February 15, 2006

Tough Cuts, Small Cell

By: by Business First


When life hands you lemons, make ... fuel cells.

That's what six former Tyco International Ltd. employees did when the beleaguered mega-corporation closed a Hertel Avenue operation in October 2002.

"Tyco made its decision, and there we were," says John Olenick, one of several Tyco veterans who had to decide whether to relocate to accept a job offer or look for new employment in Western New York.

"Most of the people on the team had worked for five or six different corporations," he says. "We were getting frustrated moving from corporation to corporation and not having those corporations stick with their plans."

The six co-workers, who made up the small fuel-cell division at Tyco's MACOM subsidiary, decided their field was promising enough to merit some risk-taking. In January 2003, they founded Enrg Inc., a company that makes ceramic components for solid oxide fuel cells.

Who's who: Today Olenick, his wife, Kathy Olenick, William Sunderlin, Viswanathan Venkateswaran, Tim Curry, Gregory Korbut, Kim Helmer and Tom Silverblatt share ownership.

John Olenick is president of the company, which is in the process of expanding to larger facilities and looking to broaden its offerings. And while there are a lot of cooks stirring the Enrg Inc. pot, he says the shared-ownership model works well.

"I'd do it again. It's worked out great," Olenick says. "Everybody's got a piece of the business, and that gives you a different attitude. You're not there to get a paycheck. You're there because this could be your future livelihood for a long time."

Where to go: Olenick says that the biggest challenge for Enrg has been finding and keeping the right facilities.

The company's first home was in the boardroom of Alden Scientific Corp.'s Walden Avenue site. Silverblatt, who later joined Enrg, was the team's contact at Alden Scientific, a Tyco subcontractor.

"We leased the boardroom and had access to the rest of the 115,000-square-foot facility - including the clean room and equipment set, which we needed to make fuel cells," Olenick says. "Incubation in this building made us look bigger than we were at that time in 2003, and it helped us get some early contracts."

Enrg got its first contract in March 2003, and picked up two New York State Energy Research and Development Authority awards totaling $600,000 four months later.

Bump in the road: Thirteen months after they started the business, however, the Enrg crew had to look for new facilities. Alden Scientific's building was sold in early 2004.

They leased 6,000 square feet in the River Rock Industrial Incubator, part of the Buffalo Economic Development Corp.'s Buffalo Free Trade Center.

Two years later, Enrg has expanded again, adding a combined 8,000 square feet at its River Rock site and a second leased property on Kenmore Avenue in Tonawanda, for a total of 12,800 square feet. Olenick signed five-year leases for both spaces in December.

Revenues: $1.3 million in 2005 and a projected $2 million for 2006.

Clients: In addition to its contracts through NYSERDA and the National Institute of Standards and Technology, Enrg provides fuel-cell components to fuel-cell developers such as Corning Inc., GenCell Inc., Pittsburgh Electric Engine Inc., SOFCO-EFS Holdings LLC, Refractron Corp. and Lilliputian Systems.

Employees: Since the eight owners added their first full-time employee in January 2005, the Enrg crew has grown to 14.

Industry trends: It's all about trying to find sources to match ballooning demand. Olenick cites a Department of Energy prediction that by 2030, the United States will use 66 percent more energy than it does today.

"How we utilize and have energy delivered to our homes, businesses and automobiles will change through the next three decades," he says. "There's currently about 7,000 fuel cells in demonstration around the world. In the year 2000, it was about 200."

The challenge before the fuel-cell industry today is getting the cost down so that those stored-energy sources can be used by more businesses and homes, and in large vehicles like tractor trailers and RVs.

"The cost is the issue right now," Olenick says. "You're in the early stages of the technological curve. We're very much highly developmental. Things cost a lot because you're not making very many of them."

The costs of fuel-cell technology are on their way down across the industry, Olenick says. A five-kilowatt proton exchange membrane system by Plug Power that cost $75,000 three years ago, he says, is now available for $25,000.

"It's still too high, but you're one-third (the original price) in three years. You're going to be one-third less in another three years, and then you start to hit some of these mass market numbers."

What is one growing pain you've experienced while building your business? Finding the right funding - and learning to be patient, Olenick says.

"We devote a tremendous amount of time in this early start-up stage to locating the right capital investments to fund our continued growth," he says. The company is in the middle of a second round of funding, looking for $1 million to $2 million, and expects to make another appeal to investors in two years.

Grants from NYSERDA and the National Institute of Standards and Technology have enabled Enrg's recent physical expansion, Olenick says.

The NIST money also allowed the purchase of $900,000 in equipment for Enrg's environmentally controlled clean room, including a large-area screen printer and ink dispenser, three furnaces and an optical gauging system.

On the private side, the company has three local investors and four out of the area, Olenick says.

On the horizon: In addition to its current list of products and services -- including custom fuel cell components, stack assemblies, sealing materials, tape casting and ceramic processing -- the company is developing technologies dealing with gas separation membranes and battery charging and storage.

It's a challenge to sell emerging technology, Olenick says, but adds" "We're very happy with the level of growth we have at this point."

Enrg Inc.
155 Rano St.
Buffalo, N.Y. 14207
Phone: 873-2939 • Fax: 873-3196