FuelCell Energy: a Multi-Bagger Investment

FuelCell Energy (FCEL) is progressing in the right direction. The company’s backlog has been increasing both sequentially and year-over-year. The fourth quarter backlog totaled $ 381 million registering a second consecutive increase in backlog. Out of this total, the product sales backlog of FuelCell Energy was $ 91 million or 41 megawatts. Service backlog totaled $ 254 million and advanced technology contract backlog was $ 36 million.

The company’s total liquidity at the end of the fourth quarter was $ 122 million.
This includes $ 58.9 million of cash and cash equivalents and $ 26.9 million of restricted cash. That amounts to $ 86 million of cash and cash equivalents. The remaining $ 36 million of liquidity of FuelCell Energy comes from the $ 36.2 million of the revolving project financing facility extended by the FuelCell Energy partner NRG Energy.

Nearing Profitability:

FuelCell Energy has not been able to generate net income but it seems to be closing in on that. Since 2008, the company has steadily narrowed its losses. The long-term trends of the various metrics look positive apart from the recent decline that may be due to cheaper natural gas that has affected coal as well as nuclear.

FuelCell Energy has not reported any profit since 1997. But that’s normal for a company that is on the cutting edge of energy generation. Intellectual property and advanced leading technologies developed by FuelCell Energy are included in over 80 % of the FuelCell Energy applications in the world. Further, the recent announcements on carbon capture, solid oxide, power generation and storage reinforce our leadership in the industry.

And more importantly, the company is doing well in the eyes of “believers in the technology”, one of whom is Connecticut Governor Dannel Malloy. Malloy was present at the ground-breaking ceremony conducted in regard to FuelCell’s factory expansion at the Torrington, Connecticut, site. He said, Hydrogen will wind up playing a larger role in the world and that it adds $ 211 million to the state’s economy through about 600 companies involved the fuel-cell supply chain.

Hence, the $ 10 million assistance is provided by the state to more than double the footprint of the factory. The credit may extend up to $ 30 million including loan and tax credits and will help boost the manufacturing capacity to 200 megawatts per year.

At present, FuelCell Energy has a capacity of 100 MW and is selling about 70 MW per year which is 20 MW per year short of the breakeven point forecasted by CEO Bottone.

More recently, Connecticut approved a proposal for what would be the world’s largest fuel cell power plant. The plant will generate 63.3-megawatt using FuelCell Energy equipment at the Beacon Falls location.

Further, FuelCell Energy has recently announced that it will install a utility owned multi-megawatt fuel cell power plant configured as a micro-grid jointly with its utility customer, United Illuminating. The company’s expertise in micro-grids opens up a new avenue of opportunities for its future. Secondly, the company demonstrated its immense potential for winning customer trust by announcing the installation of a 1.4 MW power plant for an existing customer Alameda County, California who has agreed to purchase power and heat from the former for the next 20 years.

Conclusion

FuelCell Energy has been able to impress customers and investors alike for the many years that it’s been alive. It is an ahead of the curve company like Tesla and Amazon. On the street, it has been declining for nearly two years now. But since it is most likely to churn profits from this year or the next, we can expect an unprecedented rise after that point onwards.
Published on Apr 20, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

Posted in ...