How WestPort Meets the World's Demand
Renia is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
WestPort Innovations (NASDAQ: WPRT) was an offshoot of a University of British Columbia Mechanical Engineering Department project to seek and create improvements of natural gas combustion in engines. The result of this study formed the basic theoretical knowledge on which the technology of WestPort HD was founded on and has blossomed over the years.
WestPort’s Growth and Development
The company came to fore in the field of natural gas combustion engines when it forged a partnership with Cummins (NYSE: CMI) for development and manufacturing of compressed natural gas products, such as engines and other machinery. The timing could not have been more apt as the clamor for ‘cleaner’ and ‘greener’ fuels and machines have grown in the last decade or so. The partnership has moved forward in providing significant improvements, as well as refinements from the original UBC program HPDI technologies as applied to real world heavy-duty situations.
Other partnerships have been formed by Cummins-WestPort collaboration not just in the United States but throughout the world. These include entering into joint venture agreements with Beijing Tianhai Industy Co to develop natural gas tank technology for the transportation industry in China. The technology has also become very specific, with Westport joining forces with Weichai Power Co the largest sturdy engine manufacturer in China, and Hong Kong’s Peterson Equipment. This tripartite venture established in 2008 focuses on the development, production, marketing, and sale of advanced fuel engines that utilize WestPort HD technology to utilize alternative fuels such as compressed natural gas.
Expanding the Engine Supply Scope
This technology is not just for durable trucks, power generators, and maritime applications; it has also ventured into the luxury car market. AB Volvo had entered into an agreement with WestPort to develop the Volvo PowerTrain to utilize the Westport HD natural gas fuel systems for Volvo applications in its commercial endeavors. This can be achieved after WestPort purchased Alternative Fuel Vehicle Sweden AB of Gothernburg, Sweden. This makes WestPort at the forefront of supplying all the natural gas fuel needs of the Volvo Car Company.
The first product of this partnership between Volvo and WestPort would be the bi-fuel 2.5-liter 231 turbocharged version of the V70 Wagon, utilizing the compressed natural gas fuel system designed and manufactured by AFV. This was made possible through the technologies provided by WestPort Innovations Inc. and progress is now being undertaken to answer the growing needs of 1.4 million natural gas powered vehicles currently on European roads.
According to David Demers, CEO of WestPort Innovations, “High energy efficiency and low emissions of greenhouse gases are a key focus for our strategic development efforts as natural gas and its renewable fuels counterpart, biogas quickly become the mainstream alternative fuel choice for heavy-duty engines. We are excited to be working together with a global leader who recognizes the importance of both performance and environmental stewardship”.
The Future for WestPort
One of the latest moves of WestPort was the acquisition of shares of Emer S.p.A. Brescia of Italy for a total of US$39.6 million, consisting of shares of stocks and cash plus assumption of indebtedness. This was first speculated as a takeover bid causing share prices to initially jump. Eventually, the expansion was seen as WestPort’s opportunity to expand into the Western European market.
WestPort’s business also comes in ominous times as the upsurge for ‘cleaner’ and ‘greener’ fuels have become the rallying cry for both the private and public sector. The WestPort HD technology sought to remove the emission of dangerous nitrogen oxides as well as particulate matter when fuel burns without sacrificing and even improving the engine performance, fuel efficiency, performance durability, and overall reliability of engines utilizing compressed natural gas.
One big business opportunity that WestPort is now working on is with LA Metro, which is now modifying its public transportation services to the Downtown Los Angeles and San Diego area using compressed natural gas as fuel for its fleet. Other business partnerships are also being explored with Clean Energy for refueling infrastructure for alternative fuel vehicles as well as Waste Management for fleet engine services among others.
Market Performance of WestPort
From its humble beginnings to its current worldwide market reach, WestPort Innovations has also become a stable commodity in the stock market. In NASDAQ, for the week ending February 15, 2013, the share prices have moved between US$29.25 to a high of US$31.70. This is just for its current interests in China and in Europe. With its current expansion in North America, specifically the continental United States, the growth of the company is to be expected, with a share price high of US$32.89 in 2012 on market capitalization of US$1.74 billion dollars.
Is There Still Room for Doubt?
Partnerships created in one of the biggest market base in the world, expanding its engine production to luxury cars like Volvo, consistently pushing on acquisition efforts, and meeting the demands of a cleaner and greener fuel the world over makes Westport a perfect investment for those who would like to take a shot at the engine industry. With efforts that have been met and achieved for the past few years, and even a positive foresight of what would come ahead provides a clear definition of how WestPort Innovations has blossomed from its early beginnings of scientific curiosity.
ReniaBula has no position in any stocks mentioned. The Motley Fool recommends Cummins and Westport Innovations. The Motley Fool owns shares of Cummins and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!