Mireo –New concept in rail transportation, © Siemens

As the then market leader, Ballard Power (Nasdaq: BLDP) determined soon after taking up its fuel cell activities that there was no way it could compete in the transportation sector. The upfront investment that such a move required was just too great. A decision was made to outsource these activities to AFCC, a Daimler-Ford joint venture and Ballard spin-off, which signed a three-way agreement with Nissan in 2013 to develop the next generation of fuel cells. Nevertheless, it continues to regard both Nissan and Ballard as partners to the endeavor.

To show how times have changed, let me quote Ballard’s CEO MacEwen, who recently described the fuel cell as a disruptive technology that could “uniquely position” his company. He recommended a “30 by 30” policy of having 30 percent of all commercial vehicles equipped with fuel cells by 2030. The company has only 12 years left to meet that target. Batteries and fuel cells would make a good match in a hybrid, with the latter greatly alleviating the limitations of the former and offering more route flexibility. MacEwen, however, is already thinking ahead. He explained during the third-quarter conference call in late September that he wanted to help make fuel cells the technology of choice in heavy-duty truck applications (see also August 2017 issue of H2-international).

There is mounting pressure from all sides. Countries such as China and India have made fuel cells a requirement and 40 leading cities in the world have announced to ban fossil fuel vehicles from their streets by 2030, with 12 planning to implement their policies as early as 2025. Those targets alone offer potential equivalent to around 60,000 busses – all the more reason for taking a closer look at fuel cell businesses and their stock market development.

In 2018, Ballard is said to be involved in the manufacture of around 20,000 bus stacks in China, upward from the 6,000 per year previously. It puts the Canadian business in the most favorable position to advance bus electrification through fuel cells. Considering the market’s prospects for growth, it cannot be overstated what kind of competitive advantage this represents.

On to the number crunching: The company reported a notable 54 percent increase in total revenues at a gross margin of 32 percent. Third-quarter earnings added up to USD 31.9 million. The net loss is getting ever smaller and amounted to USD 1 million during the same three months (that’s minus USD 0.01 per share). Again: The trend is your friend. Quarter after quarter shows constant improvement. The continued high investment in R&D is the reason why the company hasn’t broken even yet. Total liquidity fell to USD 60.1 million, but that’s still a very healthy number. Order backlog reached a record-breaking USD 236.8 million, according to Ballard.

Protonex, the portfolio’s crown jewel

Meanwhile, the U.S. Army has approved the use of fuel cell systems for drones and other military equipment. Starting in 2018, this public-sector customer is said to be placing orders worth USD 150 million to USD 250 million over 5 years, making Protonex, a Ballard subsidiary, the crown jewel in the parent company’s portfolio. Its outlook is extremely positive, and one may assume that the profit margin from the deal won’t be a small one either. Those USD 150 million to USD 250 million over 5 years will also mean that Ballard could rake in USD 30 million to USD 50 million annually in this segment alone. That’s no small change considering total revenues estimated at USD 100 million, and it serves to underscore the minimum 30 percent growth Ballard expects to see this year – without even looking at the company’s other segments, such as bus stack manufacture in China.

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Rolling stock and ships

CRRC, the world’s largest rolling stock manufacturer, has been collaborating with Ballard on developing a hydrogen-powered tram to transport 336 passengers at up to 70 km/h or 44 mph in a 40-kilometer or 25-mile range. Its H₂ capacity is said to be 12 kilograms. Even if this and other projects have not yet left the pilot stage, they could lead to a great many bookings. And which business is in a better position than Ballard to benefit from this growing market?

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“Looking forward, a key business driver will continue to be the compelling value proposition offered by zero-emission fuel cell electric vehicles, or FCEVs, in numerous heavy-duty motive use cases. This is particularly true where vehicles must deal with long range or long hours of operation. In these situations, FCEVs can deliver key financial and operational benefits while also addressing the limitations of a battery-only design, through extended range, rapid refueling and full route flexibility.”

MacEwen, CEO of Ballard

Good prospects

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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 in December 2017