FuelCell Energy (FCEL, Financial) is making substantial progress with its mounting installed base and new order wins, which is accelerating its product revenue. Also, its strategic move of expanding margins and reducing costs looks pretty appealing and should enhance its bottom line performance going forward. In addition, the company continues to benefit from strong growth potential in the fuel cell market.
Expanding partnerships to assist growth…
Fuel Cell remains upbeat with its Utility model and expansion plan. It continues to make progress with its utility model in Asia-Pacific, Europe and North America. It has expanded its partnership with POSCO Energy, which is driving growth for its Asia-Pacific operations. FuelCell is growing its production in the region with POSCO. It is constructing large scale fuel cell parks in South Korea. Its fuel cell campus in Pohang, South Korea remains on schedule. Also, the company has constructed a new manufacturing building along with production equipment. This should enhance its production in the region.
The company expects the initial production from this facility in mid-2015. This power plant should assist the company better providing its Ultra-Clean fuel cell solutions. Also, it should benefit from POSCO’s market development efforts that should enhance its material costs in volume purchasing and security for a second source supply. Meanwhile, POSCO is growing its global production facility to better support this growth. It expects its new manufacturing facility to soon come online and add about 100 megawatt capacities to the global FuelCell manufacturing footprint.
Alongside, POSCO remains on track with its expansion strategy. It is expanding two of its facilities in Torrington that should assist the company tapping additional demand in the market. With this extension, the company will be accommodating 200 megawatts of annual production for a total global capacity of up to 400 megawatts. In fact, these strategic efforts will enable both these companies to increase its supply chain volumes approximately 50% with the increase in its overall production volume.
NRG Energy to advance its growth in North America….
FuelCell is investing in growth opportunities in North America. It has approximately $1.5 billion of potential projects in North America and Europe. These investments in product development and building strategic relationship should enhance its total addressable market in the region. It has recently entered into a relationship with NRG Energy (NRG, Financial). NRG is one of the leading power producers in the region. NRG is expected to provide about $40 million credit facility to FuelCell. This should further improve its ability to finance projects that are under-developments and to develop more projects in the region.
In fact, FuelCell will be in a better position to fetch the prospective customers in multiple states for its on-site CHP projects. The size for its on-site CHP projects range between 1.4 megawatt power plant and 14 megawatt power plant installation.
Apart from this, the company has recently announced that it will install a new power generation facility for UIL Holdings Corporation (UIL, Financial) for its gas pipeline application. FuelCell will be in a better position to support its on-going projects it runs in North America.
In addition, FuelCell Energy looks pretty strong in Europe. It is progressing well to maintain, build and operate its power plant in Germany. It has entered into a long term service agreements with the German Government. Also, the recent announcement on utility companies restructuring and transformation look quite favorable for FuelCell in the region. This should help the company to fetch additional customers for its on-site CHP projects in the region.
Ending remarks and valuations
FuelCell looks great with these investments and partnerships that should accelerate its financial performance in the future. It is increasing its capacity that should enable the company to address effectively the growing demand in fuel cell market.
