Effective Sept 1, 2010 our equal weight fuel cell index was updated. The index still has the same six companies with aggregate market cap of about USD 500 million. The sector continues to have trouble in public markets. On June 21, 2010 Protonex Technology Corp (PTX.L) was delisted from the London AIM market.
Posts tagged ‘FCEL’
Author: Gary Simon
It appears the world has its first profitable fuel cell company. Smart Fuel Cell in Germany (F3C.DE) basically reached breakeven in Q2 08 and as revenues grow should show positive earnings in Q3 and Q4. Smart makes a direct methanol fuel cell, using a similar PEM membrane as the hydrogen-only fuel cells. Smart has reported its fuel cells are only 11% efficient, but are improving. How much they are improving has not been mentioned. Smart shows a trailing 12 month revenue of $23 million—not bad at all. Their results seem to show that indeed customers like a fuel cell with an easy-to-carry, compact and relatively easy-to-find liquid fuel, even if the efficiency is low. This stands in contrast to the hydrogen-fueled PEMs where finding the fuel is still a chore. Once a company in a new technology area begins generating positive cash flow, it has a war chest to erect barriers preventing others from entering its market. It will be interesting to see how Smart does on this score.
There are several direct methanol fuel cell companies with more efficient, maybe even better, technology. The question will be whether that matters in the face of a blocking move from a profitable competitor. Oorja Protonics (private) unveiled its direct methanol kw-class power pack for forklifts in the past quarter, and Mechanical Technology (MKTY) continues progress on its small methanol unit for portable devices. CMR Fuel Cells (CMF.L) in the UK similarly is continuing work on its 25 watt methanol unit.
A good example of a profitable business will likely lift the fortunes of other fuel cell companies and that could improve valuations. However, nothing will improve valuations like a good exit—early investors getting extravagantly rewarded through a popular public share or acquisition. The bubble in 2000 made some fuel cell company investors immediately wealthy, but that opportunity came crashing down when reality came no where near the hype. If there is to be another surge, it will have to be based on real results—from at least some companies. Hydrogenics (HYGS) and private company Altergy may be coming close to profitability soon. Altergy (hydrogen PEM fuel cells for telecom backup) is rumored to be preparing for an IPO next year. Maybe they will provide that big exit that will attract attention.
Unfortunately, another dramatic milestone was reached in Q2 08: The cumulative (multi-year) losses from the public fuel cell companies exceeded $4 billion. All the usual suspects continue to bleed cash—Fuel Cell Energy (FCEL), Ballard Power (BLDP) and Plug Power (PLUG). Those losses continue to put a damper on investor interest in the sector. FCEL’s results for Q2 08 were worse than expected, with a loss of $26 million and more importantly a ratio of cost to sale price of 1.68, actually up from 1.61 in Q1. Recall that a big question looming for FCEL is whether its success in sales (revenues doubled over last year) will bring them closer to or farther from breakeven. This quarter’s results showed worse than expected margins on increased sales.
It is still very likely there will be a significant shake-out in the next year. There are seven public and private companies currently officially in collapse—some through Chapter 11, some through liquidation, some through sale. Perhaps the most surprising to some was the announcement by Siemens-Westinghouse that its solid oxide fuel cell business was for sale. S-W probably spent hundreds of millions to develop this technology and probably the US Department of Energy tossed in hundreds more. This follows the move in the Spring of 2007 by General Electric to shutter its major solid oxide fuel cell shop in Torrance, California. While GE continues some technology research at its corporate R&D center in New York, it backed away from creating a commercial product. Maybe all this says is that the big-company approach to fuel cells isn’t working so well. Start-ups like Smart Fuel Cells show there is another way, especially by starting small with its 50 to 250 watt size systems.
United Technologies through its UTC Power unit is still one big company pursuing large fuel cells. It recently announced an award to supply 12 fuel cells of 400 kW each for the World Trade Center in Manhattan. This is the new unit slated to replace the 200 kW PC 25. UTC has sold over 270 of the PC 25 units to date, probably the most kWs of fuel cells sold in the world. However, UTC has not reported that the fuel cell division is profitable. The conventional wisdom is that the new 400 kW unit is UTC’s move to try to bring the division to profitability. That creates an interesting contrast to the “small is better” approach.
Gary Simon is a venture partner with Velocity Venture Capital in Folsom, CA. He is the CEO of Acumentrics and a board member of Jadoo Power. Both companies are deeply involved in commercializing fuel cells. Gary is also an advisor to Camino Energy.
by Mark Henwood
Emerging markets, EAFA, and the US market (S&P 500) were again little changed on the week, commodities (DJP) fell 1.7%.
Sustainable energy stocks have exhibited significant volatility in past weeks but were relatively unchanged this week. The exception was the fuel cell sector.
Fuel Cells were off for the week with the decline primarily driven by FuelCell Energy’s (FCEL) quarterly numbers. The company reported increased revenue and increased losses. The company has proven that if you sell more product at a loss you lose even more. That said, management believes they are making progress in improving their cost/revenue ratio down to 1.5 in the next quarter and toward gross margin breakeven in the later half of 2009. This means the earliest possible date for the company to show a profit is in 2010.
Investors reacted by driving the stock down 18% for the week. It’s hard to see an earnings growth tragectory starting in 2010 that justifies a USD 500 million market cap when current backlog is USD 100 million and production capacity is just 30 MW per year.
Mark is the founder of Camino Energy, an information provider specializing in globally traded sustainable energy stocks.
By Gary Simon
Three months ago, I offered some thoughts on this industry as an insider. Let’s look at how those observations held up.
1. The fuel cell sector has been underperforming on investors expectations for some time. This trend continues. A new threshold was passed as Ballard Power became the first fuel cell company to report an aggregate total loss since inception of over $1 billion. The top four in sales (FCEL, BLDP, HYGS and PLUG) are also the top four in annual losses. These three account for the majority of all fuel cell revenue, a total of $191 million in the last twelve months a figure which is still growing. The total fuel cell sales per year are up to about $300 million including private and public companies, a new record. Yet, there is still no profitable public fuel cell company. These four leaders spent about $448 million to sell that $191 million.
2. There may be a substantial market for PEM fuel cells in portable power applications. MCEL and MKTY are bellwethers in this space. The past quarter was not kind to these two and most others like them. MCEL terminated all officers and employees on May 12, indicating it had run out of cash. NASDAQ suspended trading in its stock May 27, seeking more information on the company’s plans. MCEL has not filed for bankruptcy yet, but may.
MKTY did an 8-for-1 consolidation of its shares (a reverse split) to boost its price back above the $1 minimum price required for a NASDAQ listing, but has less than one year’s cash on hand at the current burn rate. Their auditors gave them a negative opinion on whether the business could remain a going concern. They clearly need to do something to raise cash or cut back their cash use.
A similar portable power company in the UK, Voller Energy on the London market (VLR.L), is also in the throes of a possible sale or liquidation with a share price below 6 pence.
Medis Technologies (MDTL) has yet to show any significant sales of its 2 watt power pack for one-time cellphone and laptop recharging. It has a mass production line ready to meet a huge demand, but so far meaningful demand has not materialized. The unit faces serious competition from a simple and cheap emergency recharger that uses AA batteries. The company showed losses of $48 million in the last twelve months, and $19 million cash on hand. Its share price recently hit a new 52-week low.
On a more positive note, portable fuel cell maker Protonex (PTX.L) has a nice pile of cash (about $30 million) that it is using slowly.
So the score at this point is four in trouble, one doing reasonably well in the portable space.
3. The main competitor to the PEM is the solid oxide or ceramic fuel cell. Several companies have made advances faster than expected. Ceres Power (CWR.L) and Ceramic Fuel Cells Ltd. (CFU.L) are the bellwethers so far in this race. Both have seen a significant drop in their share prices. CFU.L dropped 26% from 27 pence on the London market to 20 pence. CWR.L dropped 32% from 220 pence to 150 pence. Both bounced back a bit. However, most of the solid oxide fuel cell companies are still private and their performance is yet to be seen.
4. FCEL stands out with its large fuel cells and needs volume to get to breakeven, with 2008-2010 a very telling period. FCEL is the leader in backlog for fuel cells, with now $134.7 million on the books. However, its selling price per unit is still 40% below its costs, so volume only deepens its losses. The hope is that with volume costs will decline. The company has about 4 quarters of cash on hand, and it is likely it will need to raise more in order to make it to profitability. That creates a race to get more cash before it is all gone. It has already lost $482 million getting this far.
5. There is at least an equal number of small private fuel cell companies [to the 23 public companies] churning away, hoping one day to make it to the public market [and become the market leaders]. Still true and the ray of hope in this industry. Expect to see at least two IPOs of fuel cell companies in 2009.
Gary Simon is a venture partner with Velocity Venture Capital in Folsom, CA (www.velocityvc.com) . He is the CEO of Acumentrics and a board member of Jadoo Power. Both companies are deeply involved in commercializing fuel cells. Gary is also an advisor to Camino Energy.