Kimball Resources Inc. announced that it will be hosting an online bidding event beginning June 11 and running through June 18, including Requests for Quotations (RFQ) from DaimlerChrysler Corp., General Electric Aircraft Engines, Detroit Diesel and Ford Motor Co., which will entail approximately 26 separate RFQs for approximately 45 Bcf of gas on an annualized basis throughout North America. The term requested is for one year beginning July 1.

Kimball already has 76 registered bidders for the event. Additional potential bidders may register at kimballresources.com by completing the new application link. There are no transaction or user fees to either party associated with this event and the successful bidder will contract directly with the end-users utilizing the new NAESB contract form.

Kimball, an energy management company, says it has hosted online bidding events since 2001 for its client base and has completed over 75 separate supply contracts utilizing the system. The current reverse auction will be its largest so far. Previously, bidders have praised this system of linking buyers with sellers for its ease of use, transaction efficiency and absence of user or transaction fees.

In the online auction process, bidders can see other bids but not the parties making them and can change their bids at any time up to the cut-off. The industrial customers can see the names of the bidders. The RFQs are separated according to utility delivery areas, said Brandon S. Hayes, president and owner of Kimball, which has been in business since 1981. For instance, he said Ford may have 13 or 14 different locations defined by utilities, but there may be as many as 80 facilities to be served behind MichCon.

Besides this organized event, end-users can post requests for proposals for natural gas, power or alternate fuels on the web site at any time, and all registered bidders will be notified by email of the posting. Kimball also negotiates conventional supply contracts. Hayes, who described Kimball’s function as that of a “buyers’ agent” or energy management consultant, said bidders are pre-qualified according to specifications set by the buyers, which have become more rigorous with the recent problems in the industry.

Another key feature that has changed recently, Hayes said, is that buyers now are separating the physical contract from paper transactions. Previously a paper hedge would be embedded in the physical contract. “Now companies’ financial groups are taking over the financial transactions, dealing strictly with banks or other financial institutions for their hedging. This alleviates the risk of default” that would affect both the financial and physical transactions at the same time.

Kimball is seeing an increase in the number of its clients because of the increased volatility in the energy business, Hayes said. “Energy has become a very risky business and end-users want to outsource it to experts.” In the early days of trading of Nymex contracts, “a two- or three-point day was a pretty big day. Now we have 20- to 30-point days. That volatility is extremely difficult for the industrial consumers to handle. Part of the reason the energy business is in trouble is it’s lost its focus on what the business is. It’s been consumed by paper trading.” Hayes said he hoped the current troubles in the energy business would drive it back to basics.

“Industrial consumers are very leery of the energy business right now,” Hayes said. “They are asking me a lot more questions about suppliers than ever before. They want more and more details about transactions than they have in the past.

“Credit managers have taken over the business. They’re scrutinizing every transaction. The companies are letting the marketers go and hiring more credit managers. It used to be the marketers were the dealmakers,” but now credit issues rule, and “there are not as many deals being done.”

“If we can work through the current problems and issues, there are lessons to be learned. Everyone believes deregulation is a good thing.” Hayes said he has been awaiting the completion of electric power deregulation since 1993. The Houston-based company has a Kimball Power Co. office in Kalamazoo, MI.

Hayes regards the NAESB development of a long-term “middle of the road” contract with input from buyers and sellers as a good thing, which should eliminate the hassle over whether the buyer’s or seller’s contract should be used.

Kimball Resources claims to be the oldest and most successful independent energy management company of its kind in the industry, providing comprehensive energy services to industrial clients for more than 15 years. Ford has been a client for 17 years and Goodyear Tire for over 10 years. “Typically, our clients have been with us for eight or more years,” Hayes said. Kimball does the procurement, plans and negotiates and monitors delivery, and handles billing and payments. Kimball provides savings “far in excess of its fee structure,” which varies from two to eight cents/MMBtu, depending on the complexity and volumes involved. Hayes said the company assesses alternate fuels for switchable customers. The company does not advertise, but depends on referrals for new business. The auction announcement is the first time the company has contacted the news media, Hayes said.

Kimball currently manages in excess of 500,000 MMBtu/d of natural gas and over 500,000 kW of electricity throughout North America. Kimball also provides consulting and pre-competition management services throughout North America for aggregation groups and individual customers.

Questions about the auction can be directed to Brandon S. Hayes or Doug Melis at (713) 783-7723 or at the following email addresses: bhayes@kimballresources.com or dmelis@kimballresources.com

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