View the video narrated version at: http://www.westport.com/company/media/presentations/2013-agm
Westport CEO David Demers presents a recap of Westport's 2013 fiscal year, an overview of the macro perspective in the natural gas for transportation industry, Westport technologies that bridge the gap between energy industry and the transportation industry, a roadmap of the future ahead, and much more.
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2013 Westport AGM
1. Westport Innovations Inc.
April 2014
2013 ANNUAL GENERAL
MEETING OF SHAREHOLDERS
1
stock symbols market capitalization
TSX NASDAQ CAD USD
WPT WPRT $0.95 billion $0.9 billion
2. » This presentation contains forward-looking statements that are based on the beliefs of
Westport’s management and reflect Westport’s current expectations. Investors are cautioned
that all forward-looking statements involve risks and uncertainties that could cause actual
results to differ materially from those expressed in these forward-looking statements,
including, without limitation, Westport’s ability to develop viable fuel systems; Westport’s
ability to provide the capital required for research, product development, operations, and
marketing; product development, production and commercial launch delays; changing
environmental regulations; Westport’s ability to attract and retain key personal and business
partners; competition from conventional diesel fuelled engines; and Westport’s ability to
protect its intellectual property. These factors should be considered carefully and investors
should not rely on any forward-looking statements. Investors are encouraged to review
Management’s Discussion and Analysis and the Risk Factors section in Westport’s most
recently filed Annual Information Form and filings with securities regulators for a more
complete discussion of factors that could affect Westport’s future performance. We undertake
no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law.
» All figures are in U.S. dollars unless otherwise stated.
2
Forward Looking Statements
3. » Energy transitions are enormously difficult
» Natural gas is emerging as the first significant new transportation fuel in a
century
3
Driving a Shift to
Natural Gas as a Transportation Fuel
ENERGY
• Gas exploration & production
• Distribution & utilities
• Fuel station owners/operators
• Renewable fuels
TECHNOLOGY
• Market-spanning experience
• Expansive IP portfolio
• Capital light business models
TRANSPORTATION
• Engine & vehicle OEMs
• Fleet operators
• Shippers, transportation users
• Consumers
4. 4
Financial Summary
($ in millions) CY2011 CY2012 CY2013
Westport Revenue $ 100.8 $ 155.6 $ 164.0
CWI Revenue 163.9 198.0 310.7
WWI Revenue 109.8 272.1 466.6
Adjusted EBITDA
Operating Business Units (36.0) (40.3) (34.6)
Corporate &
Technology Investments (5.4) (26.0) (62.3)
Total (41.4) (66.3) (96.9)
Consolidated including Corporate
& Technology Adjusted EBITDA
positive by end of 2015
Corporate &
Technology
Investments for new
products developed
with Volvo,
Caterpillar, Weichai,
Delphi and others
Operating Business
Units to be Adjusted
EBITDA positive by
end of 2014
5. 1. Natural gas increasingly visible as a
transportation fuel.
2. Westport is the key technology provider for OEM natural
gas engine and vehicle systems.
3. 2013 saw Westport reposition from market creation
investments to product sales. Forecast Adjusted EBITDA
positive by end of 2014.
4. Westport invested $205 million in 2012/2013 in new
collaborations with global OEM’s for products
launching from 2014 through 2017 in automotive, trucking
and off-road applications.
5
Investment Highlights
6. MACRO PERSPECTIVE
» Widespread availability of low cost natural gas (as a commodity) vs.
expensive oil is driving the first new global fuel for transportation in a century
» Adoption will be driven first by high-fuel-use fleets and transportation users
seeking lower costs—not consumers
» OEMs are now engaging; this will shift the market from aftermarket
conversion to OEM factory-built vehicles
» Emerging infrastructure participants
6
7. 7
Stability of Fuel Price Differential is
Driving Confidence at Fleets
Sources: EIA, DOE Alternative Fuel Price Report, EIA AEO2013; last update: 2013-09-04
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2010 2015 2020 2025 2030
Priceofcrudeoil[U.S.$/bbl]
Price History of Diesel Fuel & CNG for Vehicles,
with EIA Projections
Actual Diesel fuel price [$/gal] Forecast Diesel fuel price [$/gal]
Actual CNG fuel price [$/DGE] Forecast CNG fuel price [$/DGE]
8. 8
Global Light Vehicle Market
“Light vehicle” refers to passenger cars, light passenger trucks & vans, minibuses, and
light commercial vehicles usually less than 3–5 tons and not more than 7 tons.
» Combined OEM and aftermarket annual sales growth of natural gas light
vehicles in every region
» ~16.6M natural gas passenger car & light commercial vehicles on the road1
1. NGVA Europe and the GVR (2013)
2. Navigant Research
-
200
400
600
800
2013 2023
USA & Canada2
-
200
400
600
800
2013 2023
Europe2
-
200
400
600
800
2013 2023
China2
-
200
400
600
800
2013 2023
India2
-
200
400
600
800
2013 2023
Latin America2
-
200
400
600
800
2013 2023
Middle East & Africa2
-
200
400
600
800
2013 2023
Asia Pacific2
UnitSalesinThousands
9. 9
Global Markets Emerging in Every Region
1. NGVA Europe and the GVR (2013)
-
1,000
2,000
3,000
4,000
5,000
6,000
2007 2013
USA & Canada1
-
1,000
2,000
3,000
4,000
5,000
6,000
2007 2013
Europe1
-
1,000
2,000
3,000
4,000
5,000
6,000
2007 2013
China1
40%
CAGR
-
1,000
2,000
3,000
4,000
5,000
6,000
2007 2013
India1
-
1,000
2,000
3,000
4,000
5,000
6,000
2007 2013
Latin America1
-
1,000
2,000
3,000
4,000
5,000
6,000
2007 2013
Middle East & Africa1
-
1,000
2,000
3,000
4,000
5,000
6,000
2007 2013
Asia Pacific1
Number of CNG & LNG Stations
10. » Westport is positioned to benefit from high
technology and OEM integration as the market
transitions to OEM integration
10
The NGV Market is Evolving QuicklyTECHNOLOGY
LOW
HIGH
HIGH$ / VEHICLE
Market
Transition
Components & Aftermarket
(majority today)
OEM Product
(fully engineered, certified)
11. 0%
5%
10%
15%
20%
25%
30%
35%
40%
2012 2013 2014 2015 2016 2017 2018 2019 2020
Frost & Sullivan – High
Frost & Sullivan – Reference
Frost & Sullivan – Conservative
NPC – Reference Oil mid point
ACT Research
ACT Research1
(8 yr. CAGR 43%)
NPC2
(8 yr. CAGR 53%)
<1,700
units4
>3,500
units4
3–5%
(~6,000–10,000 units)
Westport Analysis – Actuals
Westport – Estimated range
11
Urban Commercial Fleets,
Truck Market in North America
Market Share of New Class 7 & 8 Natural Gas Trucks
(NPC with approximate correction from VMT to vehicle units)
1. Act Research Future of Natural Gas Engines August 2012
2. NPC Advancing Technology, Reference Case, August
2012
3. Frost & Sullivan Strategic Outlook Truck Market 2013
4. Westport Analysis
12. 12
Significant Off Road Opportunities
RAIL
MARINE
1. Morgan Stanley/Parker Bay, Westport analysis
2. UN Energy Statistics Database 2008
3. Burlington Northern 2008 Annual Report
4. Parker Bay Mobile Mining Equipment Database 2012,
Westport Analysis
5. Baker Hughes Rotary Rig Count Report, Westport analysis
6. Diesel Locomotives – Global Market Trends 2011 by SCI Verkehr GmbH, Westport analysis
7. Diesel and Gas Turbine Magazine 2011 Marine Propulsion Order Survey, Westport analysis
8. Zeus Intelligence
MINING
EXPLORATION &
PRODUCTION
TARGET VEHICLES OPPORTUNITY WORLDWIDE UNITS
mine haul trucks
Almost 2 billion gallons of diesel consumed annually
by the top 10 mining companies operating worldwide1
19,411 engine units4
(large mining trucks
>127 ton capacity)
drill rigs and
frac pumps
Land-based rigs represent 500 million to 850 million
diesel gallons per year8
13,890 engine units5
(drill rigs &
frac pumps)
diesel mainline
freight
locomotives
diesel passenger
locomotives
Rail industry consumes 9bn gal of diesel fuel annually,
half of this in North America2
Fuel represents approximately 23% of US railroad
operating costs3
50,594 engine units6
(mainline
locomotives)
ferries,
tugboats,
PSVs,
work, and
crew boats
Marine industry consumes 13bn gal of diesel fuel/year2
Emissions reduction in sensitive coastal and inland
waterways are a priority
Some examples of LNG ferries and platform support
vessels (PSV) in Scandinavia, but no widespread
adoption yet
25,000 engine units7
(small vessels)
13. » Price delta of locomotive diesel vs. LNG in rail: $1.48/DGE in 2014 » $1.77 in 2040
» High Rail LNG Case
100% of locomotives convert
to HPDI within 20 years
LNG is 95% of freight rail
energy consumption by 2040
» Reference Rail LNG Case
LNG locomotives adopted at
average annual turnover
rate of new and rebuilt stock
LNG is 35% of freight rail
energy consumption by 2040
» Low Rail LNG Case
Locomotives convert to LNG at
average rate of 1%/year
LNG is 16% of freight rail
energy consumption by 2040
13
Potential for LNG Use as a Railroad Fuel
0
50
100
150
200
250
300
350
400
450
2015 2020 2025 2030 2035 2040
trillionBtu
Energy Consumption for Freight Rail using LNG
(source: U.S. Energy Information Administration,
“Annual Energy Outlook 2014”, April 14, 2014)
Reference
High Rail LNG
Low Rail LNG
14. APPLICATION
ENGINE
DISPLACEMENT FUEL / YEAR MILEAGE
FUEL
CHOICE CONSIDERATIONS
Large marine
up to
25,000 L
up to 30M L
(7.9M gallons) LNG
Off-highway
• locomotive
• mine haul
• medium marine
20 to 150 L
~1,000,000 L
(264,000 gallons) LNG
Heavy-duty
vehicles
• on-highway trucks
9 to 16 L
~100,000 L
(26,400 gallons)
> 250
miles/day
LNG
or
CNG
• range vs. return to base
• weight of tank system
vs. payload needs
• grading of terrain
• fueling time
• chassis / body style
impacts
• fuel supply and price
Medium-duty
vehicles
• buses
• refuse haulers
5 to 9 L
~40,000 L
(10,500 gallons)
< 250
miles/day
Light-duty vehicles
• passenger cars
• lights-duty trucks
up to 7 L
~5,000 L
(1,320 gallons)
< 250
miles/day CNG
14
LNG and CNG – Customer’s Choice
Based on Westport analysis
15. TECHNOLOGIES / PRODUCTS
» Intellectual property leader
» Individual precision manufactured components up to
fully engineered complete systems for OEMs
15
16. » Originated at University of British
Columbia
» Strong global patent portfolio pivotal to
market leading position with OEMs
» Worldwide, Westport and its affiliates
have filed over 825 patent applications
16
Strong Intellectual Property Heritage
Positions Westport as the Global Leader
* As of February 24, 2014 and based on the patent search results of publicly available data within the
International Patent Classification F02, meeting the search term criteria: one of ("engine" or "combustion"
or "injector" or "injection valve") and ("natural gas" or "methane" or "gaseous fuel") and in the claims, not
("fuel cell" or "turbine"). This chart includes issued or granted patents from: Argentina, Australia, Austria,
Belgium, Brazil, Bulgaria, Canada, Ceuta and Melilla, China, Czech Republic, Denmark, European Patent
Office Grants, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, India, Ireland, Italy,
Japan, Latvia, Malaysia, Mexico, Moldova, Monaco, Netherlands, OAPI grants, Philippines, Poland,
Portugal, Romania, Russian Federation, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea,
Spain, Sweden, Switzerland, Taiwan, Tajikistan, Turkey, UK, Ukraine, USA, USSR, Yugoslavia, and pending
published patent applications from: Canada, China, the European Patent Office, USA, and the World
Intellectual Property Office.
50
62
65
82
85
99
102
154
201
327
Bosch
Cummins
GM
Honda
Toyota
Siemens
GE
Ford
CAT
Westport
Top 10 Companies with
Natural Gas Engine Related Patents*
Combustion
41%
Fuel Storage
& Delivery
31%
Components
& Fuel
Systems
21%
Electronics
7%
Westport Patent Portfolio
Technology Breakdown
18. » Scalable, asset-light business model leverages OEM partners’ infrastructure
allows us to operate globally
18
Operating Business Units & JVs
» Profitable business,
growing
» $93M TTM revenue
» Sells to over 20 global
OEMs including Fiat,
Volkswagen, the GAZ
Group, Chrysler, Tata
Motors, and GM
» Sells to aftermarket
customers in over 60
countries
Applied
Technologies
» Ford QVM commercial
trucks (Westport WiNG™);
Volvo car systems
» Westport iCE PACK™;
Westport™ JumpStart
» $55M TTM revenue
(~$24M was related to
HPDI 1.0)
» Moving from 1st
generation products and
R&D culture to ROI and
profit
On-Road
Systems
» Rail, mining and
industrial industry focus
» $3M TTM revenue
» Westport LNG Tender—
works with locomotives
from all major North
American manufacturers
» Westport™ 2.4L
industrial engine for
forklift and oilfield
applications
Off-Road
Systems
» Cummins Westport
• $311M TTM revenue
• 3yr CAGR = 38%
• Profitable
» Weichai Westport
• $467M TTM revenue
• 3yr CAGR = 118%
• Profitable
Joint
Ventures
TTM = trailing twelve months; CAGR = compound annual growth rate
19. » 2014: Major focus on
US trucking industry
with goal of 3% to 5%
market penetration;
new ISX 12G engine
available across the
industry
» Westport has a 50%
ownership interest in
Cummins Westport with
the potential to earn
more than 50% of the
income based on
meeting certain sales
thresholds
19
Cummins Westport Summary
(millions of USD except units) 2011 2012 2013
Engines sold 5,465 6,804 10,314
Revenue $ 163.9 $ 198.0 $ 310.7
Gross margin 71.6 61.4 64.2
Operating expenses 22.1 26.1 40.7
Operating income(1)
48.4 35.4 23.5
Operating income % 30.1 % 17.9 %(2) 7.6 %(3)
Westport interest 15.2 13.2 9.4
Capital expenditures 0.3 0.2 0.4
Notes:
1. Excludes foreign exchange effects and bank charges
2. The decrease in CWI operating income percentage was primarily due to R&D expense increases
related to the ISX12 G, and warranty adjustments as a result of fleets using smaller ISL G 8.9L
engine in broader applications with higher duty cycles in order to take advantage of strong
economic benefits of driving natural gas trucks.
3. The decrease in CWI operating income percentage was due to mix of sales primarily from the
sale of the ISX12 G engine, and also due to warranty adjustments for the ISL G 8.9L, as well as
additional R&D related to the ISX12 G, development of the ISB6.7 G, and ongoing product and
reliability improvements.
Excluding the warranty related impact, CWI operating income percentage would have been 25.9%
in 2012 and 19.4% for 2013.
Joint Ventures
20. » Weichai Westport JV commenced
July 2010; Westport has 35%
interest
» Focus on improved efficiencies in
JV supply chain while trying to keep
up with significant growth profile
JV represents beach head creating NG
market in China for other product
introductions from Westport while
participating in JV’s profitability
» Current priorities
Launch Westport HPDI technology in
China
Sale of components to JV and other
vehicle OEMs
Expand product offerings with
differentiated technology
20
Strong Growth in China
(millions of USD except units) 2011 2012 2013
Engines sold 8,451 22,025 38,138
Revenue $ 109.8 $ 272.1 $ 466.6
Gross margin % 12.8 % 24.8 % 37.3 %
Operating
expenses(1) 7.9 15.0 22.8
Segment operating
income 6.1 9.8 14.5
Operating income % 5.6 % 3.6 % 3.1 %
Westport 35%
interest(2) 1.9 2.9 4.3
Weichai Westport Financial Summary
Notes:
1. From 2008 to July 2010, operating expenses include income
tax expenses
2. Westport began reporting its income from WWI in July 2010
Joint Ventures
22. 22
Whole System Solutions:
Ford Trucks and Volvo Cars
» Westport WiNG™ Power System
Dedicated CNG or bi-fuel (natural gas/gasoline)
Westport is now Ford’s largest partner
under the Qualified Vehicle Modifier
(QVM) program
Operational efficiencies by consolidating
under one roof Q1 2014
» Volvo Car
Volvo V70 wagon & Volvo V60 sportwagon
Bi-fuel: CNG/biomethane or petrol (gasoline)
Installed inside Volvo’s main production
centre in Gothenburg, Sweden
Export market opportunity
On-Road Systems
23. » First deliveries underway
» High average selling price
~$800K to $1.2 million
» > 10,000 gallons LNG
capacity—provides longer
range than a diesel
locomotive, reducing the
need for LNG refuelling
infrastructure and
refuelling stops
» Supports one or two
locomotives, reducing the
capital investment
required to move to LNG
23
Westport LNG Tender
Gas Supply Module
proprietary cryogenic
components deliver low
or high pressure fuel
LNG Storage Vessel
Industry standard
40’ “Cold” LNG tank
Universal Connection
Compatible with locomotives
from leading manufacturers
Off-Road & Industrial
24. INVESTMENT OVERVIEW
» Growth strategy
» Path to profitability
» Investing in the future of natural gas technologies
» Key milestones
24
25. 25
Westport Growth Strategy
» Lead New & Differentiated
Technologies
Combustion
Fuel storage & delivery
Components & fuel systems
Electronics
ex: HPDI, spark ignited, advanced dual fuel
» Expand Application
Segments
Medium- and heavy-duty
Trucks
Buses
Locomotives
ex: GAZ , Tata, Weichai, CAT
» Increase Systems Solutions
Add new OEM relationships
Broaden content with OEMs
Implement vertical integration
ex: Strong relationships with top natural gas
car producers such as Volkswagen and Fiat
» Geographic Expansion
Target growing markets such as China
and India
Expand distribution networks
ex: Tata, Weichai, GAZ
26. $(16)
$(14)
$(12)
$(10)
$(8)
$(6)
$(4)
$(2)
-
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
millionsofdollars
Average $9.4M
Median $8.7M
2012 2013 2014
26
Transitioning from R&D Phase
to a Focused, Profitable Business
» Contributions from:
Westport’s operating
business units
Share of net income
from the joint ventures
Funding from
development partners
OPERATING BUSINESS UNITS COMBINED TO
BE ADJUSTED EBITDA POSITIVE BY Q4 2014
CONSOLIDATED
BUSINESS TO BE
ADJUSTED EBITDA
POSITIVE BY END
OF 2015
27. » Westport has invested
$205.7M in 2012/13
Co-investing with OEMs
to develop a portfolio of
new natural gas vehicle
technologies and related
systems and components
Front-end-loaded
investment cycle on new
products and
technologies designed to
deliver high margin
returns in the future
27
Investing in Next Generation Products
Off-Road
9%
Trucking
36%
Automotive
28%
Advanced
Engineering
17%
Capital
Expenditure
10%
Breakdown of Investments
28. » 2014
Westport’s combined operating business units, excluding joint
ventures, to be Adjusted EBITDA positive by end of year
Reach critical breakthrough of 3–5% natural gas market
penetration in the Class 8 truck market
1–3 new OEMs sign up to vertically integrate Westport natural
gas technologies/systems
New product launch with Weichai
Introduce Westport technologies/products into new applications
and regions
» 2015
Westport’s consolidated business to be Adjusted EBITDA positive
by end of year
28
Key Milestones