“It’s a Game-Changing Technology.”

A start-up company wants to sow the wind – and reap a bonanza. An interview with David A. Samuels, CFO of Catch the Wind Inc.

We secured another round of financing last May for another $20 million–plus, and that was completed at a premium. So when all is said and done, we raised about $35 million of capital in a very onerous environment. Our initial market cap was approximately $50 million, and when we closed the year it was about $110 million. So we had a pretty good year from a shareholder perspective.

Not bad! But you are a one-product company offering something new to a market still struggling to take hold. That must make for some sleepless nights.

We just completed a trial run of a sensor-equipped turbine with the Nebraska Public Power District, and it was very successful. The incremental power improvement during the test period was north of 12%, and in some cases it was 18%. We had told the industry as we developed the prototypes that we thought we could generate a 10% efficiency improvement, so it was a very strong test for us.

We also showed a dramatic reduction in stress load on the turbine, which is the primary reason why Nebraska wanted us to install our product. There is a lot of wear and tear on the blades and the major components, which are very expensive. Our product is great for retrofitting out-of-warranty turbines, and that’s really the key focus of our strategy in 2010.

The Vindicator is our first product; we will develop other products based on laser-sensor technology.

What’s the opportunity here? How many turbines that could be retrofitted are we talking about?

Worldwide, there are about 100,000 one-megawatt or larger wind turbines; these are the sizable turbines that are our market. So, based just on our $125,000 introductory sales price, 100,000 turbines is almost a $14 billion market. There could be as many as 500,000 one-megawatt or larger turbines worldwide by 2020, judging from industry estimates.

To put the $125,000 price of your product in perspective, how much does a one-megawatt wind turbine cost?

Typically, turbines are priced at about $2 million per megawatt.

What is the payback period?

We believe the cash-on-cash payback period is between two and three years, and that’s based only on power improvement. That doesn’t include any incremental benefit through reduced wear and tear and increased life of the turbine.

How many units will you have to sell to become cash-flow positive?

We’ve told our investors that we need to sell approximately 200 to 250 units to be working-capital neutral.

What’s to stop turbine manufacturers from making their own laser wind sensor?

We’ve got many years of testing, engineering, and intellectual property around this technology. We have 27 patents today. About half of those have been granted, and the rest are pending. This product came from the aerospace industry. Optical Air Data Systems has been pioneering these laser-based technologies since 1990; a lot of money, $70 million, has been put into their development. It would be very time-consuming and expensive for someone to develop something that can compete with us.

What kind of background does the CFO of a clean-tech start-up have?

Since 2000, I have been with a variety of what I would call emerging growth companies — most of them public, with either disruptive technologies or disruptive strategies. But prior to that, I guess you could describe me as a classically trained financial executive, with a CPA and MBA. I began my career with KPMG. I spent about 10 years with Marriott Corp., in a variety of senior finance leadership roles. Some of those roles were entrepreneurial in nature.

Could you see an OEM making you an acquisition offer that you couldn’t refuse?

Who knows? I can’t speculate on that, but it would depend on many, many factors and variables.


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