Here Comes the Sun

John MacDonald, co-founder of local high-tech pioneer MacDonald, Dettwiler and Associates Ltd. (MDA), and Leonid Rubin, former biophysics professor at Moscow State University and one of Russia’s former top physicists, were supposed to be long retired by now. After decades of success in business and academia, respectively, both should be basking in former glories. And yet here they are, camped out in a soulless business park in deepest, darkest Burnaby, hard at work on yet another business venture. It appears you can’t keep a good entrepreneur down – or, at least, unemployed. It was almost eight years ago that MacDonald, 72, and Rubin, 68, first sat down in a Moscow café to discuss a possible venture together; a month later, Day4 Energy Inc. – a manufacturer of photovoltaic (PV) modules used in solar panels – was born. Based on technology designed by Rubin, the 48 MC solar module, Day4’s flagship product, is said to be more efficient than competing systems – a claim that has some backing in the industry. The California Energy Commission ranked Day4’s technology among the top five per cent of most efficient crystalline silicon products that qualify under the state’s rebate program, while Germany’s Albstadt-Sigmaringen University, which performed independent testing of Day4’s solar panels under various weather conditions, called it “one of the best modules we have observed, offering high quality and precise manufacturing.”

Here at home, Day4 was named 2008 Emerging Company of the Year by the B.C. Technology Industry Association this past June for its strategy and “market promise.” The company has experienced significant growth in its first year as a public enterprise: raising more than $100 million from its initial public offering and expanding from a startup production capacity of 12 megawatts (a standard measure in the PV industry) to just shy of 100 megawatts by the end of 2008. While still considered an emerging player, Day4 is thought to have a great deal of potential in a world increasingly reliant on renewable energy. “Renewable energy will be the way humankind derives its energy, and it will happen this century,” predicts MacDonald. “I may not be around when it happens, but I see it coming.” The name Day4 Energy is a biblical reference to the seven days it supposedly took God to create the universe: on the fourth day, as the story goes, He made the sun. “It was Leonid’s idea,” explains MacDonald. “I remember saying to him that if the name of the company is based on the Book of Genesis, we can’t go far wrong. At least three religions agree on that one page.” MacDonald, Day4’s chair and CEO, relates the anecdote from his second-storey office overlooking a parking lot outlined by a few newly planted trees and shrubs. His modest space is cluttered with files, Day4 pamphlets and solar industry trade magazines. MacDonald and Rubin (Day4’s vice-president and chief technology officer) originally met through their sons, George Rubin and Neil MacDonald, who were colleagues in the 1990s at Vancouver investment bank Goepel McDermid Inc. (now Raymond James Holdings Canada Inc.) and later at Yorkton Securities. The four men would often meet for long dinners when Leonid Rubin was visiting Vancouver from Moscow, but it wasn’t until John MacDonald paid a return visit to the Russian capital (on business, representing Asia-Pacific Economic Co-operation) that the two men first talked about starting their own company. MacDonald describes that visit as “a drink from the technological firehose.” Rubin took him around the city and showed him a handful of innovative high-tech ventures, ranging from laser technology that could break glass to one that could improve the efficiency of solar panels. When asked which of the ideas he thought would make a good business, MacDonald said the PV technology. The proprietary technology at the heart of Day4’s business is designed to address weaknesses in existing solar panels. Day4 claims to be able to reduce the resistance of the standard PV cell and to create higher power output, thus creating a more efficient solar panel. (The company also claims its product is more attractive than standard solar panels.) The technology is used in both residential and commercial buildings – mostly in Europe, with about 90 per cent of Day4’s recent business coming from Germany (where a so-called “feed-in tariff” law gives customers tax breaks for using solar-generated electricity). Some of Day4’s dozen or so competitors in the burgeoning solar panel industry include Aleo Solar, Canadian Solar and Suntech – each of whom boasts annual revenues of more than $300 million, which is nearly triple Day4’s current sales. MacDonald, however, sees a market share for Day4 well beyond its current stake. Indeed, he makes clear that he wouldn’t be involved in the company otherwise and predicts that Day4, whose market capitalization at press time was about $28 million, will someday be bigger than MDA (whose market cap is around $870 million). “When I realized what Leonid had developed could make a significant advance in photovoltaic technology, I became fascinated,” says MacDonald, gesturing to a building under construction down the street that will soon serve as expanded Day4 production facilities. “Getting solar energy into the mainstream of electrical generation – that’s what attracted me to this, to going back to work full time.” It’s MacDonald’s visionary reputation and his success at MDA that gives many people hope for Day4. The Prince Rupert native, who spent his teenage years fixing radios on fishing boats, knew from an early age that he wanted to be an engineer. After studying electrical engineering at UBC, he went on to get both a master’s degree and doctorate at the Massachusetts Institute of Technology. He later returned to UBC to teach before eventually leaving the ivory tower for the business world, bringing a few of his best students along with him. [pagebreak] When MacDonald and friend Werner Dettwiler founded MDA in 1969, the original plan was to provide computer solutions to problems that companies were having, such as tracking data. The company’s focus soon expanded to include space technology, with MDA eventually becoming Canada’s largest space technology company, producing the iconic Canadarm, used on the Space Shuttle, and Radarsat-2, which has been hailed as a tool to protect Canada’s Arctic sovereignty. In the 1990s, MDA began diversifying again through a number of acquisitions in both the space and information products group, which provides land and property-related services to the financial services sector. Today, due to the shrinking amount that national governments spend on space technology, MDA sees the majority of its revenues coming from its property information division. Despite MDA’s failed attempt to sell its space division earlier this year (blocked by the federal government, which was worried about political fallout), MDA has a mostly stellar track record of spinning off businesses. Under MacDonald’s leadership in particular, the company was able to transform a number of innovative products into separate companies, including Mobile Data International Inc. (MDI) and Cymbolic Sciences. Former MDA employee Dan Gelbart, who helped found MDI and Cymbolic Sciences, says MacDonald had a lot to do with MDA’s success and had an entrepreneurial spirit that was “contagious.” “John MacDonald has a wonderful personality for motivating people in a high-tech startup environment,” says Gelbart, who left MDA in 1983 after 10 years to found B.C.-based imaging product company Creo Inc. (which was eventually sold to Eastman Kodak Co.). He says that MDA employees were often given the freedom to develop ideas into new businesses. Gelbart, for one, was allowed to work from home for a year developing what would become Cymbolic Sciences. “Luckily, it succeeded,” he says. “When I came to them with the idea, I had no background in the area and was asking for something that bordered on insanity. But they let me do it, and the rest is history.” Indeed, it is the employees he has mentored over the years, more than the companies he helped nurture, who represent MacDonald’s most important legacy. Dan Friedmann, MDA’s current president and CEO, says that MacDonald has been a mentor to hundreds of people in B.C., “and certainly to myself.” Friedmann landed the top job in 1995 at age 38 after being groomed for the job for several years. Day4’s president George Rubin – just 32 years old when he took the job in 2006 – is MacDonald’s latest protege. “I have worked with some extremely intelligent people,” says MacDonald. “From the point of view of his business mind, [Rubin] reminds me a lot of Friedmann. He has that steel-trap mind that seems to know what to do in all situations. He has been the spark plug of this company.” Rubin (who has a master’s degree in physics from Moscow State University as well as a diploma in financial management and an accounting degree from BCIT) acknowledges the challenges of being a young CEO, but credits MacDonald – an “entrepreneurial guru” – with easing the transition. “I have my father on one side, a world-class expert in his field, and John – the entrepreneur who has been through a number of business cycles. It has been a fantastic experience,” says Rubin, his Russian accent still thick after more than a decade in Vancouver. Rubin is careful to note that it is he who runs the business and that MacDonald and his father are there for backup. “[Macdonald] is there to weigh in. He’s not overbearing.” While the Rubins and MacDonald have high hopes for Day4, the investment community has shown significantly less enthusiasm. After going public at $7.25 a share on Dec. 6, 2007, Day4 has seen its stock price fall dramatically on the Toronto Stock Exchange (it was trading at just under two dollars at press time). Many think the sector still doesn’t have enough legs to make a good investment. Blackmont Capital Inc. analyst Trevor Johnson says that while MacDonald’s growth prediction isn’t unreasonable, investors are concerned about the company’s ability to compete with larger competitors. “From day one, they’ve been under an air of scrutiny,” says Johnson. “It takes results and performance to change that, and unfortunately, when you aren’t making money yet, people just discount what you say because it’s all just speculative. Until results start to flow in and you start to see some cash flow, it will be tough for the market to embrace the story.” Day4 expects to turn a profit in 2009. It plans to bring in third parties to outsource manufacturing next year, which will help reduce the company’s capital costs, and is constantly updating the solar panel technology to stay in stride with its competition. The company’s stock did get a boost in late summer after the announcement of a strategic partnership with Germany’s Certus Life Cycle AG to finance PV power generation projects in Europe, particularly in Italy. Lawrence Asset Management president Ravi Sood – whose Toronto-based firm has a six per cent stake in Day4, making it one of Day4’s largest shareholders – says he likes the proprietary technology and thinks the stock is undervalued. He also believes the company should be able to increase revenue from about $130 million in 2008 to $200 million in 2009. Whatever the short-term financial challenges, Johnson believes that, over the long term, having MacDonald behind Day4 gives the company credibility. “I don’t think he would put his name to this product if he didn’t wholeheartedly believe in it and the Rubins.” Phillip Tulk, an analyst with PI Financial Corp., concurs. He says MacDonald has “found religion with solar,” and that’s helping to drive Day4’s ambitious plans forward. As for the man himself, MacDonald has stated his intention to have George Rubin succeed him when he leaves Day4, though the timing of that exit is unclear. “When I decide the time has come, I’ll go. If you are a good CEO, you work yourself out of a job. Someone is going to fire you anyway.” Before he can finish his sentence, MacDonald’s cellphone rings to the tune of Scotland the Brave, the official marching tune of the Canadian Forces. He pulls the phone from his hip pocket and answers with a hearty and deep-voiced “Hello.” As he enthusiastically sets up another meeting, it seems retirement is still a long way off.