How to Buy Electricity and Natural Gas CHEAPER. and SMARTER! In This Issue

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1 How to Buy Electricity and Natural Gas CHEAPER and SMARTER! July 2007 Catalyst Financial Group, Inc. Financing for a Sustainable Economy SM In This Issue How has the energy market changed? What is Energy e- procurement? What is a Reverse Energy Auction? Who should use e- procurement to buy energy? Why use e- procurement to buy energy? What kind of contracts can we handle? How does it work? How much of your staff s time is needed? How long does it take to run an energy auction? What Value Added services do we provide? What is your risk? What does it cost? How do you start? Why work with Catalyst and EnergyWindow? Procuring energy at the lowest cost or best value is no longer an easy task. Today s energy procurement markets are complex, confusing and ever-changing. If you have facilities in deregulated markets (states in which the best current regulatory and competitive markets exist, see page 2 maps), you may be able to use e-procurement and reverse energy auctions to save as much as 30% from your existing utility bills. Catalyst, a specialist in energy financing, is pleased to announce its partnership with EnergyWindow, Inc., the premier energy e- procurement company whose mission is to uncover maximum savings (often millions of dollars) for commercial, industrial, and institutional customers. EnergyWindow s successes include saving the US Postal Service $4.5 million; saving a large publicly traded retailer $4.5 million during the first four months of the relationship; saving an auto services company $900k on $2.3 million energy costs; and saving a luxury hotel chain 14% while significantly increasing their energy staff's productivity. This document provides an overview of how e-procurement and reverse energy auctions work, why it has been used to purchase over $3 billion of energy to date, and how your organization can benefit. How has the energy market changed? Many senior managers still view energy costs as uncontrollable. Others cling to the same energy supply sourcing approaches they used in the early days of deregulation when tariffs were set for two to four years at a time. Buying from the default supplier was easy, while switching to a new low cost supplier often required a series of approvals. Today, however, default utility rates change much more rapidly, and what was considered playing it safe by remaining on the default service is currently one of the riskiest and costliest approaches. During the past decade, energy costs have increased at an annual average of 15% per year, with a lot of short term volatility. Over the last five years natural gas prices have increased 17-18% annually. While electricity s price rises have been less, some customers can expect to see increases as much as 50%. What is Energy e-procurement? E-procurement is a highly efficient and dynamic Internet based strategy to procure electricity and natural gas from a pre-qualified group of the leading regional and/or national energy providers. Rev

2 EnergyWindow's online sourcing technology enables us to achieve key goals, improve organizational efficiency, and reduce costs by nearly $2.6* million. -Keith Strange, VP Supply Management, U.S. Postal Service *currently $4.5 million What is a Reverse Energy Auction? A reverse energy auction is an important component of the e-procurement process. Buyers post their energy requirements online, and suppliers bid against one another (lowering the price on each bid). Having energy providers compete for your business gets you the lowest prices and the online process has the advantages of speed and price transparency over paper REGIONS Active Potentially Active Deregulated but Inactive Regulated Electricity Natural Gas Requests for Proposals (RFPs). Who should use e- procurement to buy energy? If your organization has a combined annual utility bill of at least $2 million and has multiple facilities in the RED (dots) or GOLD (stripes) states in the adjacent maps, you are a prime candidate for e-procurement. Organizations with smaller energy budgets or wishing to maximize savings may want to consider aggregating or combining their loads with other similar organizations. The larger your energy spend and the more facilities you have in multiple states, the greater your benefit will be! REGIONS Active Potentially Active Deregulated but Inactive Regulated Active (red) markets are deregulated markets with robust supply competition; whereas, potentially active (gold) markets are deregulated markets with more limited opportunities due to regulatory or procurement oddities. Even if you engage in competitive sourcing practices, the power of reverse auctions may help your organization obtain better pricing. Why use e-procurement to buy energy? In addition to potentially saving up to 30% on your energy costs, using a good 2

3 e-procurement system can significantly improve the efficiency of purchasing your energy by automating the most time-consuming aspects of shopping competitive markets. Working with us can reduce your energy procurement efforts from several man-weeks to less than 8 hours, while you, the buyer, maintain complete control of the process and key sourcing decisions. From a purely financial perspective, your return on investment (ROI) is off the charts. For example, if you experience an average savings of 17% on a $10 million utility bill, your savings would be $1.7 million. If you invested 8 hours staff time to save $1.7 million each year of your new utility contract, would your Board be happy? We think so! In short, our service allows you to outsource the complex and time-consuming work of procuring energy to recognized industry experts, while fulfilling your fiduciary responsibility to the stockholders (private sector) and taxpayers (public sector). The rigor and transparency of e-procurement helps public companies comply with Sarbanes Oxley fiscal responsibility mandates, and can potentially save hundreds of thousands of dollars. Bottom line: e-procurement and energy auctions will save you both time and money! What kind of contracts can we handle? Our e-procurement platform can accommodate any pricing structure you desire- -from fixed to variable with any variation in-between. We can also procure renewable energy and Renewable Energy Credits (RECs) on your behalf. Contract terms can be from 1 to 4 years. In a market where longer term pricing is typically lower than short term, we can help you capture longer term pricing opportunities, even if you are currently under contract. To streamline contracting time with the winning energy supplier, EnergyWindow worked closely with the North American Energy Standards Board (NAESB) to develop a Base Contract for Retail Sale and Purchase of Natural Gas or Electricity. Using the Base Contract can reduce contract negotiation time to an hour or less, assuming that the master terms have been established before e- procurement begins. Special conditions unique to your organization are easily included in the contract. How does it work? To get started, you must register at our web site and authorize us to complete a free professional analysis of your energy expenditures and the competitive/regulatory environment(s) in which your organization operates. We begin by collecting general data on your organization to learn about your historical and future energy needs, billing preferences, necessary contract terms and conditions, current pricing and structure, and most importantly, the target (reserve) price you are seeking to pay for your energy. Together we will create a detailed energy procurement strategy for your organization. How much of your staff s time is needed? After completing almost 9000 client energy auctions, we estimate your staff will spend less than 8 hours working with us to complete an energy auction. Collecting your account details is the most time-consuming part of this task. 3

4 How long does it take to run an energy auction? Once we have analyzed your utility data and agreed upon an e-procurement strategy, the entire procurement process is generally completed within a couple of weeks. What Value Added services do we provide? We work with you to devise a coherent energy e-procurement strategy. This includes analyzing and developing your risk profile for energy costs, balancing short-term cost reduction and long-term performance, analyzing energy costs along different dimensions, setting clear priorities, building a map of market opportunities, developing criteria for when to pursue fast-breaking energy opportunities, and most importantly, building a pre-approved process that facilitates seizing those opportunities. These combined activities translate into smarter buying and lower energy costs for your organization. In addition to saving money on your energy purchasing, our value added services can include arranging competitive financing for all your energy efficiency, renewable energy, and environmental projects. Our financing services can support energy performance contracts, lease or loan financing, purchase power agreements (PPAs), project financing and more. We have arranged financing for taxable and tax-exempt projects as low as $10,000 and as large as $50 million. What is your risk? Your only risk is the amount of time you spend working with us to analyze your energy spending and to complete the e-procurement and reverse energy auction process. All energy suppliers that are invited to bid are carefully screened and financially solvent. We use proprietary software and encryptions so your data is completely secure. If we are unable to obtain the price you target for purchasing your energy, you are not obligated to purchase anything. Your risk is very small and your potential reward is huge! What does it cost? There are no direct costs to you, the buyer. Suppliers pay us a small fixed fee for each unit of energy purchased from them. The fee we are paid is not related to the cost of energy you procure. We are fully aligned with you to procure the lowest cost energy under the most favorable terms, and we are only paid if and when you complete your purchase. Sellers are happy to work with us because we help keep their marketing costs down and offer the highest quality service at the lowest cost in the industry. Even though we are paid by the seller, we work for the buyer. It s a winning situation for all parties involved. How do you start? To start the process simply pick up the phone and call us at , or send us an at auction@catalyst-financial.com. After answering any of your questions, you register online and provide us with your utility account numbers. We will send you a simple authorization letter that permits us to 4

5 gather your historic utility information for each account. We analyze your energy usage; use our expertise to recommend the best strategy to save you money. This is all done within two weeks. Contact Us Why work with the Catalyst Financial Group and EnergyWindow team? Catalyst Financial Group, Inc., an EnergyWindow channel partner, has been providing boutique investment banking services to the energy industry since We have arranged over $2 billion in energy financing either directly or with our partners. Our clients include dozens of electric and gas utilities and we are the sole financial advisor to the EPA s ENERGY STAR program in the public sector. Our financial expertise includes performance contracting, commercial equipment leasing, project financing and tax exempt financing. Our product focus is on energy efficiency and renewable energy projects. Learn more about our capabilities and services at We have partnered with EnergyWindow, Inc. because we believe they are the best in the business. EnergyWindow, Inc. was founded in 1999 by energy industry veterans who possess deep energy insight and business and management expertise. They are recognized industry experts who offer the highest level of knowledge and support at the industry s most reasonable price. They have successfully closed over 8,800 auctions for more than 6.0 billion kilowatt hours (kwh) of electricity and 9.0 billion cubic feet of natural gas. EnergyWindow supports energy buyers with multiple facilities in deregulated locations across North America. They have helped more than 80 national enduser organizations save money on their energy supply, including: JC Penney, Sears/Kmart, American Axle & Manufacturing, Computer Sciences Corporation, Johns Manville, Hyatt Hotels, Accor Hotels, Lowe's Home Improvement, Loew's Cinemas, PETsMART, Regal Entertainment, Kohl's Department Stores, Food Lion, Pep Boys, CSK Auto, Walgreen's, Crane Plumbing, The Sports Authority, the U.S. Postal Service, and more. EnergyWindow has helped procure and/or manage energy supply in virtually every deregulated energy market in the US and Canada. Together we offer a comprehensive suite of information technology-based tools and consulting services to assist organizations in procuring and managing their energy supply, and possess the industry expertise necessary to assist in developing sound energy supply management strategies, processes, and approaches. 152 Deer Hill Ave, Suite 208 Danbury, CT Catalyst Financial Group, Inc Quarry Road Putney, VT