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As companies go, Clean Air Power (LSE:CAP) is nowhere near being a dominant world force. With a market cap of just under £20 million and five consecutive years of losses, it’s not a not a company that has been able to spark a great deal of investor interest. However, the Clean Air share price climbed more than 11.6% to 8.38 pence today on news of its receipt of a £500,000 order for trucks equipped with its patented Genesis-EDGE Dual-Fuel management systems.
Generally speaking, ADVFN prefers that we write about big companies and big stories, but I have been writing from a 30,000 foot altitude for several days, so I feel the need to get down to earth for a bit and focus on a company that I believe might warrant greater investor consideration. From what little I have already said, it is rather obvious that this AIM-listed stock is not for the short-term investor. Indeed, its much more suited for someone who believes in the technology, the company, and the opportunity. To invest without a reasonable amount of passion for all three would probably be a mistake.
Clean Air Power’s product is at the leading edge of a market trend toward the use of eco-technology. The company’s fortunes should greatly improve as market demand increases. There is nothing on the horizon that would indicate that demand will not increase, especially as the cost justification seems to be reasonable, the pressure to use eco-friendly fuels continues to grow, the supply of liquid natural gas is becoming increasingly more available at both the source and the point of sale, and the cost of LNG is significantly cheaper than other petroleum fuels.
The Genesis-EDGE is currently available as a retro-fit system for heavy duty diesel engines, converting them to alternatively use either LNG or compressed natural gas. The estimated annual cost savings per installed unit is approximately £13,000 versus a cost of slightly more than £26,000 per unit. The realization of savings begins in year two and, by year five, a vehicle will typically have saved the owner in the neighborhood of £42,000. The company from which Clean Air has received this current order is a repeat customer with over 100 units already in service. Applying some simple math indicates that there is a potential operating expense savings of over £1.3 million per year for that customer alone.
CEO John Pettitt explained that “This is a significant follow-on order for our Genesis-EDGE product from this customer and adds to 28 Dual-Fuel systems that we have already delivered so far this year following orders placed in 2013. The strong demand for our products is being driven by the expansion of Europe’s natural gas refuelling network and the increased supply of vehicles available to retrofit as a result of the high level of late Euro 5 vehicle purchases made at the end of 2013. With further European orders expected imminently and the launch of new products in the US and Russia coming later this year I am confident that the Company is on-course to meet market expectation in 2014.”
No one can say when the demand curve is going to overcome its inertia and hit full stride, but it is almost a certainty that it will. When it does, those who were there when there was not much more than a vision might expect to reap some handsome returns.
This is not a recommendation or solicitation to invest in the company featured in this article. This is a news story intended solely for the education of our clients.
