I dont think so, but here is one of some DD.(Its LLOONNGGG)
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I will start with MY thoughts on PEMFC's in general to give some perspective on why I like SOFC's
PEMFCs
I believe that PEMs may have a "mass market" place on this planet in the future, perhaps not today, perhaps 20, 50, or even 100 years from now, but IMHO I cannot personally see them receiving consumer acceptance any time soon. Consumer acceptance and stock price acceptance in my eyes are two different things. Ballard emerged with its technology for PEMs at a time when the world was looking for answers, as a result of its early entrance into the market they have also been the most recognized name in the fuel cell industry. Ballard also was the first to receive support from the big automakers, it started with Daimler Benz wishing to associate itself (now Daimler Chrysler) with green technology and was since followed by Ford. At the time these alliances were made Ballards technology indeed appeared to be the only answer or better said, the most appropriate. I believe that there is somewhat of a public misperception in the way the automakers have invested in Ballard, I believe part of the reason why we saw these investments from the huge automakers was in large part a public relations event. Automakers in this day and age are looking for things that will set them apart from their competition, with the Kyoto accords on the environment etal they were forced to start developing new technologies, I believe they made the right choice coincidentally, however much has changed in the fuel cell world since they have. 10 years ago all fuel cell applications seemed futuristic and none really offered much in terms of complimenting the worlds existing energy infrastructure, however today, the world is searching for a way to implement the technology with the existing infrastructure and thereby cause minimal dissruption to our economy, the way we think, the way we drive, and especially the way we spend money, or more specifically the way we do not like to spend it. I almost liken say to if we rolled the clock back 100 years and there were no rockets, there were no airplanes. 100 years ago you could have designed a rocketship like the space shuttle to go across the world and people would flock to it as the best, but, what if after they designed that rocketship someone came along and designed an airplane to carry you across the world? What would you buy into? The airplane? or the rocketship? The rocket may have been first but, wouldn't you choose an airplane to travel across the world? Does it make the rocketship obsolete? I guess in a way yes, however the rocket ship could still be used for other less common applications, such as going to the moon or mars.
I will not go too much farther into the PEM or into Ballard seperately in this part, I guess this is just to give you an idea on where my point of view originates.
Plug Power
IMHO GE hooked up with MKTY to form Plug Power, as was the case with the automakers, I believe GE saw the PEM technology as the best possible solution at the time. I believe as well that GE wanted to get into the fuel cell race early to establish its market share. GE may have seen Ballard Power as too costly to form a joint venture with because of its run up from working with the big automakers, so why not choose an alternate PEM Company and work with them. The Plug Power and GE relationship is very interesting. I would recommend taking the time to reading the Plug Power prospectus thoroughly for some insight as to the nature of the relationship and what GE had to pay to get into Plug, and vice versa. Short of reputation, I do not believe financially GE has much of a stake in Plug, or better said, it cost them little to be able to say they have fuel cell technology, mostly I believe because it allowed Plug to use its reputation to validate their technology and we have seen how much Plug investors are relying on GE's name for its market capitalization. Here is a link to the Plug Power prospectus freeedgar.com .
Here are some parts I believe should be highlighted from the Plug Prospectus. My personal comments are in italics, the rest of the parts are given verbatim. I have bolded some of the parts of the prospectus which I think are relevant to note. Alone, many of the prospectus parts I have copied below could be simply considered as investment warnings and risks, I believe however many of them to hold relevance when reviewing all I view as the future of fuel cells. Also, I have not commented or copied much on what it cost GE to be associated with Plug, I will leave that for you to examine from the prospectus should you wish.
Page 4
Leverage our strategic alliance with General Electric to achieve market leadership. We believe we can leverage General Electric's brand name and worldwide marketing, distribution and servicing capability to gain immediate recognition for our product and achieve market leadership.
Acquire or license complementary technologies. We regularly review strategic opportunities to acquire or license technologies that can advance the development of low-cost system components and subsystems.
Page 7
We were formed in June 1997 to further the research and development of residential fuel cell systems. We do not expect to have a commercially viable product until at least 2001. Accordingly, there is only a limited basis upon which you can evaluate our business and prospects. An investor in our common stock should consider the challenges, expenses and difficulties that we will face as a development stage company seeking to develop and manufacture a new product.
We expect the cost to produce our pre-commercial systems during 1999 and 2000 to be higher than their sales price under the terms of our distribution arrangements with GE Fuel Cell Systems and Edison Development. Futhermore, even if we achieve our objective of bringing our first commercial product to market in 2001, we anticipate that we will continue to incur losses until we can cost-effectively produce and sell our residential fuel cell systems to the mass market, which we do not expect to occur until after 2002.
Page 8
The development of a mass market for our systems may be impacted by many factors which are out of our control, including:
*the cost competitiveness of fuel cell systems
*the future costs of natural gas, propane and other fuels used by our systems
*consumer reluctance to try a new product
*consumer perceptions of our systems
*safety regulatory requirements
*the emergence of newer, more competitive technologies and product
Page 20
We expect to begin manufacturing pre-commercial residential fuel cell systems during 2000. All users of these systems will be expected to participate in field trials and evaluations designed to test system performance, market conditions and customer preferences, including usage patterns, fuel availability, buying criteria, and regulatory matters. We intend to use this data to achieve optimal product design and speed commercialization and mass market acceptance. The information obtained from the field test results will be used to improve the design and performance of the commercial units planned for production and sale in the year 2001. GE Fuel Cell Systems has committed to purchase from us, on a take or pay basis, 485 of the pre-commercial residential fuel cell systems prior to December 31, 2000. The total sales price for these units will be approximately $10.3 million. (note: this works out to be $21,237.00 US / per unit, I believe these units are being sold for this at a loss as to Plug to GE as well, the actual cost of these units today are unknown and Plug will not comment, they are however very expensive, see also the next comment)
We expect the cost to produce our initial systems to be higher than their sales price under the terms of our distribution arrangements with GE Fuel Cell Systems and Edison Development. We expect to continue to experience costs in excess of product sales until we achieve higher production levels, which we do not expect will occur until after 2002.
Page 32
Co-Generation Potential. Our systems will produce heat as a by-product. In the future, we plan to modify our basic system to use that excess heat to supplement traditional residential hot water and space heating systems, thereby significantly increasing total system efficiency and providing expected cost savings for consumers.
Page 33
Acquire or license complementary technologies. Our goal is to manufacture the best residential fuel cell system as quickly as possible, whether we develop components and subsystems internally or obtain them from third party suppliers. Accordingly, we regularly review strategic opportunities to acquire or license technologies that can advance the development of low-cost system components and subsystems
Page 35
Phase 4--Next Generation Models. In 2003, when we expect to have achieved mass market production of our basic systems, we intend to produce new models offering enhanced features, including models with co- generation capabilities. In July 1999, we entered into a Collaboration Agreement with Joh. Vaillant GmbH u. Co. to develop a residential combined heat and power system for commercial introduction in Europe. Vaillant is a leading European heating technology company and offers its customers a complete range of products for central heating and hot water. The Collaboration Agreement is contingent upon the successful negotiation and execution of supply and distribution arrangements, as well as product development arrangements, among Plug Power, Vaillant, and GE Fuel Cell Systems. (Plug Power does therefore not intend to get into co-generation until after 2003, GLE's SOFC system that they have already tested is fitted with heat exchangers so that it may be utilized for CHP (Combined Heat and Power) co-generation applications today)
Page 37
Together with GE Fuel Cell Systems, we have conducted a preliminary evaluation of target markets and potential customers, taking into account such factors as average household electricity usage, ability to pay, power availability and quality, availability of fuel, the prices of electricity and natural gas, penetration of competing distributed generation technologies, new capacity requirements and the cost of new capacity additions. Based on this evaluation, we intend to target the following market segments during 2001 and 2002 for our first commercial fuel cell systems, which we estimate will be priced to the consumer between $7,000 and $10,000, subject to market demand.
Page 40
Fuel reformer (processor)
Converts or reforms the specified hydrocarbon fuel, such as natural gas, propane, methanol or gasoline, into a hydrogen-rich stream for use in the fuel cell stack. Design may differ based upon the type of fuel used. (Note ; the difference between PEM reforming and SOFC reforming discussed later)
Fuel cell stack
Produces electricity in a chemical reaction by combining hydrogen with oxygen.
Power conditioner (inverter)
Converts the direct current, or DC, electricity created by the fuel cell stack into alternating current, or AC, electricity for use in the home. Also designed to handle voltage spikes, as well as distortions caused by the concurrent use of multiple appliances. Design may differ based upon the country in which it will be used. (Note: the SOFC also generates power in the cell from CO which in a PEM needs to be filtered out by the reformer otherwise the CO will damage the PEM cell and cause it to cease operation)
Fuel supply subsystem
Connects the fuel supply to the fuel reformer and filters out unwanted sulfur and other fuel contaminants.
Air supply subsystem
Supplies filtered air to both the fuel reformer and the fuel cell stack.
Water management loop
Supplies humidification water to the fuel cell stack to prevent the system from drying out and reaction water to the fuel reformer to facilitate the conversion of the fuel to hydrogen. (Note: The SOFC requires no complex water management/ humidification as the cell requires no humidification as a result of no humidification the cell is not damaged by freezing. Should a PEMFC freeze the moisture in the membrane would freeze and damage the membrane rendering it unusable)
Thermal management system
Regulates the operating temperature of both the fuel reformer and the fuel cell stack to ensure optimum performance. (Note: reformate (gasses made by reforming) need to be tempered in A PEMFC because the PEM cell operates at a lower temperature than the reformer - hot gas from a PEM reformer would yeild/ damage the PEM cell)
Microprocessor-based control unit
Monitors system parameters and provides control signals to the various subsystems to maintain efficient operation. Also signals need for service or maintenance.
Battery
Powers the system from initial start until the fuel cell stack warms up to appropriate temperature and also provides 3 kilowatt- hours of back-up power. Recharges while system is in use. (Use of a battery depends on the way in which the system is designed to operate in between peak loads)
Page 55
In February 1999 we entered into an agreement with General Electric pursuant to which General Electric agreed to provide capital to GE Fuel Cell Systems, in the form of loans, to fund GE Fuel Cell Systems' commitment to purchase 485 pre-commercial systems during the period ending December 31, 2000. General Electric also agreed to provide additional capital, in the form of a loan not to exceed $8.0 million, to fund GE Fuel Cell Systems' ongoing operations. In addition, the agreement provides that, as long as we are providing PEM fuel cell systems that are competitive, as determined by GE On-Site Power, in good faith, based on objective factors set forth in the joint venture agreement, GE Power Systems may not sell PEM fuel cell systems that compete with our fuel cell systems. If GE On-Site Power determines that our fuel cell systems are not competitive, we have 12 months to make them competitive before the noncompete provision terminates. Divisions or subsidiaries of General Electric Company other than GE Power Systems are not prohibited from selling competing fuel cell systems but, in the event that they do, we can terminate our agreements with GE Fuel Cell Systems or appoint additional distributors. (Note: this agreement only covers PEMFC's and does not restrict GE from purchasing/ utilizing competitive technologies, there is also a note in the prospectus somewhere that also says that GE is only restricted to stay with Plug for PEM system's under 35kW as per the alliance note on page 2. Also note GE made this agreement with Plug and was tied to Plug in February 1999, before GLE had announced any of its big advancements.)
SOFC's and Global Thermoelectric
In my discussion relative to SOFCs I will focus around Global Thermoelectric because they are the primary Company in which I have invested. Yes there are other SOFC Companies, but there are few as advanced or so pure of a fuel cell play as them. For starters, I will refer you to Global Thermoelectrics webpage at globalte.com . On that site you will see that Global is the worlds largest supplier (95% of the market) of remote Power Generation equipment globalte.com . In addition to Globals heater page here is a US army page I found on Globals heater www-acala1.ria.army.mil (I am giving you these links to show that Global although small, does have an established reputation). They are also the only supplier of heaters to TACOM (US Military) for tracked military vehicles, GLE beat out several international defense contractors to receive this contract and to date are the exclusive supplier for this. GLE also has a fuel cell information page, it is here globalte.com .
Once you have read the above I refer you to the following news releases for Global over the last year
Global Thermoelectric To Join Exclusive European Fuel Cell Research Program ---- Only North American Company Invited to Participate
newswire.ca
Global Thermoelectric Announces Fuel Cell Power Breakthrough
newswire.ca
Global Thermoelectric Announces Automotive Fuel Cell Deal with Delphi Systems
newswire.ca
Global Thermoelectric Successfully Runs Fuel Cell System Directly on Natural Gas
newswire.ca
Global Thermoelectric Receives Purchase Order for Next Segment of Delphi Automotive Systems Fuel Cell Project
newswire.ca
Global Thermoelectric Announces Offering of Common Shares
newswire.ca
Global Thermoelectric Completes Fuel Cell Support System Test, Adds Senior Fuel Cells Personnel
newswire.ca
Delphi Automotive Systems and Global Thermoelectric Successfully Test Integrated Gasoline-Fueled Solid Oxide Fuel Cell Power Generation System
newswire.ca
Global Thermoelectric Successfully Tests Integrated Fuel Cell System
newswire.ca
Interview with Jim Perry, President and CEO, Global Thermoelectric
stockhouse.ca
A Very Enlightening Report by the Gas Research Institute given at the Electrochemical Society Joint International Meeting , Honolulu October 1999
SOFC-Based Residential Cogeneration Systems - K. Krist (Gas Research Institute), K.J. Gleason, and J.D. Wright (TDA Research, Inc)
electrochem.org (Note, this is an adobe acrobat file)
National Post Article (I could not find the link so here is the text)
CALGARY - Global Thermoelectric Inc. will unveil plans next month to build the first solid oxide fuel cell manufacturing plant in Canada.
Global, known as the "baby Ballard," is closing a deal on a 24,000-square-foot facility in Calgary and expects to have commercial production of its fuel cells under way this fall.
Like other fuel cell developers, the Calgary-based company has been thrown a vote of confidence by investors following a flurry of recent announcements by Ballard Power Systems Inc. Ballard has signed a number of high-profile deals and is preparing to produce enough systems for automakers to introduce the emission-free vehicles by 2004.
Last April, Global's shares were trading at less than a $1. Last Friday, they closed at $26.50, up $5.45.
Jim Perry, Global's president and chief executive, said initially his company will produce fuel cells for its partner, auto parts maker Delphi Automotive Systems Inc., as well as prototypes for power generation equipment used in remote locations -- the first market it wants to pursue. Global is already the largest supplier of remote thermoelectric power.
Within a year, the company hopes to be manufacturing up to 10 megawatts of production a year, or about 5,000 systems.
"Right now I've got [people with] PhDs making [the cells] by hand. We know that's not economic," Mr. Perry said of his plans to get the plant operating as quickly as possible.
Unlike Ballard, which is the leader in fuel cell technology and aiming to fully power vehicles, Global sees its market potential in auxiliary and back-up power as well as home co-generation.
Global's plant will beat Ballard to the punch. Earlier this month, Ballard said it will build a $400-million fuel cell production plant in either Canada or the U.S. once it gets the backing of several major automakers.
Because Global's technology is different, and the venture so much smaller, it will make it easier to launch production sooner, Mr. Perry said.
Global will lease the building and install about $12-million in equipment.
"The difference between us and [Ballard] is the equipment that's required to manufacture the cells for us is commercially available. For us it's very similar to the manner in which you'd manufacture a computer chip."
Global is one of a handful of companies developing a solid oxide fuel cell, and is believed to be the farthest along in bringing the cell to market. Its cell differs from Ballard's in that it is capable of running on natural gas or gasoline by using a simple and inexpensive reformer.
Global announced in December it had successfully tested the new reformer designed with Delphi to separate hydrogen, which fuel cells require for power, from gasoline.
The proton exchange membrane cell, or PEM cell -- being developed by Vancouver-based Ballard, New York-based Plug Power Inc. and others -- works best on methanol or pure hydrogen, less readily available fuel sources.
"In applications with natural gas or gasoline as the fuel, we really do believe we have a leg up," Mr. Perry said.
Christine Farkas, an analyst at Merrill Lynch & Co. in New York, said Ballard's lead in the march towards clean power sources doesn't preclude others from making inroads in a number of markets.
"The overall sentiment [toward the industry] is very positive and investors are not necessarily differentiating between companies and technologies right now," she said. "Are they all going to be successful? We don't know."
Mr. Perry said Global is in talks with a number of potential partners to steer its cell into larger production.
"We have some very interesting discussions going on," he said. "We hope to get something organized in the home-gen business fairly quickly -- within a few months."
Sarah Hughes, research associate at Sprott Securities, who follows Global, said home co-generation holds promise for Global because its cell operates at a high enough temperature to provide both electricity and some heating.
"A joint venture, that's what we're looking for," she said.
Here is a copy of a Sprott securities research report
Recommendation : Speculative Buy
Target $15.00
Insight Dec 16, 1999
Sarah Hughes - Associate
(416) 943-6485
Special Situation
GLE:TSE
Global Thermoelectric ("Global") is developing SOFC systems for both the stationary (including home co-generation) and automotive market. Over the past few months, the Company has announced significant breakthroughs in its development processes, making strides towards a commercially viable product. On April 16, 1999, Global announced that it had received an initial purchase order from Delphi Automotive System for a solid oxide fuel cell system. Unlike many other fuel cell developers, Global also has two existing product lines unrelated to its SOFC development work. It is the world leader in the development, manufacturing and distribution of thermoelectric power generation equipment used in remote locations. The Company also produces crew compartment heaters for use in military vehicles; these heaters are currently supplied to the U.S. Military. We continue to recommend Global as a Speculative Buy with a target price of $15.00
1999 Recap
Throughout 1999 Global achieved a number of significant milestones in the development of its solid oxide fuel cell (SOFC) system. We have highlighted a few of them below:
1. April 8, 1999: Global increased the power output of its cell by 100% (to 670 milliwatts per square cm), while operating at 800 C (down from 1000 C).
2. July 22, 1999: Global announced that it successfully tested its SOFC running directly on natural gas, through the use of an integral reformer. The reformer is the size of your fist, and is estimated to cost approximately C$25.00. Given that 50% of all homes in the U.S. have access to natural gas, this milestone is quite significant.
3. November 30, 1999: The Company raised $25 million through a special warrant financing, in order to build a pilot plant for the production of its SOFC systems. This will give it ample capacity to enter the remote market, in addition to satisfying the initial development needs of any future industry partners.
As a result of these initiatives, Global, a relative unknown in the fuel cell circle, sparked significant interest from a few industry giants in 1999. On April 16, 1999 Global announced that it had received a purchase order from Delphi Automotive, the largest automotive parts manufacturer in the world. We believe that Delphi will be supplying Global's SOFCs to BMW.
2000 SHOULD BE GLOBAL'S TIME TO SHINE
Since acquiring its solid oxide fuel cell technology from Julich, Germany's largest R&D firm, Global has continued the development of these cells with a commercial focus. While 1999 was the time for Global to position itself in the fuel cell market, we believe that throughout the new year, Global will continue the rapid development of its SOFC system and in turn position itself to become a predominant player in the SOFC market.
The potential for SOFCs has in the past been masked by its lower temperature colleague, the proton exchange membrane fuel cell (PEM). The PEM technology is currently being developed by a number of large R&D firms, including Ballard Power Systems and Plug Power. However, over the past year the market's acceptance of SOFCs has increased and we believe that this trend will continue. As described in our initial report (June 18, 1999), there exists a number of massive potential markets for fuel cells. From the remote market to the larger home co-generation and automotive markets, it is widely believed that fuel cells have a large potential. Below we have provided an overview of how we believe SOFCs, and in turn Global, fits into these markets.
Automotive
The potential entrance of fuel cells in the automotive market has received tremendous attention thanks to the contribution of Ballard Power Systems, the reported market leader in PEM technology. However most automotive manufacturers do not expect to have PEM powered cars ready for commercial production until at least 2004. Among the number of obstacles (including cost) yet to be overcome in the commercialization, the need for a pure hydrogen fuel infrastructure has been the biggest stumbling block. It is estimated that in order to provide a pure hydrogen infrastructure for fuel vehicles, at least $300 billion in capital investment will be needed. As a result of the high cost, many market analysts now believe that we will have to make due with our current gasoline infrastructure. According to Robert Dempsey of Texaco Energy Systems, "infrastructure costs could doom fuel cells in any motor vehicle application that does not use gasoline as a hydrogen feed stock."
It is possible for both PEMs and SOFCs to use "reformed" gasoline; however the reforming process between the two types of fuel cells is very different. While SOFCs use a single step reforming process, the PEM technology requires two steps, which increases both the complexity and the cost of the reformer. In general, when a hydrocarbon is reformed, the bond between the carbon and the hydrogen is broken. Although this process allows hydrogen to enter the fuel cells, it also produces carbon monoxide. With a PEM cell, one must reform this gas once again to extract the carbon monoxide from the gas stream, as carbon monoxide is poisonous to a PEM cell. The second step is difficult to perform and as a result very expensive. In terms of the SOFC, carbon monoxide can be used as a fuel, and Global has achieved acceptable power from a system running on 100% carbon monoxide. As a result of the relatively simple procedure, the gasoline reformer for a SOFC is expected to be quite small and relatively inexpensive.
We must highlight that SOFCs also have their limitations in the automotive market. At this time the systems slow start up time (as a result of the high operating temperature) restricts SOFCs from becoming the sole power source in a car. However, SOFCs can become an efficient source of power in a hybrid situation, as currently being developed by BMW and Delphi. As stated in the joint press release by BMW and Delphi, they will be producing a hybrid car using and efficient internal combustion engine and a solid oxide fuel cell, both running on gasoline. Currently, Global is supplying prototype SOFC systems to Delphi. Since the initial purchase order in April, we believe that Global has made a number of deliveries to Delphi, and we expect them to continue into 2000. Although SOFC hybrid is still in the development stage, if successful, solid oxide fuel cells, and in turn Global, could potentially become a large player in the automotive market.
Home Co-generation Market:
While most attention has been paid to Global's future potential in the automotive market, one cannot forget about the potential in the home co-generation market. This market could prove to be much larger, and come to fruition earlier than the automotive market. Whereas SOFC high operating temperature is seen as a technical challenge for the automotive market, it is a benefit in the home market. According to a Gas Research Institute study, which compares the functionality and efficiency of SOFCs and PEMs for the residential co-generation market. SOFCs have advantages that make them more attractive in residential systems. The study states that "SOFCs operate at higher electrical conversion efficiencies, do not require CO (carbon monoxide) removal..... and generate higher quality waste heat that can be better used for reforming, space heat, and domestic hot water applications." In addition, the solid-state of the SOFCs' components (i.e. there is no liquid in the electrolyte) allow for low-cost, high volume manufacturing.
Although Global has yet to partner with anyone in the industry, management has told us that they are currently talking to a number of potential industry partners. We believe that sometime within the new year, an announcement will be made in this regard.
The Remote Market
Although the market may not be as sexy (or large) as the automotive and residential markets, it represents a great stepping stone in Global's development process. In the commercial market, systems must be extremely cheap in order to be accepted ($0.50 to $1.00 per watt): however, remote players are willing to pay significant premiums for effective and, more importantly, reliable power ($5.00 to $10.00 per watt). Therefore, Global plans to enter this market first, while continuing to focus on decreasing the cost and the size of its commercial applications. The Company expects to have a prototype system out in the remote market by the end of 2000. With Global's existing distribution system into the remote market (through its thermoelectric generator business), we believe that given and acceptable product, the Company will be able to penetrate this market successfully.
DON'T FORGET ABOUT THE OTHER PRODUCTS...
Although most attention is focused on (an valuation is based on) the Company's SOFC development work, we cannot forget about the existing product lines: thermoelectric generators and military heaters. The Company recently announced a $19 million generator contract from India, in addition to a $8 million extension on its existing U.S. Military heater contract. We are looking for revenues to increase from $13 million in f1999 (the Company has a March year end) to $22 million in f2000 and $29 million in f2001. Although these business liners do not solely justify the current valuation, they do generate some cash for the Company's on-going SOFC research and development.
Valuation and Recommendation
Although Global is an early stage Company, and therefore has a high degree of risk, we believe that Global has alot of opportunity ahead of it. From the Company's continuous development work with Delphi, and the potential entrance into the home co-generation market, to the expected launch of its first prototype in the remote market, we believe that 2000 will be an exciting time for both the Company and its investors. We continue to recom |
