FuelCell Energy Inc Strengthening Financing Ties With NRG

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Recently, FuelCell Energy Inc (NASDAQ:FCEL) has strengthened its relationship with NRG by sale of common stock and agreements over revolving construction and term loans financing. Stifel analyst Sven Eenmaa, in a report dated July 31, 2014, notes that the greater influx of cash has improved the construction financing access. The agreement is a positive advancement in solidifying the previous relationship with NRG along with providing more reasons to trust the company’s power plants.

Strengthening relationship with NRG

A few days back, FuelCell has announced the sale of 14.6 million shares of its common stock to NRG at $2.39 per share, earning a total of $35 million along with a warrant to purchase next 2 million shares at $3.35 over the next three years.

The company, also, sealed an agreement worth $40 million revolving construction and term loans financing with NRG to channel funds into its power plants, as well as, potentially offering the finance after the commercial operating date.

According to the analyst, the funds help in the smoother flow of construction financing especially before the Investment Tax Credit (ITC) deadlines, “particularly as the company increasingly focuses on turn-key project development and sales.”

Stifel analyst thinks that the statement regarding the agreement will also clear the doubt of investors regarding the follow through on the co-marketing relationship with NRG. On the research front, the company has achieved awards, but after the earnings report the power plant project has not been very significant, which suggests that in the second half of 2014 the company will be more backend-loaded.

FuelCell reducing cost

The report suggests that FuelCell has managed to bring down the cost of its fuel cell technology and manufacturing cost after many years of investment and efforts. Also, the company is leaving behind its R&D phase of testing the technology to transform into an economically deployable renewable energy technology with a capacity to become part of baseload generation mix. Cost at various fronts have dropped for the company such as its typical 2.8MW plant is now down in the $0.13/kWh range, whereas the manufacturing costs declined approximately 70% over the past decade.

Levelized cost of energy has also dropped to $0.09-$0.11/kWh after the benefits from the ITC and state-level incentives. The reduced cost is better compared to the several states baseload pricing. FuelCell has an objective to achieve comparable cost levels on an unsubsidized basis as well, which would offer economic viability as a source of renewable baseload energy.

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