Friday, September 07, 2007

Students' Lesson on Fuel Cells

Leroy Ohlsen looked back at this college days at the University of Washington and said, “There has got be a better way.” Ohlsen studied chemistry and learned about proton exchange membranes (PEM) that have long been the central piece in fuel cell technology. Anyone following the fuel cell industry knows that the difficulties developers have in achieving and maintaining the tight chemical balances necessary for PEM-based fuel cells.

Ohlsen and a fellow student decided to scrap what they learned in school and use a porous silicon instead of the PEM as the structure across which energy is created through the interaction of fuel, oxidant and electrolyte. They founded
Neah Power Systems, Inc. (NPWS: OTC/BB) in 1999 to commercialize their innovation.

Based on Bothell, Washington, Neah Power Systems, has attracted venture capital support from some heavy hitters: Intel Capital, Castile Ventures, Frazier Technology Ventures and Alta Partners. The company has also attracted some strong engineering and business talent. Ohlsen is still on board as the chief technology officer. Dr. Arthur Homa, VP of Engineering, is fresh from Bolder Technologies, another early-stage battery development company, and previously from Rayovac Corporation, a well established battery producer. Earlier this week Dr. Gerard D’Couto came on board as COO. D’Couto was previously with Novellus and Varian Associates.

What has these experienced investors and managers excited? Neah is targeting the very large and growing market for light weight, portable batteries for the military and consumer computing markets. The company cites a market size of $1.0 billion for the military and aerospace market alone. Most consumers with even a few electronic gadgets can appreciate the market opportunity for any producer with a longer-life and/or lower-cost battery.

Neah just announced successful testing of its fuel cell components and expects to have a working prototype by the end of September 2007. Next the company is working on proving a working battery for 10 watt to 100 watt devices.

Of course, there were no sales yet. However, Neah was successful in landing a $1.4 million contract with the Office of Naval Research to complete development work on “porous silicon electrodes.” The contract could not have come at a better time. The company used $3.5 million in cash during the first half of 2007. With only $1.9 million in the bank and no sales, Neah needs the cash inflow.

Despite the obvious concern that silicon is an expensive material, I think Neah Power is a company to watch. It is too early to pass judgment on whether the company can find enough efficiency elsewhere to make up for the cost of using silicon as a critical component in their product.

There is a great deal of work being done to improve lithium ion batteries. (See the earlier post “Back to School Power Boost.”) There is a wide gap between the power needs from mobile electronic gadgetry and equipment and power supplies from conventional lead acid, nickel metal hydride and lithium ion batteries. It seems likely that more than one battery solution will be needed to fill it.

NPWS shares are currently priced near $0.25, making the stock more like an option on Ohlsen’s innovation. There is also strong volume for risk tolerant investors with the willingness to speculate on this team of scientists and venture capitalists.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

1 comment:

Anonymous said...

After many hours of research, I have concluded that the porous silicon technology that Neah Power Systems (NPWS) company is developing... is by far the most advanced technology in the Direct Methanol Fuel Cells (DMFC) arena. With the announced success of their working prototype model on 9-28-07, I am more encouraged about the success of this company. Although it is a well known fact that Neah Power needs more capital to continue their business plan, I do not foresee any problems with this firm obtaining the needed funds once they reach the more astute investors. From what I've read in the past few days, it looks like Neah Power has taken steps to improve the marketing of their name with the help of Axiom Capital Management Inc., c/o Scott Livingston. I wish them well!

With Neah Power's fuel cell having a power density ratio that is at least three (3) times that of any PEM DMFC (that I am aware of)... this fact alone helps separate them from their competition.

Also, Neah Power is looking mighty strong by having at least 11 patents pertaining to this porous silicon fuel cell technology. There is nobody else with this patent technology!!

This makes them shine a little brighter in my speculative portfolio! Well... you can easily see that I am NOT hiding the fact that I have taken the investment plunge in NPWS, but I certainly wouldn't want to mislead anyone either... so I freely admit that this is NOT a guaranteed investment , but it is certainly a stock for one to consider if they have the resources to tinker with. I am excited and hopeful myself... How about you?