                            
outsourcing of energy-related activities.                                       

Corporate and Other - Includes operation of                           
telecommunications and renewable energy businesses and clean                    
fuels plants, as well as Enron's investment in crude oil                        
transportation and water activities.                                            

For financial information by business segment for the                 
fiscal years ended December 31, 1996 through December 31,                       
1998, please see Note 17 to the Consolidated Financial                          
Statements on page F-35.                                                        

EXPLORATION AND PRODUCTION                

Enron's natural gas and crude oil exploration and                     
production operations are conducted by Enron Oil & Gas                          
Company ("EOG").  Enron currently owns a majority of the                        
outstanding common stock of EOG.  As previously reported in                     
December 1998, Enron received an unsolicited indication of                      
interest from a third party with respect to exploring a                         
possible transaction pursuant to which the third party would                    
acquire Enron's shares of EOG common stock and offer to                         
acquire the remaining shares of outstanding EOG common                          
stock.  Although Enron currently intends to actively explore                    
alternative transactions for its EOG common stock including                     
the unsolicited indication of interest, there can be no                         
assurance that any such transaction will be pursued or, if                      
pursued, will be consummated.                                                   

EOG is an independent (non-integrated) oil and gas                    
company engaged in the exploration for, and development,                        
production and marketing of, natural gas and crude oil                          
primarily in major producing basins in the United States, as                    
well as in Canada, Trinidad and India and, to a lesser                          
extent, selected other international areas.  At December 31,                    
1998, EOG's estimated net proved natural gas reserves were                      
5,229 billion cubic feet ("Bcf") (including 1,180 Bcf of                        
proved undeveloped methane reserves in the Big Piney deep                       
Paleozoic formations in Wyoming), and estimated net proved                      
crude oil, condensate and natural gas liquids reserves were                     
105 million barrels, and at such date, approximately 53% of                     
EOG's reserves (on a natural gas equivalent basis) were                         
located in the United States, 18% in Trinidad, 18% in India,                    
9% in Canada and 2% in China.                                                   

EOG's eight principal United States producing areas are               
the Big Piney area in Wyoming, the South Texas area, the                        
East Texas area, the offshore Gulf of Mexico area, the                          
Canyon/Strawn Trend area in West Texas, the Sand Tank and                       
Pitchfork Ranch areas in New Mexico, and the Vernal area in                     
Utah.  Properties in these areas comprised approximately 81%                    
of EOG's United States reserves (on a natural gas equivalent                    
basis) and 82% of EOG's United States net natural gas                           
deliverability as of December 31, 1998.  These properties                       
are substantially all operated by EOG.  EOG's other United                      
States natural gas and crude oil producing properties are                       
located primarily in other areas of Texas, Utah, New Mexico,                    
Oklahoma, California, Mississippi and Kansas.  At December                      
31, 1998, 93% of EOG's proved United States reserves,                           
including the reserves in the Big Piney deep Paleozoic                          
formations (on a natural gas equivalent basis) were natural                     
gas and 7% were crude oil, condensate and natural gas                           
liquids.                                                                        

EOG is also engaged in the exploration for and the                    
development, production and marketing of natural gas,                           
natural gas liquids and crude oil in western Canada,                            
principally in the provinces of Alberta, Saskatchewan and                       
Manitoba.  EOG conducts its Canadian operations from offices                    
in Calgary, Alberta.  At December 31, 1998, Canadian natural                    
gas deliverability net to EOG was approximately 120 million                     
cubic feet ("MMcf") per day, and EOG held approximately                         
555,000 net undeveloped acres in Canada.                                        

EOG also has producing operations offshore Trinidad and               
India and is evaluating and conducting exploration and                          
development in selected other international areas.  In                          
November 1992, EOG was awarded a 95% working interest                           
concession and operatorship in the South East Coast Consortium                  
("SECC") Block offshore Trinidad, encompassing three undeveloped                
fields, previously held by three government-owned energy companies.             
The Kiskadee field has been developed, the Ibis field is                        
under development, and the Oilbird field is anticipated to be                   
developed over the next several years.  Existing surplus                        
processing and transportation capacity at the Pelican field                     
facilities owned and operated by Trinidad and Tobago                            
government-owned companies is being used to process and                         
transport the production.  Natural gas is being sold into                       
the local market under a take-or-pay agreement with the                         
National Gas Company of Trinidad and Tobago.  In 1998,                          
deliveries net to EOG averaged 139 MMcf per day of                              
natural gas and three thousand barrels ("MBbl") per day                         
of crude oil and condensate.  At December 31, 1998,                             
EOG held approximately 144,000 net undeveloped acres in Trinidad.               

In 1995, EOG was awarded the right to develop the                     
modified U(a) block adjacent to the SECC Block, and a                           
production sharing contract with the Government of Trinidad                     
and Tobago was signed in 1996.  The contract committed EOG                      
to the acquisition of 3-D seismic data and to drilling three                    
wells.  The first well was drilled in 1998 and was                              
successful.                                                                     

In December 1994, EOG signed agreements covering profit               
sharing, joint operations and product sales and representing                    
a 30% working interest in, and was designated operator of,                      
the Tapti, Panna and Mukta Blocks located offshore the                          
western coast of India.  The blocks were previously operated                    
by the Indian national oil company, Oil & Natural Gas                           
Corporation Limited, which retained a 40% working interest.                     
The 363,000 acre Tapti Block contains two major proved                          
natural gas accumulations delineated by 22 expendable                           
exploration wells that have been plugged.  EOG has                              
implemented an initial development plan for the Tapti Block                     
accumulations, and production began in 1997.  At December                       
31, 1998, production, net to EOG, from the Tapti Block was                      
50 MMcf per day.  The 106,000 acre Panna Block and the                          
192,000 acre Mukta Block are partially developed with 65                        
wells capable of producing from six production platforms                        
located in the Panna and Mukta fields.  The fields were                         
producing approximately 7.1 MBbl per day of crude oil net to                    
EOG as of December 31, 1998.  Natural gas sales from the                        
Panna field began in early 1998 and as of December 31, 1998,                    
production, net to EOG, was 18 MMcf per day.  EOG intends to                    
continue development of the fields.                                             

EOG was awarded exploration, exploitation and                         
development rights for a block offshore the eastern State of                    
Sucre, Venezuela in early 1996.  EOG has signed agreements                      
with the government of Venezuela and other participants                         
associated with a concession awarded in the Gulf of Paria                       
East.  EOG holds an initial 90% working interest in the                         
joint venture and acts as operator.  One exploratory well                       
was drilled during 1998 and encountered hydrocarbons.                           
Additional evaluation work is being done, and another well                      
is expected to be drilled in 1999.                                              

In August 1997, EOG signed a 30-year production sharing               
contract with the China National Petroleum Corporation for                      
the appraisal and potential development of oil and gas                          
reserves within the Chuanzhong Block situated in the central                    
Sichuan Province.  EOG holds a 100% interest in the fields                      
and is the operator.  The contract provides for a two-year                      
evaluation period during which EOG will perform work to                         
improve productivity in existing wells and will drill three                     
new wells in the proved areas.  Further commitments, if any,                    
would arise from entering into the development period as                        
specified in the contract.                                                      

EOG is also pursuing other opportunities in countries                 
where natural gas and crude oil reserves have been                              
identified, particularly where synergies in natural gas                         
transportation, processing and power generation can be                          
optimized with other Enron Corp. affiliated companies.  EOG                     
is also participating in discussions concerning the                             
potential for natural gas development opportunities in                          
Mozambique, as well as other opportunities in Trinidad,                         
India and other countries.                                                      

EOG actively competes for reserve acquisitions and                    
exploration leases, licenses and concessions, frequently                        
against companies with substantially larger financial and                       
other resources.  EOG's ability to compete effectively for                      
certain reserves, leases, licenses and concessions is, in                       
part, dependent on EOG's exploration budget relative to its                     
competitors.  Competitive factors include price, contract                       
terms and quality of service, including pipeline connection                     
times and distribution efficiencies.  In addition, EOG faces                    
competition from other producers and suppliers, including                       
competition from other world-wide energy supplies, such as                      
natural gas from Canada.                                                        

All of EOG's oil and gas activities are subject to the                
risks normally incident to the exploration for and                              
development and production of natural gas and crude oil,                        
including blowouts, cratering and fires, each of which could                    
result in damage to life and property.  Offshore operations                     
are subject to usual marine perils, including hurricanes and                    
other adverse weather conditions, and governmental                              
regulations as well as interruption or termination by                           
governmental authorities based on environmental and other                       
considerations.  In accordance with customary industry                          
practices, insurance is maintained by EOG against some, but                     
not all, of the risks.  Losses and liabilities arising from                     
such events could reduce revenues and increase costs to EOG                     
to the extent not covered by insurance.                                         

EOG's overseas operations are subject to certain risks,               
including expropriation of assets, risks of increases in                        
taxes and government royalties, renegotiation of contracts                      
with foreign governments, political instability, payment                        
delays, limits on allowable levels of production and current                    
exchange and repatriation losses, as well as changes in laws                    
and policies governing operations of overseas-based                             
companies generally.                                                            

The following table sets forth certain information                    
regarding EOG's wellhead volumes of and average prices for                      
natural gas per thousand cubic feet ("Mcf"), crude oil and                      
condensate, and natural gas liquids per barrel ("Bbl"), and                     
average lease and well expenses per thousand cubic feet                         
equivalent ("Mcfe" - natural gas equivalents are determined                     
using the ratio of 6.0 Mcf of natural gas to 1.0 barrel of                      
crude oil and condensate or natural gas liquids) delivered                      
during each of the three years in the period ended December                     
31, 1998:                                                                       

                                                                [Download Table]

                                    Year Ended December 31, 
                                   1998      1997       1996
                                                            
Volumes (per day)                                           
     Natural Gas (MMcf)                                     
       United States(1)              671       657       608
       Canada                        105       101        98
       Trinidad                      139       113       124
       India                          56        18         -
          Total                      971       889       830

     Crude Oil and Condensate (MBbl)                        
       United States                14.0      11.7       9.2
       Canada                        2.6       2.5       2.4
       Trinidad                      3.0       3.4       5.2
       India                         5.1       2.3       2.8
          Total                     24.7      19.9      19.6

     Natural Gas Liquids (MBbl)                             
       United States                  2.9      2.6       1.3
       Canada                         1.0      1.3       1.2
          Total                       3.9      3.9       2.5

Average Prices                                              
     Natural Gas ($/Mcf)                                    
       United States(2)           $ 1.93    $ 2.32    $ 2.04
       Canada                       1.40      1.43      1.15
       Trinidad                     1.06      1.05      1.00
       India                        2.41      2.79        - 
          Composite                 1.78      2.07      1.78

     Crude Oil and Condensate ($/Bbl)                       
       United States              $12.84    $19.81    $21.88
       Canada                      11.82     17.16     18.01
       Trinidad                    12.26     18.68     19.76
       India                       12.86     20.05     20.17
          Composite                12.66     19.30     20.60

     Natural Gas Liquids ($/Bbl)                            
       United States              $ 8.38    $12.76    $14.67
       Canada                       5.32      8.94      9.14
          Composite                 7.56     11.54     11.99

Lease and Well Expenses ($/Mcfe)                            
       United States              $ 0.22    $ 0.23    $ 0.19
       Canada                       0.37      0.39      0.35
       Trinidad                     0.12      0.16      0.16
       India                        0.24      0.64      0.99
          Composite                 0.24      0.26      0.22

<FN>                                                        
__________________                                          
(1)  Includes 48 MMcf per day in 1998, 1997 and 1996        
     delivered under the terms of a volumetric production   
     payment agreement effective October 1, 1992, as        
     amended.  Delivery obligations were terminated in      
     December 1998.                                         
(2)  Includes an average equivalent wellhead value of $1.53 
     per Mcf in 1998, $1.73 per Mcf in 1997 and $1.17 per   
     Mcf in 1996 for the volumes described in note (1), net 
     of transportation costs.                               

TRANSPORTATION AND DISTRIBUTION                   

Enron's Transportation and Distribution business is                   
comprised of the company's North American interstate natural                    
gas transportation systems and its electricity transmission                     
and distribution operations in Oregon.                                          

Interstate Transmission of Natural Gas                                          

Enron and its subsidiaries operate domestic interstate                
natural gas pipelines extending from Texas to the Canadian                      
border and across the southern United States from Florida to                    
California.  Included in Enron's domestic interstate natural                    
gas pipeline operations are Northern Natural Gas Company                        
("Northern"), Transwestern Pipeline Company ("Transwestern")                    
and Florida Gas Transmission Company ("Florida Gas")                            
(indirectly 50% owned by Enron).  Northern, Transwestern and                    
Florida Gas are interstate pipelines and are subject to the                     
regulatory jurisdiction of the Federal Energy Regulatory                        
Commission (the "FERC").  Each pipeline serves customers in                     
a specific geographical area:  Northern, the upper Midwest;                     
Transwestern, principally the California market and pipeline                    
interconnects on the east end of the Transwestern system;                       
and Florida Gas, the State of Florida.  In addition, Enron                      
holds an interest in Northern Border Partners, L.P., which                      
owns a 70% interest in the Northern Border Pipeline system.                     
An Enron subsidiary operates the Northern Border Pipeline                       
system, which transports gas from Western Canada to delivery                    
points in the midwestern United States.                                         

Northern Natural Gas Company.  Through its                            
approximately 17,000-mile natural gas pipeline system                           
stretching from Texas to Michigan's Upper Peninsula,                            
Northern transports natural gas to points in its traditional                    
market area of Illinois, Iowa, Kansas, Michigan, Minnesota,                     
Nebraska, South Dakota and Wisconsin.  Gas is transported to                    
town border stations for consumption and resale by non-                         
affiliated gas utilities and municipalities and to other                        
pipeline companies and gas marketers.  Northern also                            
transports gas at various points outside its traditional                        
market area in the production areas of Colorado, Kansas, New                    
Mexico, Oklahoma, Texas and Wyoming for utilities, end-users                    
and other pipeline and marketing companies.  Northern                           
provides transportation and storage services to                                 
approximately 90 utility customers and end-users in the                         
upper midwestern United States.  Most of Northern's revenues                    
are comprised of monthly demand charges that are based on                       
contracted capacity rather than throughput.                                     

In Northern's market area, natural gas is an energy                   
source available for traditional residential, commercial and                    
industrial uses.  Northern's throughput totaled 1,496                           
trillion British thermal units ("Tbtu") in 1998, compared to                    
1,593 Tbtu in 1997.  This slight decrease was due primarily                     
to a warmer than normal winter in Northern's service                            
territory in 1998.                                                              

In 1998, Northern maintained its existing customer base               
in an increasingly competitive market while initiating                          
expansion projects to meet increased market demand and to                       
increase Northern's market presence.  Northern completed the                    
first phase of a five-year, $113 million growth plan to                         
expand incremental firm capacity into Iowa, Wisconsin and                       
Minnesota by approximately 350 MMcf of natural gas per day.                     
This expansion is fully subscribed with five-year to ten-                       
year firm transportation contracts.  In addition, Northern                      
has several smaller service expansions underway which are                       
expected to be in service in late 1999.                                         

Northern also operates three natural gas storage                      
facilities and two liquefied natural gas storage peaking                        
units.  These storage facilities provide Northern the                           
operational capacity to balance its system on a daily basis                     
and assist in meeting customers' heating season system                          
requirements.  Northern competes with other interstate                          
pipelines in the transportation and storage of natural gas.                     
In addition, the FERC continues its efforts to introduce                        
more competition into the natural gas industry, having the                      
effect of increasing transportation and purchase options of                     
Northern's traditional customer base.  See "Regulation -                        
Natural Gas Rates and Regulations".                                             

Transwestern Pipeline Company.  Transwestern is an                    
interstate pipeline engaged in the transportation of natural                    
gas.  Through its approximately 2,700-mile pipeline system,                     
Transwestern transports natural gas from West Texas,                            
Oklahoma, eastern New Mexico and the San Juan Basin in                          
northwestern New Mexico and southern Colorado primarily to                      
the California market and to markets off the east end of its                    
system.  Transwestern has access to three significant gas                       
basins for its gas supply: the San Juan Basin, the Permian                      
Basin in West Texas and eastern New Mexico and the Anadarko                     
Basin in the Texas and Oklahoma Panhandles. Transwestern's                      
peak delivery capacity was approximately 1.6 Bcf per day in                     
1998.  Substantially all of Transwestern's delivery capacity                    
to California was held by shippers on a firm basis until                        
November 1, 1996, when approximately 450 MMcf per day of                        
firm capacity was turned back to Transwestern by a major                        
customer. Anticipating this turnback, Transwestern entered                      
into a settlement agreement with its customers whereby the                      
costs associated with this turnback are shared by                               
Transwestern and its Current Firm Customers, as defined in                      
the settlement agreement.  Transwestern is responsible for                      
70% of the risk of resubscribing the released capacity, and                     
Transwestern's customers have the remaining 30% of such risk                    
through 2001.  In addition to this cost-sharing mechanism,                      
Transwestern and its current firm customers also agreed to                      
contract rates through 2006 and agreed that Transwestern                        
would not be required to file a new rate case for rates to                      
be effective prior to November 1, 2006.                                         

Transwestern's mainline includes a lateral pipeline to                
the San Juan Basin which allows Transwestern to access San                      
Juan Basin gas supplies.  Via Transwestern's San Juan                           
lateral pipeline, the San Juan Basin gas may be delivered to                    
California markets as well as markets off the east end of                       
Transwestern's system.  This bi-directional flow capability                     
enhances pipeline utilization.  Transwestern is currently                       
negotiating with customers to expand the system from San                        
Juan to California.  Since adding bi-directional capability                     
in 1995, Transwestern has reestablished its volumes flowing                     
into the previously oversupplied California market. Total                       
throughput volumes to California averaged approximately 889                     
MMcf per day in 1998, compared to 558 MMcf per day in 1997.                     
Transwestern has firm transportation service on the east end                    
of its system and transports Permian, Anadarko and San Juan                     
Basin supplies into Texas, Oklahoma and the midwestern                          
United States.  Transwestern previously made certain                            
modifications to its mainline system which increased the                        
volumes flowing from the San Juan Basin to the east end of                      
the Transwestern system. Transwestern transported an average                    
of 489 MMcf per day off the east end of its system in 1998,                     
as compared to 657 MMcf per day in 1997.                                        

Transwestern competes with several interstate pipelines               
in the California market and its markets off the east end of                    
its system.                                                                     

Florida Gas Transmission Company.  An Enron subsidiary                
owns a 50% interest in Florida Gas by virtue of its 50%                         
interest in Citrus Corp., which owns all of the capital                         
stock of Florida Gas.  Another Enron subsidiary operates the                    
Florida Gas pipeline.                                                           

Florida Gas is an interstate pipeline company that                    
transports natural gas for third parties.  Its approximately                    
4,950-mile dual pipeline system extends from South Texas to                     
a point near Miami, Florida.  Florida Gas provides a high                       
degree of gas supply flexibility for its customers because                      
of its proximity to the Gulf of Mexico producing region and                     
its interconnections with other interstate pipeline systems                     
which provide access to virtually every major natural gas                       
producing region in the United States.  Florida Gas serves a                    
mix of customers anchored by electric utility generators.                       

Florida Gas has periodically expanded its system                      
capacity to keep pace with the growing demand for natural                       
gas in Florida.  In December 1998, Florida Gas filed an                         
application with the FERC to expand its pipeline capacity to                    
meet Florida's growing electric generation load and local                       
distribution company and industrial demand.  The proposed                       
272 billion British thermal units ("BBtu") per day Phase IV                     
expansion is backed by 20-year firm transportation contracts                    
and, subject to regulatory approvals, is expected to be in                      
service in 2001, introducing Florida Gas to the southwest                       
Florida market.  Florida Gas' current firm average delivery                     
capacity into Florida is 1,455 BBtu per day.  Florida Gas                       
also owns an interest in facilities that link its system to                     
the Mobile Bay producing area.  Florida Gas' customers have                     
reserved over 99% of the existing capacity on the Florida                       
Gas system pursuant to firm, long-term transportation                           
service agreements.                                                             

Florida Gas is the only interstate natural gas pipeline               
serving peninsular Florida.  Florida Gas faces competition                      
from residual fuel oil in the Florida market.  A primary                        
advantage of the straight fixed variable rate design (a FERC                    
mandated rate design to allow pipelines to recover                              
substantially all fixed costs, a return on equity and income                    
taxes in the capacity reservation component of their rates)                     
is that Florida Gas will recover substantially all of its                       
fixed costs regardless of levels of usage by its customers.                     
See "Regulation - Natural Gas Rates and Regulations".                           

Northern Border Partners, L.P.  Northern Border                       
Partners, L.P., a Delaware limited partnership, owns 70% of                     
Northern Border Pipeline Company, a Texas general                               
partnership ("Northern Border").  An Enron subsidiary holds                     
a 12.4% interest in the limited partnership and serves as                       
operator of the pipeline.  Northern Border owns an                              
approximately 1,214-mile interstate pipeline system that                        
transports natural gas from the Montana-Saskatchewan border                     
near Port of Morgan, Montana to interconnecting pipelines                       
and local distribution systems in the States of North                           
Dakota, South Dakota, Minnesota, Iowa and Illinois.                             
Northern Border has pipeline access to natural gas reserves                     
in the provinces of Alberta, British Columbia and                               
Saskatchewan, as well as the Williston Basin in the United                      
States.  The pipeline system also has access to production                      
of synthetic gas from the Dakota Gasification Plant in North                    
Dakota.  Interconnecting pipeline facilities provide                            
Northern Border shippers access to markets in the Midwest,                      
as well as other markets throughout the United States by                        
transportation, displacement and exchange agreements.                           
Therefore, Northern Border is strategically situated to                         
transport significant quantities of natural gas to major gas                    
consuming markets. Based upon existing contracts and                            
capacity, 100% of Northern Border's firm capacity                               
(approximately 2.4 Bcf of natural gas per day) is                               
contractually committed through October 31, 2001.  Northern                     
Border competes with two other interstate pipeline systems                      
that transport gas from Canada to the Midwest.                                  

In December 1998, Northern Border completed its Chicago               
Project which expanded its existing system by delivering an                     
additional 700 MMcf of natural gas per day from Canada, and                     
extended the pipeline 245 miles to Chicago.  The project is                     
fully subscribed by over 20 shippers with 10-year minimum                       
transportation contracts.                                                       

In October 1998, Northern Border filed an application                 
with FERC to seek approval of its "Project 2000" which seeks                    
to expand and extend the pipeline system into Indiana by                        
November 2000.  In addition to providing additional Canadian                    
natural gas to United States' markets, Project 2000 would                       
afford shippers on the extended pipeline system access to                       
industrial gas consumers in northern Indiana.                                   

Electricity Transmission and Distribution Operations                            

Enron's electric utility operations are conducted                     
through its wholly-owned subsidiary Portland General                            
Electric Company ("PGE").  PGE, incorporated in 1930, is an                     
electric utility engaged in the generation, purchase,                           
transmission, distribution and sale of electricity in the                       
State of Oregon.  PGE also sells energy to wholesale                            
customers throughout the western United States.  PGE's                          
Oregon service area is approximately 3,170 square miles,                        
including 54 incorporated cities of which Portland and Salem                    
are the largest, within a state-approved service area                           
allocation of 4,070 square miles.  At December 31, 1998 PGE                     
served approximately 704,000 retail customers.                                  

PGE serves a diverse retail customer base.  Residential               
customers constitute the largest customer class and                             
accounted for approximately 48% of the retail revenues in                       
1998.  Residential demand is highly sensitive to the effects                    
of weather, with revenues highest during the winter heating                     
season.  Electricity sales to both commercial and industrial                    
customers declined somewhat in 1998 due to the effects of                       
PGE's "Customer Choice" pilot program described below, which                    
allowed some customers to buy their power from competing                        
energy service providers; this program was terminated at the                    
end of 1998.  Commercial customers comprised approximately                      
38% and industrial customers represented approximately 14%                      
of retail revenues in 1998.  The commercial and industrial                      
classes are not dominated by any single industry.  While the                    
20 largest customers constituted approximately 22% of 1998                      
retail demand, they represented 10 different industry groups                    
including paper manufacturing, high technology, metal                           
fabrication, transportation equipment and health services.                      
No single customer represents more than 6% of PGE's total                       
retail load.                                                                    

In late 1997, PGE filed a proposal before the Oregon                  
Public Utility Commission ("OPUC") which would give all its                     
customers a choice of electricity providers as early as                         
January 1, 1999.  PGE's "Customer Choice" proposal included                     
new price tariffs and a new structure for the company in                        
which PGE would become a regulated transmission and                             
distribution company focused on delivering, but not selling,                    
electricity.  In January 1999, the OPUC issued an order                         
recommending that PGE offer its customers a limited set of                      
options, including the ability to continue to purchase rate-                    
regulated electricity, with most commercial and industrial                      
customers able to chose their electricity provider through                      
direct access.  OPUC's order further requires PGE to refile                     
a new rate case should it choose to adopt the plan                              
recommended by the order, which is also contingent upon the                     
adoption of certain statutory changes by the Oregon                             
Legislature.  Until such changes are made and agreed upon                       
among all parties, PGE will not be implementing its proposal                    
or accompanying new rate structure.                                             

Wholesale electricity sales comprised about 20% of                    
PGE's total operating revenues in 1998, down from about 35%                     
in 1997.  During the last several years, PGE has actively                       
marketed wholesale power throughout the western United                          
States, with significant sales growth since 1994; most of                       
such growth has come through sales to marketers and brokers                     
and have been predominantly short-term.  PGE will continue                      
its participation in the wholesale marketplace in order to                      
balance its supply of power to meet the needs of its retail                     
customers, manage risk and administer its current long-term                     
wholesale contracts.  Long-term wholesale trading activities                    
have been transferred to a non-regulated Enron affiliate,                       
which participates more fully in a broader market.  PGE                         
expects that its future revenues from the wholesale                             
marketplace will decline.                                                       

PGE operates within a state-approved service area and                 
under current regulation is substantially free from direct                      
retail competition with other electric utilities.  PGE's                        
competitors within its Oregon service territory include                         
other fuel suppliers, such as the local natural gas company,                    
which compete with PGE for the residential and commercial                       
space and water heating market.  In addition, there is the                      
potential of a loss of PGE service territory from the                           
creation of public utility districts or municipal utilities                     
by voters.                                                                      

WHOLESALE ENERGY OPERATIONS AND SERVICES                

Enron's wholesale energy operations and services                      
businesses ("Enron Wholesale") operate in North America,                        
Europe and evolving energy markets in developing countries.                     
Activities in such businesses are conducted primarily by                        
Enron Capital & Trade Resources Corp. and Enron                                 
International Inc.  Enron Wholesale is categorized into two                     
business lines: Commodity Sales and Services, and Energy                        
Assets and Investments.  Integrated energy-related products                     
and services related to these business lines are offered to                     
wholesale customers in varying degrees in each of Enron                         
Wholesale's markets.                                                            

Commodity Sales and Services.  The commodity sales and                
services operations include the purchase, sale, marketing                       
and delivery of natural gas, electricity, liquids and other                     
commodities, restructuring of existing long-term contracts                      
and the management of Enron's commodity portfolios.  In                         
addition, Enron provides risk management products and                           
services to energy customers that hedge movements in price                      
and location-based price differentials.  Enron's risk                           
management products and services are designed to provide                        
stability to customers in markets impacted by commodity                         
price volatility.  Also included in this business is the                        
management of certain operating assets that directly relate                     
to this business, including domestic intrastate pipelines                       
and storage facilities.                                                         

Energy Assets and Investments.  Enron Wholesale's                     
energy assets and investments activities include investments                    
in debt and equity securities of oil and gas producers and                      
other energy intensive companies.  Additionally, Enron                          
Wholesale develops, constructs, operates and manages a large                    
portfolio of energy assets such as power plants and natural                     
gas pipelines.  Enron may reduce its ownership interests in                     
certain energy assets based on market opportunities,                            
allowing it to capture significant value created during the                     
development and construction process and to reinvest capital                    
into new projects.  Enron's long-term ownership interest in                     
each of its energy assets will be determined by various                         
factors, including the operating control necessary to                           
maximize Enron's return on investment.                                          

The following table presents selected statistical                     
information for Enron's wholesale energy operations and                         
services businesses.                                                            

                                                                [Download Table]

                                     Year Ended December 31,       
                                      1998      1997      1996     

                                                                   
Physical Volumes (Bbtue/d)(a)(b)                                   
Gas:                                                               
  United States                      7,418     7,654     6,998     
  Canada                             3,486     2,263     1,406     
  Europe and Other                   1,251       660       289     
                                    12,155    10,577     8,693     
Transport Volumes                      559       460       544     
     Total Gas Volumes              12,714    11,037     9,237     
Crude Oil and Liquids                3,570     1,677     1,507     
Electricity(c)                      11,024     5,256     1,648     
     Total Physical Volumes         27,308    17,970    12,392     
      (BBtue/d)                                                    
Electricity Volumes Marketed                                       
 (Thousand MWh)                                                    
  United States                    401,843   191,746    60,150     
  Europe and Other                     529       100         -     
     Total                         402,372   191,846    60,150     

Financial Settlements (Notional)    75,266    49,082    35,259     
         (Bbtue/d)                                                 

<FN>                                                               
 (a) Billion British thermal units equivalent per day.             
 (b) Includes third-party transactions by Enron Energy Services.   
 (c) Represents Electricity Volumes Marketed, converted to Bbtue/d.

North American Markets                                                          

Enron markets natural gas, electricity and other energy               
commodities in North America and provides risk management                       
products and financial services to producers and end-users                      
of energy commodities.  Enron offers a broad range of                           
services including risk management and financing expertise                      
through a variety of products including forward contracts,                      
swap agreements and other contractual commitments.                              
Customers include independent oil and gas producers, energy-                    
intensive industrials, public and investor-owned utility                        
power companies, small independent power producers and local                    
distribution companies.                                                         

In 1998, there was a 52% increase in Enron's physical                 
wholesale commodity sales over 1997 with volumes for all                        
commodities totaling more than 27 trillion British thermal                      
units equivalent ("Tbtue") per day.  This included a more                       
than doubling of the electricity volumes from 191.8 million                     
megawatt hours in 1997 to over 400 million megawatt hours in                    
1998.  In addition, financial settlements totaled 75.3 Tbtue                    
per day.  Enron's strategy is to enhance the scale, scope,                      
flexibility and speed of its North American energy network                      
through building and acquiring strategically placed                             
generation assets and forming alliances with customers.                         

Enron's intrastate pipelines include Houston Pipe Line                
Company ("HPL") and Louisiana Resources Company.  HPL owns a                    
5,269-mile pipeline in Texas which interconnects with                           
Northern, Transwestern, Florida Gas and numerous other                          
interstate and intrastate pipelines.  HPL's intrastate                          
natural gas transportation and storage services are subject                     
to seasonal variation because many of its customers have                        
weather-sensitive natural gas requirements.  The Railroad                       
Commission of Texas has jurisdiction over intrastate gas                        
pipeline rates, operations and transactions in Texas.  See                      
"Regulation--Natural Gas Rates and Regulations."  Louisiana                     
Resources Company is a 540-mile intrastate pipeline which                       
spans the state of Louisiana and serves the industrial                          
complex along the Mississippi River from Baton Rouge to New                     
Orleans.  The pipeline interconnects with the Henry Hub,                        
which is the NYMEX physical settlement location, and has                        
numerous interconnections with both interstate and                              
intrastate pipelines.                                                           

Enron's Napoleonville natural gas storage facility                    
located in Louisiana, which accesses the Louisiana Resources                    
Company pipeline, provides approximately 4 Bcf of working                       
capacity.  This facility enhances the benefits of Louisiana                     
Resources Company by improving Enron's ability to meet the                      
firm requirements of industrial markets in Louisiana, and                       
provides the swing and peak capability required by local                        
distribution companies and electric utilities along the                         
Eastern seaboard.  Enron's Bammel natural gas storage                           
facility located near Houston provides approximately 58                         
Bcf of working capacity.  This facility has the flexibility                     
to deliver gas to the Texas market, or to the East Coast or                     
the midwestern United States.  In 1998, Enron installed new                     
compression units to increase its withdrawal and injection                      
capabilities.                                                                   

European Markets                                                                

As the energy markets liberalize across Europe, Enron's               
strategy is to build a presence early in each key market in                     
order to create an integrated pan European energy operation.                    
Energy service capabilities are in place in Europe similar                      
to those established in North America, such as providing                        
reliable delivery of physical commodities and risk                              
management and financing services. At the end of 1998, Enron                    
employed more than 700 people in trading, marketing and                         
power generation across continental Europe including the                        
United Kingdom, Norway, Germany, Turkey, Poland, Russia and                     
Italy.                                                                          

In contrast to the early stages of energy deregulation                
in North America where there was generally adequate                             
infrastructure in place to produce and transport gas and                        
power, the international energy markets have generally                          
lacked adequate energy infrastructure, providing Enron                          
opportunities to develop, construct and operate large energy                    
projects.  In December 1998, Enron acquired the Teesside                        
Utilities and Services business in northeast England, whose                     
assets include a 154-megawatt power plant and distribution                      
systems for gas, power, steam and water.  Enron's asset                         
position in the United Kingdom also includes a second gas-                      
fired combined cycle 790-megawatt plant sited at Sutton                         
Bridge currently under construction and scheduled for                           
commercial operation early in 1999.  This investment                            
provides opportunities and value to both Enron and the                          
plant's major customer from the flexibility to convert from                     
natural gas to power as determined by the market price of                       
each commodity.                                                                 

In 1996, Enron opened an office in Oslo to access the                 
power trading opportunities available in the Nordic region,                     
the most open market for power trading in the Europe region.                    
Enron provides power risk management services to regional                       
municipalities, utilities and large industrials.  Enron was                     
appointed market maker for all base load electricity trades                     
on the Nord Pool Nordic Power Exchange.  During 1998,                           
Enron's power volumes in the United Kingdom and Nordic                          
countries totaled 38 million megawatt hours.                                    

Enron has also invested in continental Europe where                   
there is a need for energy infrastructure and an interest                       
from large industrials to restructure their energy supply                       
contracts and to benefit from more liberalized gas and power                    
markets.  Enron made its first power trade in continental                       
Europe in 1998, and these volumes are continuing to                             
increase. Enron owns a gas-fired power plant of                                 
approximately 125 megawatts, owned jointly with the second                      
largest regional utility in Germany.  Enron has a 97.5%                         
interest in a natural gas fired, 116-megawatt electric, 70-                     
megawatt thermal power plant to be located in Nowa Sarzyna,                     
Poland.  Enron is the turnkey contractor and will be the                        
operator of the plant.  Twenty-year power purchase                              
agreements have been signed with the Polish power grid                          
company for electricity and with a state-owned chemical                         
company and the City of Nowa Sarzyna for steam.  Financing                      
was completed and construction began in early 1998, with                        
commercial operation expected in the fourth quarter of 1999.                    
Enron is pursuing other opportunities such as joint ventures                    
with national utilities or other energy companies in the                        
development, operation or construction of power generation                      
facilities across Europe, including Spain, Croatia and                          
Italy.                                                                          

Other International Markets                                                     

In many markets outside of North America and Europe, a                
shortage of energy infrastructure exists, providing Enron                       
significant opportunities to develop, construct, promote and                    
operate natural gas pipeline, power plants and other energy                     
infrastructure.  In these markets, Enron's strategy is to                       
facilitate completion of vital energy assets and investments                    
which will connect areas of energy supply to areas where                        
energy is consumed.  By creating energy networks, Enron                         
seeks to provide reliable delivery of physical energy                           
commodities and develop risk management and financing                           
services to wholesale customers in key international                            
regions.  Enron has developed regional wholesale energy                         
businesses around its international asset base in both South                    
America and in India and continues to pursue a range of                         
energy infrastructure opportunities outside of North America                    
and Europe.                                                                     

Enron's energy infrastructure projects are, to varying                
degrees, subject to all the risks associated with project                       
development, construction and financing in foreign                              
countries, including without limitation, the receipt of                         
permits and consents, the availability of project financing                     
on acceptable terms, expropriation of assets, renegotiation                     
of contracts with foreign governments and political                             
instability, as well as changes in laws and policies                            
governing operations of foreign-based businesses generally.                     

South America                                                         

In South America, Enron owns and operates several                     
investments which collectively comprise the asset base for                      
its integrated business strategy.  Enron acquired its                           
initial interest in Transportadora de Gas del Sur ("TGS") in                    
1992, when the state privatized its natural gas pipeline                        
systems.  The 4,104-mile pipeline system has a capacity of                      
approximately 1.9 Bcf per day and primarily serves four                         
distribution companies in the greater Buenos Aries area                         
under long-term, firm transportation contracts.                                 

In 1997, Enron acquired a 25% interest in Transredes                  
Transporte de Hidrocarburos S.A. ("Transredes"), a 3,093-                       
mile system of natural gas, crude oil and products pipelines                    
located in Bolivia and connecting Bolivian oil and gas                          
reserves to major markets in Bolivia.  Enron is upgrading                       
Transredes' existing pipeline operations and increasing the                     
capacity of the pipeline system to 1.3 Bcf per day to supply                    
market needs primarily in eastern Brazil.                                       

Enron is developing, along with Petrobras, the national               
oil and gas company of Brazil, and others, a pipeline which                     
will connect with Transredes in Bolivia and transport                           
natural gas to markets in Brazil.  The pipeline project                         
includes an approximately 1,864-mile natural gas pipeline                       
from Santa Cruz, Bolivia to Porto Alegre, Brazil.  Enron                        
currently owns (including through its ownership interest in                     
Transredes) 29.75% of the Bolivian segment of the pipeline                      
and 7% of the Brazilian segment of the pipeline.  Commercial                    
operation of the first phase of the pipeline is expected in                     
1999.                                                                           

Enron is developing a 480-megawatt combined-cycle power               
plant at Cuiaba in the State of Mato Grosso in western                          
Brazil to feed power into the Brazilian energy grid in                          
Cuiaba, at a strategic delivery point having few existing                       
alternate generation sources.  Construction is underway on                      
Phase I of the project (150 megawatts), with commercial                         
operations expected in early 1999. Commercial operations of                     
Phase II (additional 150 megawatts) and Phase III                               
(additional 180 megawatts) are expected to commence in 2000.                    
As an additional part of this project, Enron is developing a                    
385-mile, 18-inch natural gas pipeline connecting to the                        
Bolivia to Brazil pipeline in Bolivia.  Including its                           
ownership interest through Transredes, Enron owns 65.625% of                    
the power plant, 50% of the Brazilian segment of the                            
pipeline and 20% of the Bolivian segment of the pipeline.                       

In 1997, Enron acquired interests in the Rio de Janeiro               
municipal gas distribution company, the gas distribution                        
company of the State of Rio de Janeiro and natural gas                          
distribution systems in seven other Brazilian states.  These                    
systems encompass an area with a population of approximately                    
55 million people.  Through these ownership interests, Enron                    
has long-term franchises for gas distribution in the largest                    
gas consuming regions in Brazil.                                                

In 1998, Enron acquired an interest in Elektro -                      
Eletricidades e Servicos S.A. ("Elektro").  Elektro has a                       
51,000-mile transmission system for the distribution of                         
electricity to approximately 1.5 million consumers                              
throughout 228 municipalities in the State of Sao Paulo, and                    
a number of other municipalities in the State of Mato Grosso                    
do Sul, Brazil.                                                                 

India                                                                 

In India, Enron's strategy is to deliver natural gas to               
the west coast of India to fuel Enron's own gas-fired power                     
plants as well as to deliver natural gas to the industrial                      
regions further north in India and to new power plants                          
expected to be constructed in southern India.                                   

In connection with a Power Purchase Agreement between                 
Dabhol Power Company, Enron's 50%-owned subsidiary, and the                     
Maharashtra State Electricity Board (the "MSEB"), Dabhol                        
Power Company is constructing Phase I of an electricity                         
generating power plant south of Mumbai, State of                                
Maharashtra, India.  The power plant will have an initial                       
capacity of 740 megawatts (or 826 megawatts gross) (Phase                       
I), which is expected to begin commercial operations in                         
early 1999.  Enron will be the fuel manager and operator of                     
the plant, which will provide electricity for the growing                       
Maharashtra State economy.                                                      

Enron is currently developing Phase II of the Dabhol                  
power project, a 1,624-megawatt combined-cycle power plant                      
to be fueled by natural gas.  A 20-year power purchase                          
agreement has been signed with the MSEB.  Financing of Phase                    
II is targeted for early 1999, with commercial operations                       
expected to commence in 2001.  Phase II will include                            
construction of a liquefied natural gas (LNG) terminal and                      
harbor, which will be capable of handling LNG to fuel both                      
the Dabhol power projects and for additional natural gas                        
demand in India.                                                                

Other                                                                 

As a result of its development and construction                       
activities, Enron owns or operates various other energy                         
assets and investments, including the following:                                

Enron has a 50% interest in an approximately 110-                     
megawatt fuel-oil-fired diesel engine power plant mounted on                    
two movable barges at Puerto Quetzal on Guatemala's Pacific                     
Coast.  The U.S. flagged vessels went into commercial                           
operation in February 1993, and sell all of their power                         
output under a long-term contract to a large Guatemalan                         
electric utility, a majority interest in which is owned by                      
Guatemala's national electric utility.                                          

Enron currently has interests in two power plants in                  
the Philippines.  The Batangas power project, owned 100% by                     
Enron, is an approximately 110-megawatt fuel-oil-fired                          
diesel engine plant located at Pinamucan, Batangas, on Luzon                    
Island, which began commercial operation in July 1993.  The                     
Subic Bay power project, owned 50% by Enron, is an                              
approximately 116-megawatt fuel-oil-fired diesel engine                         
plant located at the Subic Bay Freeport complex on Luzon                        
Island, which began commercial operation in February 1994.                      
Both projects were developed by Enron and sell power to the                     
National Power Corporation of the Philippines.                                  

Enron operates a 185-megawatt barge-mounted combined-                 
cycle power plant at Puerto Plata on the north coast of the                     
Dominican Republic.  The plant began operation in January                       
1996.  Power is sold pursuant to a 19-year power purchase                       
agreement with the Dominican Republic government utility.                       

Enron has a 50% interest in an approximately 357-mile                 
natural gas pipeline which runs from the northern coast of                      
Colombia to the central region of the country.  Ecopetrol,                      
the state-owned oil company of Colombia, is the sole                            
customer for the transportation services and has a 15-year                      
contractual commitment to pay for all of the initial                            
capacity.                                                                       

Enron has a 100% interest in a 152-megawatt diesel                    
combined-cycle power plant on Hainan Island, an economic                        
free trade zone off the southeastern coast of China.  The                       
independent power project is the first such project                             
developed by a U.S. company in China.  An Enron affiliate is                    
operator and fuel manager.                                                      

Enron has a 50% interest in an 80-megawatt baseload                   
diesel power plant located in Piti, Guam.  The project                          
includes a 20-year power purchase agreement with the Guam                       
Power Authority, an agency of the Guam government.                              
Operations commenced in early 1999.                                             

Enron has an interest in a 507-megawatt combined-cycle                
power plant, including a liquefied natural gas terminal and                     
desalination facility, under construction in Penuelas,                          
Puerto Rico.  Enron is the turnkey contractor and will                          
operate the project.  A 22-year power purchase agreement has                    
been signed with the Puerto Rico Electric Power Authority.                      
Construction commenced in 1997, with commercial operation                       
anticipated in late 1999.                                                       

In addition to the projects referenced above, Enron is                
involved in projects in varying stages of development in                        
Europe, Mozambique, Qatar, China, Egypt and Saudi Arabia,                       
and is pursuing projects elsewhere.                                             

Certain of Enron's operations in the Caribbean area are               
conducted through Enron Americas, Inc. and its subsidiary                       
companies.  Enron Americas' subsidiary Industrias Ventane,                      
organized in 1953, operates the leading natural gas liquids                     
transportation and distribution business in Venezuela.                          
Enron has a natural gas distribution system in Puerto Rico,                     
and liquid fuels businesses in both Puerto Rico and Jamaica.                    

RETAIL ENERGY SERVICES                    

Enron Energy Services Operations, Inc. ("Energy                       
Services") is a nationwide provider of energy outsource                         
products and services to business customers.  This includes                     
sales of natural gas, electricity and energy management                         
services directly to commercial and industrial customers, as                    
well as investments in related businesses.  Energy Services                     
provides end-users with a broad range of energy products and                    
services at competitive prices.  These products and services                    
include energy tariff and information management, demand-                       
side services and financing.  In deregulated markets such as                    
California, products can include electricity and natural gas                    
and related metering and billing.                                               

Energy Services' products and services help commercial                
and industrial businesses understand how they can maximize                      
total energy savings while meeting their operational needs.                     
With a focus on total energy savings and nationwide                             
commodity, services and finance capabilities, Energy                            
Services provides outsourcing and other innovative programs                     
not only to supply electricity and natural gas to                               
businesses, but also to manage unregulated energy assets to                     
reduce their energy consumption, delivery and billing costs,                    
to eliminate inefficiencies of decentralized systems and to                     
minimize the risk of energy prices and operations to the                        
customer.                                                                       

OTHER ENRON BUSINESSES                    

Water                                                                           

In January 1998, Enron formed Azurix Corp. to pursue                  
opportunities in the global water business.  As a key step                      
in establishing this new business, Azurix Europe, an                            
indirect, wholly-owned subsidiary of Azurix Corp., acquired                     
all of the outstanding ordinary share capital of Wessex                         
Water Plc ("Wessex"), a water and wastewater services                           
company based in southwestern England.  In December 1998, as                    
part of restructuring the financing for the Wessex                              
acquisition, Enron became a 50% indirect owner of Azurix                        
Corp.  Azurix is engaged in the business of acquiring,                          
owning, operating and managing water and wastewater assets,                     
providing water and wastewater related services and                             
developing and managing water resources.                                        

Communications                                                                  

Enron is building a long-haul fiber-optic network on                  
strategic routes throughout the United States to create the                     
nation's first Pure IPsm (Internet Protocol) backbone known                     
as the Enron Intelligent Network (EIN).  The EIN, which is                      
enabled with intelligent messaging software, enhances the                       
company's existing national fiber-optic network to bring to                     
market a reliable, bandwidth-on-demand platform for                             
delivering data, applications and streaming rich media to                       
the desktop.  Enron's strategy is based on a business model                     
that offers immediate national reach while minimizing                           
capital deployed through strategic alliances with industry                      
technology leaders whose presence, customer access, market                      
share, and content enable Enron to efficiently enter this                       
new, emerging marketplace.                                                      

Crude Oil Transportation Services                                               

EOTT Energy Partners, L.P. ("EOTT"), a Delaware limited               
partnership, is engaged in the purchasing, gathering,                           
transporting, trading, storage and resale of crude oil and                      
refined petroleum products, and related activities.  EOTT                       
Energy Corp. (a wholly-owned subsidiary of Enron) serves as                     
the general partner of EOTT.  Enron owns a minority interest                    
in EOTT.  Through its North American crude oil gathering and                    
marketing operations, EOTT purchases crude oil produced from                    
approximately 40,000 leases in 18 states and is a purchaser                     
of lease crude oil in Canada.  EOTT provides transportation                     
and trading services for third party purchasers of crude                        
oil.  EOTT is in competition with major oil companies and a                     
number of smaller entities.                                                     

REGULATION                

General                                                                         

Enron's interstate natural gas pipeline companies are                 
subject to the regulatory jurisdiction of the FERC under the                    
Natural Gas Act ("NGA") with respect to rates, accounts and                     
records, the addition of facilities, the extension of                           
services in some cases, the abandonment of services and                         
facilities, the curtailment of gas deliveries and other                         
matters.  Enron's intrastate pipeline companies are subject                     
to state and some federal regulation.  Enron's importation                      
of natural gas from Canada is subject to approval by the                        
Office of Fossil Energy of the Department of Energy ("DOE").                    
Certain activities of Enron are subject to the Natural Gas                      
Policy Act of 1978 ("NGPA").  Enron's pipelines which carry                     
natural gas liquids and refined petroleum products are                          
subject to the regulatory jurisdiction of the FERC under the                    
Interstate Commerce Act as to rates and conditions of                           
service.                                                                        

Enron's power marketing companies are subject to the                  
FERC's regulatory jurisdiction under the Federal Power Act                      
("FPA") with respect to rates, terms and conditions of                          
service and certain reporting requirements.  Certain of the                     
power marketing companies' exports of electricity are                           
subject to approval by the DOE.  Enron's affiliates involved                    
in cogeneration and independent power production are subject                    
to regulation by the FERC under the Public Utility                              
Regulatory Policies Act ("PURPA") and the FPA with respect                      
to rates, the procurement and provision of certain services                     
and operating standards.                                                        

The regulatory structure that has historically applied                
to the natural gas and electric industry is in transition.                      
Legislative and regulatory initiatives, at both federal and                     
state levels, are designed to supplement regulation with                        
increasing competition.  Legislation to restructure the                         
electric industry is under active consideration on both the                     
federal and state levels.  Proposed federal legislation                         
would make the electric industry more competitive by                            
providing retail electric customers with the right to choose                    
their power suppliers.  Modifications to PURPA and the                          
Public Utility Holding Company Act of 1935 ("PUHCA") have                       
also been proposed.  In addition, new technology and                            
interest in self-generation and cogeneration have provided                      
opportunities for alternative sources and supplies of                           
energy.  Retention of existing customers and potential                          
growth of Enron's customer base will depend, in part, upon                      
the ability of Enron to respond to new customer expectations                    
and changing economic and regulatory conditions.                                

Domestic legislation affecting the oil and gas industry               
is under constant review for amendment or expansion.  Also,                     
numerous departments and agencies, both federal and state,                      
are authorized by statute to issue and have issued rules and                    
regulations which, among other things, require permits for                      
the drilling of wells, regulate the spacing of wells,                           
prevent the waste of natural gas and crude oil resources                        
through proration, require drilling bonds and regulate                          
environmental and safety matters.  The regulatory burden on                     
the oil and gas industry increases its cost of doing                            
business and, consequently, affects its ability to compete                      
and profitability.                                                              

A substantial portion of EOG's oil and gas leases in                  
the Big Piney area and in the Gulf of Mexico, as well as                        
some in other areas, are granted by the federal government                      
and administered by the Bureau of Land Management (the                          
"BLM") and the Minerals Management Service (the "MMS")                          
federal agencies.  Operations conducted by EOG on federal                       
oil and gas leases must comply with numerous statutory and                      
regulatory restrictions.  Certain operations must be                            
conducted pursuant to appropriate permits issued by the BLM                     
and the MMS.                                                                    

Various federal, state and local laws and regulations                 
covering the discharge of materials into the environment, or                    
otherwise relating to the protection of the environment, may                    
affect Enron's operations and costs through their effect on                     
oil and gas exploration, development and production                             
operations as well as their effect on the construction,                         
operation and maintenance of pipeline and terminaling                           
facilities.  It is not anticipated that Enron will be                           
required in the near future to expend amounts that are                          
material in relation to its total capital expenditures                          
program by reason of environmental laws and regulations, but                    
inasmuch as such laws and regulations are frequently                            
changed, Enron is unable to predict the ultimate cost of                        
compliance.                                                                     

Enron's international operations are subject to the                   
jurisdiction of numerous governmental agencies in the                           
countries in which its projects are located, with respect to                    
environmental and other regulatory matters.  Generally, many                    
of the countries in which Enron does and will do business                       
have recently developed or are in the process of developing                     
new regulatory and legal structures to accommodate private                      
and foreign-owned businesses.  These regulatory and legal                       
structures and their interpretation and application by                          
administrative agencies are relatively new and sometimes                        
limited.  Many detailed rules and procedures are yet to be                      
issued.  The interpretation of existing rules can also be                       
expected to evolve over time.  Although Enron believes that                     
its operations are in compliance in all material respects                       
with all applicable environmental laws and regulations in                       
the applicable foreign jurisdictions, Enron also believes                       
that the operations of its projects eventually may be                           
required to meet standards that are comparable in many                          
respects to those in effect in the United States and in                         
countries within the European Community.  In addition, as                       
Enron acquires additional projects in various countries, it                     
will be affected by the environmental and other regulatory                      
restrictions of such countries.                                                 

Natural Gas Rates and Regulations                                               

Northern, Transwestern, Florida Gas and Northern Border               
are "natural gas companies" under the NGA and, as such, are                     
subject to the jurisdiction of the FERC.  The FERC has                          
jurisdiction over, among other things, the construction and                     
operation of pipeline and related facilities used in the                        
transportation, storage and sale of natural gas in                              
interstate commerce, including the extension, expansion or                      
abandonment of such facilities.  The FERC also has                              
jurisdiction over the rates and charges for the                                 
transportation of natural gas in interstate commerce and the                    
sale by a natural gas company of natural gas in interstate                      
commerce for resale.  Northern, Transwestern, Florida Gas                       
and Northern Border hold the required certificates of public                    
convenience and necessity issued by the FERC authorizing                        
them to construct and operate all of their pipelines,                           
facilities and properties for which certificates are                            
required in order to transport and sell natural gas for                         
resale in interstate commerce.                                                  

As necessary, Northern, Transwestern, Florida Gas and                 
Northern Border file applications with the FERC for changes                     
in their rates and charges designed to allow them to recover                    
substantially all their costs of providing service to                           
transportation customers, including a reasonable rate of                        
return.  These rates are normally allowed to become                             
effective after a suspension period, and in certain cases                       
are subject to refund under applicable law, until such time                     
as the FERC issues an order on the allowable level of rates.                    

Since 1985, the FERC has made natural gas                             
transportation more accessible to gas buyers and sellers on                     
an open and non-discriminatory basis.  These efforts have                       
significantly altered the marketing and pricing of natural                      
gas.  The FERC's Order No. 636, issued in April 1992,                           
mandated a fundamental restructuring of interstate pipeline                     
sales and transportation services.  Order No. 636 required                      
interstate natural gas pipelines to "unbundle" or segregate                     
the sales, transportation, storage, and other components of                     
their existing sales service, and to separately state the                       
rates for each unbundled service.  Order No. 636 also                           
required interstate pipelines to assign capacity rights they                    
had on upstream pipelines to such pipelines' former sales                       
customers and provided for the recovery by interstate                           
pipelines of costs associated with the transition from                          
providing bundled sales services to providing unbundled                         
transportation and storage services.  The purpose of Order                      
No. 636 was to further enhance competition in the natural                       
gas industry by assuring the comparability of pipeline sales                    
service and services offered by a pipelines' competitors.  A                    
key effect of Order No. 636 and its progeny has been to                         
substantially eliminate merchant sales by pipelines like                        
Northern, Transwestern and Florida Gas.                                         

The series of 636 orders mandated a rate design, known                
as straight fixed variable, which is designed to allow                          
pipelines to recover substantially all fixed costs, a return                    
on equity and income taxes in the capacity reservation                          
component of their rates.  Northern, Transwestern and                           
Florida Gas have implemented the service restructuring                          
required by such orders by unbundling their sales service,                      
offering a limited market based merchant service and                            
establishing a straight fixed variable rate design to                           
recover all fixed costs, including return on equity, in the                     
demand component of their rates.                                                

Enron believes that, overall, Order No. 636 has had a                 
positive impact on Enron and the natural gas industry as a                      
whole.  The structural changes mandated by Order No. 636                        
have resulted in a more competitive industry.  The straight                     
fixed variable rate design included in Order No. 636 allows                     
pipelines to recover in the demand component of their rates                     
all fixed costs, including income taxes and return on                           
equity, allocated to firm customers.  Since a pipeline                          
recovers demand costs regardless of whether gas is ever                         
transported, the straight fixed variable rate design has                        
reduced the volatility of the revenue stream to pipelines.                      

Additional proposals and proceedings that might affect                
the natural gas industry are pending before Congress, the                       
FERC and the courts.  Enron cannot predict when or whether                      
any such proposals or proceedings may become effective.                         

The rates at which natural gas is sold in Texas to gas                
utilities serving customers within an incorporated area are                     
subject to the original jurisdiction of the Railroad                            
Commission of Texas.  The rates set by city councils or                         
commissions for gas sold within their jurisdiction may be                       
appealed to the Railroad Commission.  Regulation of                             
intrastate gas sales and transportation by the Railroad                         
Commission is governed by certain provisions of the Texas                       
Gas Utility Regulatory Act of 1983.  The Railroad Commission                    
also regulates production activities and to some degree the                     
operation of affiliated special marketing programs.                             

Electric Industry Regulation                                                    

Historically, the electric industry has been subject to               
comprehensive regulation at the federal and state levels.                       
The FERC regulated sales of electric power at wholesale and                     
the transmission of electric energy in interstate commerce                      
pursuant to the FPA.  The FERC subjected public utilities                       
under the FPA to rate and tariff regulation, accounting and                     
reporting requirements, as well as oversight of mergers and                     
acquisitions, securities issuances and dispositions of                          
facilities.  States or local authorities have historically                      
regulated the distribution and retail sale of electricity,                      
as well as the construction of generating facilities.                           

Enacted in 1978, PURPA created opportunities for                      
independent power producers, including cogenerators.  If a                      
generating project obtained the status of a "Qualifying                         
Facility," it was exempted by PURPA from most provisions of                     
the FPA and certain state laws relating to securities, rate                     
and financial regulation.  PURPA also required electric                         
utilities (i) to purchase electricity generated by                              
Qualifying Facilities at a price based on the utility's                         
avoided cost of purchasing electricity or generating                            
electricity itself, and (ii) to sell supplementary, back-up,                    
maintenance and interruptible power to Qualifying Facilities                    
on a just and reasonable and non-discriminatory basis.                          

PUHCA subjects certain entities that directly or                      
indirectly own, control or hold the power to vote 10% of the                    
outstanding voting securities of a "public utility company"                     
or a company which is a "holding company" of a public                           
utility company to registration requirements of the                             
Securities and Exchange Commission ("SEC") and regulation                       
under PUHCA, unless the entity is eligible for an exemption                     
or has been granted an SEC order declaring the entity not to                    
be a holding company.  Affiliates, or direct or indirect                        
holders of 5% of the voting securities of such companies,                       
are also subject to regulation under PUHCA unless so                            
eligible for an exemption or SEC order.  PUHCA requires                         
registration for a holding company of a public utility                          
company, and requires a public utility holding company to                       
limit its operations to a single integrated utility system                      
and to divest any other operations not functionally related                     
to the operation of the utility system.  A public utility                       
company which is a subsidiary of a registered holding                           
company under PUHCA is subject to financial and                                 
organizational regulation, including SEC approval of its                        
financing transactions.                                                         

The Energy Policy Act of 1992 ("EP Act") exempted from                
some traditional federal utility regulation generators                          
selling power at wholesale in an effort to enhance                              
competition in the wholesale generation market.  The EP Act                     
also authorized FERC to require utilities to transport and                      
deliver or "wheel" energy for the supply of bulk power to                       
wholesale customers.                                                            

Recent FERC regulatory initiatives are changing the                   
electric power industry.  In April 1996, FERC paved the way                     
for the transition to more competitive electric markets by                      
issuing its Order Nos. 888 and 889.  Order No. 888 required                     
utilities to provide third parties wholesale open access to                     
transmission facilities on terms comparable to those that                       
apply when utilities use their own systems.  Utilities were                     
required by the order to file open access tariffs in July                       
1996.  Power pools, which are associations of interconnected                    
electric transmission and distribution systems that have an                     
agreement for integrated and coordinated operations, were                       
directed to file their open access tariffs by the end of                        
1996.  These tariffs enable eligible parties to obtain                          
wholesale transmission service over utilities' transmission                     
systems.  In Order No. 888, FERC stated its intention to                        
permit utilities to recover legitimate, verifiable and                          
prudently incurred costs that are rendered uneconomic or                        
"stranded" as a result of customers taking advantage of                         
wholesale open access to meet their power needs from others.                    
In Order No. 889, FERC required utilities owning                                
transmission facilities to adopt procedures for an open                         
access same-time information system ("OASIS") that will make                    
available, on a real-time basis, pertinent information                          
concerning each transmission utility's services.  The order                     
also promulgated standards of conduct to ensure that                            
utilities separate their transmission functions from their                      
wholesale power merchant functions and to prevent the misuse                    
of commercially valuable information.  In March 1997 FERC                       
issued its orders on rehearing of Order Nos. 888 and 889.                       
In these orders FERC upheld the basic open access and OASIS                     
regulatory framework established in Order Nos. 888 and 889,                     
while making certain modifications to its open access and                       
stranded cost recovery rules.                                                   

Congress is considering legislation to modify federal                 
laws affecting the electric industry.  Bills have been                          
introduced in the Senate and the House of Representatives                       
that would, among other things, provide retail electric                         
customers with the right to choose their power suppliers.                       
Modifications to PURPA and PUHCA have also been proposed.                       
In addition, various states have either enacted or are                          
considering legislation designed to deregulate the                              
production and sale of electricity.  Deregulation is                            
expected to result in a shift from cost-based rates to                          
market-based rates for electric energy and related services.                    
Although the legislation and regulatory initiatives vary,                       
common themes include the availability of market pricing,                       
retail customer choice, recovery of stranded costs, and                         
separation of generation assets from transmission,                              
distribution and other assets.  It is unclear whether or                        
when all power customers will obtain open access to power                       
supplies.  Decisions by regulatory agencies may have a                          
significant impact on the future economics of the power                         
marketing business.                                                             

The Oregon Public Utility Commission ("OPUC"), a three-               
member commission appointed by the Governor of Oregon,                          
approves PGE's retail rates and establishes conditions of                       
utility service.  The OPUC ensures that prices are fair and                     
equitable and provides PGE an opportunity to earn a fair                        
return on its investment.  In addition, the OPUC regulates                      
the issuance of securities and prescribes the system of                         
accounts to be kept by Oregon utilities.  PGE is also                           
subject to the jurisdiction of the FERC with regard to the                      
transmission and sale of wholesale electric energy,                             
licensing of hydroelectric projects and certain other                           
matters.  Construction of new generating facilities requires                    
a permit from Oregon Energy Facility Siting Counsel.                            

Environmental Regulations                                                       

Enron and its subsidiaries are subject to extensive                   
federal, state and local laws and regulations covering the                      
discharge of materials into the environment, or otherwise                       
relating to the protection of the environment, and which                        
require expenditures for remediation at various operating                       
facilities and waste disposal sites, as well as expenditures                    
in connection with the construction of new facilities.                          
Enron believes that its operations and facilities are in                        
general compliance with applicable environmental                                
regulations.  Environmental laws and regulations have                           
changed substantially and rapidly over the last 20 years,                       
and Enron anticipates that there will be continuing changes.                    
The clear trend in environmental regulation is to place more                    
restrictions and limitations on activities that may impact                      
the environment, such as emissions of pollutants, generation                    
and disposal of wastes and use and handling of chemical                         
substances.  Increasingly strict environmental restrictions                     
and limitations have resulted in increased operating costs                      
for Enron and other businesses throughout the United States,                    
and it is possible that the costs of compliance with                            
environmental laws and regulations will continue to                             
increase.  Enron will attempt to anticipate future                              
regulatory requirements that might be imposed and to plan                       
accordingly in order to remain in compliance with changing                      
environmental laws and regulations and to minimize the costs                    
of such compliance.                                                             

The Comprehensive Environmental Response, Compensation                
and Liability Act ("CERCLA"), also known as the "Superfund"                     
law, requires payments for cleanup of certain abandoned                         
waste disposal sites, even though such waste disposal                           
activities were undertaken in compliance with regulations                       
applicable at the time of disposal.  Under the Superfund                        
legislation, one party may, under certain circumstances, be                     
required to bear more than its proportional share of cleanup                    
costs at a site where it has responsibility pursuant to the                     
legislation, if payments cannot be obtained from other                          
responsible parties.  Other legislation mandates cleanup of                     
certain wastes at facilities that are currently being                           
operated.  States also have regulatory programs that can                        
mandate waste cleanup.  CERCLA authorizes the Environmental                     
Protection Agency ("EPA") and, in some cases, third parties                     
to take actions in response to threats to the public health                     
or the environment and to seek to recover from the                              
responsible classes of persons the costs they incur.  The                       
scope of financial liability under these laws involves                          
inherent uncertainties.  Enron has entered into consent                         
decrees with the EPA with respect to the cleanup of two                         
Superfund sites.  Enron has received requests for information                   
from the EPA and state agencies concerning what wastes Enron                    
may have sent to certain sites, and it has also received                        
requests for contribution from other parties with respect to                    
the cleanup of other sites.  However, management does not                       
believe that any costs incurred in connection with these                        
sites (either individually or in the aggregate) will have a                     
material impact on Enron's financial position or results of                     
operations.  (See Item 3, "Legal Proceedings").                                 

PGE's current and historical operations are subject to                
a wide range of environmental protection laws covering air                      
and water quality, noise, waste disposal, and other                             
environmental issues.  PGE is also subject to the Federal                       
Rivers and Harbors Act of 1899 and similar Oregon laws under                    
which it must obtain permits from the U.S. Army Corps of                        
Engineers or the Oregon Division of State Lands to construct                    
facilities or perform activities in navigable waters of the                     
State.  State agencies or departments which have direct                         
jurisdiction over environmental matters include the                             
Environmental Quality Commission, the Oregon Department of                      
Environmental Quality, the Oregon Office of Energy and                          
Oregon Energy Facility Siting Counsel.  Environmental                           
matters regulated by these agencies include the siting and                      
operation of generating facilities and the accumulation,                        
cleanup and disposal of toxic and hazardous wastes.                             

Water Industry Regulation                                                       

In the United States, the rates for water and                         
wastewater services are generally subject to state and local                    
laws and regulation.  The Safe Drinking Water Act directs                       
the EPA to set drinking water standards for the community                       
water supply systems in the United States.  The Federal                         
Water Pollution Control Act (the "Clean Water Act")                             
establishes a system of standards, permits and enforcement                      
procedures for the discharge of pollutants from industrial                      
and municipal wastewater sources.  The law requires permits                     
for discharges from water treatment facilities and sets                         
treatment standards for industries and wastewater treatment                     
plants.  Discharge permits issued under the Clean Water Act                     
are subject to renewal once every five years.  The economic                     
aspects of the water industry in England and Wales is                           
principally regulated under the provisions of the Water Act                     
1989, the Water Industry Act 1991 (which consolidated the                       
Water Act 1989) and the Water Resources Act 1991.  In                           
general, most countries where Azurix has invested, or                           
intends to consider investments, have drinking water quality                    
and environmental laws and regulations.  Azurix intends to                      
invest in companies or projects that operate in material                        
compliance with drinking water quality and environmental                        
laws and regulations.  However, Azurix cannot guarantee that                    
due diligence performed by it in advance of investing in an                     
entity will identify any or all non-compliance with                             
environmental laws and regulations by such entities.                            

Other                                                                           

PGE is a 67.5% owner of the Trojan Nuclear Plant                      
("Trojan").  The Nuclear Regulatory Commission ("NRC")                          
regulates the licensing and decommissioning of nuclear power                    
plants.  In 1993 the NRC issued a possession-only license                       
amendment to PGE's Trojan operating license and in early                        
1996 approved the Trojan Decommissioning Plan.  Approval of                     
the Trojan Decommissioning Plan by the NRC and Oregon Energy                    
Facility Siting Counsel has allowed PGE to commence                             
decommissioning activities, which are proceeding                                
satisfactorily and within approved cost estimates.  PGE                         
received regulatory approval in 1998 to ship and dispose of                     
the Trojan reactor vessel as a single package, called the                       
Reactor Vessel and Internals Removal Project.  In 1998, PGE                     
applied for approval of the Independent Spent Fuel Storage                      
Installation Project, and expects full approval in 1999.                        
Equipment removal and disposal activities will also continue                    
in 1999.  Trojan will be subject to NRC regulation until                        
Trojan is fully decommissioned, all nuclear fuel is removed                     
from the site and the license is terminated.  The Oregon                        
Department of Energy also monitors Trojan.                                      

                                                                [Download Table]
                     REVENUES BY BUSINESS SEGMENT                

  The following table presents revenues for each business segment
(in millions):                                                   


                                   Year Ended December 31,       
                                   1998      1997      1996      

                                                                 
Exploration and Production                                       
  Natural Gas and Other Products                                 
     Unaffiliated                $   728   $   774   $   620     
     Intersegment                    114       169       197     
                                     842       943       817     
  Other Revenues                                                 
     Unaffiliated                     22        15        27     
     Intersegment                     20      (61)      (20)     
                                      42      (46)         7     

  TOTAL                              884       897       824     

Transportation and Distribution                                  
  Natural Gas and Other Products                                 
     Unaffiliated                     16        10        11     
     Intersegment                      -         -         8     
                                      16        10        19     
  Electricity                                                    
     Unaffiliated                  1,137       712         -     
     Intersegment                      -         -         -     
                                   1,137       712         -     
  Transportation                                                 
     Unaffiliated                    617       639       682     
     Intersegment                     11        10        15     
                                     628       649       697     
  Other Revenues                                                 
     Unaffiliated                     63        41         9     
     Intersegment                      5         4         -     
                                      68        45         9     

  TOTAL                            1,849     1,416       725     

Wholesale Energy Operations                                      
 and Services                                                    
  Natural Gas and Other Products                                 
     Unaffiliated                 11,916    11,778    10,013     
     Intersegment                    399       595       477     
                                  12,315    12,373    10,490     
  Electricity                                                    
     Unaffiliated                 12,714     4,376       980     
     Intersegment                      -         -         -     
                                  12,714     4,376       980     
  Transportation                                                 
     Unaffiliated                     11        13        25     
     Intersegment                      1         2         2     
                                      12        15        27     
  Other Revenues                                                 
     Unaffiliated                  2,579     1,177       395     
     Intersegment                    105        81        12     
                                   2,684     1,258       407     

  TOTAL                           27,725    18,022    11,904     

Retail Energy Services                                           
  Natural Gas and Other Products                                 
     Unaffiliated                    616       649       513     
     Intersegment                      -         2        15     
                                     616       651       528     
  Electricity                                                    
     Unaffiliated                     84         1         -     
     Intersegment                      -         -         -     
                                      84         1         -     
  Other Revenues                                                 
     Unaffiliated                    372        33         -     
     Intersegment                      -         -         -     
                                     372        33         -     

  TOTAL                            1,072       685       528     

Corporate and Other                                              
  Natural Gas and Other Products                                 
     Unaffiliated                      -         -         -     
     Intersegment                    159         -         -     
                                     159         -         -     
  Electricity                                                    
     Unaffiliated                      3        12         -     
     Intersegment                      -         -         -     
                                       3        12         -     
  Other Revenues                                                 
     Unaffiliated                    382        43        14     
     Intersegment                    (28)        -         -     
                                     354        43        14     

  TOTAL                              516        55        14     

Intersegment Eliminations           (786)     (802)     (706)    

Total Revenues                   $31,260   $20,273   $13,289     

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CURRENT EXECUTIVE OFFICERS OF THE REGISTRANT                    

Name and Age      Present Principal Position and Other Material         
         Positions Held During Last Five Years

Kenneth L. Lay (56)        Chairman of the Board and Chief                      
           Executive Officer, Enron Corp., since
February 1986.            

Jeffrey K. Skilling (45)   President and Chief Operating                        
         Officer, Enron Corp., since January
        1997.  Chief Executive Officer and
          Managing Director of Enron Capital &
        Trade Resources Corp. ("ECT") from
       June 1995 to December 1996.  From
            August 1990 to June 1995, Mr. Skilling
          served ECT in a variety of executive
managerial positions.     

Ken L. Harrison (56)       Vice Chairman, Enron Corp., since July               
            1997.  Chairman of the Board and Chief
           Executive Officer of Portland General
  Electric Company since 1987.

Rebecca P. Mark (44)       Vice Chairman, Enron Corp., since May                
         1998.  Chairman and Chief Executive
       Officer, Azurix Corp., since July
          1998.  Chairman, Enron International
         Inc., from January 1996 until March
           1999.  Chief Executive Officer, Enron
           International Inc., from January 1996
      to May 1998.  Chairman and Chief
            Executive Officer of Enron Development
            Corp. from July 1991 until March 1998.
          Vice President and Chief Development
            Officer of Enron Power Corp. from July
1990 to July 1991.        

Mark A. Frevert (44)       President and Chief Executive Officer                
         of ECT Europe and Enron Europe Ltd.
           since March 1997.  From 1993 to March
       1997, Mr. Frevert served ECT in a
     variety of executive managerial
positions.                

Stanley C. Horton (49)     Chairman and Chief Executive                         
        Officer, Enron Gas Pipeline Group,
          since January 1997.  Co-Chairman and
      Chief Executive Officer of Enron
            Operations Corp. from February 1996 to
       January 1997. President and Chief
           Operating Officer of Enron Operations
            Corp. from June 1993 to February 1996.
       President of Northern Natural Gas
          Company from June 1991 to June 1993.
           President of Florida Gas Transmission
    Company from 1988 to May 1991.

Lou L. Pai (51)            Chairman of the Board and Chief                      
       Executive Officer of Enron Energy
           Services since March 1997.  President
        and Chief Operating Officer of ECT
           from August 1995 to March 1997.  From
        March 1993 to August 1995, Mr. Pai
          served ECT in a variety of executive
managerial positions.     

Kenneth D. Rice (40)       Chairman and Chief Executive Officer                 
        of ECT - North America since March
         1997.  From 1993 to March 1997, Mr.
     Rice served ECT in a variety of
     executive managerial positions.

Joseph W. Sutton (51)      Chief Executive Officer, Enron                       
         International Inc., since May 1998.
          President, Enron International Inc.,
       since January 1996. President and
    Chief Operating Officer, Enron
         Development Corp., from May 1995 to
          January 1996.  Vice President, Enron
           Development Corp., from 1992 to 1995.

J. Clifford Baxter (40)    Senior Vice President, Corporate                     
     Development, Enron Corp., since
        January 1997.  Vice Chairman, ECT,
    since February 1999.  Managing
          Director, ECT, 1996; Vice President,
            Corporate Development, ECT, 1995-1996;
       Managing Director, Koch Equities,
            1995; Director, Corporate Development,
ECT, 1992-1994.           

Richard A. Causey (39)     Senior Vice President and Chief                      
         Accounting and Information Officer,
      Enron Corp., since January 1997.
            Managing Director, ECT, from June 1996
           to January 1997; Vice President, ECT,
     from January 1992 to June 1996.

James V. Derrick, Jr.(54)  Senior Vice President and General                    
            Counsel, Enron Corp., since June 1991.
           Partner, Vinson & Elkins from January
1977 until June 1991.     

Andrew S. Fastow (37)      Senior Vice President and Chief                      
         Financial Officer since March 1998.
           Senior Vice President, Finance, Enron
       Corp., from January 1997 to March
          1998.  Managing Director, Retail and
     Treasury, ECT, from May 1995 to
         January 1997.  Vice President, ECT,
    from January 1993 to May 1995.
         Account Director, ECT, from 1990 to
1993.                     

Item 2.  PROPERTIES                                                             

Oil and Gas Exploration and Production Properties and                           
Reserves                                                                        

Reserve Information                                                   

For estimates of EOG's net proved reserves and proved                 
developed reserves of natural gas and liquids, including                        
crude oil, condensate and natural gas liquids, see Note 18                      
to the Consolidated Financial Statements.                                       

Estimates of proved and proved developed reserves at                  
December 31, 1998, 1997 and 1996 were based on studies                          
performed by EOG's engineering staff for reserves in the                        
United States, Canada, Trinidad, India and China.  Opinions                     
by DeGolyer and MacNaughton, independent petroleum                              
consultants, for the years ended December 31, 1998, 1997 and                    
1996 covering producing areas containing 39%, 54% and 64%,                      
respectively, of proved reserves (excluding deep Paleozoic                      
methane reserves) of EOG on a net-equivalent-cubic-feet-of-                     
gas basis. These opinions indicate that the estimates of proved                 
reserves prepared by EOG's engineering staff for the properties                 
reviewed by DeGolyer and MacNaughton, when compared in total                    
on a net-equivalent-cubic-feet-of-gas basis, do not differ                      
more than 5% from the estimates prepared by DeGolyer and                        
MacNaughton.  In addition, the deep Paleozoic methane                           
reserves were covered by the opinion of DeGolyer and                            
MacNaughton at December 31, 1995.  All reports by DeGolyer                      
and MacNaughton were developed utilizing geological and                         
engineering data provided by EOG.                                               

There are numerous uncertainties inherent in estimating               
quantities of proved reserves and in projecting future rates                    
of production and timing of development expenditures,                           
including many factors beyond the control of the producer.                      
The reserve data set forth in Note 18 to the Consolidated                       
Financial Statements represents only estimates.  Reserve                        
engineering is a subjective process of estimating                               
underground accumulations of natural gas and liquids,                           
including crude oil, condensate and natural gas liquids,                        
that cannot be measured in an exact manner.  The accuracy of                    
any reserve estimate is a function of the amount and quality                    
of available data and of engineering and geological                             
interpretation and judgment.  As a result, estimates of                         
different engineers normally vary.  In addition, results of                     
drilling, testing and production subsequent to the date of                      
an estimate may justify revision of such estimate.                              
Accordingly, reserve estimates are often different from the                     
quantities ultimately recovered.  The meaningfulness of such                    
estimates is highly dependent upon the accuracy of the                          
assumptions upon which they were based.                                         

In general, the volume of production from oil and gas                 
properties owned by EOG declines as reserves are depleted.                      
Except to the extent EOG acquires additional properties                         
containing proved reserves or conducts successful                               
exploration and development activities, or both, the proved                     
reserves of EOG will decline as reserves are produced.                          
Volumes generated from future activities of EOG are                             
therefore highly dependent upon the level of success in                         
acquiring or finding additional reserves and the costs                          
incurred in doing so.                                                           

EOG's estimates of reserves filed with other federal                  
agencies agree with the information set forth in Note 18 to                     
the Consolidated Financial Statements.                                          

Producing Oil and Gas Wells                                           

The following table reflects EOG's ownership at                       
December 31, 1998 in gas and oil wells located in Texas, the                    
Gulf of Mexico, Oklahoma, New Mexico, Utah, Wyoming and                         
various other states, Canada, Trinidad, India and China.                        
"Net" is obtained by multiplying "Gross" by EOG's working                       
interests in the properties.  Gross gas and oil wells                           
include 255 with multiple completions.                                          

Productive          Productive            Total                 
Gas Wells           Oil Wells       Productive Wells            
Gross      Net      Gross      Net      Gross      Net                

5,253     3,788       897       506     6,150     4,294               

Acreage                                                               

The following table summarizes EOG's developed and                    
undeveloped acreage at December 31, 1998.  Excluded is                          
acreage in which EOG's interest is limited to owned royalty,                    
overriding royalty and other similar interests.                                 

                                                                [Download Table]

                     Developed          Undeveloped                Total        
                   Gross     Net        Gross      Net      Gross         Net   

                                                                                
United States                                                                   
 California       21,324    16,747    821,738    748,238     843,062     764,985
 Texas           413,305   220,075    637,850    513,807   1,051,155     733,882
 Offshore                                                                       
  Gulf of Mexico 283,571   126,306    564,775    417,827     848,346     544,133
 Wyoming         153,597   116,092    324,531    251,792     478,128     367,884
 Oklahoma        188,963   104,633    122,848     87,264     311,811     191,897
 Montana         119,686     1,651    146,013    103,779     265,699     105,430
 New Mexico       71,945    35,091    106,133     64,232     178,078      99,323
 Utah             74,454    50,311     40,873     27,205     115,327      77,516
 Mississippi       5,144     5,052     43,174     42,950      48,318      48,002
 Kansas           17,339    15,489      6,747      4,009      24,086      19,498
 Colorado         20,619     1,233     30,908     13,618      51,527      14,851
 Louisiana         6,285     5,429      6,520      3,767      12,805       9,196
 Arkansas          8,522     1,319      2,457      2,010      10,979       3,329
 Other             5,247       984      1,015        795       6,262       1,779
   Total       1,390,001   700,412  2,855,582  2,281,293   4,245,583   2,981,705

Canada                                                                          
 Saskatchewan    251,805   235,121    288,834    283,732     540,639     518,853
 Alberta         372,612   243,225    336,713    243,971     709,325     487,196
 Manitoba         11,743     9,954     23,730     21,966      35,473      31,920
 British Columbia    656       164      8,755      5,553       9,411       5,717
   Total Canada  636,816   488,464    658,032    555,222   1,294,848   1,043,686

Other International                                                             
 China             5,000     2,500  1,844,531    922,266   1,849,531     924,766
 Venezuela            -         -     268,413    241,572     268,413     241,572
 India            98,300    29,490    564,307    169,292     662,607     198,782
 France               -         -     168,032    168,032     168,032     168,032
 Trinidad          4,200     3,990    147,233    143,490     151,433     147,480
Total Other                                                                     
  International  107,500    35,980  2,992,516  1,644,652   3,100,016   1,680,632
      Total    2,134,317 1,224,856  6,506,130  4,481,167   8,640,447   5,706,023

Drilling and Acquisition Activities                                   

During each of the years ended December 31, 1998, 1997              
and 1996, EOG spent approximately $769 million, $693 million                    
and $599 million, respectively, for exploratory and                             
development drilling and acquisition of leases and producing                    
properties.  EOG drilled, participated in the drilling of or                    
acquired wells as set out in the table below for the periods                    
indicated:                                                                      

                                                                [Download Table]

                                      Year Ended December 31,             
                              1998             1997            1996       
                          Gross    Net      Gross   Net     Gross   Net   

                                                                          
Development Wells Completed                                               
   North America                                                          
     Gas                   478  402.80       467  352.90     396   325.04 
     Oil                    38   34.98        94   74.85      80    57.46 
     Dry                    79   62.16       101   80.01      80    68.77 
        Total              595  499.94       662  507.76     556   451.27 
   Outside North America                                                  
     Gas                     -     -          12    3.60      -        -  
     Oil                    21    6.30         6    1.80       1     0.30 
     Dry                     -     -           -       -      -        -  
        Total               21    6.30        18    5.40       1     0.30 
   Total Development       616  506.24       680  513.16     557   451.57 

Exploratory Wells Completed                                               
   North America                                                          
     Gas                     5    4.40         8    5.12      14    10.36 
     Oil                     6    5.50         -       -       1     0.78 
     Dry                    22   15.70        12    7.53      26    19.00 
        Total               33   25.60        20   12.65      41    30.14 
   Outside North America                                                  
     Gas                     1    1.00         -       -      -        -  
     Oil                     1    0.90         -       -      -        -  
     Dry                     -       -         -       -       1     0.50 
        Total                2    1.90         -       -       1     0.50 
   Total Exploratory        35   27.50        20   12.65      42    30.64 
        Total              651  533.74       700  525.81     599   482.21 
Wells in Progress           28   15.73        44   36.39      87    61.08 
 at End of Period                                                         
        Total              679  549.47       744  562.20     686   543.29 
Wells Acquired                                                            
       Gas                 333  317.23*      227   82.45*    350   148.20*
     Oil                     -    1.70*       48   20.50*      5     0.65 
        Total              333  318.93       275  102.95     355   148.85 

<FN>                                                                      
*  Includes acquisition of additional interests in certain wells          
   in which EOG previously held an interest.                              

All of EOG's drilling activities are conducted on a contract basis  
with independent drilling contractors.  EOG owns no drilling equipment.         

Natural Gas Transmission                                                        

Enron's domestic natural gas facilities include                       
approximately 31,000 miles of transmission lines, five                          
underground gas storage fields and two liquefied natural gas                    
storage facilities.  Enron also owns interests in pipeline and                  
related facilities associated with its participation and                        
investments in jointly-owned pipeline systems.                                  

Substantially all the transmission lines of Enron are                 
constructed on rights-of-way granted by the apparent record                     
owners of such property.  In many instances, lands over                         
which rights-of-way have been obtained are subject to prior                     
liens which have not been subordinated to the right-of-way                      
grants.  In some cases, not all of the apparent record                          
owners have joined in the right-of-way grants, but in                           
substantially all such cases, signatures of the owners of                       
majority interests have been obtained.  Permits have been                       
obtained from public authorities to cross over or under, or                     
to lay facilities in or along, water courses, county roads,                     
municipal streets and state highways, and in some instances,                    
such permits are revocable at the election of the grantor,                      
or, the pipeline may be required to move its facilities at                      
its own expense.  Permits have also been obtained from                          
railroad companies to cross over or under lands or rights-of-                   
way, many of which are also revocable at the grantor's                          
election.  Some such permits require annual or other                            
periodic payments.  In a few minor cases, property for                          
pipeline purposes was purchased in fee.                                         

In most cases, Enron's transmission subsidiaries have                 
the right of eminent domain to acquire rights-of-way and                        
lands necessary for their pipelines and appurtenant                             
facilities.                                                                     

Enron's regulator and compressor stations, clean fuel                 
facilities and offices are located on tracts of land owned                      
by it in fee or leased from others.                                             

Enron is of the opinion that it has generally                         
satisfactory title to its rights-of-way and lands used in                       
the conduct of its businesses, subject to liens for current                     
taxes, liens incident to operating agreements and minor                         
encumbrances, easements and restrictions which do not                           
materially detract from the value of such property or the                       
interest of Enron therein or the use of such properties in                      
such businesses.                                                                

International Power Plants and Pipelines                                        

Enron's principal international operating power plants                
and pipelines and appurtenant facilities are (i) situated on                    
land owned by Enron (or joint ventures in which Enron has an                    
ownership interest) in fee or land under the control of                         
Enron (or such joint ventures) pursuant to valid existing                       
leases, licenses, easements or other agreements, or (ii) in                     
the case of certain power plants, barge-mounted on vessels                      
owned by Enron (or such joint ventures).  Power plants and                      
pipelines in which Enron owns an interest are set forth in                      
the following table:                                                            

                                                                   Enron
Facility       Location             Fuel       Size/Capacity       Interest 

Power Plants:                                                                   
Puerto Quetzel   Guatemala            Gas            110 MW              50%    
Batangas         Philippines          Fuel oil       110 MW             100%    
Subic Bay        Philippines          Fuel oil       116 MW              50%    
Bitterfeld       Germany              Gas            125 MW              50%    
Puerto Plata     Dominican Republic   Fuel oil       185 MW              50%    
Hainan Island    China                Diesel         152 MW             100%    
Piti             Guam                 Diesel          80 MW              50%    

Pipelines:                                                                      
TGS              Argentina              -           1.9 Bcf/d;           35%    
                               4,104 miles
Centragas        Colombia               -          110 MMcf/d;           50%    
                                 357 miles
Transredes       Bolivia                -           1.3 Bcf/d;           25%    
                                   35 MMb/d;
                               3,093 miles

Electric Utility Properties                                                     

PGE's principal plants and appurtenant generating                     
facilities and storage reservoirs are situated on land owned                    
by PGE in fee or land under the control of PGE pursuant to                      
valid existing leases, federal or state licenses, easements,                    
or other agreements.  In some cases meters and transformers                     
are located upon the premises of customers.  The indenture                      
securing PGE's first mortgage bonds constitutes a direct                        
first mortgage lien on substantially all utility property                       
and franchises, other than expressly excepted property.                         

Generating facilities owned by PGE are set forth in the               
following table:                                                                

                                   PGE Net
                                  MW
Facility              Location           Fuel     Capability              
Wholly Owned:                                                             
Faraday             Estacada, OR         Hydro       44                   
North Fork          Estacada, OR         Hydro       54                   
Oak Grove           Three Lynx, OR       Hydro       44                   
River Mill          Estacada, OR         Hydro       25                   
Pelton              Madras, OR           Hydro      108                   
Round Butte         Madras, OR           Hydro      300                   
Bull Run            Bull Run, OR         Hydro       22                   
Sullivan            West Linn, OR        Hydro       16                   
Beaver              Clatskanie, OR       Gas/Oil    500                   
Coyote Springs      Boardman, OR         Gas/Oil    241                   

                                                     PGE
                                                      Interest
Jointly Owned:                                                                  

Boardman            Boardman, OR         Coal       348      65.8%        
Centralia           Centralia, WA        Coal        33       2.5%        
Colstrip 3 & 4      Colstrip, MT         Coal       288      20.0%        
                               2,023

PGE holds licenses under the Federal Power Act for its                
hydroelectric generating plants.  All of its licenses expire during the         
years 2001 to 2006.  The FERC requires that a notice of intent to               
relicense these projects be filed approximately five years prior to             
expiration of the license.  PGE filed for relicensing of the Pelton             
Round Butte Project in December 1998 and is actively pursuing the               
renewal of all other licenses.  The State of Oregon also has licensed           
all or portions of five hydro plants.                                           

Following the 1993 closure of the Trojan nuclear plant, PGE was       
granted a possession-only license amendment by the NRC.  In early 1996          
PGE received NRC approval of its Trojan decommissioning plan.                   

Combustion turbine generators at the Beaver Combustion Turbine        
Plant operate under a 25-year lease agreement.  In February 1999, PGE           
exercised its option to purchase the generators for $37 million at the          
August 1999 termination of the lease.  PGE leases its headquarters              
complex in downtown Portland and the coal-handling facilities and               
certain railroad cars for the Boardman coal plant.                              

Item 3.  LEGAL PROCEEDINGS                                                      

Enron is a party to various claims and litigation, the significant    
items of which are discussed below.  Although no assurances can be              
given, Enron believes, based on its experience to date and after                
considering appropriate reserves that have been established, that the           
ultimate resolution of such items, individually or in the aggregate,            
will not have a materially adverse impact on Enron's financial position         
or its results of operations.                                                   

Litigation.  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 ratability claims.  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.                                                          

On November 21, 1996, an explosion occurred in or around the          
Humerto Vidal Building in San Juan, Puerto Rico.  The explosion resulted        
in fatalities, bodily injuries and damage to the building and                   
surrounding property.  San Juan Gas Company, Inc. (San Juan), an Enron          
subsidiary, operated a propane/air distribution system in the vicinity.         
Although San Juan did not provide service to the building, the                  
investigation report of the National Transportation Safety Board (NTSB)         
concluded that the probable cause of the incident was propane leaking           
from San Juan's distribution system.  San Juan and Enron strongly               
disagree with the NTSB findings.  The NTSB investigation found no path          
of migration of propane from San Juan's system to the building and no           
forensic evidence that propane fueled the explosion.  Enron, San Juan,          
several San Juan affiliates and third parties have been named as                
defendants in numerous lawsuits filed in U.S. District Court for the            
district of Puerto Rico and the Commonwealth court of Puerto Rico.              
These suits, which seek damages for wrongful death, personal injury,            
business interruption and property damage, allege that negligence of            
Enron and San Juan, among others, caused the explosion.  Enron and San          
Juan are vigorously contesting 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.                                                          

Trojan Investment Recovery.  In early 1993, PGE ceased commercial     
operation of Trojan.  In April 1996 a circuit court judge in Marion             
County, Oregon found that the OPUC could not authorize PGE to collect a         
return on its undepreciated investment in Trojan, contradicting a               
November 1994 ruling from the same court.  The ruling was the result of         
an appeal of PGE's 1995 general rate order which granted PGE recovery           
of, and a return on, 87% of its remaining investment in Trojan.  The            
1994 ruling was appealed to the Oregon Court of Appeals and stayed              
pending the appeal of the OPUC's March 1995 order.  Both PGE and the            
OPUC have separately appealed the April 1996 ruling, which appeals were         
combined with the appeal of the November 1994 ruling at the Oregon Court        
of Appeals.  On June 24, 1998, the Court of Appeals of the State of             
Oregon ruled that the OPUC does not have the authority to allow PGE to          
recover a rate of return on its undepreciated investment in the Trojan          
generating facility.  The court upheld the OPUC's authorization of PGE's        
recovery of its undepreciated investment in Trojan.                             

PGE has filed a petition for review with the Oregon Supreme Court.        
The OPUC has also filed such a petition for review.  In addition, on            
August 26, 1998, the Utility Reform Project filed a Petition for Review         
with the Oregon Supreme Court seeking review of that portion of the             
Oregon Court of Appeals decision relating to PGE's recovery of its              
undepreciated investment in Trojan.  Enron cannot predict the outcome of        
these actions.  Additionally, due to uncertainties in the regulatory            
process, management cannot predict, with certainty, what ultimate rate-         
making action the OPUC will take regarding PGE's recovery of a rate of          
return on its Trojan investment.  Although no assurances can be given,          
Enron believes that the ultimate resolution of these matters will not           
have a material adverse effect on its financial position or results of          
operations.                                                                     

Environmental Matters.  Enron is subject to extensive federal,        
state and local environmental laws and regulations.  These laws and             
regulations require expenditures in connection with the construction of         
new facilities, the operation of existing facilities and for                    
remediation at various operating sites.  The implementation of the              
Clean Air Act Amendments is expected to result in increased operating           
expenses.  These increased operating expenses are not expected to have          
a materially adverse effect on Enron's financial position or results of         
operations.                                                                     

The 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 CERCLA.  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.  To         
date, the EPA has identified no other potentially responsible parties           
with respect to this 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.  Enron                 
completed the final removal actions at the site in November 1998, and           
expects to conclude all remaining site activities in the spring of 1999.        
In 1998, Enron's expenses related to the Decorah Site were $300,000 as          
compared with $400,000 in 1997.  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.                             

By order dated June 27, 1995, the Florida Department of               
Environmental  Protection approved a remedial action plan for the Enron         
Gas Processing Company Brooker Plant in Bradford County, Florida.  Soil         
and groundwater at the plant site had been impacted by historical               
releases of hydrocarbons from the now inactive liquids extraction               
plant.  Site remedial work commenced in 1996 and is expected to                 
continue for several years at a total cost of approximately $5 million.         

Enron has also received from the EPA an Order issued under CERCLA     
alleging that Enron and two other parties are responsible for the cost          
of demolition and proper disposal of two 110-foot towers that                   
apparently had been used in the manufacture of carbon dioxide at a site         
called the "City Bumper Site" in Cincinnati, Ohio.  The carbon dioxide          
plant, according to agency documents, was in operation from 1926 to             
1966.  Houston Natural Gas Corporation, a predecessor of Enron Corp.,           
merged with Liquid Carbonic Industries (LCI) on January 31, 1969.               
Liquid Carbonic Corporation (LCC), a subsidiary of LCI, had title to            
the site.  Twenty-eight days after the merger, on February 28, 1969,            
the site was sold to a third party.  In 1984, LCC was sold to an                
unaffiliated party in a stock sale.  Although Enron does not admit              
liability with respect to any costs at this site, it agreed to                  
cooperate with the EPA and other potentially responsible parties to             
undertake the work contemplated by EPA's Order.  The tower demolition           
and removal activities were completed in October 1998, and a final              
project report has been prepared for submission to the EPA.  In 1998,           
Enron's expenses related to the City Bumper Site were $600,000.  Enron          
does not expect to incur material expenditures in connection with this          
site.                                                                           

Enron's natural gas pipeline companies conduct soil and               
groundwater remediation of a number of their facilities.  In 1998,              
these expenses were $1.3 million as compared with $1.7 million in 1997.         
Enron does not expect to incur material expenditures in connection with         
soil and groundwater remediation.                                               

In addition, Enron has received requests for information from the     
EPA and state environmental agencies inquiring whether Enron has                
disposed of materials at other waste disposal sites.  Enron has also            
received requests for contribution from other parties with respect to           
the cleanup of other sites.  Enron may be required to share in the              
costs of the cleanup of some of these sites.  However, based upon the           
amounts claimed and the nature and volume of materials sent to sites at         
which Enron has an interest, management does not believe that any               
potential costs incurred in connection with these notices and third             
party claims, either taken individually or in the aggregate, will have          
a material impact on Enron's financial position or results of                   
operations.                                                                     

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    

None.                                                                 

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PART II       

Item 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED                  
SHAREHOLDER MATTERS                                           

Common Stock                                                                    

The following table indicates the high and low sales prices for       
the common stock of Enron as reported on the New York Stock Exchange            
(consolidated transactions reporting system), the principal market in           
which the securities are traded, and dividends paid per share for the           
calendar quarters indicated.  The common stock is also listed for               
trading on the Chicago Stock Exchange and the Pacific Stock Exchange,           
as well as The London Stock Exchange and Frankfurt Stock Exchange.              

                                                                [Download Table]

                           1998                          1997              
                  High      Low    Dividends   High       Low     Dividends

                                                                           
First  Quarter  $48       $38 1/8   $.2375    $45 1/8    $37 7/8    $.2250 
Second Quarter   54 5/16   45 9/16   .2375     42 3/8     35 5/8     .2250 
Third Quarter    58 7/16   40 5/8    .2375     42         35         .2250 
Fourth Quarter   58 3/4    49 1/2    .2500     41 15/16   35 15/16   .2375 

Cumulative Second Preferred Convertible Stock                                   

The following table indicates the high and low sales prices for       
the Cumulative Second Preferred Convertible Stock ("Second Preferred            
Stock") of Enron as reported on the New York Stock Exchange                     
(consolidated transactions reporting system), the principal market in           
which the securities are traded, and dividends paid per share for the           
calendar quarters indicated.  The Second Preferred Stock is also listed         
for trading on the Chicago Stock Exchange.                                      

                                                                [Download Table]

                             1998                     1997           
                  High       Low     Dividends  High  Low   Dividends

                                                                     
First  Quarter   $634       $565     $3.2424    $600  $600   $3.0717 
Second  Quarter   684 13/16  622 3/4  3.2424     555   496    3.0717 
Third  Quarter     --         --      3.2424     540   535    3.0717 
Fourth  Quarter   732 1/2    718      3.4130     523   523    3.2424 

At December 31, 1998, there were approximately 58,598 record          
holders of common stock and 209 record holders of Second Preferred              
Stock.                                                                          

Other information required by this item is set forth under Item 6     
-- "Selected Financial Data (Unaudited) - Common Stock Statistics" for          
the years 1994-1998.                                                            

Recent Sales of Unregistered Equity Securities                                  

On December 17, 1998, Enron issued in a private placement pursuant    
to Section 4(2) of the Securities Act 204,800 shares of its Mandatorily         
Convertible Reset Preferred Stock, Series A, to Preferred Voting Trust,         
a Delaware statutory business trust, in exchange for all of the                 
beneficial interests in such trust.  On December 30, 1998, Enron issued         
in a private placement pursuant to Section 4(2) of the Securities Act           
83,000 shares of its Mandatorily Convertible Reset Preferred Stock,             
Series B, to Aguia Voting Trust, a Delaware statutory business trust,           
in exchange for all of the beneficial interests in such trust.                  

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                                                                [Download Table]
Item 6.  SELECTED FINANCIAL DATA (UNAUDITED)                                     


                                        1998     1997     1996     1995     1994 

                                                                                 
Operating Revenues (millions)         $31,260  $20,273  $13,289  $ 9,189  $ 8,984

Total Assets (millions)               $29,350  $22,552  $16,137  $13,239  $11,966

Common Stock Statistics                                                          
  Income from continuing operations                                              
     Total (millions)                    $703     $105     $584     $520     $453
     Per share - basic                  $2.14    $0.32    $2.31    $2.07    $1.80
     Per share - diluted                $2.02    $0.32    $2.16    $1.94    $1.70
  Earnings on common stock                                                       
     Total (millions)                    $686     $ 88     $568     $504     $438
     Per share - basic                  $2.14    $0.32    $2.31    $2.07    $1.80
     Per share - diluted                $2.02    $0.32    $2.16    $1.94    $1.70
  Dividends                                                                      
     Total (millions)                    $312     $243     $212     $205     $192
     Per share                          $0.96    $0.91    $0.86    $0.81    $0.76
  Shares outstanding (millions)                                                  
     Actual at year-end                   331      307      251      245      244
     Average for the year                 321      272      246      244      243

Capitalization (millions)                                                        
  Long-term debt                      $ 7,357  $ 6,254   $3,349   $3,065  $2,805 
  Preferred stock of subsidiary         1,001      993      592      377     377 
  Minority interest                     2,143    1,147      755      549     290 
  Shareholders' equity                  7,048    5,618    3,723    3,165   2,880 
     Total capitalization             $17,549  $14,012   $8,419   $7,156  $6,352 

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Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                      
CONDITION AND RESULTS OF OPERATIONS                         

The following review of the results of operations and                     
financial condition of Enron Corp. and its subsidiaries and                     
affiliates (Enron) should be read in conjunction with the                       
Consolidated Financial Statements.                                              

RESULTS OF OPERATIONS                                                           

Consolidated Net Income                                                         
Enron's net income for 1998 was $703 million compared to                  
$105 million in 1997 and $584 million in 1996.  Enron's                         
operating segments include Exploration and Production (Enron                    
Oil & Gas Company), Transportation and Distribution (Gas                        
Pipeline Group and Portland General), Wholesale Energy                          
Operations and Services (Enron Capital & Trade Resources and                    
Enron International), Retail Energy Services (Enron Energy                      
Services) and Corporate and Other, which includes certain                       
new businesses.  The results of Portland General have been                      
included in Enron's Consolidated Financial Statements                           
beginning July 1, 1997.  See Note 2 to the Consolidated                         
Financial Statements.  Items impacting comparability are                        
discussed in the respective segment results.  Net income                        
includes the following:                                                         

                                                                [Download Table]

(In Millions)                               1998   1997    1996 

                                                                
After-tax results before items impacting                        
 comparability                             $ 698  $ 515   $ 493 

Items impacting comparability:(a)                               
  Gain on sale of 7% of Enron Energy                            
   Services shares                             -     61       - 
  Gains on sales of Enron Oil & Gas                             
   Company stock                              45      -      90 
  Charge to reflect losses on                                   
   contracted MTBE production                (40)   (74)      - 
  Charge to reflect impact of amended                           
   J-Block gas contract                        -   (463)      - 
  Gains on sales of liquids and                                 
   gathering assets                            -     66      59 
  Reserve for qualified facilities                              
   disposition                                 -      -     (54)
  Other                                        -      -      (4)
Reported net income                        $ 703  $ 105   $ 584 

<FN>                                                            
(a) Tax affected at 35%, except where a specific tax rate       
    applied.                                                    

Diluted earnings per share of common stock were as                        
follows:                                                                        

                                                                [Download Table]

                                      1998      1997      1996  

                                                                
Diluted earnings per share:                                     
  After-tax results before items                                
   impacting comparability            $2.01     $1.74     $1.82 
  Items impacting comparability:                                
     Gain on sale of 7% of Enron                                
      Energy Services shares              -      0.21         - 
     Gains on sales of Enron Oil &                              
       Gas Company stock               0.13         -      0.33 
     Charge to reflect losses on                                
      contracted MTBE production      (0.12)    (0.25)        - 
     Charge to reflect impact of                                
      amended J-Block gas contract        -     (1.57)        - 
     Gains on sales of liquids and                              
      gathering assets                    -      0.22      0.22 
     Reserve for qualified facilities                           
      disposition                         -         -     (0.20)
     Other                                -         -     (0.01)
     Effect of anti-dilution(a)           -     (0.03)        - 
Reported diluted earnings per share   $2.02     $0.32     $2.16 

<FN>                                                            
(a) For 1997, the conversion of preferred shares to             
    common shares for purposes of the diluted earnings per      
    share calculation was anti-dilutive by $0.03 per share.     
    However, in order to present comparable results, per        
    share amounts for each earnings component were calculated   
    using 295 million shares, which assumes the conversion of   
    preferred shares to common shares.                          

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 (see Note 17 to the Consolidated                     
Financial Statements):                                                          

                                                                [Download Table]

(In Millions)                          1998   1997    1996

                                                          
Exploration and Production           $  128  $ 183  $  200
Transportation and Distribution:                          
  Gas Pipeline Group                    351    466     524
  Portland General                      286    114       -
Wholesale Energy Operations                               
 and Services                           968    654     466
Retail Energy Services                 (119)  (107)      -
Corporate and Other                     (32)  (745)     48
  Reported income before interest,                        
   minority interests and taxes      $1,582  $ 565  $1,238

Exploration and Production                                                      
Enron's exploration and production operations are                         
conducted by Enron Oil & Gas Company (EOG).                                     

Wellhead volume and price statistics (including                           
intercompany amounts) are as follows:                                           

                                                                [Download Table]

                                              1998    1997    1996

                                                                  
Natural gas volumes (MMcf/d)(a)                                   
  North America                                776     758     706
  Trinidad                                     139     113     124
  India                                         56      18       -
     Total                                     971     889     830
Average natural gas prices ($/Mcf)                                
  North America                              $1.86   $2.20   $1.92
  Trinidad                                    1.06    1.05    1.00
  India                                       2.41    2.79       -
     Composite                                1.78    2.07    1.78
Crude oil/condensate volumes (MBbl/d)(a)                          
  North America                               16.6    14.2    11.6
  Trinidad                                     3.0     3.4     5.2
  India                                        5.1     2.3     2.8
     Total                                    24.7    19.9    19.6
Average crude oil/condensate prices ($/Bbl)                       
  North America                             $12.67  $19.33  $21.08
  Trinidad                                   12.26   18.68   19.76
  India                                      12.86   20.05   20.17
     Composite                               12.66   19.30   20.60

<FN>                                                              
(a) Million cubic feet per day or thousand barrels per day,       
    as applicable.                                                

The following analyzes the significant components of IBIT                 
for Exploration and Production:                                                 

                                                                [Download Table]

(In Millions)                                1998   1997   1996 

                                                                
Net revenues                                $769    $783   $730 
Corporate hedging activities                  19      (8)    (4)
Operating expenses                           219     210    181 
Exploration expenses                         121     102     89 
Depreciation, depletion and amortization     315     278    251 
  Operating income                           133     185    205 
Other income, net                             (5)     (2)    (5)
  Reported income before interest,                              
   minority interests and taxes             $128    $183   $200 

Net Revenues                                                                    
Exploration and Production's revenues, net of gas sold in                 
connection with natural gas marketing, decreased $14 million                    
(2%) in 1998 after increasing $53 million (7%) in 1997.  The                    
1998 change reflects lower average wellhead natural gas                         
prices and crude oil and condensate prices, partially offset                    
by increased production volumes of both natural gas and                         
crude oil and condensate.  The 1997 increase reflected both                     
increased average wellhead natural gas prices and increased                     
production volumes.  Other marketing activities, which                          
include hedging, trading and natural gas marketing                              
transactions by EOG, reduced net revenues by $4 million in                      
1998 and $61 million in 1997, compared with an increase of                      
$4 million in 1996.  Net revenues also include gains on                         
sales of crude oil and gas reserves and related assets of                       
$26 million in 1998, $9 million in 1997 and $20 million in                      
1996.                                                                           

Costs and Expenses                                                              
Operating expenses and depreciation, depletion and                        
amortization (DD&A) increased in 1998 and 1997 primarily due                    
to expanded operations and increased worldwide production                       
volumes in both years and a higher DD&A rate in North                           
America in 1998.                                                                

Exploration expenses increased 19% in 1998 and 15% in                     
1997 as compared to the prior year, primarily as a result of                    
increased exploratory drilling activities and expenses                          
related to lease acquisitions in North America.                                 

Outlook                                                                         
EOG plans to continue to focus a substantial portion of                   
its development and exploration expenditures in its major                       
producing areas in North America.  In addition, EOG                             
anticipates additional spending for the continued                               
development of its projects in India, Trinidad and China.                       

In December 1998, Enron received an unsolicited                           
indication of interest from a third party with respect to                       
exploring a possible transaction pursuant to which the third                    
party would acquire Enron's shares of EOG common stock and                      
offer to acquire the remaining shares of outstanding EOG                        
common stock.  There can be no assurance that any such                          
transaction will be consummated.                                                

Transportation and Distribution                                                 
Transportation and Distribution consists of Gas Pipeline                  
Group and Portland General.  Gas Pipeline Group includes                        
Enron's interstate natural gas pipelines, primarily Northern                    
Natural Gas Company (Northern), Transwestern Pipeline                           
Company (Transwestern), Enron's 50% interest in Florida Gas                     
Transmission Company (Florida Gas) and Enron's interest in                      
Northern Border Pipeline.  Portland General results are                         
included for the period since the July 1, 1997 merger (see                      
Note 2 to the Consolidated Financial Statements).                               

Gas Pipeline Group.  The following table summarizes total                 
volumes transported by each of Enron's interstate natural                       
gas pipelines.                                                                  

                                                                [Download Table]

                                         1998    1997    1996

                                                             
Total Volumes Transported (Bbtu/d)(a)                        
  Northern Natural Gas                  4,098   4,364   4,577
  Transwestern Pipeline                 1,608   1,416   1,341
  Florida Gas Transmission              1,341   1,341   1,296
  Northern Border Pipeline              1,770   1,800   1,801

<FN>                                                         
(a) Billion British thermal units per day.  Amounts          
    reflect 100% of each entity's throughput volumes.        
    Florida Gas and Northern Border Pipeline are             
    unconsolidated affiliates.                               

Significant components of IBIT are as follows:                            

                                                                [Download Table]

(In Millions)                         1998   1997   1996

                                                        
Net revenues                          $640   $665   $719
Operating expenses                     276    310    316
Depreciation and amortization           70     69     66
Equity in earnings                      32     40     35
Other income, net                       25     38     44
  IBIT before items impacting                           
   comparability                       351    364    416
Gains on sales of liquids and                           
 gathering assets                        -    102     90
Other                                    -      -     18
  Reported income before interest                       
   and taxes                          $351   $466   $524

Net Revenues                                                                    
Revenues, net of cost of sales, of Gas Pipeline Group                 
declined $25 million (4%) during 1998 and $54 million (8%)                      
during 1997 as compared to the applicable preceding year.                       
The decrease in net revenue in 1998 compared to 1997 was                        
primarily due to the warmer than normal winter in Northern's                    
service territory and the reduction of transition costs                         
recovered through a regulatory surcharge at Northern.  The                      
decrease in net revenues in 1997 compared to 1996 was                           
primarily due to the sale of natural gas liquids assets in                      
early 1997 and the turnback of capacity at Transwestern,                        
resulting in reduced transportation revenues beginning in                       
November 1996.                                                                  

Operating Expenses                                                              
Operating expenses of Gas Pipeline Group decreased $34                    
million (11%) during 1998, primarily as a result of the                         
reduction of transition costs at Northern and lower overhead                    
costs.  Operating expenses declined $6 million (2%) during                      
1997, primarily due to a reduction of transition costs at                       
Northern.                                                                       

Equity in Earnings                                                              
Equity in earnings of unconsolidated affiliates decreased                 
$8 million in 1998 after increasing $5 million during 1997                      
as compared to 1996.  These changes were primarily due to                       
higher 1997 earnings from Citrus Corp. (Citrus), which holds                    
Enron's 50% interest in Florida Gas.  Earnings from Citrus                      
were higher in 1997 due to a contract restructuring.                            

Other Income, Net                                                               
Other income, net decreased $13 million (34%) in 1998 as                  
compared to 1997 primarily as a result of income recognized                     
in 1997 related to liquids assets sold in 1997.  Included in                    
1998 were gains of $21 million recognized from the                              
monetization of an interest in an equity investment,                            
substantially offset by charges related to litigation.                          

Items Impacting Comparability                                                   
Gains of $102 million were recognized in 1997 related to                  
the sales of liquids assets, including processing plants and                    
Enron's interest in Enron Liquids Pipeline L.P.  During                         
1996, gains of $90 million related to the disposition of non-                   
strategic natural gas gathering facilities were recognized,                     
and gains of $18 million were recorded as a result of                           
favorable resolution of litigation.                                             

Portland General.  Results for Portland General have been                 
included in Enron's Consolidated Financial Statements                           
beginning July 1, 1997.  Since that date, Portland General                      
realized IBIT, as follows:                                                      

                                                                [Download Table]

(In Millions)                            1998      1997(a)

                                                          
Revenues                               $1,196       $746  
Purchased power and fuel                  451        389  
Operating expenses                        295        154  
Depreciation and amortization             183         91  
Other income, net                          19          2  
  Reported income before interest                         
   and taxes                           $  286       $114  

<FN>                                                      
(a) Represents the period from July 1, 1997 through       
    December 31, 1997.                                    

The 1998 results were impacted by a warmer than normal                    
winter and the transfer of the majority of its electricity                      
wholesale business to the Enron Wholesale segment, partially                    
offset by an increase in sales to retail customers.                             

Statistics for Portland General for 1998 and for the                      
period from July 1 through December 31, 1997 are as follows:                    

                                                                [Download Table]

                                             1998      1997  

                                                             
Electricity Sales (Thousand MWh)(a)                          
  Residential                                7,101     3,379 
  Commercial                                 6,781     3,618 
  Industrial                                 3,562     2,166 
     Total Retail                           17,444     9,163 
  Wholesale                                 10,869    13,448 
     Total Electricity Sales                28,313    22,611 

Resource Mix                                                 
  Coal                                          16%       10%
  Combustion Turbine                            12         5 
  Hydro                                          9         5 
     Total Generation                           37        20 
  Firm Purchases                                56        74 
  Secondary Purchases                            7         6 
     Total Resources                           100%      100%

Average Variable Power Cost (Mills/KWh)(b)                   
  Generation                                   8.6       8.7 
  Firm Purchases                              17.3      18.9 
  Secondary Purchases                         23.6      13.2 
     Total Average Variable Power Cost        15.6      17.2 

Retail Customers (end of period, thousands)    704       685 

<FN>                                                         
(a)  Thousand megawatt-hours.                                
(b)  Mills (1/10 cent) per kilowatt-hour.                    

Outlook                                                                         
Transportation and Distribution should continue to                        
provide stable earnings and cash flows during 1999,                             
including steady growth over 1998 levels.                                       

Gas Pipeline Group continues to expand its pipeline                       
system to provide services to existing customers and new                        
markets.  Florida Gas has an expansion planned to provide                       
new capacity of 270 MMcf/d into Southwest Florida by the                        
year 2001 and is evaluating other expansions to meet                            
Florida's expected strong growth in gas consumption.  Future                    
results of Northern Border Pipeline will reflect its 700                        
MMcf/d extension of service to the Chicago market area.  A                      
further expansion to Indiana through a 35-mile, 545 MMcf/d                      
extension of its pipeline will be placed in service in the                      
year 2000.  Transwestern is considering expansions to bring                     
in additional supplies from the San Juan basin to                               
California.                                                                     

Portland General anticipates continuing retail customer                   
growth in one of the fastest growing service territories in                     
the U.S.  In late 1997, Portland General filed a Customer                       
Choice Plan proposal and rate case with the Oregon Public                       
Utility Commission (OPUC) which would open its service                          
territory to competition.  Under the proposed Customer                          
Choice Plan, Portland General would separate its generation                     
business from its transmission and distribution businesses                      
and Portland General would become a regulated transmission                      
and distribution company focused on delivering, but not                         
selling, electricity.  In July 1998, the OPUC staff issued                      
its position, disagreeing with Portland General's proposal                      
for full customer choice.                                                       

In January 1999, the OPUC issued an order, which is                       
contingent upon the adoption of certain regulatory changes                      
by the Oregon Legislature, with recommendations that                            
included allowing small retail customers a limited set of                       
options including the ability to continue to purchase rate-                     
regulated electricity, allowing most commercial and                             
industrial users to have the ability to choose their                            
electricity provider and allowing Portland General to sell                      
its coal- and gas-fired generation plants but rejecting                         
Portland General's request to sell its hydroelectric assets.                    
Additionally, the order requires Portland General, should it                    
choose to adopt OPUC's recommendations, to file a new rate                      
case.  Portland General is reviewing the OPUC order, but                        
will not implement any of the recommendations until the                         
changes are agreed upon by all parties.  The issue of                           
restructuring will be further addressed by the 1999 Oregon                      
Legislature.  Portland General will support legislation that                    
creates a comprehensive approach to the electricity industry                    
that helps develop a market that is truly competitive.                          

Wholesale Energy Operations and Services                                        
Enron's wholesale energy operations and services business                 
(Enron Wholesale) operates in North America, Europe and                         
other countries.  Activities are conducted primarily by                         
Enron Capital & Trade Resources and Enron International.                        
Enron Wholesale is categorized into two business lines: (a)                     
Commodity Sales and Services and (b) Energy Assets and                          
Investments.  Integrated energy-related products and                            
services related to these business lines are offered to                         
wholesale customers in varying degrees in each of Enron                         
Wholesale's markets.                                                            

Enron manages its commodity and asset portfolios in order                 
to maximize value, minimize the associated risks and provide                    
overall liquidity.  In this process, Enron utilizes                             
portfolio and risk management disciplines including certain                     
hedging transactions to manage portions of its market                           
exposures (commodity, interest rate, foreign currency and                       
equity exposures).  Enron Wholesale from time to time                           
monetizes its contract portfolios (producing cash and                           
transferring counterparty credit risk to third parties) and                     
sells interests in investments and assets.                                      

The following table reflects IBIT for each business line:                 

                                                                [Download Table]

(In Millions)                          1998  1997   1996 

                                                         
Commodity Sales and Services          $411   $249   $348 
Energy Assets and Investments          709    565    263 
Unallocated expenses                 (152)   (160)  (145)
  Reported income before interest,                       
   minority interests and taxes      $968    $654   $466 

The following discussion analyzes the contributions to                    
IBIT for each business line.                                                    

Commodity Sales and Services.  Enron Wholesale provides                   
reliable delivery of energy commodities at predictable                          
prices.  The commodity sales and services operations                            
includes the purchase, sale, marketing and delivery of                          
natural gas, electricity, liquids and other commodities,                        
restructuring of existing long-term contracts and the                           
management of Enron's commodity contract portfolios.  In                        
addition, Enron provides risk management products and                           
services to energy customers that hedge movements in price                      
and location-based price differentials.  Enron's risk                           
management products and services are designed to provide                        
stability to customers in markets impacted by commodity                         
price volatility.  Also included in this business is the                        
management of certain operating assets that directly relate                     
to this business, including domestic intrastate pipelines                       
and storage facilities.                                                         

Enron Wholesale markets and transports a substantial                      
quantity of energy commodities as reflected in the following                    
table (including intercompany amounts):                                         

                                                                [Download Table]

                                                1998      1997     1996 

                                                                        
Physical Volumes (BBtue/d)(a)(b)                                        
Gas:                                                                    
  United States                                 7,418     7,654    6,998
  Canada                                        3,486     2,263    1,406
  Europe and Other                              1,251       660      289
                                               12,155    10,577    8,693
Transport Volumes                                 559       460      544
     Total Gas Volumes                         12,714    11,037    9,237
Crude Oil and Liquids                           3,570     1,677    1,507
Electricity(c)                                 11,024     5,256    1,648
     Total Physical Volumes (BBtue/d)          27,308    17,970   12,392
Electricity Volumes Marketed (Thousand MWh)                             
  United States                               401,843   191,746   60,150
  Europe and Other                                529       100        -
     Total                                    402,372   191,846   60,150

Financial Settlements (Notional) (BBtue/d)     75,266    49,082   35,259

<FN>                                                                    
(a) Billion British thermal units equivalent per day.                   
(b) Includes third-party transactions by Enron Energy                   
    Services.                                                           
(c) Represents Electricity Volumes Marketed, converted to               
    BBtue/d.                                                            

The earnings from commodity sales and services operations                 
increased 65% in 1998 as compared to 1997.  The change is                       
primarily due to increased earnings from originations of                        
risk management products and services in North America,                         
including contract restructurings, and increased power                          
marketing earnings, where volumes have increased over 100%,                     
partially offset by fewer originations in Europe, lower                         
earnings related to domestic operating assets and higher                        
expenses.                                                                       

The earnings from commodity sales and services operations                 
decreased 28% in 1997 as compared to 1996 primarily due to                      
lower domestic gas and power margins in 1997 compared with                      
1996.  Although volumes were higher in 1997, greater                            
seasonal volatility of domestic natural gas prices provided                     
higher margins in 1996.  Domestic liquids marketing activity                    
was also lower in 1997 compared with 1996. These decreases                      
were partially offset by increased activity in the European                     
markets related to natural gas and power contracts,                             
including originations with utilities and independent power                     
producers (IPPs) in 1997.  Originations from long-term                          
contracts in North America decreased in 1997 for both                           
natural gas and power.                                                          

Energy Assets and Investments.  Enron Wholesale's energy                  
assets and investments activities include investments in                        
debt and equity securities of oil and gas producers and                         
other energy-intensive companies.  Additionally, Enron                          
Wholesale develops, constructs, operates and manages a large                    
portfolio of energy investments such as power plants and                        
natural gas pipelines.  Earnings primarily result from                          
changes in the market value of merchant investments held                        
during the period, equity earnings and gains on sales or                        
restructurings of energy investments.  See Note 4 to the                        
Consolidated Financial Statements for a summary of these                        
investments.                                                                    

Earnings from energy assets and investments increased 25%                 
in 1998 as compared to 1997 primarily as a result of                            
earnings from the sale of interests in the Puerto Rico,                         
Turkey, Italy and U.K. power projects, from which Enron                         
realized the value created during the development and                           
construction phases, partially offset by development costs                      
and decreased earnings from the management of Enron                             
Wholesale's merchant investments.  Some of these                                
transactions involved securitizations in which Enron                            
retained certain interests associated with the underlying                       
assets.                                                                         

Earnings from energy assets and investments increased                     
115% in 1997 compared with 1996 due primarily to a                              
significant increase in the market value of its investments,                    
including the positive impact of a change in the structure                      
of a joint venture investment, as well as increased earnings                    
from originations and earnings from the sale of interests in                    
U.K. power projects.  Also contributing to the increase were                    
fees earned on projects in the U.K.                                             

Unallocated Expenses.  Net unallocated expenses include                   
rent, systems expenses and other support group costs.                           

Outlook                                                                         

Enron anticipates continued growth in Enron Wholesale                     
during 1999 due to further expansion into new products and                      
markets.  In the commodity sales and services business,                         
volumes are expected to continue to increase as Enron                           
maintains or increases its market share in the growing                          
unregulated U.S. power market and the European gas and power                    
markets.  In addition, Enron expects to benefit from                            
opportunities related to its substantial portfolio of                           
commodity contracts.  Enron also expects to continue                            
increased integration of financial products with its energy                     
commodity portfolio.  In the energy assets and investments                      
business, Enron will continue to benefit from opportunities                     
related to its energy investments, including sales or                           
restructurings of appreciated investments, and in providing                     
capital to energy-intensive customers.  Equity earnings from                    
operations are expected to increase as a result of                              
commencement of commercial operations of new power plants                       
and pipeline in early 1999 including the larger power                           
project in India.                                                               

At December 31, 1998, the following international                         
projects were under construction:                                               

                                                                [Download Table]

                                                Estimated    
                                                Commercial   
                              Size/Capacity   Operations Date

                                                             
Pipeline(a)                                                  
  Bolivia/Brazil (Phase I)     1,180 miles       2Q 1999     

Power Plants(a)                                              
  Cuiaba - Brazil (Phase I)      150 MW(b)       1Q 1999     
  Dabhol - India (Phase I)       826 MW          1Q 1999     
  Piti - Guam                     80 MW          1Q 1999     
  Sutton Bridge - U.K.           790 MW          1Q 1999     
  Trakya - Turkey                478 MW          1Q 1999     
  Corinto - Nicaragua             71 MW          2Q 1999     
  EcoElectrica - Puerto Rico     507 MW          3Q 1999     
  Nowa Sarzyna - Poland          116 MW          4Q 1999     
  Sarlux - Italy                 551 MW          1Q 2000     

<FN>                                                         
(a)  Enron holds varying interests in these projects.        
(b)  Megawatts.                                              

Earnings from Enron Wholesale are dependent on the                        
origination and completion of transactions, some of which                       
are individually significant and which are impacted by                          
market conditions, the regulatory environment and customer                      
relationships.  Enron Wholesale's transactions have                             
historically been based on a diverse product portfolio,                         
providing a solid base of earnings.  Enron's strengths,                         
including its ability to identify and respond to customer                       
needs, access to extensive physical assets and its                              
integrated approach to meeting customers needs, are                             
important drivers of the expected continued earnings growth.                    
In addition, significant earnings are expected from Enron                       
Wholesale's commodity portfolio and investments, which are                      
subject to market fluctuations.  External factors, such as                      
the amount of volatility in market prices, impact the                           
earnings opportunity associated with Enron Wholesale's                          
business.  Risk related to these activities is managed using                    
naturally offsetting transactions and hedge transactions.                       
The effectiveness of Enron's risk management activities can                     
have a material impact on future earnings.  See "Financial                      
Risk Management" for a discussion of market risk related to                     
Enron Wholesale.                                                                

Retail Energy Services                                                          
Enron Energy Services (Energy Services), formed in late                   
1996, is extending Enron's energy expertise to end-use                          
business customers.  This includes sales of natural gas,                        
electricity and outsourcing energy management services                          
directly to commercial and industrial customers.  Energy                        
Services reported losses before interest, minority interests                    
and taxes of $119 million in 1998 and $107 million in 1997                      
related to significant investments in building its sales and                    
service capabilities, developing products and services,                         
establishing a support system to service its contracts and                      
supporting Energy Services' regulatory efforts.                                 

During 1998, Energy Services completed a significant                      
number of transactions which will provide future revenues                       
and margins.  Energy Services revenues totaled $1.1 billion                     
during 1998, a 57% increase from 1997.                                          

In late 1997, Enron sold approximately 7% of its                          
ownership of Energy Services for $130 million, to defray                        
startup costs and establish a valuation for this new                            
business.  The transaction resulted in an after-tax gain of                     
$61 million, which has been reflected in Corporate and                          
Other.  This sale of Energy Services ownership reflected a                      
total enterprise value of $1.9 billion.  Since that time,                       
significant new customers and long-term contracts have been                     
obtained.                                                                       

Outlook                                                                         
During 1999, Enron anticipates continued growth in the                    
demand for energy outsourcing solutions.  Energy Services                       
will focus on delivering these services to its existing                         
customers, while continuing to expand its commercial and                        
industrial customer base for total energy outsourcing.                          
Energy Services also plans to continue integrating its                          
service delivery capabilities, focusing on the development                      
of best practices, nation-wide procurement opportunities,                       
efficient use of capital and centralized decision making.                       
Energy Services expects reduced losses in 1999.                                 

Corporate and Other                                                             
Corporate and Other includes results of Azurix Corp.,                     
which provides water and wastewater services, Enron                             
Communications, Inc. (ECI), which is building a national                        
Internet-protocol fiber-optic network to deliver high                           
content media to business customers, Enron Renewable Energy                     
Corp. (EREC), EOTT Energy Corp. (EOTT) and the operations of                    
Enron's methanol and MTBE plants.  Significant components of                    
IBIT are as follows:                                                            

                                                                [Download Table]

(In Millions)                                    1998    1997    1996 

                                                                      
IBIT before items impacting comparability        $  7   $ (31)  $ (22)

Items impacting comparability:                                        
  Gain on sale of 7% of Enron Energy                                  
   Services shares                                  -      61       - 
  Gains on sales of Enron Oil & Gas                                   
   Company stock                                   22       -     178 
  Charge to reflect losses on contracted                              
   MTBE production                                (61)   (100)      - 
  Charge to reflect impact of amended                                 
   J-Block gas contract                             -    (675)      - 
  Reserve for qualified facilities disposition      -       -     (83)
  Miscellaneous reserves and other items            -       -     (25)
Reported income before interest and taxes        $(32)  $(745)  $  48 

Results in 1998 were favorably impacted by increased                      
earnings related to ECI from the sale of capacity on its                        
fiber-optic network and increases in the market value of                        
certain corporate-managed financial instruments, partially                      
offset by higher corporate expenses.                                            

During 1998, Enron recognized a pre-tax gain of $22                       
million on the delivery of 10.5 million shares of EOG stock                     
held by Enron as repayment of mandatorily exchangeable debt.                    
Enron also recorded a $61 million charge to reflect losses                      
on contracted MTBE production.                                                  

During 1997, Enron recorded a non-recurring charge of                     
$675 million, primarily reflecting the impact of Enron's                        
amended J-Block gas contract in the U.K., and a $100 million                    
charge primarily to reflect losses on contracted MTBE                           
production.  In 1996, a gain of $178 million was recognized,                    
primarily related to the sale of 12 million outstanding                         
shares of EOG stock held by Enron.  The 1996 results                            
included an $83 million reserve related to the required                         
disposition of certain assets in connection with the merger                     
with Portland General.                                                          

Interest and Related Charges, Net                                               
Interest and related charges, net of interest                             
capitalized, increased $149 million in 1998 and $127 million                    
in 1997.  The increase in 1998 as compared to 1997 was                          
primarily a result of higher debt levels, including the                         
issuance of approximately $2.1 billion in debt between                          
November 1997 and the end of 1998, mainly to finance capital                    
expenditures and investments.  The 1998 interest expense                        
also reflects the impact of twelve months of interest                           
expense on debt related to the merger with Portland General.                    
The 1997 increase was primarily due to higher debt levels,                      
including debt of $1.1 billion from Portland General                            
following the merger on July 1, 1997 (see Note 2 to the                         
Consolidated Financial Statements). Interest capitalized,                       
which totaled $66 million, $18 million and $12 million for                      
1998, 1997, and 1996, respectively, increased in 1998 as a                      
result of the commencement of construction of several power                     
projects.                                                                       

Dividends on Company-Obligated Preferred Securities of                          
Subsidiaries                                                                    
Dividends on company-obligated preferred securities of                    
subsidiaries increased from $34 million in 1996 to $69                          
million in 1997 and to $77 million in 1998, primarily due to                    
the issuance of $215 million and $372 million of additional                     
preferred securities by Enron subsidiaries during 1996 and                      
1997, respectively.  Company-obligated preferred securities                     
of subsidiaries also increased by $29 million in 1997 for                       
securities of Portland General.                                                 

Minority Interests                                                              
Minority interests were $77 million in 1998 compared to                   
$80 million in 1997 and $75 million in 1996.  Minority                          
interests in 1998 include EOG and the minority owner's share                    
of dividends on preferred stock issued in connection with                       
the formation of an Enron-controlled joint venture in late                      
1997.  See Note 8 to the Consolidated Financial Statements.                     
Minority interests in 1997 and 1996 relate to EOG and Enron                     
Global Power & Pipelines, L.L.C. (EPP) until Enron's                            
acquisition of the EPP minority interest in November 1997.                      

Income Tax Expense                                                              
Income tax expense increased in 1998 as compared to 1997                  
primarily as a result of increased earnings, partially                          
offset by differences between the book and tax basis of                         
certain assets and stock sales.                                                 

Income tax expense decreased for 1997 as compared to 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 losses on contracted MTBE production.  In                      
addition, the 1997 tax provision was reduced for differences                    
between the book and tax basis of certain assets and stock                      
sales.                                                                          

YEAR 2000                                                                       

The Year 2000 problem results from the use in computer                    
hardware and software of two digits rather than four digits                     
to define the applicable year.  The use of two digits was a                     
common practice for decades when computer storage and                           
processing was much more expensive than today.  When                            
computer systems must process dates both before and after                       
January 1, 2000, two-digit year "fields" may create                             
processing ambiguities that can cause errors and system                         
failures.  For example, computer programs that have date-                       
sensitive features may recognize a date represented by "00"                     
as the year 1900, instead of 2000.  These errors or failures                    
may have limited effects, or the effects may be widespread,                     
depending on the computer chip, system or software, and its                     
location and function.                                                          

The effects of the Year 2000 problem are exacerbated                      
because of the interdependence of computer and                                  
telecommunications systems in the United States and                             
throughout the world.  This interdependence certainly is                        
true for Enron and Enron's suppliers, trading partners, and                     
customers, as well as for governments of countries around                       
the world where Enron does business.                                            

State of Readiness                                                              
Enron's Board of Directors has been briefed about the                     
Year 2000 problems generally and as they may affect Enron.                      
The Board has adopted a Year 2000 plan (the "Plan") covering                    
all of Enron's business units.  The aim of the Plan is to                       
take reasonable steps to prevent Enron's mission-critical                       
functions from being impaired due to the Year 2000 problem.                     
"Mission-critical" functions are those critical functions                       
whose loss would cause an immediate stoppage of or                              
significant impairment to major business areas  (a major                        
business area is one of material importance to Enron's                          
business).                                                                      

Implementation of Enron's Year 2000 plan is directly                      
supervised by a Senior Vice President who is aided by a Year                    
2000 Project Director.  The Project Director coordinates the                    
implementation of the Plan among Enron's business units.  As                    
part of the overall Plan, each business unit in turn has                        
developed, and is implementing, a Year 2000 plan specific to                    
it.  Enron also has engaged outside consultants, technicians                    
and other external resources to aid in formulating and                          
implementing the Plan.                                                          

Enron is implementing the Plan, which will be modified as                 
events warrant.  Under the Plan, Enron will continue to                         
inventory its mission-critical computer hardware and                            
software systems and embedded chips (computer chips with                        
date-related functions, contained in a wide variety of                          
devices); assess the effects of Year 2000 problems on the                       
mission-critical functions of Enron's business units; remedy                    
systems, software and embedded chips in an effort to avoid                      
material disruptions or other material adverse effects on                       
mission-critical functions, processes and systems; verify                       
and test the mission-critical systems to which remediation                      
efforts have been applied; and attempt to mitigate those                        
mission-critical aspects of the Year 2000 problem that are                      
not remediated by January 1, 2000, including the development                    
of contingency plans to cope with the mission-critical                          
consequences of Year 2000 problems that have not been                           
identified or remediated by that date.                                          

The Plan recognizes that the computer,                                    
telecommunications, and other systems ("Outside Systems") of                    
outside entities ("Outside Entities") have the potential for                    
major, mission-critical, adverse effects on the conduct of                      
Enron's business.  Enron does not have control of these                         
Outside Entities or Outside Systems.  (In some cases,                           
Outside Entities are foreign governments or businesses                          
located in foreign countries.)  However, Enron's Plan                           
includes an ongoing process of identifying and contacting                       
Outside Entities whose systems, in Enron's judgment, have or                    
may have a substantial effect on Enron's ability to continue                    
to conduct the mission-critical aspects of its business                         
without disruption from Year 2000 problems.  The Plan                           
envisions Enron attempting to inventory and assess the                          
extent to which these Outside Systems may not be "Year 2000                     
ready" or "Year 2000 compatible."  Enron will attempt                           
reasonably to coordinate with these Outside Entities in an                      
ongoing effort to obtain assurance that the Outside Systems                     
that are mission-critical to Enron will be Year 2000                            
compatible well before January 1, 2000. Consequently, Enron                     
will work prudently with Outside Entities in a reasonable                       
attempt to inventory, assess, analyze, convert (where                           
necessary), test, and develop contingency plans for Enron's                     
connections to these mission-critical Outside Systems and to                    
ascertain the extent to which they are, or can be made to                       
be, Year 2000 ready and compatible with Enron's mission-                        
critical systems.                                                               

It is important to recognize that the processes of                        
inventorying, assessing, analyzing, converting (where                           
necessary), testing, and developing contingency plans for                       
mission-critical items in anticipation of the Year 2000                         
event are necessarily iterative processes.  That is, the                        
steps are repeated as Enron learns more about the Year 2000                     
problem and its effects on Enron's internal systems and on                      
Outside Systems, and about the effects that embedded chips                      
may have on Enron's systems and Outside Systems.  As the                        
steps are repeated, it is likely that new problems will be                      
identified and addressed.  Enron anticipates that it will                       
continue with these processes through January 1, 2000 and,                      
if necessary based on experience, into the year 2000 in                         
order to assess and remediate problems that reasonably can                      
be identified only after the start of the new century.                          

As of February 15, 1999, Enron and all its business units                 
were at various stages in implementation of the Plan, as                        
shown in the following tables. The first table deals with                       
the Enron business units' mission-critical internal systems                     
(including embedded chips) and the second deals with the                        
business units' mission-critical Outside Systems of Outside                     
Entities.  Any notation of "complete" conveys the fact only                     
that the initial iteration of this phase has been                               
substantially completed.                                                        

                                                        [Enlarge/Download Table]
Year 2000 Plan Readiness by Enron Business Unit                                                     
(Mission-Critical Internal Items)                                                                   


                                                                                         Contingency
                        Inventory  Assessment  Analysis  Conversion  Testing  Y2K-Ready      Plan   

                                                                                                    
Exploration and                                                                                     
Production                  C          IP         IP         IP         IP       IP           IP    
Transportation                                                                                      
and Distribution:                                                                                   
 Gas Pipeline Group         C          C          IP         IP         IP       IP           IP    
 Portland General           C          C          C          IP         IP       IP           IP    
Wholesale:                                                                                          
 Domestic                   C          C          C          IP         IP       IP           IP    
 Europe                     C          C          C          IP         IP       IP           IP    
 Other International        IP         IP         IP         IP         IP       IP           IP    
Retail Energy Services      C          C          IP         IP         IP       IP           IP    
Corporate and Other         IP         IP         IP         IP         IP       IP           IP    

                                                        [Enlarge/Download Table]
Year 2000 Plan Readiness by Enron Business Unit                                                     
(Mission-Critical Outside Entities)                                                                 


                                                                                         Contingency
                        Inventory  Assessment  Analysis  Conversion  Testing  Y2K-Ready      Plan   

                                                                                                    
Exploration and                                                                                     
Production                  IP         IP         IP         IP         IP       IP           IP    
Transportation                                                                                      
and Distribution:                                                                                   
 Gas Pipeline Group         C          C          IP         IP         IP       IP           IP    
 Portland General           C          C          C          IP         IP       IP           IP    
Wholesale:                                                                                          
 Domestic                   C          IP         IP         IP         TBI      IP           TBI   
 Europe                     C          C          IP         TBI        TBI      IP           TBI   
 Other International        IP         IP         IP         IP         IP       IP           IP    
Retail Energy Services      C          C          IP         IP         IP       IP           IP    
Corporate and Other         C          IP         IP         IP         IP       IP           IP    

Legend:  C = Complete     IP = In Process     TBI = To Be Initiated                                 

The following tables show, by business unit, historical and estimated     
completion dates, as applicable, for the initial iteration of various stages of 
the Plan.  The first table deals with the Enron business units' mission-        
critical internal systems (including embedded chips) and the second deals with  
the business units' mission-critical Outside Systems of Outside Entities.       

                                                        [Enlarge/Download Table]
Year 2000 Plan Completion Dates by Enron Business Unit                                              
(Mission-Critical Internal Items)                                                                   


                                                                                         Contingency
                        Inventory  Assessment  Analysis  Conversion  Testing  Y2K-Ready      Plan   

                                                                                                    
Exploration and                                                                                     
Production                12/98        3/99       3/99       6/99       9/99      9/99        9/99  
Transportation                                                                                      
and Distribution:                                                                                   
 Gas Pipeline Group       12/98        1/99       4/99       6/99       7/99      8/99        6/99  
 Portland General         12/97       10/98      10/98       6/99       6/99      6/99        6/99  
Wholesale:                                                                                          
 Domestic                  6/98        8/98      12/98       6/99       6/99      6/99        9/99  
 Europe                    7/98        8/98       8/98       4/99       4/99      7/99        7/99  
 Other International       3/99        3/99       4/99       6/99       7/99      8/99        6/99  
Retail Energy Services     1/99        2/99       3/99       4/99       5/99      7/99        7/99  
Corporate and Other        2/99        2/99       3/99       3/99       3/99      6/99        6/99  

                                                        [Enlarge/Download Table]
Year 2000 Plan Completion Dates by Enron Business Unit                                              
(Mission-Critical Outside Entities)                                                                 


                                                                                         Contingency
                        Inventory  Assessment  Analysis  Conversion  Testing  Y2K-Ready      Plan   

                                                                                                    
Exploration and                                                                                     
Production                 3/99        6/99       6/99       9/99       9/99      9/99        9/99  
Transportation                                                                                      
and Distribution:                                                                                   
 Gas Pipeline Group       11/98        1/99       4/99       5/99       5/99      6/99        6/99  
 Portland General         10/98       11/98      11/98       6/99       6/99      6/99        6/99  
Wholesale:                                                                                          
 Domestic                  7/98        3/99       5/99       7/99       9/99      9/99        9/99  
 Europe                    6/98        7/98       3/99       8/99       8/99      8/99        8/99  
 Other International       2/99        2/99       4/99       6/99       7/99      8/99        6/99  
Retail Energy Services     1/99        1/99       3/99       4/99       5/99      6/99        6/99  
Corporate and Other       10/98        3/99       3/99       6/99       6/99      6/99        6/99  

Enron will continue to closely monitor work under the Plan and            
to revise estimated completion dates for the initial iteration of               
each listed process.                                                            

Costs to Address Year 2000 Issues                                               
Under the Plan and otherwise, Enron has not incurred material             
historical costs for Year 2000 awareness, inventory, assessment,                
analysis, conversion, testing, or contingency planning.  Further,               
Enron anticipates that its future costs for these purposes,                     
including those for implementing its Year 2000 contingency plans,               
will not be material.                                                           

Although management believes that its estimates are                       
reasonable, there can be no assurance, for the reasons stated in                
the "Summary" section below, that the actual costs of                           
implementing the Plan will not differ materially from the                       
estimated costs or that Enron will not be materially adversely                  
affected by Year 2000 issues.                                                   

Year 2000 Risk Factors                                                          
Regulatory requirements.  Certain of Enron's business units               
operate in industries that are regulated by governmental                        
authorities.  Enron expects to satisfy these regulatory                         
authorities' requirements for achieving Year 2000 readiness.  If                
Enron's reasonable expectations in this regard are in error, and                
if a regulatory authority should order the temporary cessation of               
Enron's operations in one or more of these areas, the adverse                   
effect on Enron could be material.  Outside Entities could face                 
similar problems that materially adversely affect Enron.                        

Shortage of resources.  Between now and Year 2000 there will              
be increased competition for people with the technical and                      
managerial skills necessary to deal with the Year 2000 problem.                 
While Enron is taking substantial precautions to recruit and                    
retain sufficient people skilled in dealing with the Year 2000                  
problem and has hired consultants who bring additional skilled                  
people to deal with the Year 2000 problem as it affects Enron,                  
Enron could face shortages of skilled personnel or other                        
resources, such as Year 2000 ready computer chips, and these                    
shortages might delay or otherwise impair Enron's progress                      
towards making its mission-critical systems Year 2000 ready.                    
Outside Entities could face similar problems that materially                    
adversely affect Enron.  Enron believes that the possible impact                
of the shortage of skilled people is not, and will not be, unique               
to Enron.                                                                       

Potential shortcoming.  Enron estimates that its mission-                 
critical systems, domestic and international, will be Year 2000-                
ready substantially before January 1, 2000.  However, there is no               
assurance that the Plan will succeed in accomplishing its                       
purposes or that unforeseen circumstances will not arise during                 
implementation of the Plan that would materially and adversely                  
affect Enron.                                                                   

Cascading effect.  Enron and its business units are taking                
reasonable steps to identify, assess, and, where appropriate,                   
replace devices that contain embedded chips.  Despite these                     
reasonable efforts, Enron anticipates that it will not be able to               
find and remediate all embedded chips in systems in Enron's                     
business units.  Further, Enron anticipates that Outside Entities               
on which Enron depends also will not be able to find and                        
remediate all embedded chips in their systems.  Some of the                     
embedded chips that fail to operate or that produce anomalous                   
results may create system disruptions or failures.  Some of these               
disruptions or failures may spread from the systems in which they               
are located to other systems in a cascade.  These cascading                     
failures may have adverse effects upon Enron's ability to                       
maintain safe operations and may also have adverse effects upon                 
Enron's ability to serve its customers and otherwise to fulfill                 
certain contractual and other legal obligations.  The embedded                  
chip problem is widely recognized as one of the more difficult                  
aspects of the Year 2000 problem across industries and throughout               
the world.  Enron believes that the possible adverse impact of                  
the embedded chip problem is not, and will not be, unique to                    
Enron.                                                                          

Third parties.  Enron cannot assure that suppliers upon which             
it depends for essential goods and services will convert and test               
their mission-critical systems and processes in a timely and                    
effective manner.  Failure or delay to do so by all or some of                  
these entities, including U.S. federal, state or local                          
governments and foreign governments, could create substantial                   
disruptions having a material adverse affect on Enron's business.               

Contingency Plans                                                               
As part of the Plan, Enron is developing contingency plans                
that deal with two aspects of the Year 2000 problem:  (1) that                  
Enron, despite its good-faith, reasonable efforts, may not have                 
satisfactorily remediated all of its internal mission-critical                  
systems; and (2) that Outside Systems may not be Year 2000 ready,               
despite Enron's good-faith, reasonable efforts to work with                     
Outside Entities.  Enron's contingency plans are being designed                 
to minimize the disruptions or other adverse effects resulting                  
from Year 2000 incompatibilities regarding these mission-critical               
functions or systems, and to facilitate the early identification                
and remediation of mission-critical Year 2000 problems that first               
manifest themselves after January 1, 2000.                                      

Enron's contingency plans will contemplate an assessment of               
all its mission-critical internal information technology systems                
and its internal operational systems that use computer-based                    
controls.  This process will commence in the early minutes of                   
January 1, 2000, and continue for hours, days, or weeks as                      
circumstances require.  Further, Enron will in that time frame                  
assess any mission-critical disruptions due to Year 2000-related                
failures that are external to Enron.  The assessment process will               
cover, for example, loss of electrical power from utilities;                    
telecommunications services from carriers; or building access,                  
security, or elevator service in facilities occupied by Enron.                  

Enron's contingency plans include the creation of teams that              
will be standing by on the evening of December 31, 1999, prepared               
to respond rapidly and otherwise as necessary to mission-critical               
Year 2000-related problems as soon as they become known.  The                   
composition of teams that are assigned to deal with Year 2000                   
problems will vary according to the nature, mission-criticality,                
and location of the problem.  Because Enron operates                            
internationally, some of its Year 2000 contingency teams will be                
stationed at Enron's mission-critical facilities overseas.                      

Worst Case Scenario                                                             
The Securities and Exchange Commission requires that public               
companies forecast the most reasonably likely worst case Year                   
2000 scenario.  Analysis of the most reasonably likely worst case               
Year 2000 scenarios Enron may face leads to contemplation of the                
following possibilities which, though unlikely in some or many                  
cases, must be included in any consideration of worst cases:                    
widespread failure of electrical, gas, and similar supplies by                  
utilities serving Enron domestically and internationally;                       
widespread disruption of the services of communications common                  
carriers domestically and internationally; similar disruption to                
means and modes of transportation for Enron and its employees,                  
contractors, suppliers, and customers;  significant disruption to               
Enron's ability to gain access to, and remain working in, office                
buildings and other facilities; the failure of substantial                      
numbers of Enron's mission-critical information (computer)                      
hardware and software systems, including both internal business                 
systems and systems (such as those with embedded chips)                         
controlling operational facilities such as electrical generation,               
transmission, and distribution systems and oil and gas plants and               
pipelines, domestically and internationally; and the failure,                   
domestically and internationally, of Outside Systems, the effects               
of which would have a cumulative material adverse impact on                     
Enron's mission-critical systems.  Among other things, Enron                    
could face substantial claims by customers or loss of revenues                  
due to service interruptions, inability to fulfill contractual                  
obligations, inability to account for certain revenues or                       
obligations or to bill customers accurately and on a timely                     
basis, and increased expenses associated with litigation,                       
stabilization of operations following mission-critical failures,                
and the execution of contingency plans.  Enron could also                       
experience an inability by customers, traders, and others to pay,               
on a timely basis or at all, obligations owed to Enron.  Under                  
these circumstances, the adverse effect on Enron, and the                       
diminution of Enron's revenues, would be material, although not                 
quantifiable at this time.  Further in this scenario, the                       
cumulative effect of these failures could have a substantial                    
adverse effect on the economy, domestically and internationally.                
The adverse effect on Enron, and the diminution of Enron's                      
revenues, from a domestic or global recession or depression also                
is likely to be material, although not quantifiable at this time.               

Enron will continue to monitor business conditions with the               
aim of assessing and minimizing adverse effects, if any, that                   
result or may result from the Year 2000 problem.                                

Summary                                                                         
Enron has a plan to deal with the Year 2000 challenge and                 
believes that it will be able to achieve substantial Year 2000                  
readiness with respect to the mission critical systems that it                  
controls.  However, from a forward-looking perspective, the                     
extent and magnitude of the Year 2000 problem as it will affect                 
Enron, both before and for some period after January 1, 2000, are               
difficult to predict or quantify for a number of reasons.  Among                
these are:  the difficulty of locating "embedded" chips that may                
be in a great variety of mission-critical hardware used for                     
process or flow control, environmental, transportation, access,                 
communications and other systems; the difficulty of inventorying,               
assessing, remediating, verifying and testing Outside Systems;                  
the difficulty in locating all mission-critical software                        
(computer code) internal to Enron that is not Year 2000                         
compatible; and the unavailability of certain necessary internal                
or external resources, including but not limited to trained                     
hardware and software engineers, technicians, and other personnel               
to perform adequate remediation, verification and testing of                    
mission-critical Enron systems or Outside Systems.  Accordingly,                
there can be no assurance that all of Enron's systems and all                   
Outside Systems will be adequately remediated so that they are                  
Year 2000 ready by January 1, 2000, or by some earlier date, so                 
as not to create a material disruption to Enron's business.  If,                
despite Enron's reasonable efforts under its Year 2000 Plan,                    
there are mission-critical Year 2000-related failures that create               
substantial disruptions to Enron's business, the adverse impact                 
on Enron's business could be material.  Additionally, while                     
Enron's Year 2000 costs are not expected to be material, such                   
costs are difficult to estimate accurately because of                           
unanticipated vendor delays, technical difficulties, the impact                 
of tests of Outside Systems and similar events.  Moreover, the                  
estimated costs of implementing the Plan do not take into account               
the costs, if any, that might be incurred as a result of Year                   
2000-related failures that occur despite Enron's implementation                 
of the Plan.                                                                    

NEW ACCOUNTING PRONOUNCEMENTS                                                   

On April 3, 1998, the AICPA issued Statement of Position 98-5             
(SOP 98-5), "Reporting on the Costs of Start-Up Activities,"                    
which requires that costs for all start-up activities and                       
organization costs be expensed as incurred and not capitalized in               
certain instances, as had previously been allowed.  SOP 98-5 is                 
effective for financial statements for fiscal years beginning                   
after 1998 and initial adoption is required to be reflected as a                
cumulative effect of accounting change.  Although Enron continues               
to evaluate the impact of adopting SOP 98-5, it expects to                      
recognize an after-tax charge of approximately $130 million in                  
the first quarter of 1999 related primarily to differences in                   
timing of commencement of capitalization of project development                 
costs compared to Enron's current policy.  This charge will be                  
reflected net of tax as a separate line item in Enron's                         
Consolidated Income Statement.                                                  

In June 1998, the Financial Accounting Standards Board issued             
Statement of Financial Accounting Standards (SFAS) No. 133,                     
"Accounting for Derivative Instruments and Hedging Activities."                 
SFAS No. 133 establishes accounting and reporting standards                     
requiring that every derivative instrument (including certain                   
derivative instruments embedded in other contracts) be recorded                 
on the balance sheet as either an asset or liability measured at                
its fair value.  The statement requires that changes in the                     
derivative's fair value be recognized currently in earnings                     
unless specific hedge accounting criteria are met.  Special                     
accounting for qualifying hedges allows a derivative's gains and                
losses to offset related results on the hedged item in the income               
statement, and requires that a company must formally document,                  
designate and assess the effectiveness of transactions that                     
receive hedge accounting.                                                       

SFAS No. 133 is effective for fiscal years beginning after                
June 15, 1999.  A company may also implement the Statement as of                
the beginning of any fiscal quarter after issuance, however, SFAS               
No. 133 cannot be applied retroactively.  Enron has not yet                     
determined the timing of adoption of SFAS No. 133.  Enron                       
believes that SFAS No. 133 will not have a material impact on its               
accounting for price risk management activities but has not yet                 
quantified the effect on its hedging activities or physical base                
contracts.                                                                      

In December 1998, the Emerging Issues Task Force reached                  
consensus on Issue No. 98-10, "Accounting for Contracts involved                
in Energy Trading and Risk Management Activities" (EITF 98-10).                 
EITF 98-10 is effective for fiscal years beginning after December               
15, 1998 and requires energy trading contracts to be recorded at                
fair value on the balance sheet, with the changes in fair value                 
included in earnings.  The effect of initial application of EITF                
98-10 will be reported as a cumulative effect of a change in                    
accounting principle.  Because Enron currently records its                      
trading activities at fair value, management believes that the                  
adoption of EITF 98-10 will not have a materially adverse impact                
on its financial position or results of operations.                             

FINANCIAL CONDITION                                                             

                                                                [Download Table]
Cash Flows                                             


(In Millions)                 1998      1997      1996 

                                                       
Cash provided by (used in):                            
   Operating activities     $ 1,640   $   211   $   884
   Investing activities     (3,965)   (2,146)   (1,074)
   Financing activities       2,266     1,849       331

Net cash provided by operating activities increased $1,429                
million in 1998, reflecting positive operating cash flow from                   
Enron's major business segments other than Retail Energy                        
Services, which continued investing in its new business.                        
Operating cash flow in 1998 also included proceeds from sales of                
interests in energy-related financial assets and cash from timing               
and other changes related to Enron's commodity portfolio.  New                  
investments in merchant assets and investments totaling $721                    
million partially offset these increases.  See Note 4 to the                    
Consolidated Financial Statements.  The decrease of $673 million                
in 1997 was primarily a result of a cash payment of $440 million                
made in connection with the resolution of the J-Block gas                       
contract.                                                                       

Net cash used in investing activities primarily reflects                  
increased capital expenditures and equity investments, which                    
total $3,564 million in 1998, $2,092 million in 1997 and $1,483                 
million in 1996.  See "Capital Expenditures and Equity                          
Investments" below.  Partially offsetting these uses of cash were               
proceeds from the sales of assets totaling $239 million in 1998,                
$473 million in 1997 and $477 million in 1996.  These proceeds                  
were primarily from the sales of liquids assets in 1997 and from                
the sales of 12 million shares of EOG common stock held by Enron                
and non-strategic gathering and processing assets in 1996.                      

Cash provided by financing activities in 1998 included $875               
million from the net issuance of short- and long-term debt, $867                
million from the issuance of common stock and $828 million                      
primarily from the sale of a minority interest in a subsidiary                  
(see Note 8 to the Consolidated Financial Statements), partially                
offset by payments of $414 million for dividends.  Cash provided                
by financing activities in 1997 was generated from net issuances                
of $1,674 million of short- and long-term debt, $372 million of                 
preferred securities by subsidiary companies and $555 million of                
subsidiary equity (see Note 8 to the Consolidated Financial                     
Statements).  These inflows were partially offset by payments of                
$354 million for cash dividends and $422 million for treasury                   
stock.  Primary cash inflows from financing activities during                   
1996 included $282 million from the net issuance of short- and                  
long-term debt, $215 million from the issuance of preferred                     
securities by subsidiary companies and $102 million from the                    
issuance of Enron common stock.  Cash outflows in 1996 included                 
cash dividend payments of $281 million.                                         

Working Capital                                                                 
At December 31, 1998, Enron had a working capital deficit of              
$174 million.  Enron has credit facilities in place to fund                     
working capital requirements.  At December 31, 1998, those credit               
lines provided for up to $3.4 billion of committed and                          
uncommitted credit, of which $149 million was outstanding at                    
December 31, 1998.  Certain of the credit agreements contain                    
prefunding covenants.  However, such covenants are not expected                 
to restrict Enron's access to funds under these agreements.  In                 
addition, Enron sells commercial paper and has agreements to sell               
trade accounts receivable, thus providing financing to meet                     
seasonal working capital needs.  Management believes that the                   
sources of funding described above are sufficient to meet short-                
and long-term liquidity needs not met by cash flows from                        
operations.                                                                     

Capital Expenditures and Equity Investments                                     
Capital expenditures by operating segment are as follows:                 

                                                                [Download Table]

                                 1999                            
(In Millions)                  Estimate   1998     1997     1996 

                                                                 
Exploration and Production(a)   $  550   $  690   $  626    $540 
Transportation and Distribution    310      310      337     175 
Wholesale Energy Operations                                      
 and Services                      410     706       318     136 
Retail Energy Services              40       75       36       - 
Corporate and Other                300      124       75      13 
  Total                         $1,610   $1,905   $1,392    $864 

<FN>                                                             
(a) Excludes exploration expenses of $70 million (estimate),     
    $89 million, $75 million and $68 million for 1999, 1998, 1997
    and 1996, respectively.                                      

Capital expenditures increased $513 million in 1998 and $528              
million during 1997 as compared to the previous year.  During                   
1998, increased expenditures in Exploration and Production were                 
primarily a result of the acquisition of producing properties in                
the Gulf of Mexico, and Enron Wholesale expenditures increased                  
primarily related to domestic and international power plant                     
construction.  During 1997, increased expenditures in Exploration               
and Production reflect increased development expenditures in the                
United States and increased property acquisitions in Canada.                    
Transportation and Distribution expenditures increased due to                   
expansion projects by the interstate natural gas pipelines.                     
Included in Enron Wholesale were send-or-pay payments totaling                  
$63 million in 1998 and $167 million in 1997 related to a                       
transportation agreement in the U.K.                                            

Cash used for equity investments by the operating segments is             
as follows:                                                                     

                                                                [Download Table]

                                 1999                        
(In Millions)                  Estimate  1998    1997    1996

                                                             
Exploration and Production      $   80  $    -   $  -    $  -
Transportation and Distribution    120      27      3       -
Wholesale Energy Operations                                  
 and Services                      600    703     580     511
Retail Energy Services             210       -      -       -
Corporate and Other                120     929    117     108
  Total                         $1,130  $1,659   $700    $619

Equity investments increased in 1998 as compared to 1997                  
primarily due to the acquisitions of Elektro and Wessex, net of                 
proceeds from transactions reducing Enron's interest in these                   
investments.  See Note 9 to the Consolidated Financial                          
Statements.                                                                     

The level of spending for capital expenditures and equity                 
investments will vary depending upon conditions in the energy                   
markets, related economic conditions and identified                             
opportunities.  Management expects that the capital spending                    
program will be funded by a combination of internally generated                 
funds, proceeds from dispositions of selected assets, short- and                
long-term borrowings and proceeds from the sale of common stock                 
in February 1999.                                                               

CAPITALIZATION                                                                  

Total capitalization at December 31, 1998 was $17.5 billion.              
Debt as a percentage of total capitalization decreased to 41.9%                 
at December 31, 1998 as compared to 44.6% at December 31, 1997.                 
The decrease primarily reflects the issuance during 1998 of                     
approximately 17 million shares of common stock and the                         
conversion in late 1998 of 10.5 million Exchangeable Notes into                 
EOG shares held by Enron, partially offset by increased debt and                
minority interests.                                                             

Enron is a party to certain financial contracts which contain             
provisions for early settlement in the event of a significant                   
market price decline in which Enron's common stock falls below                  
certain levels (prices ranging from $15 to $37.84 per share) or                 
if the credit ratings for Enron's unsecured, senior long-term                   
debt obligations fall below investment grade.  The impact of this               
early settlement could include the issuance of additional shares                
of Enron common stock.                                                          

Enron's senior unsecured long-term debt is currently rated                
BBB+ by Standard & Poor's Corporation and Baa2 by Moody's                       
Investor Services.  Enron's continued investment grade status is                
critical to the success of its wholesale businesses as well as                  
its ability to maintain adequate liquidity.  Enron's management                 
believes it will be able to maintain or improve its credit                      
rating.                                                                         

In February 1999, Enron issued 13.8 million shares of common              
stock in a public offering and approximately 3.8 million shares                 
of common stock in connection with the acquisition of certain                   
assets.                                                                         

Enron has investments in entities whose functional currency is            
denominated in Brazilian Reals.  Subsequent to December 31, 1998                
the exchange rate for Brazilian Reals to the U.S. dollar has                    
declined.  As a result, Enron anticipates recording a non-cash                  
foreign currency translation adjustment, reducing shareholders'                 
equity, in the first quarter of 1999.  Based on the exchange rate               
in mid-February, the equity reduction would be approximately $600               
million.                                                                        

Item 7A.  FINANCIAL RISK MANAGEMENT                                             

Enron Wholesale offers price risk management services                     
primarily related to commodities associated with the energy                     
sector (natural gas, crude oil, natural gas liquids and                         
electricity).  These services are provided through a variety of                 
financial instruments including forward contracts, which may                    
involve physical delivery of an energy commodity, swap                          
agreements, which may require payments to (or receipt of payments               
from) counterparties based on the differential between a fixed                  
and variable price for the commodity, options and other                         
contractual arrangements. Interest rate risks and foreign                       
currency risks associated with the fair value of its energy                     
commodities portfolio are managed in this segment using a variety               
of financial instruments, including financial futures, swaps and                
options.                                                                        

In order to mitigate the risk associated with its merchant                
investments, Enron actively manages the systematic or market                    
risks inherent in the investments.  Using various analytical                    
methods, Enron generally disaggregates and manages the equity                   
index, interest rate and commodity risks embedded in the                        
investments, leaving the specific asset or idiosyncratic risk                   
which is diversified among the investments.                                     

Enron's other businesses also enter into forwards, swaps and              
other contracts primarily for the purpose of hedging the impact                 
of market fluctuations on assets, liabilities, production or                    
other contractual commitments.  Changes in the market value of                  
these hedge transactions are deferred until the gain or loss is                 
recognized on the hedged item.                                                  

Management of the market risks associated with its portfolio              
of transactions is critical to the success of Enron. Therefore,                 
comprehensive risk management processes, policies and procedures                
have been established to monitor and control these market risks.                

Enron manages market risk on a portfolio basis, subject to                
parameters established by its Board of Directors. Market risks                  
are monitored by an independent risk control group operating                    
separately from the units that create or actively manage these                  
risk exposures to ensure compliance with Enron's stated risk                    
management policies.  Enron's fixed price commodity contract                    
portfolio is typically balanced to within an annual average of 1%               
of the total notional physical and financial transaction volumes                
marketed.                                                                       

Market Risk                                                                     
The use of financial instruments by Enron's businesses may                
expose Enron to market and credit risks resulting from adverse                  
changes in commodity and equity prices, interest rates and                      
foreign exchange rates.  For Enron's Wholesale businesses, the                  
major market risks are discussed below:                                         

Commodity Price Risk.  Commodity price risk is a consequence              
of providing price risk management services to customers as well                
as owning and operating production facilities. As discussed                     
above, Enron actively manages this risk on a portfolio basis to                 
ensure compliance with Enron's stated risk management policies.                 
Forwards, futures, swaps and options are utilized to manage                     
Enron's consolidated exposure to price fluctuations related to                  
production from its production facilities.                                      

Interest Rate Risk. Interest rate risk is also a consequence              
of providing price risk management services to customers and                    
having variable rate debt obligations, as changing interest rates               
impact the discounted value of future cash flows. Enron utilizes                
swaps, forwards, futures and options to manage its interest rate                
risk.                                                                           

Foreign Currency Exchange Rate Risk. Foreign currency exchange            
rate risk is the result of Enron's international operations and                 
price risk management services provided to its worldwide customer               
base.  The primary purpose of Enron's foreign currency hedging                  
activities is to protect against the volatility associated with                 
foreign currency purchase and sale transactions. Enron primarily                
utilizes forward exchange contracts, futures and purchased                      
options to manage Enron's risk profile.                                         

Equity Risk. Equity risk arises from the energy assets and            
investments operations of Enron Wholesale, which provides capital               
to customers through equity participations in various investment                
activities.  Enron manages this risk by disaggregating the market               
risks (such as equity index, interest rate and commodity risks)                 
from the individual investments and managing these risks on a                   
portfolio basis through the use of futures, forwards, swaps and                 
options to ensure compliance with Enron's stated risk management                
policies.  The idiosyncratic risk or specific risk is managed on                
both an individual and portfolio basis within the risk management               
polices.                                                                        

Enron measures the market risk in its investments on a daily              
basis utilizing value at risk and other methodologies.  The                     
quantification of market risk using value at risk provides a                    
consistent measure of risk across diverse energy markets and                    
products. The use of these methodologies requires a number of key               
assumptions including the selection of a confidence level for                   
expected losses, the holding period for liquidation and the                     
treatment of risks outside the value at risk methodologies,                     
including liquidity risk and event risk.  Value at risk                         
represents an estimate of reasonably possible net losses in                     
earnings that would be recognized on its investments assuming                   
hypothetical movements in future market rates and no change in                  
positions.  This is not necessarily indicative of actual results                
which may occur.                                                                

Value at Risk                                                                   
Enron has performed an entity-wide value at risk analysis of          
virtually all of Enron's financial assets and liabilities.  Enron               
utilizes value at risk in its daily business to evaluate, measure               
and manage its overall risk exposure.  Value at risk incorporates               
numerous variables that could impact the fair value of Enron's                  
investments, including commodity prices, interest rates, foreign                
exchange rates, equity prices and associated volatilities, as                   
well as correlation within and across these variables.  Enron's                 
methodology includes the use of delta/gamma approximations for                  
option positions and relies to a certain extent on historical                   
correlations across commodity groups.   Enron estimates value at                
risk commodity, interest rate and foreign exchange exposures                    
using a model based on Monte Carlo simulation of delta/gamma                    
positions which captures a significant portion of the exposure                  
related to option positions.  The value at risk for equity                      
exposure discussed above is based on J.P. Morgan's RiskMetricsT                 
approach utilizing historical estimates of volatility and                       
correlation.  Both value at risk methods utilize a one-day                      
holding period and a 95% confidence level.  Cross-commodity                     
correlations are used as appropriate.                                           

The use of value at risk models allows management to aggregate            
risks across the company, compare risk on a consistent basis and                
identify the drivers of risk.  Because of the inherent                          
limitations to value at risk, including the use of delta/gamma                  
approximations to value options, subjectivity in the choice of                  
liquidation period and reliance on historical data to calibrate                 
the models, Enron relies on value at risk as only one component                 
in its risk control process.  In addition to using value at risk                
measures, Enron performs regular stress and scenario analyses to                
estimate the economic impact of sudden market moves on the value                
of its portfolios.  The results of the stress testing, along with               
the professional judgment of experienced business and risk                      
managers, are used to supplement the value at risk methodology                  
and capture additional market-related risks, including                          
volatility, liquidity and event, concentration and correlation                  
risks.                                                                          

The following table illustrates the value at risk for each                
component of market risk:                                                       

                                                                [Download Table]

                            December 31,       Year ended December 31, 1998       
                                                           High           Low     
(In Millions)               1998   1997   Average(a)   Valuation(a)   Valuation(a)

                                                                                  
Trading Market Risk:                                                              
  Commodity price            $20   $25      $25           $47(b)         $17      
  Interest rate                -     -        2             4              -      
  Foreign currency                                                                
   exchange rate               -     1        2             3              -      
  Equity                      12     4        6            12              3      

Non-Trading Market Risk(c):                                                       
  Commodity price             10     9       13            19              6      
  Interest rate                -     -        -             1              -      
  Foreign currency                                                                
   exchange rate               -     1        -             -              -      
  Equity                       -     -        -             -              -      

<FN>                                                                              
(a) The average values presents a twelve month average of the                     
    month end values.  The high and low valuations for each market                
    risk component represent the highest and lowest month end                     
    value during 1998.                                                            
(b) In late June and early July 1998, significant price                           
    swings in the U.S. power markets caused Enron's value at risk                 
    to increase significantly for a period of less than a month                   
    before returning to normal levels.                                            
(c) Includes only the risk related to the financial                               
    instruments that serve as hedges and does not include the                     
    related underlying hedged item.                                               

Accounting Policies                                                             
Accounting policies for price risk management and hedging                 
activities are described in Note 1 to the Consolidated Financial                
Statements.                                                                     

INFORMATION REGARDING               
FORWARD LOOKING STATEMENTS                

This Annual Report 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                 
ability of Enron to penetrate new retail natural gas and                        
electricity markets in the United States and Europe; the timing                 
and extent of deregulation of energy markets in the United States               
and in foreign jurisdictions; other regulatory developments in                  
the United States and in foreign countries, including tax                       
legislation and regulations; the extent of efforts by governments               
to privatize natural gas and electric utilities and other                       
industries; the timing and extent of changes in commodity prices                
for crude oil, natural gas, electricity, foreign currency and                   
interest rates; the extent of EOG's success in acquiring oil and                
gas properties and in discovering, developing, producing and                    
marketing reserves; the timing and success of Enron's efforts to                
develop international power, pipeline, water and other                          
infrastructure projects; the ability of counterparties to                       
financial risk management instruments and other contracts with                  
Enron to meet their financial commitments to Enron; Enron's                     
success in implementing its Year 2000 Plan, the effectiveness of                
Enron's Year 2000 Plan, and the Year 2000 readiness of Outside                  
Entities; and Enron's ability to access the capital markets and                 
equity markets during the periods covered by the forward looking                
statements, which will depend on general market conditions and                  
Enron's ability to maintain or increase the credit ratings for                  
its unsecured senior long-term debt obligations.                                

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                            

The information required hereunder is included in this                
report as set forth in the "Index to Financial Statements"                      
on page F-1.                                                                    

Item 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL                              
DISCLOSURE                                                    

None.                                                                 

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PART III                    

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                    

The information required by Item 10 of Form 10-K                      
relating to directors who are nominees for election as                          
directors at Enron's Annual Meeting of Shareholders to be                       
held on May 4, 1999 is set forth under the caption entitled                     
"Election of Directors" in Enron's Proxy Statement, and is                      
incorporated herein by reference.                                               

The information required by Item 10 of Form 10-K with                 
respect to executive officers is set forth in Part I of this                    
Form 10-K under the heading "Current Executive Officers of                      
the Registrant".                                                                

Section 16(a) of the Securities Exchange Act of 1934                  
requires Enron's executive officers and directors, and                          
persons who own more than 10% of a registered class of                          
Enron's equity securities, to file reports of ownership and                     
changes in ownership with the SEC and the New York Stock                        
Exchange.  Based solely on its review of the copies of such                     
reports received by it, or written representations from                         
certain reporting persons that no Forms 5 were required for                     
those persons, Enron believes that during 1998, its                             
executive officers, directors and greater than 10%                              
shareholders complied with all applicable filing                                
requirements, with the exception of one 10% shareholder who                     
did not timely file two reports relating to a total of six                      
transactions, and one executive officer who did not timely                      
file his Form 3 Initial Statement of Beneficial Ownership.                      

There are no family relationships among the officers                  
listed, and there are no arrangements or understandings                         
pursuant to which any of them were elected as officers.                         
Officers are appointed or elected annually by the Board of                      
Directors at its first meeting following the Annual Meeting                     
of Shareholders, each to hold office until the corresponding                    
meeting of the Board in the next year or until a successor                      
shall have been elected, appointed or shall have qualified.                     

Item 11.  EXECUTIVE COMPENSATION                                                

The information regarding executive compensation is set               
forth in the Proxy Statement under the captions                                 
"Compensation of Directors and Executive Officers - Director                    
Compensation; Executive Compensation; Stock Option Grants                       
During 1998; Aggregated Stock Option/SAR Exercises During                       
1998 and Stock Option/SAR Values as of December 31, 1998;                       
Long-Term Incentive Plan - Awards in 1998; Retirement and                       
Supplemental Benefit Plans; Severance Plans; Employment                         
Contracts; Certain Transactions; and Compensation Committee                     
Interlocks and Insider Participation", and is incorporated                      
herein by reference.                                                            

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                       
AND MANAGEMENT                                              

(a) Security ownership of certain beneficial owners                           

The information regarding security ownership of certain               
beneficial owners is set forth in the Proxy Statement under           
the caption "Election of Directors - Security Ownership of            
Certain Beneficial Owners", and is incorporated herein by             
reference.                                                            

(b) Security ownership of management                                          

The information regarding security ownership of management            
is set forth in the Proxy Statement under the caption                 
"Election of Directors - Stock Ownership of Management                
and Board of Directors as of February 15, 1999", and is               
incorporated herein by reference.                                     

(c) Changes in control                                                        

None.                                                               

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        

The information regarding certain relationships and                   
related transactions is set forth in the Proxy Statement                        
under the caption "Certain Transactions" and "Compensation                      
Committee Interlocks and Insider Participation", and is                         
incorporated herein by reference.                                               

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PART IV                   

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND                          
REPORTS ON FORM 8-K                                         

(a)(1) and (2) Financial Statements and Financial Statement                     
Schedules.  See "Index to Financial Statements" set forth on                    
page F-1.                                                                       

(a)(3)   Exhibits:                                                              

*3.01  - Amended and Restated Articles of                           
Incorporation of Enron (Annex E to the Proxy      
Statement/Prospectus included in Enron's          
Registration Statement on Form S-4 - File No.     
333-13791).                                       

*3.02  - Articles of Merger of Enron Oregon                         
Corp., an Oregon corporation, and Enron           
Corp., a Delaware corporation (Exhibit 3.02       
to Post-Effective Amendment No. 1 to Enron's      
Registration Statement on Form S-3 - File No.     
33-60417).                                        

*3.03  - Articles of Merger of Enron Corp.,                         
an Oregon corporation, and Portland General       
Corporation, an Oregon corporation (Exhibit       
3.03 to Post-Effective Amendment No. 1 to         
Enron's Registration Statement on Form S-3 -      
File No. 33-60417).                               

*3.04  - Bylaws of Enron (Exhibit 3.04 to                           
Post-Effective Amendment No. 1 to Enron's         
Registration Statement on Form S-3 - File No.     
33-60417).                                        

*3.05  - Form of Series Designation for the                         
Enron Convertible Preferred Stock (Annex F to     
the Proxy Statement/Prospectus included in        
Enron's Registration Statement on Form S-4 -      
File No. 333-13791).                              

*3.06  - Form of Series Designation for the                         
Enron 9.142% Preferred Stock (Annex G to the      
Proxy Statement/Prospectus included in            
Enron's Registration Statement on Form S-4 -      
File No. 333-13791).                              

*3.07  - Statement of Resolutions                                   
Establishing Series A Junior Voting               
Convertible Preferred Stock (Exhibit 3.07 to      
Enron's Registration Statement on Form S-3 -      
File No. 333-44133).                              

*3.08  - Statement of Resolutions                                   
Establishing A Series of Preferred Stock of       
Enron Corp. - Mandatorily Convertible Single      
Reset Preferred Stock, Series A (Exhibit 4.01     
to Enron's Form 8-K filed on January 26,          
1999).                                            

*3.09  - Statement of Resolutions                                   
Establishing A Series of Preferred Stock of       
Enron Corp. - Mandatorily Convertible Single      
Reset Preferred Stock, Series B (Exhibit 4.02     
to Enron's Form 8-K filed on January 26,          
1999).                                            

*4.01  - Indenture dated as of November 1,                          
1985, between Enron and Harris Trust and          
Savings Bank, as supplemented and amended by      
the First Supplemental Indenture dated as of      
December 1, 1995 (Form T-3 Application for        
Qualification of Indentures under the Trust       
Indenture Act of 1939, File No. 22-14390,         
filed October 24, 1985; Exhibit 4(b) to Form      
S-3 Registration Statement No. 33-64057 filed     
on November 8, 1995).  There have not been        
filed as exhibits to this Form 10-K other         
debt instruments defining the rights of           
holders of long-term debt of Enron, none of       
which relates to authorized indebtedness that     
exceeds 10% of the consolidated assets of         
Enron and its subsidiaries.  Enron hereby         
agrees to furnish a copy of any such              
instrument to the Commission upon request.        

*4.02 -  Supplemental Indenture, dated                              
as of May 8, 1997, by and among Enron Corp.,      
Enron Oregon Corp. and Harris Trust and           
Savings Bank, as Trustee (Exhibit 4.02 to         
Post-Effective Amendment No. 1 to Enron's         
Registration Statement on Form S-3, File No.      
33-60417).                                        

*4.03  - Form of Supplemental Indenture,                            
dated as of September 1, 1997, between Enron      
Corp. and Harris Trust and Savings Bank, as       
Trustee (Exhibit 4.03 to Enron Registration       
Statement on Form S-3, File No. 333-35549).       

*4.04  - Form of Amended and Restated                               
Agreement of Limited Partnership of Enron         
Capital Resources, L.P. (Exhibit 3.1 to Enron     
Form 8-K dated August 2, 1994).                   

*4.05  - Form of Payment and Guarantee                              
Agreement dated as of August 3, 1994,             
executed by Enron Corp. for the benefit of        
the holders of Enron Capital Resources, L.P.      
9% Cumulative Preferred Securities, Series A      
(Exhibit 4.1 to Enron Form 8-K dated August       
2, 1994).                                         

*4.06  - Form of Loan Agreement, dated as of                        
August 3, 1994, between Enron Corp. and Enron     
Capital Resources, L.P.  (Exhibit 4.2 to          
Enron Form 8-K dated August 2, 1994).             

*4.07  - Articles of Association of Enron                           
Capital LLC (Exhibit 9 to Enron Corp. Form 8-K    
dated November 12, 1993).                         

*4.08  - Form of Payment and Guarantee                              
Agreement of Enron Corp., dated as of             
November 15, 1993, in favor of the holders of     
Enron Capital LLC 8% Cumulative Guaranteed        
Monthly Income Preferred Shares (Exhibit 2 to     
Enron Form 8-K dated November 12, 1993).          

*4.09  - Form of Loan Agreement, dated as of                        
November 15, 1993, between Enron Corp. and        
Enron Capital LLC (Exhibit 3 to Enron Form 8-     
K dated November 12, 1993).                       

Executive Compensation Plans and Arrangements Filed as                
Exhibits Pursuant to Item 14(c) of Form 10-K:  Exhibits               
10.01 through 10.43                                                   

*10.01  - Enron Executive Supplemental                                
Survivor Benefits Plan, effective January 1,      
1987 (Exhibit 10.01 to Enron Form 10-K for        
1992).                                            

*10.02  -  First Amendment to Enron                                     
Executive Supplemental Survivor Benefits Plan     
(Exhibit 10.02 to Enron Form 10-K for 1995).      

*10.03  - Enron Corp. 1988 Stock Plan                                 
(Exhibit 4.3 to Form S-8 Registration             
Statement No. 33-27893).                          

*10.04  - Second Amendment to Enron Corp.                             
1988 Stock Plan (Exhibit 10.04 to Enron Form      
10-K for 1996).                                   

*10.05  - Enron Corp. 1988 Deferral Plan                              
(Exhibit 10.19 to Enron Form 10-K for 1987).      

*10.06  - First Amendment to Enron Corp. 1988                         
Deferral Plan (Exhibit 10.06 to Enron Form 10-K   
for 1995).                                        

*10.07  - Second Amendment to Enron Corp.                             
1988 Deferral Plan (Exhibit 10.07 to Enron        
Form 10-K for 1995).                              

*10.08  - Third Amendment to Enron Corp. 1988                         
Deferral Plan (Exhibit 10.09 to Enron Form 10-K   
for 1996).                                        

*10.09  - Fourth Amendment to Enron Corp.                             
1988 Deferral Plan (Exhibit 10.10 to Enron        
Form 10-K for 1996).                              

*10.10  - Fifth Amendment to Enron Corp. 1988                         
Deferral Plan (Exhibit 10.11 to Enron Form 10-K   
for 1996).                                        

*10.11  - Enron Corp. 1991 Stock Plan                                 
(Exhibit 10.08 to Enron Form 10-K for 1991).      

*10.12  - Amended and Restated Enron Corp.                            
1991 Stock Plan (Exhibit A to Enron Proxy         
Statement filed pursuant to Section 14(a) on      
March 24, 1997).                                  

*10.13  - First Amendment to Enron Corp.                              
Amended and Restated 1991 Stock Plan (Exhibit     
10.13 to Enron Form 10-K for 1997).               

*10.14  - Second Amendment to Enron Corp.                             
Amended and Restated 1991 Stock Plan (Exhibit     
10.14 to Enron Form 10-K for 1997).               

*10.15  - Enron Corp. 1992 Deferral Plan                              
(Exhibit 10.09 to Enron Form 10-K for 1991).      

*10.16  - First Amendment to Enron Corp. 1992                         
Deferral Plan (Exhibit 10.10 to Enron Form 10-K   
for 1995).                                        

*10.17  - Second Amendment to Enron Corp.                             
1992 Deferral Plan (Exhibit 10.11 to Enron        
Form 10-K for 1995).                              

*10.18  - Enron Corp. Directors' Deferred                             
Income Plan (Exhibit 10.09 to Enron Form 10-K     
for 1992).                                        

*10.19  - Split Dollar Life Insurance                                 
Agreement between Enron and the KLL and LPL       
Family Partnership, Ltd., dated April 22,         
1994 (Exhibit 10.17 to Enron Form 10-K for        
1994).                                            

*10.20  - Employment Agreement between Enron                          
Corp. and Kenneth L. Lay, executed December       
18, 1996 (Exhibit 10.25 to Enron Form 10-K        
for 1996).                                        

*10.21  - Consulting Services Agreement                               
between Enron and John A. Urquhart dated          
August 1, 1991 (Exhibit 10.23 to Enron Form       
10-K for 1991).                                   

*10.22  - First Amendment to Consulting                               
Services Agreement between Enron and John A.      
Urquhart, dated August 27, 1992 (Exhibit          
10.25 to Enron Form 10-K for 1992).               

*10.23  - Second and Third Amendments to                              
Consulting Services Agreement between Enron       
and John A. Urquhart, dated November 24, 1992     
and February 26, 1993, respectively (Exhibit      
10.26 to Enron Form 10-K for 1992).               

*10.24  - Fourth Amendment to Consulting                              
Services Agreement between Enron and John A.      
Urquhart dated as of May 9, 1994 (Exhibit         
10.35 to Enron Form 10-K for 1995).               

*10.25  - Fifth Amendment to Consulting                               
Services Agreement between Enron and John A.      
Urquhart (Exhibit 10.36 to Enron Form 10-K        
for 1995).                                        

*10.26  - Sixth Amendment to Consulting                               
Services Agreement between Enron and John A.      
Urquhart (Exhibit 10.37 to Enron Form 10-K        
for 1995).                                        

*10.27  - Seventh Amendment to Consulting                             
Services Agreement between Enron and John A.      
Urquhart, dated October 27, 1997 (Exhibit         
10.27 to Enron Form 10-K for 1997).               

10.28  - Eighth Amendment to Consulting                             
Services Agreement between Enron and John A.      
Urquhart, dated May 27, 1998.                     

10.29  - Ninth Amendment to Consulting                              
Services Agreement between Enron and John A.      
Urquhart, dated December 31, 1998.                

*10.30  - Enron Corp. Performance Unit Plan                           
(Exhibit A to Enron Proxy Statement filed         
pursuant to Section 14(a) on March 25, 1994).     

*10.31  - Enron Corp. Annual Incentive Plan                           
(Exhibit B to Enron Proxy Statement filed         
pursuant to Section 14(a) on March 25, 1994).     

*10.32  - Enron Corp. Performance Unit Plan                           
(as amended and restated effective May 2,         
1995) (Exhibit A to Enron Proxy Statement         
filed pursuant to Section 14(a) on March 27,      
1995).                                            

*10.33  - First Amendment to Enron Corp.                              
Performance Unit Plan (Exhibit 10.46 to Enron     
Form 10-K for 1995).                              

*10.34  - Enron Corp. Restated 1994 Deferral                          
Plan (Exhibit 4.3 to Enron Form S-8               
Registration Statement, File No. 333-48193).      

*10.35  - Employment Agreement between Enron                          
Capital Trade & Resources Corp. and Jeffrey       
K. Skilling, dated January 1, 1996 (Exhibit       
10.63 to Enron Form 10-K for 1996).               

*10.36  - First Amendment effective January                           
1, 1997, by and among Enron Corp., Enron          
Capital & Trade Resources Corp., and Jeffrey      
K. Skilling, amending Employment Agreement        
between Enron Capital & Trade Resources Corp.     
and Jeffrey K. Skilling dated January 1, 1996     
(Exhibit 10.64 to Enron Form 10-K for 1996).      

*10.37  - Split Dollar Agreement between                              
Enron and Jeffrey K. Skilling dated May 23,       
1997 (Exhibit 10.41 to Enron Form 10-K for        
1997).                                            

*10.38  - Second Amendment effective October                          
13, 1997, to Employment Agreement between         
Enron Corp. and Jeffrey K. Skilling (Exhibit      
10.42 to Enron Form 10-K for 1997).               

*10.39  - Loan Agreement effective October                            
13, 1997, between Enron Corp. and Jeffrey K.      
Skilling (Exhibit 10.43 to Enron Form 10-K        
for 1997).                                        

*10.40  - Employment Agreement dated July 20,                         
1996 (effective July 1, 1997) between Enron       
and Ken L. Harrison (Exhibit 10.1 to Post-        
Effective Amendment No. 1 to Enron's              
Registration Statement on Form S-4, File No.      
333-13791).                                       

10.41  - Executive Employment Agreement                             
between Enron Corp. and Rebecca P. Mark,          
effective May 4, 1998.                            

10.42  - Executive Employment Agreement                             
between Enron Corp. and Joseph W. Sutton,         
effective June 23, 1998.                          

10.43  - Executive Employment Agreement                             
between Enron Corp. and Kenneth D. Rice,          
effective June 1, 1998.                           

12     - Statement re computation of ratios                         
of earnings to fixed charges.                     

21     - Subsidiaries of registrant.                                

23.01  - Consent of Arthur Andersen LLP.                            

23.02  - Consent of DeGolyer and                                    
MacNaughton.                                      

23.03  - Letter Report of DeGolyer and                              
MacNaughton dated January 11, 1999.               

24     - Powers of Attorney for the                                 
directors signing this Form 10-K.                 

27     - Financial Data Schedule.                                   

* Asterisk indicates exhibits incorporated                                      
by reference.                                                               

(b)  Reports on Form 8-K                                                        

Current Report on Form 8-K filed October 16, 1998, as                 
amended by Form 8-K/A filed on November 6, 1998.                      

Current Report on Form 8-K filed March 18, 1999.                      

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INDEX TO FINANCIAL STATEMENTS                 

ENRON CORP.                 

                                              Page No.

Consolidated Financial Statements                                               

Report of Independent Public Accountants                   F-2              

Consolidated Income Statement and Consolidated Statement                    
of Comprehensive Income for the years ended December 31,                    
1998, 1997 and 1996                                        F-3              

Consolidated Balance Sheet as of December 31, 1998 and                      
1997                                                       F-4              

Consolidated Statement of Cash Flows for the years                          
ended December 31, 1998, 1997 and 1996                     F-6              

Consolidated Statement of Changes in Shareholders'                          
Equity Accounts for the years ended December 31,                            
1998, 1997 and 1996                                        F-7              

Notes to the Consolidated Financial Statements             F-8              

Financial Statements Schedule                                                   

Report of Independent Public Accountants on                                 
Financial Statement Schedule                               S-1              

Schedule II  -  Valuation and Qualifying Accounts          S-2              

Other financial statement schedules have been omitted                       
because they are inapplicable or the information required                       
therein is included elsewhere in the financial statements or                    
notes thereto.                                                                  

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                        

To the Shareholders and Board of Directors of Enron Corp.:                      

We have audited the accompanying consolidated balance sheet of            
Enron Corp. (an Oregon corporation) and subsidiaries as of                      
December 31, 1998 and 1997, and the related consolidated                        
statements of income, comprehensive income, cash flows and                      
changes in shareholders' equity for each of the three years in                  
the period ended December 31, 1998. These financial statements                  
are the responsibility of Enron Corp.'s management. Our                         
responsibility is to express an opinion on these financial                      
statements based on our audits.                                                 

We conducted our audits in accordance with generally accepted             
auditing standards. Those standards require that we plan and                    
perform the audit to obtain reasonable assurance about whether                  
the financial statements are free of material misstatement. An                  
audit includes examining, on a test basis, evidence supporting                  
the amounts and disclosures in the financial statements. An audit               
also includes assessing the accounting principles used and                      
significant estimates made by management, as well as evaluating                 
the overall financial statement presentation. We believe that our               
audits provide a reasonable basis for our opinion.                              

In our opinion, the financial statements referred to above                
present fairly, in all material respects, the financial position                
of Enron Corp. and subsidiaries as of December 31, 1998 and 1997,               
and the results of their operations, cash flows and changes in                  
shareholders' equity for each of the three years in the period                  
ended December 31, 1998, in conformity with generally accepted                  
accounting principles.                                                          

Arthur Andersen LLP           

Houston, Texas                                                                  
March 5, 1999                                                                   

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                  ENRON CORP. AND SUBSIDIARIES                          
                  CONSOLIDATED INCOME STATEMENT                         


                                               Year Ended December 31,  
(In Millions, except Per Share Amounts)        1998      1997      1996 

                                                                        
Revenues                                                                
  Natural gas and other products             $13,276   $13,211   $11,157
  Electricity                                 13,939     5,101       980
  Transportation                                 627       652       707
  Other                                        3,418     1,309       445
     Total Revenues                           31,260    20,273    13,289
Costs and Expenses                                                      
  Cost of gas, electricity and                                          
   other products                             26,381    17,311    10,478
  Operating expenses                           2,352     1,406     1,421
  Oil and gas exploration expenses               121       102        89
  Depreciation, depletion and                                           
   amortization                                  827       600       474
  Taxes, other than income taxes                 201       164       137
  Contract restructuring charge                    -       675         -
     Total Costs and Expenses                 29,882    20,258    12,599
Operating Income                               1,378        15       690
Other Income and Deductions                                             
  Equity in earnings of unconsolidated                                  
   affiliates                                     97       216       215
  Gains on sales of assets and investments        56       186       274
  Other income, net                               51       148        59
Income Before Interest, Minority                                        
 Interests and Income Taxes                    1,582       565     1,238
Interest and Related Charges, net                550       401       274
Dividends on Company-Obligated Preferred                                
 Securities of Subsidiaries                       77        69        34
Minority Interests                                77        80        75
Income Tax Expense (Benefit)                     175       (90)      271
Net Income                                       703       105       584
Preferred Stock Dividends                         17        17        16
Earnings on Common Stock                     $   686   $    88   $   568
Earnings Per Share of Common Stock                                      
  Basic                                      $  2.14   $  0.32   $  2.31
  Diluted                                    $  2.02   $  0.32   $  2.16
Average Number of Common Shares Used                                    
 in Computation                                                         
  Basic                                          321       272       246
  Diluted                                        348       277       270

                  ENRON CORP. AND SUBSIDIARIES                          
         CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                 

                                               Year Ended December 31,  
(In Millions)                                  1998      1997      1996 

Earnings on Common Stock                     $   686   $    88   $   568
Other comprehensive income:                                             
  Foreign currency translation adjustment        (14)      (21)       26
Total Comprehensive Income                   $   672   $    67   $   594

<FN>                                                                    
The accompanying notes are an integral part of these consolidated       
financial statements.                                                   

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                ENRON CORP. AND SUBSIDIARIES                    
                 CONSOLIDATED BALANCE SHEET                     


                                                  December 31,  
(In Millions)                                  1998         1997

                                                                
ASSETS                                                          
Current Assets                                                  
  Cash and cash equivalents                  $   111     $   170
  Trade receivables (net of allowance                           
   for doubtful accounts of $14 and                             
   $11, respectively)                          2,060       1,372
  Other receivables                              833         454
  Assets from price risk management                             
   activities                                  1,904       1,346
  Inventories                                    514         136
  Other                                          511         635
     Total Current Assets                      5,933       4,113

Investments and Other Assets                                    
  Investments in and advances to                                
   unconsolidated affiliates                   4,433       2,656
  Assets from price risk management                             
   activities                                  1,941       1,038
  Goodwill                                     1,949       1,910
  Other                                        4,437       3,665
     Total Investments and Other Assets       12,760       9,269

Property, Plant and Equipment, at cost                          
  Exploration and Production, successful                        
   efforts method                              4,814       4,291
  Transportation and Distribution              5,481       5,279
  Wholesale Energy Operations and Services     4,858       3,879
  Retail Energy Services                         141          44
  Corporate and Other                            498         249
                                              15,792      13,742
  Less accumulated depreciation,                                
   depletion and amortization                  5,135       4,572
     Property, Plant and Equipment, net       10,657       9,170

Total Assets                                 $29,350     $22,552

<FN>                                                            
The accompanying notes are an integral part of these            
consolidated financial statements.                              

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                ENRON CORP. AND SUBSIDIARIES                     
                 CONSOLIDATED BALANCE SHEET                      


                                                 December 31,    
(In Millions, except Shares)                  1998         1997  

                                                                 
LIABILITIES AND SHAREHOLDERS' EQUITY                             
Current Liabilities                                              
  Accounts payable                           $ 2,380     $ 1,794 
  Liabilities from price risk                                    
   management activities                       2,511       1,245 
  Other                                        1,216         817 
     Total Current Liabilities                 6,107       3,856 

Long-Term Debt                                 7,357       6,254 

Deferred Credits and Other Liabilities                           
  Deferred income taxes                        2,357       2,039 
  Liabilities from price risk                                    
   management activities                       1,421         876 
  Other                                        1,916       1,769 
     Total Deferred Credits and                                  
      Other Liabilities                        5,694       4,684 
Commitments and Contingencies                                    
 (Notes 3, 13, 14 and 15)                                        
Minority Interests                             2,143       1,147 

Company-Obligated Preferred Securities                           
 of Subsidiaries                               1,001         993 

Shareholders' Equity                                             
  Second preferred stock, cumulative, no par                     
   value, 1,370,000 shares authorized,                           
   1,319,848 shares and 1,337,645 shares of                      
   Cumulative Second Preferred Convertible                       
   Stock issued, respectively                    132         134 
  Common stock, no par value, 600,000,000                        
   shares authorized, 335,547,276 shares                         
   and 318,297,276 shares issued,                                
   respectively                                5,117       4,224 
  Retained earnings                            2,226       1,852 
  Accumulated other comprehensive income        (162)       (148)
  Common stock held in treasury, 4,666,661                       
   shares and 7,050,965 shares,                                  
   respectively                                 (195)       (269)
  Other                                          (70)       (175)
     Total Shareholders' Equity                7,048       5,618 

Total Liabilities and Shareholders' Equity   $29,350     $22,552 

<FN>                                                             
The accompanying notes are an integral part of these             
consolidated financial statements.                               

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                       ENRON CORP. AND SUBSIDIARIES                        
                   CONSOLIDATED STATEMENT OF CASH FLOWS                    


                                               Year Ended December 31,     
(In Millions)                                  1998      1997      1996    

                                                                           
Cash Flows From Operating Activities                                       
Reconciliation of net income to net                                        
 cash provided by operating activities                                     
  Net income                                 $   703   $   105   $   584   
  Depreciation, depletion and amortization       827       600       474   
  Oil and gas exploration expenses               121       102        89   
  Deferred income taxes                           87      (174)      207   
  Gains on sales of assets and investments       (82)     (195)     (274)  
  Changes in components of working                                         
   capital                                      (233)      (65)      142   
  Net assets from price risk management                                    
   activities                                    350       201        15   
  Merchant assets and investments:                                         
     Realized gains on sales                    (628)     (136)        -   
     Proceeds from sales                       1,434       339         -   
     Additions                                  (721)     (308)     (192)  
  Other operating activities                    (218)     (258)     (161)  
Net Cash Provided by Operating                                             
 Activities                                    1,640       211       884   
Cash Flows From Investing Activities                                       
  Capital expenditures                        (1,905)   (1,392)     (864)  
  Equity investments                          (1,659)     (700)     (619)  
  Proceeds from sales of investments and                                   
   other assets                                  239       473       477   
  Acquisition of subsidiary stock               (180)        -         -   
  Business acquisitions, net of cash acquired                              
   (see Note 2)                                 (104)      (82)        -   
  Other investing activities                    (356)     (445)      (68)  
Net Cash Used in Investing Activities         (3,965)   (2,146)   (1,074)  
Cash Flows From Financing Activities                                       
  Issuance of long-term debt                   1,903     1,817       359   
  Repayment of long-term debt                   (870)     (607)     (294)  
  Net increase (decrease) in short-term                                    
   borrowings                                   (158)      464       217   
  Issuance of company-obligated preferred                                  
   securities of subsidiaries                      8       372       215   
  Issuance of common stock                       867         -       102   
  Issuance of subsidiary equity                  828       555         -   
  Dividends paid                                (414)     (354)     (281)  
  Net (acquisition) disposition of                                         
   treasury stock                                 13      (422)        5   
  Other financing activities                      89        24         8   
Net Cash Provided by Financing Activities      2,266     1,849       331   
Increase (Decrease) in Cash and Cash                                       
 Equivalents                                     (59)      (86)      141   
Cash and Cash Equivalents, Beginning                                       
 of Year                                         170       256       115   
Cash and Cash Equivalents, End of Year       $   111   $   170   $   256   

Changes in Components of Working Capital                                   
  Receivables                                $(1,055)  $   351   $  (678)  
  Inventories                                   (372)       63       (53)  
  Payables                                       433      (366)      870   
  Other                                          761      (113)        3   
     Total                                   $  (233)  $   (65)  $   142   

<FN>                                                                       
The accompanying notes are an integral part of these consolidated financial
statements.                                                                

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                       ENRON CORP. AND SUBSIDIARIES                                                
         CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY                                 


(In Millions, except Per Share                    1998               1997               1996       
 Amounts; Shares in Thousands)              Shares    Amount   Shares    Amount   Shares    Amount 

                                                                                                   
Cumulative Second Preferred                                                                        
 Convertible Stock                                                                                 
  Balance, beginning of year                  1,338   $  134     1,371   $  137     1,375   $  138 
  Exchange of common stock                                                                         
   for convertible preferred stock              (18)      (2)      (33)      (3)       (4)      (1)
  Balance, end of year                        1,320   $  132     1,338   $  134     1,371   $  137 
Common Stock                                                                                       
  Balance, beginning of year                318,297   $4,224   255,945   $   26   253,860   $   25 
  Exchange of common stock                                                                         
   for convertible preferred stock                -       (7)      382        -        19        - 
  Issuances related to benefit                                                                     
   and dividend reinvestment plans                -       45         -       (3)        -        - 
  Sales of common stock                      17,250      836         -        -     2,066        1 
  Issuances of common stock in business                                                            
   acquisitions (see Note 2)                      -        -    61,970    2,281         -        - 
  Issuance of no par stock in                                                                      
   reincorporation merger                         -        -         -    1,881         -        - 
  Other                                           -       19         -       39         -        - 
  Balance, end of year                      335,547   $5,117   318,297   $4,224   255,945   $   26 
Additional Paid-in Capital                                                                         
  Balance, beginning of year                          $    -             $1,870             $1,791 
  Exchange of common stock                                                                         
   for convertible preferred stock                         -                  1                 (1)
  Issuances related to benefit                                                                     
   and dividend reinvestment plans                         -                 (9)               (16)
  Sales of common stock                                    -                 18                109 
  Issuance of no par stock in                                                                      
   reincorporation merger                                  -             (1,881)                 - 
  Other                                                    -                  1                (13)
  Balance, end of year                                $    -             $    -             $1,870 
Retained Earnings                                                                                  
  Balance, beginning of year                          $1,852             $2,007             $1,651 
  Net income                                             703                105                584 
  Cash dividends                                                                                   
     Common stock ($0.9625, $0.9125 and                                                            
      $0.8625 per share in 1998,                                                                   
      1997 and 1996, respectively)                      (312)              (243)              (212)
     Preferred stock ($13.1402, $12.4584,                                                          
      and $11.7750 per share in 1998,                                                              
      1997 and 1996, respectively)                       (17)               (17)               (16)
  Balance, end of year                                $2,226             $1,852             $2,007 
Accumulated Other Comprehensive Income -                                                           
 Cumulative Foreign Currency                                                                       
 Translation Adjustment                                                                            
  Balance, beginning of year                          $ (148)            $ (127)            $ (153)
  Translation adjustments                                (14)               (21)                26 
  Balance, end of year                                $ (162)            $ (148)            $ (127)
Treasury Stock                                                                                     
  Balance, beginning of year                 (7,051)  $ (269)     (821)  $  (30)   (2,618)  $  (93)
  Shares acquired                            (1,118)     (61)   (9,790)    (374)   (2,226)     (85)
  Exchange of common stock                                                                         
   for convertible preferred stock              243        9        70        3        46        2 
  Issuances related to benefit                                                                     
   and dividend reinvestment plans            3,213      124     2,838      106     2,249       81 
  Sales of treasury stock                         -        -         -        -     1,728       65 
  Issuances of treasury stock in                                                                   
   business acquisitions (see Note 2)            46        2       652       26         -        - 
  Balance, end of year                       (4,667)  $ (195)   (7,051)  $ (269)     (821)  $  (30)
Other                                                                                              
  Balance, beginning of year                          $ (175)            $ (160)            $ (194)
  Issuances related to benefit                                                                     
   and dividend reinvestment plans                       105                (15)                34 
  Balance, end of year                                $  (70)            $ (175)            $ (160)
Total Shareholders' Equity                            $7,048             $5,618             $3,723 

<FN>                                                                                               
The accompanying notes are an integral part of these consolidated financial                        
statements.                                                                                        

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ENRON CORP. AND SUBSIDIARIES                
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                

1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

Consolidation Policy and Use of Estimates.  The accounting and            
financial reporting policies of Enron Corp. and its subsidiaries                
conform to generally accepted accounting principles and                         
prevailing industry practices.  The consolidated financial                      
statements include the accounts of all majority-owned                           
subsidiaries of Enron Corp. after the elimination of significant                
intercompany accounts and transactions.                                         

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.                      

"Enron" is used from time to time herein as a collective                  
reference to Enron Corp. and its subsidiaries and affiliates.                   
The businesses of Enron are conducted by Enron Corp.'s                          
subsidiaries and affiliates whose operations are managed by their               
respective officers.                                                            

Cash Equivalents.  Enron records as cash equivalents all                  
highly liquid short-term investments with original maturities of                
three months or less.                                                           

Inventories.  Inventories consist primarily of commodities,               
priced at market.                                                               

Depreciation, Depletion and Amortization.  The provision for              
depreciation and amortization with respect to operations other                  
than oil and gas producing activities is computed using the                     
straight-line or regulatorily mandated method, based on estimated               
economic lives.  Composite depreciation rates are applied to                    
functional groups of property having similar economic                           
characteristics.  The cost of utility property units retired,                   
other than land, is charged to accumulated depreciation.                        

Provisions for depreciation, depletion and amortization of                
proved oil and gas properties are calculated using the units-of-                
production method.                                                              

Income Taxes.  Enron accounts for income taxes using an asset             
and liability approach under which deferred tax assets and                      
liabilities are recognized based on anticipated future tax                      
consequences attributable to differences between financial                      
statement carrying amounts of assets and liabilities and their                  
respective tax bases (see Note 5).                                              

Earnings Per Share.  Basic earnings per share is computed                 
based upon the weighted-average number of common shares                         
outstanding during the periods.  Diluted earnings per share is                  
computed based upon the weighted-average number of common shares                
plus the assumed issuance of common shares for all potentially                  
dilutive securities.  See Note 11 for additional information and                
a reconciliation of the basic and diluted earnings per share                    
computations.                                                                   

Accounting for Price Risk Management.  Enron engages in price             
risk management activities for both trading and non-trading                     
purposes.  Financial instruments utilized in connection with                    
trading activities are accounted for using the mark-to-market                   
method. Under the mark-to-market method of accounting, forwards,                
swaps, options and other financial instruments with third parties               
are reflected at market value, net of future physical delivery                  
related costs, and are shown as "Assets and Liabilities From                    
Price Risk Management Activities" in the Consolidated Balance                   
Sheet.  Unrealized gains and losses from newly originated                       
contracts, contract restructurings and the impact of price                      
movements are recognized as "Other Revenues."  Changes in the                   
assets and liabilities from price risk management activities                    
result primarily from changes in the valuation of the portfolio                 
of contracts, newly originated transactions and the timing of                   
settlement relative to the receipt of cash for certain contracts.               
The market prices used to value these transactions reflect                      
management's best estimate considering various factors including                
closing exchange and over-the-counter quotations, time value and                
volatility factors underlying the commitments.  The values are                  
adjusted to reflect the potential impact of liquidating Enron's                 
position in an orderly manner over a reasonable period of time                  
under present market conditions.                                                

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 financial instruments are recognized as gains or                   
losses.  If the hedged item is sold, the value of the financial                 
instrument is recognized in income.  Gains and losses on                        
financial instruments used for hedging purposes are recognized in               
the Consolidated Income Statement in the same manner as the                     
hedged item.                                                                    

The cash flow impact of financial instruments is reflected as             
cash flows from operating activities in the Consolidated                        
Statement of Cash Flows.  See Note 3 for further discussion of                  
Enron's price risk management activities.                                       

Accounting for Oil and Gas Producing Activities.  Enron                   
accounts for oil and gas exploration and production activities                  
under the successful efforts method of accounting.  All                         
development wells and related production equipment and lease                    
acquisition costs are capitalized when incurred.  Unproved                      
properties are assessed regularly and any impairment in value is                
recognized.  Lease rentals and exploration costs, other than the                
costs of drilling exploratory wells, are expensed as incurred.                  
Unsuccessful exploratory wells are expensed when determined to be               
non-productive.                                                                 

Gains and losses associated with the sale of natural gas and              
crude oil reserves in place with related assets are classified as               
"Other Revenues" in the Consolidated Income Statement.                          

Exploration costs and dry hole costs are included in the                  
Consolidated Statement of Cash Flows as investing activities.                   

Accounting for Development Activity.  Enron capitalizes                   
project development costs which may be recovered through                        
development cost reimbursements from joint venture partners or                  
other third parties, written off against development fees                       
received or included as part of an investment in those ventures                 
in which Enron continues to participate.  Accumulated project                   
development costs are otherwise expensed in the period that                     
management determines it is probable that the costs will not be                 
recovered.                                                                      

In the first quarter of 1999, Enron will adopt the AICPA                  
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of               
Start-Up Activities," which requires that all start-up costs be                 
expensed as incurred.  Certain costs which are currently                        
classified as development costs will qualify as start-up costs                  
under SOP 98-5.  Although Enron continues to evaluate the impact                
of adopting SOP 98-5, it expects to recognize an after-tax charge               
of approximately $130 million in the first quarter of 1999.  The                
cumulative effect of this accounting change will be reflected net               
of tax as a separate line item in the Consolidated Income                       
Statement.                                                                      

Development revenue results from development fees, recognized             
when realizable under the development agreement; long-term                      
construction contracts, recognized using the percentage-of-                     
completion method; and the operation and ownership of various                   
projects.  Proceeds from the sale of all or part of Enron's                     
investment in development projects are recognized as revenues at                
the time of sale to the extent that such sales proceeds exceed                  
the proportionate carrying amount of the investment.  See Note 4.               

Environmental Expenditures.  Expenditures that relate to an               
existing condition caused by past operations, and do not                        
contribute to current or future revenue generation, are expensed.               
Environmental expenditures relating to current or future revenues               
are expensed or capitalized as appropriate.  Liabilities are                    
recorded when environmental assessments and/or clean-ups are                    
probable and the costs can be reasonably estimated.                             

Computer Software.  Enron's accounting policy for the costs of            
computer software (all of which is for internal use only) is to                 
capitalize direct costs of materials and services consumed in                   
developing or obtaining software, including payroll and payroll-                
related costs for employees who are directly associated with and                
who devote time to the software project.  Costs may begin to be                 
capitalized once the application development stage has begun.                   
All other costs are expensed as incurred.  Enron amortizes the                  
costs on a straight-line basis over the useful life of the                      
software.  Impairment is evaluated based on changes in the                      
expected usefulness of the software.  At December 31, 1998, Enron               
has capitalized $189 million of software costs covering numerous                
systems, including trading and settlement, billing and payroll                  
systems and upgrades.                                                           

Investments in Unconsolidated Affiliates.  Investments in                 
unconsolidated affiliates are accounted for by the equity method,               
except for certain equity investments resulting from Enron's                    
merchant investment activities which are included at market value               
in "Other Investments" in the Consolidated Balance Sheet.  Where                
acquired assets are accounted for under the equity method based                 
on temporary control, earnings or losses related to the                         
investments to be sold are deferred until the time of the sale.                 
See Notes 4 and 9.                                                              

Foreign Currency Translation.  For international subsidiaries,            
asset and liability accounts are translated at year-end rates of                
exchange and revenue and expenses are translated at average                     
exchange rates prevailing during the year.  For subsidiaries                    
whose functional currency is deemed to be other than the U.S.                   
dollar, translation adjustments are included as a separate                      
component of other comprehensive income and shareholders' equity.               
Currency transaction gains and losses are recorded in income.                   

Recently Issued Accounting Pronouncements.  In 1998, the                  
Financial Accounting Standards Board issued Statement of                        
Financial Accounting Standards (SFAS) No. 133, "Accounting for                  
Derivative Instruments and Hedging Activities" and the Emerging                 
Issues Task Force reached a consensus on Issue No. 98-10,                       
"Accounting for Contracts involved in Energy Trading and Risk                   
Management Activities" (EITF 98-10).                                            

SFAS No. 133 establishes accounting and reporting standards               
requiring that every derivative instrument (including certain                   
derivative instruments embedded in other contracts) be recorded                 
on the balance sheet as either an asset or liability measured at                
its fair value.  The statement requires that changes in the                     
derivative's fair value be recognized currently in earnings                     
unless specific hedge accounting criteria are met.  Special                     
accounting for qualifying hedges allows a derivative's gains and                
losses to offset related results on the hedged item in the income               
statement, and requires that a company must formally document,                  
designate and assess the effectiveness of transactions that                     
receive hedge accounting.                                                       

SFAS No. 133 is effective for fiscal years beginning after                
June 15, 1999.  A company may also implement the statement as of                
the beginning of any fiscal quarter after issuance, however, SFAS               
No. 133 cannot be applied retroactively.  Enron has not yet                     
determined the timing of adoption of SFAS No. 133.  Enron                       
believes that SFAS No. 133 will not have a material impact on its               
accounting for price risk management activities but has not yet                 
quantified the effect on its hedging activities or physical base                
contracts.                                                                      

EITF 98-10 is effective for fiscal years beginning after                  
December 15, 1998 and requires energy trading contracts to be                   
recorded at fair value on the balance sheet, with the changes in                
fair value included in earnings.  The effect of initial                         
application of EITF 98-10 will be reported as a cumulative effect               
of a change in accounting principle.  Because Enron currently                   
records its trading activities at fair value, management believes               
that the adoption of EITF 98-10 will not have a materially                      
adverse impact on its financial position or results of                          
operations.                                                                     

Reclassifications.  Certain reclassifications have been made              
to the consolidated financial statements for prior years to                     
conform with the current presentation.                                          

2  BUSINESS ACQUISITIONS                                                        

Effective July 1, 1997, Enron merged with Portland General                
Corporation (PGC) in a stock-for-stock transaction.  Enron issued               
approximately 50.5 million common shares, valued at $36.88 per                  
share, to shareholders of PGC in a ratio of 0.9825 share of Enron               
common stock for each share of PGC common stock, and assumed                    
PGC's outstanding debt of approximately $1.1 billion.                           

On November 18, 1997, Enron acquired the minority interest in             
Enron Global Power & Pipelines L.L.C. (EPP) in a stock-for-stock                
transaction.  Enron issued approximately 11.5 million common                    
shares, valued at $36.09 per share, to shareholders of EPP in a                 
ratio of 0.9189 share of Enron common stock for each EPP share                  
held by the minority shareholders.  Additionally, during 1998 and               
1997, Enron acquired renewable energy, telecommunications and                   
energy management businesses for cash, Enron and subsidiary stock               
and notes.                                                                      

Enron has accounted for these acquisitions using the purchase             
method of accounting as of the effective date of each                           
transaction.  Accordingly, the purchase price of each transaction               
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 has                  
been reflected as goodwill in the Consolidated Balance Sheet and                
is being amortized on a straight-line basis over 5 to 40 years.                 
Assets acquired, liabilities assumed and consideration paid as a                
result of businesses acquired were as follows:                                  

                                                                [Download Table]

(In Millions)                                     1998      1997  

                                                                  
Fair value of assets acquired, other than cash   $ 269     $3,829 
Goodwill                                            94      1,847 
Fair value of liabilities assumed                 (259)    (3,235)
Common stock of Enron and subsidiary issued          -     (2,359)
Net cash paid                                    $ 104    $    82 

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.                                                       

                                                                [Download Table]

(In Millions, except Per Share Amounts)    1997      1996 

                                                          
Revenues                                 $20,950   $14,401
Income before interest, minority                          
 interests and income taxes                  716     1,511
Net income                                   181       691
Earnings per share                                        
   Basic                                 $  0.53   $  2.20
   Diluted                                  0.52      2.08

During 1998, Enron, through wholly-owned subsidiaries,                    
acquired Elektro-Eletricidades e Servicos S.A. (Elektro), Wessex                
Water Plc (Wessex) and assets related to The ICI Group's Teesside               
utilities and services business (the ICI assets) in separate cash               
transactions.  These acquisitions are being accounted for using                 
the equity method (see Note 9).                                                 

3  PRICE RISK MANAGEMENT AND FINANCIAL INSTRUMENTS                              

Trading Activities.  Enron, through its Wholesale Energy                  
Operations and Services segment (Enron Wholesale), offers price                 
risk management services to energy-related businesses through a                 
variety of financial and other instruments including forward                    
contracts involving physical delivery of an energy commodity,                   
swap agreements, which require payments to (or receipt of                       
payments from) counterparties based on the differential between a               
fixed and variable price for the commodity, options and other                   
contractual arrangements.  Interest rate risks and foreign                      
currency risks associated with the fair value of the energy                     
commodities portfolio are managed using a variety of financial                  
instruments, including financial futures.                                       

Notional Amounts and Terms.  The notional amounts and terms of            
these financial instruments at December 31, 1998 are shown below                
(volumes in trillions of British thermal units equivalent                       
(TBtue), dollars in millions):                                                  

                                                                [Download Table]

                        Fixed Price   Fixed Price      Maximum    
                           Payor       Receiver     Terms in years

                                                                  
Commodities                                                       
  Natural gas              6,694        5,989             25      
  Crude oil and liquids    5,545        5,001             11      
  Electricity              1,162        1,782             26      
  Other                      583          893             10      
Financial products                                                
  Interest rate(a)        $6,574       $5,766             24      
  Foreign currency         2,719        2,699             17      
Equity investments         2,633          363             17      

<FN>                                                              
(a) The interest rate fixed price receiver includes the net       
    notional dollar value of the interest rate sensitive component
    of the combined commodity portfolio.  The remaining interest  
    rate fixed price receiver and the entire interest rate fixed  
    price payor represent the notional contract amount of a       
    portfolio of various financial instruments used to hedge the  
    net present value of the commodity portfolio.  For a given    
    unit of price protection, different financial instruments     
    require different notional amounts.                           

Enron Wholesale includes sales and purchase commitments                   
associated with commodity contracts based on market prices                      
totaling 6,047 TBtue, with terms extending up to 22 years.                      

Notional amounts reflect the volume of transactions but do not            
represent the amounts exchanged by the parties to the financial                 
instruments.  Accordingly, notional amounts do not accurately                   
measure Enron's exposure to market or credit risks.  The maximum                
terms in years detailed above are not indicative of likely future               
cash flows as these positions may be offset in the markets at any               
time in response to the company's risk management needs.                        

The volumetric weighted average maturity of Enron's fixed                 
price portfolio as of December 31, 1998 was approximately 2.6                   
years.                                                                          

Fair Value.  The fair value of the financial instruments                  
related to price risk management activities as of December 31,                  
1998, which include energy commodities and the related foreign                  
currency and interest rate instruments, and the average fair                    
value of those instruments held during the year are set forth                   
below:                                                                          

                                                                [Download Table]

                                               Average Fair Value  
                             Fair Value        for the Year Ended  
                           as of 12/31/98          12/31/98(a)     
(In Millions)           Assets   Liabilities   Assets   Liabilities

                                                                   
Natural gas             $2,294     $1,876      $2,328     $1,728   
Crude oil and liquids    1,053      1,470         731        764   
Electricity                600        396         654        517   
Other commodities          162        119         269        193   
Equity                      61         71          88         32   
  Total                 $4,170     $3,932      $4,070     $3,234   

<FN>                                                               
(a) Computed using the ending balance at each month end.           

The income before interest, taxes and certain unallocated                 
expenses arising from price risk management activities for 1998                 
was $414 million.                                                               

Credit Risk.  In conjunction with the valuation of its                    
financial instruments, Enron provides reserves for risks                        
associated with such activity, including credit risk.  Credit                   
risk relates to the risk of loss that Enron would incur as a                    
result of nonperformance by counterparties pursuant to the terms                
of their contractual obligations.  Enron maintains credit                       
policies with regard to its counterparties that management                      
believes significantly minimize overall credit risk.  These                     
policies include an evaluation of potential counterparties'                     
financial condition (including credit rating), collateral                       
requirements under certain circumstances and the use of                         
standardized agreements which allow for the netting of positive                 
and negative exposures associated with a single counterparty.                   
The counterparties associated with assets from price risk                       
management activities as of December 31, 1998 and 1997 are                      
summarized as follows:                                                          

                                                                [Download Table]

                                     1998                1997      
                             Investment          Investment        
(In Millions)                 Grade(a)   Total    Grade(a)   Total 

                                                                   
Gas and electric utilities    $1,181    $1,251    $  637    $  676 
Energy marketers                 684       795       324       481 
Financial institutions           505       505       413       416 
Independent power producers      416       613       283       436 
Oil and gas producers            365       549       280       435 
Industrials                      229       341        59       106 
Other                            101       116       118       116 
  Total                       $3,481     4,170    $2,114     2,666 
Credit and other reserves                 (325)               (282)
  Assets from price risk                                           
   management activities(b)             $3,845              $2,384 

<FN>                                                               
(a) "Investment Grade" is primarily determined using publicly      
    available credit ratings along with consideration of           
    collateral, which encompass standby letters of credit, parent  
    company guarantees and property interests, including oil and   
    gas reserves.  Included in "Investment Grade" are              
    counterparties with a minimum Standard & Poor's or Moody's     
    rating of BBB- or Baa3, respectively.                          
(b) Two and one customers' exposures at December 31, 1998 and      
    1997, respectively, comprise greater than 5% of Assets From    
    Price Risk Management Activities.  All are included above as   
    Investment Grade.                                              

This concentration of counterparties may impact Enron's                   
overall exposure to credit risk, either positively or negatively,               
in that the counterparties may be similarly affected by changes                 
in economic, regulatory or other conditions.  Based on Enron's                  
policies, its exposures and its credit and other reserves, Enron                
does not anticipate a materially adverse effect on financial                    
position or results of operations as a result of counterparty                   
nonperformance.                                                                 

Non-Trading Activities.  Enron's other businesses also enter              
into swaps and other contracts primarily for the purpose of                     
hedging the impact of market fluctuations on assets, liabilities,               
production or other contractual commitments.                                    

Energy Commodity Price Swaps.  At December 31, 1998, Enron was            
a party to energy commodity price swaps covering 156 TBtu, 4 TBtu               
and 56 TBtu of natural gas for the years 1999, 2000 and the                     
period 2001 through 2006, respectively, and 1.8 million barrels                 
of crude oil for the year 1999.                                                 

Interest Rate Swaps.  At December 31, 1998, Enron had entered             
into interest rate swap agreements with a notional principal                    
amount of $4.0 billion to manage interest rate exposure.  These                 
swap agreements are scheduled to terminate $0.6 billion in 1999                 
and $3.4 billion in the period 2000 through 2014.                               

Foreign Currency Contracts.  At December 31, 1998, foreign                
currency contracts with a notional principal amount of $0.8                     
billion were outstanding.  Such contracts will expire in the                    
period 2000 through 2009.                                                       

Credit Risk.  While notional amounts are used to express the              
volume of various financial instruments, the amounts potentially                
subject to credit risk, in the event of nonperformance by the                   
third parties, are substantially smaller.  Counterparties to                    
forwards, futures and other contracts are equivalent to                         
investment grade financial institutions.  Accordingly, Enron does               
not anticipate any material impact to its financial position or                 
results of operations as a result of nonperformance by the third                
parties on financial instruments related to non-trading                         
activities.                                                                     

Enron has concentrations of customers in the electric and gas             
utility and oil and gas exploration and production industries.                  
These concentrations of customers may impact Enron's overall                    
exposure to credit risk, either positively or negatively, in that               
the customers may be similarly affected by changes in economic or               
other conditions.  However, Enron's management believes that its                
portfolio of receivables is well diversified and that such                      
diversification minimizes any potential credit risk.  Receivables               
are generally not collateralized.                                               

Financial Instruments.  The carrying amounts and estimated                
fair values of Enron's financial instruments, excluding trading                 
activities which are marked to market, at December 31, 1998 and                 
1997 were as follows:                                                           

                                                                [Download Table]

                                    1998                  1997         
                             Carrying  Estimated   Carrying  Estimated 
(In Millions)                 Amount   Fair Value   Amount   Fair Value

                                                                       
Long-term debt (Note 7)       $7,357     $7,624     $6,254     $6,501  
Company-obligated preferred                                            
 securities of subsidiaries                                            
 (Note 10)                     1,001      1,019        993      1,024  
Energy commodity price swaps       -         (5)         -        (31) 
Interest rate swaps                -         12          -         13  
Foreign currency contracts         -          1          -          -  

Enron uses the following methods and assumptions in estimating            
fair values: (a) long-term debt - the carrying amount of variable-              
rate debt approximates fair value, the fair value of marketable                 
debt is based on quoted market prices, and the fair value of                    
other debt is based on the discounted present value of cash flows               
using Enron's current borrowing rates; (b) Company-obligated                    
preferred securities of subsidiaries - the fair value is based on               
quoted market prices, where available, or based on the discounted               
present value of cash flows using Enron's current borrowing rates               
if not publicly traded; and (c) energy commodity price swaps,                   
interest rate swaps and foreign currency contracts - estimated                  
fair values have been determined using available market data and                
valuation methodologies.  Judgment is necessarily required in                   
interpreting market data and the use of different market                        
assumptions or estimation methodologies may affect the estimated                
fair value amounts.                                                             

The fair market value of cash and cash equivalents, trade and             
other receivables, accounts payable, equity investments accounted               
for at fair value and equity swaps are not materially different                 
from their carrying amounts.                                                    

Guarantees of liabilities of unconsolidated entities and                  
residual value guarantees have no carrying value and fair values                
which are not readily determinable (see Note 15).                               

4  MERCHANT ACTIVITIES                                                          

Merchant Investments.  Through the Enron Wholesale segment,               
Enron provides capital primarily to energy-related businesses                   
seeking debt or equity financing.  The investments made by Enron                
include public and private equity, debt, production payments and                
interests in limited partnerships.  These investments are managed               
as a group, by disaggregating the market risks embedded in the                  
individual investments and managing them on a portfolio basis,                  
utilizing public equities, equity indices and commodities as                    
hedges of specific industry groups and interest rate swaps as                   
hedges of interest rate exposure, to reduce Enron's exposure to                 
overall market volatility.  The specific investment or                          
idiosyncratic risks which remain are then managed and monitored                 
within the Enron risk management policies.                                      

As part of its complement of services, and to add value to its            
investments, Enron may have involvement with the investees'                     
business, including representation on the board of directors and                
providing risk management products and services to the business.                

The investments are recorded at market value in "Other Assets"            
on the Consolidated Balance Sheet, with fair value adjustments                  
reflected in "Other Revenues" on the Consolidated Income                        
Statement.  The valuation methodologies utilize market values of                
publicly-traded securities, independent appraisals and cash flow                
analyses.                                                                       

Merchant Assets.  Also included in Enron's wholesale business             
are investments in merchant energy assets such as power plants,                 
natural gas pipelines and local gas and electric distribution                   
companies, primarily held through equity investments.  Some of                  
these assets were developed and constructed by Enron, which may                 
also operate the facility for the joint venture.  From time to                  
time, Enron sells interests in these energy-related financial                   
assets. Some of these sales are completed in securitizations, in                
which Enron retains certain interests through swaps associated                  
with the underlying assets.  Such swaps are adjusted to fair                    
value using quoted market prices, if available, or estimated fair               
value based on management's best estimate of the present value of               
future cash flow.  These swaps are included in Price Risk                       
Management activities.  See Note 3.                                             

For the years ended December 31, 1998 and 1997, respectively,             
pre-tax gains from sales of merchant assets and investments                     
totaling $628 million and $136 million are included in "Other                   
Revenues," and proceeds were $1,434 million and $339 million.                   

An analysis of the composition of Enron's wholesale merchant              
investments and energy assets at December 31, 1998 and 1997 is as               
follows:                                                                        

                                                                [Download Table]

                                              December 31,  
(In Millions)                                 1998     1997 

                                                            
Merchant Investments                                        
  Held directly by Enron                                    
     Oil and gas exploration and                            
      production                             $  279   $  147
     Energy-intensive industries                331      139
     Natural gas transportation                 132      131
     Other                                      334       80
                                              1,076      497
  Held through unconsolidated affiliates(a)                 
     Oil and gas exploration and                            
      production                                610      553
     Oil services                               123       68
     Other                                       50        -
                                                783      621
                                              1,859    1,118

Merchant Assets                                             
  Independent power plants                      148      401
  Natural gas transportation                     38       31
  Other                                           -       46
                                                186      478

Total                                        $2,045   $1,596

<FN>                                                        
(a) Amounts represent Enron's interests.                    

5  INCOME TAXES                                                                 

The components of income before income taxes are as follows:              

                                                                [Download Table]

(In Millions)                  1998    1997   1996

                                                  
United States                  $197    $96    $551
Foreign                         681    (81)    304
                               $878    $15    $855

Total income tax expense (benefit) is summarized as follows:              

                                                                [Download Table]

(In Millions)                  1998     1997   1996 

                                                    
Payable currently -                                 
  Federal                      $ 30    $  29   $ 16 
  State                           8        9     11 
  Foreign                        50       46     37 
                                 88       84     64 
Payment deferred -                                  
  Federal                       (14)     (39)   174 
  State                          11      (42)    (1)
  Foreign                        90      (93)    34 
                                 87     (174)   207 
Total income tax expense                            
 (benefit)                     $175    $ (90)  $271 

The differences between taxes computed at the U.S. federal                
statutory tax rate and Enron's effective income tax rate are as                 
follows:                                                                        

                                                                [Download Table]

(In Millions, except Percentages)         1998         1997          1996 

                                                                          
Statutory federal income tax provision    35.0%   $  5      35.0%    35.0%
Net state income taxes                     1.7     (21)   (140.0)     0.8 
Tight gas sands tax credit                (1.4)    (12)    (80.0)    (1.8)
Equity earnings                           (4.3)    (38)   (253.3)    (3.3)
Minority interest                          0.8      28     186.7      3.1 
Assets and stock sale differences        (14.2)    (79)   (526.7)     1.8 
Cash value in life insurance              (1.1)     (7)    (46.7)    (3.2)
Goodwill amortization                      2.0       9      60.0        - 
Other                                      1.5      25     166.7     (0.7)
                                          20.0%   $(90)   (598.3)%   31.7%

The principal components of Enron's net deferred income tax               
liability are as follows:                                                       

                                                                [Download Table]

                                                    December 31, 
(In Millions)                                     1998       1997

                                                                 
Deferred income tax assets -                                     
  Alternative minimum tax credit carryforward    $  238     $ 247
  Net operating loss carryforward                   605       361
  Other                                             111       218
                                                    954       826
Deferred income tax liabilities -                                
  Depreciation, depletion and amortization        1,940     2,036
  Price risk management activities                  645       457
  Other                                             700       588
                                                  3,285     3,081
Net deferred income tax liabilities(a)           $2,331    $2,255

<FN>                                                             
(a) Includes $(26) million and $216 million in other current     
    liabilities for 1998 and 1997, respectively.                 

Enron has an alternative minimum tax (AMT) credit carryforward            
of approximately $238 million which can be used to offset regular               
income taxes payable in future years.  The AMT credit has an                    
indefinite carryforward period.                                                 

Enron has a federal consolidated net operating loss                       
carryforward for tax purposes of approximately $1.4 billion,                    
which will begin to expire in 2011.  Enron has a net operating                  
loss carryforward applicable to non-U.S. subsidiaries of                        
approximately $353 million of which $237 million can be carried                 
forward indefinitely.  The remaining $116 million will begin to                 
expire in 2002 but is projected to be utilized before its                       
expiration period.  The benefits of the domestic and foreign net                
operating losses have been recognized as deferred tax assets.                   

U.S. and foreign income taxes have been provided for earnings             
of foreign subsidiary companies that are expected to be remitted                
to the U.S.  Foreign subsidiaries' cumulative undistributed                     
earnings of approximately $840 million are considered to be                     
indefinitely reinvested outside the U.S. and, accordingly, no                   
U.S. income taxes have been provided thereon.  In the event of a                
distribution of those earnings in the form of dividends, Enron                  
may be subject to both foreign withholding taxes and U.S. income                
taxes net of allowable foreign tax credits.                                     

6  SUPPLEMENTAL CASH FLOW INFORMATION                                           

Cash paid for income taxes and interest expense, including                
fees incurred on sales of accounts receivable, is as follows:                   

                                                                [Download Table]

(In Millions)                            1998      1997      1996

                                                                 
Income taxes (net of refunds)            $ 73      $ 68      $ 89
Interest (net of amounts capitalized)     585       420       290

Non-Cash Transactions.  In December 1998, Enron exchanged its             
6.25% Exchangeable Notes for 10.5 million shares of EOG common                  
stock.                                                                          

During 1997, Enron issued common stock in connection with                 
business acquisitions.  See Note 2.                                             

7  CREDIT FACILITIES AND DEBT                                                   

Enron has credit facilities with domestic and foreign banks               
which provide for an aggregate of $1.67 billion in long-term                    
committed credit and $1.37 billion in short-term committed                      
credit.  Expiration dates of the committed facilities range from                
April 1999 to June 2002.  Interest rates on borrowings are based                
upon the London Interbank Offered Rate, certificate of deposit                  
rates or other short-term interest rates.  Certain credit                       
facilities contain covenants which must be met to borrow funds.                 
Such debt covenants are not anticipated to materially restrict                  
Enron's ability to borrow funds under such facilities.                          
Compensating balances are not required, but Enron is required to                
pay a commitment or facility fee.  At December 31, 1998, $149                   
million was outstanding under these facilities.                                 

Enron has also entered into agreements which provide for                  
uncommitted lines of credit totaling $335 million at December 31,               
1998.  The uncommitted lines have no stated expiration dates.                   
Neither compensating balances nor commitment fees are required as               
borrowings under the uncommitted credit lines are available                     
subject to agreement by the participating banks.  At December 31,               
1998, no amounts were outstanding under the uncommitted lines.                  

In addition to borrowing from banks on a short-term basis,                
Enron and certain of its subsidiaries sell commercial paper to                  
provide financing for various corporate purposes.  As of December               
31, 1998 and 1997, short-term borrowings of $680 million and $825               
million, respectively, have been reclassified as long-term debt                 
based upon the availability of committed credit facilities with                 
expiration dates exceeding one year and management's intent to                  
maintain such amounts in excess of one year subject to overall                  
reductions in debt levels.  Similarly, at December 31, 1998 and                 
1997, $541 million and $462 million, respectively, of long-term                 
debt due within one year remained classified as long-term.                      
Weighted average interest rates on short-term debt outstanding at               
December 31, 1998 and 1997 were 5.5% and 6.0%, respectively.                    

Detailed information on long-term debt is as follows:                     

                                                                [Download Table]

                                               December 31,  
(In Millions)                                 1998      1997 

                                                             
Enron Corp.                                                  
  Debentures                                                 
     6.75% to 8.25% due 2005 to 2012        $  350    $  350 
  Notes payable                                              
     6.25% - exchangeable notes due 1998         -       228 
     6.40% to 10.00% due 1998 to 2028        3,342     2,492 
     Floating rate notes due 1999 to 2037      400       350 
     Other                                      38        67 
Northern Natural Gas Company                                 
  Notes payable                                              
     6.75% to 8.00% due 1999 to 2008           500       350 
Transwestern Pipeline Company                                
  Notes payable                                              
     7.55% to 9.20% due 1998 to 2004           147       150 
Portland General Electric Company                            
  First mortgage bonds                                       
     5.65% to 9.46% due 1998 to 2023           502       564 
  Pollution control bonds                                    
     3.50% to 7.13% due 2010 to 2033           200       192 
  Other                                        160       172 
Enron Oil & Gas Company                                      
  Notes payable                                              
     Floating rate notes due 1998 to 2001      105       120 
     5.44% to 9.10% due 1998 to 2028           675       390 
Other                                          302        37 
Amount reclassified from short-term debt       680       825 
Unamortized debt discount and premium          (44)      (33)
Total long-term debt                        $7,357    $6,254 

The indenture securing PGE's First Mortgage Bonds constitutes             
a direct first mortgage lien on substantially all electric                      
utility property and franchises, other than expressly excepted                  
property.                                                                       

The Enron 6.25% Exchangeable Notes were exchanged in December             
1998 for 10.5 million shares of EOG common stock held by Enron.                 

The aggregate annual maturities of long-term debt outstanding             
at December 31, 1998 were $541 million, $413 million, $666                      
million, $182 million and $656 million for 1999 through 2003,                   
respectively.                                                                   

8  MINORITY INTERESTS                                                           

Enron's minority interests primarily include amounts related              
to EOG and two joint ventures.  Also included was EPP prior to                  
Enron's acquisition of the EPP minority interest in November 1997               
(see Note 2).                                                                   

In December 1998, Enron formed a wholly-owned limited                     
partnership for the purpose of holding $1.6 billion of assets                   
contributed by various business units.  That partnership                        
contributed $850 million of assets to a second newly-formed                     
limited partnership in exchange for a 53% interest; a third party               
investor contributed $750 million in exchange for a 47% interest.               
The assets held by the wholly-owned limited partnership represent               
collateral for a $750 million note receivable held by the other                 
newly-formed limited partnership.  In 1997, Enron and a third-                  
party investor contributed approximately $579 million and $500                  
million, respectively, for interests in an Enron-controlled joint               
venture.  The joint venture purchased 250,000 shares of junior                  
convertible preferred stock from Enron.  Each share of junior                   
convertible preferred stock has a cumulative, market-based                      
dividend, is convertible at the option of the holder (currently                 
the Enron-controlled joint venture) initially into 100 shares of                
Enron stock, subject to certain adjustments, and has a                          
liquidation value of $4,000 per share, subject to certain                       
adjustments.                                                                    

These entities are separate legal entities from Enron and have            
separate assets and liabilities.  Absent certain defaults or                    
other specified events, Enron has the option to acquire the                     
minority holders' interests in the entities.  If Enron does not                 
acquire the minority holders' interests before December 2005 or                 
December 2002, respectively, or earlier upon certain specified                  
events, the entities will liquidate their assets and dissolve.                  
These entities are included in Enron's consolidated financial                   
statements and the third-party investors' interests are included                
in "Minority Interests" in the Consolidated Balance Sheet.                      

9  UNCONSOLIDATED AFFILIATES                                                    

Enron's investment in and advances to unconsolidated                      
affiliates which are accounted for by the equity method is as                   
follows:                                                                        

                                                                [Download Table]

                                             Net                       
                                          Ownership     December 31,   
(In Millions)                             Interest    1998        1997 

                                                                       
Azurix Corp.(a)                              50%     $  918      $    -
Citrus Corp.(b)                              50%        455         432
Companhia Distribuidora de Gas do Rio                                  
 de Janeiro, S.A.(c)                         25%        192         194
Dabhol Power Company(c)                      50%        285           -
Enron Teesside Operations Limited(c)        100%        118           -
Jacare Electrical Distribution Trust(c)      51%        447           -
Joint Energy Development Investments L.P.                              
 (JEDI)(c)(d)                                50%        356         392
Transportadora de Gas del Sur S.A.(c)        35%        463         472
Other                                                 1,199       1,166
                                                     $4,433(e)   $2,656
<FN>                                                                   
(a) Included in the Corporate and Other segment.                       
(b) Included in the Transportation and Distribution segment.           
(c) Included in the Wholesale Energy Operations and Services           
    segment.                                                           
(d) JEDI accounts for its investments at fair value.                   
(e) At December 31, 1998, the unamortized excess of Enron's            
    investment in unconsolidated affiliates was $203 million,          
    which is being amortized over the expected lives of the            
    investments.                                                       

Enron's equity in earnings (losses) of unconsolidated                     
affiliates is as follows:                                                       

                                                                [Download Table]

(In Millions)                               1998   1997  1996

                                                             
Citrus Corp.                                $ 23   $ 27  $ 22
Joint Energy Development Investments L.P.    (45)    68    71
Transportadora de Gas del Sur S.A.            36     45    29
Other                                         83     76    93
                                            $ 97   $216  $215

Summarized combined financial information of Enron's                      
unconsolidated affiliates is presented below:                                   

                                                                [Download Table]

                                           December 31,        
(In Millions)                            1998        1997      

                                                               
Balance sheet                                                  
  Current assets(a)                    $ 2,309       $3,611    
  Property, plant and equipment, net    12,640        8,851    
  Other noncurrent assets                7,176        1,089    
  Current liabilities(a)                 3,501        1,861    
  Long-term debt(a)                      7,621        5,694    
  Other noncurrent liabilities           2,016        1,295    
  Owners' equity                         8,897        4,701    

<FN>                                                           
(a) Includes $196 million and $0 million receivable from       
    Enron and $296 million and $569 million payable to Enron at
    December 31, 1998 and 1997, respectively.                  

                                                                [Download Table]

(In Millions)                  1998      1997      1996           

                                                                  
Income statement(a)                                               
  Operating revenues          $8,508   $11,183   $11,676          
  Operating expenses           7,244    10,246    10,567          
  Net income                     142       336       464          
Distributions paid to Enron       87       118        84          

<FN>                                                              
(a) Enron recognized revenues from unconsolidated affiliates      
    of $142 million in 1998, $219 million in 1997 and $253 million
    in 1996.                                                      

In August 1998, Enron, through a wholly-owned subsidiary,                 
completed the acquisition of a controlling interest in Elektro,                 
Brazil's sixth largest electricity distributor, for approximately               
$1.3 billion.  Elektro serves approximately 1.5 million customers               
through approximately 51,000 miles of distribution lines in the                 
state of Sao Paulo.  Enron's interest in Elektro is held by                     
Jacare Electrical Distribution Trust.  In October 1998, Enron,                  
through a wholly-owned subsidiary, acquired Wessex, which                       
provides water supply and wastewater services in southern                       
England, for approximately $2.4 billion.  Wessex is held through                
Azurix Corp.  On December 31, 1998, Enron's wholly-owned                        
subsidiary, Enron Teesside Operations Limited (ETOL), acquired                  
assets from The ICI Group for approximately $500 million.  The                  
acquisition of the ICI assets allows ETOL to supply steam, water,               
power and other utility services to large industrial customers in               
the U.K.                                                                        

Although Enron initially owned more than 50 percent of the                
voting interest in each of these entities, they are reported                    
using the equity method as a result of management's intent to                   
ultimately hold a voting interest of not more than 50 percent.                  
In December 1998, Enron completed financial restructuring of                    
Enron's ownership interest in Wessex, reducing its interest to                  
50%, and financially closed the Elektro financial restructuring,                
reducing its interest in the subsidiary that holds Elektro to                   
51%.  Enron will transfer an additional 1% interest in Elektro                  
following the receipt of certain regulatory approvals, which are                
expected in the first half of 1999.                                             

Proceeds of approximately $1.6 billion received from the                  
Elektro and Wessex financial restructurings were used to repay                  
debt incurred in the initial acquisitions.  In connection with                  
the financings, Enron committed to cause the sale of its                        
convertible preferred stock, with the number of common shares                   
issuable upon conversion determined based on future common stock                
prices, if certain debt obligations of the related entities                     
acquiring such interests are defaulted upon, or in certain                      
events, including, among other things, Enron's credit ratings                   
falling below specified levels.  If the sale of stock is not                    
sufficient to retire such obligations, Enron would be liable for                
the shortfall.  The obligations will mature in December 2000 and                
2001 for Elektro and Wessex, respectively.                                      

Enron has investments in entities whose functional currency is            
denominated in Brazilian Reals.  Subsequent to December 31, 1998,               
the exchange rate for Brazilian Reals to the U.S. dollar has                    
declined.  As a result, Enron anticipates recording a non-cash                  
foreign currency translation adjustment, reducing shareholders'                 
equity, in the first quarter of 1999.  Based on the exchange rate               
in mid-February, the equity reduction would be approximately $600               
million.                                                                        

From time to time, Enron has entered into various                         
administrative service, management, construction, supply and                    
operating agreements with its unconsolidated affiliates.  Enron's               
management believes that its existing agreements and transactions               
are reasonable compared to those which could have been obtained                 
from third parties.                                                             

10  PREFERRED STOCK                                                             

Preferred Stock.  Following Enron's reincorporation in Oregon             
on July 1, 1997, Enron has authorized 16,500,000 shares of                      
preferred stock, no par value.  At December 31, 1998, Enron had                 
outstanding 1,319,848 shares of Cumulative Second Preferred                     
Convertible Stock (the Convertible Preferred Stock), no par                     
value.  The Convertible Preferred Stock pays dividends at an                    
amount equal to the higher of $10.50 per share or the equivalent                
dividend that would be paid if shares of the Convertible                        
Preferred Stock were converted to common stock.  Each share of                  
the Convertible Preferred Stock is convertible at any time at the               
option of the holder thereof into 13.652 shares of Enron's common               
stock, subject to certain adjustments.  The Convertible Preferred               
Stock is currently subject to redemption at Enron's option at a                 
price of $100 per share plus accrued dividends.  During 1998,                   
1997 and 1996, 17,797 shares, 33,069 shares and 4,780 shares,                   
respectively, of the Convertible Preferred Stock were converted                 
into common stock.                                                              

Company-Obligated Preferred Securities of Subsidiaries.  Summarized       
information for Enron's Company-Obligated Preferred Securities of               
Subsidiaries is as follows:                                                     

                                                                [Download Table]

                                                                    Liquidation
                                                      December 31,     Value   
(In Millions, except Per Share Amounts and Shares)    1998    1997   Per Share 

                                                                               
Enron Capital LLC                                                              
  8% Cumulative Guaranteed Monthly Income                                      
   Preferred Shares (MIPS) (8,550,000 shares)(a)     $  214   $214   $     25  

Enron Capital Trust I                                                          
  8.3% Trust Originated Preferred Securities                                   
   (8,000,000 preferred securities)(a)                  200    200         25  

Enron Capital Trust II                                                         
  8 1/8% Trust Originated Preferred Securities                                 
   (6,000,000 preferred securities)(a)                  150    150         25  

Enron Capital Trust III                                                        
  Adjustable-Rate Capital Trust Securities                                     
   (200,000 preferred securities)(b)                    200    200      1,000  

Enron Equity Corp.                                                             
  8.57% Preferred Stock (880 shares)(a)                  88     88    100,000  
  7.39% Preferred Stock (150 shares)(a)(c)               15     15    100,000  

Enron Capital Resources, L.P.                                                  
  9% Cumulative Preferred Securities, Series A                                 
   (3,000,000 preferred securities)(a)                   75     75         25  

Other                                                    59     51             
                                                     $1,001   $993             

<FN>                                                                           
(a) Redeemable under certain circumstances after specified                     
    dates.                                                                     
(b) Mature in 2046.                                                            
(c) Mandatorily redeemable in 2006.                                            

11  COMMON STOCK                                                                

Earnings Per Share.  The computation of basic and diluted                 
earnings per share is as follows:                                               

                                                                [Download Table]

                                             Year Ended December 31, 
(In Millions, except per share amounts)      1998     1997      1996 

                                                                     
Numerator:                                                           
  Net income                                $ 703    $ 105     $ 584 
  Preferred stock dividends                   (17)     (17)      (16)
  Numerator for basic earnings per                                   
   share - income available to common                                
   shareholders                               686       88       568 
  Effect of dilutive securities:                                     
     Preferred stock dividends(a)              17        -        16 
  Numerator for diluted earnings per                                 
   share - income available to common                                
   shareholders after assumed conversions   $ 703    $  88     $ 584 
Denominator:                                                         
  Denominator for basic earnings per                                 
   share - weighted-average shares            321      272       246 
  Effect of dilutive securities:                                     
     Preferred stock (a)                       18        -        19 
     Stock options                              9        5         5 
  Dilutive potential common shares             27        5        24 
  Denominator for diluted earnings per                               
   share - adjusted weighted-average                                 
   shares and assumed conversions             348      277       270 
Basic earnings per share                    $2.14    $0.32     $2.31 
Diluted earnings per share                  $2.02    $0.32     $2.16 

<FN>                                                                 
(a) For 1997, the dividends and conversion of preferred stock        
    have been excluded from the computation because conversion is    
    antidilutive.                                                    

Enron has outstanding certain instruments that are potentially              
convertible into common stock but which do not qualify as                       
dilutive securities for computation of earnings per share.  See                 
Notes 8 and 9 for further description of these instruments.                     

In February 1999, Enron issued 13.8 million shares of common                
stock in a public offering and  approximately 3.8 million shares                
of common stock in connection with the acquisition of certain                   
assets.                                                                         

Forward Contracts and Options.  At December 31, 1998, Enron               
had forward contracts to purchase 6.7 million shares of Enron                   
Corp. common stock at an average price of $43.37 per share.                     
Enron may purchase the shares pursuant to the forward contracts                 
with cash or an equivalent value of Enron common stock until                    
April 2001.  Shares potentially deliverable to the counterparty                 
under the contracts are assumed to be outstanding in calculating                
diluted earnings per share unless they are antidilutive.                        

At December 31, 1998, Enron had issued put options for                    
approximately nine million shares at a weighted average exercise                
price of $54.73.  If exercised by the counterparty, Enron may                   
purchase the shares pursuant to the put options for the                         
difference between the exercise price and the market price, in                  
either cash or an equivalent value of Enron common stock.  These                
put options have been included in the diluted earnings per share                
calculation.                                                                    

In 1997, Enron granted options to EOG to purchase 3.2 million             
shares of Enron common stock (exercise price of $39.1875) in                    
connection with certain agreements between Enron and EOG.  The                  
options vested 25% immediately with 15% vesting in 1998 and the                 
remainder vesting equally in 1999 through 2004.                                 

Stock Option Plans.  Enron applies Accounting Principles Board            
(APB) Opinion 25 and related interpretations in accounting for                  
its stock option plans.  In accordance with APB Opinion 25, no                  
compensation expense has been recognized for the fixed stock                    
option plans.  Compensation expense charged against income for                  
the restricted stock plan for 1998, 1997 and 1996 was $58                       
million, $14 million and $4 million, respectively.  Had                         
compensation cost for Enron's stock option compensation plans                   
been determined based on the fair value at the grant dates for                  
awards under those plans, Enron's net income and earnings per                   
share would have been $674 million ($2.04 per share basic, $1.94                
per share diluted) in 1998, $66 million ($0.18 per share basic,                 
$0.18 per share diluted) in 1997 and $562 million ($2.22 per                    
share basic, $2.07 per share diluted) in 1996.                                  

The fair value of each option grant is estimated on the date              
of grant using the Black-Scholes option-pricing model with                      
weighted-average assumptions for grants in 1998, 1997 and 1996,                 
respectively:  (i) dividend yield of 2.5%, 2.5% and 2.3%; (ii)                  
expected volatility of 18.3%, 17.4% and 23.8%; (iii) risk-free                  
interest rates of 5.0%, 5.9% and 5.9%; and (iv) expected lives of               
3.8 years, 3.7 years and 4.0 years.                                             

Enron has three fixed option plans (the Plans) under which                
options for shares of Enron's common stock have been or may be                  
granted to officers, employees and non-employee members of the                  
Board of Directors.   Options granted may be either incentive                   
stock options or nonqualified stock options and are granted at                  
not less than the fair market value of the stock at the time of                 
grant.  The Plans provide for options to be granted with a stock                
appreciation rights feature; however, Enron does not presently                  
intend to issue options with this feature.  Under the Plans,                    
Enron may grant options with a maximum term of 10 years.  Options               
vest under varying schedules.                                                   

Summarized information for Enron's Plans is as follows:                   

                                                                [Download Table]

                             1998                1997                1996        
                                 Weighted            Weighted            Weighted
                                 Average             Average             Average 
                                 Exercise            Exercise            Exercise
(Shares in Thousands)   Shares    Price     Shares    Price     Shares    Price  

                                                                                 
Outstanding,                                                                     
 beginning of year      39,429   $35.77     25,476   $32.69     22,493   $29.02  
  Granted(a)             7,851    49.97     17,658    38.63      7,370    39.71  
  Exercised             (6,536)   31.39     (2,165)   23.29     (3,615)   24.41  
  Forfeited               (749)   39.54     (1,514)   35.25       (749)   31.66  
  Expired                 (193)   39.52        (26)   34.59        (23)   30.65  
Outstanding,                                                                     
 end of year            39,802    39.19     39,429   $35.77     25,476   $32.69  
Exercisable,                                                                     
 end of year            22,971   $36.31     21,252   $33.55     12,883   $30.65  
Available for grant,                                                             
 end of year(b)          5,249              13,047               6,505           
Weighted average                                                                 
 fair value of                                                                   
 options granted                 $ 8.39              $ 7.10              $ 9.44  

<FN>                                                                             
(a) Includes 1,768,074 shares issued in 1997 in connection with                  
    business acquisitions discussed in Note 2.                                   
(b) Includes up to  5,248,835 shares, 12,246,040 shares and                      
    5,232,218 shares as of December 31, 1998, 1997 and 1996,                     
    respectively, which may be issued either as restricted stock                 
    or pursuant to stock options.                                                

The following table summarizes information about stock options            
outstanding at December 31, 1998 (shares in thousands):                         

                                                                [Download Table]

                            Options Outstanding            Options Exercisable  
                                  Weighted                                      
                                   Average     Weighted                 Weighted
                      Number      Remaining    Average       Number     Average 
  Range of         Outstanding   Contractual   Exercise   Exercisable   Exercise
Exercise Prices    at 12/31/98       Life       Price     at 12/31/98    Price  

                                                                                
$10.69 to $30.25      4,119          4.1        $25.94        3,708      $25.66 
 30.50 to  36.06      6,779          4.9         31.71        5,498       31.87 
 36.75 to  39.88     10,310          6.9         37.73        6,322       37.73 
 40.00 to  45.00     12,810          6.3         42.21        6,489       42.32 
 46.38 to  57.06      5,784          9.2         53.33          954       52.46 
$10.69 to  57.06     39,802          6.4        $39.19       22,971      $36.31 

Restricted Stock Plan.  Under Enron's Restricted Stock Plan,              
participants may be granted stock without cost to the                           
participant.  The shares granted under this plan vest to the                    
participants at various times ranging from immediate vesting to                 
vesting at the end of a five-year period.  Upon vesting, the                    
shares are released to the participants.  The following                         
summarizes shares of restricted stock under this plan:                          

                                                                [Download Table]

(Shares in Thousands)               1998       1997      1996 

                                                              
Outstanding, beginning of year      2,537       825       159 
  Granted                           1,061     2,088     1,772 
  Released to participants           (532)     (321)   (1,062)
  Forfeited or expired                (49)      (55)      (44)
Outstanding, end of year            3,017     2,537       825 
Available for grant, end of year    5,249    12,246     5,232 
Weighted average fair value of                                
 restricted stock granted          $47.40    $38.26    $37.04 

12  PENSION AND OTHER BENEFITS                                                  

Enron maintains a retirement plan (the Enron Plan) which is a             
noncontributory defined benefit plan covering substantially all                 
employees in the United States and certain employees in foreign                 
countries.  The benefit accrual is in the form of a cash balance                
of 5% of annual base pay.                                                       

Portland General has a noncontributory defined benefit pension            
plan (the Portland General Plan) covering substantially all of                  
its employees.  Benefits under the Plan are based on years of                   
service, final average pay and covered compensation.                            

Enron also maintains a noncontributory employee stock                     
ownership plan (ESOP) which covers all eligible employees.                      
Allocations to individual employees' retirement accounts within                 
the ESOP offset a portion of benefits earned under the Enron                    
Plan.  All shares included in the ESOP have been allocated to the               
employee accounts.  At December 31, 1998 and 1997, 10,919,050                   
shares and 13,508,794 shares, respectively, of Enron common stock               
were held by the ESOP, a portion of which may be used to offset                 
benefits under the Enron Plan.                                                  

Assets of the Enron Plan and the Portland General Plan are                
comprised primarily of equity securities, fixed income securities               
and temporary cash investments.  It is Enron's policy to fund all               
pension costs accrued to the extent required by federal tax                     
regulations.                                                                    

Enron provides certain postretirement medical, life insurance             
and dental benefits to eligible employees and their eligible                    
dependents.  Benefits are provided under the provisions of                      
contributory defined dollar benefit plans.  Enron is currently                  
funding that portion of its obligations under these                             
postretirement benefit plans which are expected to be recoverable               
through rates by its regulated pipelines and electric utility                   
operations.                                                                     

Enron accrues these postretirement benefit costs over the                 
service lives of the employees expected to be eligible to receive               
such benefits.  Enron is amortizing the transition obligation                   
which existed at January 1, 1993 over a period of approximately                 
19 years.                                                                       

Enron adopted SFAS No. 132, "Employers' Disclosures about                 
Pensions and Other Postretirement Benefits," in 1998.  This                     
statement changed the disclosure requirements, but not the method               
of measurement or recognition of these obligations.  The                        
following table sets forth information related to changes in the                
benefit obligations, changes in plan assets, a reconciliation of                
the funded status of the plans and components of the expense                    
recognized related to Enron's pension and other postretirement                  
plans:                                                                          

                                                                [Download Table]

                                           Pension Benefits   Other Benefits
(In Millions)                                 1998   1997      1998   1997  

                                                                            
Change in benefit obligation                                                
  Benefit obligation, beginning of year       $617   $308      $148   $144  
  Service cost                                  27     22         2      2  
  Interest cost                                 44     32         9     10  
  Plan participants' contributions               -      -         3      3  
  Plan amendments                                -      -         3     (4) 
  Actuarial loss (gain)                         26     35       (16)   (14) 
  Acquisitions and divestitures                  -    255         -     27  
  Benefits paid                                (27)   (35)      (15)   (20) 
Benefit obligation, end of year               $687   $617      $134   $148  

Change in plan assets                                                       
  Fair value of plan assets, beginning                                      
   of year(a)                                 $727   $315      $ 54   $ 15  
  Actual return on plan assets                  41     84         3      3  
  Acquisitions and divestitures                  -    360         -     32  
  Employer contribution                         33      3         8      8  
  Plan participants' contributions               -      -         3      3  
  Benefits paid                                (27)   (35)       (8)    (7) 
Fair value of plan assets, end of year(a)     $774   $727      $ 60   $ 54  

Reconciliation of funded status, end of year                                
  Funded status, end of year                  $ 87   $110      $(74)  $(94) 
  Unrecognized transition obligation (asset)   (18)   (24)       58     62  
  Unrecognized prior service cost               33     35        17     22  
  Unrecognized net actuarial loss (gain)        79     34       (10)     6  
Prepaid (accrued) benefit cost                $181   $155      $ (9)  $ (4) 

Weighted-average assumptions at December 31                                 
  Discount rate                               6.75%  7.25%     6.75%  7.25% 
  Expected return on plan assets (pre-tax)     (b)    (b)       (c)    (c)  
  Rate of compensation increase                (d)    (d)       (d)    (d)  

Components of net periodic benefit cost                                     
  Service cost                                $ 27   $ 22      $  2   $  2  
  Interest cost                                 44     32         9     10  
  Expected return on plan assets               (63)   (43)       (3)    (2) 
  Amortization of transition obligation                                     
   (asset)                                      (6)    (6)        4      4  
  Amortization of prior service cost             5      5         1      1  
  Recognized net actuarial loss (gain)           2      2         -      1  
Net periodic benefit cost                     $  9   $ 12      $ 13   $ 16  

<FN>                                                                        
(a) Includes plan assets of the ESOP of $139 million and $135               
    million at December 31, 1998 and 1997, respectively.                    
(b) Long-term rate of return on assets is assumed to be 10.5%               
    for the Enron Retirement Plan and 9.0% for the Portland                 
    General Plan.                                                           
(c) Long-term rate of return on assets is assumed to be 7.5%                
    for the Enron assets and 9.5% for the Portland General assets.          
(d) Rate of compensation increase is assumed to be 4.0% for                 
    the Enron Plan and 4.0% to 9.5% for the Portland General Plan.          

Included in the above amounts are the unfunded obligations for            
the supplemental executive retirement plans.  At December 31,                   
1998 and 1997, respectively, the projected benefit obligation for               
these unfunded plans was $54 million and $48 million and the fair               
value of assets was $2 million and $1 million.                                  

The measurement date of the Enron Plan and the ESOP is                    
September 30, and the measurement date of the Portland General                  
Plan and the postretirement benefit plans is December 31.  The                  
funded status as of the valuation date of the Enron Plan, the                   
Portland General Plan, the ESOP and the postretirement benefit                  
plans reconciles with the amount detailed above which is included               
in "Other Assets" on the Consolidated Balance Sheet.                            

For measurement purposes, a 7.0% annual rate of increase in the             
per capita cost of covered health care benefits was assumed for                 
1999.  The rate was assumed to decrease to 5.0% by 2003.  Assumed               
health care cost trend rates have a significant effect on the                   
amounts reported for the health care plans.  A one-percentage                   
point change in assumed health care cost trend rates would have                 
the following effects:                                                          

                                                                [Download Table]

                                         1-Percentage     1-Percentage 
(In Millions)                           Point Increase   Point Decrease

                                                                       
Effect on total of service and                                         
 interest cost components                    $0.4            $(0.4)    
Effect on postretirement benefit                                       
 obligation                                   5.4             (4.5)    

Additionally, certain Enron subsidiaries maintain various                 
incentive based compensation plans for which participants may                   
receive a combination of cash or stock options of the                           
subsidiaries, based upon the achievement of certain performance                 
goals.                                                                          

13  RATES AND REGULATORY ISSUES                                                 

Rates and regulatory issues related to certain of Enron's                 
natural gas pipelines and its electric utility operations are                   
subject to final determination by various regulatory agencies.                  
The domestic interstate pipeline operations are regulated by the                
Federal Energy Regulatory Commission (FERC) and the electric                    
utility operations are regulated by the FERC and the Oregon                     
Public Utility Commission (OPUC).  As a result, these operations                
are subject to the provisions of SFAS No. 71, "Accounting for the               
Effects of Certain Types of Regulation," which recognizes the                   
economic effects of regulation and, accordingly, Enron has                      
recorded regulatory assets and liabilities related to such                      
operations.                                                                     

The regulated pipelines operations' net regulatory assets were            
$241 million and $283 million at December 31, 1998 and 1997,                    
respectively, which are expected to be recovered over varying                   
time periods.                                                                   

The electric utility operations' net regulatory assets at                 
December 31, 1998 and 1997, respectively, were $494 million and                 
$561 million.  Based on rates in place at December 31, 1997,                    
Enron estimates that it will collect the majority of these                      
regulatory assets within the next 10 years and substantially all                
of these regulatory assets within the next 20 years.                            

Pipeline Operations.  On May 1, 1998, Northern Natural Gas                
Company (Northern) filed a general rate case proceeding with the                
FERC which fulfilled a commitment made in a previous settlement.                
The rate case included an annual increase of $35 million to                     
Northern's revenues over 1997.  The FERC accepted the rate case                 
for filing and suspended the filed rates.  Northern implemented                 
the filed rates effective November 1, 1998, subject to refund.                  

Transwestern Pipeline Company implemented on November 1, 1998,            
a rate escalation of settled transportation rates, per a May 1996               
settlement.                                                                     

Electric Utility Operations.  PGE is a 67.5% owner of the                 
Trojan Nuclear Plant (Trojan).  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 December 31, 1998, PGE's regulatory asset related to                 
recovery of Trojan costs from customers was $438 million.                       
Amounts are to be collected over Trojan's original license period               
ending in 2011.  As discussed in Note 14, 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, based upon its experience to date and after               
considering appropriate reserves that have been established, that               
the ultimate resolution of pending regulatory matters will not                  
have a material impact on Enron's financial position or results                 
of operations.                                                                  

14  LITIGATION AND OTHER CONTINGENCIES                                          

Enron is a party to various claims and litigation, the                    
significant items of which are discussed below.  Although no                    
assurances can be given, Enron believes, based on its experience                
to date and after considering appropriate reserves that have been               
established, that the ultimate resolution of such items,                        
individually or in the aggregate, will not have a materially                    
adverse impact on Enron's financial position or its results of                  
operations.                                                                     

Litigation.  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 ratability claims.  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.                                                                     

On November 21, 1996, an explosion occurred in or around the              
Humberto Vidal Building in San Juan, Puerto Rico.  The explosion                
resulted in fatalities, bodily injuries and damage to the                       
building and surrounding property.  San Juan Gas Company, Inc.                  
(San Juan), an Enron subsidiary, operated a propane/air                         
distribution system in the vicinity.  Although San Juan did not                 
provide service to the building, the investigation report of the                
National Transportation Safety Board (NTSB) concluded that the                  
probable cause of the incident was propane leaking from San                     
Juan's distribution system.  San Juan and Enron strongly disagree               
with the NTSB findings.  The NTSB investigation found no path of                
migration of propane from San Juan's system to the building and                 
no forensic evidence that propane fueled the explosion.  Enron,                 
San Juan, several San Juan affiliates and third parties have been               
named as defendants in numerous lawsuits filed in U.S. District                 
Court for the district of Puerto Rico and the Commonwealth court                
of Puerto Rico.  These suits, which seek damages for wrongful                   
death, personal injury, business interruption and property                      
damage, allege that negligence of Enron and San Juan, among                     
others, caused the explosion.  Enron and San Juan are vigorously                
contesting the claims.  Although no assurances can be given,                    
Enron believes that the ultimate resolution of these matters will               
not have a material adverse effect on its financial position or                 
results of operations.                                                          

Trojan Investment Recovery.  In early 1993, PGE ceased                    
commercial operation of Trojan.  In April 1996 a circuit court                  
judge in Marion County, Oregon, found that the OPUC could not                   
authorize PGE to collect a return on its undepreciated investment               
in Trojan, contradicting a November 1994 ruling from the same                   
court.  The ruling was the result of an appeal of PGE's 1995                    
general rate order which granted PGE recovery of, and a return                  
on, 87% of its remaining investment in Trojan.  The 1994 ruling                 
was appealed to the Oregon Court of Appeals and was stayed                      
pending the appeal of the Commission's March 1995 order.  Both                  
PGE and the OPUC have separately appealed the April 1996 ruling,                
which appeals were combined with the appeal of the November 1994                
ruling at the Oregon Court of Appeals.  On June 24, 1998, the                   
Court of Appeals of the State of Oregon ruled that the OPUC does                
not have the authority to allow PGE to recover a rate of return                 
on its undepreciated investment in the Trojan generating                        
facility.  The court upheld the OPUC's authorization of PGE's                   
recovery of its undepreciated investment in Trojan.                             

PGE has filed a petition for review with the Oregon Supreme               
Court. The OPUC has also filed such a petition for review.  Also                
on August 26, 1998, the Utility Reform Project filed a Petition                 
for Review with the Oregon Supreme Court seeking review of that                 
portion of the Oregon Court of Appeals decision relating to PGE's               
recovery of its undepreciated investment in Trojan.  Enron cannot               
predict the outcome of these actions.  Additionally, due to                     
uncertainties in the regulatory process, management cannot                      
predict, with certainty, what ultimate rate-making action the                   
OPUC will take regarding PGE's recovery of a rate of return on                  
its Trojan investment.  Although no assurances can be given,                    
Enron believes that the ultimate resolution of these matters will               
not have a material adverse effect on its financial position or                 
results of operations.                                                          

Environmental Matters.  Enron is subject to extensive federal,            
state and local environmental laws and regulations.  These laws                 
and regulations require expenditures in connection with the                     
construction of new facilities, the operation of existing                       
facilities and for remediation at various operating sites.  The                 
implementation of the Clean Air Act Amendments is expected to                   
result in increased operating expenses.  These increased                        
operating expenses are not expected to have a material impact on                
Enron's 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.  To date, the EPA has identified no other                          
potentially responsible parties with respect to this 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.  Enron completed                
the final removal actions at the site in November 1998, and                     
expects to conclude all remaining site activities in the spring                 
of 1999.  In 1998, Enron's expenses related to the Decorah Site                 
were $300,000 as compared with $400,000 in 1997.  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.                                                          

Enron has also received from the EPA an Order issued under                
CERCLA alleging that Enron and two other parties are responsible                
for the cost of demolition and proper disposal of two 110 foot                  
towers that apparently had been used in the manufacture of carbon               
dioxide at a site called the "City Bumper Site" in Cincinnati,                  
Ohio.  The carbon dioxide plant, according to agency documents,                 
was in operation from 1926 to 1966.  Houston Natural Gas                        
Corporation, a predecessor of Enron Corp., merged with Liquid                   
Carbonic Industries (LCI) on January 31, 1969.  Liquid Carbonic                 
Corporation (LCC), a subsidiary of LCI, had title to the site.                  
Twenty-eight days after the merger, on February 28, 1969, the                   
site was sold to a third party.  In 1984, LCC was sold to an                    
unaffiliated party in a stock sale.  Although Enron does not                    
admit liability with respect to any costs at this site, it agreed               
to cooperate with the EPA and other potentially responsible                     
parties to undertake the work contemplated by EPA's Order.  The                 
tower demolition and removal activities were completed in October               
1998, and a final project report has been prepared for submission               
to the EPA.  In 1998, Enron's expenses related to the City Bumper               
Site were $600,000.  Enron does not expect to incur material                    
expenditures in connection with this site.                                      

Enron's natural gas pipeline companies conduct soil and                   
groundwater remediation of a number of their facilities.  In                    
1998, these expenses were $1.3 million as compared with $1.7                    
million in 1997.  Enron does not expect to incur material                       
expenditures in connection with soil and groundwater remediation.               

15  COMMITMENTS                                                                 

Firm Transportation Obligations.  Enron has firm                          
transportation agreements with various joint venture pipelines.                 
Under these agreements, Enron must make specified minimum                       
payments each month.  At December 31, 1998, the estimated                       
aggregate amounts of such required future payments were $53                     
million, $67 million, $69 million, $71 million and $72 million                  
for 1999 through 2003, respectively, and $601 million for later                 
years.                                                                          

The costs recognized under firm transportation agreements,                
including commodity charges on actual quantities shipped, totaled               
$30 million, $27 million and $25 million in 1998, 1997 and 1996,                
respectively.  Enron has assigned firm transportation contracts                 
with two of its joint ventures to third parties and guaranteed                  
minimum payments under the contracts averaging approximately $36                
million annually through 2001 and $3 million in 2002.                           

Other Commitments.  Enron leases property, operating                      
facilities and equipment under various operating leases, certain                
of which contain renewal and purchase options and residual value                
guarantees.  Future commitments related to these items at                       
December 31, 1998 were $208 million, $210 million, $324 million,                
$148 million and $131 million for 1999 through 2003,                            
respectively, and $954 million for later years. Guarantees under                
the leases total $1,039 million at December 31, 1998.                           

Total rent expense incurred during 1998, 1997 and 1996 was                
$147 million, $156 million and $149 million, respectively.                      

Enron guarantees certain long-term contracts for the sale of              
electrical power and steam from a cogeneration facility owned by                
one of Enron's equity investees.  Under terms of the contracts,                 
which initially extend through June 1999, Enron could be liable                 
for penalties should, under certain conditions, the contracts be                
terminated early.  Enron also guarantees the performance of                     
certain of its unconsolidated affiliates in connection with                     
letters of credit issued on behalf of those unconsolidated                      
affiliates.  At December 31, 1998, a total of $209 million of                   
such guarantees were outstanding, including $44 million on behalf               
of EOTT.  In addition, Enron is a guarantor on certain                          
liabilities of unconsolidated affiliates and other companies                    
totaling approximately $755 million, including $366 million                     
related to EOTT trade obligations.  The EOTT letters of credit                  
and guarantees of trade obligations are secured by the assets of                
EOTT.  Enron has also guaranteed $453 million in lease                          
obligations for which it has been indemnified by an "Investment                 
Grade" company.  Management does not consider it likely that                    
Enron would be required to perform or otherwise incur any losses                
associated with the above guarantees.  In addition, certain                     
commitments have been made related to 1999 planned capital                      
expenditures and equity investments.                                            

16  QUARTERLY FINANCIAL DATA (Unaudited)                                        

Summarized quarterly financial data is as follows:                        

                                                                [Download Table]

(In Millions, Except           First    Second     Third    Fourth     Total    
 Per Share Amounts)           Quarter   Quarter   Quarter   Quarter    Year     

                                                                                
1998                                                                            
Revenues                      $5,682    $6,557    $11,320    $7,701   $31,260   
Income before                                                                   
 interest, minority                                                             
 interests and income taxes      471       345        405       361     1,582   
Net income                       214       145        168       176       703   
Earnings per share:                                                             
  Basic                       $ 0.69    $ 0.44    $  0.50    $ 0.52   $  2.14(a)
  Diluted                       0.65      0.42       0.47      0.49      2.02(a)

1997                                                                            
Revenues                      $5,344    $3,251    $ 5,806    $5,872   $20,273   
Income (loss) before                                                            
 interest, minority                                                             
 interests and income taxes      429      (548)       311       373       565   
Net income (loss)                222      (420)       134       169       105   
Earnings (loss) per share:                                                      
  Basic                       $ 0.88    $(1.71)   $  0.44    $ 0.55   $  0.32(a)
  Diluted                       0.81     (1.71)      0.42      0.53      0.32(a)

<FN>                                                                            
(a) The sum of earnings per share for the four quarters may not                 
    equal earnings per share for the total year due to changes in               
    the average number of common shares outstanding.                            
    Additionally, certain items in the diluted earnings per share               
    computation were antidilutive in the second quarter and total               
    year 1997.                                                                  

17  GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION                                 

Enron adopted SFAS No. 131, "Disclosures about Segments of an             
Enterprise and Related Information," during the fourth quarter of               
1998.  SFAS No. 131 establishes standards for reporting                         
information about operating segments in annual financial                        
statements and requires selected information about operating                    
segments in interim financial reports.  Operating segments are                  
defined as components of an enterprise about which separate                     
financial information is available and evaluated regularly by the               
chief operating decision maker, or decision making group, in                    
deciding how to allocate resources and in assessing performance.                
Enron's chief operating decision making group is the Management                 
Committee, which consists of the Chairman, President, and other                 
key officers.                                                                   

The segments described below aggregate similar businesses                 
together based on such factors as regulatory environment,                       
products and services and customers.                                            

Enron's operations are classified into the following business             
segments:                                                                       

Exploration and Production - Natural gas and crude oil                    
exploration and production primarily in the United States,                      
Canada, Trinidad and India.                                                     

Transportation and Distribution - Regulated industries.                   
Interstate transmission of natural gas.  Management and operation               
of pipelines.  Electric utility operations.                                     

Wholesale Energy Operations and Services - Energy commodity               
sales and services, risk management products and financial                      
services to wholesale customers.  Development, acquisition and                  
operation of power plants, natural gas pipelines and other energy               
related assets.                                                                 

Retail Energy Services - Sale of natural gas and electricity              
directly to end-use customers, particularly in the commercial and               
industrial sectors, including the outsourcing of energy-related                 
activities.                                                                     

Corporate and Other - Includes operation of water,                        
telecommunications and renewable energy businesses and clean                    
fuels plants, as well as Enron's investment in crude oil                        
transportation activities.                                                      

Financial information by geographic and business segment                  
follows for each of the three years in the period ended December                
31, 1998.                                                                       

Geographic Segments                                                             

                                                                [Download Table]

                                  Year Ended December 31,   
(In Millions)                     1998      1997      1996  

                                                            
Operating revenues from                                     
 unaffiliated customers                                     
  United States                  $25,247   $17,328   $11,262
  Foreign                          6,013     2,945     2,027
                                 $31,260   $20,273   $13,289
Income (loss) before interest,                              
 minority interests and income                              
 taxes                                                      
  United States                  $ 1,008   $   601   $   938
  Foreign                            574       (36)      300
                                 $ 1,582   $   565   $ 1,238
Long-lived assets                                           
  United States                  $ 9,382   $ 8,425   $ 6,490
  Foreign                          1,275       745       622
                                 $10,657   $ 9,170   $ 7,112

                                                        [Enlarge/Download Table]
Business Segments                                                                                       


                                                               Wholesale                                
                                Exploration  Transportation     Energy       Retail   Corporate         
                                    and           and          Operations    Energy      and            
(In Millions)                   Production    Distribution    and Services  Services  Other(c)    Total 

                                                                                                        
1998                                                                                                    
Unaffiliated revenues(a)         $  750          $1,833         $27,220      $1,072    $  385    $31,260
Intersegment revenues(b)            134              16             505           -      (655)         -
  Total revenues                    884           1,849          27,725       1,072      (270)    31,260
Depreciation, depletion and                                                                             
 amortization                       315             253             195          31        33        827
Operating income (loss)             133             562             880        (124)      (73)     1,378
Equity in earnings of                                                                                   
 unconsolidated affiliates            -              33              42          (2)       24         97
Interest income                       1               3              61           -        17         82
Other income, net                    (6)             39             (15)          7         -         25
Income (loss) before interest,                                                                          
 minority interests and                                                                                 
 income taxes                       128             637             968        (119)      (32)     1,582
Capital expenditures                690             310             706          75       124      1,905
Identifiable assets               3,001           6,955          12,205         747     2,009     24,917
Investments in and advances to                                                                          
 unconsolidated affiliates            -             661           2,632           -     1,140      4,433
  Total assets                   $3,001          $7,616         $14,837      $  747    $3,149    $29,350

1997                                                                                                    
Unaffiliated revenues(a)         $  789          $1,402         $17,344      $  683    $   55    $20,273
Intersegment revenues(b)            108              14             678           2      (802)         -
  Total revenues                    897           1,416          18,022         685      (747)    20,273
Depreciation, depletion and                                                                             
 amortization                       278             160             133           7        22        600
Operating income (loss)             185             398             376        (105)     (839)        15
Equity in earnings of                                                                                   
 unconsolidated affiliates            -              40             172          (1)        5        216
Interest income                       2               3              52           -        11         68
Other income, net                    (4)            139              54          (1)       78        266
Income (loss) before interest,                                                                          
 minority interests and                                                                                 
 income taxes                       183             580             654        (107)     (745)       565
Capital expenditures                626             337             318          36        75      1,392
Identifiable assets               2,668           7,115           8,661         322     1,130     19,896
Investments in and advances to                                                                          
 unconsolidated affiliates            -             521           1,932           -       203      2,656
  Total assets                   $2,668          $7,636         $10,593      $  322    $1,333    $22,552

1996                                                                                                    
Unaffiliated revenues(a)         $  647          $  702         $11,413      $  513    $   14    $13,289
Intersegment revenues(b)            177              23             491          15      (706)         -
  Total revenues                    824             725          11,904         528      (692)    13,289
Depreciation, depletion and                                                                             
 amortization                       251              66             138           -        19        474
Operating income (loss)             205             337             287           -      (139)       690
Equity in earnings of                                                                                   
 unconsolidated affiliates            -              35             168           -        12        215
Interest income                       2               4              28           -         7         41
Other income, net                    (7)            148             (17)          -       168        292
Income before interest,                                                                                 
 minority interests and                                                                                 
 income taxes                       200             524             466           -        48      1,238
Capital expenditures                540             175             136           -        13        864
Identifiable assets               2,371           2,363           8,879           -       823     14,436
Investments in and advances to                                                                          
 unconsolidated affiliates            -             516           1,005           -       180      1,701
  Total assets                   $2,371          $2,879         $ 9,884      $    -    $1,003    $16,137

<FN>                                                                                                    
(a) Unaffiliated revenues include sales to unconsolidated affiliates.                                   
(b) Intersegment sales are made at prices comparable to those received                                  
    from unaffiliated customers and in some instances are affected by                                   
    regulatory considerations.                                                                          
(c) Includes consolidating eliminations.                                                                

18  OIL AND GAS PRODUCING ACTIVITIES (Unaudited except for                      
Results of Operations for Oil and Gas Producing Activities)                     

The following information regarding Enron's oil and gas                   
producing activities should be read in conjunction with Note 1.                 
This information includes amounts attributable to a minority                    
interest of 46%, 45%, 47% and 39% at December 31, 1998, 1997,                   
1996 and 1995, respectively.                                                    

                                                                [Download Table]
Capitalized Costs Relating to Oil and Gas Producing Activities


                                December 31,                  
(In Millions)                   1998      1997                

                                                              
Proved properties             $ 4,630   $ 4,070               
Unproved properties               184       221               
  Total                         4,814     4,291               
Accumulated depreciation,                                     
 depletion and amortization    (2,138)   (1,904)              
  Net capitalized costs       $ 2,676   $ 2,387               

                                                                [Download Table]
Costs Incurred in Oil and Gas Property Acquisition, Exploration  
and Development Activities(a)                                    


(In Millions)               United States   Foreign   Total      

                                                                 
1998                                                             
Acquisition of properties                                        
  Unproved                      $ 33         $  3     $ 36       
  Proved                         198           13      211       
     Total                       231           16      247       
Exploration                       82           55      137       
Development                      298           97      395       
     Total                      $611         $168     $779       

1997                                                             
Acquisition of properties                                        
  Unproved                      $ 69         $  8     $ 77       
  Proved                          43           38       81       
     Total                       112           46      158       
Exploration                       74           27      101       
Development                      333          109      442       
     Total                      $519         $182     $701       

1996                                                             
Acquisition of properties                                        
  Unproved                      $ 39         $  6     $ 45       
  Proved                          69            -       69       
     Total                       108            6      114       
Exploration                       61           27       88       
Development                      283          123      406       
     Total                      $452         $156     $608       

<FN>                                                             
(a) Costs have been categorized on the basis of Financial        
    Accounting Standards Board definitions which include costs of
    oil and gas producing activities whether capitalized or      
    charged to expense as incurred.                              

Results of Operations for Oil and Gas Producing Activities(a)                   

The following tables set forth results of operations for oil              
and gas producing activities for the three years in the period                  
ended December 31, 1998:                                                        

                                                                [Download Table]

(In Millions)               United States   Foreign   Total     

                                                                
1998                                                            
Operating revenues                                              
  Associated companies          $118         $ 15     $133      
  Trade                          432          193      625      
  Gains on sales of                                             
   reserves and related                                         
   assets                         29           (3)      26      
     Total                       579          205      784      
Exploration expenses,                                           
 including dry hole costs         64           25       89      
Production costs                  99           45      144      
Impairment of unproved                                          
 oil and gas properties           30            2       32      
Depreciation, depletion and                                     
 amortization                    265           49      314      
  Income before income taxes     121           84      205      
Income tax expense                23           45       68      
  Results of operations         $ 98         $ 39     $137      

1997                                                            
Operating revenues                                              
  Associated companies          $207         $ 15     $222      
  Trade                          449          160      609      
  Gains on sales of                                             
   reserves and related                                         
   assets                          4            5        9      
     Total                       660          180      840      
Exploration expenses,                                           
 including dry hole costs         51           24       75      
Production costs                 106           43      149      
Impairment of unproved                                          
 oil and gas properties           24            3       27      
Depreciation, depletion and                                     
 amortization                    239           39      278      
  Income before income taxes     240           71      311      
Income tax expense                69           40      109      
  Results of operations         $171         $ 31     $202      

1996                                                            
Operating revenues                                              
  Associated companies          $253         $ 14     $267      
  Trade                          282          153      435      
  Gains on sales of                                             
   reserves and related                                         
   assets                         19            1       20      
     Total                       554          168      722      
Exploration expenses,                                           
 including dry hole costs         45           23       68      
Production costs                  77           42      119      
Impairment of unproved                                          
 oil and gas properties           19            2       21      
Depreciation, depletion and                                     
 amortization                    209           42      251      
  Income before income taxes     204           59      263      
Income tax expense                54           39       93      
  Results of operations         $150         $ 20     $170      

<FN>                                                            
(a) Excludes net revenues associated with other marketing       
    activities, interest charges, general corporate expenses and
    certain gathering and handling fees, which are not part of  
    required disclosures about oil and gas producing activities.

Oil and Gas Reserve Information                                                 

The following summarizes the policies used by Enron in                    
preparing the accompanying oil and gas supplemental reserve                     
disclosures, Standardized Measure of Discounted Future Net Cash                 
Flows Relating to Proved Oil and Gas Reserves and reconciliation                
of such standardized measure from period to period.                             

Estimates of proved and proved developed reserves at December             
31, 1998, 1997 and 1996 were based on studies performed by                      
Enron's engineering staff for reserves in the United States,                    
Canada, Trinidad, India and China.  Opinions by DeGolyer and                    
MacNaughton, independent petroleum consultants, for the years                   
ended December 31, 1998, 1997 and 1996 covered producing areas,                 
in the United States, Canada and Trinidad, containing 39%, 54%                  
and 64%, respectively, of proved reserves, excluding deep                       
Paleozoic reserves, of Enron on a net-equivalent-cubic-feet-of-                 
gas basis.  These opinions indicate that the estimates of proved                
reserves prepared by Enron's engineering staff for the properties               
reviewed by DeGolyer and MacNaughton, when compared in total on a               
net-equivalent-cubic-feet-of-gas basis, do not differ by more                   
than 5% from those prepared by DeGolyer and MacNaughton's                       
engineering staff.  In addition, the deep Paleozoic reserves were               
covered by the opinion of DeGolyer and MacNaughton at December                  
31, 1995.  All reports by DeGolyer and MacNaughton were developed               
utilizing geological and engineering data provided by Enron.                    

The standardized measure of discounted future net cash flows              
does not purport, nor should it be interpreted, to present the                  
fair market value of Enron's crude oil and natural gas reserves.                
An estimate of fair value would also take into account, among                   
other things, the recovery of reserves not presently classified                 
as proved reserves, anticipated future changes in prices and                    
costs and a discount factor more representative of the time value               
of money and the risks inherent in reserve estimates.                           

                                                                [Download Table]
Standardized Measure of Discounted Future Net Cash Flows Relating     
to Proved Oil and Gas Reserves                                        


(In Millions)                       United States   Foreign    Total  

                                                                      
1998                                                                  
Future cash inflows(a)                 $ 5,471      $ 4,724   $10,195 
Future production costs                 (1,281)      (1,351)   (2,632)
Future development costs                  (316)        (608)     (924)
Future net cash flows before                                          
 income taxes                            3,874        2,765     6,639 
Future income taxes                       (904)        (970)   (1,874)
Future net cash flows                    2,970        1,795     4,765 
Discount to present value at                                          
 10% annual rate                        (1,399)        (845)   (2,244)
Standardized measure of discounted                                    
 future net cash flows relating                                       
 to proved oil and gas reserves(a)     $ 1,571      $   950   $ 2,521 

1997                                                                  
Future cash inflows(a)                 $ 5,187       $2,994   $ 8,181 
Future production costs                 (1,138)        (836)   (1,974)
Future development costs                  (313)        (124)     (437)
Future net cash flows before                                          
 income taxes                            3,736        2,034     5,770 
Future income taxes                       (888)        (810)   (1,698)
Future net cash flows                    2,848        1,224     4,072 
Discount to present value at                                          
 10% annual rate                        (1,298)        (473)   (1,771)
Standardized measure of discounted                                    
 future net cash flows relating                                       
 to proved oil and gas reserves(a)     $ 1,550       $  751   $ 2,301 

1996                                                                  
Future cash inflows(a)                 $ 9,391       $2,288   $11,679 
Future production costs                 (1,640)        (856)   (2,496)
Future development costs                  (306)         (10)     (316)
Future net cash flows before                                          
 income taxes                            7,445        1,422     8,867 
Future income taxes                     (2,260)        (572)   (2,832)
Future net cash flows                    5,185          850     6,035 
Discount to present value at                                          
 10% annual rate                        (2,693)        (273)   (2,966)
Standardized measure of discounted                                    
 future net cash flows relating                                       
 to proved oil and gas reserves(a)     $ 2,492       $  577   $ 3,069 

<FN>                                                                  
(a) Based on year-end market prices determined at the point           
    of delivery from the producing unit.  Based on natural gas and    
    crude oil prices as of March 1, 1999, the standardized measure    
    of discounted future net cash flows for operations in the         
    United States would have been lower by approximately 23%.         
    Changes in other producing areas and changes in reported          
    quantities were not material.                                     

                                                                [Download Table]
Changes in Standardized Measure of Discounted Future Net Cash            
Flows                                                                    


(In Millions)                          United States   Foreign   Total   

                                                                         
December 31, 1995                         $1,240(a)     $345    $1,585(a)
  Sales and transfers of oil                                             
   and gas produced, net                                                 
   of production costs                      (437)       (126)     (563)  
  Net changes in prices and                                              
   production costs                        1,817         172     1,989   
  Extensions, discoveries, additions                                     
   and improved recovery, net of                                         
   related costs                             581         275       856   
  Development costs incurred                  58           4        62   
  Revisions of estimated development                                     
   costs                                     (14)         12        (2)  
  Revisions of previous quantity                                         
   estimates                                   7          79        86   
  Accretion of discount                      137          47       184   
  Net change in income taxes                (656)       (191)     (847)  
  Purchases of reserves in place             162           -       162   
  Sales of reserves in place                (103)         (3)     (106)  
  Changes in timing and other               (300)        (37)     (337)  
December 31, 1996                         $2,492(a)     $577    $3,069(a)
  Sales and transfers of oil                                             
   and gas produced, net                                                 
   of production costs                      (519)       (132)     (651)  
  Net changes in prices and                                              
   production costs                       (1,664)        (50)   (1,714)  
  Extensions, discoveries, additions                                     
   and improved recovery, net of                                         
   related costs                             374         300       674   
  Development costs incurred                  52           2        54   
  Revisions of estimated development                                     
   costs                                       4         (28)      (24)  
  Revisions of previous quantity                                         
   estimates                                 (17)         26         9   
  Accretion of discount                      328          89       417   
  Net change in income taxes                 606         (67)      539   
  Purchases of reserves in place              44          53        97   
  Sales of reserves in place                 (29)          -       (29)  
  Changes in timing and other               (121)        (19)     (140)  
December 31, 1997                         $1,550(a)     $751    $2,301(a)
  Sales and transfers of oil                                             
   and gas produced, net                                                 
   of production costs                      (424)       (164)     (588)  
  Net changes in prices and                                              
   production costs                          (34)       (136)     (170)  
  Extensions, discoveries, additions                                     
   and improved recovery, net of                                         
   related costs                             326         440       766   
  Development costs incurred                  60          56       116   
  Revisions of estimated  development                                    
   costs                                     (27)        (80)     (107)  
  Revisions of previous quantity                                         
   estimates                                 (35)         32        (3)  
  Accretion of discount                      174         113       287   
  Net change in income taxes                  48          (6)       42   
  Purchases of reserves in place             157          20       177   
  Sales of reserves in place                 (34)          -       (34)  
  Changes in timing and other               (190)        (76)     (266)  
December 31, 1998                         $1,571(a)     $950    $2,521(a)

<FN>                                                                     
(a) Includes approximately $155 million, $86 million and $344            
    million (discounted, pre-tax) related to the reserves in the         
    Big Piney deep Paleozoic formations at December 31, 1998, 1997       
    and 1996, respectively.                                              

Reserve Quantity Information                                                    

Enron's estimates of proved developed and net proved reserves             
of crude oil, condensate, natural gas liquids and natural gas and               
of changes in net proved reserves were as follows:                              

                                                                [Download Table]

                                United States   Foreign     Total   

                                                                    
Net proved developed reserves                                       
Natural gas (Bcf)                                                   
  December 31, 1995              1,218.1(a)      544.0    1,762.1(a)
  December 31, 1996              1,325.7(a)      814.3    2,140.0(a)
  December 31, 1997              1,349.0(a)      986.3    2,335.3(a)
  December 31, 1998              1,429.7(a)    1,077.8    2,507.5(a)
Liquids (MBbl)(b)                                                   
  December 31, 1995             19,977        23,654     43,631     
  December 31, 1996             24,868        26,411     51,279     
  December 31, 1997             27,707        39,108     66,815     
  December 31, 1998             33,045        45,719     78,764     

Natural gas (Bcf)                                                   
Net proved reserves at                                              
 December 31, 1995               2,654.1(a)      634.4    3,288.5(a)
  Revisions of previous                                             
   estimates                         3.6          76.7       80.3   
  Purchases in place               100.6           0.9      101.5   
  Extensions, discoveries and                                       
   other additions                 256.8         264.5      521.3   
  Sales in place                   (58.4)         (4.3)     (62.7)  
  Production                      (210.2)        (81.5)    (291.7)  
Net proved reserves at                                              
 December 31, 1996               2,746.5(a)      890.7    3,637.2(a)
  Revisions of previous                                             
   estimates                       (50.8)         23.2      (27.6)  
  Purchases in place                60.0          67.6      127.6   
  Extensions, discoveries and                                       
   other additions                 275.9         299.0      574.9   
  Sales in place                   (17.7)         (0.4)     (18.1)  
  Production                      (229.1)        (84.6)    (313.7)  
Net proved reserves at                                              
 December 31, 1997               2,784.8(a)    1,195.5    3,980.3(a)
  Revisions of previous                                             
   estimates                       (55.9)         34.1      (21.8)  
  Purchases in place               123.0          54.9      177.9   
  Extensions, discoveries and                                       
   other additions                 272.8       1,200.6    1,473.4   
  Sales in place                   (37.5)          -        (37.5)  
  Production                      (233.8)       (109.6)    (343.4)  
Net proved reserves at                                              
 December 31, 1998               2,853.4(a)    2,375.5    5,228.9(a)

                                                                [Download Table]

                               United States   Foreign   Total  

                                                                
Liquids (MBbl)(b)                                               
Net proved reserves at                                          
 December 31, 1995                 25,399      24,997    50,396 
  Revisions of previous                                         
   estimates                          339       2,026     2,365 
  Purchases in place                  312           2       314 
  Extensions, discoveries and                                   
   other additions                  7,103       3,779    10,882 
  Sales in place                     (447)       (121)     (568)
  Production                       (3,830)     (4,272)   (8,102)
Net proved reserves at                                          
 December 31, 1996                 28,876      26,411    55,287 
  Revisions of previous                                         
   estimates                        3,515         213     3,728 
  Purchases in place                  127       1,123     1,250 
  Extensions, discoveries and                                   
   other additions                  6,037      21,713    27,750 
  Sales in place                   (1,683)          -    (1,683)
  Production                       (5,223)     (3,458)   (8,681)
Net proved reserves at                                          
 December 31, 1997                 31,649      46,002    77,651 
  Revisions of previous                                         
   estimates                         (152)      1,583     1,431 
  Purchases in place                3,104           -     3,104 
  Extensions, discoveries and                                   
   other additions                  9,396      24,467    33,863 
  Sales in place                   (1,039)          -    (1,039)
  Production                       (6,131)     (4,309)  (10,440)
Net proved reserves at                                          
 December 31, 1998                 36,827      67,743   104,570 

<FN>                                                            
(a) Includes 1,180 Bcf related to net proved deep Paleozoic     
    natural gas reserves.                                       
(b) Includes crude oil, condensate and natural gas liquids.     

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                    
ON FINANCIAL STATEMENT SCHEDULE                   

To Enron Corp.:                                                                 

We have audited in accordance with generally accepted                           
auditing standards, the consolidated financial statements of                    
Enron Corp. and subsidiaries included in this Form 10-K and                     
have issued our report thereon dated March 5, 1999.  Our                        
audit was made for the purpose of forming an opinion on                         
the basic financial statements taken as a whole.  The                           
schedule listed in Item 14(a)2 is the responsibility of the                     
company's management and is presented for purposes of                           
complying with the Securities and Exchange Commission's                         
rules and is not part of the basic financial statements.                        
This schedule has been subjected to the auditing procedures                     
applied in the audit of the basic financial statements and,                     
in our opinion, fairly states in all material respects the                      
financial data required to be set forth therein in relation                     
to the basic financial statements taken as a whole.                             

Arthur Andersen LLP 

Houston, Texas                                                                  
March 5, 1999                                                                   

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                                                        [Enlarge/Download Table]
                                                                SCHEDULE II                       

                       ENRON CORP. AND SUBSIDIARIES                                               
              SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS                                     
           FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996                                   
                               (In Millions)                                                      


       Column A                   Column B          Column C             Column D       Column E  
                                                    Additions           Deductions                
                                 Balance at   Charged to   Charged    For Purpose For             
                                  Beginning   Costs and    to Other   Which Reserves   Balance at 
     Description                   of Year     Expenses    Accounts    Were Created    End of Year

                                                                                                  
1998                                                                                              
Reserves deducted from                                                                            
 assets from price risk                                                                           
 management activities              $282        $141         $  -         $ 98            $325    

Reserves for regulatory issues       262          15           27           57             247    

Other reserves(a)                     45          20            1           17              49    

1997                                                                                              
Reserves deducted from                                                                            
 assets from price risk                                                                           
 management activities              $249        $ 50         $  6         $ 23            $282    

Reserves for regulatory issues         8          28          249           23             262    

Other reserves(a)                     35          13            3            6              45    

1996                                                                                              
Reserves deducted from                                                                            
 assets from price risk                                                                           
 management activities              $207        $ 87         $ (8)        $ 37            $249    

Reserves for regulatory issues        51           1            -           44               8    

Other reserves(a)                     36          15            -           16              35    

<FN>                                                                                              
(a) Consists of allowance for doubtful accounts and reserve for insurance                         
    claims and losses.                                                                            

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SIGNATURES                    

Pursuant to the requirements of Section 13 or 15(d) 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, on this 29th day of                     
March, 1999.                                                                    

ENRON CORP.         
(Registrant)        

  By:  RICHARD A. CAUSEY
         (Richard A. Causey)
            Senior Vice President,
                   Chief Accounting, Information
                and Administrative Officer

Pursuant to the requirements of the Securities Exchange               
Act of 1934, this Report has been signed below on March 29,                     
1999 by the following persons on behalf of the Registrant                       
and in the capacities indicated.                                                

Signature                  Title                                  

KENNETH L. LAY           Chairman of the Board, Chief                 
(Kenneth L. Lay)         Executive Officer and Director               
         (Principal Executive Officer)

RICHARD A. CAUSEY        Senior Vice President, Chief Accounting,     
(Richard A. Causey)       Information and Administrative Officer        
          (Principal Accounting Officer)

ANDREW S. FASTOW         Senior Vice President and Chief              
(Andrew S. Fastow)        Financial Officer                             
         (Principal Financial Officer)

ROBERT A. BELFER*        Director                                     
(Robert A. Belfer)                                                      

NORMAN P. BLAKE, JR.*     Director                                      
(Norman P. Blake, Jr.)                                                    

RONNIE C. CHAN*         Director                                    
(Ronnie C. Chan)                                                      

JOHN H. DUNCAN*         Director                                    
(John H. Duncan)                                                      

JOE H. FOY*            Director                                   
(Joe H. Foy)                                                        

WENDY L. GRAMM*          Director                                     
(Wendy L. Gramm)                                                        

KEN L. HARRISON*          Director                                      
(Ken L. Harrison)                                                         

ROBERT K. JAEDICKE*       Director                                      
(Robert K. Jaedicke)                                                      

CHARLES A. LeMAISTRE*      Director                                       
(Charles A. LeMaistre)                                                      

JEROME J. MEYER*         Director                                     
(Jerome J. Meyer)                                                       

JEFFREY K. SKILLING*      Director and President and Chief              
(Jeffrey K. Skilling)      Operating Officer                              

JOHN A. URQUHART*        Director                                     
(John A. Urquhart)                                                      

JOHN WAKEHAM*           Director                                    
(John Wakeham)                                                        

CHARLS E. WALKER*        Director                                     
(Charls E. Walker)                                                      

HERBERT S. WINOKUR, JR.*   Director                                       
(Herbert S. Winokur, Jr.)                                                   

*By:  PEGGY B. MENCHACA                                                         
(Peggy B. Menchaca)                                                   
(Attorney-in-fact for persons indicated)                                        

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		11/1/06		3
		10/31/01		3
		1/1/00		7
		12/31/99		7					10-K,  11-K,  U-3A-2,  U-3A-2/A
		6/15/99		7		17
		5/4/99		1		8			DEF 14A,  PRE 14A
Filed on:		3/31/99							10-Q,  U-3A-2/A
		3/29/99		20
		3/18/99		9					8-K
		3/5/99		11		18
		3/1/99		1		17			SC 13D
		2/16/99		1
		2/15/99		7		8
		1/26/99		9					8-K
		1/11/99		9
		1/1/99		3
For Period End:		12/31/98		1		19			11-K,  8-K,  U-3A-2,  U-3A-2/A
		12/30/98		5
		12/17/98		5					U-57
		12/15/98		7		17			SC 13D
		11/6/98		9					8-K/A
		11/1/98		17
		10/16/98		9					8-K
		8/26/98		4		17
		6/24/98		4		17
		6/23/98		9
		6/1/98		9
		5/27/98		9
		5/4/98		9
		5/1/98		17
		4/3/98		7
		12/31/97		4		19			10-K,  11-K,  8-K,  U-3A-2,  U-3A-2/A
		11/18/97		17
		10/27/97		9
		10/13/97		9
		9/1/97		9
		7/1/97		7		17			U-3A-2/A
		5/23/97		9
		5/8/97		9
		3/24/97		9
		1/1/97		9
		12/31/96		3		19			10-K405,  U-3A-2
		12/18/96		9
		11/21/96		4		17
		11/1/96		3
		7/20/96		9
		1/1/96		9
		12/31/95		4		17
		12/1/95		9
		11/8/95		9
		6/27/95		4
		5/2/95		9
		3/27/95		9
		8/3/94		9
		8/2/94		9
		5/9/94		9
		4/22/94		9
		3/25/94		9
		11/15/93		9
		11/12/93		9
		2/26/93		9
		1/1/93		17
		11/24/92		9
		10/1/92		3
		8/27/92		9
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