Acquisition latest change for Clean Air Partners: adding HIS next step towards full emission...

With its recent acquisition of HIS Emissions Reduction Systems (HIS), Houston, Tex., Clean Air Partners, Inc. (CAP) is seeking to expand its role in the rapidly growing diesel engine emissions technology arena.

CAP, San Diego, Calif., acquired HIS, a manufacturer of catalytic emissions

reduction systems in September, adding a line of catalytic silencers that consists of an integrated catalytic converter and exhaust silencer. HIS will become a division of CAP and its products will be marketed under the CAPHIS brand name. CAP-HIS will continue to operate in the existing Houston location and Harold Harris, founder of HIS, is now technical director of Catalyst Products.

The HIS aftertreatment products join CAP'S line of patented Dual-Fuel technology designed to lower diesel exhaust emissions by conversion to natural gas fuel. "The system uses CNG or LNG and diesel fuel simultaneously to provide diesel-like performance while providing lower costs and low emissions," said Kevin Campbell, LEV sales manager of Clean Air Partners.

The addition of the CAP-HIS products thus gives CAP a position on the front end of the engine and equipment, where the fuel is injected, as well as a stake in the increasingly key after-treatment area.

Clean Air Partners developed its Dual-Fuel technology with Caterpillar's engine division. In certain applications, Caterpillar on-highway truck engines are fitted with Dual-Fuel electronic controls that monitor and control natural gas fuel with diesel fuel used as the ignition source. "The engines can operate on diesel fuel in emergencies and the engine can be reconfigured to its original state for vehicle trade-in," Campbell added.

CAP has developed and sells Caterpillar Dual-Fuel systems for electronically controlled truck engines and also manufactures and sells its own natural gas injector and hydraulic transmission valves.

Clean Air Partners has recently undergone significant changes in ownership and management. Earlier this year, CAP named ex-Wartsila and GE Distributed Power Executive Daniel W Kabel as CEO. CAP Founder Dr. John Beck now serves as chief technology officer. The company also received its first round of venture capital ($26 million) from what Kabel said are "strategic and industrial energy investors." As a result, CAP is expanding its market profile into other types of diesel engine applications, especially power generation.

"The investors saw the potential to leverage the technologies that CAP had employed in the vehicle markets and utilize that same technology in the power sector," Kabel said. "However, the low emissions on-highway transportation segment is growing very rapidly both for us and as a market, and remains a very, very important part of what CAP does," Kabel said.

The addition of the CAP-HIS product line is significant in that it moves CAP much further down the road to being a complete emissions reduction system supplier. It also moves CAP into additional markets and engine sizes, given HIS' history in both oil and gas engine applications with larger output diesels, as well as distributed power generation.

"CAP-HIS gives us another piece of the puzzle," Kabel said. "We can begin now to optimize a package for a given type of customer. We began with Dual-Fuel and are moving towards total emissions reduction. Given that emissions are getting tighter, having that set of tools to optimize a total system gives us an advantage.

The system components supplied by CAP won't likely end here. While Kabel would obviously not comment specifically on future acquisitions, he said that CAP is looking at both potential acquisitions as well as supply agreements, all with an eye on supplying even more complete diesel emissions reduction systems.

As a result of these changes and acquisitions Clean Air Partners is now organized into three groups; low emission vehicle products; electrical power generation; and industrial components. The industrial components group, into which CAP-HIS goes, also includes coalescing filters, shut-off valves, pressure regulators, hydraulic valves, gas injectors and turbo air bypass valves.

For the power generation markets, CAP has designed and developed a range of products using its Dual-Fuel and MicroPilot gas injection systems technologies. CAP said the Dual-Fuel equipped gen-set engines operate on both natural gas and diesel fuel simultaneously with up to 90 percent gas substitution and can switch between natural gas and diesel while running under load. Steve Hall, formerly with Waukesha Engine, has been named general manager of the power generation group.

For power generation, CAP offers both new and used Dual-Fuel and MicroPilot gen-sets as well as on-site conversions of existing diesel systems. The MicroPilot gas injection system is designed to convert standard diesels to natural gas engines using about 1 percent diesel fuel for pilot ignition. Natural gas is regulated, filtered and introduced to engine intake ports by electronically controlled CAP injectors.

Besides the HIS acquisition, CAP has been active on a number of other fronts in 2002.

* CAP has formed a joint venture with T. Baden Hardstaff in the U.K., one of the largest Foden truck distributors in Europe. The venture, CAP-Hardstaff, was created to develop low emissions vehicles to for the UK. market. Headquartered at Kingston-on-Soar, the venture will offer Foden trucks with Caterpillar engines equipped with CAP's Dual-Fuel technology.

* CAP'S catalytic particulate filter for natural gas engines has been approved by the California Air Resources Board (CARB). CAP said the filter reduces its Dual-Fuel engine PM emissions to 0.006 g/bhp-hour, 40 percent below the 2007 EPA standard.

* Early in 2002, the City of Los Angeles ordered 120 municipal refuse trucks with CAP'S LNG Dual-Fuel engines. The order followed a one- year test of 10 similarly equipped trucks. With the original 10 trucks still in operation, the resulting 130 unit fleet will be among the largest LNG-powered municipal ref use truck fleets in the U.S.

* In May, CAP delivered 33 Cater-pillar C12 engines, equipped with the Dual-Fuel technology, using 85 percent natural gas and 15 percent diesel, to SYSCO Food Services of Los Angeles, Inc. In 2001, SYSCO L.A. and Clean Air Partners began to replace SYSCO's fleet of heavy-duty diesel trucks with LNG-fueled vehicles. By 2008, the company hopes to have its entire L.A.-based fleet converted to CAP'S LNG systems, which would reduce each truck's emissions by over 46 percent.

* Most recently CAP demonstrated ultra-low emissions on its Cat C-12 Dual-Fuel truck engine through a project sponsored by National Renew-able Energy Laboratory (NREL). The project reportedly produced [NO.sub.x] levels of 0.5 g/bhp-h and particulate matter 0.004 g/bhp-h. The project is part of Phase I of the Next Generation Natural Gas Vehicles (NGNGV) Program run by the U.S. Department of Energy (DOE) and NREL, to develop ad-vanced, commercially viable, medium- and heavy-duty natural gas vehicles.

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