FuelCell Energy Reports Net Loss Of $19.1 Million For Q2 Fiscal 2009

Published: 09-Jun-2009

By: Staff Writer Staff Writer Staff Writer

FuelCell Energy, Inc. (FuelCell Energy) has reported total revenues of $22.9 million for the second quarter of fiscal 2009, compared with the total revenues of $31.6 million in the year-ago quarter. It also reported a net loss of $19.1 million, or $0.29 loss per share, for the second quarter of fiscal 2009, compared with the net loss of $25 million, or $0.38 loss per share, in the year-ago quarter.

Financial Results:

Product sales and revenues were $19.3 million compared to $26.4 million in the 2008 second quarter and comparable to the first quarter 2009 total of $19 million. The prior year product sales and revenues were unusually high due to timing. The company's product sales backlog as of April 30, 2009, including long-term service agreements, was $59.2 million compared to $70.9 million as of January 31, 2009 and $134.7 million as of April 30, 2008. The current financial credit crisis caused delays in closing commercial products sales orders in the US. Subsequent to quarter end, the company added around $64.8 million of contracts to backlog.

Research and development contract revenue was $3.6 million in the second quarter of 2009 compared to $5.2 million in the second quarter of 2008. Research and development contract backlog was $19.5 million as of April 30, 2009 compared to $23.1 million as of January 31, 2009, and $8 million at April 30, 2008.

The product cost-to-revenue ratio was 1.48-to-1 comparable to the 1.50-to-1 reported in the prior year quarter, and the 1.52-to-1 in the first quarter of 2009. In addition, the company reduced spending on internally funded research and development $0.9 million and administrative and selling $1 million.

Cash use in the quarter totaled $8.4 million resulting in a total cash and investment balance of $42.4 million as of April 30, 2009. Collection of customer milestone payments provided a cash benefit compared to the prior quarter which was partially offset by delays in closing contracts. Depreciation was $2.2 million and capital spending in the quarter totaled $0.8 million.

The credit crisis is creating delays in order flow affecting the company's cash estimates for the quarter and fiscal year. The company reduced operating costs and cash use in February 2009. This included a six percent workforce reduction, suspension of employer contributions to the 401(k) plan, a freeze on the level of salaries for all employees except for production employees, and other expense reductions. As a result, the company expects reduced cash use in 2009 compared to 2008 although cash use for fiscal 2009 may not meet the company's previous expectations due to delays in the contract negotiation and closure process.

For the six months ended April 30, 2009, FuelCell Energy reported revenue of $44.6 million compared to $46.7 million for the same period a year ago. Product sales and revenues were $38.3 million compared to $36.2 million in the prior year period. The product cost-to-revenue ratio was 1.50 compared to 1.63 for the same period a year ago. The cost-to-revenue improvement is attributable to lower cost MW-class power plants. Research and development contract revenue was $6.2 million compared to $10.5 million for the six months ended April 30, 2008.

FuelCell Energy reported a net loss to common shareholders for the six months ended April 30, 2009, of $40.6 million or $0.59 per basic and diluted share compared to $45.5 million or $0.67 in the six months ended April 30, 2008.

Cost Out Program:

The company is on schedule to begin producing megawatt-class (MW-class) products in the third quarter that it expects to be gross margin profitable. These newly designed cost-reduced products deliver more power than the current design, and incorporate improved materials pricing and manufacturing productivity. The DFC1500 and DFC3000 power plants will produce 1.4 MW and 2.8 MW, respectively.

Corporate Highlights:

Despite the financial crisis, we continue to see demand for our products. The POSCO Power 30.8 MW order, recent Connecticut Renewable Portfolio Standards award, activities in the California market, and government initiatives for green energy and green jobs are positives for our business, said R. Daniel Brdar, chairman and chief executive officer.

Additionally, our cost out programs are meeting expectations and our new cost-reduced fuel cell power plants are on schedule for third quarter production.

Key Markets:

South Korea: POSCO Power ordered 30.8 megawatts (MW) of FuelCell Energy Direct FuelCell(r) (DFC(r)) modules and components in June 2009 valued at around $58 million. This brings total orders to over 68 MW since the initiation of its alliance with FuelCell Energy in 2007. POSCO Power and FuelCell Energy also signed a Memorandum of Agreement whereby the parties agree to pursue a licensing agreement to allow POSCO Power to assemble FuelCell Energy cell and module components into stack modules. POSCO Power will purchase $25 million in FuelCell Energy common stock at $3.59 per share once the licensing agreement is complete.

In South Korea fuel cells help meet government objectives for low-carbon, green technology. POSCO Power already has 18 MW operating or being installed primarily in utility grid support applications. Its 50 MW manufacturing facility began production of balance-of-plant systems, which will be integrated with FuelCell Energy's fuel cell modules at customer sites to provide power for the electric grid.

California: In May 2009, the company sold a 1.4 MW power plant to Aircon Energy. The power plant will provide power to Sonoma County's jail and several county office buildings. The heat produced by the plant will replace around half the natural gas the county currently purchases to heat hot water for space heating, cleaning, and cooking. With total energy efficiency in excess of 80%, combined heat and power installations can achieve significant reductions in greenhouse gas emissions.

Connecticut: Under the state's Renewable Portfolio Standards program, the Connecticut Department of Public Utility Control (DPUC) issued a final decision approving 27.3 MW bringing the total to 43.5 MW of projects incorporating FuelCell Energy power plants awarded. These include: a 14.3 MW power plant for grid support, 18.8 MW of DFC-ERG power plants to be located at four natural gas distribution stations, a 3.2 MW DFC/Turbine (DFC/T) for an electrical substation, and 7.2 MW at two hospitals. The DFC-ERG and DFC/T power plants are FuelCell Energy's highest-efficiency products and are twice as efficient as the average U.S. fossil fuel power plant.

Government Facilities: The US government has initiated programs to ensure that it deploys energy efficient technologies to lower its carbon footprint and save energy costs. FuelCell Energy sold two 300 kilowatt (kW) power plants to the US government during the second quarter of 2009. The unit for the U.S. Marine Corps Air Ground Combat Center at Twentynine Palms, California will provide baseload electricity and heat to the base's main steam line. The unit for Barksdale Air Force Base in Louisiana will provide baseload power that can be operated independently of the grid, increasing reliability and security.

Government Research and Development Contracts:

During the quarter, two FuelCell Energy/Versa Power 10 kW fuel cell stacks surpassed several of the Department of Energy's Office of Fossil Energy Solid State Energy Conversion Alliance (SECA) technical and performance requirements. The new stacks form the basis of a proof-of-concept system that will operate on coal-derived synthesis gas -- fuel created by reacting coal at high temperatures. FuelCell Energy is teamed with Versa Power Systems, Inc. to develop solid oxide fuel cell stack technology that meets SECA requirements for both performance and manufacturing costs.

Tell your friend about this article