Here is some info about Ballard Power Systems Inc., borrowed from an
analyst report (Merrill Lynch). Merrill set a 12-month price target
of $29 for Ballard (currently at $27)...that forecast was done in
September 1998. They make it clear that commercial implementation
won't happen until 2004. Still, my view is that if one can take a
position in one of the most remarkable companies of all time, one
should do so especially when downside is limited.
Info:
* Zero Emission Legislation Creates Electric Vehicle Market
Cars and trucks account for about half the volatile organic compounds and nitrogen oxides, and most of the
carbon monoxide dumped into the air of the United States' most polluted cities. As a result, the 1990 Clean Air
Act Amendments imposed stringent regulations concerning the emissions of internal combustion engine
vehicles. Due to the growing number of vehicles and an expected 50% increase in driving for light-duty
vehicles over the next 15 years, the U.S. Department of Energy estimates that current emissions per mile will
have to fall by one-third by 2010 simply to maintain the status quo. Growing environmental concerns and
tighter emission laws are making electric vehicles -- and soon fuel-cell vehicles -- an attractive alternative to the
internal combustion engine. The latest in emission legislation mandate that 10% of cars produces for sale in
California and 12 northeaster states be zero-emission vehicles (ZEV) by the year 2003. Other areas, including
Canada's British Columbia, have put forward plan to adopt similar measures in reducing pollutive emissions.
While we believe tighter environmental legislation has benefited fuel cells and other anti-pollution technologies,
we also believe that any loosening of environmental legislation could have a negative impact on sentiment
towards fuel cells and Ballard.
* Phenomenal Stock Price Performance (1997) Fueled by Strategic Alliances
Ballard recognized the need for international support in ultimately bringing fuel-cell vehicles to the road, and
subsequently teamed up with several leading international companies. We saw numerous joint venture
announcements in 1997, both for stationary power and automotive applications.
1. GPU International: On December18 1996, Ballard Power and GPU International (GPUI) announced the
formation of a joint venture -- "Ballard Generation Systems (BGS)" -- to commercialize fuel cell stationary
power plants. GPU International is a subsidiary of GPU Inc., serving 2.4 million customers across certain
northeastern states.
2. GEC Alsthom: On December 18, 1997, Ballard's stationary power business (BGS) received support from GEC
Alsthom, a world leader in the manufacture and electrical and power generation equipment. GEC Alsthom is
expected to bring its manufacturing and marketing expertise to Ballard's stationary power efforts, and invested
both cash and technology to be a part of the alliance. BGS and GEC Alsthom have set up a joint venture
focused on the distribution of fuel cell power plants in Europe.
3. Daimler Benz: On April 13, 1997, Daimler took a more direct interest in fuel cell development through the
purchase of 25% of Ballard Power Systems, as well as establishing a more formal joint venture ("DBB
Engines") with the goal of producing and marketing automotive fuel-cell engines. The addition of Ford Motor
Company to the alliance diluted Daimler-Benz' ownership to 20%, and the partnership is considered the
leading consortium in bringing fuel cell vehicles to market next decade.
4. Ford Motor Company: On December 15, 1997, Ford announced it will join the Daimler-Ballard alliance
through a purchase of 15% of Ballard Power Systems, and the establishment of an additional joint venture
with the two companies focusing on electric drive trains ("Ecostar").
5. EBARA Corporation: On May 20, 1998, BGS announced that EBARA Corporation of Japan will join the
stationary power plant joint venture, and create another joint venture under the BGS umbrella. EBARA
invested US$15 million in cash for an interest in BGS as well as two 250kW fuel-cell power plants for field
testing in Japan. EBARA represents the third strategic partner in BGS, following GPU International (U.S.) and
GEC Alsthom (Europe).
While Ballard has set up a joint venture with a Japanese partner in stationary power, it has yet to add a
Japanese partner on the automotive side. We note that stationary power and automotive power applications
are not the only possibilities -- portable power, marine and locomotive power are areas under development. It
would be difficult to repeat such a stellar year in terms of both strategic alliances as well as stock price
performance, and 1998 has proven this point. Ballard's share price has gone through a period of lackluster
performance as the company focuses on absorbing its existing alliances and setting up subsidiaries. |
