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Ballard dissolves Ebara Japanese power generation joint venture

VANCOUVER, B.C. – Ballard Power Systems (TSX:BLD) has dissolved a cogeneration joint venture for producing electricity and hot water in Japanese homes, saying it would take too long to develop the technology. The Vancouver-based fuel cell developer said it and partner Ebara Corp. of Japan both agreed to abandon the project because the extended timeline would require a much greater investment.

Ballard would have had to invest millions more annually to go forward with the project, president and chief executive John Sheridan said.

“We believe that this decision is in the best interest of both joint venture parties, along with our shareholders,” Sheridan said.

He said Ballard will take a non-cash gain in the second quarter of about $10 million as a result of the move. The company lost $2.9 million in the first quarter from the business, he said.
Ebara Ballard Corp. made stationary power systems for the residential cogeneration market in Japan, and were part of a government subsidy program. Ballard said it will continue to sell its cogeneration fuel cell stack products in Japan and the joint venture will continue to service systems already in the field. Sheridan said the decision doesn’t change its guidance, or its projection to sell about 4,000 fuel-cell units in 2009. The company had planned to ship 500 of the residential cogeneration units in Japan this year, as well as 1,000 fuel cells for forklifts and 2,500 for backup power systems. Sheridan said the company expects to make up the difference, which is about $2 million to $3 million in revenues annually, through its other businesses. Ballard is projecting annual revenues of about $68 million this year, which is at the lower end of its guidance.

The company has been expanding into other fuel-cell uses after selling its automotive fuel cell development business to Daimler AG and Ford Motor Co. (NYSE:F) early last year. At the time Ballard said it wanted to focus more on what it sees as other promising businesses, such as materials handling, backup power and residential cogeneration. BMO Capital Markets analyst Brian Piccioni believes the move is a good one for Ballard, calling the Japanese cogeneration business “a distraction.”

“As far as I’m concerned it was never a viable business and it’s a good thing they are getting out of it,” he said.

He said more promising ventures include selling fuel cells to India’s growing market. Last fall, Ballard signed a development and supply agreement with ACME and IdaTech LLC to supply 1,000 fuel cell units in 2009 and 9,000 units in 2010. Ballard shares closed down two cents to $2.10 on the Toronto Stock Exchange Monday. Last month, Ballard reported a loss of US$18.6 million in the first quarter, citing weak shipments and falling revenues along with restructuring costs from recent staff cuts. Ballard, which reports in U.S. dollars, said the loss amounted to 22 cents per share for the quarter ended March 31.

The most recent results included $1.1 million worth of severance costs when the company laid off 32 employees, or seven per cent of its workforce, earlier this month. The loss was compared to a profit of $81 million or 87 cents per share for the same period last year, buoyed by a $97-million gain from the sale of its automotive fuel cell development business to Daimler and Ford. Quarterly revenue fell to $8.1 million during the quarter, down nearly 50 per cent from year-earlier levels of $16 million, as weakness in the auto sector crimped demand for the company’s products. Total product shipments fell to 192 from 284 during the same quarter the year before.

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May 26, 2009 - 3:52 PM No Comments