Tuesday, April 15, 2008

Efficiency Quest

The alternative energy sector as it has developed so far includes a few brave explorers on a quest for efficiency. Two of those at the recent Wall Street Analyst Forum held in New York City last month.

Power Efficiency Corp. (PEFF: OTC/BB) has developed a technology - branded E-Save - to make motors run more efficiently. Its flagship product is a motor efficiency controller for use on escalators, granulators, mixers, saws and elevators. The company boasts that if its product was installed on all motors of this kind in the U.S., there would be a potential savings of $1.7 billion in electricity costs and a reduction in CO2 emissions by 14 million tons.

Power Efficiency has been successful in winning some big name customers, including Nordstrom’s, Universal Studios, and Los Angeles Metro (think escalators and elevators in these venues). The company is getting a boost for its sales from utilities in California that provide incentive financing to customers that want to retrofit existing equipment. Management is also pursuing OEM relationships for factory installation of its motor controller.

It all sounds great, but investors need to recognize that Power Efficiency is still at a very early stage in its development. Sales in 2007 totaled $491,000. The company burned $2.9 million in cash during the year, most of it on operating expenses. Cash resources were $5.1 million at the end of December 2007, which should buy management some time to ramp sales. In the meantime, PEFF shares are an option on the ability of management to penetrate its markets.

Motors are not the only common, everyday item in our lives that waste energy. How many light bulbs are in your home or office? Energy saving lights is just one of the energy saving technologies developed by Vista International Technologies, Inc. (VVIT: OTC/BB).

The company has not stopped with light bulbs its proclaimed mission to “reduce the carbon footprint, one step at a time.” Vista is also pursuing technologies for wind energy and waste-to-energy technologies. Vista’s wind turbines are geared to capture energy at low wind-speeds, which could win customers that want to operate in locations not now considered optimum for wind energy applications. The company has taken the same niche approach to waste-to-energy by developing a solution that accepts all kinds of trash in a gasifier. The methane-type gas that is produced is then used as fuel in a steam generator. Vista claims the relatively small size and modular design of its WTE solution makes it attractive for a variety of utility and manufacturing locations.

Vista has not produced many sales and appears to need a capital infusion to finance its entrance into commercial operations. Vista has announced two WTE projects in the last month and an acquisition of a WTR-related operation in Hawaii. Vista International, the majority shareholder of VVIT shares, recently invested $2.0 million in to the company, but we are concerned that may not be adequate to support a business model based on multiple technologies that require separate sales and marketing efforts.

On the upside for investors with a speculative temperament, Vista’s various technologies could be spun out at some point to competitors looking to fill out a product portfolio.

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.

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