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Lockheed opens a new battleground: Environmentally friendly energy

[WASHINGTON] The head of one of the world's most innovative fish farms sports a scruffy beard and talks about saving the planet by moving "toward a culture of nurture." His office is a trailer near the beach, where the views are of dolphins, the mission is progressive and the dress code is loose.

All of which makes Neil Sims's partnership with Lockheed Martin a most unusual corporate alliance.

The world's largest defense contractor is best known for making the weapons that unleash cataclysmic fury on America's enemies, whether in Iraq, Afghanistan or Syria. But lately, it has set its sights on a different threat to national security: climate change.

In the past few years, Bethesda, Maryland-based Lockheed has launched a series of new initiatives - harnessing energy from tides, purifying water, nuclear fusion, and, yes, a new, environmentally friendly way to farm fish in a cage that drifts off the Hawaiian shore. Chief executive Marillyn Hewson touts the ventures as growth opportunities, a calculated effort to go green at a time when defense spending is shrinking after more than 14 years of sustained warfare.

The move comes as the Pentagon has classified climate change as a significant threat, saying natural disasters and scarcity of food and water could create widespread instability requiring military intervention. That's why Lockheed, employer to thousands of scientists and engineers, is marshalling its forces in what many consider the unlikely new fields of energy and the environment.

But Lockheed's efforts have been met with skepticism from some analysts who say the company is moving too far from the fighter planes, combat ships and guided missiles that have made it a powerful force in the defense industry and a safe investment. It's an effort that is unlikely to benefit shareholders, they say, because any returns are likely to be a long time in coming, if at all. Other defense contractors have tried to break into energy fields, but some quickly admitted defeat, saying they should stick to what they know best.

"Defense firms look outside their core areas of expertise during spending downturns, but these forays rarely stick when spending returns," said Roman Schweizer, a defense policy analyst with Guggenheim Securities.

Among the reasons critics have been quick to doubt Lockheed's forays into alternative energy are that the early results have been spotty, and some of the science sounds more like science fiction.

One of Lockheed's most ambitious efforts has been years in the making, a headline-grabbing attempt to build a nuclear fusion reactor small enough to fit in the back of a truck. Fusion - the forced collision of two atoms forming a single nuclei - produces the same nuclear energy that heats the sun without the nuclear waste caused by fission, which fuels existing nuclear plants. The technology holds out the hope of solving global problems of energy supply, with almost no harm to the environment.

Late last year, Lockheed announced a breakthrough - a design for a compact fusion reactor that the company said it could produce in 10 years.

But being able to create a reactor so small within a decade is still more ambition than reality, several skeptical scientists said.

"As far as I can tell, they haven't paid attention to the underlying physics of nuclear fusion," Ian Hutchinson, a professor of nuclear science and engineering at Massachusetts Institute of Technology, said shortly after the announcement last year.

Although the fate of its fusion project may still be years away, another attempt to unlock a clean source of energy - the power of ocean waves - sank quickly. After Lockheed partnered with Ocean Power Technologies to build what it called "the world's largest energy wave project" off the Australian coast, the project failed within six months. Corporate filings declared the venture "no longer commercially viable," and Lockheed's partner dismissed its chief executive and got mired in legal battles with investors.

Several other defense contractors have struggled when they ventured into unproven areas of renewable energy. One company, Virginia-based Leidos, operates a biomass plant in Connecticut that turns discarded wood into energy. But the plant has suffered power outages and hasn't met its energy-production goals, costing the company US$40 million in losses last year.

At a time of rock-bottom fuel prices, renewable energy is difficult to make economical without government subsidies, Jim Moos, president of Leidos's engineering solutions group, said in an interview.

A top executive of United Technologies was especially candid when the conglomerate, which makes fighter jet engines and military helicopters, decided in 2012 to unload the wind power company it had acquired a couple of years before.

"We all make mistakes," he said in a mea culpa to investors.

But Lockheed is charging ahead, confident that the technical expertise that went into building weapons can also translate to commercial industries.

In a recent state-of-the-company speech, Ms Hewson highlighted the foray into energy markets as a growth opportunity. She mentioned climate change five times in the speech, sounding at times more like Al Gore than Dr Strangelove as she highlighted building alternative-energy solutions along with progress in the F-35 Joint Strike Fighter.

"Population growth, resource scarcity and climate change are reinforcing each other," she said.

Although seabed mining and water purification may not sound as if they fit neatly into the defense contractor's portfolio, she noted that climate change has been classified as a threat to national security by the Pentagon.

"As we consume more than ever, climate change is accelerating as well," Ms Hewson said in her speech. "In fact, we know that 2014 was the hottest year in human history. These pressures combine to create real threats to security and stability around the world." The company won't provide details about the size of its energy portfolio, but Dan Heller, Lockheed's vice president of new ventures, said the company sees his unit "as a great potential growth engine."

To Mr Sims's surprise, one of those growth areas was his little Hawaiian fish farm.

"Really? This isn't a joke?" he said when a Lockheed Martin executive called to say that the 112,000-employee defense company wanted to team up with his five-person outfit.

Mr Sims's company, Kampachi Farms, had been developing a fish cage that looks like a giant ball. Unlike other farms stationed inland, the "mobile fish pen," as it is called, drifts farther offshore in deeper water, where it can "grow fish with literally no footprint on the oceans," he said.

Lockheed's contributions are less about biology and more about technology, including setting up the satellite communications and the motor controls to track the pen.

Lockheed is also building a 10-megawatt power plant off the coast of China that would generate energy by using the differences in ocean temperatures. Off the northern coast of Scotland, it is working to install giant, windmill-like turbines to harness tidal wave energy, which it says will generate enough power for 200,000 homes.

It's even working on building plants that would transform garbage into energy. Instead of incinerating the waste, it plans to heat the garbage without oxygen so that the material decomposes and produces a gas that can be used as fuel.

Dealing with garbage may not be as exciting as a new fighter jet or a laser weapon, but "how you deal with waste is a huge issue," Mr Heller said.

The new projects have also helped the company recruit talent, he said - especially younger engineers and scientists.

"Social responsibility is important to them," Mr Heller said. "And they want to work for a company that has a strong conviction around social responsibility and really making sustainability a priority." Byron Callan, a defense analyst at Capital Alpha Partners, said the government contractors looking to energy may not be going as far afield as some think.

"Ultimately, they are engineering companies," he said. "And at the end of the day, they've got engineers who are trying to solve tough problems." Mr Sims said he didn't see a conflict. Being able to use technology originally designed for the military for other uses is a "beautiful story" that he said reminded him "of the biblical exhortation: Let's turn our swords into plowshares." Except in this case he knows Lockheed isn't about to abandon its weapons business: "Well, I guess you don't have to give up the sword."