Karen Chandler opened her bag and took out a chunky strip of copper and placed it on the table. Next to it she put a slim ribbon of something else I didn’t recognise at all.

The second had been made by depositing layers of substances that I had never heard of – such as Lanthanum Zirconate and Yttrium – onto a base of textured nickel tape.

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The finished item is a High Temperature Semiconductor (HTS) and is apparently a ceramic rather than a metal. The important thing about it is that it can deliver one hundred times the power density of copper wire, while being much lighter and more compact.

A 100-year old discovery, but with a very bright future

Superconductive materials are not new – they were discovered almost a century ago. But despite their advantages, they have never superseded copper due to the difficulty of producing large quantities of consistent quality.

But, in an era of innovation in energy technology and climate protection, AIM-listed Zenergy Power Plc could be on to something big. I went along to meet the company’s chief financial officer, Karen Chandler, to find out some more.

Zenergy arose from a series of mergers. It has operations in Germany, California and Australia. But however hard it must be to manage such a diverse operation, Zenergy has become a world leader in a select field that includes US companies, SuperPower and American Super Conductor and Japan’s Sumitomo.

Things are starting to move. Zenergy has identified some specific applications for HTS. It has supplied its first product, an HTS Induction Heater, to the German aluminium extruder Weseralu.

Induction heaters are used in the metal forming industry. They heat metals until they are in a malleable state. They require a huge amount of electric power and with conventional heaters much of this is wasted. But by making the electromagnetic coil out of HTS rather than copper, much less energy is required and much less is wasted.

Now that one of these is up and running at Weseralu, Zenergy has been able to measure the benefits. For the same €1.2m cost, the HTS heater will cut roughly €230,000 per year off the electricity bill and deliver productivity savings worth up to €2m annually.

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Attractive cost savings are attracting enquiries

These are attractive numbers. Added to the fact that the HTS Heater is quick to install, the product should find a ready market. Karen told me that Zenergy was following up forty enquiries from September’s Aluminium 2008 Trade Fair. About nineteen hundred induction heaters are sold each year. Of the €1.2m price – which is split with its partner, Bültmann of Germany – Zenergy receives about €300,000.

Zenergy is also working on an HTS Fault Current Limiter. This absorbs the unwanted and damaging electrical power common in grid failures, without having to interrupt the steady supply of power to downstream grid users. So it can be used to avoid blackouts.

Zenergy is about to deliver one of these devices into the US power grid in a deal partly funded by the Californian Energy Commission. Zenergy has also been commissioned by the US Department of Homeland Security to work on a project named ‘Hydra’ that aims to develop power grids that can keep running, even in the event of severe weather, accidents or terrorist attacks.

A big opportunity in wind generation

The market for these firewalls for power grids is, at €5bn, more than double that for Induction Heaters. Meanwhile, another major market opportunity is for electricity generators. Here, Zenergy is working with Converteam for next generation wind and hydro generators, and is already supplying the first HTS generator to E.On for a hydro electric plant.

The bigger opportunity, though, could lie with wind generators. These large wind mills suffer from a serious technical drawback in that the generator must sit at the top of the mast. They weigh 450 tons, of which more than half is accounted for by copper. That means these wind mills need a sturdy and expensive mast. By replacing copper with HTS, the weight of the generators can be reduced to just 80 tons. HTS generators are capable of reducing by 25% the cost of wind power generation.

Zenergy seems close to cracking some large markets. It also claims to be the first manufacturer to have perfected a low cost method of volume production. Profits though, are still some way off and broker Edison believes that Zenergy may have to raise more capital before it can become self-financing. So it is no great surprise that the share price has been sliding this year.

But this is certainly a company in which I will be taking an interest in. It’s one I’ll be keeping on my watch list.

P.S. Panic-sellers are running riot through world stock markets... but right now one forgotten corner of the UK stock market looks deeply oversold. Britain’s rising star firms are selling for PENNIES and look ready to rebound. The last time these same conditions occurred one stock shot up 775%!

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Tom Bulford
for The Penny Sleuth

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P.P.S. If you want to follow the insights of a small company investor, and uncover the hidden gems of the stock market, find out more about The Penny Sleuth by clicking here.

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