Tecogen Inc. (TGEN) Earnings Call Transcript & Summary

All right. So good afternoon, everyone. Thank you for joining our Propane Presents Technology webinar today. And as always, we do look forward to bringing new content about new propane power technologies and equipment that has entered the marketplace. I am Matt McDonald, I'm Director of Off-Road business development here at PERC, the Propane Education & Research Council, and I will be your moderator for today's webinar. For a little pre-meeting, just housekeeping. Everyone on the webinar is in listen-only mode. You will be remain muted throughout the presentation. If you have a question, just use the tool bar, click the question or chat button, submit your questions, and we will collect those items and address as many questions as we can throughout the time schedule. With me today is Bob Panora. Bob is President and COO at Tecogen. Today, Bob will be introducing you to Tecogen and its Ultera system, and how this catalyst system will reduce forklift tailpipe emissions to near 0. Propane forklifts, as we all know, are already some of the cleanest burning engines in use today. But however, as we move into the future, it's important that we focus on even lower emissions and cleaner burning technologies and what that next-generation forklift looks like. And good afternoon, Bob, welcome. I appreciate you being here, as we all do. The floor is yours, sir.

Thank you. And thank you, everyone, for joining in today on this presentation. I really appreciate it. And I'll get started by introducing everyone to the topics I'll cover. And let's see if I can change the slide. There it is. So the topics today I'll be covering, and I want to make the slide advance first. Let's see how long it takes. There we go. It's a little bit slow, but I'm sorry for that. So this is the topics I'm going to cover today. First off, I'll tell you a little bit about the company, Tecogen. It's probably not a household word for many of us. And then I'll go on to talk about the background and the technology. The emission system is commercialized under the trade name, Ultera. Then I'll talk mostly about the application to fork trucks, and then I'll cover regulatory issues that are important. The work we're done with MCFA and then we'll get into the performance of the product and the status. And lastly, we'll talk about a new agreement we have with Origin Engines, that's a different licensee that we signed up. And then finally, I'll close talking about the future, and leave some final thoughts, and then we'll move on to questions. So Tecogen. We are a company located in Massachusetts, and we are primarily a cogeneration CHP OEM. We have a group that does installations and service. And we have 8 or 9 service centers around the country, including a new one in Toronto that just opened a few months ago. We also sell the emissions technology to people who want to have extra low emissions say for a microgrid or whatever, usually in California. Now our product lines go back to the early 1980s and the product on the far right was our original product that's been upgraded, of course, over time. It's now called Tecopower. It is a very simple cogeneration module that works well, cost-effective and its rating is about 75 kilowatts, depending on which model you purchase. Today, the modern flagship product of the company is the InVerde e+, and that's the machine on the left. And those -- that product produces 125 kilowatts, but it's got a lot of technology built into it that the older product didn't. The technology primarily revolves around inverter technology, or IGBTs, I guess, as the device is commonly known. And what we've built into the product is that it's able to operate at a variable speed including sprint mode for a demand management response or if it's night time and the load had gone down, it can slow down to say 1,000 RPM and operate at basically the same high-efficiency as it does at full load. It also has 2 other advantages. The -- we built the product -- as a [ shape ] that it can operate either a parallel with the grid, but also as a standby blackout operating machine. And that's a tricky line to walk because the utilities are very contentious when synchronous generators are proposed on their network. And -- but the safeties that are built into the inverter, which is certified, helps with that problem. And so lastly, it involves a microgrid technology that's called CERTS. I won't go into that other than to say, we purchase it, a license for that from the University of Wisconsin. It enables us to run multiple machines with very simplified controls on the same circuit, and it's stable, shares the load equally and so forth. In the middle of the screen is another product line we have that we call Tecochill. It's an air conditioning product that's a chiller. Conceptually, what we do is we remove the engine -- I'm sorry, remove the motor from the machine and replace it with an engine. And hence, we have an engine-driven chiller that has very high efficiency. And offers the opportunity of heat recovery, just like in the co-gen application. Now the primary application for this product would be the same places that use large chillers. That would be big buildings, hospitals, hotels and a whole slew of industrial applications. The most popular application these days is skating rinks. We do a lot of skating rinks and the heat is -- used to melt the ice that's shaved off by the Zamboni. It's also used for dehumidification. The indoor cultivation is another big industrial area that we sell to, not primarily, but not exclusively to cannabis, believe it or not, which has grown a lot in the last few years. Now I want to talk about where the technology came from and what -- how it works. It's an interesting story. About 15 years ago in Southern California, the utility -- I'm sorry, the regulators, the South Coast regulators in the LA area, what they did was, unannounced, they knocked on the doors of a number of gas engines that we're operating in, I think it was well over 100. And what they found was there was widespread noncompliance. And I won't get into the details, but it was pretty bad. It was not a good look for our industry. And we were a minor subset of all the other engines that were caught up in this, but it was quite an embarrassment. Consequently, we had a bunch of work groups with the regulators and after a year or two trying to tell them that we knew we were doing, we had a good technology. They concluded that we, in fact, didn't. And I think they were right, I think that was true. And so what happened after that, let me just get the slide in advance. After that, what they did was they lowered the emissions requirement you would have if you were a new product, but they also made it much more difficult to continue to work there. What they did -- so in fact, the lowering of the emission standard was really on power fuel cells. So the engine industry, natural gas engines, cogeneration was really in a tough place right then. At that time, we were awarded a contract by the California Energy Commission and SoCalGas to try to solve that problem. And frankly, I didn't give it much chance, I thought it was -- to get to those levels reliably would be next to impossible. In the last few months of the program, we achieved a groundbreaking -- a breakthrough. And that we call, as I said earlier, was the Ultera, it's a commercialized name. And what it allowed us to do was operate natural gas engines in the range, as far as emissions are concerned, of fuel cells. We patented it in 2013, and then went on to patent it internationally as well. And they are supporting patents that have since been obtained as well. It's widely deployed in our products, including [indiscernible]. We use that technology everywhere we go, basically. And it's allowed us to permit our engines into that very difficult, Southern California standards. So over the 10 years, hundreds of engines, thousands of hours we accumulated in the technology, we're very confident in it. Now this chart I put together that helps put some numbers out there, what we've accomplished. If you look at Engine BACT, which would be the Federal Government, the EPA saying, this is what an engine should produce for emissions. And you should hours quite high. NOx, on the other hand, they do want to see a lower number. The horizontal lines that are on the chart represent the where California, Southern California went in the end, very low CO and very low NOx. And as shown on the chart, third-party testing of fuel cells. So it was a report published by the CEC, and I think there was about 19 fuel cells in that group. And they were tested, and they do give out a little bit of NOx, they do give out a little bit of CO. And that's from the reforming that's done to make the natural gas into hydrogen. And so if you look at our values, and that's a machine that ran over 8,000 hours, it was this annual certified test. It achieved almost the same levels, which is quite remarkable. And so that's the technology, how it came to pass. Our backdrop against the wall and we really wanted to continue to do business. Also, we perceive that these emissions requirements would migrate, and they certainly did. Very similar values are required now in Massachusetts, New Jersey and some of the eastern states. So we were fortunate to have a solution to that problem. So how does it work? In the closing months of that program with SoCalGas and the CEC, we went back to an old style of emission system that had been on automobiles in the '80s. And what they did was they had separated the system and the process into 2 catalysts, the Stage 1 and Stage 2, and they would inject air in between the 2 stages. And that was because they didn't have a good 3-way system at the time. They did everything all in 1 step. And you can see what happens. It allows you to really focus on NOx in the first stage, and then you do the oxidation reactions in the second stage by adding a little bit of air. What we didn't realize, and I think probably people who are in the industry probably knew, is this doesn't work. And the reason why it doesn't work is you added air, nitrogen and oxygen in between the 2 catalysts. And that air is heated up between 1,000 degrees, 1,100 degrees Fahrenheit, and then it passes through the second stage catalyst. Under those conditions with a catalyst, you make NOx from the N2 and the O2, so you've gone around in the circle. And you have NOx, it's not that high concentration, but it's high enough to make this system not viable with the emissions levels we were trying to achieve. So that was a problem. So we went back to the drawing board, so to speak, and said, how can we get around this problem? And what we thought might happen is if -- we hoped might happen, it was if we cool the gases and the [ process ] of combustion going between the 2 stages, and enter the second stage in a low temperature, possibly the bad reactions NOx formation might not occur. They might not have enough energy, but the oxidation reactions, hydro, carbons and CO made into CO2 in water, that might happen. And that's exactly what occurred. The NOx reformation was held to be 0. And we found that because the system the we had operated -- we'd be very tolerant of excursions in air/fuel ratio. In other words, we can go from a window, a sweet spot, if you will, for getting good emissions from 1x to 4x. And that had been the root of all the problems with 3-way catalysts in engines that still exist today for other systems. So and -- so in summary, it's a very simple process. You just need stage 1, high temperature; stage 2, low temperature; and you've got the recipe for what we do. And of course, we introduced a little bit of air to promote the oxidation reactions at the end. So if you look what's happened since then, in addition to putting it on our own products, we've been able to transfer it to a number of engines and platforms, and it works the same every time. We've done gasoline. We've done propane. And we've done of course, natural gas. And we see, I have a chart here, I remember. And I put together this chart some time ago just to show some actual third-party testing that's been done. And you can see we have our products, which are GM. We have Ford -- Ford Products, Caterpillar, and we have gasoline autocycle engines as well. And in every case, the chemistry works the same. We see the same type of reductions and you can get really good NOx and really good CO and hydrocarbons in the same system, which is very powerful. Now I want to add one thing that I should mention. The odd thing about this, the standard that was enacted in SoCal was that they put a very low NOx value on the table. That's typical. But the CO is usually left at a very high-value automobile regulations. They allow high CO, so on and so forth. So what's strange here is they put the CO had to be at a very low value. And most NOx technologies that I've seen don't really address that problem. And the fact that they don't is okay for certain applications, but in the forklift, an application, you do want to get the CO down. There is a benefit to doing that because much time you're inside most applications. So here's a photo album of some of the work we've done with this technology. We've done a number of standby generators. These are typically Ford, but we've done a [ hino ] type that, I think they all use the natural gas. And the model that we used in this picture is a generac. And we put the device on the roof and we've been able to permit these this unit was permitted in Pasadena. We've done a number of water pumping engines, and these would be municipalities that pump water using, in this case, a Caterpillar, a natural gas engine. We've added the device to the exhaust and that municipality has greatly reduced their difficulties with meeting the regulations in Southern California. In fact, they told me they were flunking the test they had, [ true ] every other week. And then write a novel at the end, why they were bad and once they put our system, that they never had to do that again. So it does really make us sleep good at night to know that you're going to pass. And then lastly, we have the MCFA fork truck program, which I'm going to, of course, talk to more in a minute. I guess I put up this chart here. It's the AVL company, which is a big German dynotest company where we did the work with the gasoline vehicles. The chart on the right is the driving cycle, that's the Federal Government driving cycle. And though it doesn't look at, when you actually see it being tested, it's really like Driving Miss Daisy. It's a very easy cycle to pass and in the test that we did -- there, we, again, had the very typical performance. You've got almost all the CO reduced NMOG, which is nonmethane organic gases, I guess, is what that is, 86% was reduced. And then the NOx was reduced by 25 -- 20%, which is actually a surprise because we hadn't done any tuning on the engine, and we later identified a mechanism that is actually reducing NOx in the chemistry as well. So anyway, it's worked in all these systems, and now we look at the forklift initiative. So as I think I mentioned this before, the Ultera process fits well in the forklift application. Because the engine duty cycle is all over the place, if you look at something, you put it down, you're driving, so it's quite variable. And we have that tolerance for air/fuel ratio excursions that happen when you hit the gas, take it off and so forth. CO elimination is more valued because the indoor quality consideration comes into play. And as I said before, many emissions technologies really focus on the NOx. So with that, we had a demonstration program with PERC and with MCFA, which is Mitsubishi Caterpillar Forklift America Inc. And they donated vehicle, which is shown in picture, and that was where we applied the technology for the demonstration. Now I want to talk just for a minute about the regulations because they're important here as well. And this is the California regulatory environment that I'll speak about. The OEMs are required to test the bare engine, running fork truck with only a dynamometer. And they would typically be certified with -- you can see the progression on the chart, how things have tightened up over the years. But as of 2010, the requirement that everybody falls is the 0.8 NOx plus hydrocarbon. Now they -- the way they define the pollutant is they combine the NOx and the hydrocarbon into a single chemical compound, if you will, which is annoying. It is annoying because in the truck regulation, NOx is separate. And so you get this jargon, this discussion that talks about near-zero NOx, near-zero NOx. However, because they've combined them in our application, you don't -- that jargon doesn't get translating very well. And so I found even the regulators are confused about that. And in fact, if you really break down the requirement of the trucks and the requirement for -- for the forklifts, it's identical. It really is identical, but the jargon is important for how you describe things. And so they had a little bit of trouble processing when I told them that we have a no NOx -- near-0 NOx technology. So in addition to the OEMs back to the requirements of regulators, the fleet operators are required to put their fleet specifications into a computer cloud program. And if they achieve a certain average of their fleet, they're okay. But if they begin, their average goes down, they have to retire some of the fork trucks, and that's how it works. So what was our goal? Our goal was we wanted to hit that number on the bottom right, you can see here. We want to hit the 0.1, the lowest value for the NOx and hydrocarbons. The CO, as you could see, this is what I spoke about before, it's 20 grams per kilowatt hour. You don't want to be that high. And this is because that regulation is geared towards outdoor impact on the air quality of the neighborhood of the region. And it doesn't really speak to what you would want necessarily for an indoor requirement. So that's the regulatory environment. And I think what's happened in the last few months, I want to speak to that, CARB, which is, everybody knows, is a California Air [ reg ] board. They started an initiative to phase out all IC engine forklifts. And it's separated by size and it's generally, I think they've talked about an 8-year retirement of the schedule. They have a public workshop. And I think a month later, they had another one that was basically the propane forks talking to them. And I did participate in both, and I had the feeling that they are willing to bend a little bit. In a second meeting, I told them about our system which surprised them. They were confused. They didn't know there was any standard they had that would be considered low NOx, but there is. And I think they may be willing to compromise, if not, they may be willing to just go back to their old system, I don't know. But again, maybe there's an opportunity here from the technology. If it can be used in special cases or something like that. So I'm hopeful. Now I want to talk about integration of the system into the MCFA fork truck. And you can see photos of it here as we received it. And with the conduit removed, you can see the catalyst and the -- just pointing here, the catalyst and the big muffler there that they used. And it's a GCT is the engine manufacturer, which is an affiliate of Mitsubishi. Now what I show here is what is actually -- was configured after we put our system in. We found that the muffler really wasn't needed once we've added this pipe work, everything was more or less the same sound levels. So we had plenty of room. And the devices you see here would be familiar, just thinking about what you'd add from the way I described the process. We have an exhaust cooler and we have a primary catalyst. And I think the secondary catalysts have been removed, so they can see what's here. And we have 2 control valves that control the temperature at maintain that sweet spot of 400 degrees. Now if we look at what we've done on the process diagram, this is what came from MCFA. You see the radiator and the engine and the primary 3-way catalyst. And what we've added is a huge heat exchanger, a -- we've taken a slipstream off the cooling loop to cool the heat exchanger, to cool the exhaust. And then we've added a system that maintains the 400 degrees of bypass around the heat exchange. That's hot, and it mixes with the cold and you get the right temperature out. And then there's a second stage catalysts in an air pump that's added. I show the controls here. These would be -- this is what we did. But normally, we'd integrate the controls into the main control system of the forklift. But basically, they just address those 2 valves, just like a shower, you're adjusting the hot and the cold to get the 400 degrees, and it was rather -- wasn't that hard to get that to work very accurately, worked pretty well under all conditions. That's the legend for the drawings. So let's talk about how it performed and how the system worked. We've started off with a stationary system that we could test and we could bring in a third-party with laboratory-grade instruments. And they would measure against our stuff. We found good agreement with our portable stuff that's lighter and can be ed on the fork truck driving around. And we also noted that the total hydrocarbon is 52% removal. So these numbers were very similar to what we've seen in all other applications. So after that, we looked into a drive cycle that we would call our standard test. And it's depicted here at the diagram. You can see that we're starting off in a location doing a couple of lifts, moving to B, doing a couple of lifts and moving to C doing two lifts. And I think typically, we do about a 10-minute test, and that became our standard. So if we look at how we get under those conditions, I presented these 2 charts, you see on the left CO and then the right, NOx. And the spikes you see of the solid blue line are what's happening before the Ultera catalyst. The dash line is post-catalyst, where the CO has been reduced about 93%. And these exclusions are what I was referring to earlier in the presentation, it really our problem -- can be a problem with 3 way catalyst systems where you step on the gas or release the gas and the air-fuel ratio isn't maintained and hence, you get a spike. And then the reverse is true on the NOx. So the NOx shows these spikes as well. And we see our 22% improvement from the dash line. But it's the mirror image of what's happening on the left. When you go rich, you have one effect and you go lean, letting off the gas and you get the other effect. So you're never getting quite the best performance out of the system. And this compromises what the Ultera system addresses. So at this point, we felt we knew the system was going to work. We just needed just retuning so we needed the expertise of the GCT company to come out and retune the engine. And so the specialist from Japan came along with several engineers from MCFA. And within a couple of days, they were able to tune the engine to get what we wanted, which is very low NOx, very low CO is something that would really be effective. And the results were really good. I mean the MCFA guys said that the emissions levels were eye-popping a single set. I mean, really did well. And I'll show you those right here. So here are the final tests. And the way I show the NOx here, as you can see, there's a solid line of 125 PPM, that's that fork truck before we touched it on the same -- before we modified it on the same test course. And so how does the NOx do? Well here, it's almost 0, 3 PPM or something like that on average. But you've really knocked the NOx down by the retuning. Now on the other side of the slide, you see that we have a CO track. And you get these familiar excursions that we get when you're letting off the gas and putting gas and you get the CO bumps, but they are almost eliminated. Also okay, all those bumps are eliminated by Ultera. This big one in the middle, some get by, but on the whole, you've reduced it by 90%. And that can be improved with a little more catalyst that can be you can sort of get what you have a one out of that. So it's very effective. So the whole result was we felt we've achieved what we wanted to do. So at this point, there was really -- there's really no more testing on this test track because to certify, what you really have to prove yourself 1 is a dynamometer with a computer that's controlling throttle, similar herky-jerky type test, but it's really the computer. So we said to MCFA, you really there, we think, you can probably get certified right now, just put the engine on the dyno. And so what we decided to do was let see, maybe go to the next slide. So in discussions with them, we said, let's move towards certification. So MCFA began to schedule with Southwest Research, which is certified laboratory for this type of stuff. And they were trying to get a [ May ] slot to do the initial pilot testing. And PERC generously agreed to fund it. So the first set of tests we wanted to do was put the bare engine on the dyno to make sure the tuning was right to get the low NOx and everything else that we need to get the best out of it because it was a different cycle than the test, we felt that MCFA felt as well. They didn't want to through the pain and not have the tuning engineer on hand to adjust the tuning as needed to get the best result they could. And of course, this was around March is when this was going on. And COVID-19 upended the whole plan, like it's done for so many people in actually much worse ways. So we're awaiting for the travel restrictions to be lifted. And hopefully, we can get this program back on track. And so the other vendor that we're working with, the other OEM is recent. And this would be the Origin Engine. Well, it's actually not the Origin Engine company,it's Origin Engines and they are a Nebraska-based manufacturer. We know them because we work with them, they supply our CHP engines, and we know them as innovative. They're fast-growing in the industrial market. And like us, they are aware of the growing value of lower emissions to customers. So we did get an agreement signed. And it was -- it's actually presented in Diesel Progress last month. I think the February edition -- yes, the February edition we have, you can find it there. And it tells some of the things, mostly what I'm just going to say now. The license covers the range of 80 to 280 horsepower. And we kept it at the 80 to avoid any conflict with MCFA, which is about 60 horsepower, I think. And it uses various fuels, natural gas and propane included. More importantly, it covers quite a few markets, oil and gas, and so forth, forestry and -- but of course, fork trucks it is one of the main markets they're interested in. So where are we going in the future? So we want to get the MCFA program back on track. Who knew that it would go beyond the summer, and it did and those poor folks in Houston, they're still not out of the woods yet with their issues. But we hope to get it back on track as the vaccines take effect and the travel restrictions are lifted. The Origin agreement, I believe, we're very positive. It's actually an agreement. It's a signed agreement, and it has a strong potential to expand Ultera. Origin is a terrific operation. But they're able to address not just 1 company, they can go to all the companies that sell fork trucks. And they can and they can produce some real commercialization, I think, pretty quickly. The agreement has a schedule that's aggressive for -- to getting things going. And so I'm pretty confident that we're going to see a success soon. Now I have one other thing I want to mention. I -- 2 years ago, when we were doing the gasoline development, we asked Southwest Research to do some more -- to look at catalysts, because we're just using the same old catalyst for the second stage that we've used for the first stage. We had done now looking into that area and they recognize that because we're operating in a lower temperature range, this technology that would not survive in the high-temperature environment that will work very well and better in fact in the low-temperature environment to what we have. So at the end of that initial phase that we funded, and I think it was a couple of hundred thousand dollars, so it was a significant program. New laboratory testing had shown this one particular catalyst that was made in miniature to have some pretty remarkable performance. And so we've decided internally, we're going to fund that next step because it has the potential of either increasing the effectiveness of the catalyst and the size we have or alternatively we can use small and less costly catalyst and so fourth. I don't want to talk too much about it because we want to get a patent application filed before I do any talking about it. But that's -- that, I think, could really seal the deal for this technology to make it very robust and cost-effective. So final thoughts that I have before we get into the questions. In thinking about it over these months, what is the value of this technology? I think we really were focused on that California, really an outdoor air quality standard as being the holy grail. In reality, if you go elsewhere in the country, they may not care so much about the California outdoor air quality requirements. But I think I would emphasize, and I'm not an expert in this stuff, but I would emphasize the indoor air quality aspects of it because it could really have a universal appeal, not just California. And having this potential to retain more values for all the pollutants, which is unusual for this type of technology would really benefit the industry, I think. Okay. Lastly, I have further reading for nerds, if there are any out there. We published 2 SAE papers. That deal mostly with the gasoline work that we did. And the second one, but it does tell about the technology, and it's gratifying to have a peer-reviewed paper that accepts our technology and really adds credibility. The second paper actually was selected as a significant paper of the year. One of the significant papers of the year is published in a separate group of paper, so it was really well received. And I think we have a lot of potential. So I'm done and I'm ready for questions, if anybody would like to ask any and I'll let Matt come back into the discussion.

That's great, Bob. Yes, we really appreciate it. And you're right about the indoor air quality restrictions because there's only more and more focus on that aspect of things. And the beauty of propane-powered forklifts is that they do operate indoors and outdoors. But with the focus on indoor air quality, that is -- you're dead on. All right. So we're going to open it up to questions here. If anybody has any questions, I think Rachel may be asking the questions here. So Rachel, do we have any questions we want to ask?

Yes, Bob. First question here. Has this technology has ever been considered for the aftermarket? Or is it only a solution through an OEM like MCFA?

Well, actually, we have that small business that I described where we will sell to the water district who's got a Caterpillar engine or to a person who has a standby Generac generator who wants to make it so they can run more than 200 hours a year in California for microgrid and so forth, so we do that now. And if there was -- if I think Origin may consider that, why not. I think they have the right to do that. I'm not positive, but I think they do. So yes, the answer is it works well as a kit. There is one hitch, though. If you have a forklift that has been certified already and say it was a different type of engine, a General Motors engine. And you were to add the kit, then that would invalidate the certification. So that would be a problem. So that's why I think, in the forklift market, you could do it, but you'd have to certify that engine combination separately. So if you're going to do a lot of them of 1 configuration, you could do that. But that's the certification probably is difficult. Otherwise, a kit is not a bad way to go.

Okay. And then talking efficiency, sorry. Efficiency and durability of the InVerde e+ on propane? Does it operate at 125 KW? Or is it derated when on propane?

Yes. That's a good question. We don't think it's derated. In the past, we've never done InVerde on propane. I know we've done plenty of -- not plenty, perhaps a handful of chillers and cogen machines on propane. And we never derated them. And far as I know, there was never a problem. But the -- I think we can get to the 125, but I'd like to maybe try some testing first. But technically, it should be about the same exhaust temperatures that the valve see -- the valve train is where the issue would be. And I don't know that would be a problem.

Okay. Does fuel sulfur have an effect on the second stage catalyst now that it's seen relatively lower temperatures?

It does. It does. Interesting, you ask that. So in the cogeneration application, we have hundreds of these machines out there. There are certain parts of California, and Southern California is the only one we run into this where sulfur does appear. And sulfur is in natural gas as part of the odorant and there may be some natural sulfur as well. But for whatever reason, the sulfur did get into the catalyst. And the reaction, I presume, is SO2, maybe SO something, normally goes right out the engine, you never see it again. But when you're at those temperatures, the -- you've got a chemical reaction that would, I think, form, I'm guessing, I don't really know, but I think it's sulfuric acid perhaps or something like that, and that would attack the catalyst. However, we don't see it anywhere else. And there's a little bit of sulfur, but it doesn't seem to affect us. And the longevity that we're shooting for in cogeneration is really different than that you would probably see on any application. The engine is running 7,000 or 8,000 hours a year, and you're running wide open through all -- practically all the time. So it's a very severe duty cycle. I don't think you'd run across it in propane. And there are ways to deal with it. We have a patented -- I believe we have a patented system, we developed with a catalyst manufacturer, a sulfer-resisting catalyst that instead of using the aluminum oxide as the foundation inside the catalyst, it uses another material, and that was resistant, and that seemed to get us by in California after that. Good question.

And then possibly, as a follow-up to that, is the catalyst more susceptible for sulfur poisoning?

If there is a lot of sulfur, it will have -- it could have a problem. But as I said, we have several hundred machines more than that probably on the East Coast. Never see the problem. And then we go into the West Coast, in Southern California, not normally California, it's this whole SoCalGas thing. We found we did have a problem, but it was controllable by having the sulfer-resisting catalyst in place and also by changing the catalyst every 2 years as opposed to longer than that. So that's where we ended up with that. And we haven't introduced the sulfer-resisting catalyst on a widespread basis because it's somewhat more expensive, and we just don't seem to need it on the East Coast. In most places, I should say.

Okay. What is the cost adder for a -- sorry, hold on, one second here. Yes. What's the cost adder for the Tecogen 125-kilowatt unit?

For the emission system? Or for the products?

Let's see here.

Well, I think what's being asked is how much does the Ultera system cost on the e+ machine. It's -- actually, I don't think we rarely, if ever, sell it. I don't know that we've ever sold it without it. But if you look at the Ultera product as a cogeneration machine, so it already has the 3-way catalyst, the first stage, and already has the heat exchanger because we're recovering the heat. So all you're basically doing is add a small air pump in the second catalyst. So the cost is not that bad. I don't know what the price is. That's a different question. I don't know what the price is, but it's not a complicated device for cogeneration because you already have 3/4 of the cost is already on the machine because you're covering the heat. I don't know if I addressed that properly, but I think that's what they were asking.

Yes, I think you did, Bob. Would this application be to replace an existing forklift engine? Or only on new OEM applications?