Background Information for Today's Echelon Announcement
(Sunnyvale, CA - June 30, 2000) - Today Echelon Corporation
(NASDAQ: ELON),
and Enel SpA announced that they have signed an R&D agreement under which
Enel and Echelon will cooperate to integrate Echelon's LonWorks® system
into Enel's remote metering management project for approximately 27 million
Italian households. Enel's digital meter project, called Contatore Elettronico,
will provide intelligent electricity meters capable of being integrated
into a complete home networking infrastructure over a 3-year rollout period.
Enel also entered into an agreement to purchase 3 million shares of newly
issued Echelon common stock. Answers to some background questions about
what was announced today follow.
Q1. What does this agreement mean for Echelon?
A1. This agreement solidifies Echelon's position as a world leader
in providing home networking infrastructure. We believe it to be the
largest agreement ever signed for deploying infrastructure for networking
everyday devices in homes. We expect this project to accelerate the
adoption of LonWorks networks among device manufacturers and utilities
around the world.
Q2. What are the terms of the common stock sale, including the price?
A2. The stock purchase price will be based on the average trading price
prior to the closing (subject to a minimum price of $87.3 million USD
and a maximum price of $130.9 million USD). As part of the stock purchase
agreement, Enel has agreed to hold the shares for a minimum of three
years; however, if the R&D agreement is terminated due to a material
breach by Echelon, then Enel may sell the shares thirty days after public
announcement thereof. Enel will assume a seat on Echelon's Board of
Directors. The closing under the stock purchase agreement is conditioned
upon approval under US antitrust legislation (Hart-Scott-Rodino Act)
and certain other conditions.
Q3. What is Enel's Contatore Elettronico system?
A3. Contatore Elettronico includes a remote meter reading system, a
customer management system, and a value-added services delivery system.
In particular, the Contatore Elettronico includes an innovative system
to remotely read and manage the domestic consumption of energy. The
system includes remotely controllable electronic meters in each home
and building, data concentrators located in medium voltage/low voltage
substations that feed power to the homes and buildings, and central
servers in which the network data bases are located.
Q4. Which Echelon products will be used in the Contatore Elettronico
system?
A4. Enel expects to integrate a wide range of Echelon products into
its system, including devices for every meter to enable communication
over the existing power lines based on the Neuron� chip and Echelon's
PLT-22 power line technology, data concentrators, LNST network operating
system software, and gateways to enable communication to indoor devices.
The procurement of such components will be conducted in accordance with
EU public procurement procedures.
Q5. What is the approximate value of Echelon's products that will
be used in the Contatore Elettronico system??
A5. It is expected that at least $300 million of Echelon products will
be used in the Contatore Elettronico system over the three-year deployment
period.
Q6. When will the deployment of the Contatore Elettronico system begin?
A6. Enel expects to begin installing metering systems in the second
quarter of 2001. Echelon expects product deliveries to begin within
the first half of 2001 and to ramp up to mature run rates over subsequent
years.
Q7. What are examples of value-added services that could be performed
by this system?
A7. The initial set of planned services include remote meter reading,
remote connect and disconnect, and demand-side management.
Q8. What exactly is demand-side management, and why is it necessary?
A8. The goal of demand-side management is to smooth out the peaks and
valleys in energy demand to make the most efficient use of energy resources
and to defer the need to develop new power plants. This may entail shifting
energy use to off-peak hours, reducing energy requirements overall,
or even increasing demand for energy during off-peak hours. It enables
utilities to lower their operating and capital costs and reduce power
outages.
Q9. Does the Contatore Elettronico system provide services that are
unique to Italy or could this system architecture be deployed in other
countries, too?
A9. The services that Enel plans to provide in Italy are the same types
of services required by utilities and telecommunications companies in
countries throughout the world - and the same LonWorks system infrastructure
can be applied to these countries as well. This provides a unique opportunity
for appliance manufacturers, consumer electronics companies, heater
manufacturers, alarm system suppliers, and other manufacturers to design
to a common platform - Echelon's LonWorks system - for deployment to
markets throughout the world.
###
Echelon, LonWorks, LONMARK, the LONMARK logo,
Neuron, and the Echelon logo are trademarks of Echelon Corporation registered
in the United States and other countries. LNS and Bringing the Internet
to Life are trademarks of Echelon Corporation. Other marks belong to their
respective holders.
This press release may contain statements
relating to future plans, events or performance. These forward-looking
statements are based on the beliefs of the management of ENEL and Echelon
as well as on assumptions made by and information available to these companies
at the time these statements are made. Such statements may involve risks
and uncertainties, including the risk that any required regulatory approvals
are not obtained, that the transactions contemplated are challenged by
third parties, that the R&D activities and Contatore Elettronico project
do not meet their target dates, do not yield economic returns, are not
commercially exploitable or are terminated, and other risks identified
in ENEL's and Echelon's SEC filings. Actual results, events and performance
may differ materially. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date hereof.
Neither ENEL nor Echelon undertake any obligation to release publicly
the result of any revisions to these forward-looking statements that may
be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
Contact Information
PDF version of this
press release.
