SUCCESS STORYPermo-Drive Technologies Pty Ltd

R&D the key to a new aquaculture industry

Permo-Drive’s major competitive advantage is that the

system isn’t limited to new vehicle manufacture; it can

also be retrofitted in existing vehicles. It’s this that

attracted the attention of the United States military,

with an existing fleet of 246,000 tactical vehicles and a

target to reduce fuel consumption by 75 per cent by the

year 2010. The result for Permo-Drive has been a rare

Cooperative R&D Agreement with the National

Automotive Centre (NAC) to develop the system for

use in tactical vehicles.

The road to success started, quite literally, as a hilly

one. Research began with a working group of three

travelling back and forth between Sydney and

Brisbane in a semi-trailer, armed with a stopwatch

and a spreadsheet measuring the ratio of ‘down hills’

to ‘up hills’and the potential of the terrain for energy

regeneration. Things got a little easier with the

development of an electronic device to collect the

data necessary to build a convincing case.

When a client approached Allan Rush, now Permo-

Drive Technologies’Director of Research, in late 1997

to investigate a means of storing and harnessing the

energy normally wasted in the heavy transport industry,

it was a challenge he couldn’t resist. Today the solution

– an innovative hydraulic regenerative braking and

propulsion system for heavy vehicles – is set to become

a standard feature in United States military vehicles

as well as civilian heavy transport all over the world.

In simple terms, the Permo-Drive system stores the

braking energy of a vehicle and allows it to be

released later when required; for example, a truck

descending a hill or braking can store energy and use

it later to accelerate, climb, or change gears. In terms

of reductions in fuel costs and brake and drive-line

wear, the benefits are impressive, but even more so are

the environmental implications. Projected reductions

in fuel and greenhouse gas emissions are as high as

40 per cent for vehicles in urban driving conditions.

An R&D Start grant helps Permo-Drive climb to the top of the hill.

A cleaner, greener energy solution for heavy transport

SAE World Congress, Detroit Michigan, 2003: L–R at back: Ken Deylami (National Automotive Centre US Army) and Allan Rush.L–R in front: Permo-Drive CEO Max Bosotti, Simon Basely (Dana Corporation) and Jim Borovac (Permo-Drive).

SUCCESS STORYPermo-Drive Technologies Pty Ltd

APRIL 2003 ITR 2003/031

For further information on R&D Startor the range of AusIndustryinnovation programs contact:

AusIndustry Hotline 13 28 46

Any of AusIndustry’s State andTerritory Offices

Or visit the AusIndustry website atwww.ausindustry.gov.au

The R&D Start Program is a competitive, merit-based program which provides

grants and loans to assist companies to undertake R&D and its commercialisation.

Through R&D Start the Commonwealth Government will provide approximately

$1.7 billion to June 2006 in direct support for business research, development and

commercialisation through the Backing Australia’s Ability initiative.

Non-tax exempt companies incorporated in Australia, who conduct research and

development activities or early commercialisation in Australia, are eligible for

support under the program.

R&D Start

United States military contributing

funding and two tactical trucks for

use in the test evaluations.

With leading truck manufacturers

in the United States, Europe and

Asia also showing considerable

interest in the system, the

pressure for the company to ‘go

global’has been irresistible.

Hence, the March 2002

appointment of Max Bosotti as

Permo-Drive’s new CEO, bringing

with him the global company

expertise needed to take Permo-

Drive to new heights.

For Permo-Drive it’s becoming

a great view from the top of the hill!

Contact

Allan Rush

Executive Director – Research

Max Bosotti

CEO and Managing Director

Permo-Drive Technologies Pty Ltd

203 Southern Cross Drive

Ballina

New South Wales 2478

Tel: 02 6686 1100

Fax: 02 6686 1199

Email: allan@permo-drive.com

Web: www.permo-drive.com

locally, which was oversubscribed.

Says Allan, “The AusIndustry

support combined with the

investment funds enabled us to

really forge ahead, developing the

system into an efficient functional

model and undertaking independent

performance trials.”

When the Ford Motor Company

announced in 2001 that it had

developed a similar system for

sports utility vehicles, Permo-Drive

was spurred into action. Allan and

Permo-Drive’s Marketing Manager,

Greg Beaver, embarked on a

whirlwind tour of nine US states,

a chance meeting with a United

States military representative en

route leading them to the Executive

Director of the NAC. Now Permo-

Drive is well on its way to finalising

specific evaluation criteria for the

military’s requirements, with the

A‘proof of concept’working model

launched in 1998 received an

enthusiastic reception, but the system

still needed to be tested in a working

environment. That’s when a staunch

supporter handed the group the keys

to a brand new truck – and the

means to put theory into practice. In

September 1998 the trio established

H.B.P. Permo-Drive Pty Ltd, and

applied for patents for the concept.

With support from the Department of

State and Regional Development and

a small grant for feasibility studies

the company pressed on, officially

becoming Permo-Drive Technologies

Ltd (an unlisted public company)

on 1 July 2000. Accepted to the

Australian Technology Showcase

in 2000, the system was radically

redesigned to simplify and improve

the overall efficiency, the reworked

concept attracting even greater

interest than before.

After receiving a Commonwealth

R&D Start grant of $920,000 in

May 2000, the company issued an

Unlisted Prospectus for $5 million

From: “Colin Dunstan” <colingd@tpg.com.au>To: “John Hannaford" <hanno7@tpg.com.au>

Sent: Thursday, 30 October 2008 3:16 PM

Subject: Save Our Technology feedback

John,

I have sent a letter to the ACT bus fleet operator, recommending it evaluates Permo-Drive units, and have sent a copy to "Save Our Technologies". Hope all goes well.

Best wishes,

Colin Dunstan

Colin Dunstan

Tuesday, 28 October 2008

Ph: Mob:

Email: colingd@tpg.com.au

Mr Tom ElliottGeneral ManagerACTIONPO Box 158Canberra City ACT 2601

Email: action@act.gov.au

cc: ChairmanSave Our Technology Inc12 Carrington StBALLINA N.S.W. 2478

Dear Mr Elliott, Cost-Effectiveness of Permo-Drive for ACTION

A few years ago the ABC TV made a documentary on a New South Wales engineering business developing a braking energy recovery device for heavy vehicles. See the AusIndustry Report, “SUCCESS STORY, Permo-Drive Technologies Pty Ltd, A cleaner, greener energy solution for heavy transport”, April 2003:

“In simple terms, the Permo-Drive system stores the braking energy of a vehicle and allows it to be released later when required; for example, a truck descending a hill or braking can store energy and use it later to accelerate, climb, or change gears. In terms of reductions in fuel costs and brake and drive-line wear, the benefits are impressive, but even more so are the environmental implications. Projected reductions in fuel and greenhouse gas emissions are as high as 40 per cent for vehicles in urban driving conditions.”

Recently I wanted to obtain some engineering advice on engine management technology and, recalling the expertise of the business that was the subject of that ABC TV documentary, I searched for contact details on the internet. As a result, I was able to find the business, which trades as Permo-Drive, and also learned that it was at risk of going into receivership as it had been unable to successfully market its product in any significant numbers.

I had a look over the information that Permo-Drive has made available. Either the current design of their product is priced too high to give purchasers a sufficient fuel saving to justify the expenditure, or alternately, the business, that clearly possesses a lot of engineering expertise, may simply not have identified the correct market segment and savings their product will provide to potential customers.

A website discussing Permo-Drive’s future mentions the possibility of orders being placed by trucking companies. It seems to me that drivers of heavy vehicles cruising down the Hume Highway will rarely need to touch their brakes, and the potential

fuel savings from a device designed to recover the energy of braking a heavy vehicle will be insignificant in this market segment.

However, the situation is quite different for large buses in urban transport roles – like those of the ACTION bus fleet – that are constantly stopping and starting. If Permo-Drive’s product at its current design price has any chance of commercial success, then it has to measure up in the economic realities of ACTION’s bus fleet operations.

I have found a copy of ACTION Authority’s Annual Report 2005-2006 and have attempted to estimate the annual fuel usage and fuel costs per bus in the ACTION bus fleet based on some information in that report.

The objective is to find the price at which Permo-Drive’s device becomes cost-effective. I am forwarding a copy of this letter to the Chairman of the shareholder organisation that is considering further investments to keep Permo-Drive in business; The hope is that this information may assist both Permo-Drive - to determine if Permo-Drive has any prospects of commercial success - and ACTION – to determine if Permo-Drive’s product offers a cost-effective solution with which to cut the fuel consumption and running costs of its bus fleet.

My estimates are based on an interpretation of the limited information I have found to date, that is, the ACTION Authority’s Annual Report 2005-2006, and should only be considered as a starting point. These estimates can be refined with more recent information from ACTION and from Permo-Drive.

Passenger Fleet and Special Fleet (from Table 1, page 12) 2004-05 2005-06

Number of buses 391 387Kilometres Travelled (000) 23,339 23,450

Operating expenses (from Note 10, page 86) 2004-05 2005-06

Bus running expenses ($,000) 9,135 10,367

My Estimates per Bus 2004-05 2005-06Bus Running Expenses per bus ($) $23,363 $26,788Kilometres Travelled per bus 59,691 60,594

Using the following two assumptions:1. “Bus Running Expenses per bus” in 2005-06 (of $26,788) represents the cost of

fuel, and 2. Actual average fuel savings from fitting the Permo-Drive device to any bus

are only 20% (this is a very conservative assumption. I have chosen just half the figure of 40 per cent given as a high estimate for fuel savings in the 2003 AusIndustry report quoted in the opening paragraph of this letter), -

the savings per bus would be more than $5,000- each year, or $25,000- over 5 years. Thus, if the Permo-Drive devices cost $25,000- each, then the payback period would be just 5 years: The fuel savings in 5 years would recoup the outlay on the Permo-Drive devices.

At face value, if the above assumptions are reasonable, there are potentially significant benefits for both ACTION and Permo-Drive Technologies that could be explored.

2

I am not sure of the procedure to be followed to take this analysis further. The final step, I think, following a preliminary feasibility assessment by ACTION, might be a publicly advertised request for tender (RFT) from potential suppliers of fuel-saving measures that are suitable for retro-fitting to ACTION’s existing buses – and in response to this RFT Permo-Drive Technologies could offer to supply its devices in competition with other suppliers (if any?) of devices that provide similar fuel savings.

I hope this information may assist the business objectives of both ACTION and Permo-Drive Technologies.

Yours sincerely,

Colin Dunstan

3

Link to ACTION Authority Co-Operative Agreement under Greenhouse Challenge Plus http://www.climatechange.gov.au/cgi-bin/challenge/dbsearch.pl?page=agree_detail;aid=4038

ACTION Authority2005 ACTION Authority

The ACTION Authority was created in January 2002 with a view to emphasising its commercial operations. It provides scheduled route, school and specialist bus transport to the people of Canberra and has service as its principal priority.

Company OperationsACTION's operating environment is unique in that Canberra has the highest average income and single and two car ownership in Australia, and a very large "Y" shaped geographical area with minimal traffic congestion, abundant cheap parking and low density housing. ACTION's challenge is to provide travel times that are competitive with a car and at a cost less than parking.

To meet this challenge ACTION has 374 buses, 677 staff, two depots, a corporate office and four interchanges to provide 3,000+ services a day to carry 16.3 million passengers over 22.5 million kms a year. ACTION has a fleet of 374 route buses, including 69 accessible buses, and 16 mini buses that are used for special needs transport.

The Authority has commenced the process for the construction of a CNG fuelling facility for the fuelling of its new CNG buses. The facility is expected to be commissioned by October 2004.

Emissions UpdateThe ACT Government committed to $23.4 million to purchase 62 low floor easy access buses to replace older buses in the fleet. Twenty of these new buses are diesel powered, using low sulphur fuel, and have already been incorporated into the ACTION fleet. The remaining 42 buses, run on compressed natural gas (CNG), are being introduced progressively into the fleet over the next two years. The CNG buses promise equivalent performance to diesel for less harmful emissions, including noise and lower long-term costs.The new buses are low floor with easy access with fold out wheelchair ramps. Each bus has the capacity to carry 2 wheelchairs.

Action PlanACTION Authority will continue to raise awareness to all staff regarding its environmental performance. The Authority will also continue to actively participate in research and development of alternative fuels for its buses.

From: “Richard Matto” <Richard.Matto@act.gov.au> To: “Colin Dunstan” <colingd@tpg.com.au>

Sent: Thursday, November 06, 2008 7:41 AM

Subject: Climate Change & Sustainability

Colin

ACTION is no longer an authority, ACTION since 2007 is an ACT Government Department Enterprise, & as such our administrative environment has changed significantly.

Action as a Government Enterprise has commenced with a procurement process for a Consultancy for the next stage of ACTION’s Climate Change & Sustainability Strategy.

I can certainly make mention of Permo-Drive Technology to the winning tenderer for this consultancy, the time frame for this project is approx 6 months, as it is a whole of ACTION project.

One avenue for Permo-Drive could be to locate venture capital from the Carbon Emissions Market, Investors would purchase the Permo-Drive units for installation into the transport industry, Fleet Operators could reap the fuel savings & the investor could receive the carbon credits.

Regards

Richard Matto CMILTFleet Services ManagerDepartment of Territory & Municipal ServicesAustralian Capital Territory Internal Omnibus Network

T 02 6205 4821F 02 6207 8056M 0427 261 720E richard.matto@act.gov.au

From: “Colin Dunstan” <colingd@tpg.com.au>To: “John Hannaford" <hanno7@tpg.com.au>

Sent: Thursday, 6 November 2008 5:16 PM

Subject: Fw: Climate Change & Sustainability - Permo Drive and ACTION Buses

To: John HannafordSave Our TechnologyBallina NSW 2478

Hi John,

Sorry not to get much joy from my approach to ACTION buses on Permo-Drive. At least we got an acknowledgement of the potential benefits, and hopefully some goodwill towards your organisation's efforts.

I am forwarding some further information from Richard Matto, ACTION's Fleet Services Manager, with a positive suggestion for an alternate approach to secure funding for Permo-Drive.

…

Once again, sorry I couldn't be of more help.

Best wishes and good luck with Save Our Technology,

Colin Dunstan

From: “John Hannaford" <hanno7@tpg.com.au>To: “Colin Dunstan” <colingd@tpg.com.au>

Sent: Friday, 7 November 2008 9:08 AM

Subject: Permo-Drive

Colin

Thanks for all your work. It has been a long haul with still no end in sight yet. The contacts I had seem to have all dried up now in the current economic crisis.

I have put my nomination in for the board to see what else I can from that angle.

We should be getting a notice of the AGM very soon as it should happen before the end of this month.

Best Regards

John Hannaford