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u u GLOBAL THERMOELECTRIC INC. (GLE - $46.50, TSE)
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A Summary of BMW’s Paper; New Target Price

Although we have believed for some time that Global Thermoelectric’s solid oxide fuel cell (SOFC) units are being used in BMW’s development of its new auxiliary power unit, we are now certain in this knowledge.

At this week’s Society of Automotive Engineers (SAE) conference in Detroit, BMW presented a paper describing the project, and mentioned Global’s involvement:

 “Currently, stacks with up to 1.5kW electric power, built by Canadian SOFC development specialist Global Thermoelectric, are being studied.”

After speaking with BMW’s engineer who presented the paper, we are confident that BMW is pleased and impressed with the progress that Global has made to date. After attending the conference, one observation we would make is that BMW’s move towards an SOFC APU has sparked significant interest within the automotive industry.

Although BMW is a strong supporter of hydrogen, it questions when the requisite hydrogen infrastructure will be in place to support the use of the proton exchange membrane (PEM) as the main source of power in the car. (The presenter suggested that, in his opinion, it could be more than twenty years away.) BMW’s reason for going against the grain and looking at the SOFC, as opposed to the PEM, is based primarily on the SOFC’s ease of reforming gasoline (or any other hydrocarbon) into hydrogen. As stated in its research paper,

 “since this innovative energy converter [SOFC] uses conventional engine fuel, it does not require any other source of energy such as methanol and therefore does not call for any elaborate change in on-board technologies and in the network of filling stations … gasoline APU with an SOFC is far simpler than a PEMFC and has far greater potential for being introduced earlier into the market, simply because motorists are not required to wait until a comprehensive and dense infrastructure of hydrogen is actually in place.”

Since beginning the development project last April, BMW has stated that its initial results appear very promising. It hopes to have a “proof-of-concept” car to display later this year; however, it should be emphasized that this will simply be a prototype car, as BMW has indicated that it does not plan to have a
commercial car ready until the 2003-2004 time frame.

Unlike the PEM, which has been the fuel cell of choice for the automotive industry for some time now, the SOFC is still at the beginning of the development process for mobile application; therefore, much of development work remains. For example, BMW has stated that further development will be focused on such areas as: reducing the warm up period to less than 10 minutes; thermal management of the system; reduction of volume and weight of the APU; improving fuel utilization; and examination of sulphur tolerance.

In addition, within the paper, BMW mentioned that itself and Delphi have been in close contact with a number of component manufacturers and research institutes in order to effectively and efficiently further along the development work of this project. It also mentioned that both companies are open for further joint ventures. This statement is, in our opinion, very significant, as it highlights BMW’s desire to move forward quickly by sharing development work with other parties within the automotive industry. As many automotive manufacturers have stated, joint development work is necessary if fuel cells are going to be in our future, and it appears that BMW agrees.

u u During the past twelve months, Sprott Securities Limited, either on its own or as a syndicate member, participated in the underwriting of securities of Global Thermoelectric Inc.