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JOSEPH F. LONGO STARTECH ENVIRONMENTAL CORPORATION (STHK)
CEO Interview - published 05/05/2008
JOSEPH F. LONGO, President and Chief Executive Officer of Startech Environmental
Corporation, has served as a Director and as Chairman since November 1995. Since
November 2004, Mr. Longo has served as CEO and President, positions he also
served in from November 1995 to January 2002. From July 2003 until December
2004, Mr. Longo served as Chief Operating Officer, and from August 2003 to
August 2004, as Secretary and Treasurer. Mr. Longo is the Founder of Startech
Corporation, a predecessor of the company. He was Founder and Chief Operating
Officer of the International Dynetics Corp., a waste industry capital equipment
manufacturing company with multinational customers from 1969 to 1990. Prior to
that, he was Manager of New Product and Business Development for AMF from 1959
to 1969. He has been awarded many waste industry equipment patents, all of which
have been successfully commercialized. He is a mechanical engineer and operating
business executive, with more than 25 years of waste industry management
experience.
SECTOR WASTE & ENVIRONMENTAL SERVICES
TWST: Would you describe the Plasma Converter, which I think is your basic
technology system?
Mr. Longo: Yes, of course. But I've found in talking about this through the
years that five or 10 variations of the explanation lead to confusion. So,
instead of my improvising once again, I have a news release right before me, so
I'll read what we say in that. At least we'll have uniformity.
"The Plasma Converter System safely and economically destroys wastes, no matter
how hazardous or lethal, and turns most into useful and valuable products. In
doing so, the system protects the environment and helps to improve the public
health and safety. The system achieves closed-loop elemental recycling to safely
and irreversibly destroy municipal solid waste, organics and inorganics, solids,
liquids and gases, hazardous and non-hazardous waste, industrial by-products and
also items such as "e-waste," medical waste, chemical industry waste and other
specialty wastes, while converting many of them into useful commodity products
that can include metals and a synthesis-gas called plasma converted gas (PCG).
"Among the many commercial uses for PCG is its use to produce "carbonless
power," gas-to-liquid (GTL) fuels such as ethanol, synthetic diesel fuel and
other higher alcohol "alternative" fuels. Hydrogen, for use and sale, can also
be separated and recovered from the PCG synthesis gas mixture.
"The Startech Plasma Converter is essentially a manufacturing system producing
valuable commodity products from feedstock materials that were previously
regarded as wastes.
"Startech regards all wastes, hazardous and non-hazardous, as valuable renewable
resources and as feed stocks."
TWST: How are the systems sold?
Mr. Longo: Our customers make money at the front end processing wastes and also
at the back end on the derivative products. The market for Startech systems is
enormous in the developed countries of the world and also in the newly
developing countries as well.
It's important for us to keep as many of our costs, even selling costs, as
variable as possible. We do this by having distributors and sales reps in many
parts of the world, but it takes time and money to build and train a distributor
and sales rep organization. But much of that is done now.
Distributors buy systems and sell them with their added administrative,
installation, engineering and maintenance services things that might be
required by a customer in the territory. The distributor is required to buy a
certain number of machines over the years in order to keep the distributorship
franchise. We sell to the distributor and he, in turn, sells to his customer.
Each distributor has an exclusive territory and he must be strong enough in that
territory to be what Startech would be if Startech were in the territory.
We also have many fine sales representatives who act like middlemen in helping
to cause a sale to take place between Startech and the buyer. They work on a
structured commission that's paid on actual contracts only. We continue to build
the organization. It's all a work in progress.
TWST: Who would be the best customers for your technologies?
Mr. Longo: Our market can be portioned into two principal groups made up of
waste processors, such as cities and private companies, and also of waste
generators, such as hospitals and factories. And the generators might not still
be producing wastes now, but they may be in possession of wastes previously
generated by someone else, but still their problem. And, of course, there is the
"perpetual liability."
There are a lot of euphemisms in the waste industry designed to disguise
troublesome realities. "Legacy" is one. Nice word. Sounds like you'd want one.
But the term indicates wastes that you may have come into possession of, or
still have from another time. So if someone offers you a "legacy," watch out.
There was a time when we expected that the primary market would be for the waste
generators using smaller systems. Not so. Our present market is for the waste
processors using larger systems. Many are companies that have had waste industry
experience but that were not formerly in the waste processing business.
Importantly, we produce modular systems so that the new businessman can increase
his processing capacity as he increases his business.
TWST: What will sales be like in the next few years?
Mr. Longo: Sensitive subject. We don't make it a practice of producing
projections for the public, but I might be able to answer it this way: it's a
publicly reported fact that we received about $25 million worth of sales
contracts in a period of approximately the last 12 months. We are hopeful that
the next 12 months will be even better than that. We're all very optimistic
about what we see before us.
TWST: Are there any big plans that you can tell us about?
Mr. Longo: Increase sales and earnings, of course. Always that. But we really
want to get off the Bulletin Board and on to NASDAQ ASAP. Our paperwork is in
excellent condition, but we still have some work to do in getting our equity and
share price up a bit to qualify. Because Startech is known in Europe and has a
presence there, some have even suggested the London Stock Exchange. Just an
idea.
The news releases are good indicators of our direction. Carbonless power is
important. That's probably about as far as I can go at the moment.
TWST: Why should someone buy your stock?
Mr. Longo: I have to be careful here, but maybe I can answer it this way: I'll
tell you what I'm going to be saying to the fund managers when we meet. As a
matter of fact, I have some of my notes here in front of me now. So I'll just
read loosely from them for a moment or two.
About 80% of the money in the market is invested by fund managers. So with all
of our disclosures, public filings and metrics aside, here is an additional view
I'll give them from about 40,000 feet. Besides a very attractive share price,
when you buy Startech you buy a wonderful company, again, at an attractive
price. Some of the reasons are: 1) Its Board of Directors and management are
committed to the fact that the first obligation of the company is to the long-
term interests of the owners of the company the shareholders; 2) The company
has an excellent management team in place, seasoned and experienced, who
understand the Startech business. The management is talented and passionate.
Startech's prosperity is relevant; 3) the company is a market leader.
It's protected by a wide, sustainable moat comprised of technology, marketing
and industry experience. In a manner of speaking, the surrounding moat makes a
competitive attack very difficult. The company can defend itself, and we are
very good at what we do; 4) I come back to the attractive price. The fund
managers can buy with a good margin of safety. They are able to buy the
business, and by that I mean the shares, at a price low enough to sell later
without losing money. In addition, the investors can make money and also help to
improve the environment and help to improve the public health and safety,
especially for the children; 5) most important, it's early, but not too early.
TWST: Where do partnerships, alliances, mergers and acquisitions come in?
Mr. Longo: We very much believe in partnering. It multiplies us. As I mentioned
before, we have distributors and sales reps, but we also have strategic
alliances with companies that have a compatible technology to our own that, with
the two, allows us to bring a better package of goods and services to our
customers. The recent strategic alliance with the Hydrogen Engine Center is a
good example. Of course, any alliance has to be good for both partners.
We don't have any acquisitions in mind, and it's also a bit early in our
development.
Startech could and would become a licensee of a complementary technology that
might be interesting, but we're not in favor of becoming a licensor. There are
many reasons, but the fact that a license requires too much of a technology
transfer is just one. But it's a really big one.
TWST: What's the greatest single challenge facing the company today?
Mr. Longo: Important question. If you asked me that about five years ago, I
would have said the challenge is "the fact that this is a new idea." Lots of
people are very uncomfortable with new ideas. No one likes uncertainty. It's
probably all attached to risk avoidance and also, all very reasonable.
Incidentally, it's imperative for any management in that situation to respect
and understand that marketing concern, and especially not disparage it.
In the marketing parlance, we have been, and are, the "disrupting technology"
poking at the "sustaining technologies." But to the point.
The answer to your question is "manufacturing." Some may think that's a boastful
answer and say, "that's a good problem to have," I know what they mean. And it
is a good problem to have, but nevertheless it is a problem and therefore a
challenge that can't be dismissed. We have the ability to double and triple our
manufacturing throughput now. But if what I see coming at us actually comes at
us, we will have to crank up our present manufacturing and outsourcing
capabilities. And that's what we're doing now.
In the last six months, I've spent time in various countries of Western Europe
discussing manufacturing and marketing, and there is a great deal of interest in
being a Startech subcontractor. That's good. But for our kind of capital
equipment, it's also good to know that there's a large reservoir of
underutilized manufacturing capacity in the US with good quality and good
productivity. It might be interesting to mention that with regard to Europe, US
productivity, when coupled with where the euro is today, makes America one of
the low-cost producers.
TWST: When will the R&D be done?
Mr. Longo: The principal R&D was successfully completed some time ago. However,
if that's big "R" and big "D," I suppose our product development might be called
little "r" and little "d." But, no matter. Product development is always in
progress at Startech. For example, the vessels today would appear to the
untrained eye the same as the previous vessels, when in actuality there are
differences.
A company such as ours must be active in product development as a way of life to
provide even better products and services to the market, and to keep a sharpened
competitive edge. It may be interesting to know that the Plasma Converter itself
is actually the result of the product development of previous years.
They've been making cars for over a hundred years and the makers are still doing
product advances and developments. We've come to expect it. Boeing knows a thing
or two about building airplanes, but it still has a wind tunnel.
TWST: Would you tell us about your awards?
Mr. Longo: Yes, We received the first Wall Street Journal award for the "Best
and the Brightest" three years ago. The selection committee was a luminous group
of scientists, engineers and industrialists from various companies and academia
around the world. We didn't even know we were being considered. I'll confess to
a small vanity here when I tell you that we were number one, and Xerox, the
runner-up, was second.
Last year, we received the Frost & Sullivan Award for Technology Innovation. The
easiest thing for me to do is to read directly from the news release.
"The Frost & Sullivan's Technology Innovation Award is bestowed upon a company
(or individual) that has carried out new research, which has resulted in
innovations that have or are expected to bring significant contributions to the
industry in terms of adoption, change, and competitive posture. This award
recognizes the quality and depth of a company's research and development program
as well as the vision and risk-taking that enabled it to undertake such an
endeavor." Also, a rigorous selection process.
TWST: Is this new carbonless system based on the system you had in place before?
Mr. Longo: In a way it is. It's based on the Startech hydrogen we can produce
from processing wastes. The wastes are actually valuable feedstocks. This is an
important development. We're going to have our hydrogen-powered engine at our
Tech Center in May. This is no fuel cell; it's a robust, well-proven reciprocal
engine just like the one in your car.
Developments of hydrogen-powered vehicles are still progressing, but there's a
compelling want from our customers to be able to produce clean, hydrogen-fueled,
stationary electrical power. So one must understand that this is about
stationary power, not vehicular power.
So, why Startech? Well, hydrogen's the most abundant element in the universe,
but it's not readily available on earth. It has to be produced by special
industrial methods. When our Plasma Converter System processes most wastes, it
produces a valuable, hydrogen-rich, synthesis gas that we call plasma converted
gas, PCG for short. The hydrogen in the PCG can be separated as a pristine fuel
for the Carbonless Power System. So from wastes, the Plasma Converter can
actually be the source of Startech hydrogen on site and in-house for our
customers. This is important to our customers.
A word more that might be helpful. When hydrogen, combines with air, it produces
energy, and the principal product resulting is H2O, water. Just water vapor. No
carbon dioxide results in the combustion process because there are no carbons in
hydrogen. Because of the Kyoto Protocol, there's a lively carbon credit-trading
market with its focus on "low-carbon footprints." So our customers can produce
electrical power that will not be just a "low-carbon footprint," it will be a
"no-carbon footprint." There's money in it.
TWST: Thank you (MC)
JOSEPH F. LONGO
Chairman, President & CEO
Startech Environmental Corporation
88 Danbury Road
Suite 2-A
Wilton, CT 06897
(203) 762-2499
(203) 761-0839 FAX
(888) 807-9443 TOLL FREE
www.startech.net
IR CONTACT
Steve Landa
VP
(203) 762-2499 ext. 7
(888) 807-9443 TOLL FREE
e-mail: sales@startech.net
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