VANCOUVER (CP) -- Rising gas prices and a drive for cleaner fuel are obviously good news for low-emission engine technology maker Westport Innovations Inc. [TSX:WPT], but add a U.S. oil tycoon with a new bent for alternative energy as your top investor and it's not surprising the company's shares are trading at their highest point in five years.
Vancouver-based Westport is riding the wave of interest in clean energy that has been rising in recent months along with heightened awareness of environmental concerns.
That includes interest from T. Boone Pickens, founder and chairman of BP Capital Management, which manages US$4-billion in energy-oriented investment funds. Pickens, 80, has recently found religion in the alternative energy sector and earlier this week launched his own energy plan to help reduce America's growing dependence on oil.
Pickens owns 12 per cent of Westport and more than 40 per cent of Clean Energy Fuels Corp. (NASDAQ:CLNE), a company he founded from the combined assets of Pickens Fuel Corp., Terasen (formerly B.C. Gas) and Westport.
Clean Energy advances the use of natural gas as a cleaner-burning and more cost-effective fuel, while Westport develops technologies that allow engines to operate on such fuels.
''We talk to Boone regularly,'' David Demers, founder and chief executive of Westport and a former Clean Energy director, said in a recent interview.
He said Clean Energy and Westport interact daily on partnerships and that while Pickens increased his stake to above 10 per cent in late February, he has been a shareholder in Westport for years.
''He thought the shares were a good value,'' Demers said of the increased stake.
Westport shares rose from their 52-week low of $1.51 after Pickens got more involved, and have climbed steadily since to a five-year high of $5.50 last month.
On Thursday, the stock was trading at $4.73, down seven cents on the Toronto Stock Exchange.
Westport has a key joint venture with engine maker Cummins Inc. (NYSE:CMI) to make low-emission natural gas and propane engines sold worldwide and used largely in the urban buses.
According to the company, when its high-pressure direct injection (HPDI) technology is applied to Cummins' base ISX engine, emissions such as greenhouse gases drop to levels lower than mandated by 2007 EPA standards
The company also has agreements for its fuel system technology with Kenworth Truck Co., and recently landed its largest non-port order with California-based HayDay Farms for 20 heavy duty liquefied natural gas (LNG) trucks.
The company's technology is also involved in bids to help clean up the air in the ports of Long Beach and Los Angeles. The San Pedro Bay Ports, as part of a legislated Clean Air Action Plan, have plans to replace about 17,000 trucks serving the port over the next four years. At least 50 per cent of these new trucks will be fuelled with natural gas.
Westport also has partnerships in Asia and other countries.
While the company's revenues are rising _ up 18 per cent in the last fiscal year to $71.5 million _ it has a long way to go before turning a profit.
Westport recently reported a loss of $10.3 million or 12 cents per share for the year ended March 31 compared to $11.3 million or 15 cents per share the year before.
Twelve-month targets for Westport's stock range from about $2 to $8 in the analyst community.
Analyst MacMurray Whale of Cormark Securities Inc., who has a $2 target on the stock and a ''market perform'' rating, has questioned whether the company will ever make much money given that many of its customers are only prompted to buy its engine technology as a result of government subsidies.
Brion Tanous, an analyst at Merriman Curhan Ford, said the company should continue to see growth in the lightweight, medium and heavy-duty truck market and predicts it will turn a profit by the end of fiscal 2010.
Tanous has a ''buy'' rating on the stock and a 12-month price target of about $8.
While the venture Westport has with Cummins is profitable and partly offsets its corporate costs, ''it is not yet enough to reach overall company profitability,'' Tanous said in a recent note to clients.
Philip Tulk of PI Financial Corp. said to invest in the Westport story you have to believe in the natural gas transportation alternative.
''You would want to do your homework and get comfortable with the fact that natural gas penetration in those markets will increase, and in other markets,'' said Tulk.
''They are markets we believe in,'' added Tulk, who has a ''neutral'' rating on the stock and $4.85 price target.
Tulk said the challenge for Westport will be delivering into the markets where it has arrangements.
''If the demand is there, can they keep pace,'' said Tulk. ''It seems they have their ducks in a row.''
Demers said the Westport is trying to minimize execution risk by relying on its partners.
''There is relatively small change, but there is change, and any time you introduce change there is execution risk. We have to manage that. That is what we are focused on.''
(c) Canadian Press 2008
