At OptiFuel Systems, we're making big changes in heavy-duty transportation. We sell locomotives and power equipment that is not only cost-effective but also produces zero emissions. We achieve this by using renewable and sustainable fuels like RNG (Renewable Natural Gas) and hydrogen. OptiFuel is committed to spearheading the sustainable revolution. Our aim is to deliver Total-Zero products with turnkey refueling solutions, facilitating the transition of the hardest-to-abate fleets in the world. I'm excited to share that OptiFuel is a Qualified Opportunity Zone Business (QOZB) and can accept Qualified Opportunity Fund (QOF) investments. The company has also initiated the process to issue qualified small business stock (QSBS) to investors in this round of capital.
Where We Started
Back in 2013, our journey began as an R&D company with a singular focus: repowering diesel locomotives for the Indiana Harbor Belt (IHB) Railroad using innovative dual-fuel (diesel/CNG) technology. Fast forward to 2019, a milestone year for us—we unveiled our inaugural CNG fuel station for rail and introduced our first four Tier 4 locomotives. These locomotives still operate daily at the IHB Railroad, just south of Chicago, IL.
During our tenure with IHB, the railroad industry experienced a seismic shift. As global fleets transitioned from Tier 3 to Tier 4 emissions technology, major suppliers faltered. The development of Tier 4 locomotive technology proved an immense challenge. The world's two largest freight locomotive suppliers - GE Transportation and Caterpillar/Progress Rail (EMD engine) - had major technology failures that forced them out of the market. These two companies had historically controlled 74% of global market share! This created what we believed to be an unprecedented market opportunity. With only seven years of rail experience, we had the highest performing Tier 4 locomotive. Over the course of the next few years, we found ourselves becoming the leading authority on next-generation locomotive power solutions.
In 2019, the EPA announced plans to enforce a policy mandating the transition of US railroads to zero-emission by 2050 (Tier 5). It was a pivotal moment—we rallied our small team to chart a solution. After more than a 100 year history of diesel-powered locomotives, the time had come for the world's railroads to transition to clean power.
Where We Are Today
Now, as we step into 2024, our team is thrilled to share a significant milestone: we have delivered our inaugural OptiFuel Total-Zero Locomotive! The pre-production prototype locomotive was sold to a Sierra Northern Railroad in California and can be seen running in regular operations later this quarter when final testing is complete. OptiFuel has already received a commitment for six more Total-Zero Locomotives from the same customer, a total order valued at approximately $17.5 million. (Notably, these are pre-launch sales commitments.) The order is divided into two parts: final contracting for the first 3 locomotives is expected by January 31, 2024. We will start building those right away for delivery 12 months later. The California (CARB) grant application for the 2nd order has been submitted for approval; awards will be announced in March. As part of our commitment to helping railroads affordably transition their fleets to zero emission, we assist customers in sourcing and submitting grants. OptiFuel is a co-applicant on the grants, which assures that grant funds are used exclusively for purchases of our Total-Zero Locomotives.
Our Products
OptiFuel Total-Zero Switcher Locomotives will be officially launched and opened for customer orders March 24-26, 2024 at the American Short Line and Regional Railroad Association (ASLRRA) Annual Conference and Exhibition in Kansas City. OptiFuel switcher locomotives are customizable to run on either RNG or hydrogen, at ranges from 500hp - 2400hp. The OptiFuel Total-Zero Switcher Locomotive has achieved all certifications, including zero emission certification by the EPA and safety certifications by the FRA (Federal Railroad Administration). This product ranges in price from $1 million - $3.5 million depending on choice of horsepower and fuel type. US Demand: There are 13,000 end-of-life diesel switcher locomotives in the US. Annual replacement demand through 2045 is 433-650 locomotives, with first-year demand in 2024 and the highest demand expected in years 2027-2035. OptiFuel US Sales Projections: We believe we can secure commitments and meet production requirements for a minimum of: 20 units in 2024 ($47M), 100 units in 2025 ($239M), 150 units in 2026 ($365M), and 200 units every year thereafter ($497M). Competitive Products: OptiFuel has two competitors in the zero emission Switcher locomotive market: (1) The Wabtec FLXdrive battery-electric locomotive sells for ~$3.5 million and has a significantly shorter operating range (3-8 hours) compared to OptiFuel (40 hours). (2) The EMD Joule battery-electric locomotive is also priced around ~$5.5 million and has a limited operating range of 8-12 hours. Competitive Advantage: OptiFuel's Total-Zero Switcher Locomotive leads competitors in price, performance, operating range, and lifetime operating expense. We are also the only company that provides customers with a turnkey refueling solution (competitors do not provide integrated recharging solution).
We're actively constructing our maiden OptiFuel
Total-Zero Line Haul Locomotive —a robust 5600hp RNG-powered workhorse. This locomotive will be showcased throughout 2025 as it undergoes rigorous performance and emissions testing at the world's leading locomotive center of excellence - the FRA's Transportation Technology Center (TTC) in Pueblo, CO. See the press release on:
LinkedIn. This product will be available in ranges from 3000hp to 5600hp and will have an estimated sales price between $3.5 million (3000hp) and $5.5 million (5600hp).
US Demand: There are 25,000 diesel line haul locomotives in the US. Annual replacement demand through 2045 is ~1,250 units per year. Regulatory requirements for line haul fleet transitions away from diesel will be staged in beginning 3 years after switchers, with first-year demand in 2027. Line haul locomotives must undergo extensive 1-million-mile testing, which is the reason for the delayed regulatory start.
OptiFuel US Sales Projections: We believe we can conservatively sell: 20 pre-order units during the 2025 showcase ($180M), 84 units in 2026 ($763M), 125 units in 2027 ($1.1B), 250 units in 2028 ($1.5B), and 550 units in 2029 ($1.8B) - our target exit year for IPO.
Competitive Products: There are currently no other zero emission freight locomotive suppliers. Wabtec has announced that they expect to begin R&D efforts on a hydrogen line haul locomotive in 2030. The company is also expected to focus additional efforts on a battery-electric line haul locomotive. To date, Wabtec's battery-electric trials have achieved 4400hp for a maximum of 30 minutes, falling far short of the minimum continuous power requirement.
Turnkey, Fully-Integrated Solutions with a Customer-Centric FocusOptiFuel equipment empowers railroad customers to reliably enhance operations, regain valuable competitive advantage, and take back market share lost to trucking through dependable and improved services. OptiFuel’s customer focus is underscored by its comprehensive refueling services and fuel station infrastructure plan. This plan addresses not only the capital expenditure challenges related to refueling, but also resolves the logistics and planning burden of combined diesel-RNG fleets. OptiFuel is committed to facilitating smooth fleet transitions from diesel to renewable fuels without disrupting operations.
OptiFuel’s Refueling Solutions Plan provides for line haul operators to run trains in a consist with both old (diesel) and new (RNG) locomotives without changes to routes, distance between stops, refueling time, or capital expense budgets. This diesel-RNG locomotive integrated refueling system approach is already in service at the Indiana Harbor Belt Railroad (IHB) outside of Chicago.
Future MarketsOptiFuel advances novel modularity that will allow us to efficiently deploy a range of zero-emission products. Our core products include the
Total-Zero Power Module and
Total-Zero Fuel Storage Module. These identical plug-and-play modules can be sold independently as industrial generators and generator systems; installed on trailers as mobile power generation systems, mobile refueling systems, and fuel storage systems; placed into microgrid installations; and marine power systems on harbor craft such as tug boats and ferries. We believe OptiFuel's thoughtful product engineering paves the way for OptiFuel to become the global market leader in freight locomotives and a competitive player in heavy-duty power equipment.
Our Emissions Impact
Each year, diesel locomotives burn over 14 billion gallons of fuel and produce 148 million tons of greenhouse gas emissions. OptiFuel Total-Zero Locomotives eliminate 100% of these emissions with practical, affordable solutions. Our flagship locomotive is powered by RNG (renewable natural gas). Here's the reason: it's the most practical. (1) Natural gas is the most efficient sustainable fuel. Storage requirements are reasonable and flammability risk is low. (2) Natural gas is the most accessible fuel for rail, so infrastructure will cost less. Natural gas pipelines already run alongside railroad right-of-ways in the US, Canada, South America, and many European markets. As fuel pumps are built along railroads, the proximate pipeline access makes costs efficient. (3) Renewable sources of natural gas can be blended with existing fossil-based sources directly in the existing pipelines. As RNG production grows each year, pipeline gas will naturally become cleaner - as will the trains that run off of it!
Additional Resources:
We appreciate your time and interest and are happy to provide additional detail and answers to any questions you may have. We are enthusiastic about the future of our company and hope you will join us for the journey ahead as we accelerate the pace to zero emissions in rail.
Please contact us at any time to schedule a call, request additional files, ask questions, or meet our team!