FuelCell Energy Stock Still in the Valley of Tears

Margalef
Pere Margalef, © FuelCell Energy

FuelCell Energy (Nasdaq: FCEL) disclosed in June that South Korean Posco Energy would end its agreement with the company to provide certain market access rights in Asia. By contrast, other Korean suppliers have begun to invest in fuel cells on a large scale. Posco’s decision could have been made for strategic reasons, maybe to limit its product range. The fuel cell division seems to be the logical choice: The two businesses have built relatively large fuel cell parks together, but the total investment has been comparatively small. The real question is which organization bought Posco’s 15 million shares. Also, did the corporation accept a discount on the price, which would explain the steep drop on the stock market?

The name of the new shareholder will certainly become public at one point, though it could likewise be a group of investors that managed to split up the parcel to circumvent reporting requirements. In my view, there is only one positive interpretation, considering Posco’s shares were again offered for sale later. A high-ranking Ballard employee may have used the opportunity to purchase stock in the amount of USD 200,000.

Around the same time, the company was able to add some bookings, for example, by the U.S. Navy. Moreover, it announced intriguing advances on the technology front. My gut feeling is that FuelCell Energy is trying to get into a more favorable market position, as it expects large orders to arrive soon. The company stated that it had bid on projects worth more than USD 1.6 billion. This is in line with its announcement to increase capacity from 25 megawatts to 55 in a year and hire another 100 employees.

Not long ago, it won two contract bids for delivering 22.2 megawatts of capacity in Connecticut. Additionally, the U.S. Department of Energy awarded FuelCell Energy USD 10 million in research funding.

As for the results from the second quarter ended April 30, 2018: The company was able to increase backlog to USD 682 million and has an eye on USD 1.6 billion in biddings. Cash amounted to a healthy USD 105.2 million of restricted and freely available funds. If you add NRG Energy’s credit facility of USD 40 million, FuelCell Energy has cash reserves totaling USD 145.2 million.

Shares convertible into Series C preferred stock at USD 1.84 cost the company USD 4.2 million in dividends, but the payment was – in my estimation, albeit no guarantee it’s true – in the form of shares. My interpretation of this financing method is that capital is made available on demand, so to speak, and taking full advantage of that method could rake in about USD 50 million. These funds will become important when FuelCell Energy needs to deliver large orders that require equity or securities.

I think the price took a dive because of Posco’s exit and not fundamental change, so that we may soon see the stock recover, provided business develops as expected.

FuelCell Energy Solutions has again needed to reassign responsibilities for sales in Europe, or, more specifically, Germany. After Klaus Ullrich left the company, his tasks were taken up by Pere Margalef (see photo), who “has been put in charge of all sales operations in Europe,” Chip Bottone, FuelCell Energy’s chief executive, told H2-international. Ullrich had been elevated to vice president of business development in May 2017 (see H2-international, August 2017) after Andreas Frömmel had gone to work for sunfire, where Ullrich is now employed as well.

Risk warning

Share trading can result in a total loss of your investment. 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 may experience high stock volatility. 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 content of this article reflects the author’s opinion only. This article focuses on mid-term and long-term prospects and not short-term profit. The author may own shares in any of the companies mentioned in it.

Written by Sven Jösting

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