Koch Creates Internet Business Strategies Group to Capitalize on Emerging Technologies

Current CIO to lead group charged with enhancing current businesses with Internet capabilities, finding high-tech opportunities for growth, investment

Wichita, Kan.—Citing high-tech business innovations and investments as key components of its future growth plans, Koch Industries, Inc. today announced the formation of an Internet Business Strategies group.

The new group's vision will be to further Koch's core business capabilities – like energy and other commodity trading – and discover new business opportunities by taking advantage of emerging Internet technologies.

"This is a key area for future growth and success," said Joe Moeller, Koch Industries' President. "The Internet is revolutionizing the way business is conducted and providing new ways to serve customers more efficiently. As distinguished from some of the e-business groups popping up in firms around the country, this new group is a clear, focused way to prioritize our resources and ensure we capitalize on our market knowledge and lead the pack in taking advantage of these exciting innovations."

The company also announced the appointment of Steve Kromer as its Managing Director, Internet Business Strategies, a newly created position. Kromer will report directly to Moeller and lead the new group, which will drive to achieve its vision by integrating information technology expertise with marketing and trading knowledge from around Koch's diverse businesses.

Kromer, a graduate of Texas Tech University, joined Koch in 1982 as a process engineer in the company's refining business. He has served in a variety of positions within Koch's petroleum and chemicals businesses. In the mid-1990s, Kromer headed up Koch's Canadian business divisions. In 1998, Kromer was appointed chief information officer for Koch Industries, leading an information technology organization of about 900 employees.

"Koch has enormous amounts of knowledge about some of the nation's largest industries – many of which are related to energy, petroleum and chemicals," said Kromer. "With this new focus area, we're enhancing our ability to anticipate technology-related growth areas and pursue those which best leverage our domain knowledge in these businesses.

"Our dual goals are to enhance our current businesses and to find new opportunities and alliances," he said. "On one hand, we're going to look, with a long-term eye, at what Internet-related capabilities can be applied to provide customers across Koch's various businesses with the best services possible. This is a natural continuation of what Koch's been doing for a long time – changing with the markets we serve. For instance, we've been trading in physical commodities for decades. When that business began to evolve through exchanges like the NYMEX, we grew our capabilities in that area such that we're now leading the business.

"In addition, we need to keep pace with these rapidly developing technologies to help us spot new business and investment opportunities," added Kromer. To do this,
Koch's Internet Business Strategy group will work closely with the company's private equity arm, Koch Ventures, Inc., to identify and advance emerging Internet-related business opportunities.

Koch's interest in this area began in 1998 with Koch Ventures' investment in VerticalNet, which operates online vertical trade communities that focus on a variety of industries and feature buyer's guides, news, discussion forums, career centers and auctions.

"Koch Ventures' strategy has been to build a network of investors and entrepreneurs and to develop our understanding of how the electronic commerce market works," said John Pittenger, President of Koch Ventures, Inc. "We've pursued ventures that best combine Koch's strengths – its deep commercial knowledge of a variety of industries and its solid financial position – with this growing expertise in e-business. However, we've been primarily reacting to deal flow. Steve's group will help Koch become a driving force in creating and capturing attractive opportunities in addition to the deal flow we already see."

In the past two years, Koch Ventures has become a significant investor in e-commerce, telecommunications and Internet-related companies.

In telecommunications, for example, Koch Telecom Ventures, Inc. co-founded PF.Net, which is building a high-capacity fiber-optic network to provide wholesale voice, data and video services to long distance carriers, local carriers, Internet service providers and utility companies. Since mid-1999, PF.Net has announced alliances with telecommunications giants Lucent and AT&T, among others, and has begun construction on its network that will serve major cities throughout the country and help serve next-generation communications needs.

Koch Ventures is also an investor in Universal Access, Inc., which provides multi-carrier end-to-end network connections and is positioned to become the leading independent provisioner of bandwidth for Internet service providers. Koch Ventures' other investments in e-commerce businesses include, among others, Altra Energy, a firm positioned to become the nation's leading Internet-based commodity exchange.

In addition, Koch Ventures is investing in companies that will provide important services related to the growth of e-business. This includes firms like E-Tech Products, Inc., which produces a packing material to support e-commerce's pick-and-pack logistics systems, and Primarion, a semiconductor designer and manufacturer focused on analog power amplification products, which is positioned to become the leading high-speed data-integrity solution provider for very deep sub-micron processors.

Koch Industries, Inc. through its subsidiaries, employs 12,000 people worldwide and is involved in virtually all phases of the oil and gas industry, as well as in chemicals, plastics, energy services, chemical and environmental technology products, asphalt products, metals and mineral services, ranching, financial services, and ventures. For more information on Koch, refer to www.kochind.com or www.kochenvironment.com on the Internet.



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