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John Petersen
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John Petersen is the executive vice president and chief financial officer of ePower Engine Systems, Inc., a Kentucky-based enterprise that has developed, built and demonstrated an engine-dominant diesel-electric hybrid drivetrain for long-haul heavy trucks that promises fuel savings of 30 to 40... More
My company:
Fefer Petersen & Co.
My blog:
ipo-law.com
  • EPower's Latest Investor Update 34 comments
    Apr 15, 2014 7:32 AM | about stocks: AXPW

    Since many stockholders of Axion Power International (OTCQB:AXPW) are closely following the progress of our development work at ePower Engine Systems and it's been a month since I offered any insight, I thought a lightly edited version of the update Jay Bowman sent our shareholders last night would be worthwhile.

    "We had several meetings at the Mid America Truck Show that took place March 27th through March 29th. We drove the truck down two of the three days without any problems. Everyone that saw the truck was impressed, but we were unable to give many rides due to the parking arrangements at the show. We had meetings with the Cummins Hybrid engineers as well as a great meeting with Eaton in regards to their Ultra Shift automatic transmission. I'm certain being introduced by Cummins helped us with the Eaton representatives. We have contact information from Eaton as well as a clear path forward when we decide to incorporate their transmissions into our drivetrain.

    The last three weeks we have been heavily involved collecting data for the Cummins and Marathon engineers. This is in an attempt to solve an efficiency problem in regards to our drivetrain. When we tested on the dynamometer at Cummins their engineers reviewed the data and determined that our drivetrain is only 60% to 66% efficient. A typical automobile is around 80% efficient at delivering its engine power to the rear wheels. The only way to determine where the losses are is through a process of elimination, beginning with the diesel engine, generator, digital voltage regulator, AC drive, electric drive motor and transmission.

    This has been very slow going but we are down to the digital voltage regulator programming as the only unknown. We have determined that the speed control on the diesel has been corrected, eliminating this issue. A major source of loss we knew about in the system is running our electric motor out of its torque range; this was done in order to use a stock Allison transmission. We have ordered a custom valve body for our Allison transmission that should allow us to change out our rear end ratios for a more traditional set of ratios. This will allow the operation of our electric drive motor at 1800 rpm, keeping it well within its optimal torque range. I am suspecting and the engineers agree this will up our drivetrain efficiency. Our only unresolved area after these two changes will be the DVR programming. This unit was programmed with sections of ePower operational specific coding and may need to be tweaked to gain some efficiency. We are showing a power factor of .619 during road testing and this number should be closer to .800 for optimal performance. I am hoping the Marathon engineers can resolve this for us shortly.

    Our testing lately has been mainly to gather and share data for the various engineers after our initial fuel burn and power tests were completed. This second set of data points will help us determine areas of inefficiency in our drivetrain. This is being done in preparation of exposing our trucks to real world testing in day-to-day fleet operations. We want to be certain all potential customers will be impressed with what we are working on and will be excited to place our trucks into their operations. The delays have been frustrating for all of us but a necessary and a normal part of a new system roll out.

    The first week of April we had a meeting in our facility with Jim Smith, our new Axion liaison, John Petersen, our lead investor and myself. Jim had seen the truck at Axion's stockholders meeting but was called away before he could take a ride. Jim has a history in the trucking industry as his family has operated a trucking company for many years. Jim took a ride this time in the truck and was very impressed with the truck's performance. We discussed the relationship between Axion and ePower in depth along with several business related items. I believe Jim will be great person to have working with us at Axion Power. Axion had a press release in late March in regards to our progress; here is the link for those that want to take a look. http://www.onlinetes.com/tes0414-hybrid-engines-trucks-benefits.aspx

    A lot of time over the last two weeks has been spent on the day cab design and conversion. Any time that has not been spent out on the road with the sleeper was spent working on the day cab.

    Andrew has been busy dealing with corroded and shorted original truck wiring, while Mario fabricates and mounts various system components to the truck. In an attempt to save weight and space on the day cab we have decided to run 48 of the Axion PbC batteries rather than the 56 we have been running in the sleeper truck. This was done with the approval of the Axion engineers and shows their growing confidence of their batteries performance in our system. This change will save an additional 503 lbs of weight and allow for better placement of the emissions control systems. These components have service intervals that are required to maintain emission compliance and must be easily accessible for maintenance.

    The following photos show some of our wiring replacement and component fitting work.

    (click to enlarge)

    If not for the opportunity to have this truck running hub to hub in the FedEx distribution system, it would have been a bad choice for a conversion. The original truck condition has required a lot of time to update and repair. Typically we would not be converting a truck in such bad condition.

    We are on the downhill side now and spring has finally arrived!"

    Now I'll add a couple clarifying comments of my own.

    We think most of our drivetrain inefficiencies arise from running the drive motor at 2,800 rpm instead of its optimal torque band of 1,800 rpm. When we were using the John Deere engine and didn't have ready access to a dynamometer it was easy to blame parasitic loads. So we didn't recognize the issue until we upgraded the engine and didn't get the increased power we expected. Slowing the drive motor into its optimal band, changing the transmission shift points and adjusting the rear-end ratios should resolve the problem, although it will reduce our low speed torque and may reduce our ability to work with loads in the 75,000 to 80,000 pound range.

    The most common criticism of our tractor is that the transmission is rough, which isn't surprising when you remember that the Alllison transmission we're currently using is built for garbage trucks. We chose the Allison transmission because it was cheap and readily available, but the shift points are the big reason we had to run the drive motor out of its optimal torque band. Changing the valve bodies should resolve the efficiency issue and allow us to start fleet demonstrations, but we believe we'll want to upgrade to the Eaton Ultra Shift for drivetrains we sell to customers. Our plan is to get the first two tractors on the road with the Allison transmission and then upgrade to Eaton in our third prototype. That strategy will give us the time we need to integrate a new set of electronic transmission controls without putting everything else on hold for several weeks.

    Our decision to reduce the number of batteries from 56 to 48 boiled down to an available space issue. The engine we're using on the day cab has Cummins newest emissions control systems and the urea tanks and other hardware require almost as much space as a battery box. Since the day cab is designed for lighter overall loads, Axion is convinced that we'll be able to get the performance we need from a slightly shorter string.

    During the development phase we've been quite open about our work because nobody else has an interest in keeping things quiet. We expect that dynamic to change when we start having meetings with fleet owners and negotiating demonstration tests. Potential customers won't want to be identified until they're ready to make a purchase decision and even then they'll want to tightly control the information flow. While we hope some will be willing to share their historical operating data, we know others will only be willing to tell us about the results they got using our hardware. When our business dynamic changes and we start dealing with potential customers or new component vendors who want to keep a tighter lid on the flow of information, we will meet their expectations because the customer and the supplier are always right.

    When the work is finished we expect both tractors to offer fuel economy in the 9.0 to 9.4 mpg range because the Cummins diesel only burns 6.8 gallons of fuel per hour. The big question will be the maximum weight we can effectively haul. We remain confident that the most common GCWRs in the 55,000 to 70,000 pound range will not present any big issues but we may not get all the way to 80,000 pounds without losing top-end cruising speed. We should know for sure within a couple weeks.

    Disclosure: I am long AXPW.

    Stocks: AXPW
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Comments (34)
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  • carlosgaviria
    , contributor
    Comments (797) | Send Message
     
    Buenos dias!!

     

    Muchas gracias, saludos-Carlos
    15 Apr, 07:56 AM Reply Like
  • jveal
    , contributor
    Comments (656) | Send Message
     
    Thanks for the update John!
    15 Apr, 08:02 AM Reply Like
  • wajo
    , contributor
    Comments (7) | Send Message
     
    Thanx John.
    15 Apr, 08:07 AM Reply Like
  • greentongue
    , contributor
    Comments (808) | Send Message
     
    "the opportunity to have this truck running hub to hub in the FedEx distribution system"
    Good that is still allowed to be mentioned before the NDAs.
    Everything takes so much longer than hoped but the goal is worth the effort.
    15 Apr, 08:26 AM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » We bought the day cab from a small fleet operator that hauls freight for a single client - FedEx. Part of the deal was that the seller would get testing priority for both the day cab and the sleeper. We don't have a relationship with FedEx so we don't have an NDA with them either. If a relationship develops, we may become subject to restrictions that we don't currently face.

     

    Research and development projects always take longer and cost more than you originally expect. It's just the nature of the beast. The only relevant question is "Are we closer to our goal today than we were last week, last month and last year?" As long as the answer is yes there's nothing to complain about.
    15 Apr, 08:39 AM Reply Like
  • User 7369811
    , contributor
    Comments (132) | Send Message
     
    So that would be the FedEx Ground division, correct? They use contractors with contracts that restrict them to doing business only with FedEx.
    15 Apr, 11:11 AM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » AFAIK that's the way the system works.
    15 Apr, 11:25 AM Reply Like
  • Edmund Metcalfe
    , contributor
    Comments (1509) | Send Message
     
    Is it not possible to find some compromise rear end that will bring the drive motor to a point between the 2800 and the 1800 rpm? That is quite a change and it may be you won't have to give up those other things you mention.

     

    Best wishes for success!
    15 Apr, 09:09 AM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » Our plan is to change the transmission shift points and the rear-end gearing to get as close to optimal as we can with the Allison transmission. It should take a week or two to order the parts and get everything installed. By then we should have our DVR programming issues resolved. The numbers all look good on paper, but we won't know for sure till the rubber meets the road with 40,000 pounds of concrete blocks.

     

    As long as we get the fuel economy we want in the most common weight ranges, we won't spend much time worrying about 80,000 pound loads.
    15 Apr, 09:18 AM Reply Like
  • KCtwo
    , contributor
    Comments (12) | Send Message
     
    You are correct that the power factor of 0.619 is likely the root of your problem. Ideally, you want it at 1.0 not 0.8. (A glance at the generator efficiency curves will reveal this.)
    An amusing, yet useful explanation of power factor:
    http://bit.ly/1jHOTp2

     

    I don't think that reducing the motor rpm will do anything but reduce the HP output of the system. Not much hope there. The power factor is not directly altered by reducing rpm. The problem is not likely mechanical.

     

    I have no idea what sort of generator you have, but again, solely based on tiny snippet of info that the power factor of 0.619, I'm guessing it has a PM field. Swapping to a wound rotor generator will give you some control of your power factor. You will take a small hit to your ideal generator efficiency, but you will get your power factor under better control which will gain you system efficiency, which is what you want in the end.

     

    You really have not given any details, but I suspect that you have a passive rectifier on the generator output and that is likely the real culprit. You have (hopefully) examined the waveforms on a scope, and I suspect they are a mess, with large spikes in the current waveform causing large THD (total harmonic distortion.) If this is the case, you can smooth out the THD by going with an active rectification (PFC) on your generator output. Not terribly cheap, but it will fix the THD and thus help the power factor, which will help your efficiency, which is your goal.

     

    I wish you luck with your investing. ;-)
    15 Apr, 10:07 AM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » Thanks for the informative link.

     

    Our drive motor has optimal HP and torque at 1,800 rpm but we've always run it fast (~2,800 rpm) because that's what the transmission required. The engineers from our generator and motor supplier believe the transmission and gearing changes, and any necessary DVR tweaks, will get efficiencies up into a more reasonable range.
    15 Apr, 10:19 AM Reply Like
  • H. T. Love
    , contributor
    Comments (17749) | Send Message
     
    Thanks John!

     

    I really liked the part about running in the Fedex routes.

     

    It's funny how information tends to leak out of those routes into the ears of the router. to beneficial effect I would expect, eventually.

     

    HardToLove
    15 Apr, 10:41 AM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » ePower apparently met with FedEx a couple years ago and they were very open to fuel efficiency initiatives even though FedEx does most of its truck hauling with contract operators. It's one of those wondrous grapevines where word can spread very quickly among small operators who want to improve their bottom lines while providing an appropriate level of service to a common customer.
    15 Apr, 10:51 AM Reply Like
  • DaveT
    , contributor
    Comments (180) | Send Message
     
    jp, A while back I seem to remember you were indicating you thought the generator was the "weak link" component in the power loss. Have your measurements now shown that it is running a full efficiency and has been eliminated, or do KCtwo's comments about the generator also hold as a possible explanation?

     

    Presumably instead of ratio changes a different motor that runs at the lower speed wanted by the current transmission would be a solution, but has other complications, like not being available, or cheap enough?
    15 Apr, 11:20 AM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » We originally thought something was amiss in the way the generator was interacting with the engine and it was really a stumper because we got a lot more power in the load bank tests Cummins did on the shop floor than we got once the engine and generator were installed in the truck. Once we drilled down into the power factors the issues got clearer. We were using to much energy to run the drive motor at a higher speed with lower torque; the polar opposite of what we wanted.

     

    Once we have a few months of fleet testing under our belts and rock solid proof of real-world fuel efficiency we'll be in a better position to negotiate with suppliers for components that are optimized for our tractors. Without that proof or a very deep checkbook, it's tough to get anybody to redesign a standard product for an application that may not be successful.

     

    For now we just want to build a tractor that can do the work and offer an attractive value proposition. Once we start rebuilding tractors for and selling kits to customers, we'll learn how to make our products better and cheaper as we mature.
    15 Apr, 11:42 AM Reply Like
  • iindelco
    , contributor
    Comments (9293) | Send Message
     
    Thanks for the update John.

     

    I was happy to see your comments concerning the rewiring job shortly after you mentioned it in the article. I had a little, "How does this make any sense?", going on in my mind. ;-D

     

    Anyway, I was wondering, as you mention different transmission ratios and alternatives, if the replacement of the transmission was part of the original cost differential between a conventional rebuild and an ePower proposal. I guess what I'm getting at is are your numbers still directionally on track? (If you can share this.) Also, how complex is your solution getting depending on the matrix of variations in things like rear ends, transmission variants and the many other options that these rigs might offer since you're proposing first going after the rebuild market. Will your solution be restricted to only rigs from A and B manufacturer with certain options only excluding a part of the fleet due to conversion costs? Seems like this could get somewhat complex.
    15 Apr, 12:18 PM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » The day cab is a 2002 MY chassis we picked up for $5,000 including an engine and transmission that have almost that much core value on the resale market. Any time you rehab something that old, you basically have to rehab from the frame up. It only made sense because we were pinching pennies.

     

    We chose the Allison transmission because it was readily available in the rebuild market at a good price. Upgrading to the Eaton Ultra Shift will increase our system cost, but not by a huge amount. Changing out the differential gearing is apparently no big deal and the ratios we're going to next are far more common than the ratios we've used in the past. We don't expect this next round of modifications to significantly complicate the process.
    15 Apr, 12:42 PM Reply Like
  • H. T. Love
    , contributor
    Comments (17749) | Send Message
     
    John: Since you mentioned torque, I know I've mentioned before and I hope you don't think I nagging ...

     

    (UQM) makes some constant-torque units for HD applications. As before I don't know if they are suitable or their price range, but might be worth talking with them for the next go round.

     

    HardToLove
    15 Apr, 01:29 PM Reply Like
  • D Lane
    , contributor
    Comments (1307) | Send Message
     
    And talk to Capstone about a light-weight genset too!

     

    (just kidding, I fully understand the need to focus on getting this thing to market in its current form)
    16 Apr, 10:47 AM Reply Like
  • iindelco
    , contributor
    Comments (9293) | Send Message
     
    Thanks John. Wishing you and the team continued success.
    15 Apr, 12:47 PM Reply Like
  • greengirl64
    , contributor
    Comments (224) | Send Message
     
    Thanks for the update! On a day when AXPW is plunging double-digits, it could not be more welcome.
    15 Apr, 01:23 PM Reply Like
  • robert barry
    , contributor
    Comments (76) | Send Message
     
    Mr Petersen, sorry to be a simpleton, but since you've abhorred the pipe financing for axpw, i scratch my head and wonder where the next round of money would reasonably come from, the operative word being reasonable. Can we consider this new source of cash absent a large order between now and October? Where would it come from?
    15 Apr, 02:02 PM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » This question is better suited to the Axion Power Concentrators (http://bit.ly/RmtyZ3) but the short answer is I expect things to change significantly between now and the time additional financing is required.

     

    For the last four years Axion has an unending parade of big holders who insisted on pushing shares into a market that wasn't able to withstand the pressure. That drove prices down in a big way.

     

    We are finally reaching the end of the selling because with the exception of a few shares remaining in PIPE investor inventory (less than a couple million) there are no more big holders who can punish the price by relentless selling.

     

    As near as I can tell the PIPE investors accounted for over 7/8 of the sell side volume since last summer. When 7/8 of the supply dries up and the only potential sellers are the investors who bought despite the price chart from hell, the market reaction will be a learning experience for many, including me.
    15 Apr, 02:13 PM Reply Like
  • robert barry
    , contributor
    Comments (76) | Send Message
     
    Thanks. I remember the hedge fund liquidation was merciless and never ending. In hindsight, it appeared to be a correct (or perhaps only) choice for that fund. I am long and hope you are correct. I assume you mean they do a normal offering at some higher price.
    15 Apr, 02:50 PM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » There were 5-1/2 big holders who ultimately liquidated their positions for reasons that had nothing to do with Axion's business performance. The 1/2 holder was a pair of bankruptcy trustees who had nothing to do with the 2009 deal and were going to liquidate in any event. A second big holder was a legacy investor who got crushed in the 2008 crash and had to sell. One of the big 2009 investors died and his estate became a seller. Two more were funds that changed managers who decided to restructure their portfolios. There was really only one holder that sold because it got tired of the wait and poor market performance.

     

    I've worked with several clients in the past who suffered through smaller versions of the supply and demand imbalance Axion's been plagued with over the last four years. In all cases the market responded quickly once the imbalance was absorbed. I expect a similar pattern with Axion which would make it far easier to arrange a future financing on reasonable terms.
    15 Apr, 03:24 PM Reply Like
  • JamesBBecker
    , contributor
    Comments (237) | Send Message
     
    John:: Thanks for your diligence on these updates.

     

    Typically, to run an induction motor at higher than rated speed, you increase the frequency (and voltage) of the input power. They are designed for 60 hz at 1800 rpm, so to get 2800 rpm, the controller would have to feed it power at 93 hz.

     

    I can see where that would decrease efficiency due to power factor losses - higher frequency usually means lower power factor. Though I'm not sure I would have known that if you would have asked.

     

    Good progress though - even if slightly disappointing on the schedule. Good luck with everything.
    15 Apr, 02:19 PM Reply Like
  • Stefan Moroney
    , contributor
    Comments (2620) | Send Message
     
    "Good progress though - even if slightly disappointing on the schedule. Good luck with everything."

     

    I completely agree. Thanks for the update John.
    15 Apr, 02:26 PM Reply Like
  • JamesBBecker
    , contributor
    Comments (237) | Send Message
     
    Thinking about the power factor issue a little more - just for entertainment sake:

     

    Losses in a motor are essentially resistive heating of the coils. Lower power factor -> more current -> more heating losses.

     

    However, if they increased the input voltage with frequency - then total current should have fallen, which at a lower power factor would have given roughly the same losses.

     

    That means that they must not have increased voltage (or couldn't) when they increased the frequency. Assuming a 480V 3-phase motor, they would have had to use 750V input voltage at the higher frequency. If they did that, I don't see how they would have been hurt by decreased power factor. Maybe that high of voltage isn't allowed in either the motor or the controller. 750V RMS -> 1055V peak sign wave.

     

    Assuming all of that is correct (yea right!), then if they can increase voltage a little, and increase motor speed a little - say to 2000 RPM, they can get the power they need for a 40 ton GVW. That's a wild thought.
    15 Apr, 07:47 PM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » I don't know enough to respond one way or the other. Mercifully we're getting solid support from Marathon and they do understand all the options.
    15 Apr, 08:09 PM Reply Like
  • Rick Krementz
    , contributor
    Comments (2265) | Send Message
     
    I am a quite surprised that there is a transmission at all. One of the most important advantages of a diesel-electric drivetrain, as is used on trains, is that an electric motor has extremely high low-speed torque. There is no mechanical transmission at all. Diesel-electric drive trains are also used in many other applications, such as tugboats, earth moving equipment, above ground mining equipment, etc.

     

    I have been on some very old diesel trains (short, passenger commuter rail) with mechanical transmissions, but they are essentially extinct now, AFAIK. Obviously a loco motor is too big for a truck, but I would think smaller motors exist. Smaller electric motors without a transmission are used in Tesla cars. I assume there would be a Goldilocks motor in between.

     

    JP, do you know why a motor requiring a transmission was selected? (I know you were not the decision maker, and are not an engineer.) Not trying to second guess or be critical; wanting to learn.
    16 Apr, 11:44 AM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » Torque at low speed is the easy part. The trick is getting the necessary torque at high speed. Our tractor sprints like a cheetah from zero to 50 mph, but it gets sluggish over 50 mph until you add the battery boost. It's important to remember that ePower was always inadequately funded and its buying decisions were often based on off-the-shelf availability and a form factor that would fit inside the chassis rails.

     

    I just sent a copy of our presentation deck to your e-mail so you can get a better idea of how it all fits together.
    16 Apr, 12:33 PM Reply Like
  • jcrjg
    , contributor
    Comments (172) | Send Message
     
    So does that mean that once you get past the inadequately funded stage, you will have more customized parts including an electric motor that could get rid of the transmission? I would assume this would give significant additional gains in efficiency.
    17 Apr, 04:12 PM Reply Like
  • John Petersen
    , contributor
    Comments (30024) | Send Message
     
    Author’s reply » Given the way heavy trucks use their torque curve, I think we'll probably stay with a drive motor and transmission to maximize efficiency. If we can get the same support from Eaton that we've gotten from Marathon, Unico and Cummins, I won't be surprised to see an Ultra Shift in our third tractor.
    17 Apr, 05:45 PM Reply Like
  • dunkmaster
    , contributor
    Comments (363) | Send Message
     
    Fascinating! I will watch ePowers progress with wide eyes and a slack jaw!

     

    Can't wait until the investment criteria allows me to have more than an outsider's interest!
    18 Apr, 03:00 PM Reply Like
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