Fuel Cell Stocks Power Ahead

Wednesday, March 05, 2014

By Chuck Mikolajczak, Garima Goel and Sneha Banerjee, Reuters

Shares of U.S.-listed fuel cell makers surged in heavy trading on Wednesday, led by FuelCell Energy Inc , as investors bet that demand will grow for the cleaner alternative to lead-acid batteries as a way to power vehicles such as buses and fork lifts.

FuelCell Energy's shares surged 25 percent to a four-year high of $3.40 in early trading, with 58 million shares changing hands by 1055 ET, making them among biggest movers both in percentage and volume terms on the Nasdaq.

The company's shares, along with those of Plug Power Inc and Ballard Power Systems Inc have been on a tear in recent months. Its shares have jumped more than 61 percent over the past five sessions and have more than tripled in the past 12 months, including Wednesday's gains.

That performance pales, however, when compared to Plug Power's surge of 4,024 percent. Its shares rose as much as 5 percent to $7.01 on Wednesday, with nearly 27 million shares traded.

Shares of Canada's Ballard have jumped nearly eight-fold, while those of Hydrogenics Corp have more than tripled. Both stocks rose in early trading.

Fuel cells combine hydrogen and oxygen to produce electricity, water, and heat and generate electricity continuously as long as fuel is supplied. They do not burn fuel, which makes them an efficient, quiet and pollution-free alternative to combustion engines.

Global fuel cell market revenue is expected to reach $2.5 billion by 2018, according to market research firm MarketsandMarkets. Shipments of fuel cells are expected to jump to 1.1 million units by 2018, from 24,500 in 2012.

"The technology has become more affordable," said Byron Capital Markets analyst Dev Bhangui, who has a "hold" rating on Ballard and a "strong buy" on Hydrogenics.

"In the longer term, prices are going to come down further and can be integrated with other technologies," he said.

Latham, New York-based Plug Power said last week it had won a contract to supply fuel cells to Wal-Mart Stores Inc that will power warehouse forklifts.

Analysts have pegged the contract value at about $50 million - a figure Plug Power Chief Executive Andy Marsh told Reuters was "not a bad estimate."

Plug Power has said it expects to be profitable for the first time in 2014 on an EBITDA basis as it racks up orders, which have been pouring in since French industrial gas maker Air Liquide invested in the company last May.

"The space in general has been seeing a lot of momentum just because of new contracts," said Ardour Capital Investments analyst Adam Krop.

"Plug Power announced the Wal-Mart deal and there is speculation there could be more contract wins along those lines."

Plug Power's customers include U.S. grocer Kroger Co, Procter & Gamble Co, Coca-Cola Co and German car makers Daimler Mercedes and BMW.

Ballard is Plug Power's exclusive supplier of fuel cell stacks in North America and some European countries. The stacks convert hydrogen and oxygen into electricity.

Burnaby, British Columbia-based Ballard said last week it expects revenue to increase 30 percent this year to about $80 million. The company also makes fuel cells for use in buses, power backup systems and material handling equipment.

Its shares climbed as much as 10 percent to touch a 5-year high of $5.89 on the Nasdaq on Wednesday before easing back to $5.36.

(Writing by Sayantani Ghosh; Editing by Meredith Mazzilli and Ted Kerr)

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