Westport Enters Light-Duty Automotive Market—an interview with Ian Scott, President, Juniper Engines Inc.

by Heather Merry

On July 2, Westport Innovations announced it has acquired Italian company OMVL SpA, the other parent company of its joint venture Juniper Engines Inc. Westport has purchased 100% of the interest in OMVL and as a result, Juniper is now wholly owned by Westport.

Fuel for Thought spoke to Ian Scott, President of Juniper Engines, who will now run the combined companies, to get his take on the acquisition and the future for the new Juniper.

Fuel for Thought:
Ian, this is a great step for Juniper and injects an immediate revenue stream into Juniper (and therefore Westport). What is the significance of the acquisition?

Ian Scott:
Thank you. The purchase includes OMVL’s 51% equity in the Juniper joint venture and therefore Westport now owns 100% of both Juniper and OMVL. Going forward OMVL will be operated within Juniper, and this deal represents a large step for Juniper towards leadership in the light-duty alternative fuel engine market. OMVL is the third largest global compressed natural gas (CNG) and liquefied petroleum gas (LPG) automotive fuel system and component supplier. So, Juniper will integrate a global business that includes products and technologies, assembly operations and facilities, and most importantly people, who will allow our combined company to become a leading player in our space.

FFT: Why acquire OMVL?

IS: The acquisition provides immediate access to the automotive market, new revenues for Juniper and Westport, and integration of the fuel system supply for Juniper’s industrial products. The story began in October 2007, when Westport and OMVL formed the Juniper joint venture. Both companies have worked together effectively since inception, and we largely view this acquisition as strengthening our existing partnership. OMVL brings proven spark-ignited multipoint injection fuel systems (the same systems Juniper uses on our forklift product), high volume manufacturing excellence, and strong engineering capabilities. In 2009, OMVL sold more than 300,000 LPG and CNG units, including complete fuel system kits or individual components such as reducers, for revenue of €19 million (US$23.4M). Juniper products will provide our parent company Westport with a strong balance to the differentiated Westport HD and Cummins Westport(CWI) product line-up.

FFT: What will Westport pay for the acquisition?

IS: Westport acquired OMVL for approximately US$23 million in total—about the same as OMVL’s 2009 revenues.

FFT: So Juniper is now in the light-duty automotive (passenger car) market?

IS: Yes, based on existing OMVL relationships.

FFT: What is OMVL’s current business exactly?

IS: OMVL designs, manufactures, and markets complete fuelling systems for new OEM light-duty vehicles and for the aftermarket conversion of engines from gasoline (petrol) to CNG and LPG. They are a leading supplier of alternative fuel kits and components in global markets including Europe, China, and Australia. They also have strong OEM partnerships in place including PSA Peugeot-Citroen (France) and Magna Gaz (Russia).

FFT: So, what’s the business strategy for Juniper?

IS: Juniper is the Westport business unit addressing the light-duty market. Our goal has been clear from the outset; to generate sustainable profits by becoming the OEM partner of choice for alternative fuel light-duty engine solutions. Juniper is emulating the Westport HD and CWI models by achieving success through superior products and customer support, in a focussed segment of the market; in this case light-duty. Juniper’s strategy was to enter and aggressively grow in the mobile industrial segment, migrate that experience to stationary industrial, and finally, to enter into and grow automotive. The acquisition is the culmination of that strategy.

FFT: What’s the current status of the Juniper mobile industrial product?

IS: We’re currently shipping Juniper LPG engines to our lead forklift customer, Clark Materials Handling. The engines are contract assembled in Busan, South Korea, integrating OMVL’s fuel system on the Hyundai 2.4L base engine. They are then shipped to Clark’s Korean manufacturing centre—within an hour by road from our assembly centre—and assembled into Clark forklifts and shipped globally. The first U.S.-bound forklifts have now landed on North American soil. The Juniper team is fully supporting Clark during the initial production ramp, and we look to further expand our customer base in the forklift and construction applications in the near future.

FFT: You mentioned a non-mobile industrial segment? What is happening there?

IS: We have begun field tests in oilfield applications with five engines in service that are pumping oil 24/7. Those engines operate on the wellhead natural gas that is produced from the well with the oil. The wellhead natural gas runs our engine, which in turn drivers a hydraulic unit that pumps the heavy oil out of the ground; it’s essentially a closed-loop system. When the trials are complete, we will be looking to also formalize customer relationships in other stationary applications such as power generation and agriculture.

FFT: OMVL is based in Italy. Will that change, due to the acquisition?

IS: No. OMVL is based in Pernumia, Italy, and is strong in Europe and sells products globally with the exception of North America. As we know, Westport’s main market is North America with additional global sales that are largely outside of Europe. Juniper and Westport facilities are largely concentrated in North America and Asia, whereas OMVL facilities provide a strong footprint in Europe and Latin America. The pieces fit together nicely.

FFT: So what now, Ian?

IS: We will use the current Juniper industrial and OMVL businesses as a foundation from which to grow by leveraging the strengths of both companies and evaluating strategic investments. On the industrial side, we expand with new markets, partners and products. In automotive, Juniper will grow the business through new OEM relationships and continued strong aftermarket sales. Strategic investments in new areas such as North American automotive, OEM class products and system installation capabilities, will allow us to compete for market leadership.

Read the press release on the acquisition or for more information visit http://www.juniperengines.com/.

Westport's Sustainability Report Available Online

by Karen Hamberg

Every business intersects with complex global problems and urgent sustainability challenges such as climate change, energy security, the availability of clean water, the loss of biodiversity, poverty, social justice and environmental health. It would be easy to be overwhelmed by the scale of these issues and wonder what, if anything, a small company on the west coast of Canada can do to mobilize and drive global change.

We believe that business success is no longer solely measured “company to customer” but via its relationships with a range of stakeholders. As a clean technology leader, we recognize the responsibility we have to our employees, customers, partners, shareholders, suppliers, governments, the natural environment, academic institutions, non-government organizations (NGOs) and the neighbourhoods in which we live and work.

The decarbonisation of the transport sector requires vision, leadership and boldness. Our employees are the best source of ideas for minimizing the environmental impact of our operations and developing more innovative ways of working together. Our customers have shown environmental leadership by purchasing natural gas vehicles and are now able to earn emission credits via the Westport Carbon Project. Governments around the world are recognizing the economic, energy security, environmental and job creation benefits of natural gas vehicles. Environmental NGOs want to learn more about how reducing the carbon intensity of fuels has the potential to meaningfully reduce emissions from heavy-duty vehicles. Our partners see a tremendous opportunity to revolutionize how we move freight and people.

But of course, our role in the above-mentioned efforts is meaningless if our own house is not in order. To that end, we are pleased to share our progress in our third sustainability report providing information on our social and environmental impacts. Data from four fiscal years have been included to reflect trends, achievements and challenges. Our approach to sustainability has been driven by data and quantifiable measures but the story behind the numbers is even more compelling. More comprehensive discussion will occur on our website, http://www.westport.com/ and in future annual reports.

View the Westport Innovations Inc. 2010 Sustainability Report.

Get Cash Back for Buying a Low-Carbon Natural Gas Engine—Every Year!

by Karen Hamberg

Back in March, Westport announced the first global carbon finance program for transportation registered to the Voluntary Carbon Standard (VCS). The VCS was established to provide a rigourous, trustworthy, and innovative global standard and validation and verification program for voluntary greenhouse gas offsets. All voluntary carbon units are real, measurable, permanent, additional, conservative, independently verified, unique and transparent. By working with Grütter Consulting—the world’s leading firm linking carbon finance with clean transportation projects—the Westport Carbon Project (WCP) monetizes the emission reductions associated with Westport HD and Cummins Westport natural gas engines.

“Westport strives to offer heavy-duty vehicle engines with leading environmental performance. The WCP validates the emissions reduction benefits of natural gas engines and further supports the economic and environmental value proposition we offer to customers.” (Karen Hamberg – Director, Sustainability and Environmental Performance Westport Innovations)

Globally, the transport sector is the fastest growing emitter of carbon dioxide (CO₂) emissions. Carbon finance is the mechanism by which (CO₂) reductions can be sold on the carbon markets to partially finance the measures taken to reduce these emissions. The most notable or well-recognized transportation project is the Bus Rapid Transit TransMilenio in Bogota, Colombia. The TransMilenio was the first project registered under the Clean Development Mechanism (CDM) of the Kyoto Protocol and transports more than 1.8 million passengers daily through 130 kilometres of exclusive bus lanes in 1,200 articulated buses and 500 large feeder buses. The project annually reduces (CO₂) emissions by 250,000 tonnes and has received more than US$100 million in carbon finance over the entire crediting period.

The two very different examples of TransMilenio (regulated under the CDM of the Kyoto Protocol) and the Westport Carbon Project (registered to the VCS for voluntary offset projects) highlight some of the challenges and opportunities associated with quantifying, validating and verifying emission reductions from mobile transport sources.

Let me speak to the Westport Carbon Project in greater detail:

The Challenge of Scale

• The cost of establishing a carbon finance project would be prohibitive for all but the largest fleets. The structure of the WCP allows Westport HD and Cummins Westport powered vehicles sold since January 1st, 2009 to be aggregated into a larger project. Vehicles sold to fleet owners worldwide including the United States, Australia, Canada and China will be included in the WCP.

The Rigour of Validation

• Emission reduction calculations are based on a United Nations Framework for Climate Change Convention (UNFCCC) approved methodology—in our case, AMS III.C “Emission Reductions by Low Greenhouse Gas Emitting Vehicles”. The project documentation has been validated by SQS, a Swiss entity certified by UNFCCC for the validation of climate change projects in the transport field.
• The annual verification process will provide our customers with a third-party certified account of the greenhouse gas (GHG) emission reductions associated with their fleet operations.

Carbon Pricing in the Voluntary Market

• The voluntary carbon market has historically offered lower prices per tonne than the regulated or compliance markets. The carbon rebate cheques sent to customers as part of the WCP may be variable year to year depending on fleet data such as mileage and fuel consumption and the carbon price per tonne on the voluntary market.
• It is estimated that GHG reductions for a natural gas bus are about 20 tonnes per year, whereas a heavy-duty natural gas truck are about 40 tonnes per year as compared to an equivalent diesel engine.

Please contact Westport's Director of Sustainability and Environmental Performance with any questions regarding the Westport Carbon Project and watch this space and Westport's website for further updates.

Westport Among the Top 50 Socially Responsible Corporations in Canada

by Karen Hamberg

Westport Innovations has been recognized as one of the Top 50 Socially Responsible Corporations in Canada in an annual report by Jantzi-Sustainalytics in partnership with Maclean’s magazine.  We are pleased to be in such good company with other leading organizations selected on the basis of their performance across a broad range of environmental, social, and governance indicators tracked by Jantzi Research.

Westport is being recognized as a result of its natural gas engine technology for heavy-duty vehicles that reduce nitrogen oxides (NOx), particulate matter (PM) and greenhouse gas emissions (GHG) while preserving the power, torque, and fuel efficiency of diesel engines.

In addition, the launch of the Westport Carbon Project (WCP) in March to monetize the emission reductions associated with its Cummins Westport and Westport HD natural gas engines is the first transportation project registered to the Voluntary Carbon Standard.   Through this initiative, Westport and Cummins Westport natural gas-powered vehicles sold since January 2009 are eligible for carbon credits further supplementing the economic and environmental value proposition we offer to customers.

For more information on Westport’s sustainability initiatives please visit to www.westport.com/sustainability

The Top 50 Socially Responsible Corporations issue of Maclean’s hits the newsstands today.