1. ENA Metals Group Metals B2B JV Business Model
Confidential
Enron North America

2. Objectives
Create the leading full service metals B2B Exchange Marketplace
Offer extensive line of metals
Offer extensive line of financial instruments including forward markets
Partner with industry leaders to share knowledge and create liquidity and transparency
Provide value-added services including credit facilitation, mid and back office, accounting, and logistics
Add value-added services as demanded by the customer
Create a stand alone business which can be spun-off
Confidential
Enron North America

3. Further market data is in the process of being compiled.
Primary Aluminum
$31 billion worldwide market
Copper (Cathode)
$27 billion worldwide market
Other Products (to be defined)
Further market data is in the process of being compiled.
Confidential
Enron North America

4. Enron Benefits
Develop industry credibility and expertise by partnering with industry leaders
Create equity value through development of viable intermediary
Build books in existing physical products (spot & future)
Build books in financial products
Create opportunities to cross-sell Enron products to these industry leaders
Commodity risk management
Energy outsourcing
Capital Investments
Others
Confidential
Enron North America

5. Participant Benefits Consumer: Producer: Lower search costs
Perfect information
Lower prices
Operating efficiencies
Enforceable contracts
Producer:
Lower process costs
Perfect Information
Access to new customers
Equity benefits for equity participants
Confidential
Enron North America

6. Sources of Revenue Transaction fees Advertising revenues
Main component of site profitability
Advertising revenues
Strong source of revenue (market leader and liquidity driven)
Trading margins
Metals related products
Financial products, intermediation
Fees from value added services
Logistics
Credit
Physical swapping
Confidential
Enron North America

7. Contributions Capital Dedicated personnel
Capital for joint venture
Pooled risk capital for market making
Dedicated personnel
Contractual services to joint venture
Multiple services performed by best fulfilling party
Functional responsibilities to other partners
Information sharing, risk and profit sharing for trading books
Confidential
Enron North America

8. Principal Responsibilities
Confidential
Enron North America

9. Equity Structure (Conceptual)
Confidential
Enron North America

10. Legal Structure Create distance from original parties
Incorporate joint venture
Create professional service agreements for services to be performed
Maintain flexibility to bring additional parties to, spin-off JV
Formalize relationship between original partners
Create SPV for capital pooling and risk sharing
Isolate certain business risks from the joint venture
Partners locked up for set period of time (non-compete)
Clarify ownership of particular cash flow streams
Equal cash flow and risk sharing by equity members?
Confidential
Enron North America

11. Structure Open Exchange Joint Venture Confidential Enron North America
SPV
Risk Capital
Risk Mgmt Svcs
ENE PD AA
Corps
Service Agreements to Provide:
PR, Marketing
Back Office, Mid-BO
Settlement
Logistics
(+ Capital for Equity)
Financial Partner
Industry Part. “A”
Open Exchange Joint Venture
Cash + Services for Equity
Cash + Volume for Equity
Industry Part. “B”
Technology Partner
Cash + Volume for Equity
Cash + Services for Equity
Confidential
Enron North America

12. Risks/Exposure Competition Adoption/Acceptance Counterparty risks
No dominant presence in non-steel metals online
Threat of another player achieving first mover advantage
Adoption/Acceptance
Adequate liquidity not achieved
Aversion to change
Counterparty risks
Credit, performance, product
Anti-trust concerns
Leading participants controlling the market medium
Trading Risk
Manage book and trading risk across new product lines
Confidentiality / Proprietary Risk
Disclosure of Enron proprietary trading / market expertise
Confidential
Enron North America

13. Expansion Opportunities
Add products as market liquidity improves
Physical and financial products in copper and aluminum
Physical and financial products in other metals
Zinc, nickel, lead, tin, iron ore
Sell equity to other key industry players
Create incentive to direct volumes through JV
Create adoption “spark” for remainder of market
Create additional liquidity
Create additional market credibility
Offer additional value-added services
Offer additional value-added services as demanded by customer
Confidential
Enron North America

14. Timeline Identify initial principals and structure TBD
Established entity TBD
Formalize business strategy TBD
Make public relations announcement(s) TBD
Deploy site TBD
Solicit additional partners TBD
Iterative developments TBD
Confidential
Enron North America

15. Issues for Discussion Structure Commitments & contributions
Legal (SPV)
Business unit ownership delineation
Trading businesses (physical & financial)
Base business (transaction fee business)
Other value added businesses (credit, etc)
Ownership (%)
Commitments & contributions
Capital
Physical product
Expertise
Personnel (senior management)
Logistics
Mid / Back office
Confidential
Enron North America

16. Issues for Discussion Legitimacy, Confidentiality & Neutrality
Confidentiality and neutrality issue
Strategy
Rollout Strategy
Public announcement timing and content disclosure
Liquidity strategy
Initial product (financial) offering
Business Strategy
Subsequent roll out timeline & strategy
Additional liquidity creation
Strategic investors (& contributions)
Confidential
Enron North America