How much to expect in sales through Kawasaki
FuelCell Energy---Leitman, Jerry---Chief Executive Officer
>> crude oil futures fell on tuesday as supply concerns eased. iraqi exports rose and russia said it would increase production this year. looking at crude on the day, down .4%. the drop extends a decline that has cut more than $7 a barrel from the high price of over $49 a few days ago, in the last eight sessions. still, prices are 34% higher than a year ago. checking other energy movers, gasoline, wholesale prices for gasoline, unleaded gasoline in new york at more or less unchanged. heating oil down .7% and natural gas futures, big move there, down over 3% at $5.07 per million b.t.u. fuel cell energy commercializes fuel cell power plants for electric generation. on the day, the shares rose after the company announced a deal to market in japan. yesterday, the company beat wall street estimates by a penny in its revenue reports. the c.e.o., jerry leitman, joins us from stanford, connecticut. what might have driven your share price up over 8% today is the fact that you announced an agreement with kawasaki, that that company will distribute products in japan and you said you expect delivers to begin in 2005 or 2006 but your announcement was devoid of quantification. can you give us a sense of how much you expect in sales through kawasaki?
>> kawasaki will be a packager and distributor to our main partner in japan. what we got is an electrical equipment maker who can package our products for the japanese market and distribute on behalf of our main partner there. marabeanie ordered four megawatts this year of our product and last year was three megawatts and we expect this to continue to increase.
>> can you give us a dollar value?
>> a mega-watt to us is $3 million so five megawatts is $15 million in revenue.
>> another issue is the town hall meeting where the congressman announced federal funding of dual fuel cell carbonate fuel concepts. he says the funding will result in definitive contracts to meet the military’s desire for applications. how much will that be worth to you?
>> that will be $2 million. we have a total of $7 million in appropriation in the defense bill passed and signed into law and with the help of the entire congressional delegation from connecticut, our senators and congressman larsen and congresswoman nancy johnson. we’ve had bipartisan support and we see the military looking at our products for high reliability applications and dual fuel so that if natural gas grid goes away, they have backup with logistics fuel to operate the power plants and generate power for critical military facilities.
>> your company has had quarter low losses all the way since the first quarter of 2000. can you give us a sense of when you’ll be profitable? >> let me first address the strategy. it’s a typical new technology strategy. first we select the markets we want like the military and universities and hospitals and then we make sure we get products to the market segments, make sure they’re satisfied with the product and they’ll drag in the broad market and then we drive costs out of the product. as those two things occur and broad volumes come into the products at the same time we’ve driven costs down, we’ll go to cash flow break even. that could be a year from now or longer. the good news is --
>> how long might it be?
>> a few years at the outside. i think the good news is two fold, one is, we’re the only ones in that marketplace. are the competitors are two or three years behind us so it’s our market to win or lose. the second is, once the market tips, volumes go vertical and we only need about 50 megawatts of production a year to get to cash flow breakeven. that’s a small amount of power plants when you look at the world buying 75 to 80,000 mega-watts of power plants.
>> you said cash flow positive in a few years, do you mean three or four years?
>> it could be two to three years. it’s hard to predict when the broad market will come in.
>> are you saying it won’t be longer than three years?
>> i don’t believe it will be but we don’t forecast that. it will be at 50 mega-watts but if you look at some of our customers like starwood hotels, we have three units in the northeast and now we’re looking at the west coast. any of our market segment can generate way more than 50 megawatts a year and that volume is a fairly low volume rate.
>> you said your year-to-date fuel cell product sales were 7.6 million compared to 12.2 million last year. that’s negative progress, right?
>> the sales revenues will go up and down depending on how long the selling cycle is because we look at getting both state and federal incentives to defer the cost of the protect while it’s low volume and higher cost and that selling cycle is choppy.
>> that’s all the time we have, our thanks to fuelcell energy chief executiveiery―jerry leitman for joining us.
