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High-temperature superconductors (HTS) expert Zenergy (ZEN:AIM) is powering ahead as E.ON, Germany’s largest electricity producer, asked it to upgrade the capacity of a planned 1.25 megawatt HTS hydro-power generator, to be installed at a hydro-station in Bavaria, to to 1.7 megawatt.

The upgrade is a major sign of E.ON’s confidence in the commercial strength of Zenergy’s technology. The hydro-power station in Bavaria is going through a planned refurbishment and Zenergy had previously announced that E.ON required it to install a hydro-generator that used its HTS technology.

The required upgrade means that, once the generator becomes commercially operational in 2009, it will serve as the main (or ‘base-load’) generator at the station, supplying more than 3,000 homes in the area.

Over the years Zenergy has established itself as an expert in high-temperature superconductivity, put simply this involves types of wire that work in a much more efficient way than common copper ones. The technology was discovered at the start of the last century, but Zenergy has been the first company to make it economically viable and to commercialise it.

The company’s HTS wires will make E.ON’s generator save money due to increased efficiency and stability. The German utility said it will bear the cost of the upgrade from 1.2 to 1.7 megawatt.

Unlike its larger peer American Superconductor Corporation (AMSC:NASDAQ), Zenergy is focusing on technology rather than selling HTS wires as a commodity.

The Aim company is active in almost every field of traditional and renewable energy and is especially targeting wind power, as HTS wires are much lighter and could take the lucrative offshore market by storm once Zenergy is able to produce them in large scale.

Also on the agenda for Zenergy is the installation of its fault current limiter – a device to absorb power shocks – on a grid in the US, and has sold a special metallurgic industrial machine to Germany’s Weser Alu.

Deals and news of milestone achievements sent the shares through the roof last year, more then doubling their value to the current 261p. Last December’s placing meant the company won’t have to raise funds in the medium-term. However, part of its strategy is to release minimal earnings forecasts as it is still going trough the development of technical and commercial relationships with its partners.

Shares says: A solid company with a sensible strategy and rosy prospects. SPECULATIVE BUY