FuelCell Energy (NASDAQ: FCEL) Announces Largest Order Yet

Written By Brianna Panzica

Posted November 5, 2012

U.S. fuel cell power plant manufacturer FuelCell Energy Inc. (NASDAQ: FCEL), based in Danbury, Connecticut, originated as Energy Research Corporation (ERC) in 1969. The company focused on battery and fuel cell technology, researching low-temperature fuel cells and silver-zinc battery cells.

In 1992, the company was successful with its 120 kilowatt high temperature carbonate fuel cell system, and four years later its first Direct FuelCell 2 megawatt system went online.

The battery sector spun off in 1999, when the company changed its name to FuelCell Energy. Since then, it has had success with its Direct FuelCell power plants, expanding its system to four different versions.

The DFC300 is a 300 kilowatt system with 47 percent electrical efficiency. It’s the company’s smallest version, taking up only 600 square feet and ideal for on-site power generation.

The next-biggest version, the DFC 1500, is the 1.4 megawatt system, designed to power larger facilities like universities and hotels. It also has a 47 percent electrical efficiency, as does the DFC3000 system – a 2.8MW power plant that can be used to provide grid support for utilities

FuelCell also has a fourth version: the DFC-ERG (Direct FuelCell Energy Recovery Generation) system. This system is different from the others in that it is a hybrid, combining a regular FuelCell power plant with an unfired gas expansion turbine. This one has 65 percent electrical efficiency.

And it’s these four power plants that have helped the company strike its largest deal yet.

On Monday, the company announced it would sell 121.8 megawatts of power plants to South Korean steelmaker Posco (KRX: 005490) for $181 million.

Posco and FuelCell are not strangers; the South Korean company is FuelCell’s largest shareholder with a 17 percent stake. The two have also had a licensing agreement in effect since 2009.

But the deal also builds on this licensing agreement. In an agreement worth a total of $26 million, FuelCell will receive 3 percent royalties for 15 years on any power plant built and sold by Posco.

From Nasdaq:

“With growing demand in South Korea and strong interest in Asian markets for ultra-clean distributed power generation, manufacturing in South Korea is necessary to meet customer expectations of lead times and costs,” said Jung-Gon Kim, Senior Vice President, POSCO Energy. “Local manufacturing is a cornerstone of our growth plans in South Korea and we will continue to work closely with FuelCell Energy to develop other Asian markets.”

Next year, according to Businessweek, Posco will start construction on a fuel cell factory in Pohang, which will likely be operational by 2015. It will manufacture up to 140 megawatts in fuel cells annually, with an initial production capacity of 70 megawatts.

Payments for the amendment to earlier agreements are $8 million, and the License Agreement is $18 million, with an initial payment of $10 million to FuelCell received on November 1.

FuelCell officials are excited about the deal, as they believe it opens up the opportunity for future global agreements.

From Nasdaq:

“A second source of global supply and production capacity for our DFC fuel cell modules is important to project investors and customers,” commented Michael Bishop, Chief Financial Officer, FuelCell Energy, Inc. “This licensing agreement is a key development milestone for accelerating global expansion of highly efficient and environmentally friendly fuel cell power plants.”

FuelCell is already gaining global prestige, with 300 megawatts of power generation capacity.

Shares jumped 18% before noon on Monday at the news before settling to close up 13%. The company has gained more than 18% year to date.

That’s all for now,

Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.

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