Michael Carten used to work on Easy Street.

Larry MacDougal, Business Edge
Sustainable Energy Technologies CEO Michael Carten with his company's solar panel inverter units, which convert the sun's rays into electricity.

Michael Carten

He had a successful career as a lawyer with two of Calgary's most prominent law firms and worked in tandem with some of Canada's largest oil and gas companies. He also had his own law practice and did some work for the financial company now known as Nesbitt Burns.

Then, in 1999, the former Loyola University linebacker decided to tackle a new industry - renewable energy. Instead of football, he played the shell game that has become popular in the energy industry and other sectors. Already invested in a southern Alberta wind-power project and a related private U.S.-based electronics company, he acquired a public shell company through a reverse takeover and launched what is known today as Sustainable Energy Technologies Ltd.

The Calgary-based firm develops inverters that take energy from solar power, fuel cells and other renewable sources and convert it into electricity that can be supplied to power grids operated by electrical utilities.

Carten is the largest shareholder (nine million shares and counting, out of 75 million outstanding) and became the president, CEO and chairman. In doing so, he experienced the business world's version of climate change.

He moved from an environment where financing is not a problem to a climate where your company's existence is a daily struggle - and where your company's challenges often reflect the industry's challenges.

From a company or industry perspective, the reflection is often foggy. Which begs the obvious question: Why would he get involved with Sustainable Energy, or the movement of the same name, when he had a fairly cushy living before?

"I got involved with alternative energy and Sustainable Energy because one of the promises I made to myself many years ago was not to live a boring life," says Carten, a Montreal native.

"So I wanted to have diversity of experience through my life. I had practised law and been pretty successful at it, and then done some banking and found that interesting, too. This was an opportunity to create something from scratch ... " Starting from scratch also requires a lot of scratching. For cash. For new technologies. For government support. For survival.

"We had huge adversity," says Carten. "When the market for fuel cells was not so good, there were big divisions between myself and some other shareholders as to whether to stay with fuel cells. They wanted to stay and I wanted to move it in the direction of solar - and that took us a long time.

"It's a little bit like a story I read about George Washington during the American Revolution. His major challenge was to keep the Continental army in existence. There have been times when it was really just a matter of keeping the whole thing alive and keeping it moving - and moving forward - until you can get some traction. That has its challenges."

Now that he has placed an emphasis on solar technology, the sun is starting to shine, albeit slightly, on his fledgling firm.

"We've been selling in the fuel-cell business to (Cambridge, Mass.-based) Nuvera Fuel Cells, to (Bend, Ore.-based) IdaTech (LLC), to (RWE Fuel Cells GmbH), which is a big German fuel-cell company," says Carten. "We've also sold product in Japan, so that's been spread around. But they haven't been high volumes.

"In the solar-power business, we have a partnership with a solar-module manufacturer and the five-megawatt project we're selling is developed by a company called Solaer in central Spain."

Sustainable Energy had revenues of $400,000 to $500,000 per year in the past, but should produce the same amount this quarter alone. Carten expects to hit $5-$6 million by the end of 2007.

But he also knows that he's a long way from Easy Street.

1. What was it like growing up in Montreal?

"I did all the usual things that high school kids and college kids do, played on the college football team, got involved in a lot of activities. I had five brothers and one sister, so there were lots around the house, lots going on. Not much money."

2. Who was your early mentor?

"(Eddie Enos, coach of the Loyola football team) was a big influence. He taught me that effort pays off and if you put the effort into what you want to achieve, you can achieve success. I've applied a lot of those lessons to my life."

3. What qualities did you develop at Loyola that helped you in business?

"On the football side, perseverance. On the educational side, it was analysis and empathy. It was a liberal arts-type of education. I got a general (bachelor of arts.) I was majoring in biology, of all things. Kind of a pre-med degree on the arts side.

4. What steered you into law?

"The challenge and the opportunity to do some good. I'm not sure that I did that. I tried to, but it was just the usual idealism that a lot of people go to law school for - to make a difference in society."

5. How did you get steered into business?

"Well, I practised law firstly with McLeod Dixon in Calgary and then with Bennett Jones, and ended up practising tax law and getting involved with a pretty big company then called Dome Petroleum (which would later become part of Amoco).

I structured most of their mergers and acquisitions and financings. We pioneered a lot of new financial structures and takeover techniques that are now the norm. We did some very creative financings and we got pension funds involved in the oil business for the first time. So there was a lot of creativity that came out of that organization."

6. What's it like being involved with sustainable energy after being involved with traditional oil and gas?

"From a business perspective, when you're involved as an entrepreneur, you don't have the resources that companies have. So you're called upon to do everything and you are always, in effect, living on the edge because you just have to succeed - or you die. The big difference is the intensity you put into it, and there's a big difference in terms of your learning curve. Our business is very different, because it's basically a manufacturing business, whereas the oil and gas business is a resource-extraction business. We create technology. We build products. We sell products. We have to compete every day with other companies to sell the products, and the oil and gas business is more competition."

7. How did you come to acquire Sustainable Energy?

"I had bought into a wind project in southern Alberta, and then we ended up buying the wind-turbine technology and put that into a public company that (became) Sustainable Energy. I happened to be investing in an electronics company in the United States, which was related. We put the two (companies) together around the spring of 2000, when the fuel-cell market was rocking and rolling, and raised our money based on that enthusiasm for fuel-cell applications.

"Originally we had a private company, and then we did a reverse takeover (of a public shell company) into a junior capital pool."

8. What has it been like trying to build this company?

"As one of my friends said, we've gone to the gates of hell and knocked on the door - and they didn't open. We brought it back. We came very close to failing, but we have a lot of people that believe in us. I've met some of my best friends among those who have invested in the company. Really ... There's a man in Nova Scotia, a guy named Jim Drescher, for example. He has one of the few sustainable woodlots in Canada. He came in at a very difficult time and invested beside me and salvaged the company. Some of the brokers who have supported the stock have become very good friends."

9. What's your take on the fuel-cell market?

"It's very uncertain. It's either going to be a huge business or it's going to be nothing. I happen to think it'll be a fairly sizable business. I think the first industry is going to be power generation. But we're going to see more of it in Japan in early stages - maybe battery replacements for backup power. I think it'll come by the end of the decade. " 10. What do you see as the turning point for the fuel-cell business?

"The biggest challenge with fuels cells is getting the manufacturing cost down. It's not a turning-point type of thing. Either you get it or you don't get it - but there's a lot of grinding. There's a big challenge in taking the fuel cells themselves and then packaging them and doing it on a high-volume basis - getting the reliability and all that. They just haven't got there yet."

11. What is your core business?

"We do power electronics. We convert the power output from the fuel cell or a solar panel or a wind turbine and we put it into high-quality alternating current, and we put that power on the power grid. We started with fuel cells, but we don't do anything with the fuel cells, really, right now. We're mainly focused on the solar-power side, in (commercial) production. One of the important things here is that the electronics platform is used in all the different technologies. That's unique. We've been doing that in the fuel-cell industry with a couple partners for about three years now, and we've launched our product this past summer for the solar market in Spain. We're selling the products there and we're manufacturing the products in Calgary and in China."

12. How do you see the solar market evolving?

"I think it's going to grow exponentially. My guess is that it will actually grow by 40 per last year (2006.) It'll probably grow at about 25 per cent a year for about the next 10 years. Cost is going to start coming down dramatically. There's a lot of pressure in Europe to use it for environmental purposes.

In the U.S., I think you're going to see a lot of pressure because of concerns about security of supply."

13. Why are people accepting solar and not accepting some of these other technologies?

"Well, they're accepting them all. It's just that the fuel-cell technologies have not achieved that point of commercialization. One of the reasons that solar technologies are ahead is that, by and large, they get very big companies manufacturing them. For example, you've got BP (British Petroleum), Shell, General Electric, Mitsubishi, Sharp, Sony. You have clearly big companies putting a lot of capital into it, whereas on the small wind-turbine side, they're small companies. There's no real consumer product being manufactured."

14. Why is the price of power favourable on the solar side but not on the fuel-cell side?

"Solar is different than fuel cells in one major respect - there's no fuel cost. Fuel cells burn oil or they burn gas.

"Fuel-cells technologies are not yet at the point where they have reliability and longevity. In Europe, they've really encouraged people to invest in solar and to buy solar modules. There has been significant investment in manufacturing infrastructure. Solar cells use exactly the same silicon wafers that you use for semi-conductor chips. Semi-conductor companies would make chips for computers or they'd make chips for solar. But the solar ones are different, they don't need to be as high quality. That's going to bring the cost down."

15. What do investors think about solar technology compared to other types?

"In the fuel-cell industry, the investment community has been badly burned. There was a lot of promise and no delivery. Less so with the solar-power market. The solar power is very much still dependent on governments supporting the use of solar power through premium placing for solar electricity. I think that's going to continue as they bring the cost down. So there's not as much technological risk. The investment community, in the last five years, has come a long way in terms of understanding renewable energy. Not so much in Canada, where we're a little bit behind the curve. The United States committed the investment. Europe is very actively involved."

16. How do the federal and provincial governments view solar energy?

"They don't have an attitude. They don't do anything at all. There's a huge gap in Canada between the reality of what we do on renewable energy and what the belief is. We all believe in Canada that we're good people and we're all interested in the environment. But the reality is, at the federal and provincial levels, almost totally, there's absolutely no interest in supporting renewable energy ... It's fine to put solar projects in or wind-power projects in, or whatever. But the real difference is, are we going to be the country that makes it? Or are we just going to buy it? All these big wind-power projects, basically, are German products or Japanese products. There's no Canadian products going into them - and there's very few companies in Canada developing any technologies. Scandinavians dominate the telecommunications industry, and they did it because their governments supported their companies. We need a more coherent environmental strategy, and one that's tied to an industrial strategy as well. We say we want to see more wind power, but we also want to see it developed by Canadian companies, so that in fact we will develop a technological base."

17. Should governments provide incentives for building these technologies?

"Yes, in much the same way that they provided incentives for oilsands projects. We put a huge amount of (taxpayer) capital into oilsands and gave them tremendous incentives to build those projects. The industry responded, and we got oilsands projects. We did the same thing with the nuclear power industry. The nuclear power industry is probably the most subsidized industry in the world. We encouraged that thing and we created an asset base. I think we have to do the same thing for the renewable energy side of the equation."

18.You have Sport Chek chairman and co-founder John Forzani on your board of directors. His business is quite separate from yours. Why do you have him on the board?

"Two big reasons. One, he understands marketing and distribution really well. That's going to be a big part of our business. Secondly, he knows what it takes to grow from a small company to a big company. There are not that many executives around who started their business from scratch and built it into a very successful company. A lot of them have already landed in something that's been created for them. I was introduced to him and then when I met him I was so impressed with him that I made it my mission to get him on our board."

19. What do you do when you're not trying to build your company?

"Spare time? Not much. I ski. I like to get out in the mountains and hike when I can. I try and get some non-business reading in. I play golf, but not enough to make me a good (golfer.) Right now, I'm reading Nixon in China by Margaret MacMillan. I've read that book Team of Rivals by (Doris Kearns Goodwin) about (Abraham) Lincoln's cabinet. I tend to like books that are biographical or historical, because they give you better insight into the people. I read a fair number of novels as well."

20. If you couldn't work in the energy business anymore, what would you do?

"I've learned so much about the issues of climate change and the challenges of trying to build a policy that allows us to play a part in the world. I'd love to be able to play a role in trying to create policy that would make Canada more effective in this industry. I've learned a lot. I know the difficulties of small companies. I know what a challenge it is to take a small company, get it capitalized, get it going, take a product from scratch and take it to commercialization. My goal would be to try and give that back to other people."

Michael Carten

* Title: Chairman, president, CEO of Sustainable Energy Technologies Ltd.

* Born/raised/age: Montreal/60.

* Education: Bachelor of arts, law degree.

* Family: Separated. Two children.

* Career: Carten started as a lawyer with Macleod Dixon in Calgary and then moved to Bennett Jones. He embarked on a career in the investment banking industry before acquiring the public company that eventually became SET.

* Passions: Skiing, hiking, reading.

Sustainable Energy Technologies

* Brass: Michael Carten, chairman, president and CEO; Clifford James, director, John Forzani, director.

* Profile: Formed in 1999, Sustainable Energy Technologies Ltd. (SET) produces inverters that take renewable power from solar, fuel cell and other sources and convert it into conventional electricity that can be distributed through a grid operated by a utility.

* Stats: Carten expects annual gross revenues to reach $5-$6 million by the end of 2007. SET recorded total revenues of $255,000 in 2005, and a $2.4-million loss.

* Recent Stock Price (Exchange): $0.11 (52-week range, $0.10 - $0.29).

* Website: www.sustainableenergy.com

* HQ: #500, 609 14 St. N.W. Calgary, T2N 2A1

* Phone/Fax: (403) 508-7177/(403) 205-2509

(Monte Stewart can be reached at monte@businessedge.ca)