Financial Results
FuelCell Energy has reported a 45% increase in total revenues for the first quarter of 2009 to $21.7 million from $15.0 million in the year-ago quarter. Product sales and revenues increased 95% to $19.0 million from $9.8 million in the year-ago quarter. Revenues increased due to increased production of megawatt-class (MW-class) power plants compared with the year-ago quarter. The company’s product sales backlog as of January 31, 2009, including long-term service agreements, was $70.9 million compared with $84.7 million as of January 31, 2008 and $87.6 million as of October 31, 2008.
Research and development contract revenue was $2.7 million in the first quarter of 2009 compared with $5.3 million in the year-ago quarter, mainly due to the completion of several government programs in the second half of fiscal 2008. In January, the US Department of Energy (DOE) awarded the company Phase II of the MW-class coal-based solid oxide fuel cell (SOFC) contract – a $30.2 million contract of which $21.0 million will be funded by the DOE. Research and development contract backlog was $23.1 million as of January 31, 2009 compared with $13.2 million at January 31, 2008.
Net loss increased as higher volumes of product sales and revenues resulted in increased operating losses. The product cost-to-revenue ratio increased by 24% to 1.52-to-1 compared with the 1.99-to-1 reported in the year-ago quarter, and was comparable to the 1.54-to-1 in the fourth quarter of 2008. The increased product margin is mainly attributable to increased production of lower cost MW-class power plants.
The company had high cash use in the first quarter which is anticipated to be offset by lower cash use in the second quarter. Timing of customer milestone payments increased accounts receivable to $30.4 million as of January 31, 2009 compared with $16.1 million at October 31, 2008. The company also had delays closing contracts in the first quarter that it now expects to close in the second quarter of fiscal 2009. As a result, use of cash and investments in the quarter was $36.1 million compared with $15.1 million in the year-ago quarter. Total cash and investments in US treasuries were $50.8 million as of January 31, 2009. The company expects to manage cash and investments at or above this level in the second quarter of 2009. The company has received the delayed milestone payments. Now, it expects to receive new customer milestone payments as it adds contracts to backlog. Capital spending in the quarter totaled $1.2 million.
Government Research and Development Contract:
The DOE’s Office of Fossil Energy Solid State Energy Conversion Alliance (SECA) awarded FuelCell Energy a $30.2 million contract, of which $21.0 million will be funded by the DOE.
The contract extends from January 2009 through September 2010 and seeks to construct a 25 kW SOFC stack that meets SECA-targeted requirements for performance and production cost. This stack design will be the basis for a 250 kW to 1 MW fuel cell power module and a 5 MW proof-of-concept system that will operate on coal-based syngas (fuel created by reacting coal at high temperatures). The module and proof-of-concept system are to be designed, fabricated, and tested in subsequent SECA program phases.
Key Markets
FuelCell Energy has around 65 MW of Direct FuelCell Energy (DFC) power plants installed or in backlog in Europe, Asia, and the US Of this, over 38 MW have been ordered by POSCO Power, the company’s production and distribution partner for South Korea. California is the company’s next big market, with over 15 MW installed or in backlog.
South Korea: POSCO Power opened its 50 MW fuel cell balance-of-plant production facility in September 2008. It will manufacture the non-core technology surrounding a fuel cell module beginning in the latter half of 2009. In the interim, POSCO Power and FuelCell Energy are working together to set up an in-country service and maintenance organization and train POSCO Power personnel.
California: In February, 2009 the company announced the sale of a 300 kilowatt (kW) DFC300 power plant to the US Marine Corps Air Ground Combat Center at Twentynine Palms, Calif. The DFC power plant will supply onsite baseload power for the facility’s power needs and the fuel cell’s excess heat will be fed into the base’s main steam line for hot water and space heating.
Connecticut: On March 10, 2009, the Connecticut Department of Public Utility Control issued a revised draft decision for project 150 Round 3 approving a total of 27.3 MW of projects incorporating the company power plants. This revision supersedes the prior draft issued January 2009 that approved 6.6 MW.
We have a strong backlog, products that will be gross margin positive by the end of the year, and we see near-term opportunities for new orders in our key markets, said R. Daniel Brdar, chairman and chief executive officer. The recently passed Recovery Act should create demand for many more clean energy projects and we have positioned the company to capitalize on these opportunities.
Each of our key markets remains committed to clean energy programs. South Korea continues to press ahead with green energy initiatives, which should result in continued strong demand for our fuel cells, Brdar said. In California, we are focused on capturing orders from customers looking to decrease their carbon footprint while saving on energy costs. Connecticut’s Project 150 Round 2 contracts are in negotiations, and we anticipate final awards on Round 3 in the second quarter.
