OPT's 2008 Annual Report (yr ending 30 April 2008) sets out a...

OPT's 2008 Annual Report (yr ending 30 April 2008) sets out a few of the hurdles OPT has to overcome before it can be commercially competitive.

The biggest problem is that they say they will only be cost competitve if they can increase the power output of each PowerBuoy unit to 500kw (and manufacture 300 a year). They currently have only deployed a 40kw unit. Whilst their aim is to increase this to 150kw initially, they are not sure whether they can increase the output to 500kw and even if they do, they are not sure how massive the unit will need to be and what effect that will have on their ability to transport and deploy each 500kw unit. (NOTE: A 500kW PowerBuoy is expected to have a maximum diameter of approximately 62 feet and be approximately 128 feet
long with approximately 26 feet protruding above the ocean surface.)

OPT have had to frequently delay their timetable for development. I remember a scathing broker's report (in a media article) on OPT from about 1yr ago or so when OPT decided they needed to completely redesign their PowerBuoys to improve their ability to survive storms. The broker wasnt impressed to say the least. This delay as a result of the re-design must be why the dates in the extract below have blown out (they have not yet deployed a 150kw buoy).

By comparison, CETO III will be cost competitive at 180kw-200kw and that commercial size will be deployed this year (who knows when a 500kw PowerBuoy will be deployed?). Although i havent seen any figures, I'd say it's a safe bet that, becasue of the simplicity of the CETO design and the fact that the generating equiptment is onshore, each CETO III unit will be a lot smaller, weigh a lot less and be far more easily transportable and deployable (those last two things are key factors that has motivated the design from day one - Burns and Ottaviano are business people - they wanted a business model that would ultimately work - no point designing a fantastic machine that isn't cost effective to get to where it needs to be).


Here's the bits from the "RISK FACTORS" section in their 2008 annual report that caught my attention.


**** Our future success depends on our ability to increase the maximum rated power output of our utility PowerBuoy system. If we are unable to increase the maximum rated output of our utility PowerBuoy system, the commercial prospects for our utility PowerBuoy system would be adversely affected.

One of our goals is to increase the maximum rated output of our utility PowerBuoy system, which is currently 40kW, to 150kW in 2008 and ultimately to 500kW in 2010. Our success in meeting this objective depends on our ability to significantly increase the power output of our PowerBuoy system in a cost-effective and timely manner and our ability to overcome the engineering and deployment hurdles that we face, including developing design and construction techniques that will enable the larger PowerBuoy systems to be deployed cost effectively and without damage, and developing adjustments to the mooring system to account for the larger-sized PowerBuoy systems. We have experienced delays in the development and deployment of our PowerBuoy system in the past, and could experience similar delays or other difficulties in the future. The present schedule for development of the 150kW PowerBuoy reflects management’s decision to enhance the system design to allow for improved survivability in 100-year storm wave conditions, and to work with a third-party engineering group to attain independent certification of the 150kW PowerBuoy design. If we cannot increase the power output of the PowerBuoy system, or if it takes us longer to do so than we anticipate, we may be unable to expand our business, maintain our competitive position, satisfy our contractual obligations or become profitable. In addition, if the cost associated with these development efforts exceeds our projections, our results of operations will be adversely affected.


***** If we do not reach full commercial scale, we may not be able to offer a cost competitive power station
and the commercial prospects of our utility PowerBuoy system would be adversely affected.

Unless we reach full commercial scale, which we estimate to be manufacturing levels of at least 300 units of 500kW PowerBuoy systems per year, we may not be able to offer an electricity solution that competes on a nonsubsidized basis with today’s price of wholesale electricity in key markets in the United States, Europe, Japan and Australia. If we do not reach full commercial scale, the commercial prospects for our utility PowerBuoy system would be adversely affected.


***** We have not yet deployed a wave power station consisting of an array of two or more PowerBuoy systems. If we are unable to deploy a multiple-system wave power station, our revenues may not increase, and we may be unable to achieve and then maintain profitability. We have not yet deployed a wave power station consisting of an array of two or more PowerBuoy systems. Our success in developing and deploying a wave power station consisting of an array of two or more PowerBuoy systems is contingent upon, among other things, receipt of required governmental permits, obtaining adequate financing, successful array design implementation and finally, successful deployment and connection of the PowerBuoy systems.

We have not conducted ocean testing or otherwise installed in the ocean a multiple-system wave power station. In particular, unlike single-system wave power stations, multiple-system wave power stations require use of an underwater substation to connect the cables from, and collect the electricity generated by, each PowerBuoy system
in the array. If our underwater substation does not work as we anticipate, we will need to design an alternative
system, which could delay our business plans. In addition, unanticipated issues may arise with the logistics and
mechanics of deploying and maintaining multiple PowerBuoy systems at a single site and the additional equipment
associated with these multiple-system wave power stations.
We may be unsuccessful in accomplishing any of these tasks or doing so on a timely basis. The development and deployment of an array of PowerBuoy systems may require us to incur significant expenses for preliminary engineering, permitting and legal and other expenses before we can determine whether a project is feasible, economically attractive or capable of being financed.


***** If we are unable to deploy larger PowerBuoy systems cost effectively and without damage to the systems,
we may be unable to compete effectively.

We will need to build larger buoys in order to increase the output of our current PowerBuoy systems. The larger buoys will be more difficult than our current buoys to deploy cost effectively and without damage. Our current deployment methodologies, including transportation to the installation site and the mooring of the PowerBuoy systems, will need to be revised for PowerBuoy systems with greater output. If we cannot develop cost effective methodologies for deployment of the larger PowerBuoy systems, or if it takes us longer to do so than we anticipate, we may not be able to deploy such systems in the time we anticipate or at all. Therefore, even if we succeed in increasing the output of our PowerBuoy systems above 40kW, if we are unable to deploy these larger PowerBuoy systems or encounter problems in doing so, we may be unable to expand our business, maintain our competitive position, satisfy our contractual obligations or become profitable.

http://library.corporate-ir.net/library/15/155/155437/items/306426/2008%20OPT%20Annual%20Report.pdf