Specialist power firm Wasabi Energy (LON:WAS) is currently rolling out its propriety Kalina Cycle technology, which recycles heat from industrial processes to generate electricity.
The company's recent deal with Chinese oil firm Sinopec caught the eye.
Here we catch up with Leif Powis, Wasabi's London based business development analyst, who briefed us on the exciting developments that the company is pursuing.
Proactive: So tell us more about the area Wasabi Energy works in?
Powis: Wasabi Energy is a power producer with a focus on turning heat into electricity.
The heat sources can be either a liquid or a gas and come from industrial plants such as steel, cement, petrochemical or even power stations themselves or renewable heat sources namely geothermal or solar thermal.
This adds value by creating power from a previously wasted heat source, it improves a plant’s energy efficiency, decreases operating costs and lowers greenhouse gas emissions.
To turn the heat into power we have a proprietary power cycle system called the Kalina Cycle which uses an ammonia-water mixture in a closed loop system. It operates in a similar way to a conventional steam cycle.
An ammonia-water fluid heats up by using the heat from the heat source to form steam which is passed through a turbine generator to make electricity. The ammonia-water steam is then cooled back into a liquid form. The process then starts again.
The Kalina Cycle is the most efficient way of turning low to mid temperature heat into electrical power and can provide up to 50% more power than competing technologies.
What has been the group’s main focus in the past six months? And what, in your view, what have been the operational highlights?
The group’s main focus over the last 6 months has been the continued building of Wasabi Energy as a leading independent power producer through the global adoption of the Kalina Cycle.
We have been focused on delivering our first and largest Kalina Cycle power plant with FLSmidth at DG Khan’s cement plant in Pakistan. In addition we have been supporting our licensees that have had success with the development of the Kalina Cycle in their sectors.
One licensee secured a 4.75 MWe Kalina Cycle power plant at Star Cement’s plant in the United Arab Emirates and this month another started undertaking a design for a 4.0 MWe Kalina Cycle plant for Sinopec, one of China’s largest integrated petrochemical groups.
In addition Wasabi, through its subsidiary Imparator Enerji, has committed to buying an option for 50 per cent of a geothermal field near Tuzla, Turkey. The project covers an area of approximately 11km2 of a very shallow and relatively high temperature geothermal zone. It has an operating 7.5 MWe power plant that was installed in January 2010.
We are collaborating with the technical team to develop a work programme of potential modifications to the existing power plant. Concurrently we have started the development of a pre-feasibility study for a proposed 14 - 17.5 MWe first-stage build-out which may utilise Wasabi Energy’s proprietary Kalina Cycle® technology.
In Africa, we purchased 25 per cent of AAP Carbon, a group that engineers, builds, accredits and invests in clean energy projects - this generates carbon credits under the Clean Development Mechanism (CDM) of the Kyoto Protocol.
The focus has been the energy intensive ferrochrome industry where it harvests the off-gases from furnaces for conversion into electricity by using gas-fuel reciprocating engines. A Kalina Cycle power plant can take the exhaust gases from these engines and produce up to 20% of additional power.
Through the investment in AAP Carbon, Wasabi Energy is diversifying its power technology offering to the market by being able to convert gases into electricity.
Wasabi has signed a number of deals over the past few months, is the Kalina technology now gaining general recognition and what is the pipeline for further deals?
The strategy is to rapidly deploy the Kalina Cycle through two key strategies – build, own operate and through licensing our proprietary technology to key industry or countries. We are progressing our strategy on a number of fronts.
As electricity prices continue to rise, power security is reducing and the concerns over greenhouse gas emissions increase, large organizations and countries are committing to find energy efficient solutions to increase their energy output while decreasing their carbon footprint.
The Kalina Cycle is a well understood power cycle and has been widely accepted as the most efficient way to turning low to mid temperature heat into power for a number years.
So we expect increasing implementations of Kalina Cycle® power plants.
What are your goals, and when do you expect to acheive them?
We have a strong pipeline of projects - with 15MW under construction, 14.5MW at feasibility stage and approximately 45MW at pre-feasibility stage.
This underpins our goals to have 25MW under construction/operation within 12 months, 50MW within 3 years and more than 100MW within 5 years. In addition the company continues to develop its IP and expects to continue to lodge new patents for its technology.
When will significant revenues start to come through?
Wasabi Energy has three key revenue streams: Engineering, design and procurement fees; License fees (a one off payment when a license is signed) as well as royalty payments, typically ranging from US$50,000 to $150,000 per MW; And revenues from electricity sales from build, own, operate power plants
The development of our business has seen revenues to date from the first two revenue streams namely engineering and license fees. We expect that fees in these two areas will continue in the coming years.
Our licensing strategy has many benefits including the full technology transfer to key industry partners and access to a large market potential (for example FLSmitdh have built over 1500 cement plants globally).
Revenue streams from build, own, operate plants are longer term with the construction of a power plant taking approximately 18 months to two years after the initial design.
Upon exercising the option at Tuzla Wasabi Energy will receive revenues from the operation of the existing 7.5 MWe power plant. In addition the completion of the 2 MWe Husavik Kalina Cycle Geothermal Power Plant in Iceland in the second half of 2013 will also bring in power sales revenues.
We are also working on a number of other build, own, operate opportunities that once approved and constructed will bring additional revenues from power sales.
We have focused on areas where there are defined and reasonable feed-in electricity tariffs, for example Turkey and Japan have recently announced feed in tariffs for their geothermal power plants of US$0.105 & US$0.51 per kilowatt hour respectively. In addition we are also constantly reviewing opportunities where there are existing operational power plants where we may buy a stake in the projects.
How significant is the deal with Sinopec?
The Sinopec design contract is a significant step in the Kalina Cycle penetration strategy as, not only is Sinopec one of the largest integrated energy and chemical companies in China, it also operates 45 major petrochemical facilities that could utilize the Kalina Cycle for waste heat recovery.
This implementation of the Kalina Cycle is just one part of the petrochemical process and it could be applied to other waste heat streams within the petrochemical plant, thereby improving energy efficient and reducing the environmental impact.
The initial design contract is for a 4.0 MWe Kalina Cycle plant at the Hainan petrochemical plant and, if as expected, the project leads to construction the Kalina Cycle plant it will be operational late 2013.
How significant could the oil/gas application eventually become?
As indicated by the US Department of Energy there is enormous potential in the US for power generation and this can be replicated in a number of regions around the world where there are existing or abandoned fields.
The US Department of Energy released a paper on this application indicating a potential of up to 7,800 MW of power available just in the US alone. The potential of this energy source can be multiplied when applied globally to existing or abandoned oil and gas fields.
We have been approached by a number of groups that have interests in oil and gas fields to look at the applicability of the Kalina Cycle to the hot fluids within these fields.
Are you expecting much news flow in the coming months? If so, what can investors expect?
Investors can in the coming month expect the continued adoption of the Kalina Cycle within its major applications of geothermal and industrial waste heat to power (including cement, steel petrochemical and glass making).
As previously mentioned Wasabi Energy has a strong pipeline of projects
And we envisage a continual stream of news flow as the projects in our pipeline convert. It is our intention to focus on geographical areas with attractive electricity prices, energy security issues and concerns over greenhouse gas emissions.
What, in your opinion, will be the catalysts for investors to look for in the coming months?
Strong demand continues for increased energy efficiency in industry due to rising power costs and growing demand for electricity, combined pressure of industry to be efficient and reduce greenhouse gases.
As a result, we are in on-going discussions with a number of major organisations across the world with a focus on energy intensive industry players.
In addition the demand for renewable energy continues to grow as many countries strive to reach their renewable targets.
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