Finally: FuelCell Energy has agreed and settled with South Korean company Posco. FuelCell is now independent from Posco again and can pursue other opportunities in Asia. The company figures of FuelCell Energy are not yet very convincing, given the last quarterly results: a measly 14 million USD turnover. Although there are pending orders of 1.29 billion USD in the books, so far seemingly few new orders are coming in. The cooperation with ExxonMobil was extended once again, but with no new conditions to report.
The balance sheet, however, is in good alignment. FuelCell used the run from about 0.50 USD to over 25 USD in 2021 perfectly and, by reissuing at 8.50 USD per share, was able to take in 360 million USD. So the company is in a very good financial position today: 460 million USD on hand.
Likewise for competitor Bloom, the two programs of the Biden administration amounting to 1.7 to 2 trillion USD present an interesting opportunity. If that comes, then even larger sums will massively secure the supply of energy grids as well as stimulate ramp-up of the hydrogen economy in the US.
Numbers raise questions
The first quarter of fiscal year 2022 saw an increase in turnover to 31.8 million USD (previous year: 14.9 million USD). However, included in this is an order as a result of the legal settlement with Posco: six modules were delivered for 18 million USD, and another eight will follow in the course of the first quarter, ending April 30th. At the same time, 24 million had to be borne for legal fees arising from the dispute. The stated loss for the year of 46.1 million USD is considerable, even taking into account the aforementioned (legal) costs.
The company makes use of electricity that it generates itself from FC power plants. So far, this involves 41.4 MW of power, which is sold, recurrently, via PPA (power purchasing agreement). In Canada, FuelCell has started a project with Clean Resources Innovation Network (CRIN) on carbon capture technology. With Exxon, the company has reached a new stage: Exxon is paying 5 million USD but FuelCell Energy is investing the same amount in the project in Rotterdam. About 405 million USD in cash (freely available and restricted) still lies in the bank.
What’s missing, in my opinion, is a clear company vision. Perhaps new inspiration will come from Asia. The amount of shares traded daily shows that day traders and also neobroker platforms are very active there. The share therefore is still only for investors interested in an investment with short-term, high fluctuations. If that’s the case, prices of over 10 USD will be quickly reachable. Nevertheless, the valuation of FuelCell Energy, 2.5 billion USD, relative to Bloom Energy at 4 billion USD, is very low, which makes purchase in the latter seem much more reasonable.
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: Sven Jösting, written March 15th, 2022