A.J. Since you will be getting a tape of the conference call, I'll let you hear the details yourself. Instead, I'll just talk about the big picture:
The main thing here is just how many different possible ways there are now for ERC to be a big winner. When it first went public in 1992, ERC was almost entirely a play on its own work in fuel cells, which were still many years away from completion. Yes, it had two foreign licensees of the fuel cell technology, and yes, it was fooling around with some new battery technology, but these were total long shots.
Now look what it has:
1. After over a hundred million of dollars of development work since going public, ERC's own fuel cell technology is very advanced and within a few years of commercial introduction. By commercial, I mean priced where there should be substantial market demand, without any subsidies, with a respectable profit margin built in.
2. The first major test of Daimler Benz's radically different use of ERC's fuel cell technology started up on August 16 and is going well so far. The DB design is a very compact 250 kW unit that fits on the back of a truck and is meant for industrial cogeneration applications. This is a huge market, different than the 2 MW size electric utility one ERC is aiming at with its own units. If DB starts selling this product, ERC would get royalties, as well as a right to make and sell it in the US.
3. Mitsubishi is making progress with a 200 kW cogen design in Japan. Same thing - if it is commercialized, ERC will get royalties and has rights to use the technology here.
4. ERC's licensee Corning, Inc., continues to develop ERC's nickel-zinc battery technology, and has gotten the OK from several OEMs (I would guess outfits like Black & Decker) to try it out. Corning is betting heavily on this technology, is paying ERC modest initial license fees, and will owe royalties when it starts selling the batteries. This alone could be worth many dollars per share to ERC annually.
5. ERC so far has retained the rights to use the battery in electric and hybrid gas/electric vehicle applications. It has signed up Mercedes Benz to test the battery, as will another unnamed German electric vehicle company, and expects to sign a similar deal with Audi quite soon.
6. In Japan, Sanyo is now testing the battery for EV applications, and through intermediaries ERC is working on Toyota and some others. Toyota in particular would be a great catch, because in a few months it is introducing commercially in Japan a hybrid vehicle based on the Corolla that supposedly will get twice the mileage and emit only a fraction of the pollution. Toyota's new product uses lead-acid batteries; by comparison, ERC's nickel zinc technology is more powerful, weighs substantially less, handles more cycles, and costs about the same. Getting Toyota to switch would be a big coup.
So there are a lot of possible ways for ERC to work out well as a stock. Where it once was like a biotech company with one interesting prospect, ERC is now like one with a whole raft of different drugs in the pipeline. Sure, every one of them could fail, but any one of these succeeding would justify the stock, with a current market cap of only $40 million, being substantially higher.
Compared to every other development stage battery company, and especially compared to the US $600,000,000+ valuation on Ballard, ERC is absurdly underpriced.
The Ballard comparison is particularly interesting, because Ballard is now a very long term bet on the future of its fuel cell engine partnership with Mercedes, and it appears that within Mercedes itself there is a school of thought that thinks that hybrid gas/electric vehicles may be just as good, here much sooner, and don't require the development of a hydrogen based world infrastructure to succeed. If Mercedes is happy with ERC's battery, you could see it putting its Ballard work on the back burner.
Here is a link to ERC's quarterly report: biz.yahoo.com |
