Thoughts on Last Friday's Breakfast

Vince:

Thanks for breakfast last Friday. I have been reflecting on a couple of
your thoughts and very much want to take the steps forward you suggested.
Let me take a shot at articulating what we said to make sure I have it
right, and let me take a shot at making comments and suggestions.

Firstly, thanks for agreeing to bring MarketPoint to the attention of your
outside equity people once again. I understand that you are a go between,
and I recognize and appreciate whatever efforts you are able to make. I
also recognize as you admonished that there are no guarantees here and that
you can only do your best. Thank you for that no matter what the outcome.

Secondly, your suggestion that our short term gas and electric models shoul=
d
be =01&click throughs=018 (my words intended to reflect the sentiment you
expressed) on the enrononline.com website are absolutely consistent with th=
e
MarketPoint business concept and right up our alley. I unequivocally want
to move forward with that. All that remains for MarketPoint to do so is to
secure the venture capitalization to create the website delivery system to
accommodate such click through and browser access. We have the hard part
done (the enabling technology) and we only lack the internet delivery
system. That should take a few months time after we secure the
capitalization we need. However, in the meantime, we would be prepared to
put Excel spreadsheets with our scenarios in a web location where they can
be clicked through from enrononline.com, and that could be done a bit soone=
r
if you and your enrononline.com people might be interested in providing the
capitalization. We already offer our North American electric plant data
base on a click though basis through e-acumen.com, so that part of our
infrastructure is already available (or imminent). I believe they are goin=
g
commercial with our data product any time now. Please let me know how we
can consummate an agreement here.

Thirdly, I am surmising there might be a lot of value to Enron from applyin=
g
and demonstrating MarketPoint in the more nascent areas of your business
where there are clearly few or no credible, comprehensive, pre-existing,
proprietary fundamental modeling tools (e.g., metals, telecommunications,
MIPS, agricultural commodities, water). I would jump at the chance to work
under your sponsorship to build an inherently new, previously nonexistent
forward market model of a commodity such as copper, silver, gold, phosphate=
,
aluminum, potash, grain, or some other commodity you want to attack. That
would give you an objective =01&kick at the can=018 unfettered by the fact =
that
there are previously existing models you might want to compare against each
other or against your own or that you have ongoing internal capabilities in
those areas. You have the prospect to get immediate value from such a mode=
l
in your embryonic metal or other trading business and to evaluate
MarketPoint people and MarketPoint technology in a real life setting. I
should mention that I have a relationship with what I consider to be the
premier mining/mineral processing group in the world (Michigan Technologica=
l
University). Working with their metals/mineral processing professors, we
could build a world scope forward copper, gold, silver, aluminum, or simila=
r
model in several weeks time that considers every facility in every supply
chain in the world. (Most metals have no more than several tens or a few
hundreds of facilities in the world total, and those facilities are well
known and accessible over the Internet or from trade associations or the
government. Our United States Geological Survey contacts should be very
useful here.) I really respect the Michigan Tech people I know. They know
the metal supply chains all the way from the geology and resource
considerations at the extreme upstream end, the existing and prospective
ways to mine and process that resource into such intermediate goods as
pregnant leach solution, copper sulfide concentrate, gold cyanate, blister
copper, solvent extraction/electrowinning intermediate product, and
ultimately into final goods such as tubing, sheeting, wires, and other fina=
l
forms. I would be prepared to send you a brief proposal and consulting
contract to undertake such an effort, and I am confident I can get Michigan
Tech to subcontract the data and domain expertise at modest cost. They hav=
e
strong incentives to do something like this, for it connects them even more
closely to the industry they covet. If you access the Michigan Tech
website, you will see a Dr. Carl Nesbitt (my brother) there as a mining and
minerals processor person. He has recognized world class skills in that
field and is an Altos associate as well as a tenured Michigan Tech
professor.

Fourthly, I agree with your sentiment that =01&Enron has been quite success=
ful
with what we have been doing=018 and that =01&We lean toward our own techno=
logy.=018
I have the utmost respect and admiration for Enron and the technology and
thinking you have operationalized in the past. Notwithstanding that
comment, I am sure Enron would not consider writing your own spreadsheet
code to replace Excel or writing your own C++ compiler to replace Microsoft=
=01,
s or writing your own LP code to avoid purchasing one commercially. There
is simply no economic impetus to redo what comes from the commercial market
better and cheaper--Enron buys rather than builds technology that augments
your productivity, as you should, as long as it does not compromise
confidentiality or competitive advantage. Vince, MarketPoint is technology
that augments Enron=01,s productivity and allows you to do what you want to=
do
in the fundamental modeling area rapidly and accurately. MarketPoint does
not substitute for or devalue your internally developed technology; it
augments and extends your people, data, and fundamental market insight.
MarketPoint already has over 200 man years of cumulative development effort
embedded within it, and it is just now becoming a custom =01&tinkertoy set=
=018
approach that Enron can use to enhance your productivity and accelerate wha=
t
you want to do in the fundamental modeling arena. Like Excel, it has passe=
d
the market test for almost twenty years across the entire industry
(including Enron itself). There are people in Enron today who I believe
hold MarketPoint/NARG in high esteem in part because they are aware of its
formidable and notable success over the past many years. I hope you and
your people can come to view MarketPoint in that way=01*-an automated
productivity tool that can help Enron build and monitize proprietary conten=
t
faster, cheaper, and more accurately than you otherwise might and than your
competitors can. MarketPoint might save you a lot of time and money, and i=
t
might allow you to redirect your resources toward even more productivity an=
d
profitability, just as Excel and Microsoft C++ have done. With the advent
of e-commerce, your business is ultimately more =01&up for grabs=018 than i=
t once
was. I must say I admire your early success and your early strong lead.
However, barriers to e-commerce entry are smaller than barriers to
traditional business entry, and "branding" is harder to hold. You need to
continue and in fact accelerate the first mover advantage and "branding" yo=
u
have so successfully built in the past decade and a half, and I believe tha=
t
top quality, high barrier-to-entry, rapid deployment technologies such as
MarketPoint might help you do so. I would even go one step further. In th=
e
coming e-commerce era, technology such as MarketPoint will play even more o=
f
a role, and labor centric activities will be risky and (statistically) less
successful. We are pleased MarketPoint is emerging at the start of today's
"inter-vertical competition" era because we believe all the winners such as
Enron will ultimately need to use it if they are to be successful.
Increasingly, the "not invented here" approach is likely to be supplanted
with the "cobble together elements of technology to make meta-technology"
because first mover advantage and branding will accelerate in value.
MarketPoint enabling technology is perfect for that.

Fifthly, I should mention that if any people in your traditional gas and
electric and other businesses want to use MarketPoint or Altos, please feel
free to contact me with the opportunity. We are eager to serve their or
your immediate business needs as they encounter them in our traditional
consulting mode. That was the point of the earlier meeting Kim Watson
organized, and that objective hopefully has not fallen by the wayside durin=
g
our private discussions.

After you have had a couple of days to think about the foregoing five
points, let=01,s talk. I think if you get the chance to work with me and
MarketPoint, you will see that we are what we aspire to be--the "Enron of
the fundamental forward pricing world"-=01*the best in class. A partnershi=
p
between two bests in class certainly makes sense. I know you have no basis
to believe that MarketPoint is best in class--it is new, and you and I have
not worked together in close proximity. I am eager to provide you a low
cost, high value opportunity to determine whether that might be true. Let'=
s
communicate by email or by phone in a week or ten days and see if we might
get something going.

Dale Nesbitt
650.218.3069