As federal dollars shrink, Lockheed fishes for new revenue streams

April 21, 2013

Bethesda-based Lockheed Martin is known as the largest defense contractor in the world, building military aircraft, satellites and ships. Now it wants to be a power company.

As government contractors see pressure on government spending, they’re taking another look at the technology and capabilities they have and finding ways to redirect those skills.

Lockheed, for instance, announced last week that it has partnered with a Chinese firm to build a power plant off the coast of southern China. And McLean-based contracting giant Booz Allen Hamilton has formed a strategic innovation group to consider what new technology or products it might move into.

At Lockheed, the power plant project has been managed by Dan Heller, who heads the company’s new ventures unit. The unit was established in 2008 and includes the power plant as well as Perforene, a water purification technology that Lockheed patented this year.

Heller said Lockheed has been experimenting with ocean thermal energy conversion — which will power the plant — for decades but has increased its investment in the past five years.


Lockheed Martin will develop and build a 10-megawatt Ocean Thermal Energy Conversion (OTEC) pilot power plant off the coast of southern China. The offshore plant will be the largest OTEC project developed to date, supplying 100 percent of the power needed for a green resort being developed by Reignwood as seen here in this digitally created image. (Lockheed Martin)

The technology uses the temperature difference between the warm surface water of the ocean and the cold water much lower to create an electricity-generating cycle.

Lockheed’s partner in the project, the Beijing-based Reignwood Group, invests in a range of industries, from energy to aviation to luxury products.

The plant Lockheed is designing will supply the power needed for a Reignwood-developed green resort, the company said, and the agreement could allow for developing several more power plants.

Still, the company’s focus is on building a new market. Heller said Lockheed has identified 83 countries that would be able to use the technology.

“We will start to market the [ocean thermal energy conversion] system globally before we’re even through the construction phase,” said Heller, adding that the company expects to complete the plant within about four years. “We’re trying to look far beyond the pilot plant.”

Booz Allen is also planning for the future, creating a 1,700-employee strategic innovation group tasked with applying the company’s technologies and services to new areas. The unit will also manage research and development into new technologies.

The company has appointed Karen Dahut, who previously ran Booz Allen’s analytics unit, to head the group. She said the company, which has invested $40 million in the group, is resisting the temptation to stop investing in research and new ideas, given the pressure on government spending.

“The thought behind this was . . . really to capitalize on the market that we hope to be in five to eight years from now,” Dahut said.

For instance, the group is looking into how it can translate its predictive intelligence work with government intelligence organizations to business with financial institutions. The company combines cyber-protection services with analysts monitoring Internet data to help clients identify potential cyberthreats.

Booz Allen is also considering adding more data feeds, such as financial data, Dahut said.

Still, the move into new areas can be daunting for contractors, said August Cole, an adjunct fellow at the American Security Project, which counts Lockheed among its donors.

“Companies will have to be very deliberate with the steps they take into markets that they think they know — and really don’t,” he said. “One of the big questions is, how do you take something that isn’t a natural fit and get the best out of . . . your people, get them to behave in ways that will make a big company effective in a different environment?”

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