America's Cup - Emirates Team NZ taps into Kiwi government R&D fund

by Richard Gladwell Sail-World.com on 3 Feb 2016 Emirates Team New Zealand look set to trigger another round of Kiwi media umbrage with the announcement that the America's Cup team has been awarded a research and development growth grant by Callaghan Innovation having met the eligibility criteria for the fund.

The release issued by the team does not state the amount of the grant, rather that it has met the eligibility criteria to receive one.

The Callaghan Fund was introduced by the NZ Government after research and development costs were disallowed in NZ as a tax deductible expense. It provides cash flow for companies at the time of making the R&D investment, rather than having to try and claim it back later - an accounting process which can create significant cash flow issues for those developing new technologies and products.

The twice winner of the America's Cup is not the first Cup team to receive funding. Core Builders Composites, the Larry Ellison owned, Warkworth based composite construction company, is believed to have received at least one and maybe two grants from the fund for the purchase of CNC milling machines and similar technology in this America's Cup cycle and the last.

However the two organisations are quite different in that Core Builders Composites have used the expertise gained in the construction of wingsailed, foiling catamarans and applied it to other projects outside yacht racing. CBC have kept that expertise in-house and used it for construction projects for innovative architects, including carbon roofing, staircases, energy generation and is tipped as a supplier for the Auckland SkyPath project - a walkway spanning the Waitemata Harbour.

At the time of the CBC grant allocation, it was claimed in NZ media that CBC had received $17.5 million from the Callaghan fund prompting the company to issue a statement saying the amount was in the vicinity of $250,000.

To receive the $17.5million over three years as claimed in some media, an NZ based America's Cup team would have to spend close to $100million in that period on research and development alone. The funding can only be drawn down on the basis of monitored expenditure and actual expenditure. It is not a lump sum grant.

Team New Zealand was one of 14 companies to receive funding in the announcement made today by Callaghan Innovation, the list included technology, agriculture and two other marine industry companies, Navico and Hamilton Jet boats. The release from Callaghan Innovation notes that the total potential draw-down for all 14 companies is potential $49million in total over the three years.

The R&D injection is the first for the team, which has been in operation for over 30 years, and has been the leading technology platform and launchpad for the NZ marine industry in that period. Exports alone from the NZ marine industry were $82million in 1994, increasing to $644million in 2012 and exports are projected to expand to $1.54billion in 2021.

In the past, Emirates Team New Zealand while developing some innovative technology have generally worked with other New Zealand marine technology companies in partnership, the expertise from those exercises has been leveraged by the partner companies into other fields as well as marine technology.

“It is fantastic Callaghan Innovation has recognised both the importance and the potential Emirates Team New Zealand has in the research and development of technologies that goes into creating an America’s Cup winning yacht,” said Emirates Team New Zealand CEO Grant Dalton, in a statement from the team.

Emirates Team New Zealand has been leading the way in marine and composite technology research and development for the past 20 years but access to this grant has previously not been considered because of the government funding that was provided to the team in the past.

“What we do, and what we develop has a flow-on effect on to the New Zealand marine industry as well as so many other New Zealand businesses where there is a cross-over in the technology we develop. This is at the core of the Callaghan Innovation’s R&D fund - helping New Zealand businesses succeed through technology. And the team has a proven record of leading the way in marine technology,” explained Dalton.

Callaghan Innovation General Manager, Accelerator Services, Simon Brown said the Growth Grant acknowledges the increasing R&D capacity of Emirates Team New Zealand off-water operation.

“Growth Grants are only available to organisations with at least $300,000 dedicated to R&D annually. It is designed to boost R&D among established businesses which are serious about research and development.”

In the last America’s Cup Emirates Team New Zealand led the development of foiling into Grand Prix racing. Now, just over two years on, foiling is commonplace across the sport and technology is constantly evolving.

“This America’s Cup is going to be the most technologically advanced America’s Cup ever,” explained Emirates Team New Zealand’s Technical Director Dan Bernasconi

“Although we have been working on and making exciting advancements and new developments since 2013, this funding is key to really ramping up our technological development of our next boat which is key to winning the America’s Cup all the while showcasing New Zealand as a world leader in marine and composite technology around the world and on our sports biggest global stage in 2017 at the America’s Cup in Bermuda.”

In terms of the precise figure the team will be receiving from the Callaghan Innovation Fund, Grant Dalton says it is not yet certain and depends entirely on what the team’s R&D spend is.

“Emirates Team New Zealand’s research and development spend is a constantly evolving figure month to month, but it can receive 20% of its annual R&D expenditure. It is clear to say the teams expenditure figure meets the minimum spend criteria of $300,000 per annum, but it certainly will not receive anywhere near the maximum allowable amount of the fund.”

The amount spent on R&D by the team in past campaigns has not been disclosed and is very difficult to guess. The Callaghan Fund does not release the amounts allocated, however in April 2015 following gross media misunderstanding of the funding process, Core Builders Composites revealed that it received just over $250,000 from a grant allocated almost two years earlier.

At the time, CBC said that its R&D was well under the $5million cap.