FuelCell Energy: Decision on Beacon Falls

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Power plant in Riverside, © FuelCell Energy

The final decision on which company will be awarded the contract for the 63 MW Beacon Falls project should have already been made by the end of July 2016, but has since been moved to Sept. 5 and then to Oct. 26. The delays seem to be the result of additional bids that include wind and solar energy. In my opinion, the fuel cell plant offers significant benefits, since it’s not only about the efficiency of electricity and heat generation, but also about the size of the plant. If the contract were awarded to a bidder offering wind and/or solar farms, I’d personally have doubts about the feasibility of such a project, if only because of the space required.

Meanwhile, FuelCell Energy has also procured “funds on demand,” which I believe will be utilized if the Beacon Falls deal is decided in favor of the company, as the money could be used to pre-finance certain parts of the project. We are talking about up to USD 80 million that FuelCell could get by issuing shares. What’s interesting about the situation is that the potential fund giver does not want to be named until the project’s a done deal.

Third-quarter figures

At first glance: disappointing. Compared to the third quarter of last year, revenue dropped from USD 41.4 million to USD 21.7 million. The posted loss (USD 11.8 million) was a hard pill to swallow. Still: FuelCell Energy is a project developer, which means there will inevitably be large differences in project billing from one quarter to the next. Cash and restricted cash add up to an impressive USD 129 million and the additional financing availability offered is above USD 50 million. But the intention of a so far unnamed investor to buy FuelCell shares in the amount of up to USD 80 million – which has already occurred to a certain extent at prices of above USD 5 per share – is a sign that the company is expected to receive several large orders in the future. Revenue backlog is at a very high level, amounting to USD 392 million (in particular, from service contracts). I will explain the numbers in more detail in the next H2-international issue because by then, there should be a decision on now three large projects totaling 127 MW. Today, you’d say at the stock exchange: Buy on bad news.

Risk warning

Investors must understand that buying and selling shares is done at their own risk. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they do not represent stakes in big companies and the volatility is significantly higher. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the assessments put forth in this article represent exclusively the author’s own opinion. This article focuses on mid-term and long-term perspectives and not short-term profit. The author may own shares in any of the companies mentioned in this article.

Author: Sven Jösting

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