New Zealand Engineering 1998 November

A New Dawn at Power Beat?

A feature by Peter King

Imagine a car. Its engine is light but powerful because it's built like a Lego set out of aluminium bricks; it uses a light, continuously variable transmission complete with reverse; the battery never goes flat; its emissions are scrubbed by low cost environmentally-friendly solutions; tailgaters are warned off with a warning system; and it even makes coffee for you as you drive along. No, it's not the latest concept car from BMW or Toyota, it's a group of technologies being refined by Power Beat International of Hamilton.

Imagine a business. Despite being based in a small industrial centre better known for making dairy factories than cars it commands royalty fees from the biggest industrial firms. Small but extremely innovative and flexible it develops innovative new technologies for the global market and licences them on to larger manufacturers around the world. Its exports, purely research and development that can be transported as fast as email or as quickly as a staff researcher can pack a toothbrush and get on a plane.

Imagine a lot of things because right now if this is the prelude to a new dawn for Power Beat International, the company founded to develop the revolutionary never-go-flat battery back in 1989, it sure is looking real dark. For its year ended 31 March 1998 the company made a loss of $3.78 million largely because a debt of $4.63 million owed it by Power Beat battery licensee Rial Dirham of Malaysia was deferred until 31 March 2000. In the meantime the company is surviving on a $1.2 million loan from Dorchester Finance on which it is paying 16.5 percent interest, having secured it with 330,000 shares issued to Dorchester along with liens on all its physical and intellectual assets. The loan is due for repayment on November 29. The firm's auditors Horwath and Horwath told shareholders that unless the company could raise new funding either from new shareholders, lenders or licensees it would not be able to meet its commitments to Dorchester or pay another $330,000 owed to other creditors.

"I can't pretend that the company is in anything but a serious financial situation," Power Beat founder and managing director Peter Witehira told New Zealand Engineering. "But we have managed to licence the Power Beat battery technology to a manufacturer based in Thames so, in a sense, we'll be bringing the battery home to New Zealand."

This is not the first time Power Beat has been in strife either. In New Zealand Peter Witehira is an unfashionable figure in some ways reminiscent of Britain's best known "boffin", Sir Clive Sinclair. He formed Power Beat in 1989 after initially inventing, in 1987, an automotive battery which never discharges beyond the point needed to restart the engine. The company was successful in raising $1.5 million in shareholders' capital, expanded to Australia and even attracted a somewhat ambiguous six percent shareholding by Mitsubishi in 1991 (which cost them at that time $780,000) until they sold out in 1993. The exit of Mitsubishi saw the entrance of Canadian owned Trend Vision Technologies at about the same time the company was listed on the New Zealand Stock Exchange. This was to prove the flashpoint for a showdown for control of the company between Mr Witehira and 20 percent shareholder, the Maori Development Corporation, whose chief executive Waari Ward-Holmes was also chairman of Power Beat.

Disagreements over the role of TVT and the future direction of the company led to public squabbling over control of Power Beat which did little to help perceptions of the company in New Zealand. The company was first censured by, and then withdrew from, the New Zealand Stock Exchange while Mr Witehira faced action in the District Court. The District Court found in favour of Mr Witehira and the company enjoyed a period of resurgence in 1997 as Malaysian investors came to Power Beat's aid, but with the Asian crash those investors are hardly able to help themselves and the company has once again retrenched.

Indeed, nobody doubts that Mr Witehira and the rest of the Power Beat technical team are developing some excellent products. The problem is that the company has been demonstrably bad at getting those products licensed, manufactured and out into the marketplace earning money. The company has soaked up literally millions of dollars of equity investment, but, with the cashflow collapse of the Malaysian licencees, its return on equity is now negligible. So far, after almost ten years of development, not even the original Power Beat battery is widely available anywhere in the world.

Although he has certainly attracted people with deep pockets Mr Witehira's apparent fear of losing control of his inventions seems to have come between their potential and its realisation in the marketplace. Now if he cannot come up with $1.2 million by 29 November he will then know that he has in fact finally lost that control to Dorchester.

But the probability now is, however, that this will not happen. If Dorchester Finance had been lending the money looking purely at Power Beat's balance sheet one would have to conclude the company was wasting its time, but managing director Brent King believes there is considerable value in the company which has not found its way to market and, given the right structure and market disciplines, he believes the company will emerge much stronger.

"I believe Power Beat has a long-term future in a different form, one more appropriate to the type of business that it is. The problems exist in part because it is trying to invent, build prototypes, and manufacture, and it's been too difficult for them. In the future that is likely to be separated."

Mr King has also been impressed with Mr Witehira's stewardship of the firm he founded.

"I've worked closely with Peter over the past four or five months and I think he recognises the opportunities that exist for him in the future. He has had the opportunity to leave and begin again elsewhere but he has shown strong loyalty to his shareholders largely because they have shown such loyalty to him."

Mr King believes the survival of Power Beat is important not just for its shareholders but to the entire country.

"We need a Bill Gates figure, someone for others to model themselves on. There are plenty of other Peter Witehiras out there and we need to build those sort of businesses. We can sell more butterfat or chop down more trees but if we want to buy things like mobile phones from foreigners we need to have similar high value products to sell in return."

In his own industry of finance Mr King believes the passing of the era of high inflation and high capital gains will make investment in innovative businesses a more important part of New Zealand's investment scene.

If Power Beat International is able to be saved the new dawn could be very bright indeed. The company claims to apply for more patents than any other in New Zealand and a tour of its facilities quickly demonstrates why. From osmotic pot plant pots through security systems to advanced visual display units the company is a hotbed of innovation and creativity.

Take Mr Witehira's own latest project - the automotive coffee maker. It is a solution which is at once simple and brilliant. The coffee is made in a kind of styrofoam plastic "can" placed in a cup holder which is in turn plugged in to the lighter. The "can" uses a spring as a filament which heats the water to around 60 degrees Celsius before snapping back and breaking the circuit. Just before the water stops heating the beeswax seal holding the coffee (to prevent the coffee from burning on the filament) melts releasing coffee into the water. The user can then push down tabs for whitener or sugar and crack open the can to enjoy a hot cup of coffee. The total cost per manufactured unit is mere cents.

While the company has been working using Nestlés coffee products Mr Witehira says the quality of the final cup of coffee is not quite what he is looking for.

"It doesn't matter if you've managed to develop a product that is inherently safe, low cost and easy to use with one hand if that cup of coffee isn't the best cup of coffee that that customer has had the whole thing is worthless," he says.

Equally the Osmopot which the company has just licensed for manufacture in Australia and New Zealand for $100,000. The concept is simple science but an excellent product. By putting the plant and its soil in the inner chamber of a "double boiler" type pot, filling the outer chamber with water and sealing it from the atmosphere, the plant is able to draw water from the outer chamber through tiny holes in the inner wall through osmosis to keep itself watered. The result: no periods of flood and drought and more time for the owner to remember to water the plant. Once again, an idea one finds oneself asking "why didn't anyone think of it before?" - the very soul of creative invention.

This kind of lateral thinking culture works equally well when applied to relatively sophisticated products such as the internal combustion engine. Peter Savage was doing a PhD in physics at Waikato University when he packed it all in to continue his work on his revolutionary engine.

His original research had been into replacing poppet valves with piston valves in automotive engines. He argues that poppet valves are more vulnerable to wear and can cost up to ten percent of the available power of the engine. As he began developing prototypes for piston valves to retrofit onto existing engines he began to realise that the cost of such retrofits would be prohibitive. What he really needed was to build an entirely new engine block in order to incorporate his ideas about piston valves. That was when he encountered a new problem: the cost of casting a new block could be as much as
half a million dollars. He simply didn't have the cash. This was when he hit upon the amazing idea of building up the engine block by locking together cylinder-chambers each made from lengths of extruded aluminium and capped with head and sump plates also made from extruded aluminium.

The system means that engines can be built like Lego bricks, from single cylinders up to V8s, simply by adding cylinder blocks. In addition, engines with different stroke lengths can be made from the one extrusion simply by cutting it to the required length. Standard cylinders are used which required a 250 mm billet which could only be made offshore, but smaller engines with a 200 mm bore could be put through extrusion processes almost anywhere. Mr Savage claims that engine can be made one third lighter and 70 percent of the height of traditional cast engines.

Also significant is that the cost of entry into engine manufacturing using the extrusion process is reduced enormously. Mr Savage says the cost of plant and machinery to produce cast engines is around $100 million for a capacity of 100 engines an hour. By contrast he estimates a plant costing no more than $10 million could produce 1000 extruded engines per hour.

One person who has observed some of Mr Savage's efforts is Professor John Raine of Canterbury University. Professor Raine does not share Mr Savage's enthusiasm for piston valves at all, but sees merit in the extrusion idea so long as vibration and stiffness issues, as well as any significant differences between casting and extrusion alloys, can be met. He certainly agrees that extrusion would significantly reduce production costs although he remains wary of any claims for "revolutionary" engines where investment is concerned. And while Power Beat has made a number of claims for the engine Mr Savage admits it has never run for any longer than half an hour at a time in demonstrations, and a proper testing and development phase has not yet been entered into.

None of this is to say that extruded engine technology could not be refined and developed into a very important technology for the coming century. One area where Mr Savage has already fielded inquiries is engines for powering pumps in remote places such as Nepal. Other possibilities for the smaller engine include ride-on motormowers, or stationary engines for agriculture or horticulture.

Electronics is another area where Power Beat also excels. Its knightBEAT domestic security system and B-ALERT tailgater warning system are nifty little devices which, while relatively simple, fall into the "why didn't I think of that?" category rather than anything revolutionary. But the "Deep Video Imaging" LCD screen system is something else. This is a technology where once you have seen it the potential applications start leaping to mind almost at once. Deep Video provides an image with depth of field by putting one transparent colour LCD display in front of another. This sounds simple but as developer Gabriel Engel explains, take any normal LCD screen and do this and you will see nothing because of the polarisation effects. After you've defeated those you have moiré patterns to contend with together with restricted viewing angles.

Nine months through development Mr Engel has filed numerous patents and has a prototype that your average Quake playing teenager would leap at the chance to play with.

The image presented can be viewed from as much as 60 degrees off to the side and looks somewhat like looking into a square goldfish bowl. Ordinary computer graphics are easily displayed with the technology using addressing bits while video can be displayed at different levels and intensities after pre-processing. Elements either occupy a foreground or background position and a swimming dolphin demonstration graphic circles the inside of the screen, smoothly moving from foreground to background at will. A helicopter flying over a city looks rather more like a helicopter flying over a city than a simple flat screen image and, if required, a physical object can be inserted between the screens for applications such as kiosk display terminals.

In production Mr Engel says the Deep Video Imaging screen would probably be priced around the top of computer terminal market prices in the US$1 billion LCD display market. For shorter runs for things such as arcade games the price would probably be higher. Once again Power Beat International has developed a "better mousetrap".

So where does all this creativity come from? Mr Witehira says the answer in a word is freedom. Give people the focus to develop something useful and the freedom to find their way to achieving that and they will deliver. Power Beat director Evan Bydder, who until recently taught physics at Waikato University, and was PhD supervisor for Mr Savage, believes that New Zealand has vast untapped wells of innovative talent being wasted because of the way universities and crown research institutes are run.

Dr Bydder believes that the concept of returns on taxpayer funds is something which has yet to make its way into our universities which adopt the high mindedness of Oxford and Cambridge but without the world class justification. He accuses both crown research and universities of having a culture of intellectual snobbery which dismisses talented lay-inventors such as Mr Witehira or Gladys Reid (the discoverer of zinc as a treatment for facial eczema in cattle).

"Both Auckland University and the DSIR actually told Peter that his battery idea wouldn't work. I took one look at it and knew at once that it would. They simply wrote him off as some dumb Maori. What could he actually know about batteries?"

Dr Bydder says the business of publishing papers, on which so many careers and so much funding is based, has become a self-congratulatory game for academic scientists which delivers very little return to New Zealand itself. He says many Foundation for Research, Science and Technology grants are either for work which is already complete, so tied up in red tape it wouldn't deliver creative thinking anyway, or for replicating overseas studies for no obvious purpose. He says the universities have an absurd abhorrence of applied research while students themselves become cynical about the whole point of practical education.

"The universities pretend they are there to provide an 'education' but they sell their qualifications to students as a meal ticket. The students don't see the point of doing lab work which has no obvious application. I've actually had students come up to me and say "I don't want to understand it, I just want to pass the exam"."

Dr Bydder says over the years he has become increasingly at odds with a system which seems to exist solely to perpetuate itself without any direct relevance to the outside world. He says the academic system primarily rewards those with good memories but not necessarily those with creative talent or the ability to think beyond the square. While he grants that there are individuals within the university system who are interested in applying technology to real world problems, he says universities oversell what is in reality a relatively small proportion of their overall effort.

One can only imagine what might happen if science funding was assigned on the basis of patents rather than papers. There would certainly be a hue and cry from those whose careers were based on "pure research" and some might find high technology projects supplanted by technically trivial inventions with high utility (the next safety pin for example) developed by mechanics. But is New Zealand really so rich and so large that it should not be encouraging such industry? Could we not do with a whole lot more companies like Power Beat ?