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Executives

Kraig Higginson - Chairman of the Board

Brent Cook - Chief Executive Officer

Patrick Schwartz - President

Martin Petersen - Chief Financial Officer

Raser Technologies Inc. (RZ) Q4 2007 Earnings Call March 14, 2008 1:00 PM ET

Richard Putnam

We are going to move forward with this. We just would like to welcome you to the webcast for the fourth quarter and year-end. My name is Richard Putnam. We will be giving you the opportunity to submit questions through the web link and if you would like to there is certainly a button there on the side that you can submit questions through.

Before we get started I would like to introduce the team that’s here with us today. Patrick Schwartz is with me here in Utah. Brent, Kraig and Marty Petersen are on the East Coast and so this time maybe a little bit challenging from a technology standpoint but we are going to see if we can make this work.

I would also like to call your attention to the first slide that talks a little bit about the Safe Harbor language that’s necessary for all of these types of discussions and operations and let you know that many of the things that we may be talking about today may be forward-looking and as such are stated under the Safe Harbor and are also subject to many certain risk and uncertainties and we would encourage you to read our 10-K and to get familiar with these certain risk and uncertainties. We would also like to at this time turn the time over to Marty Petersen who will take us through our -- no, Brent Cook -- excuse me who will kind of conduct this webcast from here.

Brent Cook

Thank you, Richard. We appreciate that and thank you all for tuning in with us. We are pleased to be able to talk about the 2000 year on this webcast. I will ask first that we go through the financial statements for just a moment with our CFO, Mr. Marty Petersen who is here with me and when he has concluded that then I will make a few comments with regards to summarizing the activities of 2007 and more importantly outlining what our direction is in 2008 and beyond. So Marty, would you go ahead and take a few moments?

Martin Petersen

I will. Just like Brent said as I have to go back to the year 2000, I'm going to be talking about the year 2007 results.

I'm looking at slide three which is the income statement. I'm not going to go over all the numbers here. I assume that you have had a chance to review these in the 10-K. I'm just going to highlight a few things, specifically revenues. For all attention purposes, we remain a development stage pre-revenue Company although we do have some revenues that had been generated from a contract -- a development contract with the US military that you can see there.

Just looking at operating expenses, our operating expenses on an annual basis declined $2.8 million over the year. That was due primarily to a reduction in equity based non-cash compensations. If you back up the non-cash items you actually get an increase of $3.3 million for that annual period from $8.6 million to $11.9 million. The increase of $3.3 million was due primarily as you can see from the power project developments, in other words our geothermal operations.

If you look at it on a quarterly basis you see much of the same trends; although on an accrual basis it was flat from fourth quarter of ’06 to fourth quarter of ’07 but on a cash basis, it actually increased $1.5 million from 2.2 to 3.7 and that also is primarily due to the advancement of our geothermal activities.

On a net income basis, our net income improved by $2.8 million for the reasons primarily that I stated above. I also show CapEx on this page. You can see that CapEx went from basically went up $14 million for the year and $7 million for the quarter that also reflects the CapEx primarily related to the geothermal activities categories you can see broken out there. If we turn to the balance sheet on page four, we ended the year with unrestricted cash balance of $5.9 million, just a few notes of highlights. The notes receivable went -- decreased by $5.5 million; that was due to a collection of the note from a former merger candidate in the first quarter of last year. Our un-proved property in prepaid delay rentals increased $6 million. What this is -- this represents the capitalized amount that we have spent on acquiring geothermal rights.

The geothermal welfare development increased $4.7 million that represents capitalized wealth of development cost. Our power project development deposits increased $2.5 or increased $3.5 million that is the result of placing deposits on various equipments, mostly geothermal development activities related. Our accounts payable increased by $3.2 million. That reflects the increased geothermal development activities and our total share holders equity increased $8.8 million. That’s a summary of the financial results for the year and the quarter.

Before I turn it over to Brent to talk about the milestones of other developments, I just need to point out one thing. As you are aware and was announced earlier this week, we are in the marketing period for a rule 144, a private placement of convertible notes. Until that transaction is complete we are prohibited under SEC rules from commenting further on that pending transaction in this call and so in this call we won’t be addressing any questions relating to that offering. Brent?

Brent Cook

Thank you Marty; we appreciate the good work that your group has done with regards to the filing of the appropriate financial statements and as we stated I think we are pretty much are operating what we felt we would be at this particular point. Want to point to slide five now as I change a little bit from the financial focus and talk a little bit more about where we are at from an overall strategic focus. On slide five you will know that we actually have several puzzle pieces and while there is a lot more complexity, the power plants are in these simple pieces. The reality is that it does a good job of bringing together exactly what’s been taking place over the last year.

We have built a significant geothermal resource portfolio. One that is one of the largest in the United States with regards to geothermal resources and thirdly we are very pleased and proud of what’s been able to be done in that particular thought aspect too. As many of you know from the recent announcements our project finances come together and we are pleased to have Merrill Lynch with us on the project finance piece of that, which is the bulk of the power plant structure. Likewise the modular rapid deployment equipment strategy that we’ve been able to put together and utilizing the mobile generation units has been a very important aspect for us being able to exploit these resources and to do so in a timely fashion.

We use the terminology that we optimize economically and the modular equipment really allows us to do that. Likewise the transmission and the transmission expertise and the personnel that we’ve been able to bring in with good management experience has been crucial to being able to accomplish this. As well as the power purchase agreements and yes many of you have noted in our recent 10-K filing that we have in fact signed two power purchase agreements and I will speak a little bit more about those as we go along. And likewise the permitting and what’s been able to be done on our site projects as well as tax equity fees which is now in place with the Merrill Lynch transaction we are very pleased to have that and one of the remaining pieces is this development funding which we are in the process of doing at this moment, so without commenting any further we see this as the last piece to the puzzle to be able to allow us to move forward in a rapid deployment way on our projects.

And many of you know if you have been following our announcements that we basically have seven projects totaling between 70 to 75 megawatts that are under development at this time and we are moving along through the 2007 -- or 2008 time period and we are planning to try to finish and complete the construction on as many of these as we can. We haven’t stated or announced how many we expect to have finished in the 2008 time period, but many of these will in fact will be finished in 2008 and provisions have been made for those that will not be finishing 2008 but the pricing will be adjusted accordingly so the economics will be the same with our power purchase agreements.

We can go ahead and go to slide six; will give you geothermal power update in general. Moving onto slide seven, as mentioned we feel -- in fact it’s easier for us perhaps as insiders to be able to see the significant progress that’s been made throughout the 2007 and the early first quarter 2008, but I like to speak little bit about this. Our geothermal resource portfolio is second to none in our opinion. We have interest in six states; predominantly our focus is the Utah, Nevada, California, Oregon, Washington area but we also have properties in New Mexico and we are pleased to have a project under way in New Mexico. These seven projects that are under development as mentioned total between 70 and 75 megawatts of power and likewise the UTC units are delivered. In fact if we go -- start to move through this, in slide number eight we see the states and the focus and the property that’s been able to be obtained in these six states and many of these properties are well identified well established locations. In fact our focus has been to go after low temperature and moderate temperature resources that were discovered by others and they were fairly well documented and that’s been a great strategy for us to be able to pursue.

Slide number nine as mentioned we have begun receiving delivery of the generation units. In fact you see that 45th unit moving through the production line in the United Technology Manufacturing Facility and they have been and many of these have begun to be received out into our warehouse where they are being prepared for deployment into the fields.

On slide number ten, it talks a little bit about our power purchase agreements and as mentioned we do have two contracts that have been signed for a 11 megawatts each or a total of 22 megawatts and we are expecting final approval from the governing body in the very near future and then an additional 40 megawatts that are also waiting for approval and we expect to be signing those shortly.

Besides these six -- these represent six of the seven projects or six contracts. Besides these six contracts, we also have under negotiation an additional 80 megawatts for future years in the 2009, 2010 year and of course one of those is also our seventh project that’s still in the middle of negotiations and so we are pleased with where we are at with power purchase agreements and we will continue to do that. In fact recently we were just awarded an additional short listing and we are pleased to be able to do that and so an additional 10 megawatts on the short list has just been recognized by the Company.

On slide number 11 you see again that Raser is not standing alone in this development funding that we are taking place with. Raser also has many key -- other key components standing with it. The utilities an municipalities with its 15 and 20 year power purchase agreements, you see the UTX which is a ticker symbol for United Technologies is not only standing with us with regards to the manufacturing of equipment but they are a critical performance and warranty and uptime guarantee with regards to the performance of the overall power plant. They also provide L&M agreement and maintenance agreement that for the full first ten years of the project absolutely.

Likewise we have our tax equity partners or tax equity investors, in this case its Merrill and Merrill has also chosen to keep an election open where they can bring other participants and with them should they choose, but our relationship is directly with Merrill at this point. And then likewise on the project financing, we have Merrill that is also providing the direct project financing with us. So as we complete this development funding which is -- brings as I mentioned all these pieces together for us.

Slide number 10, sorry 12 excuse me. We have continue to see enormously strong demands for renewable energy and power. It continues to grow in the Western United States as the public becomes aware of the fact that electricity does not have to be generated from polluting sources and it also, it helps with regards to the energy and independence of this country and so we continue to see this demand, both legislatively demanded requirements as indicated on slide 11. But just as importantly as we voluntary complaints by both the public as well as by governing entities, the legislative requirements are commonly referred to as renewable portfolio standards or RPS standards and what they do are is they require utilities to purchase certain percentage of their power portfolio from renewable energy sources.

Recently we just saw the sate Utah adopt a renewable portfolio standards of 20% by the year 2025. Does each of these states through this various state governing bodies adopt these mandates and these rules and in some cases goals and targets it helps significantly with regards to the demand for green power and we continue to see the pricing strengthen and that’s very significant part of what our strategy is.

Unidentified Company Representative

But just one thing to point out there. These RPS standards do continue to proliferate. It was not long ago, just last year that the only -- the number of states doing or implementing RPS standards was 24, now the number is 29 that have adopted either a standard or a goal, so they continue to proliferate.

Brent Cook

Thank you for pointing that out. Also on slide 14, one of things that we see is the market price strengthen and while market prices and the prices that are generally done in the power purchase agreements are negotiated on a one-on-one basis, what we see is the California market price reference or what’s referred to as the MPR standard; and the MPR has increased over the last few years quiet dramatically and what this is, is this is a theoretical gas cost of to bind cycle gas turbine generation which is the standard by which California requires from an air pollution stand point and so this is basically a benchmark that many people use with regards to pricing their power and you will note the climb has been steady. This means that geothermal is not only competitive with green renewable sources, but it’s clearly competitive with also type of generation.

On slide 15 we talk a little bit about the transportation in industrial and I am going to ask Patrick Schwartz head of our transportation and industrial business if he will take a few moments and summarize some of the activities here that we’ve seen in the last few quarters. Patrick.

Patrick Schwartz

Thanks Brent. I am excited to share a few things that are involved with your next two slides. The first, in the fourth quarter we began working with FEB and a global OEM on the making of series architecture plug-in Hybrid electric SUV. This is the first such attempt to such a vehicle. It’s going very well. We are on target right now with the time line that we had established at the beginning of this project. We are also working with Tecstar, we had a recent announcement that we are beginning to work with them. On second stage manufacturing as it is initial demonstration vehicles are complete and we made through filing and go through the national profits which we intend to take with respect to second stage manufacturing and supplying fleet vehicles to government agencies and also utilities.

We as you can obviously guess we call for geothermal activities with excellent relationship with a number of utilities in a number of different states and they are very interested, especially PG&E and others like them are very interested in moving along and converting their vehicles to fleet vehicles and PG&E’s announcement that they want to start with two demonstration vehicles is just kind of chip of the iceberg of their desire to convert their fleet to plugging hydro electric vehicles and as you can see in the last half of the year we have this first demonstration vehicles which expects to be completed.

We also announced at the beginning of this year, an agreement that’s -- we consider very significant with HHI and I have the industries who as a global manufacturer of motors and drives and generators. We are working with HHI initially on the incorporation of Symetron in geothermal plants for as reduction occurs to the growth and also in the H-pac applications getting better in air conditioning. We are very excited about this arrangement it really to us represents a manufacturing partner with who we can take our product and technology into numerous markets and that we are very excited about our relationship with them and that’s going very nicely as well.

We turn to slide 16; as I think most of our listeners are well aware we received awards during 2007; one for motors and drive thought innovation of the year for industrial applications which is represented by both motor and drive things we are working on and also for the Hybrid motor vehicle technology innovation of the year award for electric power train and recognized the Raser’s technology development for the advancement of plug in Hybrid electric vehicles with their power train and with Wilson Auto Electronics we are now segregated in the third quarter of this part year for the license of our alternator technology. They distribute to 50 different countries, manufacture in China, North America and they are currently have our product in field testing. It’s just a reminder for those who haven’t heard it for a while, our technology was tested by tire one manufacturer, in compared to their own product, add up to 56% improvement in the air belt output and as much of the 10% efficiency across the operating range.

I know our time is short, so Brent unless you have something else you’d like to touch up on, I will turn the time back to you.

Brent Cook

Thank you, Patrick. One thing that I get asked quite often is the FEV agreement versus the Tecstar agreement and so my understanding Patrick is that the FEV is the prototype developer and the integrator for our healthy development in our power train system and Tecstar is a second stage manufacturer capable of producing multiple units. Want to elaborate a little about how they differ.

Patrick Schwartz

Thank you. You said it right Brent. FEV is an outstanding company and a global leader in the things that they do. They don’t do second stage manufacturing. If someone, let’s say PG&E says we want 500 vehicles, FEV has its snitch and they worked with the global leaders in automotive manufacturers globally on the things that they focus on -- Tecstar and they do to the demonstration type vehicles. If we want two or three to five, FEV does a great job with that. They are not interested, not here to estimate 500 and 1000’s at a time which really is a snitch for Tecstar. They are an outstanding second stage manufacturer and once you get past that, the demonstration unit and you’ve learned from it and you refine it and you raise your doubts to production for a limited volume that’s less than OEM, Tecstar is a great place to be.

Brent Cook

So, with the Tecstar arrangement in place I guess we are to understand Pat that what the company is doing here is they are taking fleet orders and essentially beginning the PHE remarketing directly to some of the end consumers that I will call early entrance is that correct.

Patrick Schwartz

That’s correct. It’s an outstanding platform to highlight our Symetron electric power train which will be -- we hopefully are working towards that being a significant role as the entire automotive industry accelerates their move towards electrification.

Brent Cook

Okay. Thank you, Patrick. With that we will go ahead and begin our question and answers and Marty why don’t you -- you are closest to the computer there. Why don’t you moderate the question-and-answer?

Question-and-Answer Session

Martin Petersen

Okay. Usually Richard does this and he is much better at it than me, but I will give it my best. Let’s see -- in the 10-K it discusses the Nevada project taking longer to develop. Why the delay? When will we hear definitive well results?

Brent Cook

Okay. I will go ahead and answer these. Each project has its own timeline and various geothermal resources will reach stabilized temperatures faster than others and various projects will time-to-time leap for it. In fact one of the strengths of our business model is the fact that we are taking a portfolio or multiple projects approach to what we are doing and so in this particular case, the Utah and New Mexico projects have accelerated and the Nevada one has slid back or at least we have moved it back in order to assess the resource more closely. We have reached the temperatures that we desire and we have seen some of the water flows that we desire but we need to understand more about the wells of development in that particular project, so. We are confident that this project will have a completion date in the not too distant future.

Martin Petersen

Okay. Why can't you disclose the OEM referring to the discussion Pat had on the PHEV project?

Brent Cook

Pat I would take a stab at answering, but it would ask you to elaborate. My understanding is the arrangement we have is a three way arrangement between FEV and the one of the Detroit three auto makers and the reason for that is the -- they have their own strategy with regards to rolling out this particular model or this particular vehicle and they have retained any rights with regards to announcements or marketing. Is that correct?

Patrick Schwartz

That’s correct. We are not at liberty to announce who it is by contractual obligation. If their assistance is logical, no one in the world has ever done one product FEV before and this offers potential competitive advantage for them I would believe personally and it’s a very competitive market in going towards electrification and they just desire to keep it quite until they feel it’s in their better interest to announce.

Brent Cook

Thank you.

Martin Petersen

What conditions must be met before being able to draw on the project funding, referring to the Merrill Lynch facility.

Brent Cook

Yeah, I think this is referring to the permanent project financing, the non-recourse debt financing that’s on the project level. There is -- what you would expect to be standard conditions pressed as meaning there is a power purchase agreement for a similar type of agreement with regards to marketing meaning we have arrangements where we are able to do interim marketing in -- that it will satisfy that requirement with Merrill, but essentially the power purchase agreement is clearly one important one. The second one is a resource analysis from some of the standard industry players with regards to that which is commonly referred to as GeothermEx reports and that validation or that GeothermEx report that needs to be done and the third thing is there is certain other due diligence requirements that which you might expect such as permitting and so forth, that is required to be seen before that -- for that project financing skipped in. Maybe one other important component of that is our percentage or our financial commitment with regards to well-field development needs to be clear and that’s why this missing piece with regards to the financing is so crucial and critical.

Martin Petersen

Yeah, I think just for clarification’s sake, because there are some out there with questions about why the development funding when we have this agreement with Merrill Lynch in place. Merrill Lynch’s commitment begins at -- really at construction of the plant itself and that is non-recourse funding down at the project level. This funding would be at the Raser parent level and it would handle the well-field development activities that we are responsible for delivering.

Brent Cook

Yeah and the other thing I would add Marty is besides that commitment of the finance, the tax equity investment that is made by Merrill is a separate item in the Monet which is commonly referred to as debt monetization, the monetization commitment has already been established and that’s a separate commitment.

Martin Petersen

Let’s see next. The 10-K indicates that you use standard flash technology and build a traditional plant, it’s temperatures are high enough. Why not use the same binary modular approach?

Brent Cook

That’s a great question. The answer to that is the temperatures that we see as we go out there -- one of the great advantages we have with regards to the technology that we are deploying and the modular approach is we are able to utilize lower and more moderate temperatures and this greatly brought the field of resources available to us. One of our focuses is to essentially come into well developed fields that others have not been able to utilize and deploy the technology to be able to make this a valuable resource for ourselves. On occasion we will discover that higher temperatures do exist and maybe at deeper depths or in other locations within the field. When that happens, we may in fact deploy flash technologies if it’s necessary to be able to utilize those and so we have reserved that or clarified that. However, our primary focus will be this rapid deployment strategy and utilizing these lower moderate temperatures resources. One of the things that happens is the higher heat temperatures have a greater thermal advantage in being able to pull more power out of it by using that high of temperatures. Even when we are fortunate enough to have these high temperatures wells, we will probably use this lower to moderate temperature technology and cascade the discharged water not only through the flash plant but also cascade it on down and utilize it to lower temperature levels before we put it back in the earth. This will give us the maximum amount of power generation and revenue from the project.

Martin Petersen

There is a question here about the timeline for bringing plants online. We are saying that we can bring plants online in 2008 when others announcing plants even today that they were taking years to bring online.

Brent Cook

Okay. I will be happy to talk to that. We have in fact announced that of these seven plants, many of them will be finished; the first few plants will be finished in late -- in late third quarter of 2008 or this year and fourth quarter of 2008 with possibly a few plants sliding into the early part of 2009. But the first plants will be finished in Q3 and Q4 of this year. The rapid development strategy on what we have been working on for the past couple of years allows us to deploy these plants very rapidly. It takes about three to five days from the time that these units and modular units are shipped to site and the site is all ready to be able to hook them up, to have them producing power. This means that we have to be parallel processing and permitting and preparing the site at the same time we are manufacturing in the manufacturing facility. Because the manufacturing facility and capabilities of United Technologies is so vast, our delivery times on the equipment as well as our parallel processing approach allows us to essentially deploy these from the moment we have received permitting approximately six to eight months before these plants are operating.

Martin Petersen

I guess maybe two related questions. One is what is the status of the extension of the production tax credits and another one is when do you expect the first plants online?

Brent Cook

I think I answered the online question with regards to the first plants come online in late Q3 and Q4 of this year. So it’s just a few months away and we expect those to be online. With regards to the PTC credits, I will talk generally about what we believe. It’s been our belief that we expected the production tax credit provision to be extended in 2008. We think it will be closer to the election time period because that has been somewhat politicized and so we do expect that this will be extended and but it probably won't be extended until just prior to its expiration. We have a strategy with regards to how we build that essentially keeps us building and also pricing our prior purchase agreements that we are relatively indifferent to that. I'm not saying we don’t support significantly and that we wouldn’t increase the amount of units that we are producing but we are not sitting around watching the PTC legislation, we are moving ahead.

Martin Petersen

Kind of in the same vein as the PTC legislation, there is a question here saying contrasting your experience; it has had waters during section 29 deals with the opportunity under section 45.

Brent Cook

I actually don’t see -- well, there is some very similar parallels. There are some strong differences between the two. First of all, most of the synthetic fuel plants were not profitable but for the tax provisions and I think geothermal sits in a totally different arena and second of all, I believe that the green aspects to what we are doing makes this an incredibly popular area to be in. However, having said that the tax equity structuring experience of our team and the various management members is incredibly valuable and being able to optimize the economics out of these projects. There is a fair amount of complexities since there is not just the tax credit but there is three other tax attributes attributable to geothermal power production and it allows us -- having the breadth of experience of tax equity structuring allows us to go ahead and optimize those economics. I might add that I certainly am not the only one with experience in that area. I'm very appreciative of the experience and depth of experience of our general counsels, Richard Clayton and others but we also utilize many very experienced people and board members.

Martin Petersen

There is a question on the status of the military development projects Oklahoma.

Brent Cook

I think Pat we are in a -- if you could correct me if I'm wrong, but we are in the final stages as of completing the contact requirements with regards to that agreement.

Patrick Schwartz

That’s correct.

Brent Cook

And right now, while there may well be future contracts left with the military, generally speaking, our focus is to commercialize as opposed to be a military equipment supplier and so I think you will see us focus more and talk more about the commercialization although we may well pursue some of the military things as they are funded by Congress. Is that correct?

Patrick Schwartz

Yes, we are very much -- there may be other military applications we pursue as funding is made available by Congress but right now we are really driven by the commercialization of the technology and quite frankly a lot of the work we did on the MXG was a great process and some things came out of that that’s enhanced our work on the electric powertrain for PHEV. So it’s been a very fruitful project independent of any revenues we may have gained or in relationship with the military.

Brent Cook

And I guess having said that, it’s not that we are abandoning the military. It’s just that the funding being a legislative process, it’s a little harder for us to try to anticipate and predict.

Patrick Schwartz

That’s correct.

Martin Petersen

I guess here is a question back to the PTC. How is the Merrill Lynch financing change if the PTC is allowed to expire or lapse?

Brent Cook

It’s a great question. Because of the late nature of or the close timeframe with regards to construction, of the seven projects, four of the contracts that we negotiated, made arrangements with have what I will refer to as PTC backstops, meaning the utility has agreed to an escalated price where most of the economics that we normally would receive from the PTC was essentially made up by way of increasing the price to the utility for the sale of power. The utility has been willing to do this because they recognize that creditors such as Merrill Lynch on the project financing need to have an assurance that they are going to go ahead and have the financial flow there to be able to retire the debt and so forth and so we do not expect that on these projects, particularly the first seven that they will have any impact with regards to that. Obviously we will utilize the PTC backstops on the ones that that have later delivery dates as opposed to the earlier delivery dates but we do think that we have a very good probability of being able to finish the plants when we want within the deadline and so they may not even be an act of but debt back stop does exist there to give some assurance to the creditors. So we don’t see that it’s effected Merrill Lynch at all in that project financing.

Martin Petersen

And there is two questions here about the inclusion of Symetron in the UTC units and -- yes there is about -- they are both kind of the same questions.

Brent Cook

I will just make a general comment in this area. We don’t comment about this things that we are actively involved in or negotiating or working with. The United Technologies units themselves, UTC makes the decision as to what kind of components and equipments independent of us goes into those units. Having said that we clearly are working with some manufactures that are pre approved and qualified manufacturers that accelerate the equipment and motors to UTC and so it’s our expectation and effort that we will have the opportunity to market this, not just in those equipment manufacturers, but many others. We have particular interest in air-conditioning units because we believe that’s an ideal application for our technology and we also see that the geothermal generation units can benefit from that equation, our circulation pumps and managing them -- the motor road accordingly. However having said that, it’s important to us that we maintain the guarantees and performance and warrantees with UTC and we certainly with -- that would have to be at their rate, at their schedule for adoption because the back stop and the guarantee performance is of critical importance in the geothermal space, so we do expect to have that penetrated over time, but are making no comments with regards to where we are at in the process.

Martin Petersen

Another UTC related questions. How are you paying UTC for the 45 or more units that they have produced thus far given that you haven’t finished the financing yet?

Patrick Schwartz

We have financial arrangements and I guess I would describe it as arrangements between ourselves, Merrill and UTC. We have an understanding and that’s allowed them to proceed with the manufacturing side of the factory but then, of course you will see that there is a deposit that we show on ours -- balance sheet, so you’ll probably see our participation rate and beyond that I think that’s just to practically say that three parties are working together extensively to move these projects forward and we are all excited about it.

Martin Petersen

For give me if you have answered this Brent, I have been reading these questions. Please provide an update on wealth of development activities. Have you done that so far?

Brent Cook

Right, I think I made some mention of wealth or development activities. Many of you know that we are drilling and we have worked over rigs in various locations, we have opened up the wells in New Mexico, we are drilling in Utah actively, we have a worked over a rig in Utah as well and we are about to being some additional testing in latter. So there are various stages in the well field development. I think before we move into this, in to the larger area, completing the financial offering that we are currently working on, that need to be done and before I could comment further on that, so..

Martin Petersen

There’s a couple of questions here about timing and such revenues from HHI and Wilson.

Brent Cook

Patrick do you want to address the timing of revenues from some of your license deals, just to clarify for our listeners, the transportation and industrial side of our business as a technology licensing platform model as opposed to our geothermal, as that of a geothermal developer.

Patrick Schwartz

Sure Brent, on the Wilson and the alternator, we as I think I’ve mentioned during the presentation, we have supplied field trust units to Wilson. They are in the initial field testing operations. They were largely to decide these fund initial results, what they do on second stage tests would sure involve a lot more units that they will themselves make contrary to the lessly supplied for the initial test and they will be to determine that basically as to when they will launch a new product line based these results. So that’s really their determination, not ours as to when they go into full production which then starts royalties from our license. Do you have a more -- do you have a comment on that front?

Martin Petersen

As they indicated to you, any outline or expectations of timeframe?

Brent Cook

I would -- not definitely although I would guess that by the end of 2008 we will see that the testing pretty much finished and moving towards production there.

Martin Petersen

So, probably early working on market penetration by early 2009?

Brent Cook

Yeah, I think so.

Martin Petersen

Okay, thank you. Another T&I question, when will we see the FEV or PHEV model completed and how much we will produce in revenues to Raser, how does Tecstar fit into the PHEV project?

Brent Cook

I will answer the last part. We don’t forecast revenues and certainly don’t forecast revenues on new models where we don’t have a good idea with regards to market penetration, but having said that, Patrick, do you want to give us timeframe on the PHEV, the SUV?

Patrick Schwartz

Well, I think I missed the presentation that the demonstration units started to be completed in the second half of the year. Closer up towards the third quarter than the fourth quarter, we will then refine based on what we learned and move towards second stage manufacturing with Tecstar. Is that pretty much what you are looking for?

Brent Cook

Okay.

Patrick Schwartz

I guess would mention that Jeffery who is an excellent organization has probably one of the better or projections as to what they anticipate for the generation of internal combustion and market share versus the electrification through plug-in hybrid electric vehicles, electric vehicles and it’s pretty significant if someone wants to learn more about how PGVs and EV’s are expected to take over market share. You might want to go to EPRI’s report and take a look at that. So the future for PHEVs in electrification appears based on announcements from the heads of different automotive companies to independent ports that are being done, appears to be very dramatic and significant and the opportunities for electric power train as a result would also appear to be so, although we don’t make any projections as to when or what that might be at this time.

Martin Petersen

Patrick, if you wouldn’t mind, why don’t you make sure that on our webpage, there is either a link to the EPRE report or a link to their website so that people can access that if they are interested?

Patrick Schwartz

Sure, I will do that.

Brent Cook

Marty, is there any more questions?

Martin Petersen

Yeah, in which calendar year do you expect to achieve profitability?

Brent Cook

I will go ahead and answer that. We have stated many times that we do not forecast revenue and therefore we don’t forecast income and therefore we don’t forecast profitability. However, I will go ahead and say or state that we believe we will be profitable after these first plants are put in service and we stated that that will be Q3 and Q4 of this year and so we expect that the revenues, will have the income appropriate to that would be flowing after those first units are placed in service. So the placed in service deadline or the placed in service nature as you hear us announce plants being placed in service, you can expect profitability and revenue to increase dramatically each time a unit comes online and so I think that’s a good guide line for people to know. Marty any more? Let’s take -- we are thin and out on questions.

Martin Petersen

Yeah, the lets see what progress has been made in bringing the waste heat recovery products to the market?

Brent Cook

We do have Mr. Paul Stephan, an executive manager that we have hired, is focused on the waste heat and as you might have extrapolated these generation units that we are deploying while we call them geothermal what they really are is large heat farms or heat exchangers and so it affords the opportunity to capture heat from any source whether it’s geothermal or waste heat and generate electricity with it. So with -- Mr. Stephan has been focused on the waste heat arrangements and I think he has made some great progress with regards to different projects that he has been working along and none of them have come to the point where we feel that they need to be announced yet or haven’t received definitive nature, but we have made good progress. This is not a primary focus yet of the company and that is because we are focused so extensively in the geothermal space, but we do expect we will have some demonstration units or projects for demonstration reasons in the waste heat area and this is something that we will grow into but for the time being and for the next few years our primary focus will be geothermal resources.

Martin Petersen

There is a question here about disclosures that we have made relating to the Merrill Lynch transaction and the fees that are associated with that range of technologies, charges, the operating subsidiary and I know there is some confusion as to whether or not knows on top of the financial information we disclosed upon delivering the information from Merrill Lynch transaction and so that’s just clarify -- asking for clarification as to those fees and how that works.

Brent Cook

Okay. While I get a drink, I am going to go ahead and ask my CFO, Martin Petersen can answer that question.

Martin Petersen

The information that we provided when we announced the Merrill Lynch transaction and subsequent to that disclose the -- some revenues and cash flows coming to Raser Technologies in the form of fees and distribution. All of the fees that we detail in the disclosures are included in those fees and distributions. Really fees is one mechanism for compensating Raser technologies for the work and other things that it provides to the operating subsidiary and distributions are another component of that, but the information, the disclosures that we’ve made to date on fees and distributions coming to the Raser levels from the operating subsidiary, all include those fees. So they are not over and above.

Brent Cook

Okay Marty I think we are coming up on an hour at the end of this. I am going to take a few moments now and just may be a chap, so I apologize if we didn’t get to your questions, but I would like to communicate a couple of things effectively to our share holder base. One is our deep appreciation for their interest and support in our Company. We are incredibly excited about what we are seeing happened right now. Those companies continue to accelerate and pick up. I think we certainly had May fares from time-to-time wondering exactly what we were doing, but I think now hey have seen that the pieces have come together and we’ve been able to move this along incredibly well and incredibly fast in consideration for what we are trying to accomplish. We are very pleased with where we are at in the development of these seven plants. We do believe that we will be able to maintain the timing schedules that I have mentioned and it’s our policy to communicate to the marketplace anytime that we think are aware of any changes or anything of that and so you can expect that we will communicate openly.

It’s my goal to have these webcasts on a quarterly basis and I would like the opportunity to answer questions. In the meantime if you have questions, we would encourage you to send it to the investor contact and there is our webpage and send emails to the investor contact. If it’s a question that cannot be discussed without publicly speaking about it we will bring it up at the next webcast that’s something we can clarify or point out for public information, we will do so in the meantime.

Richard, with that I think we will turn the time back to you for concluding this call.

Richard Putnam

We appreciate all that have participated and thanks Brent and Marty for joining us and hopefully this technology worked well and everybody was able to hear. Well, it looks like we have got a number of questions answered and so we appreciate that Marty and we will look forward to visiting with others in the future. Thank you, good bye.

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Source: Raser Technologies Inc. Q4 2007 Earnings Call Transcript
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