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ReliOn Inc., the Spokane Valley-based fuel-cell maker, is moving on to greener pastures. To be more precise, the company, which manufactures fuel cells that are used in backup power systems for telecommunication operations, is gravitating toward greenfields. In technology and some sales circles, greenfield development refers to opportunities in untapped markets with yet-to-be-quantified potential. ReliOn CEO Gary Flood says the company is pursuing a few different greenfield markets that it expects will help it increase sales—and perhaps attain profitability. “If you can get involved in greenfield development, you aren’t seeing, ‘I’ll take two (fuel cells) and three there,’” Flood says. “You’re seeing 1,000 here and 1,000 there. We see that as an opportunity to ramp up the company.” The largely untapped markets that ReliOn is hoping will fuel the company’s growth include international telecommunications markets, the security communications backup sector and the potential for increased backup needs in domestic wireless communication operations. Pursuing business in all three of these areas is a “belt-and-suspenders” strategy, Flood says, to insure that sales will increase as the company is projecting. In other words, if one of those avenues doesn’t prove to be as fruitful as ReliOn expects, the company still should be bolstered by other new opportunities.
With the beginnings of entry into those markets and further penetration into its established sectors, ReliOn is expecting strong sales growth this year. Flood says the company is projecting that its sales volume for 2008 will be three to four times its sales last year and profitability could be reached in the near future. “We expect to be cash-flow positive before the end of 2009,” he says. In international markets, the company currently has a presence, and it hopes to make inroads into developing nations worldwide. Countries like China are expanding their telecommunications networks rapidly, and some are largely bypassing wireline networks that are prevalent in the U.S. and moving straight to a wireless-telecommunications infrastructure. To tap into emerging markets, Flood says, ReliOn is partnering with large, international original-equipments manufacturers, or OEMs, that are including ReliOn’s fuel cells in their suites of products. ReliOn announced its first such arrangement earlier this year. In February, Emerson Network Power agreed to use ReliOn’s fuel-cell products in one of its backup-power product lines. At the time, Emerson Network Power’s Manish Bhandari said, “This agreement with ReliOn gives us greater flexibility in designing backup-power solutions that meet the changing needs of our customers. While traditional battery backup remains a critical part of the existing IT and telecommunications infrastructure and is central to our business, industry changes … are driving the need for alternative sources of backup power.” Flood says ReliOn has secured similar relationships with other international OEMs that are comparable in size to Emerson, but he declines for now to disclose their names because those companies haven’t authorized ReliOn to talk publicly about their arrangements. While international markets appear fertile for growth, potential regulatory changes in the U.S. could provide more opportunity for ReliOn. The Federal Communications Commission has issued a mandate stating that most wireless transmission sites need to have at least eight hours of backup power. The wireless industry is fighting that ruling. However, Flood says, “Once the dust settles, there will be a mandate for the wireless networks. That will be a positive for our company.” In addition to the telecommunications industry, ReliOn has started providing backup for security communications, such as those needed in remote locations by U.S. Customs and Border Protection. While that’s a relatively new market for the company, sales for security-communications backups currently account for 20 percent of the company’s business. As with the telecommunications market, the company foresees opportunity in expanding sales to security operations abroad. A long sales cycle Growth in new markets and sectors can occur at this time because the fuel-cell power-backup industry now is on the radar screen for telecommunications companies. As an industry, fuel-cell makers have had to educate potential customers about the benefits of the emerging technology and to figure out the role of fuel cells in overall backup strategy. Conventional power backup involves either batteries or power generators. Both are tried and true and won’t be supplanted by fuel-cell backup. Fuel-cell makers, however, argue that their products are more environmentally friendly—ReliOn’s products operate on a combination of hydrogen and oxygen, and the only byproducts are small traces of water. Also, fuel-cell backup, they contend, is more practical under certain conditions, such as with rooftop cell towers, where weight can be an issue. For years, Flood says, fuel-cell makers have worked to help potential customers understand the technology and then how the technology could fit into their backup power needs. That process has involved answering questions about the fuel cells themselves but also other general questions, such as, “I’ve never bought hydrogen. Where do I get it?” Once telecommunications companies understood fuel cells and accepted that they had a place in their backup plans, it then became a matter of getting them to budget for fuel cells. “I used to tell our salespeople, ‘Our job is to steal other people’s money’ because the customer didn’t plan to buy fuel cells and would pay for them with money earmarked for other purchases,” Flood says. “We’re getting to the point where they’re budgeting for fuel cells.” The company doesn’t disclose its sales figures, but it says its fuel cells are being used at 550 different sites. As of mid-July, the fuel cells that it had sold throughout its 13-year history had the ability to provide 1.7 million watts of power in total. That’s grown since the beginning of this year, when that total stood at 1.3 million watts. Funding and the future ReliOn started as a subsidiary of Avista Corp. in 1995, under the name Avista Laboratories Inc. The company changed its name in 2004, the year after it received its first infusion of venture capital. Since 2003, the company has undergone four rounds of venture funding and has received a total of $80.5 million in venture capital. Last April, it closed its most recent round of funding with a $25 million investment from PCG Clean Energy & Technology Fund LLC, of La Jolla, Calif., and Robeco Clean Tech Private Equity II, of Rotterdam, Netherlands. That round is to be put toward sales and marketing of ReliOn’s current products and toward research into future products. In addition to the new investors, ReliOn is owned by six different concerns; Avista Corp. maintains a small interest in ReliOn. Flood says the privately held company hopes to become publicly traded, though it doesn’t have a timeline for going public at this time. “We’re building an enterprise that will be an individual company and eventually a public company,” Flood says. “We’ve done what we need to do (from a financial point of view) to be a public enterprise.” IBC
For more information, go to www.relion-inc.com.
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