Cleantech Investor

First published in Cleantech magazine, May/June 2010. Copyright Cleantech investor Ltd.

Advanced Power Components (APC) is an electronic components distributor that has spotted an opportunity in the cleantech sector. The company has just launched an energy saving device which reduces the electricity usage of equipment.and which could become a substantial part of the whole group over the coming years.

Rochester-based APC first became involved with the device, now known as imop, just over two years ago. The company has since refined the device and made it more attractive to customers, which initially will be industrial and commercial businesses but could also include residential.

The imop, or inductive motor optimisation panel, ensures that the power factor of a motor is optimised. The device, a box that is installed next to electrical equipment, stores reactive energy and supplies it to the equipment’s motor. Without installation of the imop, some of the electrical energy will be lost as the wires between the electricity supply and the machinery heat up – thus reducing the power factor.

Even if voltage optimisation equipment is already fitted in the premises, the imop can still save power and money. According to APC, the savings by industrial companies can be between 6% and 25%.

Each piece of equipment normally requires one imop unit. An additional benefit, though one more difficult to quantify, is that the increase in the power factor means the motors do not get so hot and therefore they should last longer.

APC has the rights to the technology outside of North and South America and has made improvements to the design and mounting of the imop, including ensuring that the device can be added to in a modular fashion so that it can cope with different sizes of motor. Although APC owns the rights to those improvements, its agreement with the technology owner means that each party has to make available to the other any improvements made.

The imop will be manufactured in Rochester and then sold to a company called Minimise, in which APC has a 19% stake. Minimise, which is based in the same building as the manufacturing facility, is effectively the sales company for the imop.

APC’s profits from the manufacture of the imop will be shared with the owner of the original technology. However, APC will also gain from the success of Minimise through its equity stake.

Minimise has already appointed distributors in the UAE and South Africa and is looking for distributors in other countries. In the UK the imop will be sold directly by Minimise .and the company is already talking to a number of potential customers. A prerequisite to installation is an assessment by a qualified electrician of the size of imop required as well as a quotation with guaranteed savings.
 
Although any potential customers could ultimately buy dozens of units of the imop, the timing of orders is difficult to assess. However, payback times can be rapid. Packaging group Nampak installed the imop on its printing line and reduced electrical costs by 16%, recovering its investment in less than one year.

The Carbon Trust recognises the imop as qualifying for installation under its interest-free loan scheme, meaning that smaller businesses can install the device and repay the loan out of the savings they are able to make.

The longer term strategy will be to use the distribution channels built up for the imop in order to sell other energy saving products, although this will have to wait until the imop business has become established.

APC chief executive Mark Robinson sees other opportunities for the components business in the cleantech area. There are niches in the LED lighting sector in which he believes APC could become involved, and there is expertise on the company’s board. Non-executive director Joe Stelzer used to run lighting company Polaron, which was acquired by Cooper Industries in 2007.

House broker Astaire is not including any revenues from the imop in its current forecasts for APC. The profit forecast of £230,000 for the year to August 2010 underpins the present share price.

It is not expected that the imop will be a significant contributor to APC’s figures until 2010-11. It is still difficult to assess the amount of such a contribution: however, if the imop does take off, it could fuel significant growth for the company.

Code: APC

Share PRice: 9p

Market Cap: £2m

12 month high/low: 15.5p/6p