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INFORMATION EDSR 06-12-2006Corn-burning stove is hot Page 1 of 3 5#~t'TrlbUite.Gl'}tt'1 'MINNEAPOLIS • ST. PACIL, MINNESOTA Last update: May 02, 2006 - 10:23 PM Corn-burning stove is hot INFORMATION The Sleep Number bed's inventor has set his sights on a new way to heat your home. Dick Youngblood, Star Tribune Bob Walker's 12,000-square-foot dream house turned into a bit of a nightmare when he opened his first heating bill and saw the number: $1,675! His response was predictable for the man who invented the Sleep Number bed and founded Select Comfort Corp., the $700 million Wall Street favorite that manufactures it. Walker, 63, spent three years researching alternative fuels, designing a remarkably efficient corn-burning stove and raising $22 million to bankroll a Rogers-based start-up called Bixby Energy Systems. The results so far: Sales are on track to reach $10 million in fiscal 2006 ending May 31, the stove's second year on the market. And with orders coming in so fast that Walker has been forced to find a production plant five times larger, he figures sales in fiscal 2007 will reach $40 million. And that's just for starters. The way Walker sees it, the corn-burning stove is but a baby step on the way to his ultimate goal: an integrated home-heating system that includes a furnace capable of burning biomass fuel pellets manufactured out of crop, animal and human waste and delivered to customers, all by Bixby or a licensee. Walker has spent several years developing a proprietary process for producing his fuel pellets and already has acquired the system he figures can be adapted to deliver them. It's called Step-Saver, a Redwood Falls company that has a patented system for pumping salt in bulk through the foundation of a client's home directly into a water softener's storage tank. Walker figures if delivery can be done with salt, a similar system can be used to deliver pellets to a furnace. "I see us as the Standard Oil of biomass energy," Walker said. "I think this could be abillion-dollar business." Are we talking pipe dreams here? Not according to a gathering of investment bankers and venture capitalists with a focus on alternative fuels; Bixby was one of 75 companies invited a year ago to present business plans. The upshot: The Minnesota company walked away with one of five "Most Promising Company" awards. The success of Bixby's corn stove, the 50,000-BTU MaxFire, offers more http://wwwstaztribune.com/539/v-print/story/408033.htm1 5/10/2006 Corn-burning stove is hot credibility. Page 2 of 3 "Bob Walker is way out in front of any competition we've seen, without question," said Neil Konietzko, a Bixby investor living in suburban Atlanta. He ought to know: He and his son own a Wisconsin dealership that sells alternative- fuel stoves, including Bixby's and its main competitors. "The vast majority of the stoves out there are much more labor-intensive in terms of starting and maintaining them," Konietzko said. The MaxFire, which retails for $3,995, holds 106 pounds of corn and heats a 3,000-square-foot area at about 45 percent the cost of heating oil and 55 percent the cost of natural gas, Walker said. It is meant to be used with the fan system of a conventional furnace to circulate heat from the stove. Three of the MaxFire prototypes have heated Bixby's 17,000-square-foot plant in Rogers, at a cost of $4.50 a day, Walker said. Given demand for the stove, however, he's not sure he can spare any of them for the 91,000-square-foot plant in Brooklyn Park to which Bixby is moving this month. A possible IPO The larger facility not only will help him fill unmet MaxFire orders, it also will allow Walker to introduce a smaller "room-heater" version of the corn stove that will sell for between $1,995 and $2,495. But all this is mere preamble to Walker's business plan. He figures to take Bixby public late this year and raise another $15 million to $20 million to begin assembling what he calls the "Minnesota Model" for a biomass furnace system. Included in the mix: • Upgrading the MaxFire into a 100,000-BTU furnace system that not only would heat a home, but also convert heat into electricity to furnish much of the home's power. • Building a plant to produce fuel pellets, probably containing readily available waste from sugar-beet and ethanol processing and litter from turkey-production operations. • Expanding Step-Saver statewide to provide abiomass-delivery system while also selling its salt pellets. It all adds up to a persuasive package. But is any of it economically feasible -- particularly Bixby's process for mixing various biomass materials, each with different burn characteristics, into a pellet that burns consistently at the same temperature? At the nonprofit Agricultural Utilization Research Institute in Waseca, which helped Bixby develop its biomass pellets, associate scientist Alan Doering notes that feasibility studies on the gathering and processing of the biomass materials http://www.startribune.com/539/v-prinUstory/408033.htm1 5/10/2006 Corn-burning stove is hot Page 3 of 3 are not yet complete. "But I'm very optimistic," he said. "We definitely believe [the biomass pellet process] will work." He's not alone. Ron Musich, chairman of Blue Marlin Capital, a Golden Valley investment company with a substantial stake in Bixby, said he has done a great deal of research on alternative energy, "and I was singularly unimpressed until I met Bob Walker." "He has the fuel, he has the system to deliver it and he has the system for burning it," Musich said. "He has it all." Meanwhile, Walker is in his element. After starting Select Comfort in 1988, he left it in 1993 to seek other challenges. His explanation: "I'm very good at starting a company, but there are others who are more interested in running them." Walker has imposed an aggressive timetable on Bixby's growth: He plans to have the new furnace in production, a pellet plant in operation and Step-Saver ready for statewide operations by the end of 2008. When that "model" proves the concept, he plans to license the technology nationwide. Meanwhile, Walker and his wife have cut back on fuel use at their dream home, trimming their winter fuel costs to between $975 and $1,400 a month. So how come he hasn't installed a MaxFire? "Too much demand," he said. "My dealers would have my head if I took one off the line. "But when we install our first prototype of the central furnace system, guess where it's going." Dick Youngblood • 612-673-4439 • yblood(a~startribune.com ©2006 Star Tribune. All rights reserved. http://www.startribune.com/539/v-print/story/408033.htm1 5/10/2006