It was a proud moment for Tecogen (TGEN – $3.77) representatives when they presented a paper at the prestigious SAE World Congress earlier this week. After all, when a provider of clean energy products is invited to present a paper on a platform as big as the SAE, it speaks volumes about the kind of research the Company is undertaking to eliminate criteria pollutants and significantly reduce the carbon footprint of engines.
SAE is a U.S.-based, globally active professional association and standards developing organization for engineering professionals in various industries. The organization has more than 127,000 engineers globally. Principal emphasis is placed on transport industries such as automotive, aerospace, and commercial vehicles.
The paper, entitled “Development and Testing of the Ultera® Dual Stage Catalyst System on Gasoline-Fueled Light Duty Vehicles”, was a compilation of the results achieved in Phase I and Phase 2 of the Ultera tests on automobile engines conducted in 2016. It was presented by Prof. Ahmed Ghoniem, Ronald C. Crane Chair Professor of Mechanical Engineering at MIT and Tecogen Board member.
Presenting a paper on such a platform is great as it gives the Company an opportunity to showcase its cutting edge research in front of a global audience.
Outstanding Phase I and Phase II Test Results
The main objective of the Phase I test was to verify that the favorable performance of the Ultera technology, which had been proven on stationary natural gas engines, could be repeated on a gasoline engine on a vehicle. The tests were conducted on two light duty trucks.
The so-called US06 standard drive cycle was performed. This cycle encompasses a high speed/quick acceleration loop that lasts 10 minutes, covers 8 miles (13 km), averages 48 mph (77 km/h) and reaches a top speed of 80 mph (130 km/h). It includes fours stops and a brisk acceleration.
The test results show that carbon monoxide (CO) emissions are reduced by as much as 94%. In addition, levels of non-methane hydrocarbons (NMOG) are lowered by 81%.
NOx + NMOG
Drive Cycle Test Results – Emissions (mg/mile). Source: Company Presentation.
Needless to say these were outstanding test results. As far as we know no other technology in the world has ever accomplished similar results with gasoline powered engines.
As a result of these highly encouraging Phase I results, Phase II testing on a broader range of vehicles commenced in September of 2016. This phase was concluded late October and was successful in accomplishing its goals with an Ultera device that was even more accurate than the unit used in Phase I. According to the Company, the tests have provided plenty of data showing the system’s effectiveness.
Robert Panora, Tecogen’s President and COO, and co-author of the paper noted, “This innovative aftertreatment technology will provide the automobile industry with an emission control system that can be both incorporated into vehicle design, or retrofitted to existing vehicles. We are very excited about the results”.
Both tests were conducted by AVL North America at their state-of-the-art California Technology Center in Lake Forest, CA. Its laboratory, in addition to its ability to accurately replicate driving conditions, can measure pollution output of the vehicle in real time with extreme precision.
AVL is the world’s largest independent company for the development, simulation, and testing of powertrain systems for passenger cars, trucks, and large internal combustion engines. For more than 60 years, AVL, which reached 1.15 billion euro in sales in 2014 and employs 7,500 people, has been working in partnership with companies all over the world.
ULTRATEK Joint Venture
In December 2015, following the outbreak of the Volkswagen emissions scandal, Tecogen formed Ultra Emissions Technologies Ltd (Ultratek), a joint venture to pursue this once-in-a-lifetime opportunity.
Tecogen received an initial 50% equity interest in the JV in exchange for a fully paid-up worldwide license to use Tecogen’s Ultera emissions control technology in the field of mobile vehicles burning gasoline. The other half of the joint venture equity interest was purchased for $3,000,000 by a small group of offshore investors.
In August 2016, the Ultratek stakeholders invested an additional $4 million, and the following month another $6.25 million was raised in a third round financing, bringing the total cash on hand to approximately $12.5 million. Very interesting to know is that investors in the third round of funding paid a substantial premium to prior funding rounds. During the initial round money was raised at $2 per share, while the second round – exercise of warrants – was conducted at $1 per share. In the third round investors paid $7.1656 per share. This gives ULTRATEK a valuation of $58.2 million!
Knowing that Tecogen currently owns 43.09% of ULTRATEK’s shares, its stake is worth about $25 million. Given Tecogen’s $73 million market capitalization, the Company’s core business is valued at only $48 million, which is extremely low.
The paper presented at the SAE World Congress described how Tecogen’s Ultera emissions technology was tested on an ultra-low emission vehicle resulted in significant reductions of carbon monoxide (CO), nitrogen oxides (NOx), and non-methane organic gas (NMOG) emissions, with no measurable effect on fuel economy.
The paper is a significant validation of the tests. After all, the most important aspect of negotiating with an automotive component supplier or car manufacturer is to make sure that the test data is unassailable and verified.
At the same time, it proved that Tecogen’s Ultera technology is a viable alternative to emerging new vehicle testing regulations that incorporate real world driving conditions, such as the EU6d Emission Regulation.
Adapting the Ultera technology to gasoline fueled automotive engines, represents an exciting and potential game-changing new market for Tecogen. The prospect of vehicle and stationary engines, with standard engine technology, but realizing fuel cell like emissions is tremendously compelling from a policy and market standpoint. Buy recommendation.
|Smallcaps.us Advice: Buy||Price Target: $9.44||Latest Company Report (pdf)|
|For important disclosures, please read our disclaimer.|