Plug Power, Vaillant to collaborate on fuel cell prototype
The Business Review (Albany) - 9:47 AM EST Thursday
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Plug Power Inc. will share in a grant worth $3.2 million from the
European Commission to develop a new type of fuel cell that produces
heat as well as electrical power.
The grant will be shared with Vaillant Group, a German company that
specializes in heating and air conditioning technology. The U.S.
Department of Energy has also committed $3.6 million for the project,
which is expected to cost about $14.2 million over two years.
"This grant helps Plug Power and its partners accelerate the
application of fuel cell systems as heat and power sources for
commercial and residential structures," said Roger Saillant, CEO of
Plug Power (Nasdaq: PLUG).
The grant money will be used to develop three prototypes, known as high
temperature combined heat and power proton exchange membrane fuel cell
systems. Plug Power, a fuel cell company in Latham, said its operations
in the Netherlands would help coordinate the collaboration.
Look Out Energizer Bunny, Here Comes the Fuel Cell Battery
Wouldn't it be nice to get a month out of your cell phone battery
without having to recharge?
That may sound far fetched. But it's the kind of mileage you could
see from fuel cell-based batteries in a few years.
The futuristic battery is based on what's called direct methanol fuel
cell technology (DMFC). An Albany, NY-based company called Mechanical
Technology (MKTY) has a version of the battery that can last for over
90 hours.
Plus it probably won't blow up in your lap.
Of course fuel cells, like many other kinds of "alternative
energy," are one of those areas that hold plenty promise -- and let
down -- for investors. So if you buy shares of Mechanical Technology,
limit your exposure and be prepared to think long term.
"This is one of our most speculative stocks," agrees Edward
Guinness of the London-based Guinness Atkinson Alternative Energy Fund
(GAAEX), which holds the stock. "We are in it eyes wide open coming
up against crunch time. The problem is it they are nearly a year and a
half from hitting a revenue upswing. The next 18 months are going to be
key."
But like Guinness, I'll give Mechanical Technology the benefit of the
doubt as a speculative play -- because insiders have been buying the
stock.
In November insiders purchased $262,000 worth for $1.81-$2 right before
the stock shot up to nearly $3. Then chief executive Peng Lim bought
$20,000 worth in the pullback in late December. You can get it even
cheaper now at around $1.80.
I'd be a buyer, for the following reasons.
Strong partnerships
Mechanical Technology is developing fuel cell batteries with several
high-profile partners, including the Duracell division of Gillette, the
cell phone maker Samsung, and the U.S. Air Force and the Army.
It has a low-powered battery for consumer applications (called
Mobion-1) that packs a lot more power than standard lithium-ion
batteries - the kind you use now. One problem: The battery is still
too big.
Mechanical Technology is also developing high-powered versions of this
battery for use by the military (Mobion-30) in applications like
satellite communications systems.
The company is in the demonstration phase for each. But it hopes to be
selling the military batteries in 2008.
End of the road for lithium-ion
Makers of lithium-ion batteries been cramming more and more energy into
smaller batteries, and they've pushed the limits. The result has been
exploding batteries - which recently lead to a massive laptop battery
pack recall by Apple (AAPL) and Dell (DELL).
The whole affair heightens the interest in fuel cell batteries,
believes Rodman & Renshaw analyst Amit Dayal. Besides, portable digital
gadgets will continue to demand more memory and computing power to
handle more complex tasks. This calls for more power - and fuel cell
batteries may be the answer.
Pure methanol
Mechanical Technology develops fuel cells in its MTI MicroFuel Cells
division. Rodman & Renshaw's Dayal thinks the company's direct
methanol micro fuel cells are superior to those of competitors because
they run on pure methanol, which means they produce more power. The
batteries operate on a small cartridge of methanol, and they can be
"recharged" instantly by putting in a new cartridge.
Bigger potential upside
With a market cap of just $55 million, Mechanical Technology looks like
a better deal than competing plays like Medis Technologies (MDTL) which
has a market cap ten times the size. "There is significantly more
upside in Mechanical Technology if this does take off," says
Guinness.
Cash burn
By a rough calculation, Mechanical Technology seems like it could go a
year or more without another dilutive capital raise. It looks
Mechanical Technology used up about $13 million to $14 million in cash
in 2006.
As of early November the company had $5 million in cash. It also held
shares of Plug Power (PLUG), which the company helped found, worth
$11.6 million. It December, it raised $10.3 million by selling stock to
RG Capital Management based in the Cayman Islands.
While the MTI MicroFuel Cells division burns cash, the company also has
an instruments division that produced $1.7 million in revenue in the
third quarter, an increase of 19%. The company has no debt, and it has
a tax loss carry-forward of about $46 million.
Mechanical Technology may announce a new partnership in the private
sector this year, and the Department of Energy could increase funding
for alternative fuel cell technology. It expects sales in the military
sector to start in 2008.
The bottom line: These kinds of alternative energy plays often flame
out - so be careful with position size. But the recent round of
insider buying suggests this company is one of the safer ways to get
exposure to what could be a big deal in consumer electronics a few
years down the road.
Disclaimer
At the time of publication, Michael Brush did not own or control shares
in any of the companies listed in this column. Mr. Brush is an
independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in
About Insiders Corner: http://www.investorideas.com/insiderscorner/ .
InvestorI deas.com Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp . InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article.
posted by Michael Brush at 9:20 AM
Eeyore wrote:
> lkgeo1 wrote:
> > Plug Power, Vaillant to collaborate on fuel cell prototype
>
> Totally irrelevant to this group.
>
> Graham
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