Clean Air Power's flagship technology is its patented Dual-Fuel(TM) system, which enables heavy duty diesel engines to operate primarily on natural gas, with diesel fuel acting as a 'liquid spark plug'. The diesel engine is basically unchanged and retains its high performance and high efficiency 4-stroke diesel cycle. By efficiently burning up to 90% natural gas, in certain applications, customers benefit from lower fuel costs and a lower carbon footprint. Dual-Fuel(TM) can operate normally on bio-methane and bio-diesel, giving it the potential to be carbon-neutral. If the natural gas supply runs out, the Dual-Fuel(TM) system changes seamlessly to operate on 100% diesel, giving complete diesel operational back-up, a crucial feature in attracting risk averse operators to a new technology.
The primary target market for this technology lies within the estimated 1.3m heavy duty (above 16 tonnes) vehicles sold annually. It is, however, technically feasible to apply Clean Air Power's technology to any diesel engine and in the longer term it is expected that the much larger, medium and light duty vehicle sectors will also become potential targets. During 2010, we developed a Dual-Fuel(TM) Snowblower for Volvo Construction and Schmidt on a Volvo 9 litre engine. We also developed our system on a bus, for the Volvo Bus Corporation. The success of this co-operation has led to initial orders for 11 units from Volvo bus, which will be delivered during 2011.
2010 was a successful year for this division as revenues increased to GBP2.76m compared with GBP1.81m in 2009. This 52% increase is due mainly to revenue from development activity and increased Dual-Fuel(TM) vehicle systems sales. 2011 sales are currently slower than expected but expected to gain momentum later in the year with positive indications for both UK and Australia.
The Dual-Fuel(TM) technology is currently available in two main variants; the Interfaced product and the 'Genesis EDGE' retro-fit product currently marketed in Europe.
Interfaced Vehicle System:
In this solution our technology is interfaced with the manufacturer's electronic engine management system. This requires the cooperation of the vehicle manufacturer to integrate the Clean Air Power software with the vehicles existing Electronic Control Unit. This integration increases the flexibility with which the engine fuelling can be managed and, as a result, maximises the product benefits in terms of carbon emissions and fuel cost savings. Between approximately 70% to 90% of the diesel normally used by the vehicle is substituted for gas in our interfaced products.
In order to sell interfaced Dual-Fuel(TM) vehicles, compliance with the relevant emissions regulations is required in most markets. Clean Air Power's preferred strategy is to demonstrate such compliance in partnership with a manufacturer and then allow the manufacturer, with the Company's support, to gain the necessary compliance requirements and then market the product. This arrangement is in place with Volvo.
Clean Air Power's only current interfaced product in full production is installed on Caterpillar engines. However, this product is at the end of its life cycle with only certain niche markets in Australia being current realistic targets. During 2010, sales were affected by this reduced opportunity and by the delay in commissioning the LNG plant in Tasmania and the subsequent delayed supply of fuel used in the target market.
'Genesis EDGE' Retro-Fit Vehicle System:
The 'Genesis EDGE' system was developed specifically to be a retro-fitted product which can be installed without the need for formal co-operation of the engine manufacturer. This new product launched in the summer of 2010 incorporates improved software which has increased the expected diesel substitution performance. The solution does not interface directly with the vehicles own engine management system and up to 60% of the diesel normally used by the vehicle is substituted for gas. The emissions and fuel savings are therefore lower than would be expected on a fully interfaced system, but are still commercially attractive in the target markets, particularly with recent oil price increases.
2011 sales are currently slower than expected but expected to gain momentum later in the year with in both UK and Australia.
Components Division
Clean Air Power designs and manufactures a number of components that are used in the Group's Dual-Fuel(TM) technology. These components are also commercially available to enable automotive and truck manufacturers to build low-emission natural gas vehicles that meet worldwide emissions regulations. Volvo and Mercedes-Benz currently manufacture engines with Clean Air Power's components, including gas injectors and coalescing filters. Clean Air Power components are certified by the EU standard ECE R 110. Revenue and cash generated by this division are an important supplement to Clean Air Power's overall business, particularly while we develop core Dual-Fuel(TM) products.
In 2010 sales reduced by 27% to GBP2.11m from GBP2.90m in 2009, as a result of a planned decrease in activity from a US based defence contractor. This business tends to operate with long initial order lead times but thereafter receives regular ongoing revenues, once customers have specified one of our products into their engines. Repeat orders can typically then be expected, often for the life of the vehicle to provide for maintenance and servicing needs. We expect that 2011 revenues in this division will be lower than 2010 due to the loss of a large customer.
Emissions Reduction Division
This division provides systems incorporating catalyzed substrates supplied by specialist manufacturers and can be integrated during the initial installation or retrofitted to older existing engines and plants. New and more stringent legislation is driving the development and application of exhaust after-treatment in all areas where internal combustion engines operate. It is extremely unlikely that developments in base-engine technology will meet these regulations, thus guaranteeing a need for companies to use emissions reduction technology far into the future.
A major success in 2010 has been the development of a new product offering. Historically this division has only provided emissions solutions to very large stationary diesel and natural gas engines such as those used in pumping stations. However, during 2010 the division secured orders with Emissions Solutions Inc. (ESI) for catalytic convertors to be used on a 7.6L Natural Gas Engine for trucks and buses in the USA. These trucks are compliant with the US EPA '10 emissions levels which require near-zero emissions of particulates and NOx.
In 2010 revenues decreased by 15% with sales of GBP0.92m compared with GBP1.08m in the previous year, partly due to budget cut backs within our customer base for large scale projects. The increased revenue from the new products helped to offset the deficit from the large scale projects during the year. Revenue from both areas is targeted for the future although trading levels are below expectations for early 2011.
Outlook
Our key objective in 2010 was to deliver a contract with an OEM partner. This was achieved in July 2010 with the signing of the Supply and Development Agreements with Volvo. The top priority in 2011 is to support Volvo to bring this product to market, thereby providing the Company with its first interfaced product launch since its admission to AIM. Development of the product is being finalised and the commencement of limited production is expected in the second half of 2011.
Discussions with Navistar are ongoing and we aim to progress from Concept Development towards a Full Development Contract.
The Company expects to deliver Dual-Fuel(TM) systems for 11 buses under its agreement with Volvo Bus and may progress certain other opportunities depending on resource requirements for the key manufacturer projects, which remain the main focus.
We have a strong team with excellent experience that ensures that the Company is well placed to deliver on these projects and capitalise on other opportunities for the year ahead.
While we are delighted to have made such good progress with Volvo and Navistar, we continue to discuss co-operation opportunities with other potential partners and engine developers.
In addition to the activity with manufacturers, Clean Air Power plans to expand its 'Genesis EDGE' Dual-Fuel(TM) system offering into new markets to supplement revenues during the incremental roll out of the Volvo products.
The Company continues to explore avenues in which to maximise shareholder value and during 2011 intends to evaluate the feasibility and potential benefits of a listing on a North American market.
Clean Air Power continues to receive a significant and increasing level of interest from a variety of organisations with regard to the use of its Dual-Fuel(TM) technology. While some of these may be of interest in the long term, our clear focus remains firmly fixed on the delivery of agreements with manufacturers to incorporate our Dual-Fuel(TM) technology on their vehicles.
The primary target market for this technology lies within the estimated 1.3m heavy duty (above 16 tonnes) vehicles sold annually. It is, however, technically feasible to apply Clean Air Power's technology to any diesel engine and in the longer term it is expected that the much larger, medium and light duty vehicle sectors will also become potential targets. During 2010, we developed a Dual-Fuel(TM) Snowblower for Volvo Construction and Schmidt on a Volvo 9 litre engine. We also developed our system on a bus, for the Volvo Bus Corporation. The success of this co-operation has led to initial orders for 11 units from Volvo bus, which will be delivered during 2011.
2010 was a successful year for this division as revenues increased to GBP2.76m compared with GBP1.81m in 2009. This 52% increase is due mainly to revenue from development activity and increased Dual-Fuel(TM) vehicle systems sales. 2011 sales are currently slower than expected but expected to gain momentum later in the year with positive indications for both UK and Australia.
The Dual-Fuel(TM) technology is currently available in two main variants; the Interfaced product and the 'Genesis EDGE' retro-fit product currently marketed in Europe.
Interfaced Vehicle System:
In this solution our technology is interfaced with the manufacturer's electronic engine management system. This requires the cooperation of the vehicle manufacturer to integrate the Clean Air Power software with the vehicles existing Electronic Control Unit. This integration increases the flexibility with which the engine fuelling can be managed and, as a result, maximises the product benefits in terms of carbon emissions and fuel cost savings. Between approximately 70% to 90% of the diesel normally used by the vehicle is substituted for gas in our interfaced products.
In order to sell interfaced Dual-Fuel(TM) vehicles, compliance with the relevant emissions regulations is required in most markets. Clean Air Power's preferred strategy is to demonstrate such compliance in partnership with a manufacturer and then allow the manufacturer, with the Company's support, to gain the necessary compliance requirements and then market the product. This arrangement is in place with Volvo.
Clean Air Power's only current interfaced product in full production is installed on Caterpillar engines. However, this product is at the end of its life cycle with only certain niche markets in Australia being current realistic targets. During 2010, sales were affected by this reduced opportunity and by the delay in commissioning the LNG plant in Tasmania and the subsequent delayed supply of fuel used in the target market.
'Genesis EDGE' Retro-Fit Vehicle System:
The 'Genesis EDGE' system was developed specifically to be a retro-fitted product which can be installed without the need for formal co-operation of the engine manufacturer. This new product launched in the summer of 2010 incorporates improved software which has increased the expected diesel substitution performance. The solution does not interface directly with the vehicles own engine management system and up to 60% of the diesel normally used by the vehicle is substituted for gas. The emissions and fuel savings are therefore lower than would be expected on a fully interfaced system, but are still commercially attractive in the target markets, particularly with recent oil price increases.
2011 sales are currently slower than expected but expected to gain momentum later in the year with in both UK and Australia.
Components Division
Clean Air Power designs and manufactures a number of components that are used in the Group's Dual-Fuel(TM) technology. These components are also commercially available to enable automotive and truck manufacturers to build low-emission natural gas vehicles that meet worldwide emissions regulations. Volvo and Mercedes-Benz currently manufacture engines with Clean Air Power's components, including gas injectors and coalescing filters. Clean Air Power components are certified by the EU standard ECE R 110. Revenue and cash generated by this division are an important supplement to Clean Air Power's overall business, particularly while we develop core Dual-Fuel(TM) products.
In 2010 sales reduced by 27% to GBP2.11m from GBP2.90m in 2009, as a result of a planned decrease in activity from a US based defence contractor. This business tends to operate with long initial order lead times but thereafter receives regular ongoing revenues, once customers have specified one of our products into their engines. Repeat orders can typically then be expected, often for the life of the vehicle to provide for maintenance and servicing needs. We expect that 2011 revenues in this division will be lower than 2010 due to the loss of a large customer.
Emissions Reduction Division
This division provides systems incorporating catalyzed substrates supplied by specialist manufacturers and can be integrated during the initial installation or retrofitted to older existing engines and plants. New and more stringent legislation is driving the development and application of exhaust after-treatment in all areas where internal combustion engines operate. It is extremely unlikely that developments in base-engine technology will meet these regulations, thus guaranteeing a need for companies to use emissions reduction technology far into the future.
A major success in 2010 has been the development of a new product offering. Historically this division has only provided emissions solutions to very large stationary diesel and natural gas engines such as those used in pumping stations. However, during 2010 the division secured orders with Emissions Solutions Inc. (ESI) for catalytic convertors to be used on a 7.6L Natural Gas Engine for trucks and buses in the USA. These trucks are compliant with the US EPA '10 emissions levels which require near-zero emissions of particulates and NOx.
In 2010 revenues decreased by 15% with sales of GBP0.92m compared with GBP1.08m in the previous year, partly due to budget cut backs within our customer base for large scale projects. The increased revenue from the new products helped to offset the deficit from the large scale projects during the year. Revenue from both areas is targeted for the future although trading levels are below expectations for early 2011.
Outlook
Our key objective in 2010 was to deliver a contract with an OEM partner. This was achieved in July 2010 with the signing of the Supply and Development Agreements with Volvo. The top priority in 2011 is to support Volvo to bring this product to market, thereby providing the Company with its first interfaced product launch since its admission to AIM. Development of the product is being finalised and the commencement of limited production is expected in the second half of 2011.
Discussions with Navistar are ongoing and we aim to progress from Concept Development towards a Full Development Contract.
The Company expects to deliver Dual-Fuel(TM) systems for 11 buses under its agreement with Volvo Bus and may progress certain other opportunities depending on resource requirements for the key manufacturer projects, which remain the main focus.
We have a strong team with excellent experience that ensures that the Company is well placed to deliver on these projects and capitalise on other opportunities for the year ahead.
While we are delighted to have made such good progress with Volvo and Navistar, we continue to discuss co-operation opportunities with other potential partners and engine developers.
In addition to the activity with manufacturers, Clean Air Power plans to expand its 'Genesis EDGE' Dual-Fuel(TM) system offering into new markets to supplement revenues during the incremental roll out of the Volvo products.
The Company continues to explore avenues in which to maximise shareholder value and during 2011 intends to evaluate the feasibility and potential benefits of a listing on a North American market.
Clean Air Power continues to receive a significant and increasing level of interest from a variety of organisations with regard to the use of its Dual-Fuel(TM) technology. While some of these may be of interest in the long term, our clear focus remains firmly fixed on the delivery of agreements with manufacturers to incorporate our Dual-Fuel(TM) technology on their vehicles.
