Christchurch firm looks to tap external markets and investors

Christchurch-based Nightside Test Design, which provides testing services for technology and power companies, will look beyond Australasia to fuel growth in the coming year.

Following on its success with Genassure in New Zealand and Australia, the next step will be to move into markets with a firm regulatory framework and high power generation requirements, Nightside Test Design MD, Peter Brown, said.

“Genassure contributes around 30 per cent of our revenue. The next step was to look at where to next. We engaged an MBA from the University of Canterbury to look at the worldwide market outside Australasia and identify where the highest regulation was coupled with the most number of generators, which would be the best place to go.

“At this stage it looks like the USA is best case, especially the western group of states that have an interconnected network and the highest regulation,” he said.

If everything goes right, the firm will be looking to put out proposals into the new market before the end of the year, Brown said. Nightside will also look to skilling up and hiring sales and technical resources in the new market over time to support its move there.

Genassure is a technology for automating the testing of power generators developed by Nightside Test Design in partnership with Meridian Energy. The company licences the technology from Meridian, and provides it as a service to power companies in both New Zealand and Australia.

“NZ has roughly 200 generators. Hydro generation in the States isn’t huge, but it is much bigger than NZ. Hydro represents only 6 to 7 per cent of the US market, and even then we are talking about 2,500 generators. That is a huge jump in market size and that is what we are looking for in considering the best place to go,” says Brown.

According to Brown, the firm is looking at other markets as well, and the choices might well be made in collaboration with Nightside’s partner, Wellington-based Power Systems Consultants (PSC).

“The work that we do is in two halves. There is measurement and then there is modelling. And you take the data from the measurement and you build an accurate model of your generator and then you have to give it to Transpower and they take everybody’s models and puts them into a big model for the NZ grid," he said. "That allows them to look at the safety factors around NZ grid and they can do what-if scenarios rather than having to do them physically, which is rather impossible.

“We do some of the analysis around the stability and measurement around the machine but the analysis, the modelling analysis, is done with our data by PSC. That is why it is such a good partnership.

“It is very likely that any entrance into a new market will be done with PSC and we are currently in discussions with them on where they see opportunities. They have staff in the States, staff in Australia and through the rest of the world. We are looking at where we can leverage some of the existing relationships to gain access to some of those markets. But for us the key is regulation. If there is no regulation then there is no reason for the generator companies to test.”

The company, with around four full-time staff and $1 million in revenues, has had to restructure and refocus some of its efforts recently following a tough economic climate. This has meant the shutting down of Auckland office and the letting-go of related personnel.

“It is because clients in the high tech space are exporters. A high export dollar impacts on them, so they are looking at ways to reduce costs. So as a contractor they tend to try to do things in-house or delay it.

“We found that we weren’t getting the level of workload through the Auckland office, although there is a high presence of high tech companies,” Brown said.

He remains confident that the firm’s refocusing, and the ability of the product to provide testing services that go beyond hydro-power, will broaden the company’s potential market in the coming months.

“The test system does work for other types of generation and we have extended it. That is where our investment in the product comes in. Meridian was only interested in hydro, but we have extended the product to work in geothermal, gas turbines and diesel generators. That has broadened our reach.

“If you look at Australia, one fifth of their market is hydro, but four-fifths are thermal energy of some kind. Most of it coal being dug out of the ground and burnt in power stations. For us that is a huge market,” Brown said.

He agrees that making the product is just half the story, and the firm will need capital infusion and the right people to make its entry into new markets a profitable venture.

“You need to have the resources and the marketing to get into the new market and in a market like power companies it is a slow moving, generally state owned type of market. It can take a long time.

“If you are going to go into a new market like the States you have got to put down a footprint. You have got to have enough people and you have to pay them for two years before you can make a sale. That is quite a cost. So from our point of view having on-the-ground partners and capital partners is probably the only way we can go to the States,” Brown said.

The company has had some initial interest from potential investors in the US, though nothing concrete has been signed off-on.

“There is a lot of promise and a lot of opportunity. We have been growing sales over the last two to three years. We will be pushing it up a notch over the next year,” Brown concluded.