Sprott Research #1
Global Thermoelectric
Inc.
Sprott Securities
Sarah Hughes (416) 943-6485
June 18, 1999
Rating: 4 (Speculative Buy)
Global Thermoelectric Inc. ("Global") is developing solid
oxide fuel cell (SOFC) systems for both the stationary and automotive market.
Over the past few months, the Company has announced significant breakthroughs in
its development processes, making strides towards a commercially viable product.
On April 16, 1999, Global announced that it has received an initial purchase
order from Delphi Automotive System for a solid oxide fuel cell system. Unlike
many other fuel cell developers, Global also has 2 existing product lines
unrelated to its SOFC development work. It is the world leader in the
development, manufacturing and distribution of thermoelectric power generation
equipment used in remote locations. The Company also produces crew compartment
heaters for use in military vehicles; these heaters are currently supplied to
the U.S. military. At this time we are initiating coverage of Global as a
Speculative Buy with a target price of $15.00.
Valuation (Includes only near-term fuel cell applications)
With the company being in its development stage, only a few near-term
(two to three years) fuel cell applications have been included in our valuation.
The inclusion of more lucrative mass market applications would increase both
our revenue and earnings estimates significantly. The future prospects for these
markets are potentially unlimited, and there fore minimal market share would
represent significant revenue share for the Company. However there are a number
of things we would like to see happen before we include mass market applications
in our valuation. We believe the markets represent "gravy" in terms of
valuation, and could result in substantial upside over and above our target
price.
We do caution investors that this potential is not without its risks. Global is
still in the development stage of its solid oxide fuel cell system, and there is
no guarantee that it will be able to deliver a commercially viable product.
Having said that, to date the Company has reported significant developments over
a relatively short period of time, indicating to us that it does have the
capabilities to be a significant player in the fuel cell market.
Company Overview
Global was formed in 1975, acquiring technology from the 3M Company to
develop its thermoelectric generator business. Since that time, the Company has
become the leading supplier of thermoelectric generators for remote markets,
with customers in over 45 countries. In 1996, the Company expanded its business
by entering the military vehicle heater industry, and is currently the sole
provider of heaters for tracked vehicles for the U.S. military. Globals third,
and most exciting, line of business came in 1997, when the Company entered into
an agreement with a German research institute to license the institute's solid
oxide fuel cell technology. We have provided a brief outline of the Company's
two existing product lines; however, the majority of the report will focus on
Global's development of a solid oxide fuel cell system.
Thermoelectric Generators and Vehicle Heaters
Thermoelectric Generators
Thermoelectric generators convert heat from the combustion of natural gas or
propane directly into electrical power. These generators are an ideal source of
power in remote and inaccessible areas, providing continuous power with minimal
maintenance and have an average life of 15 years. There exists a large range of
applications for these generators in remote markets, including pipeline
corrosion protection for the oil and gas industry, microwave repeater stations
in the telecommunications market, and instrumentation and pressure measurement
for gas lines.
Global has been involved in the thermoelectric generator market since 1975, and
currently manufactures a wide variety of generators with power output ranging
from 15 to 550 watts. Prices for these generators range between $2,500 and
$25,000, depending on the size and power output. The Company has successfully
penetrated international markets, and at the end of fiscal 1999 year Global had
approximately 250 clients in over 45 countries. As a result of its success in
this market, Global estimates it has a 98% share of the total thermoelectric
generator market. Despite this strong market share there represents significant
growth opportunities.
In 1998, the Company secured
its first major contracts in India and in China, both of which represented new
opportunities for the Company. On June 1, 1999, Global had announced that it had
entered into an agreement worth 19 million dollars with the Gas Authority of
India Limited. The Companies generators will be used to supply electric power
for cathodic protection and telecommunications systems for a new pipeline in
India. The timeline of the contract is still under negotiations, but it is
expected to commence late in calendar year 1999. This is the largest contract the
company has ever been awarded, and highlights its leading edge technology.
Vehicle Heaters
In 1996, the company successfully won a contract to supply the U.S. Army's
Tank Automotive Command, with personnel compartment heaters for their new
armoured vehicles. Global's heaters replaced existing outdated heater which
often did not meet expectations. Globals heaters have an on-board
micro-processor which monitors the units functions in order to ensure proper
operations. In case of a problem, the micro-processor will address the situation
and take the appropriate action to reduce out-put or safely shut-down the
operations. These heaters allow for rapid field maintenance and repair, and in
turn result in increased efficiency for the Army vehicles.
The contract includes an initial order of 2,137 heaters with an option for an
additional 1,863 heaters. The value of the contract amounts to approximately $18
million, with the first 2,000 heaters priced at US$2,800, and the next 2,000 at
a higher price (has not been disclosed). At the end of f1999, the Company has
supplied approximately 600 heaters to the military. After a number of growing
pains, the production of heaters is currently up to full output, at 200 heaters
per month. The initial order will be completed during the third quarter of
f2000, however based on the eagerness of the government to get these heater as
quickly as possible, we believe the government will exercise the option for the
additional 1,863 heaters.
Also, on February 3, 1999, Global announced that it entered into a new agreement
with the U.S. Army to adapt its heaters to heavy military trucks. Although the
amount of the new contract is nominal (at $450,000), it is indicative of
Global's ability to produce high-quality heaters and find additional markets. The
new contract also allows Global to tap into the non-tracked market, which is six
times larger than the tracked vehicle market. In addition, these agreements will
enable Global to attain international exposure, as the U.S. currently produces
approximately 40% of all tracked vehicles worldwide.
Fuel Cells
Introduction to Fuel Cells
Although fuel cells have been around since 1839, they were not viewed as a
credible source of power until the 1960's, when the U.S. space program choose
fuel cells over riskier nuclear power and more expensive solar energy. Since the
1960's, we have seen significant development in a number of fuel cell
technologies, which in turn sparked significant interest in these systems. Fuel
cells have emerged in the last decade as one of the most promising new
technologies for meeting the vehicle emission targets of many nations.
Fuel cells are an environmentally clean, quiet and highly efficient method of
generating electricity and heat from natural gas and other fuels. The cell is an
electrochemical device that takes a fuel such as hydrogen and combines it with
oxygen, to produce electric power, heat, and water. The fuel is not burned, but
is chemically combined with oxygen in the air, and therefore produces only small
amounts of pollutants.
According to the Department of Energy, there exists four main types of fuel
cells: phosphoric acid fuel cells (PAFCs) molten carbonate fuel cells (MCFCs),
solid oxide fuels cells (SOFCs) and proton exchange membrane fuel cells (PEMs).
Although the core operations among the various type of cells is the same, there
are a number of differening operating characteristics between them.
The Future of Fuel Cells
Although fuel cell systems are
not expected to reach the commercial market place for a number of years, there
exists a huge market which is ready and waiting. The applications for fuel cells
include such things as stationary power systems, back-up power generation, home
co-generation, and as a replacement or augmentation to the internal combustion
engine. Fuel cell applications are broken down into two categories, the
stationary and automotive markets, both of which offer large potential for fuel
cell developers.
A Stationary Market Applications:
Within the stationary market, fuel cell systems could successfully enter both
the remote and commercial/industrial power generation markets.
B. Automotive
Applications
One of the driving forces being the development of fuel cells for the
automotive industry is the proliferation of emissions regulations. Today,
approximately 12 states, (of which California is the most vocal) have enacted
legislation requiring a significant reduction in emissions over the next few
years. The fuel cell is believed to be one of the most promising technologies in
terms of reducing emissions. Fuel cells produce electricity with 40% to 60% efficiency, compared to 15% to 18% efficiency obtained with the internal
combustion engine. With 40 million cars produced every year (15 million in the
U.S.)., the market is enormous. Although the exact market size at this time is unknown, one study projects global demand for transportation fuel cells to reach
$9 billion by the year 2007 (source: fuel cell 2000). The amjour barrier to
entry to this market is cost; " at the moment it costs around $4,000 per
kilowatt to make a fuel cell engine, compared to $40 per kilowatt for an
internal combustion engine" (source: The Economist, April 24, 1999).
Although commercialization is expected to eliminate some of these costs,
additional research and development is needed to bring down costs to comparable
levels. Even though industry analysts believe that these cost reductions are
possible, it will take a number of years before the market sees a commercially viable product.
The ultimate success of a commercially
viable fuel cell system from auto is still unknown, and additional
development is still needed. As to which fuel cells will succeed and who will be
the market leader will be, only time will tell. However significant developments
continue to be made, and the backing of industry leaders (i.e. GE, all major car
manufacturers and major utility companies), speak to the future of potential of
fuel cells in the marketplace.
Global Thermoelectric's Solid Oxide Fuel Cell
In July 1997, Global signed an agreement with Forschungszentrum Julich
(Julich), Germany's largest R & D institute, to license its solid oxide fuel
cell technology. The license agreement between Julich and Global is not
exclusive; however, Julich can only re-license its original fuel cell technology
to others, which would exclude any incremental technological developments
achieved by Global. This agreement would set any competitors back to square one.
The monetary terms of the deal include a royalty payment based on future
commercialization of the fuel cell systems (the payment is based on square
centimeter area of membrane sold).
Although Julich did the initial development of the SOFC, Global took over the
development process of the cell and focused its efforts in making a commercially
viable product. Subsequently, Global has made significant process in its
development, reporting a number of breakthroughs over the past year. Since 1997,
the Company has solved the sealing issue, decreased the size of the membrane and
reduced the operating temperature, while at the same time achieving ever
increasing power output. Global is currently applying for a patent on its high
density fuel cell technology.
Global decided to go with the SOFC as it believes (and research concurs) that
this technology has significant growth potential and has the ability to penetrate
numerous markets. As mentioned previously, there exists two primary markets for
fuel cells, the stationary an automotive market. Due to the different characteristics
between fuel cells (SOFC, PACF, PEM and MACF), the successful
penetration of the potential markets differs for each type. In the case of
SOFCs,
the Electric Power Research Institute (ERPI) believes that these cells can
penetrate numerous markets. "ERPI considers SOFCs the only fuel cell
technology with the potential to span market-competitive applications from
residential loads as small as 2kW to wholesale distributed generation units of
10MW-25MW.....Both PEM fuel cell and SOFCs could someday be suitable for small
scale residential market applications if the ultimate cost goals are
reached" (Source; The ERPI Journal). In terms of the automotive markets,
recent market related developments speak to the successful entry of the SOFCs
into this market. (Please see The Great Debate: Solid Oxide Vs. Proton Exchange
Membrane Fuel Cells on pages seven and eight.)
One of the main disadvantages
of solid oxide fuel cells, is the required high-operating temperature. Most
literature reports an operating temperature of close to 1,000 degrees Celsius,
at which point the cost of manufacturing the cell system are unsatisfactorily
high. Although these costs decline with a decrease in temperature, the decline
in operating temperature affects the amount of power that is ultimately released
from the system. On April 8, 1999, Global announced that it has successfully
reduced the operating temperature of its fuel cell to 700 deg C- 800 deg C, and
achieved record power output per unit. ( http://www.newswire.ca/releases/April1999/08/c0870.html
) As the power output per unit increases, the size of the fuel cell system
can be reduced, allowing for additional market opportunities. Although the exact
power output has yet to be released, we believe that the company has made
significant strides towards a commercially viable solid oxide fuel cell. Our
belief was re-affirmed by the announcement that Global received an initial
purchase order from Delphi Automotive System to develop a solid oxide fuel cell
system. ( http://www.newswire.ca/releases/April1999/16/c3211.html
) Although the final negotiations are still on-going, this purchase order will
allow Global to begin its work in this system immediately.
The Company's current strategy is to first target the remote market, where it
believes it can have a commercially viable product within the next two to three
years. Although the mass market applications offer additional unit production
and greater long-term revenue potential, we believe that the remote market
strategy is the best for the Company in both the long and the short term.
This strategy will allow Global to first penetrate a niche market, delivering a commercially viable product within two years, while at the same time continuing to work on getting costs down to enter the mass market. The technology used in both the remote and mass market applications is very similar, therefore any technological developments relating to its fuel cell system for the remote market will contribute to its progress of a commercially viable product for the more lucrative mass market applications.
Despite the Companies current focus on the remote market, we believe that if an opportunity arises involving mass market applications, management will undoubtedly pursue this opportunity. In fact, on April 16, 1999, Global received an initial purchase order from Delphi Automotive Systems to develop a solid oxide fuel cell system for an automotive application. A recent announcement from Delphi leads us to believe that it plans to use Globals fuel cell system in a hybrid application. ( http://www.delphiauto.com/index.cfm?location=799 ) Although the full details of the contract have yet to be released, we believe that this will be the first of many strategic alliances which the Company will form over the next few years.
Despite all the uncertainties over the Companies development stage status, we believe that it has made significant breakthroughs over the past two years and is capable of producing a commercially viable fuel cell system. As mentioned previously, the recent purchase order from Delphi speaks to the Company's technology and its potential use in the transportation market. We believe that there exists a substantial market for Global's technology, and if it continues to make major strides in the development process, the Company should play a significant role in the proliferation of fuel cells in the commercial market.
THE GREAT DEBATE: SOLID OXIDE VERSUS PROTON EXCHANGE MEMBRANE
Since the release of the Delphi
purchase order, many investors have been comparing Global to Ballard Power
Systems (BLD:TSE, NYSE). Ballard Power, a renowned fuel cell developer, is
reported to be one of the world's leaders in the development of the proton
exchange membrane fuel cells. These fuel cells have been endorsed by most major
automotive manufacturers, including Ford and Daimler Chrysler, in addition to a
number of large players in the industry. In addition to Ballard, there exists a
number of additional PEM developers including Plug Power, International Fuel
Cells, and H-Power.
As discussed earlier, although the base operations of all fuel cells are very
similar, there exists a few significant differences. The most common differences
between PEMs and SOFCs deal with the large differential in operating
temperatures and required use of pure hydrogen by PEMs. PEMs operate at much
lower operating temperatures (80 deg C) compared to most other fuel cell systems.
These low operating temperatures allow for quick start-up times and the use of
inexpensive materials, which make PEMs suitable for mass market applications,
where space is a constraint and the cost must be extremely low. However the
temperature also contributes to the systems biggest obstacle, the requirement of
pure hydrogen. Before these cells can successfully enter the mass market, either
a hydrogen fuel infrastructure must be built, or a low cost onboard reformer will
be required. Obviously the establishment of a new fuel infrastructure will take a
significant amount of time and money. Although many of the large petroleum
producers are currently attempting to develop a ferasable fuel infrastructure,
there is no guarantee they will be successful. The problem with hydrogen is that
it is an explosive gas with a very low boiling point, and therefore is difficult
to store. In terms of the reformer, it not only increases the cost of the system
but also its size, both of which will play an important role in the ultimate use
of PEMs as a replacement for the internal combustion engine.
In contrast, SOFCs operate at a much higher temperature, and therefore the conversion of natural gas to hydrogen can occur internally. These systems can incorporate an internal reformer in the design, which uses heat from the fuel cell to convert natural gas directly into a hydrogen rich fuel. In addition, the SOFC system is significantly less sensitive to impurities in the fuel (such as sulphur) throughout the reforming process, increasing the efficiency and dependency of these systems. In terms of the stationary markets, the efficiency of the SOFC systems can be dramatically increased (up to 80% to 90%) when the heat excess is used for other purposes. Although the operating temperatures gives SOFCs a number of advantages over the PEMs, it also leads to a number of obstacles, including the need for thermal management, high material costs, and the gradual degradation of the system.
In terms of the mass market applications, PEMs have received significantly more attention than SOFCs; however, industry experts believe that the required use of hydrogen will delay the successful entry of PEMs into the mass auto market. In the meantime, automobile manufacturers cannot wait for the infrastructure to be built, as they are up against strict timelines of current emission legislation. In order to meet the strict deadlines of the emissions legislation, automotive manufacturers have begun to look for an alternative to PEMs while the hydrogen problem is resolved.
On April 26, Delphi and BMW announced that they would work together to create a fuel cell system that would be used as an auxiliary power unit for the gasoline engine. BMW made a significant statement regarding the future potential for solid oxide fuel cells.
"Compared with the proton exchange membrane fuel cell (PEM) generally still proposed today, which in theory may also be supplied with hydrogen via a reformer running on petrol, the SOFC is far less sensitive to impurities in the reforming process. A further advantage is that it does not require and expensive precious metal electrodes. Accordingly, the SOFC is clearly superior to the PEM, especially as the latter is subject to the further restriction that it should preferably only be run on pure hydrogen. With the solid oxide fuel cell, on the other hand, motorists will not have to wait until a comprehensive and dense hydrogen supply infrastructure is in place." (Source: BMW http://www.bmw.com )
As BMW noted above, the high operating temperatures of SOFCs allow for the direct conversion of natural gas to hydrogen, therefore reducing the size and cost of the cell. We are not saying that the SOFCs are not without their drawbacks; although the high operating temperatures allow for the use of natural gas, it also results in higher component costs and insulation problems.
Overall, it is difficult to compare SOFCs to PEMs because a lack of research on solid oxide for the mass market place. Most literature has dismissed SOFCs in the transportation market due to the high operating temperatures and the lack of development; however the recent backing of this technology by two prominent players in the automotive industry (Delphi and BMW) shed additional light on its future potential. We believe that in the future there may exist a number of large markets in both the stationary and automotive market for SOFCs.
The next section is management profiles, I will not add that here as it can be accessed from the GLE annual report at http://www.globalte.com/financial.htm
INVESTMENT RISKS
1. Development Stage Company: Global is still in the development stage
of its SOFC system, and does not expect to have a commercially viable product out
in the market place for another few years. In terms of mass market (home
co-generation and automotive), the Company does not expect to enter this market
until at least 2005. Although it has made significant progress in its fuel cell
development to date, there is no guarantee that it will be able to continue to
achieve technological breakthroughs.
2. Delphi Contract Still Under Negotiation: On April 16, 1999, Global announced
that Delphi had placed an initial purchase order for a solid oxide fuel cell
system. The final contract is still under negotiation, and therefore its final
terms are not yet known. There are a number of different scenarios by which the final
negotiations could play out and each could have a different affect on the
value of Global. In our opinion, if Delphi makes an equity investment, or forms
a joint venture with Global, the stock will most likely rise on the news;
however, if it turns out to be nothing more than a purchase order for a
completed system, the stock could potentially react less positively.
3. Solid Oxide Fuel Cell is still an unproven application in the mass market:
In the past, solid oxide fuel cells have not been considered an appropriate
application for the mass market due to their high operating temperature and, in
turn, excessive costs. In terms of mass market applications, proton exchange
membranes have received the most attention. SOFCs are reported to be suited for
the high power applications and large scale electricity generations, where the
excessive heat can be used to increase the efficiency of the system. However,
over the past few years, SOFCs have gained some interest in both research and
the media. While they are still considered a superior source of electricity for
both high-power and large-scale applications, the success of their entry into
the mass market is also gaining acceptance. We are still a number of years away
from the potential target date of SOFCs entrance into the mass market;
therefore, there are no guarantees that they will end up as the chosen
technology for this high growth application.
4. Additional funding requirements: Assuming Global is successful in development
of a commercially viable fuel cell system, it will require additional financing
in order to meet productivity demands. At this time, the Company does not have
enough capacity to enter low-volume production in its existing plant. Therefore,
over the near future, we expect the Company will need to raise funds in order to
continue its R$&D program and for the construction of a new plant to sustain
low-volume production of fuel cell systems for the stationary market. Global could raise the funds through a number of different methods including such
things as additional funding through governments or automotive and energy
providers and/or increasing its debt and equity exposure. In our model we have
assumed the issuance of an additional 3 million shares (at $10.00/ share) in
f2000 to reflect the companies near term funding needs. There is no guarantee
that the Company will be able to successfully raise these funds, which could in
turn hurt Global's expansion requirements.
The low level of earnings could
result in volatility of the stock price: Although the Company has two existing
product lines which generate earnings, in our opinion they do not support the
current stock price. In addition, the Company currently defers all of its fuel
cell related R&D expenses, and if they were expensed as incurred, it would
result in a net loss in 1999, which could possibly continue over the next few
years. We do anticipate growth in the Company's existing product lines, but the
stocks valuation comes primarily from the development of the fuel cell systems.
In terms of fuel cell related sales, we do not expect to see any revenues until
2002 for remote market applications and 2005-2007 for mass market
commercialization (home co-generation and transportation). Therefore, the absence
of earnings from the fuel cell division over the next few years could
lead to a price volatility in the stock. Over the near to mid term, we expect
the stock could trade on news releases and, in turn, be subject to downward
pressure on the absence of news.
6. Cost Reductions: Before penetrating the mass market, the cost of the fuel
cells must be reduced to a point where they are comparable to existing power
generations. Although industry analysts believe that cost reductions are achievable, it will take a significant amount of time and money. Currently
Global does not have the resources to initiate such programs and would
therefore, in our opinion, need to form strategic alliances with companies
across numerous industries.
Valuation Recommendation
Valuation of Global is no easy task. As a result of the speculative
nature of this investment, "normal" valuation methods do not apply.
Unlike may other development firms, Global has existing product line and
positive earnings growth. However, we recognize that its current valuation is
not based on these earnings, but on the potential revenues stemming from its
development of a commercially viable solid oxide fuel cell system. As mentioned
previously in this report, the Company's strategy is to first enter the remote
market, while at the same time, continue its development of a product that meets
the strict cost constraints of the mass market. Based on our research, we
believe that Global will be able to generate significant revenue from the remote
market by fiscal 2004 (The Company has a March year end), however mass market
applications, such as transportation and home co-generation, are not expected to enter the picture till at least calendar year 2005, and there is no guarantee
that Global will be successful in its development of a system which meets the
strict cost requirements of the mass market.
We have chosen to use a
discounted price to sales valuation incorporating our estimated financial
results stemming from the near term (2-3 years) fuel cell related applications.
At this time, we have not included any revenues resulting from transportation or
home co-generation markets. Both of these markets are still years away and a
number of things must fall into place in order for the Company to be successful
in these markets. In particular, it is our opinion that the Company would need
to form a number of key strategic alliances in order to penetrate both the home
co-generation and transportation markets. Although the initial purchase order
from Delphi is a step in the right direction and speaks to the Company's SOFC
technology, additional agreements are needed in order to include these markets
in our valuation.
Our revenue forecast for f2004 includes revenues generated from
telecommunications and oil and gas applications in the remote market. As a
result of Global's current presence in these markets, through its thermoelectric
generator business, we believe that it will be able to achieve significant
revenues and earnings by f2004. In terms of valuation, Global lacks directly
comparable companies, due to the early development stage of both the Company and
its industry. Many of Globals characteristics, namely lack of current earnings,
the speculative nature of the investment and its strong future growth prospects,
are however similar to those of emerging technology stocks. We have therefore
chosen to value Global in line with these types of investments, using a
discounted price-to-sales multiple.
As a result of Global's strong growth prospects in the remote market, its
leading solid oxide fuel cell technology and attractive net profit margins (once
production is up to speed), we are applying a 10X multiple to our f2004 sales
estimate of $4.36 (per share) and a discounted rate of 30%. Our valuation is in
line with other emerging high technology companies which have potential access
to a market the size of Global's. In addition, we believe that this multiple is
justifiable due to Global's existing presence in the remote market, the
Company's recent developments related to its SOFC systems and potential market
size of fuel cells. Our determination of an appropriate discount rate was based
on the perceived risk of Global being able to attain our revenue estimate of
$112 million in its fiscal 2004 year. Although we believe that the company will
be successful in its penetration of the remote market, a 30% discount rate is
warranted due to the current development stage of its SOFC system. At this time
we are initiating coverage of Global with a target price of $15.00 and a
Speculative Buy Rating.
IN CONCLUSION, from a big-picture outlook, we can visualize a very large opportunity for the Company. If Global continues to be successful in its development process and sign strategic alliances, there remains a great deal of upside potential for this stock. However, the potential is not without its risks. If the Company is not successful in its development, it would be difficult to justify the current valuation. However, based on our research, we believe Global is positioned to enter the remote market in f2002, which justifies a target price of $15.00. We note that our assumptions leave a significant amount of revenue potential off the table by excluding the mass market applications from our current valuation. BOTH THE HOME COGENERATION AND TRANSPORTATION MARKETS ARE HUGE, AND THEREFORE MINIMAL MARKET SHARE WOULD REPRESENT SIGNIFICANT REVENUE POTENTIAL FOR THE COMPANY. AS MENTIONED PREVIOUSLY, IT IS ESTIMATED THAT THE AUTO MARKET ALONE COULD AMOUNT TO US9 BILLION DOLLARS BY 2007, APPROXIMATELY 10 TIMES GREATER THAN OUR ESTIMATE OF THE REMOTE MARKET. THEREFORE, INCLUSION OF THE MASS MARKET APPLICATIONS COULD INCREASE OUR ESTIMATES SIGNIFICANTLY, AND IN TURN OUR TARGET PRICE OF $15.00 WOULD CHANGE MULTIFOLD IF THESE MARKETS CAME TO FRUITION.