3rd March 2016

CEO of the Month Ermanno Santilli

MagneGas Corporation is a highly innovative technology company that counts among its inventions, a patented process that converts liquid waste into hydrogen based fuels. We spoke to Ermanno Santilli, CEO of MagneGas, to find out more about his company and learn more about the truly game-changing technology they have created.

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CEO of the Month Ermanno Santilli

First of all, could you give us an overview of your company?
The technology behind our company and the product MagneGas2® was actually founded by my father Dr. Santilli, and throughout the years we have evolved into a fully independent publicly traded company with over 8000 shareholders. Last year, the increase in our stock performance was close to 140% and our shareholder base and institutional shareholder base grew by approximately 30%. We are unique in the fact that we are the only green technology (or greentech) company that is based on a process called Submerged Plasma Arc Flow technology.

Please tell us more about this technology. How would you describe it to someone outside of your industry?
This submerged plasma arc flow technology is just a fancy way of saying that we take a liquid and we shoot an electric arc through it. Basically, we zap it with electricity and when you do that a gas is created that bubbles to the surface. Once this is done, we filter it, compress it and then fill our cylinders with it. We have independently verified our gases, and have found that our gases are hotter, safer and cut much faster than any other cutting fuel product out there. Because of this, our gas is currently being used by NASA subcontractors on the Space Center project, the Fire Department of New York City, both the US Army and Navy, and several of the top utilities in the US as well as thousands of customers throughout Florida and the rest of the country. 

Across our company, we have three lines of business: industrial gas, agricultural and energy. Believe it or not, for industrial gas we actually use soybean oil. With our process, the liquid you put in dictates the type of gas that comes out. What we found to be the best application for the replacement of acetylene is soybean oil, but that may change over time. Many customers rave about the faster cutting speed of our product MagneGas2, and just about everyone who tries it switches over. The customer response is so great that we are ramping up our production to accommodate this ever-increasing demand.

But that’s just one of our operating modes, another involves taking waste manures such as hog manure, raw sewage or anything that has biological activity and processing this waste. For this process, we flow it through instead of zapping it and the heat and the electric arc kills any bacteria. This process renders it completely inert, yet it is still full of the nutrients that nature puts into manures. What this means is that farmers can take what are, in essence, one of the most abundant wastes in the world and reuse these liquids in the form of sterilized water and soil supplements.

We continue to test this sterilization application at several large farms and have many discussions underway with the US Department of Agriculture and others in terms of collaborations. As you can imagine, the agricultural business is a very stable business and doesn’t adopt new technologies very quickly.

Our third opportunity, energy, uses a very specific type of gas and the reason why our gas is so much more effective is that it has a very high flame temperature. The City College of New York in the US tested our gas and found that it has a 10,500 degree Fahrenheit flame temperature, significantly higher than any other industrial gas. Typically speaking, when you burn something, the higher the flame temperature, the better the efficiency and lower emissions. When you burn something using the product MagneGas2 at such a high temperature you get more complete combustion. Along with our partners in Australia, we found that if you take certain fuels and mix it with our gas you can burn it in a way that is both cleaner and more efficient.

This brings us to another one of our innovations, co-combustion, which is we believe is a real game-changer. Coal fired electric generating plants continue to provide approximately 45% of the world’s power, so it’s not going away anytime soon. In certain countries, however, coal has a bad name and many coal plants are being forced to close due to their polluting emissions, and/or expensive CO2 taxes. When you burn a lump of coal, it’s burning at best at a 35% efficiency, which wastes energy and creates a lot of particulate matter in the smoke emitted. That smoke contains pollutants that many believe are heavy contributors to climate change.

Our work has shown that if you inject the product MagneGas2 into a specially designed chamber and have an ignition point, you have a secondary combustion event that allows you to burn the smoke again at a much higher efficiency. Using MagneGas2 in this coal-burning process, we can add another 30% efficiency at a minimum, while at the same time achieving a substantial reduction in emissions of CO2 and other greenhouse gases. We firmly believe that this is going to have a significant impact on the coal-burning industry as a whole and on our global environment as well.

The advantages of this technology goes beyond increased energy efficiency. “Scrubbers”, which are the current technology used to reduce coal emissions, are highly expensive, costing up to $700 million dollars each. The average coal-fired power plant needs about four of them. So there is certainly a CAPEX and OPEX opportunity alongside being more efficient. In our industry, people fight tooth and nail to try and improve the efficiency of coal and spend billions of dollars on being more efficient. We can turn the game on its head because we don’t treat the smoke as a waste stream but as a new energy source as a result of using our fuel.

We’ve been working on this project for about two years with one of the largest power companies in the United States, who has apready spent over $5 billion on carbon capture. Depending on the setup and configuration, we’re getting up to a 20 to 40% reduction in the level of CO2 emissions. There is no other technology that reduces CO2 and saves money. Most companies tend to put it underground or convert it into something. What this company has said to us is that we are the only company they’ve come across that potentially reduces CO2 and saves money.

Could you give us an insight into what it’s like to work in your industry? What are the major challenges facing your company at present?
Generally speaking, launching any new technology can be difficult, especially in our target industries. If you took your mobile phone out of your pocket, chances are that it’s no more than two or three years old. That’s because the mobile phone industry moves to adopt new technologies and ideas very quickly. By contrast, the industrial gas business has far less innovation, and the people in that market are just not as used to changes like you and I are about our phones. There’s a tendency to stick to what we’re doing and less willingness to adopt to new innovations.

In terms of challenges, when you experience the type of rise our company has experienced in just one year, you attract a lot of attention and some of this can be quite negative. This negative attention typically comes from people who are speculators and manipulators, shorting your stock and writing wild and speculative things, which has led to a lot of potential distractions. We’ve worked hard to keep our eye on the prize.

As a growing company, it’s inevitable that you’ll continue to build your team. What are some of the qualities you look for when hiring staff?
We find that because our industry is not as dynamic as others, instead, we look for parallel or related industries and try and use the experience garnered there to add value to our company. We look for innovators and early adopters, those with an open mind as well as classical experience in the world of engineering.

In fact, we’ve actually had luck recruiting ex-military members, who now make up 40% of our staff, and it is very humbling to have them work for our company. Some of them have been incredibly decorated for their service and we find that that level of structure and experience and their ability to adapt has been very important to us.

As for the award, how does it feel to have been selected as CEO of the Month?
It feels great to be selected as CEO of the Month and it is certainly an honor. I would like to thank Wealth & Finance very much! Last year’s stock performance is something we’re obviously proud of, but what really drives us is that we are taking this fantastic technology and using it to try and create a strategic shift in the energy markets. I have often said that our work in the co-combustion of coal will be the biggest news in the energy sector since the advent of nuclear power. Our social media following has also demonstrated that a lot of people love what we do, and this is what motivates me to press forward.

During my time as CEO, we have had a lot of success in terms of product development and market penetration. I am an open integrator and one of the first things I did was to have a worldwide meeting with all of our various partners and collaborators. Actually, this was where the co-combustion model was born. We have brought in many fresh new faces from four years ago and are now moving into a new and bigger facility. And during this time we went from an over the counter company to being listed on NASDAQ.

Lastly, what would be your major plans for 2016 and beyond? Do you have any interesting opportunities on the horizon?Our objectives are quite simple and straightforward. First, we’re going to continue to penetrate the $5 billion industrial gas market. Later this year we are going to place our first unit in the US to produce gas. In addition to this, we have several other customers waiting in the wings for the placement of a unit. We’re going to grow at the right speed for our size and resources. Second, in the agricultural sector, we’re going to continue to partner with the USDA. We also have some very interesting testing going on, both in Europe and the US. Third, on the co-combustion side, we expect to complete our testing in Q2 and we anticipate several significant opportunities to come out of it. We will continue to do more and grow, develop and transform while keeping our operating costs under control. MagneGas Corporation has never been in such a fantastic position to grow and prosper.

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