FuelCell Energy: A Real Strategic Shift

Franc
Pierre-Etienne-Franc

More and more news reports, talk shows and interviews with leading politicians in Germany are making explicit mention of fuel cells – sadly, most of the time only in reference to the diesel scandal among the country’s automakers. Still, it’s a clear sign that people are becoming aware of the technology’s potential. Pierre-Etienne Franc, secretary general of the Hydrogen Council, has said recently: “The years 2020 to 2030 will be for hydrogen what the 1990s were for solar and wind. It’s a real strategic shift.”

FuelCell Energy: It Has Begun

Finally, there are the agreements you could hope for: Three contracts requesting the supply of overall more than 39.8 megawatts were awarded to FuelCell Energy (Nasdaq: FCEL) by Long Island Lighting, NY. The contracting arrangement to supply power and heat to 40,000 residential units will run for 20 years. Another contract was awarded by Korea Southern Power for a 20-megawatt system. FuelCell Energy has said that these new bookings exceeded USD 1 billion. The recent capital raises and the issue of warrants, plus the option to exercise them at some point, add up to a theoretical amount of currently USD 73.8 million in available liquidity (equity), which has laid the perfect groundwork for financing the business’s share in this and other projects in the future.

Additionally, FuelCell Energy issued preferred stock convertible into common shares (at a rate of USD 1.84 per share) adding up to a nominal value of USD 33.5 million, which corresponds to a net amount of USD 28 million. In my book, it gives the company a very good chance to finally win out on the Beacon Falls project. And Exxon could soon come to the decision to deploy FuelCell Energy’s carbon capture technology at several facilities worldwide after their joint demonstration project. What’s interesting is that the third-quarter net loss of USD 17.8 million attributable to common shareholders and posted on Sept. 7 only resulted in a short-term drop in prices, which rallied to a positive close at the end of the day. A good sign of how the stock market views the company and its future.

The above are “visions” which – if they become reality – could boost the price considerably and, I believe, return it to the above USD 5 quotes at which shares were traded as recently as 2016 or even top them. Projects such as the Long Island one can provide a steady revenue and profit stream, which traders will factor in when evaluating the company. And technologies to produce clean energy are regarded as a base component of many applications, markets and regions worldwide. FuelCell Energy is among the leaders in the field, even though the market cap of below USD 100 million doesn’t reflect this yet.

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, written September 8th, 2017

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