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PTAC Energy Technology Capital Forum Final Report



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  • 1. R&D Funding FO RUM REP O RT Energy Technology Capital Forum and Networking Reception Final Report November 20, 2003 Hyatt Regency Calgary Compiled by: PTAC Petroleum Technology Alliance Canada Heather Traub, Innovation and Technology Coordinator Produced for: Industry Canada Lyn Bilida, Industry Development Officer, Oil and Gas Energy and Marine Branch
  • 2. R&D Funding FO RUM REP O RT 2003 11 20 Energy Technology Capital Forum and Networking Reception Imperial Ballroom, Hyatt Regency Calgary 700 Centre Street, Calgary, AB PRESENTING PARTNERS GOLD PURPOSE Altira Group LLC The purpose of this forum is to educate industry participants on all facets of capitalizing and growing an energy technology company. Experienced capital providers describe the variety of capital funding sources for emerging and Chrysalis Capital Advisors Inc. maturing energy technology companies. Company growth facilitators and technology end-users discuss the lifecycle of an energy technology company and key hurdles associated with attracting investment capital. Selected emerging and maturing energy technology companies seeking capital SILVER present their specific business strategies and technologies, participate in ARC Financial Corporation discussions, ask questions of presenters, network and meet potential strategic capital and industry partners. EXECUTIVE SUMMARY A keynote presentation by ARC Financial explored the role of energy technology Gowling Lafleur Henderson LLP in the past, present and future. Capital providers and facilitators delivered seven educational presentations describing the life cycle of an energy technology company, understanding capital sources and attracting capital, and critical issues BRONZE for sustainable growth. A Nexen Inc. speaker provided an end-user presentation Inno-centre Alberta on the market demand perspective. Following the morning’s presentations, 10 selected emerging and maturing energy technology companies showcased their business strategies and technologies as possible investment candidates. Presenting emerging energy FORUM PARTNER technology companies were chosen from the Calgary Technologies Inc. Concept Industry Canada to Capital (C2C) Program, a 12-week program for companies seeking equity investment, which focuses on building a winning investor presentation. Presenting maturing energy technology companies were selected by a PTAC CO-SPONSORS producer panel. Alberta Innovation and Science NEXT STEPS Calgary Angel Network Calgary Technologies Inc. Demonstrated interest by capital providers, company growth facilitators and emerging and maturing energy technology companies seeking funding indicates CONRAD a need for future forums to continue to identify the energy industry’s needs, to NewERA allow energy technology companies to continue to research and develop new ways to meet those challenges, and to facilitate fruitful partnerships between PSAC venture capital providers and the energy technology companies seeking funding. THECIS Feedback generated at the forum indicates a desire for PTAC’s energy University of Calgary technology capital forum to become an annual event. A summary of data compiled from returned feedback and evaluation forms is included in this report. DISCLAIMER: PTAC is only a facilitator for these presentations. PTAC makes no representation regarding ownership or quality of any technology described by a presenter, or generally as to the contents of a presentation. PTAC does not endorse any presenter nor the technology presented. Please use your own judgment. PTAC trusts that each presenter will engage in fair trade practices, but does not police or otherwise enforce this policy in any manner. For more information, contact – Heather Traub, PTAC Petroleum Technology Alliance Canada Tel: (403) 218-7704, Fax: (403) 920-0054, Email: Web Address: rdff0301rep.doc 2003 12 18 HT 1
  • 3. ENERGY TECHNOLOGY CAPITAL FORUM Brief summaries of the morning’s presentations are incorporated in this report, click on presentation titles to view the PowerPoint presentation. KEYNOTE ADDRESS Dynamics of Change on the Energy Landscape Peter Tertzakian Jr., Chief Energy Economist and Director ARC Financial Corporation Energy supply chains from those in our agrarian past to modernity and those in the future, including upstream, downstream and primary energy conversion or value added components. Energy supply chains are supported by layers of decision-makers, operators and service providers and hardware providers. Economically successful energy technology adoption follows Alfred Marshall’s Fifth Principle of Economics, where either better results are obtained with the same expenditure or equal results with less expenditure. Historically, technological innovation and energy supply scarcity have been the drivers of change. Each new fuel source requires new carriers and new hardware to expedite adoption of the new technology, and many years typically elapse before the new technology is widely adopted and becomes price competitive. PART II: UNDERSTANDING CAPITAL SOURCES AND ATTRACTING CAPITAL Overview of the Funding Lifecycle of an Energy Technology Company Glenn Huber, President Chrysalis Capital Advisors Inc. There are five key stages of an energy technology company’s funding lifecycle: Technology Creation, Market Product Development, Early Commercialization, Market Penetration/ Maturation, and finally, the Exit. Various types of primary investors are associated with each key stage of an energy technology company’s evolution. As the funding cycle matures the cost of capital decreases commensurate with the risk profile of the investment. Key characteristics and perspectives of private sector investors as well as keys to surviving and thriving through the funding lifecycle are described. Key drivers of success for emerging energy technology companies will be understanding and building relationships with potential capital providers and the financial community. Positioning Your Company for Initial Investment Richard May, Vice President, Advanced Technologies Inno-centre Alberta Inno-centre Alberta provides experienced business and financing mentorship to accelerate the development, financing and commercial success of investment- caliber emerging-technology companies. Investors want to see signs of future success evidenced by sales, testimonials, trials, and studies. Investors ‘buy’ investments of high payoffs with high odds, usually fast growing high margin businesses, which usually are the result of doing the right things. Bridging the Gap with Venture Capital Barb Richardson, Director SpringBank Tech Ventures A Calgary-based VC private equity fund, SpringBank TechVentures invests in wireless, telecom, Internet, software early stage–but “post” beta-testing 2 2003 12 18 HT rdff0301rep.doc
  • 4. ENERGY TECHNOLOGY CAPITAL FORUM companies. VCs have recently been focused on supporting their current portfolios rather than making new investments. In addition to the majority of the money going to support current portfolios–investment dollars are also being shifted to later stage deals. Entrepreneurs should maximize early financing vehicles (angel, seed, friends and family, government grants) and spend every dollar like the last. Start your pitch addressing the market opportunity for your product or service. Most VCs are afraid to invest in industry verticals–need to convince them that the energy technology is huge. Do your homework, build relationships with VCs or local financiers first—most foreign VCs look for local partners to be their “eyes and ears” and often references. Be realistic on valuation–focus on building the company and bringing together the right partners to maximize the exit value of your technology company. Keeping the Interest of Venture Capital Kirk Washington, Founding Partner Yaletown Venture Partners Inc. Vancouver-based Yaletown Venture Partners Inc. provides expertise and capital for the development of pre-revenue early-stage energy and information technology businesses in British Columbia, Alberta and NW Washington. VC investment methods include screening and due diligence review, staged financing, syndication of investments, compensation – alignment of incentives, covenants and restrictions on decisions, composition of the board of directors. Venture capital is the source for investment for soft asset, innovation-based businesses. PART II: CRITICAL ISSUES FOR SUSTAINABLE GROWTH Successfully Attracting Private Energy Capital Providers Dirk McDermott, Managing Partner and Founder Altira Group LLC Investing in companies that develop and commercialize energy technologies, Altira Group operates under the investment premise that energy technology providers have higher growth rates and higher returns than the energy producers. Once energy technology companies understand the drivers for venture investors, they can avoid common pitfalls in raising capital. A compelling investment has a solid management team, a compelling value proposition and a competitive advantage. The right fit between investor and entrepreneur is important. Considerations beyond Initial, Venture and Private Funding Roderick W. Graham, Senior Vice President ARC Financial Corporation Founded in 1989, Calgary-based ARC Financial Corporation is an investment management company focused exclusively on energy, primarily in Canada. Currently involved in energy technology investment in oilfield service and NEET – New Energy & Energy Technology. Core investment principles of ARC Financial advise energy technology companies to focus on “best in class” management teams and target markets with size and breadth, only invest in commercial or near commercial technology companies, focus on private versus public companies and know your exits before you enter. ARC illustrates these principles with a pipe supplier case study. rdff0301rep.doc 2003 12 18 HT 3
  • 5. ENERGY TECHNOLOGY CAPITAL FORUM Protecting Your Position through the Lifecycle John T. Ramsay, Partner Gowling Lafleur Henderson, LLP Best IP practice non-disclosure agreements include: ownership agreements, inventorship records, patent policies, regular disclosures to a “patent committee”, a selection process for inventions to be protected within the budget, and patent strategies. The search for strategic patents in a new technology creates a race among companies. There is also a second race for the surrounding patents taking place to fence in any conceivable strategic patent. Multiple patent strategies are examined, and entrepreneurs are encouraged to use an IP value hierarchy to determine the optimal patent strategy to protect their technology. PART III: MARKET DEMAND PERSPECTIVE Energy Technology: A Producer End-User’s View Rich Kerr, Chief Engineer Nexen Inc. Ten industry trends currently affect technology development. R&D is difficult to measure, and there will always be skeptics who question the value of R&D. Nexen’s technology strategy is their belief that R&D is a good investment, not a poor expense. Their willingness to collaborate and participate, to take the long view, to maintain their focus, and base their growth platforms on EOR, Oil sands, and CBM technology are contributing to their technology strategy’s success. Technology and technology growth platforms are important for Nexen. Technology has, can and will create significant value for us. Nexen has specific examples of success, at least partially related to technology (e.g. Long Lake). There are lots of future challenges, but every challenge is a significant opportunity. 4 2003 12 18 HT rdff0301rep.doc
  • 6. ENERGY TECHNOLOGY CAPITAL FORUM EMERGING TECHNOLOGY COMPANIES A brief synopsis of each technology company’s offering follows, to contact a presenter, click on the presenter’s name to generate an email. Emerging technology companies are defined as pre-commercial ventures. Aralan Solutions Inc. Terry Joubert petroAra is a software application for the O&G industry to budget and track capital, operating cost, reserves and production. SP Technologies Ltd. Clare Bildfell Ensync Pump Systems Inc. is a patented pumping system for Steam Assisted Gravity Drainage (SAGD) Bitumen Production. Sentry Corp Carolyn Martin SENTRY provides a Virtual War Room for automated crisis management, centralizing and sharing all tools and information among responders, agencies and the enterprise. Synodon Inc. Adrian Banica Synodon offers realSensTM – a cost-effective, reliable, and timely patent- pending remote sensing platform technology that measures very small ground- level gas concentrations from aircraft. Earthrenew Organics Ltd. Christianne Carin Earthrenew offers a proprietary low-risk technology platform that integrates gas turbines into a manufacturing process to profitably generate electricity and high value organic fertilizers. rdff0301rep.doc 2003 12 18 HT 5
  • 7. ENERGY TECHNOLOGY CAPITAL FORUM MATURING TECHNOLOGY COMPANIES Maturing companies are those which have achieved commercialization. Malibu Engineering and Software Ltd. Garry Perry Wellcore is a complete well life cycle management solution which captures field costs (construction, drilling, completions),securely transmits data to and from the office, manages AFE processes and sign-offs, budgets and cost variances, and automates document distribution to staff teams and partners. Mariah Energy Corp. Paul Liddy Distributed Generation Energy Company provides distributed energy products and services, efficiently reducing emissions through on-site energy generation. Pandell Technology Corporation Greg Chudiak Pandell has a proven, fast and cost-effective way to build and deliver cost-cutting solutions to enterprise customers using proprietary next generation web services technology to plan, capture and analyze spend in real-time. Unotec – Unique Oilfield Technology Services Ari Laurell Drilling waste disposal using Supercritical Fluid Extraction, a new application of existing technology. XERGY Processing Inc. Mike O’Hara New H2S removal technology which produces bright yellow sulphur to world-wide infra-structure not limited to agricultural markets. 6 2003 12 18 HT rdff0301rep.doc
  • 8. ENERGY TECHNOLOGY CAPITAL FORUM SUMMARY OF ENERGY TECHNOLOGY CAPITAL FORUM EVALUATION AND FEEDBACK 74 registrants attended the conference, and 8 evaluation forms were returned. 1. Did you find the information provided at the forum today of value? Yes 100% (8) Please comment:  overall very well-organized  I enjoyed both the lesson in venture capitalism and the outline of some of the new product ideas  the morning presentations were useful, some afternoon presentations did not get to the point, some too “black box” 2. Which presentations did you find most valuable?  many good thoughts…especially around financing  Dirk McDermott  morning sessions and emerging company presentations for financing  pure technical offerings  the emerging technology presentations  morning presentations, and in particular, Richard May’s  Dynamics of Change on the Energy Landscape (Peter Tertzakian)  Funding Lifecycle of an Energy Technology Company 3. Please specify your objectives for attending this session:  strengthening our story and preparing for financing  educational process as a startup  interest in technology companies presenting for financing  I play a role in Husky’s corporate R&D investment. I want to understand the R&D investment process and community and the role Husky can play in it  to learn about the energy technologies not yet in the marketplace  considering financing alternatives  to present and to learn what investors are looking for in a potential investment  learn about investor interest and requirements  see new energy innovation 4. How well did today’s forum meet your objectives?  12.5% (1) Exceeded objective  87.5% (7) Satisfied objective Please comment:  I found the afternoon presentations targeted to the investors and not a customer like myself  overall very informative but too much (i.e. not enough slack time so some interesting Q&As and presentations were cut short rdff0301rep.doc 2003 12 18 HT 7
  • 9. ENERGY TECHNOLOGY CAPITAL FORUM 5. What additional questions do you have on the information presented?  questions around value offerings to customers  presenters targeted investors 6. What investment challenges/barriers confront your organization?  still an early stage company  maturing companies – a couple were quite early for this category, e.g. Unotec. Xergy isn’t seeking capital, therefore not really most suitable for a forum  being selective about entities we share Husky’s name with; ensuring Husky realizes the same relative value by working with the R&D company as the R&D company will realize by working with Husky  increasing penetration into US/Canadian energy sector; financing for acquisitions to expedite growth  mentoring SP Technologies – they need money to complete prototype testing and commercialization of a new pump 7. What opportunities do you foresee for your organization in energy technology?  Husky is piloting a number of innovative equipment and information management technologies: continuous rod, rodless pumps, micro-gas compressors, measurement, single well monitoring, intelligent well advisory system  lots of opportunities  increased sales of management software 8. How did you hear about this event?  37.5% (3) PTAC email  12.5% (1) Forwarded email  25% (2) Word of Mouth  25% (2) Other (please specify): C2C program; Glenn Huber 9. Were the time and timing of the session satisfactory?  Length of forum 75% (6) Yes 12.5% (1) No 12.5% (1) No Response  Time of year 87.5 (7) Yes 0 No (1) No Response  a long day 10. Would you be interested in attending a similar event in the future?  100% Yes 11. Would you find a tradeshow component for this forum valuable?  12.5% (1) Yes  75% (6) No  12.5% Unsure, might attract more people  not sure, maybe not given vast quantity of information to cover 8 2003 12 18 HT rdff0301rep.doc
  • 10. ENERGY TECHNOLOGY CAPITAL FORUM 12. Please suggest ways in which future events could be improved.  attract more angel investors – angel investor presentations, more producers  involve investor groups with investment/business experience in selection of maturing companies  maybe displays of the technology if possible  the morning session had some duplication if it could have been eliminated, time would be less rushed. Entrepreneurs need to be more concise on what they want and more open with what they are trying to accomplish 13. What next steps or events do you recommend PTAC undertake in this area?  separate trade show  keep track of companies who did presentations and provide updates at future sessions or in your newsletter  follow up with investors in attendance to determine if the forum was valuable and satisfied their needs and objectives  document the results as you mentioned 14. General Comments:  Very nice forum. Great food. Lots of entrepreneurial spirit. A good cross- section of technology and industry. It would be useful to try and grow this initiative because it supports a great entrepreneurial spirit in the province...and I think it should seed new ideas and opportunities for entrepreneurs to learn from each other.  Thanks for organizing this meeting.  This could definitely be an annual event.  Good job holding speakers to time limit in the afternoon.  Have a canned question ready for each speaker so that all speakers can answer a question.  Too many morning speakers.  Too full a day (19 presentations total – 14 a better number?)  Good overall forum for the first year. Should get stronger each year out.  Good job, overall informative and enjoyable. rdff0301rep.doc 2003 12 18 HT 9