SOURCE: Titan Energy Worldwide

Titan Energy Worldwide

September 15, 2010 11:43 ET

Letter to Shareholders of Titan Energy Worldwide, Inc.

CEO Discusses Company Progress and Its Advancing Role in the Demand Response Industry

MINNEAPOLIS, MN--(Marketwire - September 15, 2010) -  Titan Energy Worldwide, Inc. (OTCBB: TEWI), a leader in distributed power generation products and intelligent energy management services, released today this letter to the Shareholders from Titan Energy CEO Jeffrey Flannery.

Dear Shareholders:

The first half of 2010 has been a very exciting and successful time for Titan Energy. Here are just a few of the highlights to date:

  • Continued strong financial and operating performance -- 1H 2010 Sales were 86% above 1H 2009. Gross Profit for the 1H 2010 was 207% above 1H 2009. 
  • Record revenues in our Florida and Northeast U.S. operations
  • A record high in new bookings with $2 million in August
  • Achieved positive cash flow for the 2nd Quarter
  • Increased our sales force in the Midwest, Northeast U.S., and Florida
  • Expanded our relationships with major national retail chains
  • Established a release schedule for our new monitoring and control technology

To build on this success and set our goals for 2011 and beyond, we recently held a management meeting which brought together the leaders from our Northeast U.S., Florida and Midwest offices, as well as our new technology team in Houston, Texas. What I experienced over these few days was the excitement and enthusiasm that comes from working with one of the strongest management teams I have known, people who are committed to working together as a team as we grow Titan into a true industry leader in energy management. I would like to discuss the results of that meeting and other positive developments at Titan Energy.

First, I would like to explain in some detail the role of Demand Response in Titan's business plan and how this will impact our company's direction and growth. Demand Response represents a tremendous opportunity as Titan is uniquely positioned to be a leader in this growing, multibillion dollar industry.

Titan's Role in the $10 Billion Demand Response Industry.

The events of this long, hot summer brought to the front pages of newspapers one of the challenges facing our energy industry -- what do we do about our aging electrical power grid? I met with one of the board of directors of Con Edison in the middle of New York's longest heat wave. He told me that the board was meeting every 12 hours to discuss the concern over delivering electricity during this time and how to deal with a possible brown out or black out. Fortunately that disastrous event never took place, but as this board member said to me, that was "only because we are in a recession." Yet, the Department of Energy estimates that grid failures do in fact create $150 billion in annual losses in the United States. 

Demand Response is a $10 billion industry, and 80% of that is virtually untapped. Titan Energy has an opportunity to be a leader in deploying a vital demand response solution for improving the nation's electrical operations.

This scenario was played out in many other places that I visited this summer and public discussions about demand response were prominent in both print and television coverage. When it comes to responding to a "peak" demand for electricity, such as the hot afternoons when air conditioners are on high in every building and apartment, the utilities have already spent as much as 80% of their planning time preparing for these events and the majority of their infrastructure budget as well. However, without the real ability to build new power plants (too expensive and not enough public support) or put in new transmission or distribution lines (no one wants those wires in their backyard), the most viable solution has been "Demand Response." 

As the name suggests, Demand Response is any program that reduces or removes load from the electrical grid during a peak demand event. Grid failures aside, many utilities utilize Demand Response to manage the costs of purchasing electricity during peak periods when the cost can be many times that of base load electricity. 

Many Demand Response companies specialize in programs that reduce power consumption at a customer's facility by lowering lighting or turning up thermostats during peak demand periods. Titan offers an alternative and, we believe, more effective approach to Demand Response than simple load curtailment.

Titan's "Interruptible Rate" Demand Response Programs.

We have been actively talking to Wall Street and the energy investment community about our programs in "Interruptible Rate" (IR) demand response. Instead of curtailing energy consumption at a particular facility, Titan's IR programs will take that entire facility off the electrical grid during a peak demand event. We do this by transferring the operations of that facility over to on-site generation, usually large power generators. The impact of our IR Demand Response program is significant. While load curtailment can reduce demand on the grid by an average of 70kW to 100kW per facility, with its Interruptible Rate program, Titan Energy can reduce demand by 1000kW to 2000kW. In other words, as many as 20 facilities would be required on load curtailment to create the equivalent load reduction benefits of one facility on Titan's IR program. An additional benefit is that we do not impact the facility's operations -- the customer continues to operate as normal with full power to manage and continue its operations through these peak demand events. 

For these reasons, we believe that Interruptible Rate Demand Response -- or more generally, the use of onsite generation in load reduction or displacement - is a more effective form of Demand Response and can offer greater efficiencies and better results nationwide for managing electrical grid operations. With the advent of new generator technology, including systems powered by natural gas, the Interruptible Rate Demand Response solution is also a cleaner, greener solution. 

Titan Energy is now showing the utility and the electrical industry the power, efficiency and reliability that can be wrought from the proper use of these powerful, mini power plants that have been installed as stand-by power systems at companies across the nation. There is an estimated 192 GW of power in stand by generators in the U.S., enough to meet the Demand Response goals recently set by the Federal Electricity Regulatory Commission (FERC). Titan Energy is tapping into that huge potential by creating a program that will allow us to expand its implementation on a major scale nationwide. Based on the goals set by FERC, Demand Response can be viewed as a $10 billion industry and more than $8 billion of that market is literally untapped. We expect IR to be a major solution to these Demand Response goals and to contribute significantly to Titan's growth in the next two or three years.

Interruptible Rate demand response is nothing new for Titan. We currently manage more than 60 facilities with IR programs on behalf of the utilities, including programs with one of the nation's top retailers. Our ability to enter the Demand Response industry is a natural extension of our company's expertise and experience in working with and managing industrial power generation. In fact, I firmly believe we are the best, if not the only company in the U.S. that has the qualifications and infrastructure to build out an effective national IR program. This is our goal.

Titan's Industry-Changing Technology Solutions

When we spotted the shortcomings of established monitoring and control technologies for onsite generators, we realized an important opportunity for Titan Energy. We immediately began working with one of the leaders in Smart Grid and network communications companies in the U.S. to create an industry leading solution for remote management of onsite generators. 

During the early development process both Titan and our development partner decided it would be better to operate as one company and we have now entered into the final stages to acquire our partner. Scheduled to be completed by October 1, 2010, this acquisition will bring their entire team of developers and technologies into the Titan team, as well as $1.2 million in annual revenues and major contracts with Fortune 500 customers such as Itron and BP. 

Titan's technology will not only power generators but also solar, wind, battery and other forms of alternative energy to participate more effectively in our distributed generation programs. In other words, our communications systems will not only advance but will change this industry.

Our goal is to demonstrate to the industry our remote monitoring and controls technology for power generators as early as the 4th Q of this year. This system will be the first fully scalable, truly dynamic wireless monitoring platform built on a utility-grade set of standards for operability and reliability. We plan to make this technology available not only to our customers, but to our manufacturers, other service providers, and utilities across the nation. There are literally hundreds of thousands of generator systems that could benefit from our state-of-the-art service. Not only will our technology advance the use of power generators in demand response, but it will also allow solar, wind, battery and other forms of alternative energy to participate more effectively in our distributed generation programs. 

In other words, I believe Titan's communications and control systems will not only advance but will potentially change the electrical industry. 

Our Advancement in the Interruptible Rate Industry

Another development is underway which we believe will accelerate our growth in the demand response arena. We recently submitted our final bid to acquire an established Midwest IR company. This 20 year old company has more than 25 IR customers totaling about 70 MW of power generation under contract. Titan's offer was submitted under a competitive bid, but we are confident in our chances to be the winning bid. We expect to learn of the decision later in September and the transaction is scheduled for an October close. If completed, this acquisition would make us one of the leading companies in the Interruptible Rate industry. 

Titan's Overall Progress -- Triple Digit Growth and Industry Leadership

With all the exciting developments taking place for Titan in Demand Response, I also want to highlight the progress we have made in our company and how much growth and potential we foresee over the next few years within our traditional standby generation business. 

We announced earlier in the year that we had achieved a goal we set back in January -- to be operating cash flow positive for the 2nd quarter of the year! This is a tremendous accomplishment and allows us to move forward knowing that continued growth will soon lead us to profitability. 

By expanding our sales programs and our profitable service operations, Titan could very well double sales revenues and achieve its goal of profitability in 2011. With the possible acquisition of the Midwest IR company and the roll out of our new IR programs, we could far exceed these goals.

We are now moving forward with our plans to expand our sales and marketing efforts in all areas of operation. In Florida, we have now moved into a modern new office, including an expansive parts and inventory warehouse. We have also hired a new sales person who will take responsibility for the Western side of Florida, an additional sales position for the Miami area; and within the month we are planning to fill a new international sales position, that will be focused on the Caribbean and South/Central Americas. 

In the Northeast, we have also located to a new office in New Jersey. We have expanded our sales force there with two great new hires. Amy Gaitane, who comes with a strong power engineering background with Eaton, Group Schneider & Con Edison Solutions, has already been making a strong contribution to our sales efforts. We have also hired a new project manager to help us coordinate jobs and planning in the New York/New Jersey and Connecticut areas. 

We are also planning to bring in new sales professionals into the Midwest operations as we look to expand our presence in Iowa, Nebraska and some other states. Over all, it is our intention to bring in 10 new people over the next 3 to 6 months. Our expectations from these new hires are that they will each produce $2 million or more annually in new sales. So when these new positions are filled, we will expect to increase our annual revenues by $20 million -- more than doubling our current sales run rate -- without significantly increasing our administrative overhead. 

We are also going to expand our service departments -- especially in Florida and the Northeast -- operations which have demonstrated strong sales and profit margins in the Midwest. We believe we have one of the strongest and most efficient generator service programs in the United States and we want to see this success duplicated in all our sales areas. We have achieved incredible success obtaining new national accounts, and we now have multi-year contracts with two major retailers and we are negotiating on several more. 

What began with a commitment to be the best in providing power generation to thousands of customers across the nation has evolved into a program that is benefitting our utility partners, improving our national electrical system, paving the way for renewable energy to play a larger role in distributed generation, and building a smarter, more efficient grid that will benefit us all far into the future.

In other words, we believe we now have the key elements in place to realize a level of accomplishment that will far exceed anyone's expectations. With our new technology, our superior generators and best of class service, Titan will be a leader not only in demand response but in all areas of onsite power generation. 

Thank you again for your continued support. 

Go Titan!

Jeffrey Flannery
Chairman of the Board and Chief Executive Officer

About Titan Energy Worldwide, Inc.

Titan Energy Worldwide a provider of onsite power generation, energy management and energy efficiency products and services that help support and improve the performance of our nation's electrical utility grid. We operate in an area of the overall electrical utility infrastructure called Distributed Generation, whereby we specialize in the deployment of power generation equipment at the consumer's facility and the integration of that equipment through monitoring and communication systems with the needs of the utility's electrical grid. These onsite power generation systems support a customer's critical operations during times of power failure and serve as demand response systems that work to reduce energy usage and decrease demand on the electrical grid during peak periods. When managed with the proper intelligent monitoring systems and controls, Distributed Generation offers a vital and significant contribution to the development of the nation's Smart Grid. We contribute the tools and resources to produce immediate and long term improvements in the performance and stability in the energy production and transmission segments of the electrical grid and reduce the need for new power plants. From emergency and back-up power technologies, to demand response programs and Smart Grid applications, Titan Energy is setting a path for the future in energy management. For more information, please visit the company's website at: www.titanenergy.com.

Forward-Looking Statements

Investors are cautioned that certain statements contained in this document as well as some statements in periodic press releases and some oral statements of TEWI officials are "Forward-Looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "believes," "anticipates," "intends," "plans," "expects," and similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future TEWI actions, which may be provided by management, are also forward-looking statements as defined by the Act. Forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to materially differ from any future results, performance, or achievements expressed or implied by such forward-looking statements and to vary significantly from reporting period to reporting period. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be different from the expectations expressed in this report. These statements are not guarantees of future performance and TEWI has no specific intention to update these statements.

Contact Information

  • For more information about Titan Energy Worldwide please contact:

    Jeffrey Flannery
    Titan Energy Worldwide, Inc.
    619-988-5869
    Email Contact

    Stan Altschuler
    Strategic Growth Int'l
    212-838-1444
    Email Contact