PLUG -- Batteries--STORAGE--BLows up as GE may be out of it's contract.
Thursday May 4 7:26 PM ET
Plug Power Stock Tumbles
LATHAM, N.Y. (Reuters) - Shares of Plug Power Inc. (NasdaqNM:PLUG - news) tumbled on Thursday after the company said that design changes in technology to covert natural gas and other fuels into electricity relieved General Electric Co. (NYSE:GE - news) of any obligation to buy fuel cells under a contract signed in 1999.
The Latham, N.Y.-based company said the pre-commercial units now under development do not conform to the specifications set in February 1999 when GE made a commitment to buy 485 units as part of a marketing agreement.
The cells, which use an electro-chemical reaction to produce 7 kilowatts of electricity from natural gas, are due to be sold to residential customers and small businesses next year. Plug Power has said it expects them initially to retail for $7,000 to $10,000 each. It has declined to say what marketers such as GE will pay for the units.
Plug Power's stock dropped about 37 percent after the news, closing at 59 7/16, down 21 1/4. Like a lot of other technology shares, the stock was already well below its all-time high of 156 1/2 reached on Jan. 24.
Plug Power disclosed the news as it reported its first-quarter net loss had widened to $17.2 million, or 40 cents per diluted share, from $6.5 million, or 32 cents, in 1999.
Excluding special items, the loss was 28 cents a share, a penny wider than the consensus estimate of analysts surveyed by First Call/Thomson Financial.
Even though GE is no longer obligated to purchase the 485 units, Plug Power expects the company to purchase a large number of fuel cells with the modified design during the remainder of this year and the first half of 2001.
``We are currently working out the terms of this arrangement and our relationship with GE remains intact,'' Chief Executive Officer Gary Mittleman said in a statement.
``Plug Power has been advised that GE continues to support product development, sales and distribution directed at bringing the GE MicroGen/Plug Power commercial product to market,'' Mittleman said.
``We remain on track to bring our first commercial product to market in 2001,'' he added.
Asked about the design changes, Chief Financial Officer William Largent told Reuters the first commercial units will not work independently of the local electric utility power grid, as originally planned. Instead, customers using the cells will be able to switch between electricity generated by the local utility and power produced by the fuel cell.
After the initial roll-out, the company will launch new models designed to provide power to homes that have no connection to the grid -- the type of unit contemplated by the initial GE agreement, Largent said.
Plug Power expects those systems to be available in late 2001 or early 2002.
``We have run these systems in our labs, but have decided to release them a little later because of their more demanding performance requirements,'' said Manmohan Dhar, chief engineer of Plug Power's Residential Program.
Plug Power's owners include its founders, DTE Energy (NYSE:DTE - news) and Mechanical Technology (NasdaqNM:MKTY - news), with 32.5 percent each; GE and a Sempra Energy (NYSE:SRE - news) subsidiary, Southern California Gas Co., the largest U.S. gas distribution company. |
