During the industry conference Energy – Think Outside the Box in Berlin, William M. Colton, vice president corporate strategic planning at ExxonMobil, talked about the big potential of a technology called “carbon capture.” By that, he meant the option to add CO2 to hydrogen to create methane and convert the result into power and heat inside a fuel cell. ExxonMobil’s partner for generating energy from emissions is FuelCell Energy (NASDAQ: FCEL). Days later, U.S. President Donald Trump said in a speech that he intended to “end the war on coal” and that the United States was going to have “clean coal.” A co-incidence? One of the members of Trump’s team is former ExxonMobil chair Rex Tillerson, who could have told Trump about the technology.
In any case, it’s good news for FuelCell Energy, which has the great opportunity after the construction and successful operation of a joint test facility together with ExxonMobil to set up similar installations with the help of this partner/customer worldwide. Why else would Colton have pointed to FuelCell Energy in his speech? On March 16, 2017, ExxonMobil also held a presentation on carbon capture storage at company headquarters, an event said to have been attended by the new chair of the corporation, Darren Woods. One day earlier, FuelCell Energy had spoken in front of the National Coal Council, an organization that reports directly to the U.S. government, highlighting the carbon capture solution.
With a net loss of USD 0.39 per basic and diluted share and revenue down to USD 17 million – as the collaboration with Korean-based POSCO Energ is no longer generating sales but license and royalty revenue – business development did not meet expectations. Still, FuelCell Energy has the chance to be awarded the contract in several bidding projects. At least, it was able to up backlog to above USD 437 million. With USD 57.6 million in cash and cash equivalents, a value that matches the current market cap of the business, liquidity has been maintained as well. Add to that the around USD 43.5 million in “restricted cash” and a financing facility worth USD 40 million.
New projects in the pipeline
The 63 MW project Beacon Falls is progressing and FuelCell Energy is still in it to win it. The company said that it had “numerous projects in several markets” where a final decision was expected soon. Members of management have held a series of presentations in front of politicians, associations and businesses to highlight the benefits of the company’s fuel cell technologies (efficiencies, cost-benefit ratio, decentralized and clean energy generation, etc.). FuelCell Energy also operates 11.2 MW capacity on its own, a portfolio to which 6.5 MW are said to be added to drive up revenue by selling power and generate cash flow from operating activities.
My thoughts: FuelCell Energy should be evaluated based on its technological prowess. Customers such as ExxonMobil have the potential to market these technologies (e.g., carbon capture) on a large scale. This idea of large-scale projects is, in my opinion, the basis for an evaluation of the company going forward. That it needs to create sustainable profit is par for the course.
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 (text was written in March 2017)