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Energy’s Place in the New Economy, Now and in the Future Louise Kitchen October 18, 2000.

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Presentation on theme: "Energy’s Place in the New Economy, Now and in the Future Louise Kitchen October 18, 2000."— Presentation transcript:

1 Energy’s Place in the New Economy, Now and in the Future Louise Kitchen October 18, 2000

2 © 2000 Enron Corp. All Rights Reserved 2 “ In five years time, all companies will be internet companies, or they won’t be companies at all.” Andrew Grove Chairman, Intel Corp.

3 © 2000 Enron Corp. All Rights Reserved 3 ãMany industries exist that sell commodity - like products through legacy distribution channels comprised of complex sales forces and long term relationships with little price transparency (“Dine ‘Em and Sign ‘Em”). –Result - Enormous inefficiencies exist in the pricing of commodity products. ãThe internet provides a unique opportunity to have immediate and inexpensive access to customers through a web-based transaction platform. –Result - All incumbent companies are vulnerable due to reduced/no barriers to entry. ãThe equity markets have created an enormous value differential between old economy businesses and new economy businesses. –Result - Possible rate of return opportunities are multiples of historical rates of return Current Market Conditions

4 © 2000 Enron Corp. All Rights Reserved 4 eCommerce Global Growth Source: Forrester Research, Inc.

5 © 2000 Enron Corp. All Rights Reserved 5 ‘98 Source: New York Times 2/15/99 Technology has Slashed the Price of doing Global Business The Cost of a 3-Minute Phone Call From New York to London ‘90‘70‘50 ‘30 General Industry Trends

6 © 2000 Enron Corp. All Rights Reserved 6 Source: Downes, Larry and Chunka Hui, Unleashing the Killer App., Boston: Harvard Business School Press, 1998, pp.44-45 BranchTelephoneATMInternet …and Radically Lowered Transaction Costs Average Cost per Transaction Retail Banking by Channel Transaction Costs

7 © 2000 Enron Corp. All Rights Reserved 7 Energy Market Trends ãThe Internet is becoming a disintermediary ãIncreasing commoditization of goods and services ãDeclining barriers to entry ãIncreasing transparency and competition ãProvide the catalyst for significant efficiency gains achievable through trading online ãGrowing acceptance of transacting online

8 © 2000 Enron Corp. All Rights Reserved 8 Business at the speed of light ã Internet traffic doubles every 70 days ã Acceleration Process –Market Growth –The pie gets bigger quicker 20%

9 © 2000 Enron Corp. All Rights Reserved 9 Development Process ãSpeed of response is critical ãTraditional lead times for technology development in offline world are inadequate in the rapidly changing e-commerce world ãPrioritization becomes a rationing process ãAll priorities are driven by time to market and potential transaction generation ãMatching online application with capabilities of bricks and mortar organization

10 © 2000 Enron Corp. All Rights Reserved 10 Expansion not Contraction OTC Volume

11 © 2000 Enron Corp. All Rights Reserved 11 Transportation & Distribution Retail Energy Energy Businesses Net Works Broadband Services Wholesale Energy New Businesses Enron Corp

12 © 2000 Enron Corp. All Rights Reserved 12 60% of Enron’s total earnings come from businesses which didn’t exist 5 years ago.

13 © 2000 Enron Corp. All Rights Reserved 13 Enron Net Works Philosophies ã We have been B2B for years ã Expansion and Extension of our Existing Business ã Export strong skills in risk intermediation and risk control systems. ã We are already positioned as having successfully migrated from the “old economy” to the “new economy” company. ã We have a proven Business Model and track record of transforming markets. ã Incubator of New Ideas and Business Models ã Challenge Existing Ideas and Beliefs

14 © 2000 Enron Corp. All Rights Reserved 14 Enron Net Works ClickPaper.comEnronDirect.com EnronOnline.com EnronCredit.com DealBench.com

15 © 2000 Enron Corp. All Rights Reserved 15 What is EnronOnline? A free, internet-based, global transaction system which allows Enron’s customers to view real-time prices from Enron’s traders and transact instantly online A free, internet-based, global transaction system which allows Enron’s customers to view real-time prices from Enron’s traders and transact instantly online

16 © 2000 Enron Corp. All Rights Reserved 16 EnronOnline’s Approach ãPrincipal based ãExpand access to customers ãIncrease product throughput ãFocus on the business in the platform’s underlying commodity products ãTime to market is critical, and continued innovation is a must ãIt’s not about the platform! It’s the electronic transaction!

17 © 2000 Enron Corp. All Rights Reserved 17 Changing the Way We Conduct Business TelephoneEnron Telephone Internet Enron Pre Nov 29 1999 Post Nov 29 1999

18 © 2000 Enron Corp. All Rights Reserved 18 Markets Available ã ã Asian Crude & Products ã ã Australian Weather ã ã Australian Power ã ã Austrian Power ã ã Bandwidth ã ã Belgian Natural Gas ã ã Canadian Natural Gas ã ã Credit Derivatives ã ã Dutch Power ã ã Emissions ã ã European Coal ã ã European Weather ã ã German Power ã ã International Coal ã ã Japanese Aluminum ã ã Japanese Weather ã ã LPG ã ã Nordic Power ã ã Oil & Refined Products ã ã Petrochemicals ã ã Plastics ã ã Pulp & Paper ã ã Sea Freight ã ã Spanish Power ã ã Swiss Power ã ã UK Natural Gas ã ã UK Power ã ã US Natural Gas ã ã US Metals ã ã US Power ã ã US Weather

19 © 2000 Enron Corp. All Rights Reserved 19 What’s New on EnronOnline? Taking the Big Deal Out of the Big Deal… New Market Content New Market Content New Trading Functionality New Trading Functionality New Trading Content New Trading Content

20 © 2000 Enron Corp. All Rights Reserved 20 New Market Content ãMarket-Specific Content customized for what you want to see

21 © 2000 Enron Corp. All Rights Reserved 21 Enhanced Transaction Features –Price Limit Orders allow greater flexibility in placing orders.

22 © 2000 Enron Corp. All Rights Reserved 22 ãEnhanced Personalization tools enable you to specify exactly what products and content you want to see and where you want to see them. Enhanced Transaction Features ã XML - Transactions Information is now downloadable in XML. ã Floating Windows give you greater control over optimal use of your screen space.

23 © 2000 Enron Corp. All Rights Reserved 23 ãReal-Time Information to help you respond faster to changing market conditions worldwide: –General News –Global News –Industry News –Stock Quotes –Sports News –Weather News New Trading Content

24 © 2000 Enron Corp. All Rights Reserved 24 Additional Content Available ãIndustry-Specific Information to help you make better decisions: –Natural Gas Intelligence –Petroleum Argus –Coal Daily –Air Daily –Bandwidth Desk –Market Commentary & Analysis –Others…

25 © 2000 Enron Corp. All Rights Reserved 25 EnronOnline Prices on Other Websites ãIncrease general customer access to Enron by providing additional transaction channels ãGives Enron access to customers who prefer to transact via multilateral platforms ãLeverages the proven technology, liquidity and Enron resources that together provide superior services to all Enron customers ãIt’s the transaction - not the platform

26 © 2000 Enron Corp. All Rights Reserved 26 Lessons Learned ãTechnology is not difficult with the right people on the team ãTime to market is critical with product roll-out ãMust continue to innovate to maintain first mover advantage ãBusiness model could have broad applications in other industries ãPrincipal-based and Exchange-based are both viable models ãIt’s not about the platform, it’s about the electronic transaction

27 © 2000 Enron Corp. All Rights Reserved 27 “ Technology makes possible what good management knew but was formerly unable to achieve.” W Wriston The Listener, 1986

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