My guess is LIPA bureaucracy is glacial. They just got around to selecting winners for a 2015 RFP along with our stuff.

Puts a whole new meaning on slow. If FCEL does win, I hope LIPA pays faster than they pick winners. ;-)]]>

My guess is LIPA bureaucracy is glacial. They just got around to selecting winners for a 2015 RFP along with our stuff.

Puts a whole new meaning on slow. If FCEL does win, I hope LIPA pays faster than they pick winners. ;-)]]>

Did you read the comment linked below?

-- https://seekingalpha.c...

It shows PPA free cash flow for a hypothetical 60 MW operating portfolio financed at various interest rates. Cash flow for the portfolio financed by sale-leaseback is also given. Details on how those numbers were obtained are provided in previous comments on that thread.

This topic is central to the future of the company. Let me know what you think. Same goes for anyone else with an opinion.

Look forward to getting feedback.]]>

Did you read the comment linked below?

-- https://seekingalpha.c...

It shows PPA free cash flow for a hypothetical 60 MW operating portfolio financed at various interest rates. Cash flow for the portfolio financed by sale-leaseback is also given. Details on how those numbers were obtained are provided in previous comments on that thread.

This topic is central to the future of the company. Let me know what you think. Same goes for anyone else with an opinion.

Look forward to getting feedback.]]>

These obligations include paying off the NRG construction loan, funding a reserve account for future service, and covering administration costs. Only when this is done can the plant be added to FCEL's operating portfolio and become self funding via PPA revenue.

In the recent past, FCEL brought plants into commercial operation via the PNC sale-leaseback. The cash flows of the transaction monetized the frozen assets of each project and allowed all contractual obligations to be fulfilled. This appears to have worked reasonably well until the ITC expired in 2017. We have not seen any sale-leaseback deals since then.

If the PNC sale-leaseback is no longer available on reasonable terms, then FCEL must go to the bank. The numbers show even low interest rate loans can't compete with the PPA cash flow from a sale-leaseback.

Will bank loans be good enough to keep the PPA model viable?]]>

These obligations include paying off the NRG construction loan, funding a reserve account for future service, and covering administration costs. Only when this is done can the plant be added to FCEL's operating portfolio and become self funding via PPA revenue.

In the recent past, FCEL brought plants into commercial operation via the PNC sale-leaseback. The cash flows of the transaction monetized the frozen assets of each project and allowed all contractual obligations to be fulfilled. This appears to have worked reasonably well until the ITC expired in 2017. We have not seen any sale-leaseback deals since then.

If the PNC sale-leaseback is no longer available on reasonable terms, then FCEL must go to the bank. The numbers show even low interest rate loans can't compete with the PPA cash flow from a sale-leaseback.

Will bank loans be good enough to keep the PPA model viable?]]>

The financing you mention seems different from the $40M project finance facility provided by NRG to FCEL. It appears to involve equity ownership by investors. FCEL adopted the PPA business model to sell power precisely because they can't find buyers or infrastructure investors for their plants.

Are you saying investors can be easily found?]]>

The financing you mention seems different from the $40M project finance facility provided by NRG to FCEL. It appears to involve equity ownership by investors. FCEL adopted the PPA business model to sell power precisely because they can't find buyers or infrastructure investors for their plants.

Are you saying investors can be easily found?]]>

Rocket launches always involve high G-forces. Long AMD.]]>

Rocket launches always involve high G-forces. Long AMD.]]>

Better than that, AMD is running on top of the water.]]>

Better than that, AMD is running on top of the water.]]>

P.S. - In space you can't hear shorts scream. ;-)]]>

P.S. - In space you can't hear shorts scream. ;-)]]>

-- https://seekingalpha.c...]]>

-- https://seekingalpha.c...]]>

Had to dig a little but here's the link. Quote is at the bottom of the article.

-- http://bit.ly/2h10xU1

"Under two feed-in tariffs separate from the RFP, LIPA approved 31 carport and commercial rooftop solar projects across Long Island, totaling a capacity of approximately 20 MW, and three low-emission fuel cells at the Brookhaven Rail Terminal in Yaphank for a total capacity of 39.8 MW."

FCEL is not explicitly named, but it's likely them. Not sure what the article means by "three low-emission fuel cells" totaling 39.8 MW. Probably just sloppy journalism. Ten SureSource 4000 units and one SureSource 3000 adds up to 39.8 MW. Maybe those 11 units are spread over three distinct plant complexes at the Brookhaven Rail Terminal.

This is excellent news.]]>

Had to dig a little but here's the link. Quote is at the bottom of the article.

-- http://bit.ly/2h10xU1

"Under two feed-in tariffs separate from the RFP, LIPA approved 31 carport and commercial rooftop solar projects across Long Island, totaling a capacity of approximately 20 MW, and three low-emission fuel cells at the Brookhaven Rail Terminal in Yaphank for a total capacity of 39.8 MW."

FCEL is not explicitly named, but it's likely them. Not sure what the article means by "three low-emission fuel cells" totaling 39.8 MW. Probably just sloppy journalism. Ten SureSource 4000 units and one SureSource 3000 adds up to 39.8 MW. Maybe those 11 units are spread over three distinct plant complexes at the Brookhaven Rail Terminal.

This is excellent news.]]>

The April secondary offering surprised many folks including me. It smacks of desperation and reveals the problem with cash. Given the current cash burn rate, it's possible another dilution could occur in the Fall. That would be disastrous for the share price unless other positive factors countervail.

Lots of new projects could be coming our way. But how those projects will be financed remains uncertain. Risk and opportunity. Interesting times.]]>

The April secondary offering surprised many folks including me. It smacks of desperation and reveals the problem with cash. Given the current cash burn rate, it's possible another dilution could occur in the Fall. That would be disastrous for the share price unless other positive factors countervail.

Lots of new projects could be coming our way. But how those projects will be financed remains uncertain. Risk and opportunity. Interesting times.]]>

Fortunately O&G Industries will manage the Beacon Falls power project. Upon completion, O&G will either sell the project outright or sell power via a PPA. The role for FCEL is providing fuel cells and service. That's great news because it would be huge product sales and steady service revenue. Exactly what FCEL needs.

POSCO will probably resume purchasing fuel cell kits. Also product sales in Asia could pick up significantly. We will hear more about the utility deal in South Korea soon. Hopefully details about it will give a better feel for other activity in the Asia market.]]>

Fortunately O&G Industries will manage the Beacon Falls power project. Upon completion, O&G will either sell the project outright or sell power via a PPA. The role for FCEL is providing fuel cells and service. That's great news because it would be huge product sales and steady service revenue. Exactly what FCEL needs.

POSCO will probably resume purchasing fuel cell kits. Also product sales in Asia could pick up significantly. We will hear more about the utility deal in South Korea soon. Hopefully details about it will give a better feel for other activity in the Asia market.]]>

-- https://seekingalpha.c...

Beacon Falls will be a source of product sales for FCEL. It is more vital than ever that this project happens soon.]]>

-- https://seekingalpha.c...

Beacon Falls will be a source of product sales for FCEL. It is more vital than ever that this project happens soon.]]>

Using the previous analysis of Riverside as a basis, we can infer results. Let's compare free cash flows for plants financed by bank loans at various interest rates. Also toss in PNC sale-leaseback numbers where the ITC gets reinstated, as unlikely as that is.

60 MW operating portfolio has $35.7M annual PPA revenue

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Negative annual free cash from PPA after payment (6.887%)

$4.73M annual free cash from PPA after payment (5.121%)

$9.89M annual free cash from PPA after payment (3.019%)

$15.0M annual free cash from PPA after payment (0.650%)

$17.2M annual free cash from PPA after payment (PNC with ITC)

Looking at those numbers, it's obvious why FCEL used the sale-leaseback facility while the ITC was still in effect. Now that the ITC is gone, it remains to be seen what terms will be offered by PNC. The new numbers didn't look good for sale-leaseback deals without the ITC.

That means FCEL will likely go to the bank to finance projects. PPA free cash flow will drop off a cliff. Hopes for EBITDA breakeven just got a whole lot harder to achieve.]]>

Using the previous analysis of Riverside as a basis, we can infer results. Let's compare free cash flows for plants financed by bank loans at various interest rates. Also toss in PNC sale-leaseback numbers where the ITC gets reinstated, as unlikely as that is.

60 MW operating portfolio has $35.7M annual PPA revenue

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Negative annual free cash from PPA after payment (6.887%)

$4.73M annual free cash from PPA after payment (5.121%)

$9.89M annual free cash from PPA after payment (3.019%)

$15.0M annual free cash from PPA after payment (0.650%)

$17.2M annual free cash from PPA after payment (PNC with ITC)

Looking at those numbers, it's obvious why FCEL used the sale-leaseback facility while the ITC was still in effect. Now that the ITC is gone, it remains to be seen what terms will be offered by PNC. The new numbers didn't look good for sale-leaseback deals without the ITC.

That means FCEL will likely go to the bank to finance projects. PPA free cash flow will drop off a cliff. Hopes for EBITDA breakeven just got a whole lot harder to achieve.]]>

https://seekingalpha.c... (Pfizer deal analysis)

http://bit.ly/2qoq2md (8-K Pfizer/PNC)]]>

https://seekingalpha.c... (Pfizer deal analysis)

http://bit.ly/2qoq2md (8-K Pfizer/PNC)]]>

The numbers below are based on an analysis of the Pfizer deal. Data comes from an 8-K dated October 31, 2016 and filed on November 4, 2016. The Pfizer deal analysis contains additional complexity that won't be reiterated here. Links are provided at the bottom.

The Pfizer deal used the PNC sale-leaseback facility. It allowed FCEL to monetize the project while still obtaining revenue from power sales via a PPA. The deal will first be reviewed as it actually occurred when the ITC was still present. Afterwards the ITC will be removed to see what happens with the numbers. The dollar values (in millions) are shown below. Let's take a closer look.

PNC sale-leaseback with ITC...

Immediate cash flows upon signing:

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PNC / FCEL / Description

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

-36.1 / +36.1 / Gross proceeds

+7.5 / -7.5 / Initial lease payment

+0.8 / -0.8 / Lease transaction costs

N/A / -10.0 / Reserves for plant service

N/A / -8.5 / Repay NRG loan for project costs

+10.8 / N/A / Federal investment tax credit (ITC)

+7.5 / N/A / Depreciation (first year equiv cash value)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

-9.5 / +9.3 / Net proceeds (immediate)

Subsequent cash flows (over 10 years):

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PNC / FCEL / Description

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

+16.1 / -16.1 / Sum of quarterly lease payments

+5.1 / N/A / Depreciation (later years equiv cash value)

N/A / +32.0 / PPA revenue (from power sales)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

+21.2 / +15.9 / More net proceeds (over 10 years)

Analysis (with ITC)

- - - - - - - - - - - - - - -

PNC side: Immediate cash flows leave PNC underwater by $9.5M after signing the deal. Depreciation and quarterly payments by FCEL over 10 years brings in another $21.2M in cash for PNC. After the $9.5M principal is deducted, $11.7M in proceeds are received over 10 years. The $9.5M "investment" provides $11.7M profit for PNC. That's an uncompounded annual return rate of 12.3% on the funds. So PNC earns over 12%

per year for 10 years on their $9.5M cash outlay.

FCEL side: Immediate cash flows leave FCEL ahead by $9.3M after signing the deal and paying contractual expenses. The $9.3M cash helps FCEL cover operational costs not directly related to the project. Subsequent quarterly payments by FCEL to PNC reduce PPA cash flow by roughly half. Over 10 years FCEL gets $15.9M in free cash from PPA revenue of $32M.

When the ITC is present, the sale-leaseback appears to be quite equitable

for both PNC and FCEL. Now let's see what happens when the ITC goes away.

PNC sale-leaseback without ITC...

Immediate cash flows upon signing:

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PNC / FCEL / Description

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

-36.1 / +36.1 / Gross proceeds

+7.5 / -7.5 / Initial lease payment

+0.8 / -0.8 / Lease transaction costs

N/A / -10.0 / Reserves for plant service

N/A / -8.5 / Repay NRG loan for project costs

N/A / N/A / Federal investment tax credit (ITC)

+7.5 / N/A / Depreciation (first year equiv cash value)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

-20.3 / +9.3 / Net proceeds (immediate)

Subsequent cash flows (over 10 years):

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PNC / FCEL / Description

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

+16.1 / -16.1 / Sum of quarterly lease payments

+5.1 / N/A / Depreciation (later years equiv cash value)

N/A / +32.0 / PPA revenue (from power sales)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

+21.2 / +15.9 / More net proceeds (over 10 years)

Analysis (without ITC)

- - - - - - - - - - - - - - -

PNC side: Immediate cash flows leave PNC underwater $20.3M after signing the deal. Depreciation and payments from FCEL over 10 years barely cover the $20.3M principal with only $0.9M gain for PNC. Clearly PNC will not be happy with this. Most or all of the $9.3M free cash available to FCEL after signing will have to be forfeited. It's likely PNC will

charge a fee to reclaim most or all of FCEL's $9.3M free cash. The rest of PNC's shortfall must be recouped by increasing quarterly payments made by FCEL. There is some wiggle room, but PNC will likely not reduce their 12.3% rate of return by much.

FCEL side: Free cash is in jeopardy. FCEL must choose between reduced PPA free cash and little or no upfront free cash. Commitment to the PPA business model will likely force FCEL to forfeit upfront cash and preserve PPA cash. But even then, PPA free cash will go down because $9.3M doesn't cover PNC's $10.8M ITC shortfall. The sum of quarterly payments must be increased by at least $1.5M to compensate PNC, assuming all $9.3M upfront cash is forfeited. If FCEL decides to retain some upfront free cash, then PPA free cash will take a bigger hit with PNC raising the quarterly payment amount even more.

General Discussion

- - - - - - - - - - - - - - -

The PNC sale-leaseback is a carefully balanced flow of payments. The ITC appears to be a keystone in that financial ediface. Removing it disrupts the cash flow and makes the deal undesirable for both parties. PNC loses a valuable tax credit and is forced to extend less favorable terms to FCEL. That puts stress on FCEL and raises the risk. Creditors tend to compensate for risk by charging more interest. Don't expect that 12.3% to drop.

A central feature of the sale-leaseback is freeing up cash. Expiry of the ITC disrupts this process. FCEL loses critical free cash upfront. Free cash from PPA revenue is also reduced.

If FCEL chooses to retain the upfront free cash, then it forfeits almost all free cash from PPA revenue. Without the ITC, frozen project assets cannot be effectively monetized via the sale-leaseback. That adds pressure to raise cash by other means including dilution.

A similar argument can be made regarding depreciation. Reduction of corporate taxes has been a periodic topic in Congress, though it would not be unopposed. Nevertheless if such a thing came to pass, the cash value of depreciation would be reduced. That would have adverse consequences for the sale-leaseback facility. Nothing has happened with corporate taxes yet, but it's not outside the realm of possibility.

Conclusion

- - - - - - - - - - - - - - -

With selection results from LIPA pending, financing could soon be put to the test. It remains to be seen if PNC continues offering their sale-leaseback and under what terms. The numbers do not look good. Losing the ITC could close a previously used avenue for financing projects. FCEL will likely need to find another source of cash to fill the gap. Hopefully it's not shareholders.]]>

The numbers below are based on an analysis of the Pfizer deal. Data comes from an 8-K dated October 31, 2016 and filed on November 4, 2016. The Pfizer deal analysis contains additional complexity that won't be reiterated here. Links are provided at the bottom.

The Pfizer deal used the PNC sale-leaseback facility. It allowed FCEL to monetize the project while still obtaining revenue from power sales via a PPA. The deal will first be reviewed as it actually occurred when the ITC was still present. Afterwards the ITC will be removed to see what happens with the numbers. The dollar values (in millions) are shown below. Let's take a closer look.

PNC sale-leaseback with ITC...

Immediate cash flows upon signing:

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PNC / FCEL / Description

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

-36.1 / +36.1 / Gross proceeds

+7.5 / -7.5 / Initial lease payment

+0.8 / -0.8 / Lease transaction costs

N/A / -10.0 / Reserves for plant service

N/A / -8.5 / Repay NRG loan for project costs

+10.8 / N/A / Federal investment tax credit (ITC)

+7.5 / N/A / Depreciation (first year equiv cash value)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

-9.5 / +9.3 / Net proceeds (immediate)

Subsequent cash flows (over 10 years):

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PNC / FCEL / Description

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

+16.1 / -16.1 / Sum of quarterly lease payments

+5.1 / N/A / Depreciation (later years equiv cash value)

N/A / +32.0 / PPA revenue (from power sales)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

+21.2 / +15.9 / More net proceeds (over 10 years)

Analysis (with ITC)

- - - - - - - - - - - - - - -

PNC side: Immediate cash flows leave PNC underwater by $9.5M after signing the deal. Depreciation and quarterly payments by FCEL over 10 years brings in another $21.2M in cash for PNC. After the $9.5M principal is deducted, $11.7M in proceeds are received over 10 years. The $9.5M "investment" provides $11.7M profit for PNC. That's an uncompounded annual return rate of 12.3% on the funds. So PNC earns over 12%

per year for 10 years on their $9.5M cash outlay.

FCEL side: Immediate cash flows leave FCEL ahead by $9.3M after signing the deal and paying contractual expenses. The $9.3M cash helps FCEL cover operational costs not directly related to the project. Subsequent quarterly payments by FCEL to PNC reduce PPA cash flow by roughly half. Over 10 years FCEL gets $15.9M in free cash from PPA revenue of $32M.

When the ITC is present, the sale-leaseback appears to be quite equitable

for both PNC and FCEL. Now let's see what happens when the ITC goes away.

PNC sale-leaseback without ITC...

Immediate cash flows upon signing:

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PNC / FCEL / Description

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

-36.1 / +36.1 / Gross proceeds

+7.5 / -7.5 / Initial lease payment

+0.8 / -0.8 / Lease transaction costs

N/A / -10.0 / Reserves for plant service

N/A / -8.5 / Repay NRG loan for project costs

N/A / N/A / Federal investment tax credit (ITC)

+7.5 / N/A / Depreciation (first year equiv cash value)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

-20.3 / +9.3 / Net proceeds (immediate)

Subsequent cash flows (over 10 years):

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PNC / FCEL / Description

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

+16.1 / -16.1 / Sum of quarterly lease payments

+5.1 / N/A / Depreciation (later years equiv cash value)

N/A / +32.0 / PPA revenue (from power sales)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

+21.2 / +15.9 / More net proceeds (over 10 years)

Analysis (without ITC)

- - - - - - - - - - - - - - -

PNC side: Immediate cash flows leave PNC underwater $20.3M after signing the deal. Depreciation and payments from FCEL over 10 years barely cover the $20.3M principal with only $0.9M gain for PNC. Clearly PNC will not be happy with this. Most or all of the $9.3M free cash available to FCEL after signing will have to be forfeited. It's likely PNC will

charge a fee to reclaim most or all of FCEL's $9.3M free cash. The rest of PNC's shortfall must be recouped by increasing quarterly payments made by FCEL. There is some wiggle room, but PNC will likely not reduce their 12.3% rate of return by much.

FCEL side: Free cash is in jeopardy. FCEL must choose between reduced PPA free cash and little or no upfront free cash. Commitment to the PPA business model will likely force FCEL to forfeit upfront cash and preserve PPA cash. But even then, PPA free cash will go down because $9.3M doesn't cover PNC's $10.8M ITC shortfall. The sum of quarterly payments must be increased by at least $1.5M to compensate PNC, assuming all $9.3M upfront cash is forfeited. If FCEL decides to retain some upfront free cash, then PPA free cash will take a bigger hit with PNC raising the quarterly payment amount even more.

General Discussion

- - - - - - - - - - - - - - -

The PNC sale-leaseback is a carefully balanced flow of payments. The ITC appears to be a keystone in that financial ediface. Removing it disrupts the cash flow and makes the deal undesirable for both parties. PNC loses a valuable tax credit and is forced to extend less favorable terms to FCEL. That puts stress on FCEL and raises the risk. Creditors tend to compensate for risk by charging more interest. Don't expect that 12.3% to drop.

A central feature of the sale-leaseback is freeing up cash. Expiry of the ITC disrupts this process. FCEL loses critical free cash upfront. Free cash from PPA revenue is also reduced.

If FCEL chooses to retain the upfront free cash, then it forfeits almost all free cash from PPA revenue. Without the ITC, frozen project assets cannot be effectively monetized via the sale-leaseback. That adds pressure to raise cash by other means including dilution.

A similar argument can be made regarding depreciation. Reduction of corporate taxes has been a periodic topic in Congress, though it would not be unopposed. Nevertheless if such a thing came to pass, the cash value of depreciation would be reduced. That would have adverse consequences for the sale-leaseback facility. Nothing has happened with corporate taxes yet, but it's not outside the realm of possibility.

Conclusion

- - - - - - - - - - - - - - -

With selection results from LIPA pending, financing could soon be put to the test. It remains to be seen if PNC continues offering their sale-leaseback and under what terms. The numbers do not look good. Losing the ITC could close a previously used avenue for financing projects. FCEL will likely need to find another source of cash to fill the gap. Hopefully it's not shareholders.]]>

-- https://seekingalpha.c... (Pfizer deal analysis)]]>

-- https://seekingalpha.c... (Pfizer deal analysis)]]>

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

20 year loan payment schedule:

scenario 1 (zero interest)

37,500 monthly payment

450,000 annual payment

0 total interest paid

9,000,000 total 240 monthly payments

interest rate 0.000%

380,000 annual free cash after payment

scenario 2 (sub 1% interest)

40,000 monthly payment

480,000 annual payment

600,000 total interest paid

9,600,000 total 240 monthly payments

interest rate 0.650%

350,000 annual free cash after payment

scenario 3 (low interest)

50,000 monthly payment

600,000 annual payment

3,000,000 total interest paid

12,000,000 total 240 monthly payments

interest rate 3.019%

230,000 annual free cash after payment

scenario 4 (medium interest)

60,000 monthly payment

720,000 annual payment

5,400,000 total interest paid

14,400,000 total 240 monthly payments

interest rate 5.121%

110,000 annual free cash after payment

scenario 5 (max interest)

69,167 monthly payment

830,004 annual payment

7,600,080 total interest paid

16,600,080 total 240 monthly payments

interest rate 6.887%

-4 annual free cash after payment (loss)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

15 year loan payment schedule:

scenario 1 (zero interest)

50,000 monthly payment

600,000 annual payment

0 total interest paid

9,000,000 total 180 monthly payments

interest rate 0.000%

230,000 annual free cash after payment

scenario 2 (sub 1% interest)

52,490 monthly payment

629,880 annual payment

448,200 total interest paid

9,448,200 total 180 monthly payments

interest rate 0.650%

200,120 annual free cash after payment

scenario 3 (low interest)

62,235 monthly payment

746,820 annual payment

2,202,300 total interest paid

11,202,300 total 180 monthly payments

interest rate 3.019%

83,180 annual free cash after payment

scenario 4 (max interest)

69,167 monthly payment

830,004 annual payment

3,450,060 total interest paid

12,450,060 total 180 monthly payments

interest rate 4.569%

-4 annual free cash after payment (loss)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

10 year loan payment schedule:

scenario 1 (zero interest)

75,000 monthly payment

900,000 annual payment

0 total interest paid

9,000,000 total 120 monthly payments

interest rate 0.000%

-70,000 annual free cash after payment (loss)

scenario 2 (sub 1% interest)

77,485 monthly payment

929,820 annual payment

298,200 total interest paid

9,298,200 total 120 monthly payments

interest rate 0.650%

-99,820 annual free cash after payment (loss)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Notes on Riverside PPA

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Revenue in thousands of dollars

Escalation factor is 1.75% per year

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

year 01 - 767 / year 11 - 912

year 02 - 780 / year 12 - 928

year 03 - 794 / year 13 - 945

year 04 - 808 / year 14 - 961

year 05 - 822 / year 15 - 978

year 06 - 837 / year 16 - 995

year 07 - 851 / year 17 - 1012

year 08 - 866 / year 18 - 1030

year 09 - 881 / year 19 - 1048

year 10 - 897 / year 20 - 1066

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

average - 830 / average - 988

average over 20 years - 909

Related Links

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

https://seekingalpha.c... (Riverside deal)

http://bit.ly/2vFiGKn (Interest rate calculator)]]>

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

20 year loan payment schedule:

scenario 1 (zero interest)

37,500 monthly payment

450,000 annual payment

0 total interest paid

9,000,000 total 240 monthly payments

interest rate 0.000%

380,000 annual free cash after payment

scenario 2 (sub 1% interest)

40,000 monthly payment

480,000 annual payment

600,000 total interest paid

9,600,000 total 240 monthly payments

interest rate 0.650%

350,000 annual free cash after payment

scenario 3 (low interest)

50,000 monthly payment

600,000 annual payment

3,000,000 total interest paid

12,000,000 total 240 monthly payments

interest rate 3.019%

230,000 annual free cash after payment

scenario 4 (medium interest)

60,000 monthly payment

720,000 annual payment

5,400,000 total interest paid

14,400,000 total 240 monthly payments

interest rate 5.121%

110,000 annual free cash after payment

scenario 5 (max interest)

69,167 monthly payment

830,004 annual payment

7,600,080 total interest paid

16,600,080 total 240 monthly payments

interest rate 6.887%

-4 annual free cash after payment (loss)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

15 year loan payment schedule:

scenario 1 (zero interest)

50,000 monthly payment

600,000 annual payment

0 total interest paid

9,000,000 total 180 monthly payments

interest rate 0.000%

230,000 annual free cash after payment

scenario 2 (sub 1% interest)

52,490 monthly payment

629,880 annual payment

448,200 total interest paid

9,448,200 total 180 monthly payments

interest rate 0.650%

200,120 annual free cash after payment

scenario 3 (low interest)

62,235 monthly payment

746,820 annual payment

2,202,300 total interest paid

11,202,300 total 180 monthly payments

interest rate 3.019%

83,180 annual free cash after payment

scenario 4 (max interest)

69,167 monthly payment

830,004 annual payment

3,450,060 total interest paid

12,450,060 total 180 monthly payments

interest rate 4.569%

-4 annual free cash after payment (loss)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

10 year loan payment schedule:

scenario 1 (zero interest)

75,000 monthly payment

900,000 annual payment

0 total interest paid

9,000,000 total 120 monthly payments

interest rate 0.000%

-70,000 annual free cash after payment (loss)

scenario 2 (sub 1% interest)

77,485 monthly payment

929,820 annual payment

298,200 total interest paid

9,298,200 total 120 monthly payments

interest rate 0.650%

-99,820 annual free cash after payment (loss)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Notes on Riverside PPA

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Revenue in thousands of dollars

Escalation factor is 1.75% per year

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

year 01 - 767 / year 11 - 912

year 02 - 780 / year 12 - 928

year 03 - 794 / year 13 - 945

year 04 - 808 / year 14 - 961

year 05 - 822 / year 15 - 978

year 06 - 837 / year 16 - 995

year 07 - 851 / year 17 - 1012

year 08 - 866 / year 18 - 1030

year 09 - 881 / year 19 - 1048

year 10 - 897 / year 20 - 1066

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

average - 830 / average - 988

average over 20 years - 909

Related Links

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

https://seekingalpha.c... (Riverside deal)

http://bit.ly/2vFiGKn (Interest rate calculator)]]>

Fortunately the 1.4 MW Riverside deal has what is needed. Riverside is small enough to provide a nice baseline. Numbers for larger projects can be inferred by scaling accordingly. For example, the 5.6 MW Pfizer project has a scale factor of four based on the Riverside deal. The specifics will likely vary slightly for each situation. Inference must be used as full disclosure of the details is usually not given by FCEL management. Nevertheless an overall picture can still be obtained.

Some background on Riverside is necessary to provide better perspective. The Riverside project is actually financed via the PNC sale-leaseback facility. The project is valued at $9M with a 20 year PPA. While the PPA has a 20 year term, the deal with PNC is only 10 years.

After 10 years, the lease with FCEL will expire and another deal will have to be negotiated. FCEL has the option to buy the plant or perhaps sign another lease. Something involving FCEL must happen because PNC has no competency running a fuel cell plant or providing service for the remaining years on the PPA.

The customer for Riverside provides free biogas for fuel. That means the PPA revenue is unencumbered by fuel cost. The PPA has a cost escalator index that gradually increases revenue every year. The average annual revenue is $830K in the first 10 years and $988K in the last 10 years. The overall 20 year average is $909K.

Picking the appropriate average depends on what is being analyzed. Examination of the sale-leaseback requires using numbers from the first 10 years, as that is the period covered. Revenue for outlying years has no bearing on the sale-leaseback and will occur under some other deal.

To keep things simple, an average of $830K for PPA revenue will be used here. PNC's terms for Riverside are unknown, but are probably similar to the better documented PNC deal with Pfizer. That would give FCEL about $2.3M free cash upfront after signing Riverside and paying contractual expenses. There is also roughly $400K free cash annually from Riverside PPA revenue after lease payments.

Riverside deal with PNC:

- - - - - - - - - - - - - - - - - - - - - -

Riverside 1.4 MW with 20 year PPA

PNC sale-leaseback (10 year term)

$9M total value of deal.

$2.3M free cash upfront after contractual expenses.

$830K annual PPA revenue.

$400K annual free cash flow after lease payment.

Now let's look at the hypothetical bank loan. Free cash flow depends mostly on how much PPA revenue gets used up servicing the debt. Shorter term loans accelerate the repayment schedule and overwhelm PPA revenue very quickly. Low interest and longer terms are vital if FCEL wants to retain any free cash flow from their PPA revenue.

Ten year loans are dead on arrival even with zero interest. Loans with 15 year terms consume all PPA revenue when the interest rate goes above 4.5 percent. Twenty year loans don't max out until rates hit just below 6.9 percent. Free cash flow for outlying years will improve with PPA cost escalation. However for comparison purposes, the PPA average annual revenue of the first 10 years is used.

Riverside deal with a bank:

- - - - - - - - - - - - - - - - - - - - - -

Riverside 1.4 MW with 20 year PPA

Bank loan at 5.121% interest (20 year term)

$9M total value of deal (principal).

$4.3M free cash upfront after contractual expenses.

$830K annual PPA revenue.

$110K annual free cash flow after loan payment.

Note the increased upfront cash from the bank loan. All contractual expenses for FCEL are assumed to be the same for the sale-leaseback and the bank loan. Only exception is the huge first lease payment to PNC. PNC has this to balance the carefully crafted cash flow of the sale-leaseback. The bank loan likely will not, which gives extra upfront cash to FCEL. But the downside with the bank loan is reduced free cash flow from PPA revenue. Everything comes with a price. No telling how flexible the bank will be to customize loan terms. Sticking with a vanilla scenario for now.

In conclusion, the sale-leaseback and bank loan each have pluses and minuses. The sale-leaseback is better for shorter term financing deals. Hopefully PNC will continue to offer reasonable terms. However if PNC walks away because of no ITC, then FCEL must go to the bank. Low interest rates are critical for bank loans. Without good loan terms, FCEL will find it difficult to become profitable.]]>

Fortunately the 1.4 MW Riverside deal has what is needed. Riverside is small enough to provide a nice baseline. Numbers for larger projects can be inferred by scaling accordingly. For example, the 5.6 MW Pfizer project has a scale factor of four based on the Riverside deal. The specifics will likely vary slightly for each situation. Inference must be used as full disclosure of the details is usually not given by FCEL management. Nevertheless an overall picture can still be obtained.

Some background on Riverside is necessary to provide better perspective. The Riverside project is actually financed via the PNC sale-leaseback facility. The project is valued at $9M with a 20 year PPA. While the PPA has a 20 year term, the deal with PNC is only 10 years.

After 10 years, the lease with FCEL will expire and another deal will have to be negotiated. FCEL has the option to buy the plant or perhaps sign another lease. Something involving FCEL must happen because PNC has no competency running a fuel cell plant or providing service for the remaining years on the PPA.

The customer for Riverside provides free biogas for fuel. That means the PPA revenue is unencumbered by fuel cost. The PPA has a cost escalator index that gradually increases revenue every year. The average annual revenue is $830K in the first 10 years and $988K in the last 10 years. The overall 20 year average is $909K.

Picking the appropriate average depends on what is being analyzed. Examination of the sale-leaseback requires using numbers from the first 10 years, as that is the period covered. Revenue for outlying years has no bearing on the sale-leaseback and will occur under some other deal.

To keep things simple, an average of $830K for PPA revenue will be used here. PNC's terms for Riverside are unknown, but are probably similar to the better documented PNC deal with Pfizer. That would give FCEL about $2.3M free cash upfront after signing Riverside and paying contractual expenses. There is also roughly $400K free cash annually from Riverside PPA revenue after lease payments.

Riverside deal with PNC:

- - - - - - - - - - - - - - - - - - - - - -

Riverside 1.4 MW with 20 year PPA

PNC sale-leaseback (10 year term)

$9M total value of deal.

$2.3M free cash upfront after contractual expenses.

$830K annual PPA revenue.

$400K annual free cash flow after lease payment.

Now let's look at the hypothetical bank loan. Free cash flow depends mostly on how much PPA revenue gets used up servicing the debt. Shorter term loans accelerate the repayment schedule and overwhelm PPA revenue very quickly. Low interest and longer terms are vital if FCEL wants to retain any free cash flow from their PPA revenue.

Ten year loans are dead on arrival even with zero interest. Loans with 15 year terms consume all PPA revenue when the interest rate goes above 4.5 percent. Twenty year loans don't max out until rates hit just below 6.9 percent. Free cash flow for outlying years will improve with PPA cost escalation. However for comparison purposes, the PPA average annual revenue of the first 10 years is used.

Riverside deal with a bank:

- - - - - - - - - - - - - - - - - - - - - -

Riverside 1.4 MW with 20 year PPA

Bank loan at 5.121% interest (20 year term)

$9M total value of deal (principal).

$4.3M free cash upfront after contractual expenses.

$830K annual PPA revenue.

$110K annual free cash flow after loan payment.

Note the increased upfront cash from the bank loan. All contractual expenses for FCEL are assumed to be the same for the sale-leaseback and the bank loan. Only exception is the huge first lease payment to PNC. PNC has this to balance the carefully crafted cash flow of the sale-leaseback. The bank loan likely will not, which gives extra upfront cash to FCEL. But the downside with the bank loan is reduced free cash flow from PPA revenue. Everything comes with a price. No telling how flexible the bank will be to customize loan terms. Sticking with a vanilla scenario for now.

In conclusion, the sale-leaseback and bank loan each have pluses and minuses. The sale-leaseback is better for shorter term financing deals. Hopefully PNC will continue to offer reasonable terms. However if PNC walks away because of no ITC, then FCEL must go to the bank. Low interest rates are critical for bank loans. Without good loan terms, FCEL will find it difficult to become profitable.]]>

The yield co from NRG seems unavailable and only small projects in CT can be financed by the Connecticut Green Bank. It's always possible FCEL could find some rich investor willing to buy a project, but that's too speculative to analyze.

This leaves the PNC sale-leaseback facility and traditional bank loans to finance projects. FCEL must obtain financing under reasonable terms so that positive free cash flow is achieved. That is the pathway to profitability.]]>

The yield co from NRG seems unavailable and only small projects in CT can be financed by the Connecticut Green Bank. It's always possible FCEL could find some rich investor willing to buy a project, but that's too speculative to analyze.

This leaves the PNC sale-leaseback facility and traditional bank loans to finance projects. FCEL must obtain financing under reasonable terms so that positive free cash flow is achieved. That is the pathway to profitability.]]>

Doesn't matter. Buy the dips. Dips are a gift. MSFT and Baidu are on board with EPYC. This will be a rocket next year. Long AMD.]]>

Doesn't matter. Buy the dips. Dips are a gift. MSFT and Baidu are on board with EPYC. This will be a rocket next year. Long AMD.]]>

A natural fit for the low end PC market where integrated graphics lives. INTC has 70% of the graphics market because of the low end PC.

Fortunately the OEM embargo is over. AMD needs to push hard and grab share. APUs are low cost and relatively high performance. APUs offer excellent value. Just ask the console folks at MSFT and Sony.

EPYC, Threadripper, Ryzen, and APUs will take market share. Long AMD.]]>

A natural fit for the low end PC market where integrated graphics lives. INTC has 70% of the graphics market because of the low end PC.

Fortunately the OEM embargo is over. AMD needs to push hard and grab share. APUs are low cost and relatively high performance. APUs offer excellent value. Just ask the console folks at MSFT and Sony.

EPYC, Threadripper, Ryzen, and APUs will take market share. Long AMD.]]>

That sure sounds like AMD. Don't know what this wild pony will be doing over the next few days. But by next year it'll be in the promised land. Hold on tight. Buy the dips. Long AMD.

P.S. - Hope the minion Blayne from Barclays is right for a few minutes. AMD at $9 would be a gift. Volatility might make it happen.]]>

That sure sounds like AMD. Don't know what this wild pony will be doing over the next few days. But by next year it'll be in the promised land. Hold on tight. Buy the dips. Long AMD.

P.S. - Hope the minion Blayne from Barclays is right for a few minutes. AMD at $9 would be a gift. Volatility might make it happen.]]>

This is a rocket. MSFT and Baidu on board with EPYC. Long AMD.]]>

This is a rocket. MSFT and Baidu on board with EPYC. Long AMD.]]>

Holding for next year. MSFT and Baidu on board. Billions in new revenue. Long AMD.]]>

Holding for next year. MSFT and Baidu on board. Billions in new revenue. Long AMD.]]>

Any dip is a gift. Buy and hold for next year. EPYC will rock. Long AMD.]]>

Any dip is a gift. Buy and hold for next year. EPYC will rock. Long AMD.]]>