Citing the cheap price for natural gas, Westport Innovations Inc. said Tuesday that it reached a deal with Caterpillar Inc. to jointly develop natural gas engines for off-road equipment including mining trucks and trains.
Specific financial terms were not disclosed. The news sent Westport shares up $1.53, or 6.8 percent, to $23.80 in premarket trading. Shares of Caterpillar, the world's largest maker of construction and mining equipment, fell 26 cents to $83.
The Canadian company said that lower prices for natural gas, especially when compared with prices for traditional diesel fuel, provide a strong financial incentive to develop natural gas engines for off-road uses.
A surge in domestic production combined with a relatively warm winter has pushed the price of natural gas to 10-year lows in recent months.
Caterpillar, which is based in Peoria, Ill., will fund the development of natural gas fuel systems. Westport, which makes natural gas engines, expects to supply key components.
The companies are beginning to development programs now, and commercial production is expected to begin in about five years, Westport said.