People looking for a speculative play in the renewable energy space might want to take a look at FuelCell Energy (FCEL).
The company, which is based in Connecticut, signed a big deal yesterday with a Spanish energy company, Abengoa.
The deal gave the stock a one-day pop of nearly 20%, most of which it had given back a day later. The sales are presently on sale at 95 cents each.
The headlines here talk about bio-energy, but this is actually a gas play. FCEL calls its technology Direct Fuel Cell (DFC), and it basically extracts oxygen from various forms of hydrocarbon gas, combines them with ambient energy, and releases energy that way. It has cells in a variety of sizes, from 10s of kilowatts through megawatts, so it can mix-and-match to your capacity. What makes it most interesting is it can take a wide variety of feedstocks, including gas from rotting biomass.
FCEL just made its first gross profit this last quarter, resulting in a net loss. But the company says the result is based on lower costs associated with higher production, in other words it's ramping toward real profits. Sales were a pretty serious $31 million, a 60% rise from the same quarter a year ago. The market cap, at $121 million, is about one year's sales.
So we are talking about a waste gasification play. Take gas from industrial processes of all kinds, all kinds of gas, and turn it into grid energy. FCEL competes with simple boilers that will just burn industrial waste and sell the resulting heat or hot water for electricity.
The big risk is that the deal with Abengoa is completed. If it is, we're talking about many megawatts of plants using what Abengoa calls “liquid biofuel” throughout Spain and Latin America. That would be enough demand to ramp up production toward serious profitability. And proof of concept that would lead to more deals.
Completion of the deal is based on FCEL retaining its intellectual property rights in a global marketing contract. In other words uncertainty, risk. But for speculators it may be a risk worth taking.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.