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Technology Stocks : FCL - FuelCell Energy -- Ignore unavailable to you. Want to Upgrade?

To: Fun-da-Mental#1 who wrote (303)	8/5/1999 12:02:00 AM
From: Sid Turtlman	Read Replies (2) \| Respond to of 407

Fun and Bill: This is from the liquidity section of ERC's 10-K covering the year ending last October: "The Company will need to raise additional funds to expand its Direct Fuel Cell manufacturing capability. The first stage in this process is to raise the output capability of the Company's manufacturing facility to 50 MW per year. Approximately $16 million has been estimated for this step." I think some similar language was in the previous few year's 10-K's as well, although the dollars the company thought it would need to achieve that production level has gone down over time. Until the last year or so it was still fiddling with the design of the unit, as far as I can tell, and wasn't ready to expand capacity and get into commercial production. The success of the stack tests last year and this, with one of ERC's units powering its main facility for some months now, has shown that all the technical issues are now behind them (which is more than one can say for any other fc company.) The only remaining issue is economic - can the company get the chicken and egg process rolling correctly. By that I mean, ERC's cost per kW of its products will be very much a function of the level of production; the selling price is a function of cost; and the sales level will be a function of the selling price. At a price of, say, $1500 per kW, the product's high efficiency and ultra cleanliness should allow it to achieve a decent percent of a market that is measured in the tens of billions per year. But ERC can't charge that price unless its costs are less than that, and they won't be less than that unless its capacity and production level is an awful lot bigger than it is at present. It costs money to expand capacity, hence the extra shares, which presumably will be traded for cash at some point. That doesn't necessarily mean a stock offering at market prices - it could come from a corporate partner at a premium to market.