What are Ener-core's Business Segments?
Our first commercial product, or the EC Series, is the Ener-Core Powerstation
EC250, or EC250, which consists of a combination of our Power Oxidizer and a 250
kW gas turbine. The gas turbine was initially developed by Ingersoll-Rand, plc,
or Ingersoll-Rand, and subsequently enhanced by our predecessor, FlexEnergy, Inc.,
or FlexEnergy. The substitution of the Power Oxidizer for the combustor within
a traditional turbine allows for the resulting, modified turbine to utilize low
energy density waste gases as a fuel, in place of commercially purchased gases.
The low energy density gases that the EC Series products can use as a fuel do
not have an alternative commercial market as traditional combustion-based turbines
require uncontaminated high energy fuels and thus cannot run on low energy density
gases, and therefore such low energy density gases have no market value. In most
of our targeted geographical markets, these low-quality gases would require pollution
abatement equipment, often at considerable expense, to comply with air quality
standards. Our products utilize the low quality gases as a fuel source and eliminate
the gases to emissions level well below the current best practices pollution abatement
alternatives.
Our second commercial product is currently sold under a contract manufacturing
and commercial licensing agreement, or CMLA, to Dresser-Rand. In November 2014,
we entered into a commercial license agreement, or CLA, with Dresser-Rand, pursuant
to which we agreed to jointly develop a Powerstation that consisted of our Power
Oxidizer integrated with a Dresser-Rand KG2 turbine rated up to 2 MW of power
output. The resulting product is currently being marketed and sold by Dresser-Rand’s
international teams under the Dresser-Rand brand and is called the KG2-3GEF/PO
(or KG2 with Power Oxidizer, or KG2/PO). In June 2016, we executed the CMLA, which
was intended to replace the CLA upon satisfaction of certain requirements. In
April 2017, we amended the terms of the CMLA to make the CMLA effective as of
January 1, 2017, at which time it superseded and replaced the CLA. The CLA required
us to fulfill, sell and warranty any Power Oxidizers sold to Dresser-Rand. The
first two systems sold to Dresser-Rand were shipped to a Stockton, California
biorefinery site owned Pacific Ethanol, Inc., or Pacific Ethanol, in the fourth
quarter of 2016. Any future 2MW systems are expected to be sold under the CMLA
based on a per unit royalty payment payable to us and without a product warranty
requirement by Ener-Core.
We believe our Power Oxidizers provide a significantly lower fuel cost per kilowatt
hour since they can operate using both premium and refined natural gas, a wide
variety of lower quality, low hydrocarbon gases, traditionally considered to be
“waste” gases, as well as certain volatile organic compounds, or VOCs,
such as paint solvents. These gases and compounds are typically seen as a waste
by-product of industrial processes, which often represent a source of pollution
and, in turn, require expensive waste abatement equipment and significant recurring
operating costs. As such, our Power Oxidizers are designed to serve as an opportunity
for our industrial customers to reduce their fuel costs.
We also believe our Power Oxidizers provide a superior air pollution waste abatement
solution for industrial customers. Typically, industrial customers require electricity
and steam for their operations and generate industrial gases as a by-product of
their facility operations. Prior to the introduction of our Powerstations, these
customers would purchase energy or produce energy using a traditional gas turbine,
which uses a combustion chamber to ignite refined natural gas and generates air
pollution in the form of carbon dioxide, carbon monoxide and nitrogen oxides.
The gas turbine and by-product gases generally require pollution control equipment
and recurring costs in order to comply with existing pollution standards, which
vary by geography. Since both the natural gas fuel and the industrial by-product
gases oxidize in our Power Oxidizers over a much longer time than combustion heat
sources, the Power Oxidizer reduces both the gas fuels and by-products to levels
below substantially all of the existing and proposed air quality emission standards
in most areas of the world.
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