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December 6, 2006

Fuel Cell Revenues Up 20% in 2005

Source: Canada.Com

Global revenue for publicly traded fuel cell companies increased 20 per cent in 2005 but profitability remained elusive, according to a new report.

The review by PricewaterhouseCoopers suggested total revenues for the companies in the sector reached US$266 million last year, up from $221 million in 2004.

But the sector remained in the red, losing $365 million, compared with a loss of $450 million a year earlier.

John Webster, leader of PwC Canada's fuel cell practice and survey co-author, said Wednesday that in the near term a large proportion of revenue will continue to come from demonstration contracts and research and development work.

"But I think you will also begin to see more of what we began to see in 2005, which is almost pre-commercial sales into certain niches," he said, noting the forklift market is an area of particular interest to fuel cell makers.

"One of the things that this sector has been working very hard to cultivate are areas where they can supply fuel cells or components or systems into areas where the cost demands are less than the automotive market."

The report by the accounting and consulting firm covered 23 public companies around the world including seven Canadian firms.

Quantum Fuel Systems of the United States was the top revenue earner, with $54.3 million, up from $28 million in 2004 and narrowly ahead of the former front-runner, Canadian company Ballard Power Systems (TSX:BLD).

Ballard reported 2005 revenues of $53.7 million, down from $81 million the previous year, due to lower automotive products deliveries.

Webster noted there are thousands of forklift trucks and similar equipment in warehouses around the world that for the most part use lead-acid batteries.

"They are relatively high-cost to operate, relatively high-maintenance, you've got to switch them in and out on a regular basis and you need big recharging infrastructure," he said.

"What the fuel-cell sector has done is through a lot of work with customers in the actual warehouses and distribution centres, they've developed comparable cost-effective solutions that require less maintenance and that don't have the disposal problems of lead-acid batteries."

Ballard announced earlier this year that it would supply 2,900 fuel cells to be used in forklifts to General Hydrogen Corp. under a US$22-million agreement.

The company has touted the use of fuel cells for cars and buses for years, but in recent months has reported success in sales for forklifts, cogeneration power systems and other applications.

Among other Canadian companies included in the PricewaterhouseCoopers report were Hydrogenics (TSX:HYG) with revenue of $37 million, Dynetek Industries Ltd. (TSX:DNK) at $22 million and QuestAir (TSX:QAR) Technologies Inc. at $5 million.

The survey found a slight decline in research and development spending to $206 million, compared with $218 million in 2004, while employment increased to 3,022 people from 2,791.

The market capitalization of the sector faded by five per cent to $3.21 billion.