A Huntington Beach startup is looking to take over and possibly build power stations at office buildings, factories and other businesses.
In December, 808 Renewable Energy spent what it called “several million dollars” to buy nine plants at office buildings and factories across California.
The plants, bought from a Canadian company that was in financial trouble, bring 808’s total to 14.
The company’s focus is cogeneration plants, which are power substations that produce electricity for buildings and capture steam and exhaust to heat or cool water and to fuel a building’s heating and cooling system.
The plants, which are smaller than those run by a utility, are powered by natural gas and capture heat or exhaust gas that would otherwise be wasted.
808 acquires the plants, fixes them up with engines, steam boilers and turbines, and then sells power back to the building operator.
Cogeneration can supply half of a building’s power for heating and air conditioning while using 10% to 30% less fuel than it takes to produce electricity and heat separately, according to 808.
“This provides huge amounts of power on site so users don’t have to pull power from the grid,” said Patrick Carter, 808’s chairman and president who left a career in investment banking four years ago to start the company.
808 is part of the county’s budding clean technology sector, a broad sector that includes alternative energy, pollution control, recycling, green vehicles, energy-efficient lighting and other products and services.
The county is home to nearly 300 clean tech companies that employ about 20,000 people according to the Orange County Business Council and trade group CleanTech OC.
The local clean tech sector is attracting venture capital, with more than $150 million invested in 2010.
Whether 808 can emerge as a long-term clean tech player here is unclear.
808’s plants are remotely controlled from its Huntington Beach headquarters. Contractors manage and maintain them.
Customer
Pacific Clay Products Inc. in Lake Elsinore became 808’s first customer more than a year ago. The brick and clay maker uses excess heat from its plant to dry bricks and pavers.
Other customers include the California Public Utilities Commission in San Francisco and office buildings in Torrance and San Diego.
Two deals are slated for Orange County at 3200 Park Center in Costa Mesa and 333 S. Anita Drive in Orange.
808 has spent about $10 million buying and retrofitting power plants, according to Chief Executive Pascal Lorthioir. All 14 of the company’s plants should be up and running by the end of the second quarter, he said.
Reliable statistics on cogeneration are hard to come by. Industry watchers and trade groups estimate that it accounts for less than 10% of the country’s energy production.
Cogeneration is more common in India and Europe, with Denmark, Germany and Russia relying heavily on the technology, thanks in part to tax breaks and other incentives.
California and other states also offer incentives. But the high cost of building cogeneration plants—at several million dollars apiece—have hurt adoption.
The cogeneration market here is fragmented, with only a few big players.
The biggest include Consolidated Edison Co. of New York—which distributes 30 billion pounds of cogeneration steam annually to 1,800 customers in Manhattan—and Recycled Energy Development LLC in suburban Chicago.
808 expects 2010 revenue to come in at $1 million to $1.5 million, according to Lorthioir.
Yearly revenue is projected to top $6 million once all 14 plants are refurbished.
The company’s goal is to buy and build 100 more plants across the U.S., generating 350 megawatts, enough for a midsize city.
Money is the big challenge for 808. It will need some $500 million to build and acquire that many plants, Carter said.
The company is in talks with private equity and venture capital firms and hopes to land funding soon, executives said.
There’s also been talk of an initial public offering.
Last year, the company said it had begun hiring lawyers to prepare a registration statement with the Securities and Exchange Commission.
The announcement, which alluded to pricing shares within a few months, turned out to be premature.
Money Raised
So far, 808 has raised about $14 million through friends, colleagues and investments by some of Carter’s previous clients from his days as an investment banker with UBS AG’s Newport Beach office.
In September, Carter hired Lorthioir, a friend and fishing partner, to build up the business.
Lorthioir developed and managed production at Los Angeles-based Marshall & Swift, a real estate data provider, for 18 years.
Most recently, he was an executive at J.D. Power and Associates, part of Ohio’s McGraw Hill Cos., where he managed global data production and product development.
