Copyright © 2008 World Energy Solutions Inc. Tools, Knowledge, and Expertise for Successful Energy Transactions A presentation on World Energy by Independent

Copyright © 2008 World Energy Solutions Inc.

Tools, Knowledge, and Expertisefor Successful Energy Transactions

A presentation on World Energy by Independent Energy Consultants, Inc.

Copyright © 2008 World Energy Solutions Inc. 2

Why Independent Energy Consultants partners with World Energy

Overview of World Energy– Background– Procurement Platforms– Benefits

Case Studies Next Steps

Contents


Why Independent Energy Consultants Partners with World Energy

Deliver a Best of Breed Solution– Deliver the best price with reverse auction technology

– typical savings are 2 to 10% from “traditional” paper RFP

– Enhance traditional energy procurement with a transparent bidding process

Deliver a Compliant Procurement Approach– The transparent reverse auction platform helps

organizations address Sarbanes-Oxley Section 404 requirements

Deliver Greater Customer Value – World Energy’s platform complements our existing

services


World Energy Solutions

Bringing together intelligence and tools – enabling energy buyers to obtain the best price and meet compliance requirements

20%20%

5 – 155 – 15

3 – 73 – 7

2 – 10%2 – 10%

over 300over 300

over 12,000over

12,000

16x16x

over $600Mover

$600M

1 TCF1 TCF

over 50Mover 50M

over $10B over $10B Electricity, natural gas, financial instruments, and green credit transactions

Megawatt hours transacted over the Exchange

Volume of natural gas transacted over the Exchange

Customer savings

Volume of nearest competitor

Auction events conducted

Registered suppliers

Typical customer discounts vs. traditional RFP

Suppliers per auction

Bids from each supplier per auction event

Frequency winning supplier outbids itself last minute to ensure a win

ENERGYCOSTS

ENERGYCOSTS

CONFIDENCECONFIDENCE

Never beaten by paper-based RFP

process on apples-to-apples basis EVEN NET

OF OUR FEE!


Our Clients:Leader in Online Procurement

Government

Wholesale Utilities, Industrial, and Commercial

United NationsVeterans Affairs

Social Security

Dept of Justice

Wholesale Utilities, Commercial & Industrial Clients, and Government Agencies trust World Energy with their energy procurements

Maryland District of ColumbiaMassachusetts PennsylvaniaEPA

General Services Administration

New Jersey DelawareConnecticut


‘Reverse Auction’ Process

Auction RFPsare posted for Energy Consumers

EnergySuppliers BidCompetitivelyfor Contracts

Benchmark Price

Copyright © 2008 World Energy Solutions, Inc. 7

‘Reverse Auction’ Process

Price-to-Compare provides a market

benchmark…

Natural competition, enhanced by blinding

the number of suppliers and leading supplier, drives price

down

Fixed end time causes

suppliers to sharpen their

pencils…

… and often bid lower than would be otherwise

required to win the business.

}… against which

customer savings are quantified.


Source: New York Mercantile ExchangeFor demonstration purposes only. Prices are the average of 12-month seasonal forward pricing on date of prompt month’s NYMEX contract expiration.

‘Post & Respond’ Process• Market visibility to your unique load

• Track the market over time

• Automated notifications when pricing approaches target

• Lock in a price when results match goal


RFP Architecting Enables Price Testing

Running multiple Auctions or running multiple scenarios through the Post & Respond enables discovering the costs of various parameters– Green Power Mix– Pricing Product– Term Length– Credit Terms– Special Conditions


Product and Feature Breadth

Commodities Pricing Products Auction FeaturesElectricityNatural GasGreen Credits

– Renewable Energy Credits

– GHG Emissions Credits

Fixed (commodity/basis)IndexHeat RateCapacityBlockBaseload, no capacity% of the systemOn-peak, Off-PeakFinancial or Physical

Proactive ProcurementStructured Event with Fixed End TimeUnique Hybrid Anglo/Dutch DesignFinal Blind Bid Feature

Event Type Procurement TypeReverse AuctionForward AuctionPost and Respond

RetailWholesale


Documentation and Reporting

Due Diligence and Audit BookDue Diligence and Audit Book

Management Reporting and Data Services

Management Reporting and Data Services

ProcessAudit Trail

RFPBid

History

Tariff Models Contract ManagementAccounts & Usage


What is the Process?

Needs PlanningNeeds Planning Pre AuctionPre Auction Auction or P&RAuction or P&R ContractContract SupportSupport

Opportunity Assessment

Opportunity Assessment

• Review market price drivers

• Price to Compare Analysis

• Terms• Products• Draft RFP• RFP Approval

• Review full analysis based on inputs & needs

• Understand Factors

• Agree to take away price

• Summarize Results

• Product• Term• Supplier• Results meet

expectations• Review and

finalize contract

• Upload contracts, sites & usage

• Set renewal trigger goals

• Monitor

Run EventRun Event

• Provide Preliminary Information

• Bills & Usage Data

• Site Information• Current Energy

Contracts• Review Data• Information and

Contracts

Submit RFP to suppliers

Submit RFP to suppliers Sign ContractSign Contract Renew ContractRenew Contract


Benefits to the Customer

World Energy Exchange’s unique process: Creates transparency, promoting competition and

driving down prices – Instant feedback forces suppliers to sharpen their pencils

Allows price discovery – you can test the market with a variety of scenarios to determine the pricing sweet spot

Simplifies bidding, reducing administrative costs for suppliers and creating lower prices for large buyers– All qualified suppliers have an equal opportunity to win

the business– No protests have ever been filed regarding one of our

events


Benefits to the Customer

World Energy Exchange’s unique process: Speeds up award times, minimizing risk

premiums Provides data management – All procurement

information is captured on the platform – Secure access to data for various stakeholders

(hierarchy)– The Customer can run reports on contracts and bid

history– Complete auction and process documentation book

supplied for audit purposes (Regulators, SOX)

Helps you achieve your objectives such as budget certainty, cost savings, and fulfillment of green energy requirements at the least cost


Never Beaten by a Traditional RFP

Auction Design Optimizes Result for Buyer

– Auction drives bidding activity– Transparency forces hyper

competition amongst suppliers as end of auction nears

– No auction gimmicks to create risk and uncertainty

Significant Market Liquidity– Supplier network of over 300 players– Online nature attracts market

entrants by lowering their cost to acquire

Automation Enables Testing of Multiple Consumer-Defined Contract Parameters

– Pre Qualified suppliers compete on price alone

– Customer can test different parameters to optimize price

Time Efficient– Contracts usually awarded within

hours of auction ending, enabling suppliers to minimize risk premiums in pricing

Better Pricing Through Technology

“The auction saves between 7 and 9% versus the paper-based RFP process we formerly used with our clients.”

Eric Hoegger, Cargill Energy Management Services

“The World Energy Exchange is brutally efficient at driving margins to the bare minimum.”

Andrew Owens,Entergy Solutions


0

2

4

6

8

10

$/MWh

Power Supplier Margin by Procurement Method

$4-8/MWh

$3-5/MWh

$0.25-2/MWh

Traditional RFPand Consultants

World EnergyExchange

Sole SourceSupplier

Sources: Restructuring Today, Supplier Annual Reports, and World Energy Supplier Survey

World Energy’s unique methodology typically cuts supplier margins by 30-80 percent.


$0.00

$0.02

$0.04

$0.06

$0.08

$0.10

$0.12

$/Dth

Natural Gas Supplier Margin by Procurement Method

$.05-.10/Dth

$.02-.05/Dth

$.005-.02/Dth

Traditional RFPand Consultants

World EnergyExchange

Sole SourceSupplier

Sources: Restructuring Today, Supplier Annual Reports, and World Energy Supplier Survey

Margins typically charged by suppliers when buyers use conventional methods of procurement as compared to supplier margins for buyers who use World Energy’s unique platforms.

Case Studies


Case Study: Multi-Site Fortune 400 Industrial

ResultsSituation

19

Integrated producer of steel products with plants located across 4 states and multiple utilities

Historically managed financial and physical risks separately through different processes

Had proactively managed physical risk for over 5 years through the Post and Respond system

Established goal of 5% year-on-year savings from 2006 to 2007 and solicited World Energy’s help

Jointly designed a 2007 risk management program that commenced in August 2005

World Energy facilitated over 50 proactive procurement events for customer

Supply is now diversified across 11 individual suppliers

Savings to date against budgeted targets have amounted to approximately $2M

Produced 27% savings to date

Copyright © 2008 World Energy Solutions, Inc.


Case Study: Hospital Saves $3 Million

A Texas hospital had sole-sourced with one supplier

In cost cutting effort, they decided not to automatically renew the contract, choosing instead to hold a competitive auction with World Energy

Incumbent supplier was invited to bid and spoke out against the auction process stating that they had already offered the lowest price available

The hospital’s energy buyer proceeded with the auction, inviting the supplier to submit their best bid in a competitive environment

Over 40 bids were generated in the auction

Faced with stiff competition the incumbent was forced to reduce its price

Supplier cut their bid by $3 million in a multi-year contract in order to keep the customer

ResultsSituation

20Copyright © 2008 World Energy Solutions Inc.

Hospital saved $3 million by using the competitive auction process


Case Study: Ford Motor Company

ResultsSituation

21

Ford Motor Company desired to re-bid its natural gas supply

Their procurement consultant sent out RFPs to their top 5 suppliers

World Energy tapped its network of suppliers to participate in an auction event

Online auction was conducted on the day pricing from the RFPs was due

Going head-to-head, World Energy beat the paper RFP process by 18%

Visible, real time bidding drove price down

Suppliers, confident that with WE contract would be awarded to winning bid promptly, cut their risk premiums

Ford got a lower price from the auction event than from the consultant’s RFPs



Case Study: Aggregation Group Member

Mass High Tech Council selected supplier of choice

VP of a member firm felt pricing too high, contacted World Energy to conduct an auction

World Energy sent out invitations to bid to supplier network

Council official contacted member’s CEO to advise against “wasting money” on an auction when they already had the lowest price

Member went on with auction, asking incumbent to bid with others

Online auction event generated 39 bids

Incumbent bid below its current rate, showing the competitive power of the auction

Another supplier beat the incumbent, saving the company nearly 11% of previous price

ResultsSituation

22

Aggregation group member saved $90K



A new, privately-held specialty hospital was in search of its first energy supply contract

Ethicus entertained a default quote from the incumbent supplier

The hospital’s design engineer referred Ethicus to World Energy

Ethicus engaged World Energy to secure the best possible price for a defined usage

Ethicus proceeded with the reverse auction process, however only desired a fixed-priced, 12-month term due to usage forecasts

Online auction event generated 88 bids over six tranches from five suppliers

Products tested:– 12, 24 & 36 month fixed – 12, 24 & 36 month fixed w/

5% green 36 month fixed product w/o

green offered Ethicus the best value but Ethicus was concerned with their usage forecasts

World Energy Market Director was able to secure 100% swing at no premium for the 36 month term

World Energy helped provide budget certainty, savings and usage protection with a 100% swing

ResultsSituation

23Copyright © 2008 World Energy Solutions Inc.

Compared to quote from incumbent supplier, Ethicus saved 27.5%

Case Study:Ethicus Healthcare Management LLC.


Case Study: Vesuvius

ResultsSituation

24

Vesuvius had been purchasing electricity the same way they purchased all materials – paper-based RFPs

Vesuvius’ goal in using World Energy was to save time and gain more control over electricity procurement

The ability to shop the market over time and evaluate alternatives was important to them

Vesuvius selected World Energy’s Post & Respond platform

Post & Respond experience resulted in a new efficient approach to energy procurement

Eight suppliers responded to posting with initial or refreshed offers

Vesuvius filtered out non-competitive suppliers over a 2-week process

Selected supplier based on factors of price, delivery and other requirements

Process was judged to be “seamless, quick and efficient” by Vesuvius management

Currently posted electricity and natural gas forward procurement



Next Steps

Perform Initial Evaluation of Requirements to Ensure Fit Execution of World Energy Exchange Agreement Collect Required Data for Analysis

– Letter of Authorization for Historical Load Information– Copy of current contract– Copy of most recent bills

Refinement of your Specific Product Requirements Development of Electronic RFP Finalize All Terms and Conditions During the Pre-Event

Conference Call Perform Final Verification of Supplier Participation Conduct Auction Event or post to Post & Respond Execute Transaction

Copyright © 2008 World Energy Solutions Inc.

Thank You

Independent Energy ConsultantsMark BurnsP: 888 862-6060F: 216.274.9176www.naturalgas-electric.com

Documents

Copyright © 2008 World Energy Solutions Inc. Tools, Knowledge, and Expertise for Successful Energy Transactions A presentation on World Energy by Independent