eClearinghouse Electronic Processing of Over-The-Counter Energy Trades October 1999

The eClearinghouse Vision A global company providing trade services for over-the-counter energy trades, including confirmation, margin, and settlement processes, all at the click of a button

How Does It Work? Trade data is sent to eClearinghouse via the Internet or dedicated lines - directly from the counterparties’ trading systems. Trade Data Confirm Margin Dedicated Internet Seamless Invoice Processed Trade C/P A Trade Data C/P B Trade Data Processed Trade

What Services Are Performed? eClearinghouse performs all or part of the following: Seamless notification, confirmation and recording. Global ID and warehousing. Enable electronic signatures. NO FAXES OR MANUAL PROCESSING! CONFIRMATION Daily cash margining for transactions marked to exchange settlements or indices. Regulated eClearinghouse entity holds margins and/or acts as central counterparty. MARGINING Settlement of financial and, possibly, physical trades. Interactive process with counterparties, brokers, operators and banks. INVOICING

What are the critical issues? Building Critical Mass Reliable, Secure and Scalable Technology Global Legal and Regulatory Structures Independent Operation

Building Critical Mass Partnership with Leading Energy Companies Connect with Leading Trading Systems Transition with Market Phase 1 (1st Qtr 2000)- confirmation service only with partners Phase 2 (2nd Qtr 2000)- expanded confirmation service with limited margining Phase 3 (2nd or 3rd Qtr 2000)- full range of confirmation, increased margining, financial settlements.

Technology Confirmation, Margining & Settlement Systems Integration Module for Legacy Trading Systems EnergyML - The Standardised Data Language for Energy Trades and Nominations. firewall eClearinghouse Company A Confirm Language Converter EnergyML Language Converter Integration Module Margin Integration Module Internet or Dedicated line Settlement firewall

Legal and Regulatory Issues Phase 1 - No major impediments in North America or Europe Phase 2 - Margining will require regulation or partnership with existing clearing firm. Electronic Signatures USA Bliley/Davis sponsored Electronic Signature Bill - H.R. 1714 Commodities Futures Trading Commission Proposed Rules issued August 1999. Europe Directive on a Common Framework for Electronic Signatures 2001 (or 18 months given to member states from the entry into force) - implementation completed

Independent Operation Separation of management and ownership Separate independent location Periodic Auditing Ownership No majority ownership Strategic partners Top tier energy companies Prestigious Technology Companies

eClearinghouse Milestones Equity partners  Partner Test IPO Other equity partners Phase 2 (margining & settlement) Phase 1 (confirmation) 4Q 99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01