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JOHN GOCEK – SOFAME TECHNOLOGIES INC. (SDW:TSX.V)
CEO Interview - published 05/26/2008
JOHN GOCEK, President and CEO of Sofame Technologies Inc., is a C-level
executive offering 20 plus years of hands-on experience in general management,
accounting, manufacturing operations, corporate finance, investment and
international banking, portfolio and treasury management, IS/IT and management
consulting. He is a proven executive, well-rounded in general management for
manufacturing, private equity and international banking. He is an advocate of
performance-based metrics and Web-based management systems, and a mentor,
skilled at coaching others to understand the organization's needs and to act
constructively. An Honors degree in Economics from McGill University in
Montreal, management associate training on Wall Street, and years of
professional development have led to roles of increasing responsibility in
finance, business strategy and executive management, including CEO of a public
company and co-Founder and CFO in a multinational SOX-regulated manufacturing
corporation.
SECTOR – ENERGY
TWST: Would you give us a brief historical sketch of the company and a picture
of the things you're doing at the present time?
Mr. Gocek: Sofame was started 24 years ago in Montreal by a couple of mechanical
engineers who were trying to recover waste heat from industrial flue gases. For
many years the company made significant investments in R&D and equipment because
the process occurs inside a machine manufactured by Sofame Technologies, which
essentially uses direct-contact principles, meaning we spray water into the flue
gases to recover the latent heat.
In 1997, the company went public on the TSX Venture Exchange, which at the time
was called the Vancouver Exchange. At that time, we had a major gas utility in
Quebec, Gaz Metropolitain, which was one of the main shareholders with a
minority interest and they also participated in a lot of the testing. They have
a laboratory and testing facilities and developed some of our patents. We have
five patents presently.
In the last three years, because of the increase in natural gas prices, Sofame's
equipment has become more desirable and the payback periods have become much
quicker — down from seven or eight years 10 years ago to around two to three
years today, making it a lot more attractive to companies that want to recover
the value that's being lost as waste heat goes up the chimney.
TWST: What are your principal products?
Mr. Gocek: We have five principal products. The first product, which we don't
sell as much of today, is a wastewater heat recovery machine. That would be used
by commercial laundromats or hospitals recovering heat from wastewater and to a
certain degree by municipal water treatment facilities or sewage treatments
recovering waste heat from water. That's a good business, but we've gone more
into commercial buildings and industrial buildings with large space heating,
which today uses hot water as opposed to steam. Many people probably remember
the old steam radiators in, for example, a hospital or a university, which would
make a lot of noise and get extremely hot and they were difficult to control. So
for a lot of technical reasons, the construction industry went into hot water.
It's easier to control the flow and temperature of water than it is with steam.
So that's actually where we felt Sofame's advantage, in that by recovering heat
from flue gases we produce hot water. We don't produce steam and there are some
advantages to not being in steam.
Firstly, our equipment is not regulated by pressure vessel regulations. We don't
need it to be in an explosion-proof room. We don't need a stationary engineer
watching the operation 24 hours a day, seven days a week, which represents a
significant payroll budget when you build a boiler room. There are some other
stringent regulations on steam boilers that do not apply to Sofame equipment.
We have various models. Our most simple machine is called the Percomax, which is
the trademark name. It's essentially a water heater. Rather than the small
residential style water heaters everyone is familiar with, it can be extremely
large. Just to give you an idea, the minimum size machine we would sell, because
of the prohibitive costs for small applications, would be a 3 million BTU per
hour Percomax, which would be essentially a water heater that is good for use in
a hotel of 150 rooms and up. Because it uses direct contact principles, it
recovers 99% of the energy in the fuel. The fuel in many cases in cities today
is natural gas. A typical water heater making hot water for a hotel would be
somewhere around 70% efficient today, possibly 75%. Some of the older machines
are only 50% efficient. A Percomax water heater in an industrial establishment
would recover 99% of the energy and put it into the water. So it's a much better
deal financially speaking. Gas prices, as everyone knows, are going up and it
doesn't look like they are going to go back down any time soon.
Our next product is called a Percotherm, which is a heat recovery condensing
boiler, meaning if there is an existing steam boiler which is to exceed 70%
efficient, a Sofame Percotherm would recover the waste heat by redirecting the
flue gas into our machine where we apply direct contact principles and recover
the heat that would normally be lost in flue gases. That could represent up to
40% of the gas bill of the establishment. So our machine is now paying for
itself in under two years including installation, which is very attractive for
anyone managing corporate assets.
The third machine in our list of products is a patented machine. This is a
Sofame patent, which is the Hybrid Percomtherm. This unit combines the simple
principles of a water heater and a heat recovery boiler and that's why we were
able to apply and receive the patent. This machine recovers heat from existing
boilers and also adds its own source of heat, which in most cases is a natural
gas burner; however, we do make units which burn number 2 and number 6 fuels and
also successfully recover waste heat. It's important to note that the type of
fuel you use has two impacts on the condensate, meaning the hot water that
accumulates in our system. Natural gas burns very clean so the water is actually
approved to go directly into a wash down of a food-processing establishment by
the FDA and Agriculture Canada. So food processing is a large consumer of
natural gas because I believe every 24 hours of operation they have to wash down
for eight hours with extremely hot water. So if we make that water heater 99%
efficient, we're saving them a lot of money. If they had an existing boiler, for
example, and we were to replace that or they were to add on to their facility,
we could sell them a Hybrid Percomtherm to recover the waste heat from their
existing water heaters and generate more hot water, because the Percomtherm has
its own heat source. A typical burner in the Percomtherm would represent about
anywhere from 10-20 million BTUs per hour, which is roughly 3-7 megawatts of
energy. So it's quite a large gas burner.
TWST: Could one customer use more than one of your products at the same time?
Mr. Gocek: It depends on what the application is. The simple answer is "Yes,"
and the other side of the coin depends on what we do with flow of hot water,
because we sell an engineered solution. It's a system solution, meaning it's not
just a machine that a company purchases for a particular purpose, but we take
the waste heat and as a result we have to decide how we are going to
redistribute the recovered heat into their process. So we're actually mechanical
engineers with expertise in boilers. We would take that waste heat that
sometimes represents quite a significant amount of energy or a large volume of
hot water.
Just to give an idea of the size that this can attain, our largest machine is
operating at a liquid natural gas facility in France on the Brittany Coast and
we are recovering 60 megawatts of waste heat from a turbine generating
electricity, and we are recycling that heat in the form of hot water at a rate
of 800 gallons per minute, which we use to reheat liquid natural gas at the
terminal. Once the gas becomes a vapor, it can be compressed for distribution
and that operation is actually saving something like $15 million per year in gas
costs by recycling that waste heat. So it takes quite an experienced systems
engineer to figure out in a process what to do with the recovered energy.
So when we sell a solution, it's not just a machine, it's how the heat will be
redistributed in the entire process. There are several heat sinks in the typical
industrial operation and our engineers have to be experts in finding out where
they are and how to feasibly and economically transfer the heat energy back into
the process, the net result being that the company combusts less fuel to achieve
the same operating results.
TWST: I understand that your systems or solutions require very little servicing.
Mr. Gocek: It's actually surprising. Of course, we offer a service contract and
the machine needs to be inspected once a year just for normal effects. Typically
in a closed loop heating system, we look for corrosion and we look for buildup
or calcification of some sort of sediment or particles. Typically, in our
systems we have an excellent record of zero corrosion and zero accumulation of
calcium and different sorts of scale, so as a result maintenance is very
limited.
With the pumps we use, it's an integrated pipe skid. We try to ship the machine
on a couple of skids, which could be quite large — it can be the size of a small
tanker truck on its side. We would then ship the pipe skids and all the pumping
equipment on a separate truck and then those two components would be bolted
together at the job site, which means we can do a lot of the piping at our plant
as opposed to at the job site, and it's more economical for the customer that
way.
We use stainless steel pumps, which have to be ordered specially and there
aren't too many manufacturers of custom stainless steel pumps today. They are a
little more expensive than typical cast iron pumps and we do that because of the
acidity in the water. It's the way we ensure that there won't be any corrosion.
We use high density, high quality stainless steel. Because we use such high
quality stainless steel, we typically experience almost zero corrosion in our
applications, which is good news for the customer. Even the life of the machine
is anywhere from 20-30 years, depending on the application.
Some environments are extremely harsh, like in the mines, for example. We
actually just had a very successful project in New Brunswick where we're
recovering waste heat from the drying process of a large zinc mine, and they're
really pleased with the results and we are also reducing the emission of
greenhouse gases there, but the environment is extremely harsh. There are
particulates in the water and it looks like the machine is not having any
corrosion at all. So that's good news for us for the future possibly, even
looking into coal-fired boiler applications where we have to be more concerned
about what kind of contaminants are in the flue gas. We are very interested in
doing R&D now. In fact, we started a program to look at coal-fired applications,
which represent internationally an enormous market for heat recovery. As you
know, most greenhouse gas emissions come from energy production and coal-fired
boilers.
TWST: What kind of competition do you have?
Mr. Gocek: Competition at this time in the large industrial applications would
probably come from the architects and engineers who actually are designing the
facilities because you can't buy a refinery off the shelf. It's all custom-
designed and engineered over a period of years. There are more urgent priorities
now to reduce the energy footprint or even the carbon emission footprint of an
industrial facility. So those engineers are constantly striving to design more
efficient facilities.
There aren't very many specialized manufacturers like Sofame that actually make
a piece of equipment and have engineering expertise that they can sell as a
package. Don't forget that we've been doing this for 24 years with limited
financial results only because energy costs in North America were too low to
justify investments in heat recovery. That's what changed recently. So we do
have a lead on the market and certainly our business plan is to maintain that
lead indefinitely and invest whatever resources are required in R&D,
distribution and manufacturing to make sure we remain the leader in the
marketplace.
TWST: Would you tell us more about your business plan? What is your agenda for
the next three years or so?
Mr. Gocek: We actually are working on a five-year business plan starting on
October 1, 2008. In fact, the company's reorganization began in May 2007 when
new investors came into the picture, and that would be Notre-Dame Capital based
in Montreal. The Managing Partner of Notre-Dame is actually the Chairman of the
Board at Sofame, Richard Groome. He contributed the working capital in May 2007
to get the company back on its feet financially.
Subsequently, I was hired as CEO in October because of my experience as the CFO
of an air conditioning manufacturing company in Montreal, which was a part of
Nortek, a New York Stock Exchange company that was formally taken private about
three years ago. I built that large facility in Montreal and gained experience
in customer-engineered products, distribution in the US market, and dealing with
mechanical contractors, engineers, architects, and building owners. So with
unique financial and industry-related experience, I came on board in October and
we immediately started executing some changes and improvements to the
operations.
Actually I was really pleased with the human resources of the company early on
in the mandate. It's a small company still in Montreal, but the people here are
really experts in what they do. They have excellent educational backgrounds and
are very committed to the business, which is essentially a green business. It's
heavily engineering-oriented, but it's a green business and today it's a very
profitable proposition for customers to install and apply our energy-saving
equipment.
We believe that we have a good future and our plan has been to, first of all,
attack the US market, meaning sign up representatives who can call on their
customers in exclusive territories. We have four reps so far in the US. They're
typically boiler experts who have been selling boilers for many years and know
the customers in their territory — it could be a state or it could be a large
urban area. We think there is room in the US for up to 40 representatives who
would then call on the building owners and add Sofame products to their list of
existing product offerings. Typically, they would sell a line of boilers as well
because our equipment is complementary to boilers and they might sell pumps,
maybe even air conditioning chillers or air handlers. Because air handlers and
chillers are an applied product in the construction and engineering business,
Sofame products are complementary to that skill set as opposed to selling an
additional boiler that can almost be done from a catalog. Our products are
custom-engineered and custom-manufactured so we do have some synergies
occasionally with the existing air conditioning and chiller representatives in
the US market. So we're building our rep force in the US now and constantly
recruiting and interviewing new reps who write a mini-business plan — what they
think they can achieve in terms of sales in their territory, who their customers
are, what their product line consists of, and we have to figure out how we would
be complementary to what they already do.
At the same time, we are expanding into Europe. We just had some very successful
meetings and signed a joint venture for sales with a company called Soffimat in
Paris. They are a very well known firm out of Paris that builds, owns, operates
and also finances power plants. They had 1.4 gigawatts of electrical generating
capacity in France, which makes them quite a larger player in the private power
market. They recently sold many of their assets and they're reinvesting the
proceeds of those sales into research in mainly bio-gas applications but they
are still into power generation and they kept a lot of their operating
contracts. So they are operating power plants throughout France and they've seen
enormous opportunity to apply Sofame technology in their existing power plants.
Because their customers would be investing the capital, they are offering to
share the energy savings with the customers. In other words, they would apply
the technology, the customer would finance the investment, and the two parties
would split the energy savings. So we're really excited about that. We just
signed that agreement and they are already working on some important projects in
France and they can help us develop similar rep networks in other European
countries and in the Middle East where they have some ties in six countries. As
you know, there is enormous construction growth happening in the Middle East and
it's very much heavily accented toward energy efficiency and the carbon
footprint. So Sofame Technology fits quite nicely into their mindset and those
kinds of environmental objectives. We're pretty excited about the potential in
the next year for expansion into both Europe and into the Middle East.
TWST: What about challenges or problems?
Mr. Gocek: I was a banker for 12 years, so I'm a bit of a pessimist when it
comes to capabilities, business plans and even past history, so I would look for
what's the truth behind the shine. However, I was very pleased with the quality
of Sofame's product, and with the high profile and success of some of its
installations. Let me just give you an idea, and this was part of the due
diligence Notre-Dame Capital did before they invested their funds as well. The
Montreal Airport, Trudeau International Airport, expanded their terminal a few
years ago. They built a new terminal and actually rebuilt the old terminals and
added a third terminal. They increased the volume of airspace in the building by
80%. At that time, they really needed to build a new boiler plant to heat and
cool the space, because now you do district heating and district cooling, but
they were concerned about the heating portion of the business and were concerned
about the costs involved in building a new boiler plant. So the engineers opted
to implement the Sofame heat recovery solution and they applied four Percotherm
heat recovery boilers to their existing four steam boilers. We recovered enough
heat from that operation to heat the new terminal, which represents 80% more
volume of air than the old terminal and they reduced their gas bill by over 50%.
So they almost doubled the building and almost cut the gas bill in half, which
are really extraordinary results. That's the kind of an impact Sofame Technology
can have. I should probably put in parentheses there that, of course, the new
terminal has been much better built than the old terminal, which was 40 years
old and it's more energy efficient from the get-go because there's a lot of less
heat lost from the building, but typically in a Sofame application we can
recover 15%-25% of the gas bill at the power plant.
TWST: What would you reasonably expect the company to look like in about three
years?
Mr. Gocek: We have two business models. Our existing business model right now is
to sell manufactured equipment. I think I need to talk about metal prices so you
understand fundamentally what's happened in the market in the last three years.
As you know, steel prices have gone up by as much as 500% in the last five years
and our unit is constructed in such a way that the center is pretty much empty
whereas the traditional boiler is full of tubes and it's made of very heavy
lower grade metals, but mostly metal, and they weigh tons. So our machine,
especially the Hybrid Percomtherm, is competing with a traditional boiler. If
you were like Trudeau International Airport and you wanted to increase the
capacity of your existing boiler plant, do you build a new boiler plant or do
you put in a Hybrid Percomtherm and recover the waste heat from your existing
boilers? With the Sofame Hybrid Percomtherm, we would add new heat to the system
with our own gas burner.
When they opt for the Hybrid Percomtherm, first of all, they save the cost of
building a new boiler plant, but secondly, when comparing boiler to boiler,
because the traditional boiler has so much weight of metal even though it's
lower grade metal, when metal prices went up, stainless steel went up. Our units
are made of 100% high-grade stainless steel. So when steel prices went up, our
units became more expensive, but we have less weight per thermal unit of output
than the traditional boilers. Whereas the Sofame unit used to cost twice as much
as the traditional boiler, today we are talking about possibly a 20% premium
over a traditional boiler and you get the benefit of reducing your carbon
footprint and recovering 99% of the energy from your combustion process and all
the savings that represents today with high gas prices. So Sofame's business
model is a lot more attractive when we are competing with traditional steam
boilers, and now take that to the next step.
Our goal is to increase the volume of sales by expanding our distribution
network in the United States and Europe. A typical sale takes anywhere from six
to 18 months to generate because we have to deal with the owners, with the
engineers and with external consulting engineers. It's a highly technical
process with a lot of documentation. We don't experiment in someone's boiler
plant. It really has to be proven, approved and validated by third parties. So
it takes some time before we get that order.
In five years, we could probably be a $100 million company — whereas last year
we were a $2.3 million company — simply by selling more equipment. That
represents an enormous amount of work just to get the specifications and then
actually produce the quotation and the purchase order and all the technical
drawings. So what we've decided to do is offer a turn-key solution to our
customers, meaning we would not expect the customer to hire the mechanical
contractors, but we would offer turn-key installation and maintenance contracts.
Then add to that, in addition to offering installation, we want to offer 100%
financing. So the fact that the entire installation wouldn't cost the customer
any cash flow, or any money, and because we are so confident about the machine's
performance and the system's performance, the payback would be sharing the
energy savings. Some of our reps are already doing this in their territories in
the US. Of course in Paris, that's how they do it as well. We are going to
follow that model and we are in a process of establishing a financing
subsidiary, which will be financed by third party investors — a combination of
green funds, banks and venture capital funds. We would have a credit department
and we would evaluate on a project-by-project basis if our financing subsidiary
could offer 100% financing. We would hire the contractor and do the
installation. Because most of these installations are extremely well monitored
and metered even before we actually start a job, we ask for 10 years of data on
various capacities and parameters of the existing boiler plant so we'll be
comfortable to estimate the energy savings given the certain gas price and
assume the risk of the customer.
Obviously, we'll be betting that gas prices will either stay the same or go up,
but when your payback is three years, even if gas prices go back down by 50%,
payback will be six years. We are comfortable that on a 10-year contract we
would recover our investment and generate an attractive profit for the investors
or certainly an acceptable level of return on investment. The customer would
have to put up no cash, and we think that's going to help accelerate our sales
process.
There are many customers out there that have a very long capital approvals
process and if we can somehow make it easier for them to acquire the equipment,
we think we will increase our sales volume in that way. Then if you consider the
installation costs, which we would be paying for rather than the customer, not
only is it easier to sell, but the transaction would also add revenues to our
top line. Rather than selling $100 million of equipment in three to five years,
we could possibly be selling $200 million of turn-key installations. If the
energy savings model pans out, we would have repetitive revenue from our 10-year
service contracts and energy savings as opposed to a one-shot gross margin on a
manufactured product for which it takes 18 months to generate the purchase
order.
So we are changing our business model to a much more complex model, but it
certainly is exciting. I presented it in Europe in the Brussels Cleantech Show
recently and it was very well received by the people present. There were about
300 investment funds, venture funds and green funds in the room and the feedback
was very positive. The timing is right for environmentally friendly energy-
reducing investments.
TWST: Would you tell us about the backgrounds of one or two of your colleagues?
Mr. Gocek: I would start with one of the co-founders of the company, who is very
much active on the Board and is the Vice President of Technology here, Luc
Mandeville. He's a mechanical engineer who was educated at the University of
Montreal. He has been in the manufacturing and boiler business for almost 35
years. In fact, he started out welding when he was very young and went on to do
mechanical engineering. He has an extreme knowledge of the boiler business and
the heating business and also all the players in the business. Over the years,
he has met many of the key manufacturers throughout North America. He has given
lots of technical presentations and he really has the expert knowledge to sell
this product to difficult and discerning technical customers. Once we get over
the technical hurdles, how are we going to implement the installation? Where are
you going to put the machine? How are you going to build it? How are you going
it to make it fit in the existing boiler room? What are the heat sinks? Where
will the excess energy be used in the process? These are things Luc Mandeville
can really deal with. He can deal with the difficult customers and consulting
engineers. So he is an enormous asset to the firm.
To his credit, he has assembled an expert team underneath him of five other
engineers. This is a fairly young team, anywhere from 25 to 45 years old, and we
have people with Master's degrees in Controls, PhDs in Combustion Engineering,
and we are in the process of hiring some new people now. In fact, we hired just
recently another applications engineer with a Master's degree in Fluid Dynamics.
So we are a technically oriented crew here that does the actual execution of the
production drawings and the manufacturing of the unit. Luc is the scientist and
educator, and often educator of customers, and the practical team here takes
over. They just do an excellent job of handling the quote volume and delivering
the drawings that are required not only to make the sale, but then to do the
manufacturing and installation of the equipment. I am very confident with the
team. We will be expanding our engineering team nevertheless, because the quote
volume is increasing and we need a little more help to generate some of these
quotes and also transfer some of this specialized knowledge.
We also are very good in the controls field. Our control panels on our machines
monitor and regulate a whole diversity of flows and parameters in the system so
that our machine can regulate itself, and so it can run at 100% or what we call
a turn down ratio of 10:1. It can go down to 10% capacity as well. Everything
obviously has to be designed with safety in mind, so everything is fail safe,
meaning if there is a power failure or if something goes wrong, we have to make
sure the system resets itself so that all heating stops and all flue gases are
returned to the main chimney so that you never have a possibility of some sort
of industrial accident occurring. These are things that customers are concerned
about and we have the expertise to make sure that we meet and exceed existing
standards in building codes and just common sense in safety. So that's our small
team and it will be growing.
TWST: What steps might you be taking to improve your capital structure?
Mr. Gocek: We've raised funds in the last 12 months three times. We did a
debenture issue in May 2007, we did a subsequent debenture issue in September
2007, and we recently completed a private placement in March 2008. We have
raised a total of $5.6 million, which is exactly what the company needed to
replenish working capital, finish some jobs that were in the shop, and beef up
the engineering and technical personnel.
There were some lingering accounts payable that had to be dealt with to
suppliers and essentially a complete cleanup and restructuring of the balance
sheet. We have installed a new accounting system. Don't forget that I am a CEO
with a finance background. I was a banker for 12 years and come from New York
originally. I completed a degree in Honors Economics here in Montreal, but
subsequently went back to New York to work at Marine Midland Bank at 140
Broadway for four years and completed the management training program there in
finance, international banking and international accounting. So with a good
credit background, I was a lender up here in Montreal for the Canadian federal
government's Business Development Bank and then was a consultant for six years,
writing business plans and financial models for international infrastructure
projects. Then the air conditioning company started in 1998, Ventrol Air
Handling Systems, and grew from a business plan with two proponents to 300
employees and $50 million a year in volume after four years. We had to double
the plant after 12 months to 157,000 square feet. It is still operating very
successfully today, exporting into the US.
Because of that finance background, I'm obviously concerned with the quality of
the balance sheet. The fact that the debentures issued were convertible was done
intentionally so that as the share price rose we could call those debentures. We
did call a second series of debentures about three weeks ago. That means $1.7
million of debt on the balance sheet is now equity and that will show up in the
third quarter financial statement ending June 30. You won't see them until
probably mid-August.
But the company had accumulated losses and what we are doing now is using new
investment to restructure, beef up the sales model and decide what markets we
need to pursue aggressively. That decision has led us to industrial markets,
power generators, airports, institutional buildings, pulp and paper plants and
breweries. Even cruise ships offer a good market because the cruise ship is a
giant floating hotel and everyone has to take a shower at seven in the morning
so they use an awful lot of hot water and we could probably recover a lot of
waste heat on cruise ships as well. So there are a lot of interesting areas, but
they are all large and heavily engineered contracts that take time.
We needed to raise that working capital, which we now have. We have cash in the
bank of about $2.2 million. I suppose I'm not going to publish what our burn
rate is, but it's very low. It's a small company with a small building that it
owns in Montreal. The secret now is to close some of these purchase orders that
we have been working on for 18 months in the US and we'd like to have $10
million in confirmed order backlog by September 30. That's really our goal. We
would like to double our sales in 2008 by September 30. We shipped $2.3 million
last year and we expect to ship a little over $4 million this year — so almost
double our sales — and to create more efficient operations. We have to break
even in 2008, and then we can improve our capital structure by recording profits
from there on.
TWST: What would be two or three best reasons for the long-term investor to look
closely at Sofame?
Mr. Gocek: I really am pleased you're talking about long-term investors because
in the last year the stock price has more than doubled. Two years ago, the share
was under $0.05 and by the time I came on board in October 2007, it had risen to
about $0.15 and subsequently went up to $0.48 in 2008. For the investors who did
come in earlier, the stock's performing very well.
We have made tours in North America and Europe showing the company, talking
about our story, and the interest is very high and very keen for the product.
The creditability is there and I believe these investors are waiting for some of
the large purchase orders to come through that we've been working on. We have
about $19 million of quotes in process at various stages of completion, mostly
in the United States. These are not yet purchase orders. When a few of those
prestige jobs come through, I think it's the validation of what we've been
saying, that it's a proven technology in Canada that has been perhaps understood
but not marketed at all. It has not been marketed in 24 years.
All the sales that Sofame achieved were done engineer to engineer, often from
consulting engineers to consulting engineers, without even speaking to the
company. So we finally have a proper marketing and sales force in place. We are
building right now upon what we already have. We are advertising the company in
trade publications, which mechanical contractors would read and where the boiler
makers would advertise their products. We have some really nice advertising
campaigns going on right now. We've been on the ASHRAE Website, which is the
American Society of Heating, Refrigerating and Air Conditioning Engineers, which
is clearly the leading organization for all engineers in the United States. We
had a very nice ad on their Website with a link to our Website. So we are
getting the word out. With the projects and case histories that we have on our
Website, I think engineers are seeing what the product does and can do, and that
it is proven. We just need to prove that we can deliver the orders we already
have in the pipeline and I think that the sales are going to increase from
there.
TWST: Is there anything that you would like to add, especially regarding
strategies, long-term objectives and reasons for an investor to look at the
company?
Mr. Gocek: Our plan is to increase our marketing, orders and installations in
Europe. We already have five in France because the company previously had ties
with Gaz Metro and Gaz de France and we recently signed a joint venture
agreement with Soffimat in Paris. We expect sales to pick up in Europe, where I
would say environmental awareness is 10 years ahead of the United States, and
investments and corporate decisions are really accented toward carbon footprint,
carbon emissions and energy savings. The payback tolerances in Europe are much
longer than in North America. So Europeans are willing to invest in
environmentally friendly and energy saving technologies with a much longer
payback.
That is also true of the investing population who would look for shares like
Sofame shares. They are much more patient and they understand that new
technologies — even if proven — take time to become adopted by industry. So for
this reasonwe are moving some of our shareholder base now over into Europe,
which is why we recently did a tour in London, Geneva, Zurich, Amsterdam and
Brussels, and presented the company to various fund managers and private wealth
management firms in those cities. It was very well received, even much better
received than anything we have seen in North America. So that change and
diversification of the shareholder base will be happening.
Some of the institutional investors there would like to invest larger amounts of
money possibly in our new financing subsidiary, and have actually requested that
we do a dual listing on probably the Alternext. They have a junior exchange
called Alternext, which is the Euronext in Europe, the European listing of the
New York Stock Exchange. We've been approached by some of the institutional
investors that we met in Europe recently to pursue a dual listing on the
Alternext to open up other avenues for us to fund our finance subsidiary model
that we promoted in Europe, as recently announced in a press release. So this is
public domain information. We haven't presented to our Board yet the Alternext
listing, but there is clearly an appetite for investments such as Sofame in
Europe. That will not stop some of the European investors and the wealth
managers there from buying the stock that's already listed in Toronto. They are
very actively looking around the world for investments like Sofame. So I would
say that we did make an impression on this recent European trip and I think the
European interest is more long-term. They are willing to give us the time we
need to execute our business plan and they're environmentally oriented. They are
more interested in the environmental results. It's a different kind of investor
mentality. We are going to listen to all these suggestions while we actively
pursue European expansion. I think the stock has a good future, and I think
North American investors should keep in mind that this is a global market for
energy savings and carbon gas and greenhouse gas reductions, and Sofame fits
into that global market.
TWST: Thank you. (MC)
JOHN GOCEK
President & CEO
Sofame Technologies Inc.
500 Alphonse D. Roy Street
Montreal, Quebec H1W 3Y8
Canada
(514) 523-6545
(514) 524-6183 – FAX
www.sofame.com
e-mail: sofame@sofame.com
The Wall Street Transcript (TWST) interviews are published verbatim, and TWST does not in any way endorse or guarantee the accuracy of any information or opinions expressed herein and all opinions are subject to change without notice. Nothing herein constitutes a solicitation to buy or sell any securities. TWST interviews with CEOs or other senior executives may include "forward-looking statements", which are based on factors that involve risks and uncertainties. Actual results may differ materially from those expressed or implied. TWST shall have no liability whatsoever for any trading losses arising out of use of this information. Copyright 2005 Wall Street Transcript Corporation. All Rights Reserved.
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