1. 1 PRELIMINARY MARKET ASSESSMENT & OUTLOOK : Real-time Automation & Controls in the North American Electric Utility Marketplace (2003-2007) Michael A. Marullo, Director Strategic Market R&D InfoNetrix LLC Michael A. Marullo, Director Strategic Market R&D InfoNetrix LLC

2. 2 Presentation Topics  Market Intelligence ‘101’  Marketplace Characteristics  Principal Market Focus: RTAC  Prevailing Market Conditions  Future Market Outlook  Market Dynamics  7 Signs of Market Evolution  Supplier Dynamics  Other Observations & Conclusions  Market Intelligence ‘101’  Marketplace Characteristics  Principal Market Focus: RTAC  Prevailing Market Conditions  Future Market Outlook  Market Dynamics  7 Signs of Market Evolution  Supplier Dynamics  Other Observations & Conclusions

3. 3 Market Intelligence ‘101’ InfoNetrix Market Horizons™ Reports

4. 4  Market Planning & Positioning  Launch a new product or product line  Learn what prospective buyers want, need & expect  Expand or change your geographical presence  Competitive Analysis  Identify new, existing or emerging competition  Evaluate sales/marketing channel alternatives  Understand market leadership, shares & penetration  Business Planning & Diversification  Initiate an acquisition, merger or divestiture  Understand market changes and change with them  Identify new markets, applications & solution sets  Market Planning & Positioning  Launch a new product or product line  Learn what prospective buyers want, need & expect  Expand or change your geographical presence  Competitive Analysis  Identify new, existing or emerging competition  Evaluate sales/marketing channel alternatives  Understand market leadership, shares & penetration  Business Planning & Diversification  Initiate an acquisition, merger or divestiture  Understand market changes and change with them  Identify new markets, applications & solution sets Using Strategic Market Data

5. 5 2003 Market Study Parameters  Electric Utilities in U.S. & Canada  Transmission & Distribution Management Solutions  EMS (i.e., Network Security Applications)  TMS (Transmission SCADA/AGC)  GMS (Merchant Power & Divested Gen Assets)  DMS (Including Distribution Automation  T&D Substation Automation  Field Data Devices (RTUs & ‘RTU-like’ Devices)  Base Year: 2002 (constant US dollars)  5-Year Outlook Period: 2003-2007  Calendar Year Bookings  Confidentiality!  Electric Utilities in U.S. & Canada  Transmission & Distribution Management Solutions  EMS (i.e., Network Security Applications)  TMS (Transmission SCADA/AGC)  GMS (Merchant Power & Divested Gen Assets)  DMS (Including Distribution Automation  T&D Substation Automation  Field Data Devices (RTUs & ‘RTU-like’ Devices)  Base Year: 2002 (constant US dollars)  5-Year Outlook Period: 2003-2007  Calendar Year Bookings  Confidentiality!

6. 6 RTAC Market Horizons™ Report REPORT 1: Executive Summary 2: Marketplace Characteristics 3: Drivers, Issues & Trends 4: Future Market Outlook 5: Supplier Environment REPORT 1: Executive Summary 2: Marketplace Characteristics 3: Drivers, Issues & Trends 4: Future Market Outlook 5: Supplier Environment APPENDICES A: Abbreviations B: Glossaries C: Relevant Organizations, Publications & Events D: Supplier Listings E: Application Descriptions F: Utility Restructuring G: Electric Competition in the States: A Summary H: Standards References

7. 7 Marketplace Characteristics Marketplace Structure & Composition

8. 8 Marketplace Characteristics

9. 9 Deregulation Status (2000)

10. 10 Principal Market Focus Real-time Automation & Controls (RTAC)

11. 11 GMS EMS TMS FIELD DATA DEVICES (FDDs) RTAC SYSTEMS DISTRIBUTION SYSTEMS TRANSMISSION SYSTEMS SSA TMS RTUs Transmission RTUs RTAC Market Organization EMS/GMS RTUs RTAC Remote Terminal Units (RTUs) Distribution RTUs Substation Controllers (SSCs) DMS

12. 12 RTAC Market Snapshot  Transmission-level Systems  EMS - Heavily tied to ISO/RTO plans & progress  GMS - No major changes from 2002 forecast  TMS - Expected short-term spending jump; then flattening out  TMS - Most likely will track TMS profile (above)  Distribution-level Systems  DMS - Sustained growth after blackout hysteria subsides  DA - Good growth, especially among smaller utilities  Substation Automation - Ramping up demand over 5 years  Field Data Devices (RTUs, SSCs & RTU-like devices)  New generation of IEDs & SSCs continued to hammer RTUs  Continued downward ASP pressure for entire outlook period  Increasing demand for standard, cheap ‘commodity’ devices  Communications flexibility surpassing basic I/O issues  Transmission-level Systems  EMS - Heavily tied to ISO/RTO plans & progress  GMS - No major changes from 2002 forecast  TMS - Expected short-term spending jump; then flattening out  TMS - Most likely will track TMS profile (above)  Distribution-level Systems  DMS - Sustained growth after blackout hysteria subsides  DA - Good growth, especially among smaller utilities  Substation Automation - Ramping up demand over 5 years  Field Data Devices (RTUs, SSCs & RTU-like devices)  New generation of IEDs & SSCs continued to hammer RTUs  Continued downward ASP pressure for entire outlook period  Increasing demand for standard, cheap ‘commodity’ devices  Communications flexibility surpassing basic I/O issues

13. 13 Prevailing Market Conditions 110965 071377 070296 081096 062598081403

14. 14 Prevailing Market Conditions  NOV 09, 1965≤13 Hours  NY, CT, MA, RI, PA, NJ + ON (Canada)  JUL 13, 1977≤26 Hours  NYC  JUL 02, 1996Minutes to Hrs  AZ, CA, CO, ID, MT, NE, NV, NM, OR, SD, TX, UT, WA, WY  AB, BC (Canada)  Baja California Norte (Mexico)  AUG 10, 1996≤9 Hours  AZ, CA, CO, ID, MT, NE, NV, NM, OR, SD, TX, UT, WA, WY  AB, BC (Canada)  Baja California Norte (Mexico)  JUN 25, 1998~19 Hours  MN, MT, ND, WI  ON, MB, SK (Canada)  NOV 09, 1965≤13 Hours  NY, CT, MA, RI, PA, NJ + ON (Canada)  JUL 13, 1977≤26 Hours  NYC  JUL 02, 1996Minutes to Hrs  AZ, CA, CO, ID, MT, NE, NV, NM, OR, SD, TX, UT, WA, WY  AB, BC (Canada)  Baja California Norte (Mexico)  AUG 10, 1996≤9 Hours  AZ, CA, CO, ID, MT, NE, NV, NM, OR, SD, TX, UT, WA, WY  AB, BC (Canada)  Baja California Norte (Mexico)  JUN 25, 1998~19 Hours  MN, MT, ND, WI  ON, MB, SK (Canada)

15. 15 Prevailing Market Conditions A dark night to remember… It shouldn't happen every evening, but a crisis like the lights going out has its good points. In the first place it deflates human smugness about our miraculous technology, which, at least in the area of power distribution and control, now stands revealed as utterly flawed. I have never regarded as trustworthy many of the appurtenances of modern America; automatic elevators, for example, have always chilled me with their smooth mindlessness -- and it is somehow delicious to contemplate the fact that all our beautiful brains and all those wonderful plans and all that marvelous equipment have combined to produce a system that is unreliable. A dark night to remember… It shouldn't happen every evening, but a crisis like the lights going out has its good points. In the first place it deflates human smugness about our miraculous technology, which, at least in the area of power distribution and control, now stands revealed as utterly flawed. I have never regarded as trustworthy many of the appurtenances of modern America; automatic elevators, for example, have always chilled me with their smooth mindlessness -- and it is somehow delicious to contemplate the fact that all our beautiful brains and all those wonderful plans and all that marvelous equipment have combined to produce a system that is unreliable. THE VIEW FROM HERE by Loudon Wainright; Life Magazine, Vol. 59 No. 2 (19 November 1965)

16. 16 Prevailing Market Conditions August 14, 2003, 11:15PM EST

17. 17 Prevailing Market Conditions Potential business benefits achievable Proximity to core business PC Maintenance Remote Metering Internet Systems integration SCADA External Application Development Call Center Operation Asset Management SOURCE: DATAMONITOR Impact & Importance of SCADA Among Utilities

18. 18 Prevailing Market Conditions  Political Hyperbole…  “The cascading nature of this blackout offers an object lesson of how the electricity grid requires regional coordination and planning, a challenge the nation is still striving to meet”  - FERC Chairman Patrick H. Wood III  “It appears that the cascading power outages throughout the Northeast only reinforce our need to focus on reliability and transmission infrastructure development rather than creation of a new national market system. The power grid system was built to provide electricity to local customers, and a national market system is not feasible without significant infrastructure additions.”  - Senator Richard C. Shelby (R-AL)  “… a final bill will include a provision to delay implementation of any FERC plan on regional transmission organizations until 2005” - An assurance reportedly given to Shelby by Pete V. Domenici (R-NM), Senate Energy & Natural Resources Committee Chairman. (House leaders have not agreed to this, aides said.)  Political Hyperbole…  “The cascading nature of this blackout offers an object lesson of how the electricity grid requires regional coordination and planning, a challenge the nation is still striving to meet”  - FERC Chairman Patrick H. Wood III  “It appears that the cascading power outages throughout the Northeast only reinforce our need to focus on reliability and transmission infrastructure development rather than creation of a new national market system. The power grid system was built to provide electricity to local customers, and a national market system is not feasible without significant infrastructure additions.”  - Senator Richard C. Shelby (R-AL)  “… a final bill will include a provision to delay implementation of any FERC plan on regional transmission organizations until 2005” - An assurance reportedly given to Shelby by Pete V. Domenici (R-NM), Senate Energy & Natural Resources Committee Chairman. (House leaders have not agreed to this, aides said.)

19. 19 Future Market Outlook Preliminary Market Assessment (Sept ‘03)

20. 20 5-Year Market Perspective (2002 Report) $Mil $258.7 ? ? ? ? $262.6 (Est.) Down by 10-12% from 2002 Forecast

21. 21 Preliminary 2003 Market Assessment $Millions Mitigating Factors: Economic Uncertainty Economic Uncertainty Political Turmoil (+ Iraq) Political Turmoil (+ Iraq) Downward ASP Pressure Downward ASP Pressure Stalled Energy Legislation Stalled Energy Legislation Security Concerns Security Concerns ISO/RTO/SMD Delays ISO/RTO/SMD Delays Mitigating Factors: Economic Uncertainty Economic Uncertainty Political Turmoil (+ Iraq) Political Turmoil (+ Iraq) Downward ASP Pressure Downward ASP Pressure Stalled Energy Legislation Stalled Energy Legislation Security Concerns Security Concerns ISO/RTO/SMD Delays ISO/RTO/SMD Delays

22. 22 RTAC Systems Market (2002 Report)  RTAC market includes…  Energy Management Systems (EMS) - Network Security & Market Systems Interface  Generation Management Systems (GMS) - EMS w/o transmission applications  Transmission Management Systems (TMS) - SCADA/AGC & Substation Automation (SSA)  Distribution Management Systems (DMS) - SCADA, Distribution Automation (DA) & SSA  RTAC market includes…  Energy Management Systems (EMS) - Network Security & Market Systems Interface  Generation Management Systems (GMS) - EMS w/o transmission applications  Transmission Management Systems (TMS) - SCADA/AGC & Substation Automation (SSA)  Distribution Management Systems (DMS) - SCADA, Distribution Automation (DA) & SSA CAGR = 9.3% ($) $Millions

23. 23 Q1 & Q3-2003 Projects (3-30 Months) Q1 Q2 Q1 Q2 386 Projects @ $137.7 Million

24. 24 Market Dynamics Market Drivers, Issues & Trends

25. 25 Market Dynamics Principal Market Drivers  Politics & Fear!  Security (NERC-1200)  Do more with less mantra  Demand for Interconnectivity  Host level Mainly ICCP  Network Level DNP Modbus IEC 60870 CEIDS (Feeder level)  Regulatory Bodies  FERC (USA)  Provincial (Canada)  Return to financial stability Principal Market Drivers  Politics & Fear!  Security (NERC-1200)  Do more with less mantra  Demand for Interconnectivity  Host level Mainly ICCP  Network Level DNP Modbus IEC 60870 CEIDS (Feeder level)  Regulatory Bodies  FERC (USA)  Provincial (Canada)  Return to financial stability Key Issues & Trends  Security & Reliability  Continued Uncertainties  Market  Economic  Investment Recovery  Holistic Solution Sets  Simple  Intuitive  Inexpensive (with ROI)  PBR & Accountability  Return to Stable Operations  Commercially  Technically  Physically

26. 26 Market Dynamics Challenges  Suppliers  Security  Survival in a down market  Cost reduction strategy  Transition from leased comm lines to newer tech  Downward price pressure  Utilities  Security Mandates  Cope with reduced staff & resources  Assimilate acquisitions  Return to core business and core values  Preparation for next round of restructuring  Blackout prevention/recovery Challenges  Suppliers  Security  Survival in a down market  Cost reduction strategy  Transition from leased comm lines to newer tech  Downward price pressure  Utilities  Security Mandates  Cope with reduced staff & resources  Assimilate acquisitions  Return to core business and core values  Preparation for next round of restructuring  Blackout prevention/recovery Critical Success Factors  Price & ROI  Open standards & open integration at all levels  Reliability & Reputation for:  Quality service & support  Proper applications and skillful execution  Delivery of tangible value  Ability to augment good products with good services  Viable migration path to next generation technologies and applications  Emphasis on Business Case

27. 27 Market Dynamics 1. Regulatory Policy & Governance 2. Economics & Investment 3. Technology/Integration/Standardization 4. Data Integrity & System Security 5. Web & Wireless Solutions 6. Enterprise Asset Management (EAM) 7. Customer Care & Satisfaction of Market Evolution

28. 28 1. Regulatory Policy & Governance  2002-2003: Solid but Modest Recovery  Looming security issues (NERC-1200)  FERC moves still fail to assure solid investment incentives; SMD delayed  Utilities returning to core business  Blackout shining a light on need for investments; TDMS gaining ground  2004-2007: Good to Excellent Growth  Traditional solutions to transmission constraints won’t pass muster  Wall St. likes return to core business  Investment funds available for ROI  Economic recovery appears good  PBR continues to gain momentum of Market Evolution

29. 29 2. Economics & Investment Issues  Transmission  Short-term (1-2 yr) spending increases  Knee-jerk reaction to blackout  Flattening out after 2004  Distribution  More emphasis on customer service  Some RECs may cash out  Return to Core Utility Market  Improving investment outlook  Increasing management mind-share  Reduced staff = more outsourcing of Market Evolution

30. 30 3. Technology, Integration & Standardization  Technology  Windows still #1, BUT Linux on the rise  Outsourced design, integration & support  Next generation RTU/SSC designs in 2003  RCM/CBM slowed (temporarily?)  Integration  Enterprise Application Integration (EAI) making inroads… slowly  Enterprise Asset Management (EAM) still a mystery to most… yet all agree it’s vital!  Standardization  DNP (still) rules and…  UCA is (still) UCA, but:  IEC 60870 gaining momentum of Market Evolution

31. 31 4. System Integrity & Data Security  System Integrity  Web & Wireless Data access/distribution questions loom RCM/CBM negatively impacted Web-based control a non-issue (for now)  Corporate I/T networks for real-time? Rationalization of R/T with I/T still a mixed bag; no clear directions yet  Data Security Issues  Access by non-ops personnel  Corporate I/T prioritization of Market Evolution

32. 32 5. Web & Wireless Solutions  Web  Data access/distribution questions loom  RCM/CBM heavily impacted  Web-based control a non-issue (for now)  Rationalization of R/T with I/T still a mixed bag; no clear directions yet  Wireless  Coverage improvements driving use  Definitely impacted by security issues  Problem resolution will come of Market Evolution

33. 33 6. Enterprise Asset Management  It’s all the buzz!!!  Everybody says it’s hot, BUT  Hardly anyone seems to know what it is, AND  Of those who think they do…  They all have different ideas  Soooo Stay tuned for further developments! of Market Evolution

34. 34 7. Customer Care & Satisfaction  OMS - continuing good growth  PBR - Still gaining ground  CIS/CRM - Redefinition phase of Market Evolution

35. 35 Competitive Environment Supplier Dynamics

36. 36 Suppliers To Watch  Rising  OSI - Open Systems International  OpenSoft (Pi Historian)  Reliatronics (embedded RTUs)  Survalent Technology (Canada)  Telemetric (radio-modem)  Falling  Hathaway/Systems Northwest (Danaher)  LogicaCMG (UK)  SchlumbergerSema (Convergent Group)  Changing  ATS - now Microsol (Ireland)  Metso - Now Telvent (Spain)  Re-entry  Invensys  Rising  OSI - Open Systems International  OpenSoft (Pi Historian)  Reliatronics (embedded RTUs)  Survalent Technology (Canada)  Telemetric (radio-modem)  Falling  Hathaway/Systems Northwest (Danaher)  LogicaCMG (UK)  SchlumbergerSema (Convergent Group)  Changing  ATS - now Microsol (Ireland)  Metso - Now Telvent (Spain)  Re-entry  Invensys (Or, were they pushed?)

37. 37 How well you focus… …will determine your reality Albuquerque, NM Birmingham, AL Houston, TX Jacksonville, FL Menlo Park, CA New Orleans, LA Phoenix, AZ Pittsburgh, PA Portland, ME Sacramento, CA San Francisco, CA Midlands (UK) Albuquerque, NM Birmingham, AL Houston, TX Jacksonville, FL Menlo Park, CA New Orleans, LA Phoenix, AZ Pittsburgh, PA Portland, ME Sacramento, CA San Francisco, CA Midlands (UK) N E W O R L E A N S S A C R A M E N T O

38. 38 PRELIMINARY MARKET ASSESSMENT & OUTLOOK : Real-time Automation & Controls in the North American Electric Utility Marketplace (2003-2007) Enjoy the Conference!

39. 39 The “Art” of Market Forecasting Come on! It can‘t go wrong every time...

40. 40 The TDMS Market in 2002…

41. 41 Marketplace Characteristics TDMS Transmission & Distribution Management Solutions

42. 42 Marketplace Characteristics & Composition FIELD DEVICES TDMS SYSTEMS TDMS MARKET

43. 43 FIELD DEVICES TDMS SYSTEMS DISTRIBUTION SYSTEMS TRANSMISSION SYSTEMS TDMS Market Segmentation TDMS MARKET