<p>[Editor’s note: This article was updated on Jan. 22, 2020, to remove erroneous information about materials used by FuelCell.]
This can be a strange question to ask a company with renewable energy. But analysts still ask. Is FuelCell Energy (NASDAQ: FCEL) Sustainable? Has this manufacturer of hydrogen fuel cells found a niche that it can grow into, or is the recent success a one-time thing? And once we have answered these questions, what exactly are the long-term consequences for the FCEL share?
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FuelCell Energy had been in a long-term trading range of about 25 cents per share, but opened for trading on January 17 around $ 2.25 with a market capitalization of $ 443 million. The catalyst appears to have been a $ 60 million two-year deal with Exxon Mobil (NYSE: XOM) involving carbon capture technology. The deal is almost twice as much as the company’s annual revenue.
A new way to look at FCEL shares?
While competing Plug Power (NASDAQ: PLUG) has operated fuel cells as a solution for forklifts and other factory vehicles, FuelCell Energy has aimed for large contracts in the electricity and energy space.
Fuel cells produce energy by combining hydrogen with oxygen. Water is the “waste product”. Fuel cells are also silent, which means that tools can place them in residential areas. But the most important source of hydrogen has always been natural gas. Tools have usually decided that just burning the gas is cheaper.
While the Plug Power story is easy to understand, if it is speculative, the FuelCell Energy story is all over the map.
Do they offer a way to reduce the carbon footprint of large power plants, as ExxonMobil suggests? Is this a solution for treating wastewater with the biogas that is in place? Or is this a microgrid solution for power tools, as FuelCell’s latest press release announces? Is it all three? Is it also a breath?
Rely on tools?
FuelCell reported a $ 2.1 billion lag in its third-quarter report, but only $ 22.7 million in revenue. The backlog resulted in a press offensive, as the FuelCell management sought the capital needed to fulfill its orders.
The question remains whether the current driving force is sustainable. In theory, I buy everything. I buy with biogas to produce hydrogen. I buy carbon dioxide capture at power plants. I have long supported micro networks as a better way to guarantee electricity service.
What I have not been able to buy because of the track record is the words of the oil companies or electricity companies that they are serious about climate change. Exxon Mobil, for example, has hit the drums on TV to collect fuel from plants. They said the same thing ten years ago and little has happened.
The same goes for tools. Al Gore wrote about micro networks such as “Electranet” over a decade ago. But PG&E (NYSE: PCG), the most progressive of the major tools for accepting solar and wind power, never adapted this secondary technology. It kept its uniform system of long power lines in place and went bankrupt when they, predictably, caused forest fires.
I wish I did not write this, but FuelCell Energy is still a speculation.
The company does not only offer a series of press releases. It seeks to implement a long-term strategy that is meaningful. But that strategy relies on very large partners staying on track, and tooling companies are willing to change.
This is what you do when you buy FuelCell Energy shares today. It should be a slam dunk, but unfortunately it is not.
Dana Blankenhorn is a finance and technology journalist. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle Store. Write him on firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. At the time of writing, he did not own any of the companies mentioned in this story.