Hanover Measurement Services Company

1. Hanover Measurement Services Company

2. Today’s Presentation • Strategic Rationale • Business Plan, Growth Strategy and Goals • Embracing Change - A New Opportunity • Organizational Structure • Benefits • Enron • Hanover • Questions

3. State of the Industry • Deregulation has drastically changed the natural gas industry • Intense competition greatly reduced transport margins and forced pipeline companies to operate at extremely low costs Rather than follow others in the industry and cut costs through downsizing, HPL has come up with a creative solution: A new company, Hanover Measurement Services Company (HMS), to operate and maintain measurement assets and drive technological improvements in the measurement industry

4. Strategic Rationale • Measurement assets/operations can be shifted from a cost center to a profit generator • Outsourcing leads to efficiency gains and reduced costs • HMS can provide services to others in the natural gas production and pipeline industry, further enhancing cost effectiveness and service levels. • HMS can leverage the expertise and customer/industry contacts of Enron and Hanover

5. Today’s Presentation • Strategic Rationale • Business Plan, Growth Strategy and Goals • Embracing Change - A New Opportunity • Organizational Structure • Benefits • Enron • Hanover • Questions

6. Business Plan Highlights • HMS will provide comprehensive, fee-based measurement management services for pipelines, producers, gatherers, and processors • HMS will offer customers total measurement solution packages from field services to the back room, such as: • Meter inspection, repair and calibration • Measurement equipment installation • Gas and liquid sampling • Measurement auditing • Pulsation testing

7. Growth Strategy • Execute 10-year measurement services agreement with HPL • Target producers, gatherers, processors, and other intrastate pipelines that have geographical synergies with HPL system and Hanover customers, then expand into other regions • Offer its customers LUAF contract - a guaranty that LUAF will be at a negotiated percentage • Acquire or form an alliance with a company who creates back room systems

8. September 1, 1999 December 31, 1999 December 31, 2000 Complete HPL Transition Procure 3 Additional Contracts Secure 1 additional equity participant Goals Become the #1 Measurement Services Company in the U.S.

9. Today’s Presentation • Strategic Rationale • Business Plan, Growth Strategy and Goals • Embracing Change - A New Opportunity • Organizational Structure • Benefits • Enron • Hanover • Questions

10. Change - An Exciting Opportunity • HMS employees have upside potential: • Growth of outsourcing/service sectors - Hanover has had 56% growth over the last six years • Additional compensation based on meeting company objectives, including LUAF incentive • Enhanced skills through exposure to multiple systems throughout Texas • Improved interaction with management in a lean, mean environment

11. HMS has 2 integral parts -Each are the best in their respective businesses HMS Hanover HPL • Successful outsourcing business • Recognized leaders in compression/production equipment industry • Aggressive, talented management team • Strong relationship with producers, pipelines, and processors • Brand name recognition • High quality operations experience and personnel • Technical measurement expertise • Relationships with tech and commercial vendors • Existing contracts for outsourcing (marquis contract for HMS) • Strong relationships in industry

12. Today’s Presentation • Strategic Rationale • Business Plan, Growth Strategy and Goals • Embracing Change - A New Opportunity • Organizational Structure • Benefits • Enron • Hanover • Questions

13. Legal Structure DEFPipeline HPL Fee Fee ServiceContract Service Contract X% LP X% LP; Y% GP HPL Hanover HMS Personnel, Service Equipment, $X MM $X million

14. Management Structure HMS Board: 2 Enron Members, 2 Hanover Members, Bill Rome PresidentBill Rome Business Development/ Marketing VP OperationsPat Flavin Technology Administration

15. Organizational Structure VP Operations - Pat Flavin 1 Communication Specialist 3 Measurement Specialists 1 Computer Analyst WESTERN REGION EASTERN REGION Zone 1 Zone 2 Zone 3 Zone 4 Zone 1 Zone 2 Zone 3 Gas Analysis 2 Lab Analysts

16. Organizational Structure (cont.) VP Operations - Pat Flavin EASTERN REGION WESTERN REGION Zone 1 Zone 2 Zone 1 Zone 3 1 Technical Foreman 12 Measurement 2 Communication 1 Technical Foreman 5 Measurement 1 Communication 1 Technical Foreman 4 Measurement 1 Communication 1 Technical Foreman 6 Measurement Zone 2 Zone 4 Zone 3 1 Technical Foreman 8 Measurement 1 Communication 1 Technical Foreman 5 Measurement 1 Communication 1 Technical Foreman 5 Measurement

17. Today’s Presentation • Strategic Rationale • Business Plan, Growth Strategy and Goals • Embracing Change - A New Opportunity • Organizational Structure • Benefits • Enron • Hanover • Questions

18. Enron Corp. Severance Plan • EE offered job by acquiring company at same or higher salary • EE offered job by acquiring company at lower salary • EE offered job within Enron at same salary, no relocation greater than 50 miles • EE offered job within Enron at same salary, relocation greater than 50 miles • Resignation prior to separation date results in loss of severance eligibility

19. Medical & Dental Plans • COBRA • Portable Medical & Dental Plan • Inactive/Retiree Medical Plan

20. COBRA • EEs who separate from Enron payroll are eligible for COBRA coverage for 18 months • EE pays full plan cost with premiums billed monthly

21. Portable Medical & Dental • EEs with 5 years of service and are at least 40 years of age are eligible • Must make your Medical or Medical/Dental election within 31 days of separation or will lose eligibility permanently • To elect Dental you MUST elect Medical • All eligible dependents covered at time of separation are eligible for coverage

22. Portable Medical & Dental (cont.) • Option you elect will be the maximum level of coverage from that point forward • At open enrollment you may elect a higher deductible, change coverage category or drop dependents

23. Inactive/Retiree Medical Plan • EEs with 5 years of service and are at least 55 years of age are eligible • EE has 31 days from separation date to elect coverage or will lose eligibility permanently • MUST elect Medical coverage to elect Dental • Participant contributions WILL be subsidized • Enron provides a Defined Dollar Benefit (DDB) amount for each full year of credited service at time of separation

24. EE & Family Life Insurance & ADD • Life Insurance and Accidental Death & Dismemberment (ADD) coverage CAN be converted to individual policies within 31 days of separation

25. STD & LTD • Coverage is DISCONTINUED at separation

26. Vacation • EEs are paid for their 1999 earned but unused vacation

27. Savings Plan (401 K) • Contributions STOP at time of separation • EEs can have account distributed at separation • If account is more than $5,000, money is held in trust until withdrawal or distribution is requested

28. Savings Plan (cont,) • If no withdrawal/contribution is made, the money will be distributed on April 1 of the calendar year that EE reaches age 70 1/2 • Taxes will be withheld from available cash • If account is less than $5,000, money will be distributed and taxes withheld • A 10% tax penalty generally applies to distributions/withdrawals made before EE reaches age 59 1/2

29. Savings Plan (cont.) • This 10% tax penalty does NOT apply if you retire from Enron or after your 55th birthday and a TOTAL distribution is taken • If you have your account held in trust, you can make transfers between funds daily (with the exception of company-contributed funds)

30. Savings Plan (cont.) • EEs can elect one of several forms of annuities, which will provide a series of monthly benefit payments • EEs involuntarily separated after July 1, 1999 have an additional six (6) months from separation date to pay off loan(s) • Loan(s) MUST be paid in full within six (6) months of separation date or be in default

31. Cash Balance Plan • EEs with 5 or more years of service and 55 years of age or older may elect to retire • Special Provision for EEs who were at least 50 years of age with 5 years of service on January 1, 1995 • Cash Balance Plan became effective 1/1/96 • EEs are fully vested after 5 years of service • 1999 credits to the account are prorated based on separation date

32. ESOP • 1/1/96 EEs had opportunity to access shares in the ESOP Retirement Subaccount and the vested shares in the Special Subaccount in 20% percent increments over the next 5 years • Grandfathered employees gained access to 100% of their shares in ESOP Retirement Subaccount in January 1996 • DO NOTHING - leave shares in ESOP, quarterly dividends paid directly to you in cash

33. ESOP (cont.) • ROLLOVER - roll shares into the Savings Plan or to an individual IRA • One time option PRIOR to separation to roll shares into Savings Plan or withdraw shares taking a taxable distribution of the vested account balance • EEs MUST submit an ESOP Distribution Request Form to Corporate Benefits by the 20th of the month to request a roll-over or distribution

34. Stock Options • EEs who are involuntarily separated or take retirement have 12 months from separation/retirement date to exercise options • Vesting of stock options will STOP upon separation

35. Spending Accounts • Spending account contributions STOP on separation date • Expenses incurred up to separation date may still be submitted up to your annual election (4 month period after Plan year to submit claims for reimbursement) • COBRA allows EEs to continue to make contributions to the Health Care Spending account on an after-tax basis for 18 months • Any contributions which cannot be claimed WILL be forfeited

36. Credit Union • EEs with loans through the Credit Union will be required to make direct payments to the Credit Union • As long as you maintain an open account you may remain a member

37. Today’s Presentation • Strategic Rationale • Business Plan, Growth Strategy and Goals • Embracing Change - A New Opportunity • Organizational Structure • Benefits • Enron • Hanover • Questions

38. Medical Deductibles • In Network office services • $15.00 per visit • Calendar year deductibles • $300.00 individual / $900.00 family • Non Network services in network areas • additional $300.00 deductible per year • Out of Network Hospital Admission • additional $250.00 per admission • Maximum out of pocket expense/year • individual $2,000.00 / family $4,000.00

39. Office Services • In network office services covered at 100% after a $15.00 co-pay/visit • Non network office services covered at 60% after individual deductible met • Lab/x-ray charges may not be covered under office services, depending on how doctor bills the charges

40. Hospitalization • Pre certification required. If not pre-certified, $500.00 penalty applied • In network hospitalization covered at 80% after $300.00 deductible • Non network hospitalization covered at 60% after $300.00 deductible

41. In Network Accident Visit $25 co pay and 80% covered Sickness visit $100 co pay and 80% covered Non Network Accident visit $25 co pay and 60% covered Sickness visit $100 co pay and 60% covered Emergency Room

42. Major Medical Maximum $1,000,000.00

43. In Network Confinement Paid at 80% after $300 deductible Non Confinement Paid at 60% limited to $80 in expenses per visit; 15 visits/year Non Network Confinement Paid at 60% after $300 deductible Non Confinement Paid at 50% limited to $80 in expenses per visit; 15 visits/year Mental and Nervous, Alcohol and Chemical Dependency $300 Deductible applies to all non confinement charges

44. Prescription Drugs • Express Scripts Rx Card: • Brand Name = $15 co pay • Generic Brand = $10 co pay • Mail order Rx drugs (3 month supply): • Brand Name = $30 co pay • Generic Brand = $20 co pay • Employee pays the cost difference between generic and brand, if brand name is selected

45. Second Surgical Opinion Required and Covered at 100%

46. Wellness Benefit Must be provided by a network provider to be covered

47. Dental • Included with health coverage • Employee cannot have dental coverage without having health coverage • Calendar year maximum = $1,000.00 • Deductible: • Individual = $50 per year • Family = $150 per year • Diagnostic and preventative = 100% covered with no deductible • Restorative = 80% covered after deductible • Major restorative = 50% covered after deductible (1 year waiting period)

48. Life Insurance-term life • Company paid: 2x annual salary for employee only (up to a maximum of $400,000.00) • Spouse covered at $10,000.00 (only if covered under Medical Plan) • Each dependent covered at $5,000.00 (only if covered under Medical Plan)

49. Accidental Death and Dismemberment Company paid: 2x salary up to maximum of $400,000.00 for employee only

50. Supplemental Life Insurance • Employee Paid (Voluntary) • Spousal coverage up to 50% of employee coverage • Dependent coverage at either $5,000.00 or $10,000.00 per child • Maximum employee coverage is 4x annual salary up to $400,000.00 • Guarantee coverage up to $200,000.00; amounts in excess subject to medical insurability • Enrollments after initial 30 days of employment subject to medical insurability