Alison Boggs Staff writer Spokesman Review
Chrysalix Energy of Vancouver, B.C., Seattle-based Buerk Craig Victor LLC and Wall Street Technology Partners now own all but 19.9 percent of the company.
That portion remains with Avista Labs' former corporate parent, Avista Corp. Owning less than 20 percent of Avista Labs ensures that no losses count against Avista Corp.'s earnings.
"If you look at the contacts and networks each of our partners have, those are a whole lot of doors that can be open to us that we wouldn't have been able to open before," said Mike Davis, CEO of Avista Labs.
Chrysalix is an early stage venture capital firm that focuses on fuel cell and related fueling technology companies. Buerk Craig Victor is a Pacific Northwest private equity firm whose partners have a combined 200 years of investment and operational expertise. Wall Street Technology Partners is a New York-based fund that invests in mid- to late-stage U.S. technology and media companies. WSTP is affiliated with international banking giant Dresdner Kleinwort Capital.
The new owners say Avista Labs appealed to them because it is one of the few fuel cell companies with a product already for sale. Avista Labs projects $1.6 million in sales for 2003 with its 1-kilowatt, 500-watt and 100-watt fuel cell systems.
"This is the most exciting fuel cell company I have come across in the past several years in terms of a product that is ready today, with a great management team in place, strong corporate backing to date and really ahead of rivals within the fuel cell space," said Tom Pigott, venture partner for Buerk Craig Victor. Pigott also founded Pacific Energy Ventures, a venture-capital firm focused on fuel cell technology.
Avista Labs' fuel cells are marketed mostly into the backup power industry. They are being used in the telecommunications, railroad and renewable energy industries, as well as being sold to government agencies, such as the Federal Aviation Administration. The company's goal is to replace industrial batteries as a backup power supply anywhere to 50 watts to five kilowatts of power are needed.
Mike Sherman, investment manager for Chrysalix, said his firm was impressed with Avista Labs' unique design. The fuel cells are set up in cartridges, which are installed into a unit about the size and shape of a microwave. If a cartridge fails, the rest of them keep running, with no interruption in power. Better yet, users don't need to call for servicing. They can pull out the failed cartridge and put a new one in.
"It's absolutely unique and the type of reliability customers understand," Sherman said. "In our discussions with Avista's customers, it was an attribute they found very valuable."
Fuel cells are lauded as a nonpolluting way to create electricity. They convert pure hydrogen into electricity through an electrochemical reaction, and the only byproducts are heat and water.
The investors said they didn't expect many changes at Avista Labs, other than accelerating commercialization of the company's products. They said the company's business plan and leadership is solid and should continue.
Avista Corp. has been trying to sell Avista Labs for about two years, said company spokesman Hugh Imhof. The company has said it does not have the capital to take the fuel cell maker to the next level of commercialization. From 1997 to 2002, Avista Corp. reported $28.9 million in losses due to its investment in Avista Labs.
"The energy crisis was hard on us," Imhof said. "We're still recovering from the effects of that."
Owning 19.9 percent, Imhof said, will limit stockholders' losses, but still allow them to benefit if Avista Labs takes off.
Davis said Avista Corp. has been a "generous and very patient" corporate parent. "We were most fortunate that we were able to to develop and grow with that support."
Davis said Avista Labs plans to stay in Spokane, and though there are no immediate plans to hire additional staff, the company's success should benefit the region in other ways -- such as increasing orders from local manufacturers where Avista Labs buys components. Davis said while the company expects to sell 250 kilowatts worth of power this year, that number should jump to 1,000 kilowatts next year with the new financial support.
"The good news is we continue to be able to build this company right here in Spokane," Davis said. "That's good for the region, good for the economy and good for the high-tech space.
"We've got a great group of people right here at Avista Labs, and I want to build on that."
•Business writer Alison Boggs can be reached at (509) 927-2150 or by e-mail at alisonb@spokesman.com
http://www.spokesmanreview.com/news-story.asp?date=072203&ID=s1384834&cat=section.business