Benzinga  Oct 18  Comment 
This story is developing; for some background info which was published only a few hours prior to the offering news, click here. © 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Benzinga  Oct 18  Comment 
Ocean Power Technologies Inc (NASDAQ: OPTT) stock has caught fire this week after the company was granted a patent for a wave energy converter buoy on Tuesday. Ocean Power is an alternative energy company that specializes in harnessing the power...


Ocean Power Technologies' PowerBuoys use the kinetic energy found in the ocean's waves to produce electricity. The company's technology is not yet competitive in the larger energy market.[1] But in a world where traditional sources of energy are getting more expensive, more difficult to access, and more harmful to the environment, governments are turning to sources of renewable energy like OPTT's wave power systems. Government R&D funding allows technology developers like OPTT to continue to operate at a loss, as well as mandating that utilities add them to their energy mix.

Ocean Power has already served a contract with the New Jersey Board of Public Utilities, driven by New Jersey's mandate to get 22.5% of its energy from renewables by 2021.[2] The company calls its technology cheaper than any other renewable resource except wind[3], but it has not yet released PowerBuoys with enough capacity for large-scale (say, 100 MW) generation. Until that happens, its technology will only be viable for groups with large budgets, like the U.S. Navy or Total, the oil major who, along with a Spanish electric utility and two Spanish government agencies, is contracting OPTT to build a 1.39 MW wave farm off the coast of Spain.[4]

Though there are ideas for wave power systems flooding the market, OPTT is the only publicly traded wave power company in America. It is also one of the only companies to demonstrate the long-term viability of its power system, proving that its 40 kW PowerBuoy can still generate after 18 months in a harsh sea environment battered by hurricane winds and winter storms.[5]

Business Overview

Business & Financial Metrics[6]

In 2009, OPTT incurred a net loss of $19.2 million on revenues of $5.1 million. This represents a 4.7% increase in net loss and a 26.0% increase in total revenues from 2008, when the company lost $18.3 million on $4.0 million in revenue.

Business Segments

Ocean Power Technologies builds oceanic buoys that use the kinetic energy of the ocean's waves to generate electricity. The company has two types of buoys:

  • Utility PowerBuoy: Ocean Power only produces utility-scale PowerBuoys with 40 kW, 250 kW, and 500 kW capacities.[7] These utility-scale generators have the ability to be wired to the grid.
  • Autonomous PowerBuoy: These buoys are designed to provide independent power to offshore systems, like subsea monitoring systems, offshore platforms, and scientific data collection units.

The company has only a single reportable operating segment.


Trends and Forces

Government Support for Renewable Energy is Lifting the Wave Power Boat

For reasons ranging from rising energy prices to the desire for energy security to fears of climate change, governments around the world are passing legislation supporting the adoption of renewable energy.

  • Renewable Portfolio Standards that set varying targets for the amount of energy to be obtained from renewable sources by certain dates have been enacted by 24 states plus D.C.[9] These standards don't provide funding for renewable energy adoption; they force power generators to adopt renewables through threats of financial penalties.
  • The European Union has stated that its goal is to get 21% of its energy from clean sources by 2010.[10]
  • The U.S. Energy Independence and Security Act of 2007 has committed, among other things, to provide funding for the development of viable wave power solutions.[11]

These government initiatives all have or will benefit Ocean Power in some way. To contribute to the EU renewable energy goal, Spain's Iberdrola, France's [{Total S.A.]], and two Spanish government agencies are contracting with OPTT to build a 1.39 MW wave power system off the coast of Spain. Once the U.S. Energy Independence and Security Act kicks in, Ocean Power will receive as-yet-unspecified funding for R&D, helping it realize its technological goals. As more government support emerges for wave power, Ocean Power will benefit both from government funding and increased demand for its technology.

Until its Technology is Truly Viable, OPTT is Dependent on its Largest Customer: the U.S. Government

Over half of Ocean Power's revenue comes from the U.S. Navy, who use the company's utilities buoys to power the Marine Corps Base in Oahu, Hawaii. The Navy also uses one of OPTT's autonomous buoys to power the Department of Homeland Security's Deep Water Acoustic Detection System, which monitors for possible underwater threats.[12] With so much revenue coming from one source, and the rest coming from less than five other sources, the loss of any of these customers would mean the loss of a significant source of company revenue.


The wave power industry is a very young industry; most of OPTT's competitors are independent research labs and privately-owned companies like Finavera Renewables, who contracted for a 2 MW wave farm with PG&E off the California coast.[13] The market is currently flooded with innovative, albeit untested ideas for using wave power to generate electricity, but OPTT is one of the only companies that has demonstrated the long-term viability of its systems in harsh, real-life conditions.[14]


  1. OPTT 2007 10-K, Page 43
  2. Descriptions of State Renewable Portfolio Standards
  3. Ocean Power Technologies Inc. Presentation to U.S. Senate, May 30th, 2001
  4. OPTT 2007 10-K
  5. SeekingAlpha: "Ocean Power Technologies F3Q08 (Qtr End 01/31/08) Earnings Call Transcript". Page 2
  6. OPTT 2009 10-K pg. 43  
  7. OPTT 2007 10-K, Page 4
  8. OPTT 2009 10-K pg. F-22  
  9. Descriptions of State Renewable Portfolio Standards
  10. Renewable Energy World: " EU to Fall Just Short of 2010 Renewable Target"
  11. SeekingAlpha: "Ocean Power Technologies F3Q08 (Qtr End 01/31/08) Earnings Call Transcript". Page 3
  12. OPTT 2007 10-K, Page 17
  13. CNET: " Wave power to go commercial in California"
  14. SeekingAlpha: "Ocean Power Technologies F3Q08 (Qtr End 01/31/08) Earnings Call Transcript". Page 2
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