Cleantech company seeking capital as of February 25, 2011
Fuel cell maker Tekion, recently restructured, is now partnering with a dominant battery manufacturer and world wide distributor and a new player in the backup power market. Its partners bring application OEMs, integration capability, large volume applications and distribution to deliver Tekion’s environmentally benign fuel to the world. With an addressable market over $1.3 billion in portable power alone, and a battery partner relationship it believes is worth $400 million in revenue, Tekion is seeking $9mm in working capital, with $4mm already committed by a lead investor.
Executive summary of company's business:
Today’s world is dependent on portable electronic devices. Electronic suppliers have been forced to develop more efficient components, and battery suppliers to constantly increase energy density. The limits of battery technology have become strained. Proton Exchange Membrane (PEM) fuel cells have long been considered an alternative. PEM fuel cells work best when pure hydrogen is used as the fuel. The commercialization barrier is how to carry the fuel.
Tekion, a recently restructured BC company, has developed and patented an economic and practical solution for this portable energy problem. Starting with a commodity chemical, formic acid, the company modifies and markets its product as Formira™.
The company has developed, demonstrated and is partnering with one of the worlds largest retail battery manufactures and distributors. The initial target market of this partnership is a small portable charger with the capacity to charge all portable electronic devices anywhere, anytime. Product launch is scheduled for 2nd half of 2012 followed by a series of applications which currently use “D” sized alkaline batteries.
According to an analysis by Tekion's battery partner, this fuel carries substantially more energy than any alkaline battery and they intend to price the cartridge accordingly. Under the terms of the definitive agreement the company intends to manufacture and sell the conversion component (reformer), license the cartridge design and supply the Formira fuel to their partner.
According to the company, this relationship will generate $400 million in revenue with a 50% anticipated gross margin. Using the same components the company has formed a relationship with a supplier of fuel cell systems for backup power systems in the telecommunications market. The range of product sizes would be from 500Watts to 3kWatts. The company would supply the reforming component and the partner will integrate into their product replacing T size hydrogen cylinders.
Competitors:
Ida Tech, Poly fuel, L&T India, Bend Corp., Genesis Fueltech, EoPlex Technologies, Praxair, Sanyo electric Co., Lillipution, Onsi Corp
Differentiation vs. competitors:
Portable power applications require small compact fuel cell systems. Formic acid is a simple molecule which in the presence of certain catalysts easily breaks down into H2 and CO2. Other liquid fuels such as methanol, liquid propane or sodium borohydride need larger, higher temperature and more complex reformers or cartridges to deliver the hydrogen to the fuel cell. Formic acid, although carrying less energy than its competitors, has the advantage of a simple, low temperature, inexpensive and compact solution in delivering hydrogen to the fuel cell. In these applications, small is more important than energy density.
Key team members:
Neil Huff, cofounder, President and CEO: Mr. Huff has a Chemical Engineering degree from Queens University and an MBA from the University of Toronto. He spent 17 years in the plastics automotive components manufacturing industry with a particular focus on engineering, product development, and operations, working for companies such as Rockwell International and General Electric. He spent 5 years as CEO of Ballard Battery Systems (a Division of Ballard Power Systems) and was instrumental in spinning the Division out of Ballard, which was subsequently acquired by Eagle Picher. David McLeod, cofounder, Vice President Business Development and Marketing: Mr. McLeod joined Ballard Power Systems in 1983 as the VP Marketing. During his 15 years in this role, Mr. McLeod was involved in the formation of virtually all of the strategic relationships Ballard had, including the relationship with Daimler which developed into an equity partnership and the world’s first fuel cell powered automobile. Mr. McLeod’s background prior to Ballard was 20 years in the “high technology” community with an emphasis on marketing, communications and strategic relationships.
Existing investors and capitalization details:
Since its inception in 2003, the company has raised $22mm over 5 rounds with investors including Allen Born, Illinois Ventures, Motorola Ventures, RAB Capital and Scotia Capital. Tekion has been restructured based on a new technology, new OEM partners and new investors - it has closed the first phase of a two-phase financing: in phase one, it closed $1.5mm in cash plus $3mm in converted bridge debt - the financing was led by a private equity investor based in the Boston area - this investor will lead a follow-on financing for $9mm with a $4mm lead investment - Tekion is looking to fill the $5mm balance. In Phase 1, all of the existing Pref shares were converted to Common leaving the following cap structure: 12.3mm Preferred A shares, 4.4mm warrants to purchase Pref A shares, 4.4mm Common shares, 5mm Common share option pool.
Capital sought & use of proceeds:
The company is seeking $9mm for working capital, with $4mm already committed by a lead investor, to launch its portable power and backup power product lines in conjunction with strong OEM partners.
Characteristics of ideal investors:
The ideal investor will have some familiarity with the portable power markets and a 3 year time horizon to exit.
8602 Commerce Court
Burnaby,
BC V5A 4N6Canada
Javascript is required to view this map.
Kachan & Co. (Kachan) is not registered as an investment dealer or advisor with any securities commission or similar regulatory authority in any jurisdiction and cannot and will not have any involvement in any transaction that may take place between the Company above and any prospective investor. Kachan will not a) discuss any matters with the Company or investors that requires familiarity with securities, b) advise the Company or investors on the merits of particular investments, securities, any proposed listing of securities on any exchange or quotation service or otherwise provide securities advice, c) participate in negotiating the terms of any transaction, or d) handle funds or securities in connection with any transaction.
Kachan has not verified the information provided by the Company and makes no warranties or representations regarding the truth, accuracy or completeness of the information provided by such. Kachan is not responsible for the release of any confidential, restricted or proprietary information provided by the Company above.
