Making waves: the company you've never heard of

www.smh.com.au
October 26, 2009

The most important small business you've never heard of before has recently inked another deal to set up a sea-based power station in Japan. US-based Ocean Power Technologies, founded by an Australian inventor, builds buoys that ride waves, converting their natural energy into electricity, promoting a technology that could ease carbon emissions while powering cities and industries. In Australia OPT is partnering with Leighton Contractors to build a 19-MW demonstration wave station near Portland, Victoria, which would create enough electricity to power about 7000 homes.

The Victorian project is "quite advanced", said OPT (Australasia) director Gilbert George. However, its biggest impact for the company and its technology would be its commercial significance once operational. Mr George said the company had made a "very detailed submissions to the Victorian Government", while the company is seeking debt and equity funding for the project. With the race between China, Europe and the US to dominate green-energy production heating up, OPT is angling to have its technology adapted by energy companies in Europe, Australia, Asia and North America.

Low profile
Proving its technology makes business sense is the next step for the company which is not well-known even within the emerging green power industry - another challenge for a company proposing an alternative not just to fossil fuels, but to the wind and solar energy producers. "Being very focused on technology, we haven't had a high profile," said Mr George. "We haven't really looked until recently at actively promoting what we're doing."

OPT's buoys use the ocean's rising and falling motion to move an internal piston, which in turn drives an on-board electrical generator. That power is then transmitted ashore through an underwater cable. Buoys requiring less than a tenth of a square kilometre of ocean could generate 10 MWs of electricity, more than a train locomotive. Expanding them into full wave farms could generate 100 MWs or more, enough to power about 40,000-50,000 homes. "OPT is really a technology development company," said Mr George, noting the company which generated $US4 million last year but has about $US80 million in the bank.

The revenues help offset the cost of employing the 60-odd engineers the company hires, slowing the company's cash burn rate. "Owning individual power stations is not our business," he said. "But we're well funded to develop and deliver technology into these projects." The company is building a 10 buoy wave farm near off the north coast of Spain in conjunction with Spanish energy company Iberdola and French energy company Total. Once the design and development stage ends, Iberdola said it plans to roll out wave farms generating 100s of MWs in the Bay of Biscay, Mr George said. OPT is focusing its sales in North America, Europe, Australia and the east coast of Japan.

Australian founder
The US Navy accounted for the bulk of OPT's revenues, for a small wave farm it is building off-shore from a military base in Oahu, Hawaii. Income from Iberdola and Total makes up the rest. However, this month the company inked an agreement with three Japanese companies, Idemitsu Kosan, Mitsui Engineering & Shipbuilding, and Japan Wind Development, for another demonstration wave power station in Japan. The company also signed a deal with defence manufacturer Lockheed to develop utility-scale power systems in the US.

Hailing originally from Perth company co-founder and executive chairman George W. Taylor first made his name developing liquid crystal displays and digital watch technology in the US in the 1970s and 1980s. The idea of harnessing the natural energy of ocean waves came to Dr Taylor and his business partner, the late Dr. Joseph R. Burns in the aftermath of the OPEC crisis of the 1970s.

The company was founded in 1994 and began ocean trials off the coast of New Jersey in 1997. It is listed on the London Stock Exchange's AIM market and the Nasdaq in the US. After attracting companies such as Lockheed, Leighton and Mitsui Shipbuilding in Japan, Mr George said OPT is now "identifying ways in which we can put projects together that minimise the risks for the companies prepared to take the first big step".