As I said, I like ENER and I also like RTK and TESI (Texaco Energy Systems, Inc.). Here's part of the reason why.
Repost-Article about the Texaco/ENER deal and RTK.
The new relationship between Energy Conversion Devices and Texaco could be a true
landmark - it depends on how committed Texaco is to really moving the alternative
energy agenda forward. This remains to be seen (but see Texaco material below for
evidence that they are committed). For TX, with a market cap of $28 billion, it could be
that this deal was nothing more than cheap "green" PR. The $67 million they paid for
20% of ECD and two board seats is petty cash for them, and probably a lot loss than
their annual advertising budget. It was a tremendous deal for them (which their
representative at the press conference admitted - gaffe), and their was grumbling in the
chat rooms that ECD management had sold too cheap again. If ECD has been conned it
was a masterful job by TX - Stan Ovshinsky has a 40 year history of minimizing dilution
and loss of control of this company. He would never have sold an oil company (!) 20% of
the company unless he was thoroughly convinced that TX is sincere. Texaco announced
in March that it intended to form a relationship with a fuel cell company this year. ECD
could be the deal they were talking about.
The big news for those particularly interested in fuel cells is that ECD has a regenerative
fuel cell (RFC) in development. An RFC works like an ordinary PEM, but can be run in
reverse to electrolyze hydrogen from water. The beauty of this is that it can be used to
produce electricity when grid power is expensive (day) and than reversed to produce H2
when electricity is cheap (night) -- sort of an energy arbitrage. This will become
increasingly important as utility deregulation causes consumers to see different prices at
different times of day on their bills (industrial electricity customers already do).
The big question is what will ECD do with all of this cash? For a company of ECD's size,
$ 67 Million can only mean one thing - manufacturing capacity. This deal could only have
happened now because ECD management has decided that they are ready to greatly
increase production of one or more of their products now. Obvious candidates are
photovoltaics, batteries, and OUM memory with Intel.
A press conference and conference call announcing the TX deal revealed the following:
--The investment in ECD is only TX's first step into the fuel cell business
--TX is especially interested in ECD's H2 storage technology, and a JV will be created by
the two companies to develop this tech
--TX scientists will be relocated to ECD
--TX's support of ECD's H2 efforts will help commercialize the technology
--The RFC uses a non-noble metal catalyst, i.e. no expensive platinum
--ECD's metal hydride storage medium is based on magnesium
TX and ECD have been talking about forming this relationship for four years (probably
necessary to convince Stan!)
H2FC participated in the conference call and asked Ovshinsky about the RFC and how
big a prototype the company has. Ovshinsky neatly ducked the question. Nevertheless,
the announcement of this device makes ECD, in H2FC's opinion, a full-fledged fuel cell
company, which is why it now has its own box on this page.
The following excerpt from Texaco's recent quarterly (page 19) sheds some on light on
the degree of TX's commitment to developing fuel cell technology:
Texaco Energy Systems Inc.
Texaco Energy Systems Inc. (TESI) was created in 1999 to explore opportunities to
broaden our energy portfolio. Leveraging the strength of a global corporation, TESI is
developing businesses related to fuel cells, hydrocarbons-to-liquids (HTL), and alternate
fuels. As a technology-based company, we plan to apply energy expertise and
proprietary technologies to make these emerging energy businesses a reality.
With the creation of the new division, we systematically began evaluating opportunities in
the fuel cell industry. We sought to determine whether we could leverage our recognized
industry leadership in fuel processing and feed conversion into a joint-venture opportunity
with a fuel cell supplier. That investigation led us to:
--Create a Fuel Cell Technology Center at our Bellaire office complex;
--Begin the installation of an actual fuel cell to power part of the office complex load
(which complex incidentally houses our major computing center)
Recall also that Texaco is working with Rentech (Gas-to-Liquids technology) and that
Rentech is exploring the possibility of building a nine megawatt fuel cell with FCL.
The way ECD stock has languished over the years is pretty amazing. Wall Street must
not like the company for some reason - maybe the perception that management is more
interested in playing in his lab than making money. The company has been around for a
very long time and has never shown a significant profit. To someone predisposed to view
it that way, it might look like management has intentionally sought only enough revenue to
support operations. But the company has critical and potentially disruptive technologies
in several sectors, and is well capitalized and debt free after forty years in business. This
new relationship with Texaco is a monumental change in tone. Perhaps ECD can finally
start getting Wall Street's well deserved attention.
ECD Home Page - very recently updated - excellent reading
ovonic.com |
