It's an interesting coincidence that Canadian fuel-cell developer Ballard Power (NASDAQ:BLDP) reported earnings on the same day that Congress is expected to approve a new energy bill. I'll get to the bill in a moment, but let's first briefly discuss the second quarter.
Reported revenue declined by about 57% to $9 million on lower product and engineering service revenue. Frankly, that's a total non-issue to me. At this stage in the company's life, revenue is going to be lumpy (and small) and quarter-by-quarter swings don't really matter.
The bigger item of interest to me is the cash consumption. Ballard consumed nearly $29 million in cash during the quarter ($28 million from operations) and exited the quarter with $231 million on the balance sheet. While straight math suggests that the company has two years of cash left, that's not exactly accurate -- deals with partners EBARA, Ford (NYSE:F), and DaimlerChrysler (NYSE:DCX) should alter both the cash balance and cash-burn rates. If management's guidance is taken at face value, the company will end the year with between $205 million and $225 million in cash on the balance sheet and a consumption run-rate of $15 million to $20 million a quarter.
Now for the politics.
Congress will be voting on a comprehensive energy bill today that is expected to pass and be signed into law. Much of that bill is irrelevant here -- tax breaks for oil companies, research and development dollars for clean coal, incentives for the nuclear industry, and so on -- but there are a few components that have direct bearing on the fuel-cell industry.
First, the bill funds about $1.9 billion in fuel-cell R&D over the next five years. There is also a provision to spend $1.3 billion to fund various fuel-cell demonstration projects. Some of the money will go toward stationary or mobile fuel-cell research, and there will also be other parties working on automotive fuel cells that will get a piece. I have no idea how much of this might go to Ballard, but whatever its share, it'll help.
What I do know is that there are other components that should help Ballard. Tax credits for car buyers and providers of alternative energy refueling should both entice customers to buy the vehicles and encourage the build-out of hydrogen-refueling stations. Finally, a $1.3 billion appropriation for a hydrogen-production facility in Idaho could offer insight into ways of producing hydrogen more cheaply. Remember, as it stands today, the hydrogen equivalent of a gallon of gas costs about $3.
The bottom line is that I still don't think this stock is all that compelling. For all of the optimism and conviction expressed by management, senior officers still own all of about 115,000 shares of stock combined (out of 123 million or so outstanding). As a call option on the future of energy tech, maybe the stock isn't overpriced, but it's certainly not a slam-dunk by any stretch.
For more Foolishness on fuel cells:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
