Plug, FuelCell Climb as ‘Experiments’ Seen as Profitable
The fuel-cell manufacturers including Plug Power Inc. (PLUG) that have been Nasdaq’s three-biggest gainers in the past month are at their highest in more than four years today as executives predict profitability as early as this year.
FuelCell Energy Inc. (FCEL) climbed 17 percent to $4.58 at 9:38 a.m., the highest intraday since September 2009. Plug rose as much as 14 percent to its highest since October 2009, and Ballard Power Systems Inc. (BLD) gained 14 percent to reach a seven-year high.
Investors are recognizing that fuel cells have become a viable source of electricity, often provided directly to energy consumers who see them as a way to reduce utility bills. Cheap natural gas from shale and improved systems are making the systems easier to finance, while blackouts from natural disasters including Hurricane Sandy may boost demand. Fuel cells use gas or hydrogen to produce electricity through a chemical reaction.
“These publicly traded science experiments are now talking about becoming profitable after years of losses,” Jeffrey Osborne, an analyst at Stifel Nicholas & Co. in New York, said yesterday in an interview. “The applications they chose to develop are finally becoming competitive, whether it’s forklifts or backup power for cell towers or power plants.”
The surge in valuation for fuel-cell producers mirrors that of solar companies, including SolarCity Corp. and SunPower Corp. SolarCity has gained 33 percent this year to become the most valuable U.S. solar company. SunPower is up 13 percent. Both offer rooftop power systems that provide electricity directly to residential and commercial customers, a challenge to the traditional utility model. SunPower is also the biggest U.S. panel producer after First Solar Inc.
FuelCell makes large power systems that generate electricity for campuses, factories and utilities. The Danbury, Connecticut-based company reported an annual production run rate of 70 megawatts in its first fiscal quarter, up from 56 megawatts a year earlier, according to a statement yesterday. It has said it will be profitable when it’s making 80 megawatts of systems a year.
Plug Power, based in Latham, New York, makes systems that run forklifts and last month said Wal-Mart Stores Inc. agreed to install more than 1,700 of them at six North American distribution centers. It expects profits this year and will release its earnings in two days.
Ballard Power, based in Burnaby, British Columbia, supplies the fuel-cell stacks that run Plug’s forklifts well as its own systems for buses and backup-power supplies for mobile phone towers.
Ballard, which got 11 percent of its revenue last year through its Plug relationship, will benefit from efforts to increase the reliability of mobile phone systems in the wake of Hurricane Sandy and other emergencies that leave consumers without power, Osborne said.
In the U.S., the Federal Communications Commission may consider requiring mobile-phone towers to have backup power systems that have more storage capacity than most battery-back-up systems currently available, he said. That may boost Ballard’s sales to telecommunications companies like Sprint Corp.
FuelCell is benefiting from gas prices that make its power plants competitive with electricity from the grid, he said. Gas on the New York Mercantile Exchange has gained 10 percent this year to $4.66 per million British thermal units.
“With $8 gas, they come in around 14 cents a kilowatt-hour,” Osborne said. “Even after the polar vortex increased fuel demand, with current prices and a federal tax credit they come in under 10 cents.”
That puts installing fuel cells at a campus in line with what they can get it for from their local utility, where the average commercial customer pays 9.9 cents for electricity.
FuelCell reported a loss of $11.4 million, or 6 cents a share in its fiscal first quarter, ending Jan. 31 compared to a loss of $12.5 million, 7 cents, a year earlier. Sales increased 22 percent to $44.4 million.
Sales of stationary fuel-cell systems may increase to $40 billion worldwide by 2022, from about $1.4 billion last year, according to a report yesterday from Navigant Research.
Plug Power reported a net loss of $16 million, or 19 cents a share, in the third quarter, compared with $10 million, or 27 cents, a year earlier.
Plug Power Chief Executive Officer Andrew Marsh said the company will “make money this year” during a March 7 CNBC interview.
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