(The Canadian Press circulated the following article by Steve Mertl on its website on December 19.)
VANCOUVER, B.C. — With its order book growing and a new infusion of cash, RailPower Technologies Corp. hopes it’s riding an environmentally friendly locomotive to profitability.
Company founder Frank Donnelly initially saw RailPower’s hybrid yard-switcher engine as a stopgap product to help fund development of a clean, compressed natural gas-turbine locomotive.
But since the prototype first rolled out in 2001, followed by two years of testing, RailPower has orders for 84 of its Green Goat and smaller Green Kid yard engines that promise deep cuts in fuel consumption and pollutants.
The biggest order so far came in early November when a large unidentified North American railway signed a letter of intent to buy 35 Green Goats over four years.
The deal is significant, says Railpower president Jim Maier, because its not contingent on the railway tapping government emissions-reduction funding.
The company, headquartered in North Vancouver, sees vast potential in a North American market with 10,000 diesel-electric yard engines at work, most of them decades old. It’s also eyeing Europe and Australia.
Last week, RailPower (TSX:P) announced National Bank Financial (TSX:NBF) and Paradigm Capital Inc. took up the remaining option on a total eight-million-share bought-deal financing that provides gross proceeds of $41.6 million.
This wasn’t what Donnelly – a transplanted Californian whose 30 years of railway experience includes a long stint at B.C. Rail – originally had in mind.
Donnelly’s team was focused on its gas-turbine technology when it attended a 1999 symposium sponsored by California’s air quality agency.
Officials there asked if the company had any small, green switching engines, the kind that putter slowly around railway marshalling yards assembling freight cars into trains.
“The (Toyota) Prius had just made its debut and we asked ourselves maybe this is a great entre into the business,” says Donnelly.
“We put two and two together and it didn’t take long to hatch this idea. Within two years to the day we had a prototype built.”
The concept proved so promising, RailPower has backburnered its gas-turbine project and related technology to focus on commercializing the hybrid locos.
RailPower got a boost in 2003 when it lured Jim Maier out of semi-retirement on Vancouver Island, where he runs a toy shop and organic vegetable farm.
Maier, 54, spent several years as a senior executive with the railway divisions of General Electric and Bombardier before freelancing as a consultant for technology startups in Silicon Valley.
“So when I got a call about this one I said, ‘yeah, OK, I’ll take a look at it.’ Then when I got into it I said, ‘Wow, this thing’s got some real potential,’ ” says Maier, now RailPower’s CEO.
Last March, the company graduated to the Toronto Stock Exchange’s main board from its junior Venture Exchange.
The Green Goat switchers use technology inspired by Toyota’s automobile hybrid, which combines a small internal-combustion engine with a powerful electric motor and battery pack to cut fuel consumption and emissions.
Almost all commercial locomotives use diesel engines to power electric traction motors.
Like the Prius, the Green Goat can run solely on its massive array of lead-acid batteries until the charge falls to the point a small diesel engine kicks in to run a generator that recharges the batteries.
The hybrid’s gen-set, as it’s called, operates only a fraction of the time – a distinct advantage over conventional yard switchers which are stationary a lot of the time with their diesels idling.
While not practical to pull a heavy freight over long distances, Donnelly says it’s ideal for applications that involve frequent short trips over a long duty cycle.
RailPower has an engineering centre in Erie, Penn., but owns no manufacturing plant. The units are built on the chassis of refurbished old switchers at the former CP Rail Ogden shops in Calgary, now owned by Alstom.
RailPower’s hybrid switchers have undergone tests with several railroads, including Union Pacific in the United States, and CP Rail.
“We’re always interested in new technology,” says CP Rail spokesman Len Cocolicchio from Calgary.
“We wanted to see also how it would function in our particular circumstances in different operating conditions and temperatures.”
Cocolicchio would not say whether CP Rail, which has about 200 switchers, might buy a hybrid.
“It’s interesting technology but we’ve made no decisions,” he says.
Mark Hallman of CN Rail says it also intends to test the hybrid in its 180-unit switcher fleet.
IDC Distribution Services Ltd. of Surrey, B.C., acquired a Green Kid for its new container marshalling yard near the Fraser River docks.
The unit, operating since September, has been trouble-free, says Jim Babson, IDC’s manager of railway operations.
“The emissions from this locomotive are almost non-existent; the noise from this locomotive again is almost non-existent, as compared to a conventional locomotive,” says Babson, a retired CP Rail superintendent.
Except for occasional gasps from its compressed-air brakes, the Green Kid works silently in the hands of its two-man crew, Doug Thomas and Glenn Hurst, retrained longshoremen, with no previous railway experience.
Rated at the equivalent of 1,000 horsepower, Babson says the Green Kid not only lacks the incessant thrum of an idling diesel when it’s stationary, it also delivers its power without the normal lag when a diesel’s revs build.
Although it’s half the power of RailPower’s Green Goat, IDC’s Green Kid was able to rescue a fully loaded CP Rail train recently when its engine broke down in the middle of a nearby level crossing.
Babson estimates IDC’s hybrid saves 30 to 40 per cent in fuel costs.
“For this application, this is doing the job,” says general manager Bryan Tate. “I really think the economics and the environment, the neighbours and noise factor, you couldn’t be any cleaner than this.”
Maier says RailPower’s next step is to develop a hybrid road switcher, a larger engine used to shuttle longer strings of freight cars on main railway lines.
It’s also looking at a version for commuter railways such as Toronto’s GoTrain and Vancouver’s West Coast Express.
“The commuter is wonderful because in the station people want it quiet, they don’t want emissions, but then as it runs between stations the gen-set can come back on,” says Maier.
The company is also looking at marine and stationary-power applications.
Despite its potential, RailPower is at least a year away from black ink as it starts to deliver units to customers.
It lost about $4.4 million or more than 13 cents a share in the three months ended Sept. 30, up from $994,000 or almost six cents a share for the same period last year. Its overall deficit more than tripled to $16 million.
Communications director Nigel Horsley said RailPower hopes to achieve “a measure of profitability” by the last quarter of 2005.