SEPTEMBER 2001
Dear Shareholder:
Ocean Power Corporation is completing this third quarter of the year with commitment and confidence in its future. The worldwide demand for renewable sources of power and water, especially those that can be produced independent from mass infrastructure is imperative in good times and in bad.
We believe our company, with a growing product line of innovative solutions is well-poised to respond to present and future market needs.
Planned and strategic growth is occurring in the company and we want to take this opportunity to provide you with some of the highlights.
Regulatory Compliance
In April 2000, the Securities and Exchange Commission (SEC) completed its review of our Form 10-SB for the year ended 1999. Several of Ocean Power's market makers immediately filed with the NASD seeking a relisting of our stock on the "Bulletin Board" (our stock had been trading on the "Pink Sheets").
That process was recently completed, and as of September 7, 2001, Ocean Power stock is again trading Over the Counter on the Bulletin Board, (OTCBB: PWRE).
We appreciate the patience conveyed by so many of our shareholders during the last year.
The above mentioned filings are available on our newly rebuilt - yet still transitional website which can be found at(www.powerco.com), and on the SEC website at (www.sec.gov).
ABN AMRO
Ocean Power has engaged ABN AMRO as its exclusive financial advisor. ABN AMRO was chosen because of its international prowess and its influential position as a commercial lender in the energy industry.
ABN AMRO's depth of experience will be extremely useful in helping Ocean Power manage its projected growth.
New Employees
Attracting capable and experienced employees has been a critical focus over the last several months and we are pleased to introduce you to some of our new team:
-- David Moard, President, Powerco US, Inc.
- Kevin Tyson, Chief Information Officer
- Gustavo Guzman, Manufacturing & Quality Manager
- Todd Peeters, Senior Engineer
- Peter Womble, Associate Engineer
- Joel Rich, Systems Administrator
- Carrie McFarland, Administrative Assistant
You can read more about many of these team members on our website.
We would now like to describe some of the activities that are at the core of Ocean Power's business growth.
POWER
Sigma Elektroteknisk AS (www.sigma-el.com) - Oslo Norway
As you might recall, Ocean Power acquired Sigma in 2000. Mr. Svein Hestevik, CEO along with Dr. Randy Peeters, formerly Chief Scientist for GenCorp Aerojet, now Chief Scientist for Ocean Power, have done an exceptional job of melding a unique team of Stirling and rocket scientists. This team seeks to apply our patent pending thermal management/combustion technology to the Stirling cycle in a manner that may offer a leap in the overall system performance and lower the overall cost.
As a result of this development work, Ocean Power had filed three provisional patent applications with the United States Patent and Trademark Office since November, 2000. These patent applications are directed to new configurations, including new manifold designs for Stirling engines, which should increase their efficiency.
A financing note worth mentioning is that Statoil, the Norwegian State Oil Company (www.statoil.com) has converted debt formerly owed by Sigma into shares of Ocean Power stock. Ocean Power is in discussion with Statoil about broadening our working relationship as we both move forward.
Sigma, with the support of Ocean Power, UK led by Mr. Phillip Johnson is working to develop strategic relationships in Southern Europe and Northern Africa to market our power and water products.
Ecological Engineering & Monitoring - San Diego California
OPC is currently negotiating with EEM on the final terms of an exclusive license to manufacture, market and sell EEM's real time air monitoring systems for all territories outside the former Soviet Union. Testing to date and OPC's research of the competition in the marketplace indicate that this technology holds the promise of a serious enhancement to both our power and water systems and contributes to cost efficiencies.
SAIC - San Diego California
Ocean power has signed a nonexclusive license with Science Applications International Inc. (www.saic.com) for its second-generation solar dish technology. SAIC, along with its strategic partner, Arizona Public Services (www.aps.com) will become minority shareholders (5% and 0.5% respectively) of a subsidiary company that Ocean Power is forming to commercialize a broad range of distributed power generation technologies in the US and Canada. David Moard will have primary responsibility for the day to day operations of the company, which has already been formed as a Delaware Corporation under the name of Powerco US, Inc..
Electric Power Research Institute - Palo Alto California
Electric Power Research Institute, (EPRI) has ordered its first unit for testing at its facilities in Knoxville, Tennessee as part of a signed Letter of Intent with OPC. This launches the process of commercializing the Company's 3 kW electric/9 kW thermal, home, Micro-CHP (Combined Heat and Power ) system. EPRI, (www.epri.com), is currently engaging its membership for the purpose of selecting utilities to partner with Ocean Power. The partnership will perform endurance testing and assist the company in meeting local and national building codes, deal with regulatory issues and put the appropriate installation and maintenance infrastructure in place supporting our Stirling micro combined heat and power products.
Organic Power - El Dorado Hills California
The Company is continuing to negotiate the terms of a definitive agreement with Organic Power (www.organicpower.com) for regional licenses. The licenses will permit OPC to market and install Organic Power's modular gasification plants, which produce energy, using biomass and solid waste as the fuel source. The initial proposed project is in California with follow-on projects proposed in our regional joint venture territories starting with Mexico. These specific projects will be used to define the working relationship, scope of the license and performance levels required to maintain an exclusive marketing arrangement in select geographic territories.
Fuel Cells
The initial testing has started on our low-temperature hydrogen generator and our advanced alkaline fuel cell design efforts continue to move forward under the direction of Dr. Robert Zhao and Mr. Sergey Puzhaev.
WATER
Malta
The Company has signed an exclusive distribution agreement with the Water Services Corporation and its subsidiary Malta Desalination Services, Ltd., (MDS). The agreement grants to Ocean Power the exclusive right to market, sell and install Seawater Reverse Osmosis (SWRO) desalination equipment produced by MDS on a global basis, excluding only the Island of Malta itself. MDS' packaged SWRO units will be the initial desalination subsystems used in Ocean Power's H2OkW Systems. These are currently operating at a competitive 2.8 kWh per cubic meter and we project a reduction to 2.0 kWh within the next 12 months. This translates into a much lower cost per cubic meter for potable water.
Regional Joint Ventures
The Company continues to work with its anticipated three regional partners in Greece, Mexico and the Caribbean to select and design the first H20KW systems for each region. Engineering design for the first Greek system is near completion and the design for the first system in Mexico is well underway. Project funding discussions have been initiated with regional economic development banks for the first system in Mexico.
The Company has secured an exclusive and expanded position regarding the license of the KIPT Plasma Chemical Reactor technology made available by way of the US Department of Energy and Pacific Northwest National Laboratory and Battelle Memorial Institute. The Company has secured, for testing, additional demonstration systems from KIPT under this project. One such system is slated to be tested with current and new desalination equipment in Malta later this year. If the tests are successful, the technology will be a very significant step toward commercial, economic, chemical free pre-treatment of seawater for desalination.
Ocean Power has continued to develop selected technologies supporting the overall Seawater Desalination System Development program and intends to expand this effort upon the completion of its current negotiations with Aquamax/Keeran and Hadwaco Oy.
A Few Words About Risk
While management remains optimistic as to the long term prospects for the Company, there are still many risks and uncertainties involved in the Company's business. Whether we are able to become and remain profitable will depend on our ability to generate and sustain increased revenues in excess of our expenses. We expect to experience significant growth in our operating expenses for the foreseeable future and that our revenues during this period will not be sufficient to offset our expenses. Future working capital requirements depend on many factors, including our ability to successfully execute our business plan. If our current funding plans prove insufficient to support future operating requirements, we will need to obtain additional funding by issuing additional equity securities or debt in the public or private capital markets. For a more complete discussion of the risks associated with our business, please see the "Risks and Uncertainties" section of our Amendment No.1. to Annual Report Form 10-KSB/A.
We appreciate your support and share your commitment to see Ocean Power grow as a strong force in the water and power fields.
Respectfully,
Joseph P. Maceda,
President
Gloria Rose Ott,
Chairman |
