ConectiSys Corp. (CONC): FYI. Here is some information I put toge...

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Z_MAN

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Monday, 01/22/2007 6:24:48 AM

Monday, January 22, 2007 6:24:48 AM

FYI. Here is some information I put together after I attended a conference on the subject in 2005. Most of this still applies. CNES has the technology, I have looked at it and held it. They now have the final portion (with Trimark) which is the software plug in for viewing and billing etc. Let's just hope they can land a contract. Management has come close in the past, but hosed it up in the end. For some reason Management just didn't like the deal.

My DD on Conectisys in 2005,

The enclosed summary of information was derived from my attendance of the Marcus Evans Conference in January 2005 and the research I have done on the industry and Conectisys. I created this summary to help current and potential investors get a better understanding of the industry and Conectisys. Please do your own Due Diligence (DD) before you invest and understand this is still a high risk investment imo. However, the potential rewards are worth it to me and that is why I have invested in the Company.

Based on presentations I have reviewed at the conference, this is a summary of the main reasons for implementing Advanced Automated meter Reading (15 minute to daily intervals). This is assuming two-way AMR is used:

Top 3 reasons given by the Utilities

1. Outage management (storm response etc.).
a. Customer service and Satisfaction. You can know exactly how many customers are out, know before the customer calls, improve decision making, better communication to customer, and better estimate for restoration of customer power.
b. Outage Analysis Application. This can be mapped to GIS (graphical) interfaces etc.
c. Operation Impact. Analyze the extent of the outages, better decisions, deploy crew more effectively, track restoration efforts, reduce outage duration, and improve system protection.
d. Restoration and verification. This can be done at a network or meter level and used to manage crews and confirm call in (on demand reads).
2. System Reliability (more reliable)
3. Remote connect/disconnects (for those that do not pay the bill)

Top 3 by Given by the Regulators

1. Detailed energy usage for customers
2. Lower customer bill
3. Supporting new rates

Major Operational Savings (not a complete list)

1. Meter reading resource reduction including wages, auto, maintenance, fuel, insurance etc.
2. Revenue recovery (Tamper/Theft). i.e. can tell when it is tampered with immediately.
3. Revenue recovery (system losses)
4. Connect/Disconnect service trips eliminated
5. Avoided meter reprogramming trips

Smaller Operational Savings (not the complete list)

1. Meter Reading hardware/software/billing cost reduction
2. Reduced re-read cost and mailings etc.
3. Reduced billing adjustments
4. Reduced meter reading complaints, example meter man peeked through my window and saw me naked! That pervert!
5. Service Restoration Prediction Improvement
6. Load Forecasting
7. Transformer Load Management. This includes growing demand on transformers, planning, upgrades, downsizing, and correct sizing studies.

Other Miscellaneous Reasons (not a complete list)

1. Billing Cycle services improved.
2. Improvement in cash flow for billing
3. Elimination of estimated bills
4. Reduction in non-billable consumption
5. Reduction in Uncollectible Write-offs
6. Reduction in Energy Theft (mostly colleges)
7. Reduction in high bill complaints
8. Reduction in call center operations calls
9. Reduction in service visits for customer problems
10. Vacancy Monitoring
11. Ability to move read dates
12. Off Cycle reads on demand
13. Elimination of Special Reads (move in and move outs)
14. Reduction in employee injuries
15. Accelerate replacement of old meter (not need to maintain old meters)
16. Improve metering accuracy
17. Better buying rates since you can forecast more accurately
18. System switching profiles

I met Brian Pollem, President of the Automated Meter Reading Association (AMRA) at the conference. He had attended a conference earlier that month (January 2005). I found some very good internet links to the early January conference presentations. The Marcus Evans sessions are not online, but these are by clicking on presentations after you go to this link:

http://www.puc.state.or.us/elecnat/010605_metering_workshop.htm

If you want to look at all of them it is quicker to download the documents. All documents are about 13 meg. If you simply want to browse a couple of them, here is a summary of things I thought were interesting and it also helps validate what I learned at the conference. Note that the Marcus Evans sessions and these are not the same sessions (or at least most of them).

Here is Brians presentation. He was at Puget Sound and helped implement Cellnets wireless AMR at Puget. He recently left Puget to work for a startup AMR company named Integride. Why did he leave? IMO, He saw the potential for wireless AMR and went to a company that is in now development mode of wireless AMR. Brian is a very good Conectisys POC IMO and yes they know each other now:

http://www.puc.state.or.us/elecnat/010605/pollom.pdf

Look at Mr. Kings Presentation on page 14 for an idea of some automated metering installations. Note, wireless is mostly used for recent installations. Also be aware that when you see the word automated it still is being used as a term in utility industry for any non-fully manual meter reading such as drive reads via radio frequency (RF) etc. An example of this is on page 4. Remember, CNES is state of the art instant two way and no drive by.

http://www.puc.state.or.us/elecnat/010605/king.pdf

The above presentation is from Co-chairman of the DRAM collation. This site has good information pertaining to demand response regulatory information. Clink on the links at the top of the page to get to the other areas of the site:

http://www.dramcoalition.org/regulatory.htm

Note the CA statewide project for pricing/planning. Remember, CA is still gearing up for full AMR. I think it needs to be mentioned at this point, Conectisys states they intend to start marketing by specifically going after the CA market. Do a search on California if you missed it in the SEC filings. Utility rumors (and only rumors) are that decisions are to be made in spring 2005 by the CA governor due to problems in the past. This is what I was told by utility CA attendees at the conference. Some did not agree with it, but they thought it was going to be shoved down there throats. Note: Utilities are very cautious since others have gotten burnt in the past by bad technology or poor management. It also requires a huge change in the Information Technology(IT) systems they use. However, imo CA is VERY political and I would not take anything for granted. Remember, the federal government it holding the states responsible for AMR implementation. Some states are doing it while others are waiting and listening. Imo, what starts on the West coast moves east (hopefully!). Here is the letter from 2004 that initiated a change in CA; thus, the current review of AMR usage:

http://www.governor.ca.gov/state/govsite/gov_htmldisplay.jsp?BV_SessionID=@@@@1974438505.1109523106@....

This next link shows the different types of AMR. Note: Advanced AMR is either daily or 15 minute reads which is what Conectisys has developed(15 minute):

http://www.dramcoalition.org/metering_table.htm

Last page on the left at the bottom:

http://www.dramcoalition.org/id53.htm

If they do mandate it, Page 5 has a cool map of the regions they are studying:

http://www.puc.state.or.us/elecnat/010605/george.pdf

This is just some of the behind the scenes discussions that are being held that can impact our investment. Take a good look at these presentations and look at DRAM. Demand response is one of the highest priority reasons to implement advanced AMR or AMI.

Type of AMR’s that could compete with CNES:

Power Line Carrier (PLC) - Not really good for 15 minute reads, but can be used daily or monthly. The problem is getting volumes of data past the transformer. Small amounts are ok, but large amounts require transformer modification. My DD has found they do not want to change the transformer. US = 3 end points to 1 transformer, Europe = 200-300 end points to 1 transformer. Think about it, that is why PLC internet broadband is not available nationally in the US.

Cell/Tower/Dialup - Too expensive and requires towers. This is used for very large customers since the payback offsets the large AMR cost. This is not a good overall solution according to the POS’s I met.

CNES started development with PLC and then went to Cell Towers. They found issues with both and they were expensive. They then started on Wireless development. Since then some wireless companies have come out. The questions to be determined in the future: a.) does Conectisys have a technology edge against the current wireless AMR companies? If they do not, can they break in or will they be bought out? B.) Can they compete against the current strong holds like ITRON that have a foot in the door even using other technology? Utilities are very tight when it comes to changing their infrastructure. These questions and how they are answered are the key to Conectisys future imo.

Wireless AMR – IMO the main wireless competitor that is similar to Conectisys is Cellnet. To the best of my knowledge Cellnet only updates 15 minute data into IT systems daily according to the conference I went to in January.

Conectisys Competitors (From Conectisys 10K):

We perceive the following companies as being the principal competition to our AMR solution in the form of our H-Net(TM) system:

Itron Inc.
Itron provides and has installed AMR systems worldwide. Itron provides "drive-by" automated meter reading equipment.

CellNet Data Systems
CellNet provides fixed-network wireless AMR systems and has installed systems in Kansas City, Minneapolis, San Francisco, Indianapolis, and
through Puget Sound Power. CellNet has technology alliances with the major energy meter manufacturers and was recently acquired by Schlumberger.

Schlumberger Ltd.
Schlumberger's Resource Management Systems Division has deployed meter reading systems that include hand-held meter reading devices. Schlumberger recently acquired CellNet and Metricom.

Hunt Technologies, Inc.
Hunt provides power line carrier AMR systems with capabilities including substation switching. The market niche for Hunt's AMR systems is rural electric cooperatives.

Do a search on AMR wireless and you will get some other hits.

CNES has stated they have developed a proprietary protocol for their wireless system, HNET5. I have been unable to determine if it has an advantages to any of it’s competition. I have been told by Conectisys that HNET5 does not use MESH technology. They state they have investigated MESH technology and it is not a good fit for AMR. They claim their technology is better than MESH technology. That is the extent of what I have been able to learn about the internal wireless technology of the product. I am still working on that DD, but they are keeping the Company proprietary information very secret or they just are not telling me. I have asked several times and have not received an answer.

IMO, the down side to this Company is that they have issued Convertible Debentures to keep them afloat. While the OS is lower than some of the other OTC companies, it still is a concern. Please do your DD on this if you are considering investing in this company. This is still a high risk investment as far as I am concerned.

CNES – After years of development they could be in the right place at the right time. Only time will tell. They will have to compete against companies that currently have their foot in the door at utilities with similar or older technology. While it will be tough to break into the market, if they do I believe Conectisys Investors will be heavily rewarded. That is JUST MY OPINION.

I hope you enjoy the information. Any comments are appreciated especially comments to correct any mistakes.

z