News Article

Fuel-cell maker Jadoo powers up with solar after merger; Company envisions eventually combining two technologies
Date: Aug 12, 2011
Author: Melanie Turner
Source: bizjournals ( click here to go to the source)

Featured firm in this article: Jadoo Power Systems Inc of Folsom, CA

Convinced that commercial adoption of fuel cells is still a few years away, Jadoo Power Systems Inc. is diversifying by moving into solar power.

"We want to be in more than just one clean energy," said Ken Pearson, president and chief operating officer of Jadoo. The Folsom company started 10 years ago as a fuel-cell maker.

The company envisions solar and fuel cell technologies being used in the same markets. It plans to generate hydrogen using power from the sun and store it for use in fuel cells that power houses at night.
Focused for years on getting its fuel-cell power supplies to market, Jadoo began selling rooftop and ground-mounted photovoltaic systems in the commercial market last year.

Then in December, it acquired, a family-owned Carmichael company that designs, manufacturers and installs solar water-heating systems for homes and businesses. Jadoo acquired the 14-year-old company in a stock-for-stock deal. Terms were not disclosed.

"They were looking for help to grow. We were in the market for diversification. It was a good marriage," Pearson said.

SolarRoofs gained access to Jadoo's management team and engineers. Jadoo diversified its product line and tapped Al Rich's "wealth of knowledge in the industry," Pearson said. The founder of SolarRoofs, Rich was named vice president of technology for Jadoo.

SolarRoofs is an outgrowth of AC-Rich & Sun, which Rich launched in New Hampshire in 1979.
‘Significant growth opportunities"

Now a division of Jadoo, SolarRoofs has hundreds of dealers nationwide. Pearson said Jadoo is working to improve the quality of those dealers by creating more qualifications and providing them with more support.

Despite its nationwide distribution, Pearson said Jadoo is targeting a 150-mile radius around Folsom. "We believe there are significant growth opportunities within that radius that will allow us to grow SolarRoofs," he said.

The cost of the solar thermal systems varies from "four figures to seven figures," depending on the size of the project, Pearson said.

Post merger, Jadoo has a work force of 31, with 16 employees dedicated to the fuel cell business and 15 in the SolarRoofs division. Jadoo added eight employees in the past year, including five on the solar side to boost sales and marketing.

Six SolarRoofs employees in sales, dealer support and engineering are in Folsom. Eight remained in Carmichael, where manufacturing and distribution take place. Jadoo plans to hire one more installer this month.

Rich said he believes the potential for SolarRoofs is "huge."

"We've got so many more opportunities," he said, adding that he has high hopes that next-generation projects he's had on the "back burner" will come to fruition.

He said he was impressed by Jadoo's experienced engineers.

"That's what really excites me," he said. "I didn't have that before."

Pearson declined to be specific but said the merged company has revenue of at least seven figures and is not yet profitable. The fuel cell business makes up more than half of Jadoo's total revenue.

Jadoo had $4 million in revenue in the fiscal year ended Sept. 30, 2009, and said a year ago revenue was expected to be flat last year. About half its revenue for fiscal 2010 came from the U.S. Department of Energy.

In spring 2010, Jadoo delivered its first products to the U.S. Air Force for testing and entered into a $2.2 million contract with the DOE to test 1-kilowatt generators that run on hydrogen derived from propane. The DOE contract is winding down.

Jadoo started working with the U.S. military as a possible first adopter of its technology more than four years ago. The hope is that rigorous military tests will turn into more military contracts.

The Air Force would use the portable power supply to run medical equipment for injured soldiers when they're evacuated. It would be one-fourth the weight of today's power supplies for life-support equipment. Pearson said the Air Force test is "going well" and in the "home stretch." He declined to elaborate.

The system being developed for aeromedical evacuation costs about $18,000. Jadoo also expects to sell smaller units for about $2,000.

Fuel cells to go commercial
While Jadoo's fuel cell technologies "continue to advance and show progress," executives realized sales were not going to ramp up as quickly as they'd like.

"We underestimated the time it would take to commercial adoption," Pearson said.

The fueling infrastructure is still being created, and people are often not familiar with fuel cell technologies, which is a hindrance, he said.

Still, Pearson said commercial adoption of fuel cell technologies is not far off. Jadoo hopes to start production next year and be ready for commercial markets by 2013.

By comparison, tax credits have driven down the cost of photovoltaic products significantly, or by more than 50 percent in the past few years, Pearson said.

The solar industry experienced year-over-year growth in 2010 of 67 percent, based on sales of installed solar, and is now the fastest growing industry in America, according to the Solar Energy Industries Association.

Bob Rose, executive director of the nonprofit Breakthrough Technologies Institute and senior advisor to the Fuel Cell & Hydrogen Energy Association in Washington D.C., said a "base-broadening strategy" makes a lot of sense and is one that's being adopted in Europe by more than one successful fuel cell company.

"That reflects a growing trend in Europe where renewable power is plentiful now," he said, adding that power consumers don't really care what the technology is. "Companies are going with integrated systems that involve fuel cell batteries and one or more renewable energy source."

But he said fuel cells are, in fact, being used commercially.

The nonprofit Fuel Cells 2000 estimates the industry is between $800 million and $1 billion a year. There are, for example, an estimated 1,000 fuel cell powered forklifts on order in the U.S., Rose said. Other fuel cells are being used to provide heat and power for hospitals or data centers, he said.

"There's no question fuel cells have been entering those markets in California with state support," he said.

Gopan Madathil, founder of TechCoire, a local technology networking group, said there is "definitely a segment of the market where both technologies can be leveraged."

The pure solar intellectual property is an "add-on asset to what Jadoo is producing," he said. "What they're trying to do is create more value for shareholders of the company."

Madathil speculates that the company could be an acquisition candidate or could buy a public company so its shares would be traded. The investors, he said, will be looking for a return on the investment they made in Jadoo in early 2007.

Velocity Venture Capital has invested "multiple millions" in the company, said Jack Crawford Jr., general partner of Velocity. Crawford stepped in as chief executive officer for Jadoo in 2009.

"We're focused on growing the company's revenues to get to profitability," he said.

"I think the acquisition of SolarRoofs is a significant pivot point for the company that positively changed the trajectory of the business," Crawford said.