FAQs for Freepower ORC Electricity Company Investors

Our core business is developing Organic Rankine Cycle (ORC) power generating equipment, run from the wasted heat of engine exhausts, flare stacks, ovens, kilns, industrial process, or from the sun's heat.

2. How is your business structured?

We have an R&D unit which carries out the development and new equipment testing. There are separate commercial contracts and manufacturing departments. The commercial contracts department finds and negotiates regional distribution or original equipment manufacturer agreements, and joint venture arrangements where there is the potential for sales expansion into other market sectors. The business will carry out some manufacturing and then increased capacity will be undertaken through manufacturing joint venture or licensing.

3. Does Freepower have a policy towards the environment?

Yes, Freepower has a holistic approach to its business design, manufacture and disposal practices. The Equipment is designed to be made from small components, which take considerably less raw material to manufacture than components used in many other technologies. On disposal, at end of equipment life, all elements of the equipment are designed to be recyclable under current capabilities. We are always seeking out better ways of doing things.

Our Markets

1. What is your immediate market focus?

The UK and European Landfill industry, followed by the Petrochemical industry.

2. What makes the landfill sector so attractive?

In the UK and most European countries Landfill benefits from what is known in the UK as Renewable Obligation Certificates (ROCs) which gives the recipient an enhanced value for generating electricity from renewable resources. Also the Landfill industry already injects a high percentage of electricity generated from sites, so we can take the experience gained here and apply it to other markets over a period of time.

3. What's driving these markets?

Environmental pressures and policies, the Kyoto Agreement, reducing oil and gas supplies over the next 20/30 years. Increased goals for production of electricity from renewable sources, worldwide electricity shortages and increasing costs of electricity.

4. Do you think governmental policies for the reduction in emissions, CO2 and pollution generally will benefit you and or your customers?

Yes, some European Governments are now seeking to increase the amount of electricity to be generated from renewable resources. For example the UK government have increased their requirement from 10% by 2010 to 15% by 2010. This capacity is not currently achievable from existing renewable resources. The UK Government have also undertaken to maintain financial incentives and Carbon Trading looks set for 2005.

Product Portfolio

1. So if this is another engine how does yours differ from others?

Other engines all use conventional fuels or gases and have combustion chambers and exhausts. Our unit has no combustion chamber and no exhaust requirement.

2. So if your engine doesn't burn fuel and create exhaust, how does it run?

In simple terms the system is a closed cycle, which uses an environmentally accredited, working fluid heated by transfer oil, which itself is being heated by wasted heat. Both the working fluid and the transfer oil are continuously cycling, in their own closed loops.

3. Is there a classification used for this kind of equipment?

Yes, this would come under the UK's classification of "Clean Mechanism".

4. How many products do you make?

Currently we have FP6 (6kW) available. FP120 (120kW) is planned for 2007 with FP60 (60Kw) following shortly behind.

5. What are the risks in moving from a 6kW unit to a 120kW unit?

Few, from the perspective of upsizing. Up scaling suffers fewer specification constraints.

Customers

1. Who are your main customers?

Our customers are Distributors or Original Equipment Manufacturers who will already have an established regional, worldwide or market sector customer base, or reputation / brand name.

2. Is it difficult to get the market to take your technology seriously?

Worldwide environmental factors, policies, electricity generating shortages and price increases are separately, or collectively, reinforcing the need for commerce and industry to take efficiency strategies and, or, independence from grid supply, into account in their business strategy.

3. Are there incentives available that customers can take advantage?

Worldwide environmental factors, policies, electricity generating shortages and price increases are separately or collectively reinforcing the need for commerce and industry to take efficiency strategies and or independence from grid supply into account in their business strategy.

4. Are the barriers to entry quite high?

No, the view is that our market focus has a very favourable payback time of less than one year in many European countries, and there is sufficient opportunity for the next 3 years in this region to achieve the company's goals. During this time, we would also be able to promote organic growth into other regions, as well as having the time to develop other markets.

5. Will you supply into other non-target markets?

Yes, we will react to requests to supply especially if they come within a future target.

Competitors

1. Who are your main competitors?

No other company competes with us directly, across all our market sectors; but sector-by-sector we compete with a mixture of players. Our listed peers are often quoted as Stirling engines, Micro Turbines, Ormat & Turboden although we compete with them in very few market sectors.

2. Do you think there is a big enough demand for other players to come in?

Undoubtedly over time, as the market for renewable and energy saving equipment is still in it's infancy.

Economic Climate

1. What would happen in a recession?

We don't really know, as we have never lived through one. The equipment is not optimised for any one-market sector, but for a range of solutions. There are therefore two answers to the question. Firstly the power generation industry has been fairly insulated over past recessions, because most projects are based on long-term criteria, and there is a worldwide requirement for increased electricity generation to meet demand. Secondly, that we could lose some of our existing market, but that conversely, we are well placed to gain other markets much sooner. How this would balance out is an unknown. Certainly, reversing current incentives could impact us in the short term, although the end customer sees a short payback without taking such things as Capital Allowances and ROCs into account.

2. What about inflation in raw material costs - what are the key impacts and how can you pass these on?

The exchange rate has affected prices for some imported components, however these have to date had a beneficial impact on prices. Where there is an industry-wide issue we may pass on price increases selectively. We also have the opportunity, with increases in batch production, to become more efficient and absorb some pricing pressures whilst maintaining margins.

3. How do you propose to increase your margin in this tougher trading environment?

We are currently uniquely placed, and do not promise to increase margin beyond current objectives. However, our aim is to defend margins and we can do this through increased volumes and becoming more efficient in several areas: for example, purchasing, building, use of automation, and when volumes allow, sub assembly outsourcing, etc.

To Round Up

1. What keeps your management awake at night?

We have identified five key areas, which we must get right if the business is to be successful; equipment safety, our customers, the operating customers, our staff and our investment.

2. Do you see yourself as a suitable candidate for an IPO?

The short answer is yes; because the company will need the resources to be able to grow into the size of organisation that market need shows. This is a way forward that is being considered, however several factors will be taken into account, in no order of merit, such as economic climate, the best value for shareholders, the management structure and benefit to the business and its goals.

3. What would you say to a potential investor?

We cannot persuade you to invest in the energy sector or in private company, but if you do, and want growth, this is a good place to be and we are a unique player in this area. We believe that growth will be generous to us in the medium to long term, but that given the trading environment there could be some short-term turbulence.