Utility B2B Exchanges Elements for Success June 16, 2000

1. Utility B2B ExchangesElements for SuccessJune 16, 2000

2. U.S. Business-to-Business e-Commerce Revenue $Bn Computing and electronics Motor vehicles Petrochemicals Utilities Office products Shipping and warehousing Food and agriculture Consumer goods Pharmaceutical and medical Aerospace and defence Construction Heavy industries Industrial equipment Utilities B2B have a long-term growth opportunity

3. Scottish and Southern Energy’s UDM Overview

4. What is B2B? Businesses now buy and sell over Internet based net markets or “B2B Exchanges” Once in a lifetime shift of power from the Seller (supplier) to the Buyer (utility) Business-to-Business = B2BExchange = indirect and direct goods / services

5. Global multiple buyers and sellers from all over the world meet in electronic market space Dynamic and live pricing Cost reduction ranging from 5% to 50% Typical example of saving 20% indirect spend Integration with a dominant B2B Exchange can revolutionize a company’s whole supply chain management Why B2B Exchanges Change Everything

6. Open Neutrality Time to Liquidity Best of Breed Technology Marketplace Differentiators The critical success factors are...

7. PlasticsNet – Plastics MetalSite and eSteel – Metals AutoXchange-Ford, GM, DC Ventro/Chemdex – Chemicals PaperExchange – paper products CreditTrade-Credit derivatives & loan trading Prominent Examples

8. Integrity - open, fair market Neutrality Need for Regulations Membership Structures Ownership Structures Transparency Confidentiality B2B Exchanges are like Stock Exchanges

9. Recent news on utility B2B exchanges:

10. Details of Pantellos Energy Utility E-Marketplace Consortium Forms New Company, Announces New Participants And Selects Technology Partner (The Woodlands, Texas, June 1, 2000) The consortium of 15 leading North American energy and utility companies formed earlier this year today announced the legal formation of Pantellos Corporation to operate and manage an open, independent Internet e-marketplace for the purchase of goods and services between the energy industry and its suppliers. To date, six additional companies have joined the original 15 members in the e-marketplace. Pantellos will have an initial capitalization of $100 million. It will use the proceeds to fund development and deliver of a broad suite of technology enabled supply chain solutions and provide the necessary capital for ongoing operations.

11. Details of the European B2B Exchange Sunday May 28 3:20 PM ET EU Utilities Plan Giant Procurement Web By Andrew Callus LONDON (Reuters) - Twelve of Europe's power utilities are to set up one of Europe's largest online procurement exchanges doing business worth at least 22 billion euros a year, industry officials said on Sunday. Scottish Power Plc, which with Spain's Endesa leads the new Internet buying forum for industry goods and services, said the 12 account for about one-third of the 66 billion euros ($60.61 billion) spent Europe-wide every year on pipes, wires, switching gear, computers, and other industry goods and services. The exchange will not deal in fuel, the biggest item on many of the partners' shopping lists, but it expects to save up to 50 percent on transaction costs, and up to 10 percent on purchasing costs for the rest of the industry's needs, mainly by bypassing long and expensive tender processes. Electricite de France and ENEL of Italy, Europe's two biggest power utilities, are also involved in the new exchange, which expects to be up and running by late summer. Other members are Germany's RWE AG, Vattenfall of Sweden, Spain's Iberdrola and the Belgian group Electrabel, along withBritish companies National Grid, United Utilities, and Northern Electric, and Nuon of the Netherlands. Four-fifths of the exchange's equity will be owned initially by the 12 founders, who hope eventually to float the business, Scottish Power said. A memorandum of understanding was signed in Amsterdam last week, and an official announcement is expected on Tuesday. Cross-border online purchasing partnerships are springing up everywhere among more capital intensive industries, with the aim of harnessing the low-cost, high speed exchange of information offered by the Internet to bring operating costs down and encourage price competition among suppliers. The utility exchange is the latest example of business-to-business (B2B) commerce on the Internet, which is predicted to far outstrip the sales that will be made by businesses selling to consumers, or business-to-consumer (B2C). According to industry estimates, the new power utility exchange will be one of the largest in Europe, on a par with the linkups recently established by key players in the aerospace and oil industries. The exchange, to be named in the next couple of months, will be in direct competition with Achilles, a similar proposal announced a few weeks ago. Achilles currently groups mainly smaller British power and water utilities including National Power, PowerGen and Anglian Water. ``There's a feeling that it's going to be size that counts in online procurement,'' said one insider from among the partners. ``Each industry will probably end up with only one exchange.''

12. Essential Elements of B2B Exchanges Insurance Logistics Credit Payment Community / Content Auction Analytics Catalog / Storefront Exchange Protocol Conversion Data Privacy Membership / Access Control Messaging / Routing Value-Added Services Transaction Fees Transaction Fees, Subscription, Advertising e-Market Functions Common Platform Subscription

13. Data Cycle Insurance Logistics Credit Payment Community / Content Auction Analytics Catalog / Storefront Exchange Protocol Conversion Data Privacy Enterprise Resource Planning Supply Chain Management Membership / Access Control Financials CAD / CAM Messaging / Routing e-Markets Firewall Firewall Seller / Customer Relationship Management Buyer / e-Procurement

14. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Qualification Content Monitoring SupplierCollaboration Ordering Requisition/Approval

15. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Knowledge management Supplier identification Capability assessment Geographic assessment Scorecarding Budget approvals Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

16. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Multi round RFQ Dynamic trading Industry specific templates Product liquidation Spot Market auctioning Auction management process Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

17. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Concurrent engineering Multi-enterprise project planning Product transition Support equipment identification Shared workspace Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

18. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Inventory assessment Product take-up forecasting Multi-tier buffer policies Support equipment planning Logistics requirements planning Budget planning Services planning Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

19. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Contract performance Rebate tracking Balanced scorecarding Financial performance Criteria assessment Innovation uptake Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

20. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Multi-enterprise forecast Replenishment management Capacity management Logistics forecasting Support equipment management Spare parts management Logistics requirements Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

21. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Forecast Collaboration Inventory Collaboration Capacity Collaboration Logistics Collaboration Engineering collaboration Quality collaboration Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

22. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Requisitioner workflow Approval processing Requisitioner permissibility Skills matching Services purchasing Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

23. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Order generation Order routing Order collaboration Financial processing Direct material purchasing Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

24. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management RFQ/Auctions Procurement Planning Track and Trace Feedback scorecarding Policy validation Services Monitoring Supplier Management Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

25. Procurement Workflow Strategic Procurement Planning DesignCollaboration Contract Management Catalog services Catalog aggregation Personalized catalog Distributed catalog Dynamic pricing & availability Community & Industry Content RFQ/Auctions Procurement Planning Qualification Content Monitoring SupplierCollaboration Ordering Purchasing

26. Marketplace Sellers Buyers • Browser • PDA / Mobile • XML / EDI e-Procurement • Browser • PDA / Mobile • XML / EDI e-Commerce Value AddedServices Collaborative Planning, Forecasting & Replenishment Dynamic Pricing / Auction Contracts/Catalog / Content Management Member Management Marketplace Management Administration Global Interoperability / Multi-Billion Dollar Exchange

27. Assess & Improve Marketplace Solution Solution Macro Vision Release Micro Outline Design Design Workshop Ideal Implementation Model • What is an e-marketplace • How to capture participants • How to manage money (ROI) • How to survive • Managing risk Deployment Build Cycle • Release-specific requirements and design • Iterative customization, build, and test • Customer acceptance testing • Security review • e-Marketplace deployment • e-Participant education • Release plan update • Lessons learned review • Redefine e-marketplace requirements • Design catalogs • Define technical components • Refine architectural models • Prototype UI and catalogs • Technical proof of concept • Release and deployment plans • Verify priorities • Define high-level requirements • Analyze IT environment • Outline solution architecture and customization • Develop planning estimates • Proposal and Statement of Work

28. Larger the trading network, the more likely that it will succeed Buyers will drive network volume, not sellers The more buyers on a network the greater its revenue potential Rule of thumb: Maximum long-term e-market revenue = 1% of transaction value Single customer networks are not sustainable Proof point = auto industry Data privacy will be a major differentiator Size Matters