| FuelCellStocks.Com Fuel Cell News July 31, 2005 Ballard Power to focus on non-auto market to boost
revenue: CEO
The firm, which makes most of its money selling light-duty fuel cells and engines and heavy-duty fuel cell bus engines, said late Thursday it lost $29.5 million US in its second quarter and took in less than half the revenue it did in the same period a year ago. "At present, we are between product cycles and our year-to-date revenues reflect that lull," CEO Dennis Campbell said in a conference call Friday. "This slack period, however, does not reflect a reduction in interest or commitment to automotive fuel cells technology." To help turn things around and make it more sustainable, Ballard will focus on fuel cell design, development and manufacturing and leave systems integration to others, he said. As part of that plan, Ballard wants to sell its stake in its German subsidiary - Ballard Power Systems AG, which develops fuel cell support systems - to its partners in the project, automakers DaimlerChrysler AG and Ford Motor Co. The deal is up for a shareholder vote Aug. 29. That sale, along with a $30-million-US investment by Japanese partner Ebara Corp. and jointly owned Ebara Ballard Corp., should provide about $90 million to fund Ballard's next-generation auto fuel-cell electric drive and co-generation development programs, Campbell said. "Our decision to focus on fuel cells and leave systems integration to others is already starting to bear fruit." Ballard is already exploring opportunities for its Mark 902 short stack - a scaled-down version of its automotive fuel cell, Campbell added. "Several fuel-cell systems integrators have expressed strong interest in this product for material handling and back-up power applications, among others." Campbell said the company currently offers pricing in the $1,000-per-kilowatt range, but is "confident" it can offer "fully competitive pricing" - about half that cost - by 2010. "We believe we can deliver unmatched cost, performance, reliability and durability that will enable us to become the supplier of choice among non-automotive applications, allowing players in those markets to concentrate their efforts on the systems side of the business, and leave the fuel cell design, development and manufacturing to us." But one analyst was less optimistic about a Ballard foray into the non-automotive market. "I think ultimately the technology that Ballard has makes the most sense on an automobile, but it's clear that that's not going to happen well after 2010 - if at all," said MacMurray Whale, a Toronto-based research analyst with Sprott Securities Ltd. Selling its high-density power technology to the stationary power generation market will likely be difficult when more suitable technology already exists, he said. "I don't think any of the fuel-cell developers are going to be successful in the materials-handling or the telecom back-up market, because the price points are still difficult - a real challenge for fuel-cell makers to reach," he added. Whale said the change may also affect how markets view the company's shares, currently priced to reflect its auto fuel-cell ambitions. Ballard, which reports in U.S. dollars, said late Thursday it lost 24 cents per share, compared with 26 cents a year ago as revenue slipped to $9 million from $21.2 million in the same quarter of 2004. Last month, Ballard signed a deal to sell its 50.1 per cent stake in its German subsidiary in exchange for nine million of Ballard common shares, which the company said it intends to cancel under a plan to reducing its outstanding share capital by 14 per cent. Ballard will continue to be responsible for the design, development and manufacture of vehicular fuel cells for its alliance partners, while DaimlerChrysler and Ford will be jointly responsible for the design, development and manufacture of the vehicular fuel cell support system. Earlier this year, Ballard committed to offering commercially viable fuel cell technology for hydrogen-powered vehicles by 2010. On Friday afternoon, Ballard shares (TSX:BLD) shot up 25 cents, or four per cent, to $6.22 Cdn on the Toronto Stock Exchange.
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