An Interview with Michael Rouse

President and Chief Executive Officer of Turbine Truck Engines, Inc.
Conducted by Lynn Fosse, Senior Editor, CEOCFOinterviews.com.
September 11, 2009

Download Interview(4 Page PDF, 243 KB)


Profile of Michael Rouse, President and CEO

Michael Rouse is the President and Chief Executive Officer of Turbine Truck Engines, Inc. (TTE). In the early ’80s, Mr. Rouse was a Production Manager for U.S. Steel and later served as the General Manager of Freefall Express, Inc., an airplane leasing company. Responding to his entrepreneurial spirit, he founded Cox-Rouse Construction and Development Corporation, a commercial real estate development firm which won the prestigious Most Energy Efficient Home Built in Florida award in 1997.

Mr. Rouse is also a licensed commercial aircraft pilot and Airframe and Powerplant (A&P) maintenance expert, whose extensive working knowledge of aviation engines ideally qualifies him to understand and promote Turbine Truck Engines’ unique and beneficial turbine engine technology. He founded TTE in 2000, and has since built the company on superior research and development, and conservative business practices.

Company Profile

Turbine Truck Engines, Inc. (TTE) is a developmental stage company that owns an exclusive license to develop and re-license the patented Detonation Cycle Gas Turbine (DCGT) engine, which holds the promise of being the engine of choice for a wide range of applications throughout the next 30 to 40 years.

The DCGT is in the late stages of prototype development, and it has received an enthusiastic response from the Pacific Rim where interest in emerging, fuel-efficient, environmentally friendly technologies is keen. Most recently, TTE’s signing of Letters of Intent to enter into Joint Ventures with three premier Chinese companies has led to increased investor interest in the company. That interest has been reflected in a sharp increase in the price of TTE’s stock.

The enterprise, which is based in DeLand, Florida, has been a fully reporting company since its inception, and it has an unblemished record with the Securities and Exchange Commission.

Interview

CEOCFO: Mr. Rouse, what was the vision when you founded Turbine Truck Engines?

Mr. Rouse: We came across this new engine technology and realized its great potential because it was more fuel efficient as well as having fewer harmful emissions. We formed the company in 1999-2000, and at that time, fuel was relatively inexpensive, but the trucking industry was not able to meet the new EPA requirements and we felt that this technology would enable them to do that. So our focus was to bring this technology to the trucking industry which would help them to meet the new EPA requirements.

CEOCFO: Where are you today and has that vision changed?

Mr. Rouse: Our vision hasn’t really changed. We are still focused on environmental issues and how this engine can impact those issues by helping to reduce emissions while also reducing fuel use. That is basically where we are today. We are moving the technology forward by bringing in development partners that we have been seeking for several years. Their presence gives us the capital we need to move the technology forward. Over the years we have been able to take incremental steps in that direction, but never the big steps that needed to be made because we were never able to access the capital required to do so.

CEOCFO: Would you explain your technology and how it works?

Mr. Rouse: The technology is very simple. Basically, we have a technology that utilizes a paddle wheel; everyone is familiar with water wheels and how they work, and this is very similar. What we have are detonation cylinders on each side of the paddle wheel, offset from each other. What the engine does is detonate a fuel air mixture in the cylinders, creating high pressure gasses which shoot across the paddles of the wheel. The process repeats cyclically across the top and bottom of the wheel, causing it to spin and produce power.

CEOCFO: Your technology seems so simple and understandable; why has it not been tried before?

Mr. Rouse: When I saw the technology I said the same thing; why didn’t I think of this? The scientist who invented the engine, Robert Scragg, had worked on this technology for over ten years. The unique thing about the process is that it is pulse detonation; we are exploding the fuel air mixture in cyclic detonations, which means there is a pause between each detonation. Typically, a regular gas turbine engine uses a continuous flame, which is very fuel inefficient and causes a great deal of exhaust emissions. This technology uses intermittent fuel delivery and explosions to drive the turbine, so it becomes very efficient.

CEOCFO: Can you use any type of fuel with this engine?

Mr. Rouse: That is the beauty of this engine. The ignition system is unique in that the spark plug is actually a plasma injector, and it delivers a continuous visual arc into the detonation chambers. So any fuel/air mixture that comes into the chamber detonates automatically or simultaneously to produce a complete combustion of the fuel/air mixture in less than a millisecond. Then the high pressure that is produced when you have that huge explosion creates a shockwave that is directed to the turbine, and then that is followed by a fast flame thrust that expands over the turbine blades which creates even more power.

CEOCFO: So you can mix fuels!

Mr. Rouse: It has that capability, yes. Today the prototypes that we have are feasibility prototypes, and we are using gaseous type fuels that easily combust. But any type of fuel that we gasify prior to putting into the detonation chamber will be detonated, or any mixture of fuels. We are even talking to a company now that is looking at using powdered coal to produce power.

CEOCFO: Would you tell us more about your new development partners and the plan going forward?

Mr. Rouse: The trucking industry was the first application we pursued because that was the industry that needed the engine the most. But it is an industry that is one of the most difficult to affect. That is because of the weight of the vehicle and the amount of integration that is needed, as well as the extensive DOT testing which is required, which is about a year on the road after an engine is put into a vehicle. Currently we are working on another application, a genset, where we are creating a 70 horsepower engine that will produce 30 to 50kw of electricity. That is something that we would be able to get to the market much quicker, and it is an application that can be used to power homes in Florida or other hurricane prone regions when the power is out. It is also a unit that would be the perfect size for hybrid electric vehicles, and that will be important down the road as we work with one of our partners, AMEC, in China. But the engine is scalable, and it can be adapted to many different types of applications.

CEOCFO: What is your involvement in China?

Mr. Rouse: For a number of years, I tried to get this technology produced in the United States, but I ran into a lot of roadblocks. We talked to engine manufacturers and trucking company manufacturers, and they were all looking for new technology, but they were unable, or unwilling, to spend the capital necessary to take our technology from where it was and get it into a vehicle. In that exploratory process, we discovered that the estimated cost of getting our technology into production to be somewhere around $600 million. More recently, the people in China have been very receptive to our technology. Of course, they have serious pollution problems in their major cities and in trying to clean that up, they are looking for new green technologies that reduce harmful emissions. We have entered into strategic alliances with companies that have the will and the capital to commercialize applications. One of those is with AMEC, which I mentioned earlier, which is the Aerospace Machinery and Electric Equipment Company. They are looking at building a 150 horsepower engine for cars and a 400 horsepower engine for buses. After entering into the agreement with AMEC, I found out that the cost for them to do the development is about one-third of what it is here in the U.S. I spent a lot of time here in the U.S. hoping to find an ally to help us, but they wanted our company to produce the engine and then, and only then, would they accept it. However, the Chinese were willing to take it at this stage and help move it along, which is very important to us.

CEOCFO: So the status quo at Turbine Truck Engines is changing!

Mr. Rouse: Yes. The technology is revolutionary, and once one application becomes commercialized, other companies will see that other applications can be commercialized as well. Then we are looking at being able to joint venture or license that technology to companies that have the wherewithal to commercialize the applications.

CEOCFO: What is the competitive landscape for newer technologies like yours?

Mr. Rouse: Companies like PACCAR and Volvo are looking for new engine technologies to replace the piston engine. After talking with them recently, they told me specifically that there is no technology out there like our engine. They told us that if we could get our engine developed, we would have the technology of the future.

CEOCFO: Do you think we will have a real change in government policy with the current administration as far as the potential in the U.S. for your technology is concerned?

Mr. Rouse: It has been a real struggle since 1999. As the Clinton administration left office, Clinton signed into law new EPA requirements, but when the Bush administration came in, one of the first things they did was wipe those out, and the secretary of the EPA resigned because they did away with those requirements. So it was very difficult over the next eight years because instead of increasing CAFE and EPA standards, it pretty much stayed status quo. With the current administration focusing on climate change and reduced emissions, that mindset is changing. There is a lot of talk and money being put into this, but, in my opinion, it is not happening fast enough. But interest is there, and as attitudes have changed, more venture capital and private equity groups are funding more green technologies such as ours.

CEOCFO: How do you get attention?

Mr. Rouse: That is something that we are in the process of doing now. Until we had a real development partner that had the capital resources to do what we needed to do, we couldn’t really go out and tell our story. Now that we have that, we are going out and showing the world what we have. We are doing radio interviews and road shows touting our technology to the general public, broker dealers, and institutional investors. And interestingly, it is out of recessions that new technologies are often born.

CEOCFO: How do we know your concept is valid?

Mr. Rouse: Alpha Engines Corporation, who we license this technology from (and we have an exclusive license), did a battery of tests on the engine. The engines they produced were done on a low budget, which meant that they were very crude prototypes. However, one of Mr. Scragg’s tests showed that a little 4-cylinder engine was producing about 57 horsepower and 13,000 rpm, and that was demonstrated and documented on a video. Currently we are working with AbM Engineering and the Gas Turbine Research Center at Embry-Riddle Aeronautical University in Daytona Beach to conduct further tests on the engine. This will give us third-party verification of the engine’s capability, and as we move forward, I anticipate that we will be able to enhance the performance of the engine by making very small changes to it.

CEOCFO: You sound poised and ready!

Mr. Rouse: We are!

CEOCFO: What is the financial picture for Turbine Truck Engines?

Mr. Rouse: We have been able to raise capital all along through private placements to high net-worth individuals and others who believe in our product and believe in what we are trying to do. Now that we have moved to the next step, we have been able to get connected to some venture capital groups as well as private equity funds in China. They will take equity positions in our company which will fund the next step. So, we are at a point now where we are fully funded to do these next prototypes, and then we will build a highly engineered prototype, and eventually, of course, a manufactured engine.

CEOCFO: Why should potential investors pick Turbine Truck Engines out of the crowd?

Mr. Rouse: Turbine Truck Engines has been a research and development company. We are not producing any revenues yet. Therefore, our stock is volatile. But if I were talking to investors today, I would say that if you are looking to invest in high-potential companies like ours, which we hope you do, you need to talk to your financial advisors about how much you are willing to risk on a company such as ours. Most portfolio managers invest a certain percentage of a portfolio in speculative stocks knowing that when one of them comes through, they can be very rewarding. So my suggestion would be to talk to your financial advisor about our company, do your due-diligence, and make a decision from there.

CEOCFO: Let’s say an investor allocates a part of his or her portfolio for innovation, why pick Turbine?

Mr. Rouse: You can go out and buy Altria, which is a cigarette company, and you will probably make a profit. But I think it is time that we thought about making money by investing in something that has the potential to do some real good. It is nice to be able to invest in a company that has the potential to make an impact on our global environment.

CEOCFO: Final thoughts, what should people remember most when they read about Turbine Truck Engines?

Mr. Rouse: As we move the technology forward, it is important to remember that companies that innovate and bring new technologies to market dominate those markets and create new ones, which creates real value for shareholders. Therefore, it is important that we do what is right as well as something good and help bring this technology forward.

Safe Harbor: This program may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The risks and uncertainties that may affect the operations, performance, development, and results of the company’s business include, but are not limited to, fluctuations in financial results, availability and customer acceptance of our products and services, the impact of competitive products, services, and pricing, general market trends and conditions, and other risks detailed in the company’s SEC reports.