Coming out of a record year in 2007 for ETRM product sales, we’ve observed a not unexpectedly slow first quarter 2008. The first quarter for any new year is historically the slowest, as budget dollars are being spent at the end of the year and vendors are pushing prospects to get signed up in order to book the business in their yearend results. Activity normally starts picking up early in the second quarter as customers are trying to get new systems purchased and implemented prior to the beginning of the heating season.

However, this year, the slowdown may linger a bit longer than usual. Recent developments - namely the growing credit crises and a general economic uncertainty - may delay new systems purchases. Based upon conversations with many of the vendors, while a few deals have closed and others are in the pipeline, the activity levels are not what they were seeing last year. Frankly, given the extraordinary numbers that were posted in 2007, it shouldn’t really be surprising that 2008 is showing some weakness, after all, the market for ETRM solutions is relatively small.

There has been a trend emerging, however, that will continue to add additional market for the ETRM vendors in 2008 and beyond. As implied by the title of this entry, the vendors of traditional ETRM products are finding buyers in the wider commodities markets. This trend started a couple of years ago, with industrial fuels consumers, particularly the airlines, buying ETRM systems to help hedge their fuel purchases in an environment of rising costs. Solarc was able to capitalize early in this space and has virtually locked out all other vendors. Additionally, the company has found customers in the railroads and package delivery space. Still, “fuels” does imply energy, so it would seem an obvious extension to the ETRM model. Recently though, industrial purchasers of non-energy commodities are turning more and more to the ETRM vendors in order to deploy systems to better hedge and manage a wide range of commodities. In particular, bio-fuel producers are deploying ETRM systems to capture not only the sales and logistics of their produced fuels, but are also using the system to track the inputs - agricultural products, chemicals and other supplies. Given the huge price increases we’ve seen in the ag markets, particularly grains and non-grain sugar sources, it is certainly not surprising that the industrial consumers of these products (like ethanol producers) are more actively hedging those inputs. We are also starting to see a growing interest in these systems from food processors for the very same reason. With wheat and corn prices skyrocketing in the last year and showing volatility previously unseen in those markets, food processors are now faced with the problems (and opportunities) energy traders have been exposed to for years. Triple Point has reported quite a bit of success with these new market players recently, selling systems in which the energy management capabilities of the system took a back seat to its broader commodities capablities.

Given the ability of today’s modern ETRM systems to capture transactions, track logistics, manage positions, and analyze and quantify financial risks, it’s clear these systems have the capacity to provide value in markets outside the wholesale energy trading space. Wholesale and industrial markets for which there is a financially traded product (such as wheat, corn, soybeans, zinc, aluminum, steel, cotton, and polypropylene) can certainly realize significant benefit from the capabilities of a modern ETRM system.

We believe these new non-energy commodity markets are going to continue to be a growing source of market share for these solution vendors. The time is arriving quickly when many of these vendors of ETRM systems are going to drop the “E” and add the “C”.

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