|Partnerships Point Investors |
To Fuel Cell Prospects
Strategic partnerships offer an important clue to ultimate success of the various fuel cell developers. It is through these partnerships that investors can get a good idea of how viable the technology is and in some cases, who owns a piece of it.
Of the top seven developers, Burnaby, BC-based Ballard Power (NASDAQ: BLDP, TSE: BLD) and FuelCell Energy (NASDAQ: FCEL) of Danbury, Connecticut have more significant alliances under their belts than all of the other fuel cell developers combined.
Ballard Power has been able to use its substantial market cap, currently sitting around $9.2 billion, to acquire equity interest in their partners. These partnerships are considered to lend more credence and support to a technology than the type of distribution alliances FuelCell Energy has negotiated lately.
As its latest financials revealed shrinking losses, the company plans to use its stock to make minority investments and acquisitions of companies that have complementary fuel-cell technology. Acquisitions would focus on companies developing proton exchange membrane (PEM) fuel cells that would increase Ballard's speed to market.
Announcing its third-quarter financials in an analyst conference call on October 31, Ballard Power set the stage for an increase in future partnerships and eventual acquisitions. The day before the conference call, Ballard announced it had entered into a joint development agreement with Eatontown, NJ-based Millennium Cell (NASDAQ: MCEL) for its Hydrogen on Demand ™ generation system.
On October 24, BLDP had announced another agreement with Matsushita Electric Works of Japan. Matsushita will initially use the Ballard fuel cells for on-going field-testing and demonstration of their 250-watt portable compact power generators for the Japanese market. Ballard had an evaluation program relationship with Matsushita dating back to 1996, and has seen that partnership develop into a supply alliance.
On September 27, Ballard had announced it had taken a 10% equity stake in another Burnaby, BC-based tech company called QuestAir Technologies, with an agreement to develop and commercialize QuestAir's hydrogen purification and oxygen enrichment technology, which will be integrated with Ballard's PEM cells.
Ballard's existing partners include; GPU International, an energy company in Parsippany, NJ, ALSTOM, the power generation leader in France and Ebara Corporation of Japan, all holding equity positions in Ballard Generation Systems, the stationary power division of Ballard Power. Both DaimlerChrysler (NYSE: DCX) and Ford (NYSE: F) hold equity stakes in Ballard of 18.4% and 13.8% respectively.
One of the first commercially available products utilizing Ballard's fuel cell technology will emerge in late 2001 through a partnership announced January 16 with Coleman Powermate, a subsidiary of Sunbeam Corporation (NYSE: SOC), for portable and standby power products.
FuelCell Energy has fewer equity partners than Ballard.
One significant equity partner it recently picked up is Enron North America, a wholly owned subsidiary of Enron Corporation (NYSE: ENE), the largest wholesale power marketer in the U.S. FuelCell and Enron plan on working together to develop and market FuelCell's Direct FuelCell ™ products, with a focus on state renewable and energy conservation programs. Enron has taken a $5 million equity position in FuelCell with the option to purchase additional warrants down the road.
On September 21 FuelCell announced that PPL EnergyPlus, a subsidiary of PPL Corporation (NYSE: PPL) would become the first North American distributor of FuelCell fuel cells and make a $10 million equity investment in FuelCell. PPL markets wholesale or retail energy in the U.S. and Canada and delivers electricity everywhere from Britain to Brazil.
On October 6, FuelCell announced the formation of a multi-party partnership with Southern Company (NYSE: SO), Mercedes-Benz U.S. International Inc, and the Alabama Municipal Electric Authority (AMEA), combining an energy company with a power utility, a vehicle manufacturer and a fuel cell developer, all working towards getting fuel cells to market. As part of the deal, Southern Company and AMEA have options to negotiate exclusive arrangements for the sale and distribution of FuelCell's power plants. Southern Company is the largest producer of electricity in the U.S. Alabama Power is a wholly owned subsidiary of Southern Company.
On October 30, FuelCell announced a fuel marketing partnership with Syntroleum Corporation (NASDAQ: SYNM), which will set the foundation for FuelCell to buy and resell Syntroleum synthetic fuels to its customers. Under the terms of the deal, FuelCell has also acquired the option to purchase synthetic fuels from a planned project under development in Australia as well as other plants as they become operational.
FuelCell has a long-standing relationship with the U.S Department of Energy (DOE) and recently received a $40 million extension to its existing contracts with the DOE. Other existing partners include; MTU, the European division partner of DaimlerChrysler, Marubeni Corporation of Tokyo, Japan, and Bath Iron Works of Bath, Maine , a division of defence contractor General Dynamics (NYSE: GD).
International Fuel Cells (IFC), is a division of industrial giant United Technologies (NYSE: UTX) based in South Windsor, Connecticut, is apparently still mulling over the possibility of spinning off International Fuel Cells as a separate operating entity. The company expects to generate $1 billion in revenues from its fuel cell and micro turbine businesses by 2005 and $4 billion by 2010.
International Fuel Cells announced plans on September 19 to form a joint venture with Toshiba Corporation (NASDAQ: TOSBF) to develop and market commercial and residential fuel cell technology in Japan. Toshiba will own 51% of the venture while IFC will control 49%. Toshiba already maintains a significant equity stake of 12% in IFC.
In mid-September, IFC signed another partnership, this time with Shell Hydrogen, to combine their fuel cell expertise in a 50/50 joint venture to develop fuel processors.
United Technologies has been working with the DOE for some time and recently announced the successful demonstration of a gasoline powered fuel cell system, designed to power an automobile.
In addition, IFC has been working closely with five automakers, including BMW and Hyundai, on development and demonstration programs for the auto niche.
IFC has been in the fuel cell business far longer than any of the other developers and have a nearly 35-year relationship with NASA that has positioned the company to expand into a variety of other market niches.
Plug Power (NASDAQ: PLUG), based in Latham, NY,
was created in 1997 as a joint venture between DTE Energy (NYSE: DTE) and Mechanical Technology (NASDAQ: MKTY), each controlling roughly 32% of the company.
Plug has long been a partner with GE. A joint agreement between the company and GE Power Systems created GE Fuel Cell Systems for the purpose of installing Plug Power fuel cells worldwide. Since that time, the two companies have had to revise their agreements and push back commercialization dates by more than a year. To date, GE seems to remain committed to PLUG.
German chemical group Celanese is working with PLUG on stationary fuel cells and PLUG also has a strategic relationship with Sempra Energy (NYSE: SRE) subsidiary, Southern California Gas Co., the largest natural gas distributor in the U.S.
H-Power (NASDAQ: HPOW) is based in Clifton, NJ.
The company announced on October 23 that it had signed a Memorandum of Understanding with SGL Carbon (NYSE: SGG) to jointly develop graphite plate components for use in H-Power's PEM fuel cells. SGG is the world's largest maker of graphite and carbon products but has run into trouble in the past with the U.S. Justice Department, pleading guilty in May 1999 for price fixing irregularities and agreed to pay a $145 million fine. A similar settlement was reached in Canada in July 2000 for CAN$12.5 million.
On September 20, HPOW signed another Memorandum of Understanding with Ball Aerospace & Technologies Corp., a subsidiary of Ball Corporation [BLL). Under the terms of the deal, HPOW will supply Ball with PEM fuel cell stacks for use in Ball Aerospace's hydrogen power systems that are sold to the U.S. military and other users.
Energy Conversion Devices (NASDAQ: ENER) is based in Troy, Michigan.
The company announced on October 31, the formation of Texaco Ovonic Hydrogen Systems, a 50/50 joint venture to develop and advance the commercialization of ECD's hydrogen storage technology. Texaco already maintains a 20% equity interest in ENER.
Global Thermoelectric, (TSE: GLE) is based in Calgary Alberta.
The company announced on July 31 that it had established an alliance with Enbridge (TSE: ENB) to develop and distribute natural gas-fuelled fuel cell products to residential and light industrial markets in Canada. Enbridge is a key partner for Global Thermoelectric since owns the largest natural gas distribution company in Canada through its subsidiary, Consumers Gas. Enbridge has invested C$25 million in the venture.
Global Thermoelectric has ongoing contracts with the Gas Authority of India, as well as the U.S. Army's Tank Automotive and Armaments Command, which could both lead to long-term production alliances.
Graphs on the link.