Ballard Power Systems Inc. is engaged in the design, development, manufacture, sale and service of fuel cell products.
The rational:
Fuel cells are gaining more and more popularity as it extends the range of zero emission vehicles. Toyota, one of the pioneers with fuel cells, released their 5000+ patents for free in 2015 to allow competitors to gain interest and invest in the technology. Have a look at their video, http://bit.ly/2dJRCp5, which demonstrates how fuel cell generates electricity from Hydrogen and Oxygen. Not only Toyota and China are investing in this technology but recently the Volkswagen group by means of Audi are investing in the technology (http://bit.ly/24Sfs2F)
We all know Tesla as the zero emission car producer but on December 1st, Nikola Motor Company will present a prototype of the first zero emission truck http://bit.ly/2amECUe. This truck will NOT have a gas turbine, as communicated earlier, but will use fuel cells instead! In June, Nikola said it already received 7,000 truck reservations with deposits of $1,500, totaling $2.3 billion. Now, you can probably guess the first name of the electrical engineer Tesla? As Nikola is a privately held company, you cannot invest directly in them, however they also going to set up 56 hydrogen stations in the US and a solar farm to produce the Hydrogen. This investment in hydrogen infrastructure will be our angle to play this evolution.
1/ Is Nikola teaming up with Ballard? In their press release (http://bit.ly/2c1r9zk) Nikola mentioned “… details about how Nikola achieved zero emissions were kept confidential pending finalization of key supplier agreements”. This hints that they most likely will team up with an industry player for the technology and the setup of their stations. Currently only a handful companies make out the space: Ballard Power System (NASDAQ:BLDP), Fuel cell Energy (NASDAQ:FCEL), Plug Power (NASDAQ:PLUG). The most likely they will chose is Ballard as they have the most patents and references in the space. Recently Ballard also tweeted more and more about the regulations on the heavy duty trucks, which clearly indicates their interest.
2/ Ballard will close a large production contract before the end of the year. On July 18th, Ballard signed an agreement with Guangdong Nation Synergy Hydrogen Power Technology for a fuel cell stack production operation in Yunfu, China (http://bit.ly/2dgYDIM). Over five years, this deal has a contemplated minimum value to Ballard of $168 million. The transaction is expected to close late this year, at which time a joint venture will be created to undertake the stack manufacturing operations. The venture will be owned 90% by Synergy and 10% by Ballard. Ballard will receive $18.4 million in revenue for technology transfer services and commissioning support and $150 million in sales of products based on a “take or pay” contract that ends in 2021. We are anticipating a positive price move on the release of this news.
3/ Earnings on 26 October. Ballard will probably announce on 13 October that their Q3 earnings will be released on 26 October. From the past, it’s likely that between these dates, they will post some positive news. The Q3 earnings themselves also look promising with different new contracts in China and the signing of a Memorandum of Understanding on a strategic partnership (http://yhoo.it/2dN9URN).
Play:
On Monday, the price ran up on the news of 12 fuel-cell-powered buses had hit the streets in Guangdong. It’s now forming a nice base around 2.4$ with a big bidder at 2.36 the last days. We will play the likelihood of a lot more positive news before the earnings of 26 October: final agreement on fuel stack production, additional buses hitting the street or eventually a partnership with Nikola!
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