FuelCell Energy (FCEL)
By Brendan Coffey, Editor of Cabot Green Investor
From Cabot Wealth Advisory 2/21/11 Sign up for free Cabot Wealth Advisory e-newsletter
This small stock is a play on a key driver to the worldwide boom in Green energy. And it is perhaps the most important to politicians: energy security. For one, it’s getting harder to find oil—it was reported this week the world’s largest oil company, ExxonMobil (XOM), has found only 95 barrels of oil to replace every 100 barrels it sold in the past decade. That’s a problem, since it means there’s less oil around.
Secondly, world demand for oil is booming, thanks to China, India, Indonesia and nearly every other nation. Demand is so great that the International Energy Agency strongly warns that by 2035 the world needs to find the equivalent of FOUR Saudi Arabias to simply sustain today’s demand levels! ExxonMobil’s problem with finding oil is ultimately our problem—and a reason to go Green.
There are a number of astonishingly large alternative energy programs recently put in place in areas like China and the European Union, but today I want to focus on a major, but often overlooked economy: South Korea. Korea is the world’s 15th largest economy with annual GDP of $1.5 trillion—the 11th largest user of energy. It is, obviously, a major trading partner with the U.S., as attested by the prevalence of Hyundais on the road and Fila sportswear at the gym (Italian origin, yes, but Korean owned).
Korea also imports a jaw-dropping 97% of its energy.
It’s lacking in natural energy resources, so the country has no choice but to go Green. Right now it gets just 1% of its energy from renewable resources, a reason the government has just enacted an aggressive national plan to get Greener.
Right now the mandate is to quintuple the amount of renewables in the country by 2015, to 5% of national energy usage, raising that sharply in subsequent years. One additional problem for Korea, though: The peninsula doesn’t have very good prospects for solar and wind. Korea’s solution: fuel cells.
A fuel cell is an electrochemical device that draws energy from an input through electron transfer via oxidation. That in itself is pretty amazing—after all, combustion is the dominant method of powering everything and the biggest reason global warming is such an imminent threat.
The byproduct of the fuel cell? Heat and not much else. If you use the heat emitted for an obvious purpose, like heating a building or its water, you end up with a manner of consuming fuels that can claim efficiency of over 70% and in some cases 80%. A typical fossil fuel power plant operates at about 35% conversion efficiency—and of course emits acid rain-type and greenhouse gas-type particles.
My stock recommendation is a Connecticut firm called FuelCell Energy (FCEL) that has been researching fuel cells for decades, and has been selling them the past decade.
Clients are institutions looking to reduce their carbon footprint, like Yale University, convert waste product into energy, such as Gills Onion, one of the nation’s largest onion processors which uses as much as 300,000 pounds of onion waste to run its fuel cells, to industrial users looking to maximize their efficiency, such as natural gas pipeline owner Enbridge, which uses fuel cells to use natural gas ordinarily released from pipelines to relieve pressure.
Korea has established fuel cells as the top tier candidate for renewable energy credits in its national Green plan. By 2030, the plan is to have the capital of Seoul generating 48% of its clean energy via fuel cells.
FuelCell Energy has the inside track on selling fuel cells to Korea. For one, the major Korean conglomerate Posco, one of the world’s largest steelmakers and a major power utility in Korean, owns over 10% of FCEL shares and is an existing customer. For two, no other company makes fuel cells as powerful as FuelCell Energy’s.
For the current year, look for FuelCell to post all-time high revenues around $111 million while narrowing its net loss to 40 cents. Shares are low-priced, a 2, and with the prospect of major Korean orders to be announced, a possible home run.
We’re following FCEL closely in Cabot Green Investor and will be featuring more low-priced, high-growth companies in the months ahead.
Editor’s Note: Brendan Coffey is the editor of Cabot Green Investor, which ended 2010 with a 24% return, easily trumping its benchmark, the WilderHill Clean Energy Index, which fell 7%! And that’s merely the beginning. The high-potential socks Brendan recommends have even further to go in the weeks, months and years ahead. Don’t miss another recommendation. Get started today!
Analyst and Editor of Cabot Green Investor
Brendan Coffey is a member of the Cabot investment team and editor of Cabot Green Investor. A veteran financial journalist, Brendan has spent more than a decade writing about investing for publications including Barron's, Forbes, The Wall Street Journal and a number of private-client brokerage newsletters.
|FuelCell Energy Inc.
3 Great Pasture Road
Danbury, Connecticut 06813
|Index Membership: N/A |
Sector: Industrial Goods
Industry: Industrial Electrical Equipment
Full Time Employees: 441