2003 NATIONAL MINORITY SUPPLIER DEVELOPMENT COUNCIL CONFERENCE & BUSINESS OPPORTUNITY FAIR

1. REVERSE ONLINE AUCTIONS: MBEs COMPETE AND WIN Don Rueter Vice President, Supply Management, Pantellos October 29, 2003 2003 NATIONAL MINORITY SUPPLIER DEVELOPMENT COUNCIL CONFERENCE & BUSINESS OPPORTUNITY FAIR

2. Bonneville Power Administration Who Is Pantellos? • Electronic marketplace and supply chain services company • Built by the utility industry in 2000 • Originally founded by 21 of North America’s largest utilities as an independent company • Currently more than 30 utility and almost 500 supplier trading parties • Helps companies source, procure and manage more than 100 categories of products and services • Enabled more than $2 billion in utility spending • Turned EBITDA Positive Q1 2003 • Solid & secure with tremendous energy supply chain experience SOME OF OUR KEY UTILITY TRADING PARTIES ARE:

3. The Pantellos Business Model

4. …and why is it called a Reverse Online Auction? • Opposite of eBay process • Buyer offers to purchase goods • Suppliers bid against requirements • Price declines over course of the auction • Short duration (15-30 minutes)followed by automatic overtime periods What is a Reverse Online Auction? A process which stems from traditional procurement methods and allows organizations to make more informed decisions through an online, competitive bidding format to obtain best available market prices.

5. Why are Online Auctions Gaining Popularity? First Bid $76.6M Opening Period Overtime Period 18% Buyer Goal $72.0M 10% Closing Price $64.9M Millions $ 78.0 $ 76.0 $ 74.0 $ 72.0 $ 70.0 $ 68.0 $ 66.0 $ 64.0 9:30 AM 10:00 10:30 11:00 11:30 12:00 PM 12:30 1:00 1:30 2:00 PM

6. What are the Industry Trends? • In 2002 ISM reported that in 84% of Global 2000 use a form of e-sourcing • 20 of the top 25 largest US electric utilities utilize auctions • Studies find that 40% of a utility’s spend is “auctionable” • IDC reported in 2001 that $192 billion of goods and services were auctioned; in 2002 the amount rose to $ 350 billion • In 2003 it was estimated that $600 billion will be sourced online • Online auctions are quickly becoming a standard in sourcing • Pantellos’ customers are experiencing 18% average savings from over $1.5 Billion in auction volume • Buyers and suppliers are getting more comfortable with the process and smarter about applying it where it makes sense

7. What Does the Supplier See? MBWE Suppliers have been successful in many of our auctions

8. Our Buyers Have Achieved Significant Success Pantellos Total Volume Statistics Pantellos Total Volume Statistics Reported Savings Auction Utility Auction Volume • 417 Events • 869 Auctions (Lots) • $1.448 Billion Spend • $263 Million Savings • 18.2 Percent Savings • 23 Auction Customers • Over 1000 Bidding Companies Events Utility A 15 $ 228,204,587 $ 43,002,590 Utility B 20 $ 156,935,906 $ 37,046,786 Utility C 38 $ 200,909,558 $ 35,245,270 Utility D 40 $ 100,722,632 $ 20,950,632 Utility E 15 $ 121,759,685 $ 19,561,011 Utility F 9 $ 84,397,957 $ 18,511,307 Utility G 29 $ 17,498,021 $ 96,623,038 Utility H 24 $ 51,948,887 $ 11,318,412 Utility I 9 $ 54,673,080 $ 6,252,330 Utility J 15 $ 45,030,000 $ 4,265,500

9. Buyer Benefits Buyers rapidly identify the current market situation and obtain the most competitive prices for goods and services. • Reduction in negotiation time and effort • Improved pricing; more representative of market • Introduction to new, quality suppliers • Improves internal processes • Shortens overall procurement cycles • Improved decision making capabilities • Provides market transparency

10. Supplier Benefits As suppliers place bids, they are able to gauge their competitive position while buyers view the current market price. • More market feedback and competitive position • Typically faster turnarounds and decisions from buyers • Typically tighter requirements • Value added positions stay intact • Introduction to new business opportunities • Fair and ethical process

11. Preparing for an Auction Before participating in an online auction, be certain to: • Ask the buyer and the auction service provider a lot of questions • Understand the experience level of the auction services provider • Know your “walk away” price • Prepare your bidding strategy prior to event • Make sure a final decision-maker is close by or available during the auction • Understand the buyer’s decision criteria to determine how that will affect your bidding strategy • Be clear about what it takes to win—is it low bid, evaluated price or some other combination?

12. When to Walk Away from an Auction Before the event: • Clear specifications and requirements are not provided • A level playing field has not been established • Price (e.g., low bid) is the only decision criteria evident prior to the auction • Other factors (e.g., diversity certification, services provided etc.) are not being considered During the event: • When bids go below your established “walk away” price

13. Closing Thoughts When investigating opportunities for expanding your business, keep in mind that: • MBWE Suppliers have won many of the auctions conducted by Pantellos • You can’t win if you don’t participate • It’s not just about the technology • Auctions transform traditional markets into more efficient markets • Online auctions will be a standard way to source goods and services