Ballard Power Systems Inc. (TSX:BLD; NASDAQ:BLDP) announced the closing of a transaction with Japanese partner EBARA Corporation (EBARA) and their jointly-owned company, EBARA BALLARD Corporation, that will provide funding for the next generation of cogeneration fuel cell stack and system technology. An MOU related to the transaction was signed in May. The agreement will provide Ballard approximately US$30 million in cash over four years, through development funding and equity contributions.
The transaction covers a broad range of activities designed to enhance Ballard’s competitive position and commitment to the Japanese stationary cogeneration market.
Under its terms:
– Ballard will receive US$18 million for the ongoing development of the current and next generation 1 kW combined heat and power cogeneration fuel cell stack, subject to the completion of the work pursuant to technical milestones under the development program. This funding would be received over the next four years.
– EBARA BALLARD (owned 51% by EBARA and 49% by Ballard) will gain rights, over time, through an exclusive, royalty-bearing license, to assemble, service, develop, manufacture and sell stationary cogeneration fuel cell stacks in Japan, as part of a joint long-term strategy to localize development and manufacturing in Japan for the Japanese market.
– Ballard will retain all rights related to stationary cogeneration fuel cell markets outside of Japan.
– Ballard will receive an equity investment from EBARA of US$11.7 million in two equal payments. The first half of the equity investment was received at closing, with the payment by EBARA to Ballard of U.S. $5,850,000 in exchange for 1,004,178 Ballard Common shares. The second half of the equity investment will be made in September 2006.
“The agreement with EBARA serves to strengthen Ballard’s already robust position in Japan and opens the doors to other markets where we have the exclusive right to access and leverage our fuel cell technology,” said Dennis Campbell, Ballard’s President and Chief Executive Officer. “Our next generation technology development is well underway, with a focus on reduced cost and increased durability to a targeted lifetime of 40,000 hours, for a market launch in 2008.”
About Fuel Cell Cogeneration in Japan
Cogeneration systems are installed directly at consumers’ homes and simultaneously generate electricity and hot water. The unique value proposition of fuel cell powered cogeneration for the Japanese market is that it reduces dependency on grid-based power in a country with some of the world’s highest electricity rates. Customers save money and the fuel cell technology supports the government’s Kyoto Accord commitment by reducing carbon dioxide emissions by up to 40% compared to conventional electric generation using fossil fuels.
The Japanese government is very focused on its energy policy and in providing product introduction subsidies and support for alternative energy technologies. This year alone, US$23 million in product introduction subsidies are slated for the installation of 400 fuel cell cogeneration systems.
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