Tools, Knowledge, and Expertise for Successful Energy Transactions Copyright © 2008 World Energy Solutions Inc. A presentation on World Energy by RUSS Consulting Group LLC
May 21, 2015
Tools, Knowledge, and Expertisefor Successful Energy Transactions
Copyright © 2008 World Energy Solutions Inc.
A presentation on World Energy byRUSS Consulting Group LLC
Why RUSS Consulting Group partners with WorldEnergy
Overview of World Energy– Background
– Procurement Platforms
– Benefits
Contents
Copyright © 2008 World Energy Solutions Inc. 2
– Benefits
Case Studies
Next Steps
Why RUSS Consulting GroupPartners 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 transparentbidding process
Deliver a Compliant Procurement Approach
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– The transparent reverse auction platform helps organizationsaddress 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 energybuyers to obtain the best price and meet compliance requirements
over $600Mover $600M
1 TCF1 TCF
over 50Mover 50M
over $10Bover $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
Never beaten bypaper-based RFP processon apples-to-apples basis
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20%20%
5 – 155 – 15
3 – 73 – 7
2 – 10%2 – 10%
over 300over 300
over 12,000over 12,000
16x16x
over $600Mover $600M 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
on apples-to-apples basisEVEN NET OF OUR FEE!
Our Clients:Leader in Online Procurement
Government
Wholesale Utilities, Industrial, and Commercial
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Government
United NationsVeteransAffairs
SocialSecurity
Dept ofJustice
Wholesale Utilities, Commercial & Industrial Clients, and Government Agenciestrust World Energy with their energy procurements
Maryland District of Columbia Massachusetts PennsylvaniaEPA
General ServicesAdministration
New Jersey DelawareConnecticut
‘Reverse Auction’ Process
Auction RFPs Energy
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Auction RFPsare postedfor EnergyConsumers
EnergySuppliers Bid
Competitivelyfor Contracts
BenchmarkPrice
‘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
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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.
RFP Architecting EnablesPrice Testing
Running multipleAuctions or runningmultiple scenariosthrough the Post &Respond enablesdiscovering the costs of
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discovering the costs ofvarious parameters– Green Power Mix
– Pricing Product
– Term Length
– Credit Terms
– Special Conditions
Product and Feature Breadth
Commodities Pricing Products Auction Features
Electricity
Natural Gas
Green Credits– Renewable Energy
Credits
– GHG EmissionsCredits
Fixed (commodity/basis)
Index
Heat Rate
Capacity
Block
Baseload, no capacity
Proactive Procurement
Structured Event withFixed End Time
Unique HybridAnglo/Dutch Design
Final Blind Bid Feature
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Credits Baseload, no capacity
% of the system
On-peak, Off-Peak
Financial or Physical
Final Blind Bid Feature
Event Type Procurement Type
Reverse Auction
Forward Auction
Post and Respond
Retail
Wholesale
Documentation and Reporting
Management Reporting and Data ServicesManagement Reporting and Data Services
Tariff Models Contract ManagementAccounts & Usage
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Due Diligence and Audit BookDue Diligence and Audit Book
Management Reporting and Data ServicesManagement Reporting and Data Services
ProcessAudit Trail
RFPBid History
What is the Process?
Needs PlanningNeeds Planning Pre AuctionPre Auction Auction or P&RAuction or P&R ContractContract SupportSupport
• Review marketprice drivers
• Price to CompareAnalysis
• Terms
• Review fullanalysis basedon inputs &needs
• Understand
• Summarize Results
• Product
• Term
• Supplier
• Uploadcontracts,sites & usage
• Set renewaltrigger goals
• ProvidePreliminaryInformation
• Bills & Usage Data
• Site Information
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OpportunityAssessmentOpportunityAssessment
• Terms
• Products
• Draft RFP
• RFP Approval
• UnderstandFactors
• Agree to takeaway price
• Results meetexpectations
• Review andfinalize contract
trigger goals
• Monitor
Run EventRun Event
• Site Information
• Current EnergyContracts
• Review Data
• Information andContracts
Submit RFP tosuppliers
Submit RFP tosuppliers
Sign ContractSign Contract Renew ContractRenew Contract
Benefits to the Customer
World Energy Exchange’s unique process:
Creates transparency, promoting competition anddriving down prices– Instant feedback forces suppliers to sharpen their pencils
Allows price discovery – you can test the market with avariety of scenarios to determine the pricing sweet spot
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variety of scenarios to determine the pricing sweet spot
Simplifies bidding, reducing administrative costs forsuppliers 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 procurementinformation is captured on the platform– Secure access to data for various stakeholders (hierarchy)
– The Customer can run reports on contracts and bid history
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– The Customer can run reports on contracts and bid history
– Complete auction and process documentation book suppliedfor audit purposes (Regulators, SOX)
Helps you achieve your objectives such as budgetcertainty, cost savings, and fulfillment of green energyrequirements at the least cost
Never Beaten by a Traditional RFP
Auction Design Optimizes Result forBuyer
– Auction drives bidding activity– Transparency forces hyper competition
amongst suppliers as end of auctionnears
– No auction gimmicks to create risk anduncertainty
Significant Market Liquidity– Supplier network of over 300 players
“The auction saves between 7 and 9%versus the paper-based RFP process weformerly used with our clients.”
Eric Hoegger,Cargill Energy Management Services
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– Supplier network of over 300 players– Online nature attracts market entrants
by lowering their cost to acquire
Automation Enables Testing ofMultiple Consumer-Defined ContractParameters
– Pre Qualified suppliers compete onprice alone
– Customer can test different parametersto optimize price
Time Efficient– Contracts usually awarded within hours
of auction ending, enabling suppliersto minimize risk premiums in pricing
Better Pricing ThroughTechnology
“The World Energy Exchange is brutallyefficient at driving margins to the bareminimum.”
Andrew Owens,Entergy Solutions
6
8
10
Power Supplier Margin byProcurement Method
$4-8/MWh
World Energy’s unique methodology typically cuts supplier margins by30-80 percent.
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0
2
4
6
$/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
$0.08
$0.10
$0.12
Natural Gas Supplier Marginby Procurement Method
$.05-.10/Dth
Margins typically charged by suppliers when buyers use conventionalmethods of procurement as compared to supplier margins for buyerswho use World Energy’s unique platforms.
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$0.00
$0.02
$0.04
$0.06
$/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
Case Studies
Case Study:Multi-Site Fortune 400 Industrial
ResultsSituation
Integrated producer of steel productswith plants located across 4 statesand multiple utilities
Historically managed financial andphysical risks separately throughdifferent processes
Had proactively managed physical
Jointly designed a 2007 riskmanagement program thatcommenced in August 2005
World Energy facilitated over50 proactive procurementevents for customer
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Had proactively managed physicalrisk for over 5 years through the Postand Respond system
Established goal of 5% year-on-yearsavings from 2006 to 2007 andsolicited World Energy’s help
Supply is now diversifiedacross 11 individual suppliers
Savings to date againstbudgeted targets haveamounted 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-sourcedwith one supplier
In cost cutting effort, they decidednot to automatically renew thecontract, choosing instead to hold acompetitive auction with WorldEnergy
Incumbent supplier was invited to bid
Over 40 bids were generatedin the auction
Faced with stiff competitionthe incumbent was forced toreduce its price
Supplier cut their bid by $3million in a multi-yearcontract in order to keep the
ResultsSituation
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Incumbent supplier was invited to bidand spoke out against the auctionprocess stating that they had alreadyoffered the lowest price available
The hospital’s energy buyerproceeded with the auction, invitingthe supplier to submit their best bid ina competitive environment
contract in order to keep thecustomer
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Hospital saved $3 million by using thecompetitive auction process
Case Study:Ford Motor Company
ResultsSituation
Ford Motor Company desired to re-bidits natural gas supply
Their procurement consultant sentout RFPs to their top 5 suppliers
World Energy tapped its network ofsuppliers to participate in an auctionevent
Visible, real time biddingdrove price down
Suppliers, confident that withWE contract would beawarded to winning bidpromptly, cut their risk
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event Online auction was conducted on the
day pricing from the RFPs was due
Going head-to-head, World Energy beat the paper RFPprocess by 18%
promptly, cut their riskpremiums
Ford got a lower price fromthe auction event than fromthe consultant’s RFPs
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Case Study:Aggregation Group Member
Mass High Tech Council selected supplierof choice
VP of a member firm felt pricing toohigh, contacted World Energy to conductan auction
World Energy sent out invitations to bid
Online auction eventgenerated 39 bids
Incumbent bid below itscurrent rate, showing thecompetitive power of theauction
ResultsSituation
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World Energy sent out invitations to bidto supplier network
Council official contacted member’s CEOto advise against “wasting money” on anauction when they already had thelowest price
Member went on with auction, askingincumbent to bid with others
auction
Another supplier beat theincumbent, saving thecompany nearly 11% ofprevious price
21
Aggregation group member saved $90K
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A new, privately-held specialtyhospital was in search of its firstenergy supply contract
Ethicus entertained a defaultquote from the incumbent supplier
The hospital’s design engineerreferred Ethicus to World Energy
Ethicus engaged World Energy to
Online auction eventgenerated 88 bids over sixtranches from five suppliers
Tested 12, 24 and 36 monthproducts, both 100%traditional and 5% green
36 month fixed product w/ogreen offered the best valuebut Ethicus was concernedwith their usage forecasts
ResultsSituation
Case Study:Ethicus Healthcare Management LLC.
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Ethicus engaged World Energy tosecure the best possible price for adefined usage
Ethicus proceeded with thereverse auction process, howeveronly desired a fixed-priced, 12-month term due to usageforecasts
but Ethicus was concernedwith their usage forecasts
World Energy Market Directorwas able to secure 100%swing at no premium for the36 month term
World Energy helped providebudget certainty, savings andusage protection with a 100%swing
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Compared to quote from incumbent supplier,
Ethicus saved 27.5%
Case Study:Vesuvius
ResultsSituation
Vesuvius had been purchasingelectricity the same way theypurchased all materials – paper-basedRFPs
Vesuvius’ goal in using World Energywas to save time and gain morecontrol over electricity procurement
Eight suppliers responded toposting with initial or refreshedoffers
Vesuvius filtered out non-competitive suppliers over a 2-week process
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control over electricity procurement The ability to shop the market over
time and evaluate alternatives wasimportant to them
Vesuvius selected World Energy’s Post& Respond platform
Post & Respond experience resulted in anew efficient approach to energy procurement
week process
Process was judged to be“seamless, quick and efficient”by Vesuvius management
Posted electricity and naturalgas forward procurement as aresult of initial auction success
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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
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Refinement of your Specific Product Requirements
Development of Electronic RFP
Finalize All Terms and Conditions During the Pre-Event ConferenceCall
Perform Final Verification of Supplier Participation
Conduct Auction Event or post to Post & Respond
Execute Transaction
Thank You
Copyright © 2008 World Energy Solutions Inc.
RUSS Consulting Group LLC
Michael A. Russell
President/CEO
877-250-1905