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OTTAWA (Reuters) - Tiny Catch the Wind Ltd is bracing for big business from technology that helps wind farms harness more power, but dreams of billion-dollar sales are not turning to reality yet.
"This is an industry that requires very high reliability because you, as a consumer, don't want your lights to go off," Chief Executive Phil Rogers said in an interview. "We're in a show-me stage."
Virginia-based Catch the Wind has developed what it says is a revolutionary fiber optic laser system that senses and calculates changes in wind speed and direction at least 300 meters before airflow reaches a wind farm's turbine.
The company says its $150,000 Vindicator sensor can boost energy output by about 10 percent, and also cut maintenance costs and extend the life of a turbine by several years.
If it sells the sensor for just 10 percent of the 110,500 turbines currently in operation, that works out to $1.6 billion in revenue, the company said.
The dream has made Catch the Wind one of the stars of the TSX Venture Exchange. Its stock, launched in an initial public offering in 2008, surged more than 400 percent last year and its last equity offering, in April, raised C$5.15 million ($5.09 million) from shares priced at C$2.
The stock price has since slipped back to C$1.68, including a slide of 13 Canadian cents on Thursday after the company reported a quarterly loss of $3.2 million.
Jacob Securities analyst Khurram Malik said the Vindicator is the first forward-looking measurement device to enter the market, with no likely competition for two to three years.
But there are still risks.
Typically, new technology is adopted only slowly, and Catch the Wind faces intense competition in the wind energy market, where rivals with deeper pockets may offer cheaper products.
For example, the world's biggest supplier of wind turbine blades, Denmark's LM Glassfiber, is working on "intelligent" blades that incorporate laser and Doplar technology and aims to have a prototype ready by the end of 2012, Malik wrote.
Two of the four analysts who follow the stock have "speculative buy" ratings, one an "outperform" and one a "hold". They say the technology has promise, but some do not see major sales or profit until 2012.
National Bank Financial analyst Rupert Merer last month cut his target price to C$2.50 from C$3, on a slow sales ramp up.
Catch the Wind says it is "aggressively" seeking sales from wind farm operators and wind assessors, and will next target turbine manufacturers.
Spun off from Optical Air Data Systems, the company notched its first sale in March to a "leading turbine manufacturer".
Rogers, who has invested $11 million in the business with his wife and fellow director Alisa, believes customers will make initial orders of two to three sensors this year.
He expects those customers to return for bigger buys by early 2011, after they study the Vindicator.
The sensor uses lasers and Doplar radar to analyze air particle movement, giving turbines 20-30 seconds to adjust to a change in wind direction or speed. Today, sensors gather information after air has passed a turbine's blades.
For a 2.5 megawatt turbine, that translates into $60,000 a year in incremental operating cash flow, or an estimated $18 million over 20 years for a typical 75 MW wind farm, Chief Financial Officer David Samuels said.
The company said more accurate alignment could lead to more reliable turbines, a growing issue as turbines get bigger and more costly and are increasingly installed offshore.
The company has gathered test data over the past two years, including a trial with Nebraska Public Power District that showed a 12.3 percent increase in energy output despite operating just 56 percent of the time.
A second phase of that trial is under way, while expanded testing at TransAlta Corp's Pincher Creek wind farm is expected to resume soon.
A longer study is ongoing with Spanish wind turbine maker Gamesa and Rogers said that could mean "significant sales" in the long term.
The company has also developed a hand-held wind sensor called the Racer's Edge. The team it supplied for the America's Cup sailing race in February won the contest.
And if Rogers has his way, that is just the beginning.
He envisions wind sensors for pollution control, forest fire fighting, airports, shipping, wind maps for weather forecasting and agricultural planning and even storm chasers.
Reporting by Susan Taylor; editing by Janet Guttsman