Ocean Power is working actively with Lockheed Martin on its teaming agreement to develop a 19-megawatt energy project off the coast of Victoria in Australia. Lockheed Martin is assisting in design manufacturability, supply chain expertise and overall project management. The project is to be developed by a special purpose Australian company, Victorian Wave Partners, which is currently owned by OPT's subsidiary, Ocean Power Technologies Australasia. Funding includes a grant of AUD 66.5 million from Australia's Department of Resources, Energy and Tourism. The grant has funding milestones, including the receipt of additional funding. OPT expects the project to create a considerable number of local jobs for both the development and operation of the project. Community reaction has been positive so far.
OPT continues to explore additional funding to meet Phase 1 of the 3-phase Australia project and to meet with parties regarding a potential power purchase agreement. Phase 1 would consist of 3 buoys and some development work on the next generation buoy. The budget for Phase 1 is currently $40 million and OPT has about 50 percent of that amount through the grant. It is trying to obtain funding through corporations that would be interested in the project and through additional grant funding. OPT only needs to get funding for phase 1, not the entire project, before it can pull in the grant money. Phase 1 would only represent validation of the technology; the return on the investment likely would not occur until phases 2 and 3.
In August, the U.S. Federal Energy Regulatory Commission approved a full buildout of OPT's proposed 1.5 megawatt grid-connected wave power station off of Reedsport, Oregon. This is the first license to be issued to a power wave station in the United States. OPT is in the final process of assembling and testing the initial PowerBuoy to be installed off Reedsport and expects the first buoy to be ready to be deployed in late October. The actual deployment date will depend on the weather. The 35-year license allows OPT to deploy up to 10 PowerBuoys, which can power 1,000 homes. Other parties involved in the project include PNGC Power, which supported the funding for the project, and Lockheed Martin, which is providing design manufacturing and supply chain management expertise.
OPT entered into a Cooperative Research and Development Agreement (CRADA) with the U.S. Department of Homeland Security to enhance the technology for ocean surveillance. In conjunction with this project, OPT was awarded a grant from the Maryland Technology Development Corporation to demonstrate how the Autonomous PowerBuoy (APB) can be used with multiple surveillance technology. OPT will be demonstrating persistent maritime vessel detection, expanding on work it began with its LEAP program last year. OPT continues to believe there is market potential for the Autonomous PowerBuoy in areas such as the oil and gas industry, academic oceanography and desalination. It hasn't received any orders yet, but the product is ready for these markets.
OPT continues to work on improving efficiency and enhancing its products. In Oregon, OPT is fielding a new drive power take-off (PTO) that it expects to have greater energy output, higher system efficiency, increased reliability and lower maintenance costs than its previous hydraulic PTO. In Spain, OPT's WavePort initiative is focused on demonstrating significant improvements to its electronic tuning system, which will enable the PowerBuoy to enhance its energy conversion efficiency by using wave prediction and control system enhancements to increase power output. In New Jersey, OPT continues to work on the next generation PowerBuoy, which will be more efficient and provide more power per ton.
Financials
Revenue in Q1 was $1 million versus $1.9 million a year ago. The reduction in revenue is attributed to the completion of the U.S. Navy's Littoral Expeditionary Autonomous PowerBuoy (LEAP) program in fiscal year 2012. However, some of this decline was offset by an increase in revenue from the European Union from OPT's WavePort project.
Net loss in Q1 was $4.4 million versus a net loss of $5 million in Q1/2012. The reduction in net loss is primarily attributable to a decrease in product development cost for the PB150 deployed off Scotland in 2011 and the PowerBuoy about to be deployed in Reedsport, Oregon.
Total cash, cash equivalents, restricted cash and investment were $29.4 million versus $33.2 million at the end of Q4/2012. Quarterly cash outflows will likely vary significantly in future periods, depending on the success of OPT's business development initiative and on expenditures related to the Oregon project.
The transcript of the earnings conference call can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/867911-ocean-power-technologies-management-discusses-q1-2013-results-earnings-call-transcript?part=single
Copyright 2012 Jaygo's Earnings Conference Call Summaries
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
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