It doesn’t seem that long ago since early investors in Ballard Power Systems Inc. (TSX: T.BLD, Stock Forum) were getting rich as the stock price soared on hopes that the Canadian company’s fuel cells would replace the internal combustion engine in cars and buses.
At the height of the dot.com era in 2000, the stock traded above $170, making the Burnaby, B.C. company a regular headline maker and a household name in global investment circles.
But when fuel cells failed to deliver on those early expectations, the stock collapsed in 2004, raising fears that Ballard would go the way of other high profile tech names like 360 Networks and NorTel.
It didn’t happen. Ballard simply retrenched, and found other applications for its fuel cells.
Now, after what company officials refer to as “the lost decade,’’ the fuel cell maker is operating under the guidance of newly appointed Chief Executive Officer Randall MacEwen.
Trading at around $2.70 this week, the company is looking ahead to a new phase of growth, as it puts the focus on other markets for its fuel cells, including backup power for the telecommunications sector, material handling (forklift trucks), fuel cell buses, and engineering services.
“Under Randy’s leadership we are aiming for a larger market cap, to grow revenue and drive profitability more quickly,’’ said Ballard Chief Financial Officer Tony Guglielmin in an interview with Stockhouse.
“That will make us more relevant with the investor community,’’ he said.
MacEwen comes to Ballard with a wealth of experience in clean technology. He is a former executive vice-president of hydrogen producer Stuart Energy Systems. He is also the founder and Managing Director of NextClean Tech LLC, a clean tech energy consulting firm.
He inherits a company that remains a leading maker of fuel cells which yield electricity, heat and water by catalyzing the reaction of oxygen and hydrogen.
Discovered 160 years ago by British scientists Sir William Grove, they were embraced by environmentalists because of their ability to power vehicles without emitting harmful sulphur dioxides or nitrogen oxides.
After the initial hype, which was fueled by high profile alliances with Ford, Chrysler and others, Ballard ran up against barriers to auto market entry that are as complex as the tecnhnology itself.
So under MacEwen’s predecessor John Sheridan the company slimmed down, reduced fixed costs, and turned its attention to other areas including Telecom backup power, material handling (meaning fork lift trucks), fuel cell buses and development stage markets.
It is now generating significant revenue from those areas.
In the third quarter ended September 30, 2014, for example, Ballard posted a loss of $2.4 million or 2 cents a share on total revenue of $20.6 million. Of that amount, engineering services accounted for $8.2 million, Telecom backup power generated $6.3 million, $3.6 million came from Material handling, and $2.5 million from development stage markets.
“Randy has inherited the company at a good time,’’ Guglielmin said.
“The balance sheet has been cleaned up, putting the company in a position to fall just shy of breaking even this year. We are in good shape, and he can focus on growing the company.”
Of the 350 employees that remain at Ballard, roughly 150 are dedicated to engineering services.
These are people that are either working to improve overall fuel cell design or on contracts signed with companies that are seeking to apply fuel cells in new areas such as aerospace and the military.
Under a four-year deal with Volkswagen Group, Ballard is helping the German auto maker to develop the next generation fuel cell system for demonstration cars in its fuel cell automotive research program.
The company also has a deal to supply Plug Power Inc. (NASDAQ: PLUG, Stock Forum) with fuel cell stacks for use in forklift trucks.
Buses powered by fuel cells are another potential growth area.
There are currently about 50 Ballard fuel cell-powered buses in operation, including 40 in Europe and the balance in North America.
Ballard and Belgian partner Van Hool N.V. are working to develop a European Service and Parts Centre for fuel cell buses (to be called ESPACE). The hope is that the number of buses powered by Ballard fuel cells will grow in the near future as a result of improvements in fuel cell design and power density.
In the telecom backup power market, Ballard sees the opportunity to sell more of its systems into regions of the world where the electricity grid is unreliable, and in countries like the United States where natural disasters are becoming more common as a result of global warming and other factors.
“In areas where four hours of continuous backup power might be needed every day, a fuel cell power system is perfect,” Guglielmin said.
Still, in spite of its leadership role in the fuel cell space, there are areas such as hydrogen generation, hydrogen storage, and large scale power generation, where the company has largely been absent, but could still play a role in the future.
“We also see those as potential growth opportunities,’’ he said.
As for the global auto sector, virtually all of the major manufacturers have continued to invest in fuel cell.
While the basic technology remains largely unchanged, Ballard engineers have reduced the average cost of a fuel cell stack by about 70% in the last four years.
Smaller fuel cells and greater power density means that the cost to generate the same amount of power has come down considerably.
However, Guglielmin says two key issues continue to stand in the way of commercialization. They include the lack of hydrogen refueling infrastructure, and a lack of familiarity on the part of consumers with fuel cell cars.
Still, Ballard officials are hoping that reductions in the size of fuel cells (which can now be fitted in the area where an internal combustion engine would normally reside), and changes in government regulations that govern the adoption of clean technology, will eventually lead to commercialization.
“We are still a world leader in the automotive space,’’ Guglielmin said. “When the auto market starts to take off, we intend to be there.’’
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