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Off-roading equipment is getting ready to go a little greener following a new agreement between Westport Innovations (NASDAQ: WPRT) and Caterpillar Inc. (NYSE: CAT). Announced early this morning, the budding relationship will serve to co-develop natural gas technology for worker transportation such as mining trucks and trains.

Implemented immediately, WPRT and CAT will begin development programs for new and existing engines, combustion technology and fuel systems with the combination of the companies' technology and expertise.

The CAT-funded arrangement positions both companies to bring something entirely new the table when it comes to high horsepower vehicles; Westport's High Pressure Direct Injection [HPDI] technology.

In a recent Mackie Research morning call, WPRT's latest Investor Day was abuzz with the fact that the company has begun to develop a spark ignited 15 liter natural gas engine with HPDI technology. Taking note of the excitement building around such an innovation, CAT customers stand to gain quite a bit of knowledge from today's agreement.

"This is a significant opportunity that has the potential to transform important segments of the global off-road equipment industries," said David Demers, CEO of Westport Innovations. "We are working with the global leader in engines, locomotives and off-road equipment to develop an attractive natural gas offering for their customers.

Also in his statement, Demers commented that the current substantial price difference between natural gas and diesel fuel creates a strong need to enable off-road equipment to take advantage of natural gas without foregoing operational performance.

Clearly, the agreement is a win-win all around for WPRT, CAT, off-roading equipment and the environment, as each player stands to gain something positive. Jumping off to anything but a sluggish pace, the companies combined efforts will begin with initial focus on trucks and locomotives, and will soon transition into developing natural gas technology for CAT's off-road engines.

With commercial production expected to begin within five years, it appears WPRT and CAT have forged a partnership that will one day blossom into a beautiful , healthy butterfly thanks to green efforts made by both.

WPRT closed yesterday at $22.27, down 33% year-to-date, while CAT closed yesterday at $83.26, down 8.1% year-to-date.

Latest Ratings for CAT

Oct 2017ArgusMaintainsBuy
Oct 2017BMO CapitalMaintainsOutperform
Oct 2017CitigroupMaintainsNeutral

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