1
Table of Contents
PREFACE
2
EXECUTIVE SUMMARY
RECOMMENDATIONS
4
7
COMPANY BACKGROUND
9
COMPANY AND PRODUCT BACKGROUND
FUEL CELL ENERGY EXECUTIVES
STRATEGIC PARTNERS
INNOVATIVE TECHNOLOGIES
9
10
10
12
FURTHER ANALYSIS
13
SWOT ANALYSIS
PEST ANALYSIS
VIRO ANALYSIS
FISHBONE / CAUSE-EFFECT DIAGRAM
COMPANY THINKING MODEL
13
15
22
23
25
INDUSTRY ANALYSIS
27
INDUSTRY BACKGROUND AND OVERVIEW
MACROECONOMIC FACTORS: DEMAND DETERMINANTS AND GOVERNMENT ROLES
INDUSTRY RISKS
27
28
31
COMPETITOR ANALYSIS
33
GENERAL COMPETITION
FURTHER COMPETITOR ANALYSIS
TOP 3 COMPETITORS
DYNAMICS OF INDUSTRY
FORCES AT WORK
INDUSTRY LIFE CYCLE
SWOT FOR TOP 3 COMPETITORS
OTHER COMPETITOR INFORMATION
PORTER’S FIVE FORCES
KEY FACTORS FOR COMPETITIVE SUCCESS
INDUSTRY ATTRACTIVENESS
33
34
35
37
38
42
52
55
64
69
69
FINANCIAL ANALYSIS
72
2
FIVE KEY FINANCIAL RATIOS
COMPETITOR FINANCIALS
72
73
APPENDIX
87
RESEARCH DATA
CITATIONS
87
92
3
Executive Summary
FuelCell Energy, Inc. is a company that designs, manufactures, installs, operates and
services stationary fuel cell power plants. They have three locations throughout the world. [1]
According to the Smithsonian Institute, a fuel cell is defined as, “a device that generates
electricity by a chemical reaction. Every fuel cell has two electrodes, one positive and one
negative, called, respectively, the anode and cathode.”[2] FuelCell Energy has been working
towards creating an environmentally friendly alternative energy source that can produce nearly
the same amount of energy output as traditional fossil fuels. The company was founded in 1969
and the first commercial power plant was installed in 2003 using a 250 kilowatt (kW) fuel cell
stack. Through technology enhancements and cost reductions, FuelCell Energy was able to
increase the power output of the stacks by 40 percent to 350 kW and reduced product costs by
more than 60 percent. In 2007, they branched out to the Southeast Asian market and in 2012 they
established their power plant in Europe. [1] FuelCell Energy also has six partners that they work
with to generate and supply energy around the world. The partners are POSCO Energy,
Fraunhofer, NRG, Abengoa, Air Products, and Enbridge. One of FuelCell Energy’s most
promising systems that they have developed is the multi-megawatt Direct FuelCell Energy
Recovery Generation. The DFC-ERG combines a Direct FuelCell power plant with a gas
expansion turbine. The pressure reduction process drives the gas turbine, generating additional
electricity above and beyond that of the fuel cell power plant.
The fuel cell technology industry is under heavy scrutiny for not delivering on the hopes
that were placed in it for a major, viable and sustainable energy solution. Throughout the last
couple of centuries it has been developed and has experienced growth and a more widespread
4
use, without ever being able to penetrate the global commercial market. However, recent data is
compelling in the argument that fuel cell technology just might have reached a turning point.
With the uncertain viability of fossil fuels, in the face of progressive depletion, and the
world becoming increasingly focused on sustainability, fuel cells might be facing their prime
market entrance. Government funding is at its highest, which include lucrative incentives to
construct fuel cell plants.
Certain major risks remain. Mainstream commercialization has not yet been attained, the
use of fuel cells thus being reduced to a few corporate giants such as Wal-Mart and Coca-Cola,
or small entities such as universities or data centers. The goal is to utilize fuel cells in an array of
fields, including automobiles, and consumer electronics such as phones, computer chargers, etc.
If fuel cell technology is able to breach this frontier, it is certain that the companies developing
them will finally experience a strong surge of profitability.
FuelCell Energy must compete with roughly seventeen other competitors who are in the
industry to manufacture batteries and storage for consumers, vehicle, and industrial use.
However, some of these companies that are listed, use fuel cells on the side of their main
production. An example of this is Rolls-Royce who is commonly known for their high quality
cars, but they are also using fuel cells to increase business. The top three main competitors of
FuelCell energy are Cummins, Ballard Power, and Doosan Corporation. Cummins is a fortune
500 company for producing and manufacturing engines. A section of their company is the
Cummins Power Generation, which is where they create fuel cells. Within this section they have
around 1,800 employees and have annual sales of 191.6. However, this number is based off of
more than just their fuel cell production. Another extremely large competitor is the Doosan
Corporation. They are a South Korean company that uses Infrastructure Support Businesses to
5
get their profits. The Doosan Corporation has an impressive 1.53 billion sales but when you add
up the total sales for their fuel cell section, it results to 37.9 million, which is just a small fraction
of their original number. The last competitor is Ballard Power, and they are a company founded
in 1979. Their annual sales are 61.25 million, they have 335 employees, and their market cap is
166.85 million. Compared to these companies, FuelCell Energy has the second highest amount
of annual sales, just behind Cummins. The competition for the Fuel Cell Industry is currently
not the largest or competitive, this is because results have always been zero profit. Only when
net profit goes positive for fuel cell companies, is when the competition will begin to get
aggressive.
From a financial standpoint, FuelCell Energy Inc. is certainly viewed as a long-term
investment, as it has not posted any profits to date since the company was founded in 1969.
Because of cheaper, more effective means of producing energy, fuel cell research and use has
taken a back seat to these. However, since the recent concerns about climate change have started
to become more severe, funding has started to flood into more clean, efficient, and sustainable
energy, including fuel cells. FuelCell Energy Inc. has benefitted heavily from this after receiving
multiple contracts and investments from the Department of Energy, POSCO, and NRG, to name
a few. Although FuelCell struggles to post profits and reduce its cost of goods sold, it has been
making some serious progress over the years and shows promise to become a competitive force
in the energy sector in the future.
6
Recommendations
As previously stated, FuelCell Energy has yet to turn a profit. In a market where, in fact, no
other company specializing in fuel cells has also yet to turn a profit, certain changes need to be
implemented. Currently staying afloat thanks to enormous government subsidies and hopeful
investors that are betting on the fuel cell market finally living up to its reputed potential, FuelCell
Energy needs to become financially independent and self-sustaining, before eventually starting to
benefit. FuelCell Energy’s overall marketing strategy needs revision to allow commercial market
penetration. There are additionally certain cost-related constrictions that bear down on
production that need to be addressed, notably in the cost of the chemical components of fuel
cells. Finally, in order to truly benefit from the research and development FCL conducts, it
would be advisable to perform a merger with Enbridge, its distributor.
1) Integrate fuel cell technology into mainstream commercial based products
(immediately)
FuelCell Energy Inc. needs to develop a way to integrate fuel cell technology into
mainstream commercial based products. Currently only used in certain commercial purposes,
FuelCell Energy needs to spread brand awareness to heighten the interest in fuel cell technology.
This would increase their revenue while starting the movement for a conversion to a cleaner,
more efficient energy source. It may be difficult to accurately state how long this movement
would take, but results would be realized right away as soon as more products embrace the fuel
cell technology.
2) Decrease overall cost of production (immediately)
In order to generate more revenue, FuelCell Energy should decrease their overall costs of
production. They could do this by increasing their government subsidies and contracts in order to
7
develop a more efficient system and products to create a higher output. Ultimately, their biggest
costs are in the elements needed for production, which are platinum and palladium. Currently,
platinum costs $1,269 per ounce, and palladium costs $787 per ounce. If FuelCell Energy were
able to find suitable, less costly substitutes for these two elements, their cost of production would
drop considerably.
3) Merge with Enbridge to integrate sales into company activities (long-term)
One of FuelCell Energy’s most efficient and popular products is DFC-ERG (Direct FuelCell
Energy Recovery Generation) which was developed with the help of the company, Enbridge.
Enbridge is the exclusive distributor of DFC-ERG and has seen constant growth within their
company since this system was integrated into their sales. If FuelCell Energy and Enbridge were
to merge, FuelCell energy would have a large increase in revenue.
8
Company Background
I.
Company and Product Background
FuelCell Energy, Inc. is a company that designs, manufactures, installs, operates and
services stationary fuel cell power plants. They have three locations throughout the world. The
primary headquarters is located in Danbury, Connecticut. They also have locations in Dresden,
Germany and Pohang, South Korea. [1] According to the Smithsonian Institute, a fuel cell is
defined as, “a device that generates electricity by a chemical reaction. Every fuel cell has two
electrodes, one positive and one negative, called, respectively, the anode and cathode.”[2]
Hydrogen is usually the main fuel source, but oxygen is also required for the reaction to occur
and there is virtually no environmental impact from this form of energy creation. The only
byproduct is water. However, a single reaction in a fuel cell creates a very minimal amount of
electrical current. In order to obtain a usable amount, multiple fuel cells need to be combined, or
stacked on top of each other, which are called a cell stack. [2] FuelCell Energy has been working
towards creating an environmentally friendly alternative energy source that can produce nearly
the same amount of energy output as traditional fossil fuels. They are currently focusing their
research on hydrogen generation, carbon capture, solid oxide fuel cells, and hydrogen
compression and storage. All of these projects could revolutionize the fuel cell energy generation
system and make it much more affordable and efficient. [1]
FuelCell Energy, Inc. is the first fuel cell manufacturer to commercialize megawatt-class
stationary fuel cell power plants. [1] Being that they are the first of their kind, there have been
troubles trying to grow the company and to continue to have positive earnings. The company was
founded in 1969 and the first commercial power plant was installed in 2003 using a 250 kilowatt
(kW) fuel cell stack. Through technology enhancements and cost reductions, FuelCell Energy
was able to increase the power output of the stacks by 40 percent to 350 kW and reduced product
9
costs by more than 60 percent. In 2007, they branched out to the Southeast Asian market and in
2012 they established their power plant in Europe. [1]
II.
FuelCell Energy Executives
Arthur “Chip” Bottone is the president and chief executive officer. Mr. Bottone was hired
at FuelCell Energy in 2010 to accelerate the adoption of the Company’s power generation
solutions and was promoted to President and Chief Executive Officer in 2011. Mr. Bottone also
serves as the Chief Executive Officer of FuelCell Energy Solutions, GmbH in Germany, the
European business platform for stationary fuel cell power plants. Mr. Bottone has previous
experience power generation industry including traditional central generation and alternative
energy. Before joining FuelCell Energy, he worked with Ingersoll Rand, a diversified global
industrial company and was the President of the Energy Systems. [1]
Michael Bishop, the Senior Vice President, Chief Financial Officer, Treasurer and
Corporate Secretary, has been working with FuelCell Energy since 2003. Prior to joining
FuelCell Energy, Mr. Bishop held finance and accounting positions at TranSwitch
Corporation, Cyberian Outpost, Inc. and United Technologies, Inc. He is a Certified Public
Accountant and began his professional career at McGladrey and Pullen, LLP. [1]
III.
Strategic Partners
FuelCell Energy also has six business partners that help to leverage market development
opportunities and research and development resources. They are:

POSCO Energy

Fraunhofer

NRG

Abengoa
10

Air Products

Enbridge
POSCO Energy, and they partnered in 2003 with the direct sale of a single sub-megawatt
Direct Fuel Cell power plant. POSCO Energy has installed or ordered more than 270 megawatts
of the company’s fuel cell power plants and components. POSCO Energy owns approximately
11 percent of the outstanding common stock of FuelCell Energy. [1]
Fraunhofer is another partner and is Europe’s largest application-oriented research
organization. FuelCell Energy and Fraunhofer partnered in 2012 and have been responsible for
developing, manufacturing, selling, installing, servicing and operating stationary fuel cell power
plants in the European Served Area. [1]
NRG is a Fortune 500 company and one of the country’s largest power generation and retail
electricity businesses. [1] Due to the mutual focus on clean and sustainable alternative energy
sources, FuelCell Energy partnered with NRG in July 2014 [3] and have reached an agreement
where NRG can purchase power plants directly from FuelCell energy, but there is a stipulation
that only FuelCell Energy can install, operate and maintain each power plant sold under the comarketing agreement. NRG owns approximately 6 percent of the outstanding common stock of
FuelCell Energy. [1]
Abengoa, an international company that applies innovative technology solutions for
sustainability in the energy and environment sectors, has non-exclusive distribution rights for
Direct FuelCell power plants in Spain and Latin America. [1]
Air Products supplies a variety of industrial gases, materials and services to customers. Air
Products and FuelCell Energy are partners for the tri-generation Direct Fuel Cell-H2 renewable
11
hydrogen vehicle fueling project in California. Together we are evaluating global opportunities
for distributed hydrogen generation utilizing tri-generation stationary fuel cell power plants. [1]
Enbridge transports and distributes energy across North America through the employment of
more than 6,000 people in Canada and the United States. Enbridge and FuelCell Energy jointly
developed the DFC-ERG (Direct FuelCell Energy Recovery Generation) fuel cell power plant.
[1]
IV.
Innovative Technologies
One of FuelCell Energy’s most promising systems that they have developed is the multi-
megawatt Direct FuelCell Energy Recovery Generation. This process generates ultra-clean
electricity and in addition, recovers energy normally lost during natural gas pipeline distribution
operations. The DFC-ERG combines a Direct FuelCell® power plant with a gas expansion
turbine. The pressure reduction process drives the gas turbine, generating additional electricity
above and beyond that of the fuel cell power plant. This unique DFC-ERG configuration
generates extremely high electrical efficiencies of 60% and higher with virtually zero smog
emissions and quiet operation. [1] Even though Enbridge, the company partnered with FuelCell
Energy, has been seeing constant growth since the introduction of this new system, FuelCell
Energy, Inc. has not seen the same results.
Company’s Product Life Cycle
FuelCell Energy’s fuel cells last on average for 2,000 hours which is approximately 2 years.
However, there has been continuous research and development intended to lengthen the timespan
of a fuel cell stack. The extreme temperatures of fuel cells has a detrimental effect on the
electrodes and the precious metals needed to conduct energy. There has been speculation that in
the near future, through a heat reduction process, fuel cells will be able to last for nearly 4-5
12
years. [1] Due to the public’s relative lack of knowledge about the fuel cell energy field, there
has not been a lot of growth in the field. However, as funding increases, there is a movement
towards integrating fuel cells into everyday technology. This is why we believe that fuel cells as
a whole are in-between the introduction and growth periods.
13
SWOT Analysis
Strengths









Fuel Cell Energy is a new/exciting
energy source
Very clean
Receiving Govt. funding
Can provide energy for hospitals,
schools, businesses, etc.
Room for growth in energy sector
International business connections
Partnerships with NRG and
POSCO
Patent on combined Direct Fuel
Cell technology
Unaffected by external factors as
long as there are inputs available
Weaknesses







Opportunities







Could be the next energy source
that becomes popular
Public is looking for a clean
alternative energy source
There are alternatives to using
platinum & palladium that are
being developed
International growth within the
company
Valuable partnerships
Receiving government funding
Some foreign governments have
less stringent environmental
restrictions
Fuel cells receive barely any
publicity
Other energy sources exceed
energy output
Large bulky fuel cell stacks are
needed for production
Fuel cells run extremely hot
One of Fuel Cell Energy’s most
valuable technologies is half
owned by Enbridge
Energy production requires
platinum & palladium which are
extremely expensive
Price of inputs outweighs revenues
Threats




Enbridge has a large say in Fuel
Cell Energy’s production of Direct
FuelCell Energy Recovery
Generation because they have a
joint patent
Other energy sources are more
efficient
The rarity and high price of
platinum and palladium limit the
output
Cummings and Doosan (2
prominent competitors) are much
larger than Fuel Cell Energy
Strengths:
The fact that fuel cells are an extremely clean energy source and that there are advancements that
have made the production system more and more efficient has created a large buzz in the energy
production world. The German government has even given grants for further development within
14
the fuel cell energy field. The overall future of FuelCell Energy looks very promising due to their
strategic partnerships they have created as well as their patented technologies that have made
energy production more efficient and cheaper.
Weaknesses:
Even though there have been technological advancements pertaining to the efficiency of fuel
cells, compared to other forms of energy creation, the energy output for fuel cells is very low.
Paired with the fact that platinum and palladium, which are inputs for the energy production
process, are extremely rare and expensive, there are alternatives that are more economical such
as nuclear energy. Also, the multi-megawatt DFC-ERGTM (Direct FuelCell Energy Recovery
Generation) system, which is the most promising of FuelCell Energy’s patented technologies, is
shared by the company Enbridge and they are not able to receive the full economic benefits.
Opportunities:
One of the highest cost of production is the need for platinum and palladium. This poses the
opportunity for advancements in the production process to eliminate the need for those elements.
This could decrease overall costs and increase their revenues. Also, with the amount of untapped
potential within the fuel cell market, there is the opportunity for more government subsidies and
grants in order to make this form of energy production more widely used.
Threats:
The fact that FuelCell Energy’s most valuable technology is shared with Enbridge could be a
huge threat to their future success. Enbridge has power over FuelCell Energy and can influence
their business transactions. Also, the fact that fuel cells still cannot exceed the energy production
of other sources may make it difficult for people to embrace it as their primary source of energy.
15
PEST Analysis
Political Factors
The federal government as well as individual state legislatures have funded and
subsidized the development of fuel cell technology for decades. The prospective cost-efficiency
and relative environmentally-friendliness that the fuel cell industry has promised, yet not
capitalized on for the time being, has driven the influx of high investments into its developing
companies [39]. As an illustration of the heightened interest in the success of fuel cell
technology, the Department of Energy (DOE) has been in the lead for promoting fuel cell
development over the past two decades, with over $2.4 billion dollars in funding for applications
research and product development [39]. In fact, the DOE has a specific unit dedicated to fuel
cells, called the Fuel Cell Technologies (FCT) Office. Their purpose is stated on its website and
reads as follows:
“The mission of the DOE FCT Office is to research, develop, and validate hydrogen
production, delivery, storage, and fuel cell technologies. In carrying out this mission, the
DOE FCT Office selects research and development and other projects through open and
competitive procurements and encourages collaborative partnerships among industry;
universities; national laboratories; federal, state, and local governments; and nongovernment agencies.” [41]
Although the Department of Energy has spent a considerable amount, and strongly
encouraged activities leading to the enhanced development of this technology, as stated in their
mission, there are multiple other incentives and programs that have been installed. For the “key”
states for fuel cell technology development, shown in the table below, the government has
16
established several research centers and created a number of state funding programs that are
eligible for use by any certified fuel cell developer [40].
State
Research and Development Centers
California
National Fuel Cell Research Center at
UCAL Irvine
State Funding for research and
Development
California Energy Commission
Clean Energy Funding
Institute for Transportation Studies at
UCAL Davis
Florida
--
--
Massachusetts
--
Massachusetts Technology Collaborative
Michigan
NextEnergy Center
Michigan NextEnergy Authority
Michigan Alternative
Energy Center
and
Renewable
NextEnergy
Energy Office of Michigan
Center for Fuel Cell System and Power
Integration
New York State Energy
Development Authority
New York
Long Island Power Authority
New York Power Authority
Ohio
Fuel Cell Prototyping Center
Third Frontier Project
Pennsylvania
Fuel Cell Test Center at Concurrent
Technologies Corporation
--
Hybrid and Hydrogen Research Center at
Pennsylvania State University
South Carolina
Center for Hydrogen Research at Savannah
River National Laboratory
--
University of South Carolina National Fuel
Cell Center
International Center for Automotive
Research at Clemson University
James E. Clyburn Transportation Center at
South Carolina State University
Connecticut
Connecticut Global Fuel Cell Center
Connecticut Innovations, Inc.
Connecticut Clean Energy Fund
New Energy Technology Grants
Research
and
17
In consideration of the fact that no fuel cell company has ever turned a profit, it would be
impossible for these companies to continue their operations without the substantial funding they
have received in the form of grants and subsidies. It is essential that these investments do not
experience a decline, if fuel cells are ever going to deliver on the high hopes placed in them. One
factor in particular that could potentially affect these investments, among other things, is the
economy.
Economic Factors
The US economy is currently facing a recession. In the aftermath of the global financial
crisis of 2008 that affected the entire world economy, the US is slowly recovering. This can be
shown via several financial indices, such as the NASDAQ Composite, up from 1,293.85 on
March 6, 2009, currently at 4,276.24, as of October 10, 2014 [43]. This can also be seen via the
Dow Jones Industrial Average, which recorded 7,062.93 in February 2009 and now is up to
16,544.10 [44].
The US is considered to have the largest and most technologically powerful country in
the world, with a GDP per capita of $52,800 [42]. It has the highest overall GDP, recording
$16.72 trillion in 2013. However, the US is heavily indebted. Its public debt to GDP ratio is just
over 77%, and its external debt to GDP ratio is 100.4% [45]. These numbers, although not as
high as, for example, Ireland, with an external debt to GDP ratio of over 1,062%, are
problematic. The less debt an economy has, the healthier it is and the prospects of experiencing
economic prosperity are heightened [42]. This large debt can be explained by several factors.
The first, US revenue is $2.849 trillion, while national expenses record in at $3.517 trillion; a
deficit accumulates each year. The second, the Federal Reserve spent extremely high amounts of
money during the financial crisis in the form of financial stimuli, spending upwards of $1.5
18
trillion conservatively on aiding large institutions and attempting to revamp the market [42]. The
US is recovering, slowly but surely, and many are forecasting a positive resolution and outcome
to the current situation. For the time being, however, precautious and wise investment is
necessary.
The US will also have to deal with some predicted long-term issues. The CIA website
lists them out as follows:
“Long-term problems include stagnation of wages for lower-income families, inadequate
investment in deteriorating infrastructure, rapidly rising medical and pension costs of an
aging population, energy shortages, and sizable current account and budget deficits.”
[42]
These problems, coupled with a high unemployment rate (the conservative number is 7.3%), will
cause consumer spending to stagnate at its current low levels [42]. However, as mentioned in the
“Industry Background” section, government funding through the crisis and ensuing recession
never truly faltered, and because FuelCell Energy’s products are not yet commercialized for
general public use, a variance in consumer spending will leave FuelCell Energy’s revenue
relatively unscathed. In conjunction with political factors and economic factors, societal factors
affect the development of the fuel cell economy due to certain trends that not only affect fuel
cells, but the energy field in general.
Societal & Environmental Factors
In the case for the fuel cell market, societal and environmental factors can be grouped
together in the same section, as they both pertain to the same notion: the global societal trend
towards a reduced carbon footprint via a focus on renewable energy sources is affected and
driven largely by the environment [46]. More generally, this trend can be explained by the fact
19
that “renewable energy resources are not depleted, they are becoming less expensive, and they
have a softer environmental impact” [46]. This steady increase in renewable energy usage is
illustrated in Chart 1.
Chart 1 [47]
Although the fuel cell industry is not one of the main sources of renewable energy for the time
being, and thus not represented in Figure 1, the global trend toward renewables will positively
affect it. With the government heavily funding a field that is predicted to experience growth due
to a recovering economy and social pressure, the fuel cell industry will also be benefited by the
significant technological advancements it is experiencing.
Technological Factors
Technology is ever-changing and ever-adapting, so much so that new processes and
systems are developed extremely often and can drastically alter the cost of production in many
fields. An article discussing the “Trends in Renewable Energy Production and Consumption in
20
the USA”, found on geology.com, discusses the fact that technology has greatly improved over
the last few years which has caused a significant reduction in production costs:
“While fossil fuel prices are rising the cost of manufacturing solar panels, geothermal
systems, wind turbines and other renewable energy equipment is falling on a cost per
BTU basis. While the cost of renewable energy still remains high the price trend is in a
favorable direction.” [46]
Throughout the years and since the initial prototypes for fuel cells appeared in the late
19th century, there have been multiple technological advancements that have positively affected
the development and installation of fuel cell technology within various fields [4]. Initially simply
used as batteries to power very basic machinery, fuel cells are now relied upon by such
companies and organizations as NASA, who has used them in space vehicles, the US Navy, in
submarines, and various automobile companies as they explore the possibility of producing fuelcell powered cars for consumer use [4].
Fuel cells are used for a variety of purposes, but can be divided into three different
sectors: portable, stationary and transport. There has been a large increase in the production and
shipment of fuel cells, as shown by the graphs below.
Chart 2 [4]
Chart 3 [4]
21
Chart 2 shows the steady increase of fuel cell shipments by type from 2008 to 2012, and Chart 3
shows the projected increase in shipments through 2018, when it is expected to reach an all-time
high of 1,127,560 units [4]. With government funding that is ever-increasing, there is no reason
to believe that technological development will come to a halt – technological factors are quite
favorable to fuel cell development.
22
VIRO Analysis
Service
Offered
Valuable?
Rare?
Difficult
to
Imitate?
YES
Carbonate
YES
YES
DFC®
Products
Use of
YES
YES
YES
Harmful ByProducts of
Waste
Materials for
Power
Virtually
YES
NO
YES
Zero
Emissions
Service
YES
NO
NO
Agreements
(Installation,
maintenance,
operation, &
monitoring)
Customer
YES
NO
NO
Support
Source: EBF 304W VIRO Analysis Example
Supported by
Organization?
Competitive
Implications
Performance
YES
Competitive
Advantage
Excellent
YES
Temporary
Competitive
Advantage
Excellent
YES
Temporary
Competitive
Advantage
Competitive
Parity
Good
Competitive
Parity
Excellent
YES
YES
Excellent
Carbonate Direct Fuel Cell Products – DFC products by FuelCell Energy offer extremely clean
power, while doing so in an efficient and economical fashion.
Use of Harmful By-Products of Waste Materials for Power – DFC power plants are capable of
using the biogas from decaying organic materials in order to power them while not releasing
these harmful gases into the atmosphere.
Virtually Zero Emissions – DFC plants only emit only trace levels of nitrogen oxide, sulfur
oxide, or particulate matter.
Service Agreements – Offer complete installation services such as Engineering, Procurement and
Construction while ensuring the project is complete on time and within the budget.
23
Customer Support – Around the clock support and monitoring Global Technical Assistance
Center (GTAC) that are operating 24/7/365 and are able to solve a majority of the problems
without having to dispatch a technician.
[34]
Fishbone Model
24
Company Thinking Model
How: FuelCell Energy Inc. produces energy from large fuel cell stacks that can produce
enough energy to power structures such as hospitals, schools, businesses and smaller scale
neighborhoods. Their patented Direct Fuel Cell technology generates extremely clean energy
with barely any type of emissions. This new technology is also more efficient that previous fuel
cell stacks and gives them the upper hand against their competitors such as Cummings.
What: Along with the Direct Fuel Cell technology, FuelCell Energy has also partnered
with the company Enbridge to create the multi-megawatt DFC-ERGTM (Direct FuelCell Energy
Recovery Generation). This system incorporates a gas expansion turbine that is able to generate
25
extra energy from the byproducts of the fuel cells while they are active. “The DFC-ERG
combines a Direct FuelCell® power plant with a gas expansion turbine. The pressure reduction
process drives the gas turbine, generating additional electricity above and beyond that of the fuel
cell power plant. This unique DFC-ERG configuration generates extremely high electrical
efficiencies of 60% and higher with virtually zero smog emissions and quiet operation”. [1]
To Whom: FuelCell Energy has three large facilities located around the world. One
located in Connecticut, another in South Korea, and a third in Germany. These power plants are
able to produce nearly 2.7 billion kilowatts yearly, which can generate 245,000 average sized
homes. [1] Stated before, this energy can also power hospitals and other large scale buildings,
both for private and public use.
For How Much: FuelCell Energy is currently working on developing cheaper inputs in
order to reduce their overall costs. The scarcity of platinum and palladium, which are crucial
elements to the energy production process, drives up the cost of production. The average cost of
a fuel cell is roughly $100, but when FuelCell Energy creates their large fuel stacks and large
scale production facilities, the costs can reach millions of dollars for the plants.[1]
26
Industry Analysis: External Environment for the Fuel Cell Power Industry
I.
Industry Background and Overview
FuelCell Energy Inc. (FCEL) operates in the fuel cell power industry, a division of the
renewable energy industry. Fuel cell technology development was initiated as far back as the
early nineteenth century, and has since experienced strong and steady growth with increasing
relevance in various markets, its technology utilized by such companies and organizations as
NASA, Honda, and the US Navy [4].
Despite the global financial crisis, initiated in 2008, which affected many industries, the Fuel
Cell Technologies Market Report determined that the shipments of fuel cell technologies grew
by 214% between 2008 and 2011 [6]. Another indicator of the industry’s steeping growth is
evoked by the Fuel Cells Annual Report 2013, which highlights the fuel cell sector’s $1 billion
revenue, an all-time high. In addition, the number of companies in the fuel cell industry with
revenues above $1 million increased from 24 to 42 by the end of 2012 [13]. A fuel cell
technology market analysis by Markets & Markets (M&M) predicted that the industry’s overall
revenue would increase to $2.5 billion by 2018. In addition, the unit shipments of fuel cells is
expected to increase by over 1,400% from 78,100 in 2012 to 1,127,560 by 2018. M&M establish
the reasons behind such growth in the following statement: “Major factors responsible for the
growth of fuel cell market include the ability of fuel cells in stationary, portable and
transportation applications as a source of off grid power source, zero emission and clean energy
source and continuous depletion of existing oil reserves makes” [8]. A trend confirmed by an
article on fuel cell technology on the Alternative Energy website, which also specifies that the
reason fuel cell technology is so interesting from a viability point of view, is that it uses the
world’s most plentiful resource: hydrogen [7].The Fuel Cell Industry Review forecasts a 46%
27
increase in annual shipments of fuel cell systems, and the annual megawatts shipped is expected
to grow by 29%, reinforcing the notion that the fuel cell industry truly is on the rise.
As of yet, Asia has established dominance over the fuel cell industry, with more than 61% of
the global market in terms of system shipments. Asia also leads the world in megawatt count
with 52% of the total, leaving North America second with 37% [5]. The main fuel cell
companies include Ballard (Canada), Ceramic Fuel Cell (Australia), FuelCell Energy (US),
PlugPower (US) and SFC Energy (Germany); these companies constitute almost 58% of the total
market for fuel cell technology [8]. Within the US, FuelCell energy is the largest publicly traded
fuel cell manufacturer [9]. FCEL also holds relevance in many regions across the globe. Yahoo!
Finance reported the corporation operates plants in around 50 nations worldwide, and has
established strategic alliances with international companies such as POSCO Energy, the
Fraunhofer Institute for Ceramic Technologies and Systems, Enbridge, Inc., Abengoa, and NRG
Energy [12], to ensure its competitiveness as one of the world’s leading fuel cell technology
entities.
II.
Macroeconomics Factors: Demand Determinants and Government Roles
1) Changing consumer needs
As the prices for fossil fuels rise, the uncertainty surrounding oil increases, and the threat of
climate change cloud the future of the “old” energy economy (that of oil, coal, and natural gas),
there is an ever growing demand for newer, more sustainable and ecological energy [10]. Fuel
cell technology is part of this new, sustainable energy category and its demand has been steadily
increasing in a highly diverse list of consumers. In the 1960’s, NASA began using them in space
missions. In the 1980’s, the US Navy began using them in their submarines. The 1990’s saw
large automobile manufacturers such as DaimlerChysler, General Motors and Toyota invest in
28
fuel cell technology, with the hopes of developing cars with much-reduced pollution rates.
Nowadays, it is used in a variety of companies such as Walmart, Coca-Cola, and AT&T, as well
as in certain universities and other institutions [4]. The world’s energy consumers are shifting
their demand progressively, albeit slowly, to an energy economy of renewable, sustainable
resources.
Between 2006 and 2012, the world invested $1.3 trillion in the renewable energy industries,
while semi-constantly increasing their investment for each individual year; in 2006, $100 billion
was invested, in 2007 it was $146 billion, 2008 experienced $172 billion in investments, in 2009
it was $168 billion, 2010 saw $227 billion, in 2011 it was $279 billion, and in 2012 it was $244
billion [19]. According to Mr. Achim Steiner, United Nations Under-Secretary General, "The
uptake of renewable energies continues world-wide as countries, companies and communities
seize the linkages between low carbon Green Economies and a future of energy access and
security, sustainable livelihoods and a stabilized climate.” He also highlights the sharp cost
reductions in industries such as wind power and solar power, which to his is “not only normal in
a rapidly growing, high tech industry but is likely to lead to even more competition, with even
bigger gains for consumers, the climate and wider sustainability opportunities” [19].
Sustainability is the trend as consumer needs and demand change, which could potentially bode
very well for the fuel cell industry.
2) Governmental aid and restraints
The US government has always played a massive role in the energy industry, and
understandably so when the fact that energy affects every other industry is taken into account.
The role it plays manifests itself most often in the form of subsidies: Between 1994 and 2009, the
government allocated $446.96 billion in subsidies in the oil and natural gas industries [20].
29
Comparatively, between those same years, it only allocated $5.93 billion to renewable energy.
This number, however, is on the rise as the popular focus shifts to sustainability [20].
In the last decade especially, government and private funding for fuel cell research has
increased significantly. There has been a renewed focus on fundamental research to achieve
breakthroughs in cost reduction and operational performance to make fuel cells competitive with
conventional technology [4]. A good deal of government funding worldwide has also been
targeted at fuel cell demonstration and deployment projects. The European Union, Canada,
Japan, South Korea, and the United States are all engaged in high-profile demonstration projects,
primarily of stationary and transport fuel cells and their associated fuelling infrastructure [4].
Although, as a whole industry, fuel cell technology thrived despite the financial collapse and
recession that ensued, certain companies did suffer considerably. Government funding was
substantially lessened, and as a result a number of firms went out of business [4]. However, since
the recession, “governments around the world have come to see fuel cells as a promising area of
future economic growth and job creation and have invested further resources in their
development, something fuel cell companies have not been slow to capitalize on” [4].
There are numerous Federal and state incentives to encourage the development and use of
sustainable energy, and fuel cell in particular for many cases. The Renewable Electricity
Production Tax Credit stipulates that the federal government will credit 1.8 cents per kilowatt
hour generated by using renewable energy [11]. The California Energy Commission offers cash
rebates on fuel cell renewable energy electric-generating systems; in Connecticut, four million
dollars is available to help lower the cost of fuel cell technology meeting certain criteria; Hawaii
offers a five year, 100 percent tax credit of up to two million dollars on an equity investment in a
qualified high tech business, in which fuel cell companies are included [11].
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III.
Industry Risks
There are a few risks involved in the fuel cell technology industry. The most basic one
pertains to the potential hazardous nature of the hydrogen that is used in fuel cell; due to the high
pressure exerted upon it, there are risks of combustion, explosion and toxic release, in extreme
cases. This is potentially hindering fuel cell development and causing the technology to be
reconsidered as a viable solution for electricity generation [14].
However, there are more complex risks in the industry, which could prevent fuel cell
technology from truly emerging as a serious, sustainable option for our future. As “Fuel Cell
Technology Market” puts it: “The key concerns in the industry pertain to the high cost of
catalyst, commercialization of fuel cells and establishment of fuel cell infrastructure.” Fuel cell
technology faces a catch-22 situation: in order to enter the commercialized market, costs need to
be significantly cut. However, to cut costs, the cumulative production needs to heavily increase,
i.e. significant market penetration needs to occur [15]. This uncertainty needs to be overcome if a
fuel cell company ever wants to become profitable [16]. Analysts worry that these companies
will never be able to reduce the cost of production – the price for less sustainable but much easier
to use and produce resources like coal and natural gas is simply far too inexpensive for fuel cells
to compete with [16]. However, steps are being taken towards progress. Ongoing research is
focused on identifying and developing new materials that will reduce the cost and extend the life
of fuel cell stack components including membranes, catalysts, bipolar plates, and membraneelectrode assemblies. Low cost, high volume manufacturing processes will also help to make
fuel cell systems cost competitive with traditional technologies [17].
Another risk is that fuel cell technology will never have significant bearing in the
renewable energy market in the midst of “new” energy economy giants such as wind, biomass
31
and geothermal, respectively 53.13%, 14.79 and 7.52 of the renewable energy used in the US
[19]. This does not include the other types of renewable energy, in addition to the still majorly
widespread use of fossil fuels; fuel cell technology still has a long way to go to make an impact
in the global energy economy.
32
Competition Analysis
I.
General Competition
Fuel cell research and companies began to surface more in the 1960’s. FuelCell energy
was able to get an early start in the industry having been founded in 1969. Since then there have
been many other competitors to challenge them. There are approximately seventeen competitors
to FuelCell energy. These competitors are in the fuel cell industry to manufacture batteries and
storage for consumers, vehicle, and industrial use. Out of these companies, the Gross Revenues
range from .42 million at Palcan Fuel Cells, to 95,925.76 million at the Hitachi company. Some
of the companies do not have their net profit margin listed, however the companies that do, range
from IdaTech’s NPM of negative 476.6% to Rolls-Royce 15.51%. Again like Net Profit Margin
not all of the companies list their Net Operating Cash Flow. The lowest company that lists their
Net Operating Cash Flow was McDermott, which is at negative 256.61 million ranging to the
highest competitor, Caterpillar, at 10,191 million. [21] One important aspect that must be
acknowledged is that many of these companies, for example Rolls-Royce and Caterpillar, are
making large profits from products other than fuel cells. If these larger companies only stated
their revenues from what they were receiving for the fuel cells, then the numbers would be much
different.
With Fuel cell technology growing and changing it wont be long until there are more
companies looking to get into the industry. Recently on July 24th, 2014, an article was release
stating that General Electric is beginning to set in motion a way to commercialize their solid
oxide fuel cells. These fuel cells will have an efficiency of 65% and if they can use the waste
heat they can reach 95% efficiency. A Scientist who works at GE stated “The cost challenges
associated with the technology have stumped a lot of people for a long time, we made it work,
33
and we made it work economically.” [22] The article goes on to discuss the hardship of actually
profiting from fuel cells and how companies are still investing in them. One of the competitors
of Fuel Cell Energy is Bloom Energy, which recently invested a billion dollars into the same
type of fuel cell that GE was discussing in the article. If large companies like GE begin to gain
more interest in fuel cell then it will add even more amounts of pressure through competition.
One way to look at the top ten competitors to FuelCell Energy are to examine which companies
are bringing in the highest gross Revenue. The reasoning this is a good way to judge who are the largest
competitors is because the companies with the most revenue will have a lot of money to invest into fuel
cells when they become more prevalent. However most of the top competitors aren’t specific fuel cell
companies. In order of high to low gross revenue: Hitachi is a business that is involved with many sub
divisions ranging from Transportation and Power Systems to Electronic Systems and Equipment.
Caterpillar is a company which focus’s on selling construction machinery and different engines.
Mitsubishi Heavy Industries works on electrical equipment and other electronics. Rolls Royce is a luxury
car manufacturer that also uses engineers to build better batteries and engines for their vehicles.
Finmeccanica is an Italian company who focuses on aerospace, defense, and security. Cummins is listed
as number six on the highest grossing revenue, and this company produces and designs engines.
Kawasaki Heavy Industries is a company, which manufactures products from aerospace and recreation
vehicles to energy and power plants. Similar to Kawasaki, the IHI Corp is known to produce aerospace
products, ships, industrial machines, and a few others. Ingersoll-Rand is an Irish drilling company. And
the tenth and last name on the list is the Fuji Electric a company that is known for creating power
supply’s, sensors and measurements, Distributions and controls, and a few other products. It is easy to
take note that out of the highest grossing and largest competitors to FuelCell Energy, known of them are
specifically fuel cell companies. The majority of them focus on a larger industry and just have a smaller
section devoted to fuel cell research and manufacturing.
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II.
Top Three Competitors
Although there are multiple other competitors for FuelCell Energy, there are three top
companies that provide the most competition. These companies are Cummins, Ballard Power,
and Doosan Corporation. The largest of the three is Cummins, which is a Fortune 500 company
that mainly deals with the production and manufacturing of engines. The company started up
around 1919 in Indiana just building engines, however they now produce and service engines,
filtrations systems, and power generation. On May 5, 2010 there was a statement released
discussing Cummins and their success in using fuel cells. They stated “Cummins successfully
demonstrated a tubular solid oxide fuel cell in a hybrid-configured auxiliary power unit
configured to power a Class 7/8 trucks “hotel loads” while running on commercial ultra-low
sulfur diesel fuel.” [23] This shows that Cummins is implementing fuel cells into their already
successful business, possibly pushing other companies to do the same. They have annual sales of
17.3 billion dollars, 47,900 employees, and a 26.32 billion dollar market cap. [24] Part of
Cummins is there Cummins Power Generation section and that is the section that will do
research and work to achieve better fuel cell generation. The power generation section has about
1,800 employees and has annual sales at around 191.6 million. This number shows a much
better example of what kind of profit the fuel cells bring to the company. [25]
The second company that is a main competitor of FuelCell Energy is the Doosan
Corporation. This company was established in 1896 in South Korea, meaning it is the oldest of
the three competitors and has been running for a much longer time the FuelCell Energy. Doosan
has multiple Infrastructure Support businesses, which is how they make the majority of their
profits. These ISB’s are in Energy and energy plants, water plants, castings and forgings,
construction and engineering, construction equipment, machine tools, engines, chemical process
35
equipment, offshore structures and subsea, hydraulic components, and industrial vehicles. [26]
Doosan Fuel Cell America incorporated, is the part of the Doosan Company dealing with fuel
cells. Recently in July 2014, the Doosan Corporation purchased ClearEdge Power, which was a
fuel cell company that was located in Sunnyvale California. With this purchase, Doosan is able
to purchase a subsidiary in South Windsor Connecticut, the same state as FuelCell energy. [27]
The Doosan Corporation has annual sales of 1.53 billion, but when looking more into their fuel
cell section in South Windsor their annual sales are only at 6.8 million with 70 employees, this is
because it only began in 2014. [28] The purchase of ClearEdge Power brought 180 employees
and annual sales of 31.1 million dollars. [29] It’s easy to see with this company that they are
beginning to branch out more in the fuel cell industry, especially with the recent purchase of
ClearEdge Power and that they introduced a new plant in Connecticut. This just adds more
competition for FuelCell Energy.
The third and smallest company is Ballard Power. Ballard is the most similar to FuelCell
Energy in the fact that they both are specifically producing and manufacturing fuel cells. This
company is newer than FuelCell Energy, opening in 1979 and is located in Burnaby, British
Columbia. Ballard Power has sales at 61.25 million with a net income of negative 19.96 million.
It also has 335 employees working at the plant. [30] When you compare the four companies
Cummins, Doosan Corp, Ballard Power, and FuelCell Energy. Cummins has the highest annual
sales of 12.30 billion, but that is for the whole company, their annual sales are only 191.6 million
for their power generation sector. Fuel Cell Energy has the next highest sales at 187.66 million,
Ballard Power is at 61.25 million, and Doosan Corp is at 1.53 billion but for the fuel cell section
they are only around 37.9 million dollars in Sales. Realistically FuelCell Energy and Ballard
Power are doing the best with sales of fuel cells because that is their main product and their
36
concentration is only on that. Even thought Cummins has 191.6 million annual sales for their
power generation that still does not specifically mean fuel cells. This makes it harder to measure
how much they actually make.
III.
Dynamics of Industry
After looking at the three largest competitors there are a few things that need to be
identified. Cummins and the Doosan Corporation have been around a lot longer than FuelCell
Energy and Ballard Power. That being said, these two companies have had time to make their
mark on the economy with specific products and have slowly grown to billion dollar companies.
These companies are only now beginning to look into fuel cells, but since they have the
resources, it makes it a much easier and faster process. They may not make most of their
revenues from fuel cells, but they have the assets to invest into research and to manufacture in
large amounts when they need or want to. The company’s in which mainly focus on fuel cells,
an example being FuelCell Energy, are not making nearly as many profits. This puts them
behind, in the case that they suddenly need to invest large amounts of money into the company.
But looking into the Doosan Corporation it is easy to see that their fuel cell sections is much less
of a factor in their company, although they are starting to change that.
It is made clear that the fuel cell industry is growing; the more these larger companies
keep trying to develop the technology, the larger it will get. The problem with the fuel cell
industry though is that there are minimal profits for how much costs are. Until there are strong
sales, and Net Profit Margins for companies within the industry stop being negative, then that
will be the time that the competition will sky rocket. This will give advantages to the companies
that have been specializing in the fuel cell industry for a longer period of time.
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Forces that change our industry’s conditions
Right now:
Currently, some of the more prevalent forces that are creating the greatest influence are contracts awarded
by both the United States government, as well as other countries around the world that are attempting to
integrate fuel cells into their energy supply. Another force is the push for clean renewable energy that can
produce energy outputs that can rival some of the more established sources such as coal and hydro. A
final force that is affecting the industry’s conditions is the need for innovation. From a current time
aspect, there is a need for new products that can create more energy and last longer while costing less.
This will also have an impact for many years to come as more and more funds are allocated to develop
more efficient methods.
One year from now:
One year from now, the push for green energy that can output comparable energy levels will still be a
relevant force within our industry. Over the past 10 years, there has been increasing attention when it
comes to companies being able to produce cleaner and more efficient. Similarly, fuel cells will be
attempting to stay ahead of the curve and produce even more efficient energy. Another force that will be
influential one year from now is if governments around the world will choose to embrace fuel cells and
begin to work them into the energy production cycle for their area. Additionally, if a company is not able
to create an alternative to using platinum and palladium during the energy production process, the prices
of these precious metals will continue to climb as the supply gets smaller and smaller. This could be
extremely detrimental to the push for trying to decrease the price of fuel cell energy production.
38
Three years from now:
In the three year perspective, one of the most important factors for creating change within our
industry will be the previously discussed factors as well as FuelCell Energy’s ability to create a
compromise with Enbridge in order to receive more profits from their patented combined cycle
technology.
What difference will each force make and will it be favorable or unfavorable
As the recent government action has shown, fuel cell energy has been receiving increased
contracts and funding in order to enhance and integrate the use of fuel cells into everyday life.
This will has a positive effect on the industry and will lead to new innovations that will help to
increase the capacity and energy output. Also, the push a clean energy will work in the fuel cell
industry’s benefit because it will provide positive publicity. The driving force for needed
improvements within the output of fuel cells will be positive as well because it will allow for the
industry to be able to compete with the more established energy producing systems such as coal
and natural gas. The platinum and palladium situation, unless an alternative is discovered, will be
a negative force as time goes on. These supplies will only increase in price as time goes on and
will continue to keep fuel cell energy expensive.
What impact and how important to the industry is each issue for your company and top 3
competitors?
Right Now:
The issue of governments, both foreign and domestic, allocating funds and contracts to assist in
the development and integration of fuel cells is extremely important for FuelCell Energy and its
39
top 3 competitors. As it currently stands, fuel cells are not able to compete with the output of
traditional energy sources. Only with the addition of these funds to spur further innovation will it
be possible for the usage of fuel cells to be able to compete in the energy market. Also, unless
companies are able to develop some technology on their own that will make their company stand
above the rest, it is going to be very difficult for one fuel cell company to excel.
Since fuel cells are already a very clean energy source, the push for a “green” alternative will
work in their benefit. It may not be so important right now since the movement has already been
happening for years now, but it will only help their initiative. Similarly, the need for innovation
within the field is ongoing and is not likely to just drop off and become nonexistent, making it
not such as important factor to FuelCell Energy and its competitors.
Finally, the need for platinum and palladium is a very important factor to the industry and will
remain this way for years to come unless a cheaper alternative is created. The need for these
precious metals makes the production cost very high, therefore making the cost of energy high.
One year from now:
Whichever companies are fortunate enough to receive government contracts and funding will
surely thrive in the market and will slowly take control of the industry. As time passes, the
companies that do not receive this funding will slowly fall behind. Since there is no foreseeable
reason for the push for a clean energy source to decline, as the years pass this will be a factor that
will work in the advantage of all fuel cell companies. Also, the need for innovation within the
industry will remain constant as time goes on and will be a driving force for all companies that
want to be relevant and thrive in the market. As stated earlier, the need for platinum and
palladium will continue to cause a problem for any company that is not able to modify the
40
production system. This will be a very influential factor for all companies that wish to decrease
their price.
Three years from now:
At this point, whichever companies that are not able to secure some type of government funding
will be nonexistent within the fuel cell industry. By this time, there will have been some type of
development or a takeover that will make certain companies the power figures in the market.
This will be very important for any company that wishes to thrive and control a large share of the
business. This is very similar to the innovation force. Whichever company is able to create a new
system that revolutionizes the fuel cell energy production method, will be the controlling force in
the industry.
Seeing as there would be no reason for the push for finding new clean energy sources to end, this
will not have such as large impact as it did in the short range perspective. On the other hand, if
no alternative to platinum and palladium is found by this point, fuel cells will begin to fade
because other energy sources will be taking over their market share due to their high prices.
Which issues represent opportunity for your company and top 3 competitors?
The issues of government funding and contracts will be an opportunity due to the fact that
FuelCell Energy is already receiving aid from the government. However, this could prove to be a
threat for our competitors if they are not able to secure the same assets. The push for clean
energy as well as innovation will be an opportunity for FuelCell Energy because they will
continue to excel and hopefully stay ahead of their competitors.
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Which issues represent threats to your company and top 3 competitors?
The only issues that represents a threat to all in the fuel cell industry, is the reliance on platinum
and palladium. The cost of these precious metals will drive up the cost and continue to make fuel
cell energy more expensive than its competitors.
FuelCell Energy Life Cycle within the Fuel Cell Technology Industry
I.
Industry / Product / Service Life Cycle
FuelCell Energy
Fuel cell products
In terms of industry life cycle, placing FuelCell Energy and its products is a complicated
task. FuelCell Energy has been conducting fuel cell developing operations since 1969 [55],
however they have not made any significant progress towards a cost-competitive, efficiencycompetitive, and commercialized product since their inception. This raises a few issues, and
offers two possible scenarios: either their fuel cell products have never been able to breach out of
42
the introduction stage, or fuel cells are simply not a product that will ever move onto the growth,
maturity and decline stages, because they will never hold enough bearing in their industry.
However, there have been some recent developments that are lending to the notion that
FuelCell Energy is on the rise. On October 29, 2014, FCEL unveiled a manufacturing expansion
project, which is expected to reduce production costs significantly and poise the company in an
excellent position for growth [56]. Their stock price immediately began rising, and many
investors are banking on a return to the forefront of fuel cell companies [12]. For these reasons,
we can assume that FuelCell Energy has broken out of the “introduction” stage (although still
displaying traits of a company in this stage, such as low sales volume) and is on the brink of real,
constant growth.
II.
Product / Service Characteristics
FuelCell Energy offers a variety of fuel cell based solutions with regards to power
generation in buildings, machinery and other equipment. Its website qualifies FCEL’s endeavors
as the following:
“As a leading global fuel cell company, we provide ultra-clean, efficient and reliable
baseload distributed generation for electric utilities, commercial and industrial
companies, universities, municipalities, government entities and other customers around
the world.” [55]
FuelCell Energy is committed to providing quality customer service as well as physical products.
It is thus involved in comprehensive operations, maintenance, and installation [55]. FCEL deals
mainly in stationary fuel cells, although with the recent developments in their manufacturing
operations that are allowed thanks to low costs
[56], they are planning on expanding
43
permanently into the commercial sector, where their products will ideally be utilized in everyday
products.
III.
Size & Growth Rate of Market Space
The market space of fuel cell technology within the scope of renewable energy (thus after
narrowing down the market from “energy” in general) is quite small. As mentioned in the
“Industry Analysis” section of this portfolio, the inconstant fluctuation of the share prices for
different companies and the chronic inability for fuel cell companies as a whole to create any
breakthroughs in technology that would see fuel cells being commercialized have caused the
market to remain at the same level for several years [4].
The size, however, is expected yet again to rise. According to Gordon Spratt, the global
fuel cell market could be worth over $26 billion in 2020, and over $180 billion in 2050 [64]. If
these numbers are anything close to accurate, it would entail effectively revolutionary
breakthroughs into the commercial market and fuel cells would be a significant source of
renewable energy.
IV.
Competition and Competitive Rivalry
44
The above chart shows the position of FuelCell Energy relative to three of its major
competitors, Ballard Power Systems, Hydrogenics Corp and Plug Power. The information for
Tesla and Facebook is to put into perspective the true values of fuel cell companies in terms of
bearing on the market. In terms of enterprise value, FCEL ranks second, after Plug Power (worth
over twice what FCEL is).
Despite the fact that the fuel cell industry has primarily been around since the 1960’s [4],
most companies are still at the product development / prototype / pilot stage; due to the large
number of these companies, competition for business is strong [64]. As mentioned in the
“Porter’s Five Forces” section, as soon as one of the competing companies releases a
commercially viable product, it will immediately acquire an enormous share of the market. Until
then, it is mainly a Cold War of sorts that the different companies are engaging in as they
continue to research and develop their products.
V.
Customer Characteristics
Currently, the majority of FuelCell Energy’s customers are corporations and
governmental organizations, such as the US Navy, NASA, and Coca-Cola [4]. They are not used
commercially, i.e. in commercial retail products, but developments are being pursued to integrate
their fuel cell products into the automobile and other machinery industries. FuelCell Energy
currently caters to different smaller business (in contrast with the enormous corporations cited
above) in North America (USA and Canada), Europe (mainly Germany), and Asia (mainly South
Korea) in a variety of fields such as hospitality, higher-education, data centers, and retail
buildings [54].
VI.
Entry / Exit Barriers in Market Space
45
Entering the fuel cell industry is not simple, and involves a complex mesh of technology,
resources, and hefty investments. In order to establish a functioning, retail fuel cell
manufacturing plant, which will supply an array of companies and organizations, a prospective
new entrant will need to comply with a vast selection of regulations, and acquire a license.
Because there is no standardized design for fuel cells, this new entrant will need to spend a hefty
amount of time in research and development, in order to come up with a design that is feasible
and hopefully more efficient than the countless other designs already being offered on the market
[64].
However, as previously mentioned, the government has initiated programs that encourage
new entrants into the fuel cell market by offering subsidies and tax exemptions, in order to take
some of the edge off the heavy investments that are needed. These will help the company cover
its start-up costs, and some of its other operations costs and expenses. These government
initiatives mitigate the real cost of entering the market – however, they also serve as a mask to
hide the harsh reality that the fuel cell industry is, for the time being and the foreseeable future,
extremely unprofitable.
VII.
Backward / Forward Integration
It is very difficult for fuel cell companies to backward integrate to purchase their various
suppliers. One of these rather obvious reasons is that fuel cell companies, as they have yet to
profit, do not have any disposable income to spend on acquiring other companies. Another more
technical reason is that fuel cell companied are supplied very complex and expensive materials,
which are difficult to manufacture / collect [62]. Because of this fact, there are very few suppliers
in contrast with the amount of fuel cell companies on the market. In addition, these suppliers are
46
wary about involving themselves too intensively in this market, fearing a market collapse, and
thus would not merge with fuel cell companies for economic reasons [64].
Forward integration, on the other hand, is an option that we as a consulting team are
recommending FCEL implement to increase their profit margin: currently, their distributor is
Enbridge, and we believe that merging with them would be extremely beneficial. This is not a
widely used practice, as fuel cell companies are focusing exclusively on developing their
products rather than retailing them [64]. Forward integration would be a significant step towards
better marketing and thus having a more significant impact on the various commercial markets.
VIII.
Industry Profitability
[57]
The unprofitability of the fuel cell industry is actually quite astounding. Not a single fuel
cell company has, of yet, posted profits in the black as of yet (despite Ballard’s brief stint in the
47
past year, having since returned to posting negative profits) [64], and as is visible in the above
graph which compares the profits of FuelCell Energy, Plug Power and Ballard Systems over the
past four years, the profit margins are significantly lower than 0% [57].
As mentioned before, the reasons for this lack of profitability lie in expenses and other
costs that are abnormally high, especially for the amount of production they are completing,
although, granted, much of these incurred costs pertain to research and development. The prices
of resources and necessary supplies do not help, with platinum costing $1,269 per ounce, and
palladium costing $787 per ounce [64]. The outlook is somewhat positive, however, with many
experts forecasting nearby growth and Plug Power recently significantly approaching the
profitability mark [12].
IX.
Capacity Utilization and Resource Requirements
Fuel cells are by no means a novelty – they were invented in the 19th century. However it
is only recent developments in technology that have allowed them to develop into powerful
energy sources that are used by the US Navy, NASA and other organizations [4]. Their further
potential is strikingly apparent, if they can ever break out of the negative spiral they have been in
for a while.
Fuel cells are quite complex to manufacture, and the necessary resources are phenomenal.
The first of these is the most obvious: funding. Fuel cells are so expensive to develop and
produce that financial resources are a necessity, although readily available via government
subsidy. Other resources include expensive materials such as platinum and palladium, which are
essential components of fuel cells.
X.
Experience Curve
48
The experience curve measures a firm’s ability to reduce costs as well as increase in
volume. Although specific results pertaining to the unit costs and exact production volume for
FuelCell Energy and its top three (fuel-cell-developing only) competitors, Plug Power, Ballard
and Hydrogenics Corp, were nearly impossible to find, an assessment of each company’s
position along the curve is able to be determined thanks to sales numbers in comparison with
total revenues and expenses – i.e., if the recorded revenues and expenses are relatively constant
while the sales volume increases, it is safe to assume that they are decreasing their costs while
increasing production. To put it plainly, the company’s gross margin will be a good indicator of
its position along the experience curve.
FuelCell Energy
[60]
On the graph above, we can see that FCEL’s gross margin has been, albeit slowly,
increasing over the last few years. This is a sign of financial health and we can assume that
FCEL has a reasonably positive relationship between unit cost and production volume. On the
experience curve, from 1-10 with 10 being a perfectly inverse relationship between unit cost and
production, FCEL rates at 5.
49
Ballard
[59]
As is visible in the graphs above, Ballard has been posting excellent gross margins, as
well as strongly increasing revenue. Although this does not point directly at unit cost decrease,
due to Ballard’s exemplary financial health, it is safe to assume so. Ballard rates at a 6 on the
experience curve.
Plug Power
[61]
Plug Power, on the other hand, is unable to remain consistent. As seen on the graph
above, its gross margin has been fluctuating since 2010, with no real pattern. It is thus safe to
assume that Plug Power is not efficient when it comes to reducing cost per unit as production
increases. They rate 2 on the experience curve.
Hydrogenics Corporation
50
[65]
The graph above illustrates Hydrogenics Corp’s gross margin for the past 14 years (since 2000).
As is visible on this graph, Hydrogenics has never been able to remain consistent or undergo any
significant growth periods. This indicates poor financial health, and although they have
experience an increase in revenue, and thus their sales volume [65], they have not been able to
decrease their cost per unit. On the experience curve, Hydrogenics rates a 2.
51
Competitors SWOT Analysis
Cummins Inc.
SWOT Analysis
Strengths
-Has a large market cap of 26.32 Billion
- Is the leading manufacturer of Diesel
Engines
- Has a global presences with 5,000 facilities
spread through 197 countries
Weaknesses
- With such a large company, costs are high
- Has a dependence on a limited amount of
suppliers
- Some geographic markets do not sell as
well as they should be
Opportunities
- Diesel engines are being sought after more
globally, which results in more factories in
different countries
- Diesel gives off less emissions, meaning
more use of this type of engine
- Earnings estimate is increasing from year
to year
- There is a high rate of competitors forming
for future competition
- The labor wages in the U.S are increasing,
which will increase costs
- Tax changes and government regulations
could add potential costs
Threats
[35] [36]
52
Doosan Corporation
SWOT Analysis
Strengths
- Has annual sales of 6.28 Billion
- Owns many different companies world
wide for construction equipment, engines,
batteries, and other materials
- Has a high growth rate since it is a large
and powerful company
- The company has many divisions meaning
there will be high costs to keep everything
running
Weaknesses
Opportunities
- More rapid growth to different countries to
achieve more resources
Threats
- It is a competitive market with other
competitors being thriving companies with
global presence as well
- Rising labor costs in different countries
could be costly
- Different government regulations
[37]
53
Ballard Power
SWOT Analysis
Strengths
- Current Assets cover Total Liabilities
- Has the financial security to survive an
economic downturn
- The growth rate is rising for fuel cells
Weaknesses
- Has a market cap of only 166.85 million,
compared to FuelCell Energy’s 263.06
million
- Very minimal reinvestments of profits,
most likely because they haven’t made a
profit
-Doesn’t receive many funds to continue
growing
Opportunities
- Currently has a negative earning estimate,
but next years estimate is less negative. This
shows that earnings are increasing
- Based out of Canada, they have the ability
to expand to more countries
Threats
- Rising costs of labor, materials, and
interest rates
- There is a low profitability in the fuel cell
field
- Competition is rising, as fuel cells become
more relevant
[38]
54
Competitor PEST Analysis
Cummins [48]
Political
- Cummins receives
the majority of their
revenues from their
engines, this is
affected by the
governments need
for less air pollution
Economic
- Since 2008’s
financial crisis,
Cummins has been
able to slowly
recover. The
economy is still in
recession, but with
Cummins being
such a powerful
company, it is still
able to create
revenue
Social
- Society wants
more fuel-efficient
clean cars.
Cummins will have
to adapt to what the
demand is craving
to continue to be
successful, meaning
hey will have to
keep changing their
engines, to make
them give off less
emissions
Technology
- Cummins have
technology in
engines, power
generation,
filtration, turbo
technologies,
emission solutions,
and fuel systems.
With technology
growing and
developing
everyday, Cummins
is sure to grow as
well
Economic
- The financial crisis
in 2008 has caused
many problems with
the U.S economy.
This especially does
not help Ballard
Power being that it
is a fuel cell
company. Fuel cell
research and
progression is
expensive and with
the country in a
recession it does not
help
Social
- The idea of fuel
cells is socially
accepted in that it is
a clean and
renewable energy.
The problem
currently though is
that fuel cells are
not yet efficient
enough and have not
been
commercialized
Technology
- Fuel cell
companies are
always trying to
better their
technology to
increase efficiency.
-Currently Ballard
Power has fuel cells
for Backup Power,
Distributed
Generation,
Material Handling,
and Buses. With
more technology
they will be able to
increase the uses
and abilities of fuel
cells
Ballard Power [49]
Political
- The government
has shown support
of fuel cell research
by funding the idea
for many years. It
has yet to pay off,
but with continued
funding and
research, fuel cells
will eventually be
able to make a
profitable impact
55
Doosan Corporation
Political
- Legislation
looking for green
energy will affect
the Doosan
Corporation since
they make many
different Engines as
well as construction
equipment and have
a variety of power
plants, and water
plants
Economic
- In 2008, when the
global financial
crisis occurred, the
world’s economy
was greatly affected.
Luckily the Doosan
Corporation was so
large and had
enough earning to
not be as affected as
many other smaller
companies, however
still today the
company is working
at increasing their
profits.
Social
- With Doosan
having many
different sections to
the company
involving
construction
equipments to
power plants, they
will have to focus
on the worlds social
outlook of having a
greener more
efficient world.
Technology
- The Doosan
Corporation has
seventeen different
support businesses
under their name.
This means that the
technology that they
have is superior to
many other
companies and will
continue to grow as
time goes on
Competitor VIRO Analysis
Cummins [50]
Service
Offered
Valuable? Rare?
Competitive
Implications
Performance
Yes
Difficult Supported by
to
Organization
Imitate?
No
Yes
Proton
Exchange
Membrane
(PEM)
Use of
Harmful ByProducts
of Waste
Materials for
Yes
Temporary
Competitive
Advantage
Excellent
No
Yes
Yes
Competitive Below
Disadvantage Average
No
56
Power
Virtually
Zero
Emissions
Solid Oxide
Fuel Cells
(SOFC)
Fuel
Flexibility
Yes
No
Yes
Yes
Competitive
Parity
Good
Yes
Yes
Yes
Yes
Competitive
Advantage
Excellent
Yes
Yes
Yes
Yes
Competitive
Advantage
Excellent
Valuable? Rare? Difficult Supported by
to
Organization
Imitate?
Yes
Yes
No
Yes
Competitive
Implications
Performance
Temporary
Competitive
Advantage
Excellent
No
Yes
Yes
No
Competitive Below
Disadvantage Average
Yes
No
Yes
Yes
Competitive
Parity
Average
Yes
No
No
Yes
Competitive
Parity
Excellent
No
Yes
Yes
Yes
Competitive Below
Disadvantage Average
Ballard Power
Service
Offered
Proton
Exchange
Membrane
(PEM)
Use of
Harmful ByProducts
of Waste
Materials for
Power
Virtually
Zero
Emissions
Service
Agreements
(Installation,
maintenance,
operation, &
monitoring)
Fuel
Flexibility
57
Doosan [51]
Service
Offered
Valuable? Rare?
Competitive
Implications
Performance
Yes
Difficult Supported by
to
Organization
Imitate?
Yes
Yes
PureCell
Model 400
Fuel Cell
System
Use of
Harmful ByProducts
of Waste
Materials for
Power
Virtually
Zero
Emissions
Energy
Productivity
and
Efficiency
Customer
Support
Yes
Competitive
Advantage
Excellent
No
Yes
Yes
No
Competitive Below
Disadvantage Average
Yes
Yes
Yes
Yes
Competitive
Advantage
Excellent
Yes
No
Yes
Yes
Competitive
Parity
Excellent
Yes
No
No
Yes
Competitive
Parity
Excellent
58
Proton Exchange Membrane (PEM)- These Fuel Cells are meant for transportation, stationary, and
portable applications.
Use of Harmful By-Products of Waste Materials for Power- None of these Companies use DFC Power
Plants.
Virtually Zero Emissions- Hydrogen based fuel cells release limited amounts of emissions from their
power plants.
Solid Oxide Fuel Cells (SOFC)- Electrochemical device that will produce electricity by converting fuel
and air into electricity without combustion.
Service Agreements- Offer complete installation services such as Engineering, Procurement and
Construction while ensuring the project is complete on time and within the budget.
Energy Productivity and Efficiency- Uses resources that result in maximum energy use and lifetime.
Customer Support- Around the clock support and monitoring Global Technical Assistance Center that
are operating 24/7/365.
Fuel Flexibility- Able to use more than one type of resource for the fuel cells that will be able to run
efficiently.
59
Action Reaction
Action 1
FuelCell Energy will integrate fuel cell
technology into mainstream commercial
based products. This will peak interest in
fuel cell technology and increase revenues.
Action 2
Currently the fuel cell industry has not
achieved any positive revenue. This means
that FuelCell Energy needs to decrease
their overall cost of production as soon as
possible. This would be possible by
increasing government subsidies and
contracts. They could also potentially find
a cheaper alternative element used for
production.
Action 3
FuelCell Energy merges with Enbridge to
integrate sales into company activates. The
product Direct FuelCell Energy Recovery
Generation was created with help from the
company Enbridge. This company now is
the only company that distributes said
product. Enbridge has had constant growth
within their company since they started
selling this product. FuelCell Energy will
merge with them to increase revenue.
Reaction1
Seeing FuelCell energy commercializing
their fuel cell technology will result in the
competitors doing the same. They will be
forced to commercialize in a similar
fashion or see the effects of a competitive
disadvantage.
Reaction 2
If FuelCell Energy were to increase their
government subsidies and contracts at a
high enough rate, then it would catch the
attention of their competitors, which would
cause them to do the same. The same is
with the cheaper alternative element. If the
competitors discovered that there was a
cheaper element than that of what they
were currently using then they would
switch over to that way of production.
Reaction 3
The merger of FuelCell Energy and
Enbridge would cause many competitor
companies’ to begin to examine the
benefits of merging with other company’s
to increase their revenues. It will be more
difficult for competing companies to merge
because they more than likely didn’t create
a product with the company they plan to
merge with.
60
Strategic Group Map
The Strategic Group Map above shows the revenues of the companies FuelCell Energy, Cummins,
Ballard Power, and Doosan Corp. It is extremely noticeable that FuelCell energy and Ballard power are
almost non-existent on this graph. This isn’t a fair assessment because the Doosan Corp has many sub
businesses in its company to bring in its revenue. As you can see from the orange circle, Doosan has
many different types of products that it produces for a mid level cost of production. If this graph showed
the revenue of Doosan Fuel Cell Inc, then it would be the same size as FuelCell energy and Ballard
Power. The same goes with Cummins, in the graph you see that it has large revenue. The revenue comes
from the engine related sales in the company, which is the majority of the company. If revenues from the
fuel cell section of Cummins were shown here, then it too would be the size of FuelCell Energy and
61
Ballard Power. Cummins is still bringing in the highest net sales for their power generation sector,
followed by FuelCell Energy, Ballard Power, and lastly is the Doosan Corp for their fuel cell section.
Financial Analysis
I.
Financial Data & Analysis
The fuel cell industry wouldn’t exactly be described as booming at this point in time.
However, recent funding and investment have begun to get the industry off the ground feet and
potentially show a relatively large upside for the future. Since 2009, revenues and net income
have increased by around 213% and 51.4%, respectively as seen in Figure 1 & 2. One of the
companies biggest issues are it’s cost of goods sold. Figure 3 clearly shows that even though
COGS has been slightly decreasing, it still makes up nearly 100% of revenue, which makes it
difficult to be an appealing investment to most. Total assets and total liabilities have increased
by $46.15 million and $73.08 million, respectively, from 2012 to 2013 while total equity has
decreased by $26.92 million during that same time period (Figure 4). During this same time
period, sales have increased by over $67 million, but again the financials have been hindered by
factors such as COGS and operating costs. Total operating costs have exceeded the highest
company sales in 2012 and 2013, which is why it has been hard for FuelCell Energy Inc. to
become competitive in the energy market (Figure 3). Figure 5 shows an exact percentage of
total operating expenses to revenues, almost reaching 116%. This figure must decrease if the
company ever wants to post its first profit to date. The company is still relatively liquid as its
most current assets exceed its current liabilities by nearly 35% (Figure 6). The company has
been uplifted by recent funding and grants from various corporations and government entities.
In late July of 2014, NRG took a 6% stake in FuelCell, by purchasing $35 million in FCEL stock
(14.6 million shares) and also extending $40 million in credit in order to help FuelCell complete
62
new power plants in the US. [31] Also in late July, FuelCell Energy Solutions, a joint venture
between the Danbury, CT based company and Fraunhofer IKTS, the German research firm,
received 4.9 million Euros ($6.6 million) in research grants in order to improve the efficiency
and operating life of its fuel cell stacks. This grant was received by Germany’s Federal Ministry
for Economic Affairs and Energy. [32] FuelCell also completed the largest fuel cell system (59
megawatt power plant) in South Korea in February. FuelCell also won a contract to supply
POSCO, South Korea’s largest steelmaker and biggest shareholder of FCEL, with 5.6 megawatts
of equipment. [33] With this kind of new funding, there could quite possibly be a bright future
ahead for FuelCell Energy’s financials, as it still waits to post a profit to date.
II.
Financial Ratios
During the evaluation of a company, there are a number of important ratios to take into
account in order to see how healthy the firm is. In the case of FuelCell Energy, it is not a
profitable company, with its ROS, ROE, and ROA all being negative. However, some of these
ratios and percentiles have become less negative over the years. In recent years, the company’s
average collection period and both the inventory turnover and fixed asset turnover ratios have
increased. The company has recently taken on more debt and it’s debt to equity ratio is at it’s
highest level in three years. One of the most positive aspects of FuelCell is that it can easily pay
off it’s current liabilities and has also increased it’s net working capital by almost $30 million
from 2012. Figure 7 displays all of these ratios and percentages for a more concrete view.
63
Porter’s Five Forces Model
SUBSTITUTE PRODUCTS (10)

Fossil fuels, which currently dominate the
global energy industry
Other renewable energies (wind, solar,
etc.) are far more widespread
Fuel cells are still one of the most
expensive sources of energy and can easily
be undercut in terms of price


BUYERS (9)
SUPPLIERS (9)





Companies
require
specialized
suppliers, which
are few
No standard
model so
components vary
Contracts with
suppliers to
protect
intellectual
property
Few component
substitutes
RIVALRY AMONGST
COMPETITORS (5)



Moderate due to small size of
market and relative
inefficiency of competitors
Companies focused on
developing products rather
than retail sales
Once efficient product is
developed, competition will
be fierce
POTENTIAL NEW ENTRANTS (4)



Lack of monetary gain incentive should
dissuade new entrants
Government incentives may heighten
the interest in entering this market
Higher chance of established companies
branching out into this market than new
companies starting from scratch


Small number of
buyers lead to
high bargaining
power
Many other
alternative
energy sources
Other
companies can
rely on profits
from other
sectors to
decrease their
prices for fuel
cells
64
I.
Threat of Potential New Entrants – Relative Strength: 4
The threat of potential new entrants is affected primarily by two factors: the fact that not
a single mainly fuel cell technology developing company has yet to turn a profit, and thus
monetary gain is not an incentive for any new company to launch a fuel cell development
enterprise; and the fact that the government offers subsidies and other incentives for companies
to develop fuel cells.
While to notion that profitability (or rather lack thereof) is a turn-off for potential
investors is straightforward and needs little to no explanation, government involvement is
complex and vast, as it utilizes an array of means to incentivize companies to develop fuel cells
[63]. The Federal Investment Tax Credit provides tax credits that cover a large portion of total
project costs for qualifying companies. On a state level, certain states award grants that can range
up to $3 million (in New Jersey) and reimbursements that can range up to 60% of total project
costs [63] The advantages vary from state to state, but the incentives are generally quite
attractive to a company exploring the possibility of launching a fuel cell based venture.
Due to this information we can make a few assumptions. The first is that the threat of a
new entrant that consists of a start-up company, or a brand new company, that will focus solely
on developing fuel cells is extremely low, due to the high initial investment costs and foreseeably
negative return on investment. However, an already existing energy company, which deals in an
ulterior energy industry (such as renewables or fossil fuels) might explore the option of opening
a branch in this field, due to the subsidies available and the potential boom of the fuel cell
market, sometime in the future (which some optimistic investors and analysts are banking on).
Overall, the threat is low to moderate.
65
II.
Threat of Substitute Products – Relative Strength: 10
Fuel cells are designed to power and fuel a variety of machinery and vehicles; their
primary rivals in that sector are the fossil fuels, mainly oil and natural gas, which are
undoubtedly far more common and inexpensive. There is no possibility of fuel cell technology
overcoming these two energy sources, until there are no more fossil fuels left to utilize. That
being said, with the perspective of eventually running out of fossil fuels, the world has somewhat
shifted its focus and attention onto the developing field of renewable energy.
In the complex and highly competitive field of renewable energy, which ultimately is the
general category in which fuel cell technology companies operate, the amount of available
substitute products is enormous. Some extremely common examples of renewable energy
sources include wind, geothermal, solar, nuclear, etc. These options are not only more
widespread and easier to develop and utilize, they are also significantly cheaper, although certain
forecasters predict that “the cost of fuel cells will quickly come down to consumer-affordable
levels with mass production” [62]. However, for the time being, fuel cell technology simply
cannot compete with other renewable energy sources in terms of convenience and cost.
III.
Bargaining Power of Buyers – Relative Strength: 9
The bargaining power of buyers is currently high because of the relatively small number
of fuel cell end-users and the significant number of manufacturers competing for their business.
Notably, potential customers also have the option of choosing a less expensive renewable energy
source (such as wind, solar, etc.) to generate their power, so they have the power to demand
reduction in energy prices and excellent customer service. Companies that produce solely fuel
cells are at a particular disadvantage.
66
In the commercial power generation market, because of the deregulation of the energy
markets, a number of companies which produce wind, photovoltaics (and other renewables) as
well as fuel cells, hold some power over fuel cell specializing companies as they have the option
to enter into joint ventures, backward integrate to develop their own systems, and finance
development programs with profits generated from their other sectors, which contributes to
buyer bargaining power as they can opt for these companies’ reduced prices [64].
There are however certain movements that are beginning to transpire which evoke the
possibility of government actions which mandate the use of fuel cells in certain applications [64].
This would decrease the bargaining power of buyers as demand increased. Strategic alliances and
partnership between fuel cell manufacturers could also be developed in order to maximize
production volumes and mitigate the risks associated with expensive product research and
development [64].
IV.
Bargaining Power of Suppliers – Relative Strength: 9
The bargaining power of suppliers is currently relatively high. Given the current low
demand for fuel cells on a commercial scale, and the fact that the technology is highly
specialized, and thus requires components from highly specialized suppliers, these suppliers hold
some power over manufacturers. Over time, and due to the uncertainty of eventual fuel cell
commercialization, low production volumes have resulted in high component costs and low
levels of supplier commitment to the industry, wary of becoming too dependent on the business
of companies that may never emerge as profitable [64].
In addition, there are relatively few companies that manufacture the components of fuel
cells, which adds to supplier bargaining power. There is no “standard” fuel cell design, which
67
means that each manufacturer has its own design, which calls for its own specialized components
this entails contracts and exclusive agreements between suppliers and manufacturers (seeking to
protect their intellectual property in the form of unique designs). There are also very few
substitutes for the components of a fuel cell, which gives suppliers even more leverage to charge
the prices they desire [64].
V.
Intensity of Competitive Rivalry – Relative Strength: 5
The fuel cell industry is made up of a significant number of companies and research
institutes that are all vying for a share in what is currently a small market. As previously
mentioned, no company has of yet turned a profit, and all are investing quite heavily in research
& development to create and develop a commercially viable and performant product. This leads
to a great race between the companies, as the longer it takes to develop a commercial product,
the more difficult it will be for the smaller companies to survive, and the first company to attain
this objective would gain an enormous portion of the market share (including the fact that there
are confidentiality and intellectual property protection agreements in place with defend against
the release of fuel cell designs) [64].
For the moment, the competition among companies is moderate. Each company is
primarily focused on developing its own, viable product, which will eventually turn into a highly
competitive product. For the time being, the market is simply too small, and the buyer and
supplier bargaining power too vast, in order for the competitive rivalry to have any major role
between fuel cell companies. As alluded to above, however, as soon as a company manages to
surpass the rest and become profitable with an industry-changing product, the competition
between competitors will become fierce.
68
Key Success Factors in the Market
In order to tap into, as well as be successful in the fuel cell industry, there are various different
factors that come into play. One of the most notable factors, however, is capital or access to
capital. Fuel cells are expensive to make, and the industry itself is not yet profitable. Therefore,
a company must be both well established and well diversified so it is capable or surviving while
also maintaining its fuel cell branch, or a company must receive outside investments or subsidies
in order to keep the unprofitable company afloat.
Another key success factor is market
credibility. With fuel cells starting to truly become a viable source for clean energy in the future,
companies must act now in order to gain relationships with potential clients in order to ensure
sales volume, growth, and also most notably more investors. By doing this, certain companies
will allow themselves to become dominant forces in he fuel cell industry. Lastly, a lot of welltrained and thorough research and development teams are needed in order to make the fuel cells
longer lasting as well as more efficient. If the fuel cell industry ever wants to be profitable,
money must be used for R&D so that one day the cost of production will be cheaper, and also so
the lifespan and efficiency of fuel cells would be much longer, making fuel cells a feasible
option to use as a means of clean power generation.
Industry Attractiveness
Current: The Fuel Cell industry is currently unattractive but it does have some attractive parts as well.
The reason for this statement is that, although it may be too expensive and unrealistic to strongly use fuel
cells right now, the idea of a fuel cell as a renewable source in the future is attractive. The world is
beginning to look more and more into a renewable way of life. This means that all options are worth
taking a look at, which includes fuel cells. The Fuel Cell industry started becoming more prevalent
roughly fifty years ago, and there hasn’t been a great amount of progress to commercialize and switch to
69
use fuel cells more often since it began. However, it is noticeable that some of the larger companies in
the world, that deal with engines, construction, or transportations, are beginning to subsidize sectors of
their companies for fuel cell research and production.
This sort of behavior from more powerful
companies show that the fuel cell field is somewhat attractive.
Recently FuelCell Energy Inc shares increased greatly because of a financial package they
received for a few million dollars. This package shows that money is being put into the research and
development of fuel cells, and that the industry is continuing to push forward to be successful.
Unfortunately some see the increase in shares seems like an opportunity to sell, one article stated "We
rate FUELCELL ENERGY INC (FCEL) a SELL. This is driven by multiple weaknesses, which we
believe should have a greater impact than any strengths, and could make it more difficult for investors to
achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen
in multiple areas, such as its deteriorating net income, poor profit margins and weak operating cash flow."
[52] This kind of attitude demonstrates the unattractiveness that some feel towards the fuel cell industry.
Near Term 1-3 Years: The main things to examine when it comes to the next one to three years for the
fuel cell industry is how much technology increased, the funding that is achieved, and what companies
subsidize more sectors. Realistically, it does not seem as if much will change in the next one to three
years. The fuel cell industry is a slow moving and improving industry, which is proved by the fact that
FuelCell Energy has been around for more than fifty years and has no profit to show for it. Potentially a
new strategy could be created for the marketing and commercialization of fuel cells, but that is unlikely in
as short as three years. With the recent funding of FuelCell Energy, they could use that money research
and find out more information about fuel cells and maybe develop a new technology that will bring them
profit. In the end, one to three years will result in some new technology advancements, and some new
competitors, but it will not have a large impact on the fuel cell industry.
70
Longer Term 5+ Years: Longer than five years is when the attractiveness of fuel cells will begin to
blossom.
The industry needs time to commercialize, and figure out a way to bring costs down.
Technology will increase and eventually it will be a commonly used power source. The unattractiveness
of fuel cells will also dissolve as fossil fuels begin to diminish. With a demand increasing more and more
for renewable options, there is no other way for the fuel cell industry to go than up. One of example that
will probably come up again in the future is cars running on fuel cells “Toyota, the world's biggest
carmaker, unveiled its first mass-market fuel-cell car on Wednesday, which is due to go on sale in Japan
by end-March next year priced at around 7 million yen ($68,600). A U.S. and European launch will
follow in the summer. Prime Minister Shinzo Abe's growth strategy, announced the day before, also
included a call for subsidies and tax breaks for buyers of fuel-cell vehicles, relaxed curbs on hydrogen
fuel stations and other steps under a road map to promote hydrogen energy.” [53] This kind of
information will need a few more years to become more of a mainstream idea, that just shows that in 5+
years that this could potentially be a more commonly seen option. In a few years the fuel cell industry
will have a breakthrough, creating more competition, an actual profit, and an increasing impact on energy
use.
71
Five Key Financial Ratios
Return on Sales – Because FuelCell Energy does not make a lot of large quantity sales, the year
over year increase of net income shows an greater possibility of the company becoming
profitable in the near future.
Return on Assets – Due to the expensive nature of building fuel cells, the higher return on assets
is a very positive indication for FuelCell Energy. They have been able to generate more revenue
per asset, while also starting new projects that will hopefully increase the return on assets even
more in the near future. Its focus on R&D should also play a large role in generating a greater
return on assets by continuing to find ways to produce cheaper, more efficient fuel cells.
Asset Turnover – An increase in net sales shows that the demand for fuel cells and power plants
has been increasing by businesses. This is a key factor because the trend of increasing demand is
a huge factor in the success of FuelCell’s future.
Current Ratio – FuelCell is currently able to pay off all of its current liabilities if need be. This
is good news considering the company is not leveraged too much in debt.
Net Working Capital – NWC has been growing substantially over the past few years which can
be viewed as very good news as long as FuelCell is able to put that money towards projects and
generating revenues.
72
Key Competitor Financials
Ballard
Revenues YoY
Source: Hoover’s
Net Income YoY
Source: Hoover’s
73
Horizontal Analysis: Income Statement
2013
2012
Variance
Sales
$61.25
$43.69
$17.56
COGS
$44.49
$36.32
$8.17
Gross Margin
$16.76
$7.37
$9.39
SG&A Expense
$19.07
$19.21
($0.14)
$5.73
$6.18
($0.45)
Other Expenses
$11.91
$23.66
($11.75)
Total Operating Expenses
$81.20
$85.37
($4.17)
($19.43)
($31.11)
$11.68
Nonoperating Income
($0.32)
($10.04)
$9.72
Nonoperating Expenses
($1.49)
($1.69)
$0.20
($19.96)
($42.14)
$22.18
Depreciation & Amortization
Operating Income
Net Income
Numbers obtained from Hoover’s
74
Horizontal Analysis: Balance Sheet
2013
2012
Variance
Cash
$30.30
$9.77
$20.53
Total Receivables
$15.47
$16.37
($0.90)
Total Inventory
$14.09
$11.28
$2.81
$0.09
$23.88
($23.80)
Current Assets
$60.71
$61.30
($0.59)
Fixed Assets
$19.95
$24.32
($4.37)
Noncurrent Assets
$39.56
$41.93
($2.37)
$120.21
$127.55
($7.34)
Accounts Payable
$5.70
$5.26
$0.44
Short Term Debt
$1.40
$13.33
($11.93)
Other Current Liabilities
$19.33
$21.51
($2.18)
Total Current Liabilities
$26.43
$40.09
($13.66)
Long Term Debt
$10.77
$13.01
($2.24)
Other Liabilities
$11.37
$12.03
($0.66)
Total Liabilities
$48.57
$65.14
($16.57)
Total Equity
$71.65
$62.41
$9.24
$120.22
$127.55
($7.33)
Other
Total Assets
Total Liabilities & Equity
Numbers obtained from Hoover’s
75
Vertical Analysis: Income Statement
$ Totals (in millions) 2013
Percent
Sales
$61.25
100.00%
COGS
$44.49
72.64%
Gross Margin
$16.76
27.36%
SG&A Expense
$19.07
31.13%
$5.73
9.36%
Other Expenses
$11.91
19.44%
Total Operating Expenses
$81.20
132.57%
($19.43)
-31.72%
Nonoperating Income
($0.32)
-0.52%
Nonoperating Expenses
($1.49)
-2.43%
($19.96)
-32.59%
Depreciation & Amortization
Operating Income
Net Income
Numbers obtained from Hoover’s
76
Vertical Analysis: Balance Sheet
$ Totals (in millions) 2013
Percent
Cash
$30.30
25.21%
Total Receivables
$15.47
12.87%
Total Inventory
$14.09
11.72%
$0.09
0.07%
Current Assets
$60.71
50.50%
Fixed Assets
$19.95
16.60%
Noncurrent Assets
$39.56
32.91%
$120.21
100.00%
Accounts Payable
$5.70
4.74%
Short Term Debt
$1.40
1.16%
Other Current Liabilities
$19.33
16.08%
Total Current Liabilities
$26.43
21.98%
Long Term Debt
$10.77
8.96%
Other Liabilities
$11.37
9.46%
Total Liabilities
$48.57
40.40%
Total Equity
$71.65
59.60%
$120.22
100.00%
Other
Total Assets
Total Liabilities & Equity
Numbers obtained by Hoover’s
77
Cummins
Revenues YoY
Source: Hoover’s
Net Income YoY
Source: Hoover’s
78
Horizontal Analysis: Income Statement
2013
2012 Variance
Sales
$17,301.00
$17,334.00
($33.00)
COGS
$12,918.00
$12,826.00
$92.00
Gross Margin
$4,383.00
$4,508.00
($125.00)
SG&A Expense
$1,920.00
$1,900.00
$20.00
$407.00
$361.00
$46.00
Other Expenses
$1,904.00
$1,962.00
($58.00)
Total Operating Expenses
$4,231.00
$4,223.00
$8.00
Operating Income
$2,101.00
$2,254.00
($153.00)
$32.00
$24.00
$8.00
($14.00)
($7.00)
($7.00)
$1,483.00
$1,645.00
($162.00)
Depretiation & Amortization
Nonoperating Income
Nonoperating Expenses
Net Income
Numbers obtained from Hoover’s
79
Horizontal analysis: Balance Sheet
2013
2012
Variance
Cash
$2,699.00
$1,369.00
$1,330.00
Total Receivables
$2,362.00
$2,475.00
($113.00)
Total Inventory
$2,381.00
$2,221.00
$160.00
Other
$1,197.00
$1,102.00
$95.00
Current Assets
$8,639.00
$7,167.00
$1,472.00
Fixed Assets
$3,156.00
$2,724.00
$432.00
Noncurrent Assets
$2,933.00
$2,657.00
$276.00
$14,728.00
$12,548.00
$2,180.00
$1,557.00
$1,339.00
$218.00
$68.00
$77.00
($9.00)
Other Current Liabilities
$1,743.00
$1,720.00
$23.00
Total Current Liabilities
$3,368.00
$3,136.00
$232.00
Long Term Debt
$1,672.00
$698.00
$974.00
Other Liabilities
$2,178.00
$2,111.00
$67.00
Total Liabilities
$7,218.00
$5,945.00
$1,273.00
Total Equity
$7,510.00
$6,603.00
$907.00
$14,728.00
$12,548.00
$2,180.00
Total Assets
Accounts Payable
Short Term Debt
Total Liabilities & Equity
Numbers Obtained from Hoover’s
80
Vertical Analysis: Income Statement
$ Totals (in millions) 2013
Percent
Sales
$17,301.00
100.00%
COGS
$12,918.00
74.67%
Gross Margin
$4,383.00
25.33%
SG&A Expense
$1,920.00
11.10%
$407.00
2.35%
Other Expenses
$1,904.00
11.01%
Total Operating Expenses
$4,231.00
24.46%
Operating Income
$2,101.00
12.14%
$32.00
0.18%
($14.00)
-0.08%
$1,483.00
8.57%
Depretiation & Amortization
Nonoperating Income
Nonoperating Expenses
Net Income
Numbers obtained from Hoover’s
81
Vertical Analysis: Balance Sheet
$ Totals (in millions) 2013
Percent
Cash
$2,699.00
18.33%
Total Receivables
$2,362.00
16.04%
Total Inventory
$2,381.00
16.17%
Other
$1,197.00
8.13%
Current Assets
$8,639.00
58.66%
Fixed Assets
$3,156.00
21.43%
Noncurrent Assets
$2,933.00
19.91%
$14,728.00
100.00%
$1,557.00
10.57%
$68.00
0.46%
Other Current Liabilities
$1,743.00
11.83%
Total Current Liabilities
$3,368.00
22.87%
Long Term Debt
$1,672.00
11.35%
Other Liabilities
$2,178.00
14.79%
Total Liabilities
$7,218.00
49.01%
Total Equity
$7,510.00
50.99%
$14,728.00
100.00%
Total Assets
Accounts Payable
Short Term Debt
Total Liabilities & Equity
Numbers obtained from Hoover’s
82
Doosan
Horizontal Analysis: Income Statement
2013
2012 Variance
Sales
$20,246.93
$22,476.60
($2,229.67)
COGS
$16,852.02
$18,695.64
($1,843.61)
Gross Margin
$3,394.91
$3,780.96
($386.06)
SG&A Expense
$2,328.98
$3,043.33
($714.35)
Depretiation & Amortization
NA
NA
NA
Other Expenses
NA
NA
NA
Total Operating Expenses
NA
NA
NA
$1,065.93
$737.63
$328.30
$166.36
$205.07
($38.71)
($282.43)
($399.77)
$117.34
$120.14
$185.99
($65.84)
Operating Income
Nonoperating Income
Nonoperating Expenses
Net Income
Numbers obtained from Doosan.com
83
Horizontal Analysis: Balance Sheet
2013
2012
Variance
Cash
$1,161.52
$2,098.24
($936.72)
Total Receivables
$6,045.18
$6,200.34
($155.15)
Total Inventory
$2,392.06
$2,626.92
($234.86)
Other
$1,762.46
$2,010.46
($248.00)
$11,361.23
$12,935.96
($1,574.73)
$7,992.96
$6,933.97
$1,058.98
Noncurrent Assets
$17,404.33
$16,142.36
$1,261.97
Total Assets
$28,765.56
$29,078.32
($312.76)
Accounts Payable
$3,344.75
$5,301.20
($1,956.44)
Short Term Debt
$3,726.09
$4,552.33
($826.25)
Other Current Liabilities
$3,834.46
$2,581.29
$1,253.17
Total Current Liabilities
$10,905.30
$12,434.82
($1,529.52)
Long Term Debt
$4,248.97
$4,091.87
$157.10
Other Liabilities
$5,250.97
$6,018.89
($767.92)
Total Liabilities
$20,405.24
$22,545.58
($2,140.34)
$8,360.32
$6,532.73
$1,827.58
$28,765.56
$29,078.32
($312.76)
Current Assets
Fixed Assets
Total Equity
Total Liabilities & Equity
Numbers obtained from Doosan.com
84
Vertical Analysis: Income Statement
$ Totals (in millions) 2013
Percent
Sales
$20,246.93
100.00%
COGS
$16,852.02
83.23%
Gross Margin
$3,394.91
16.77%
SG&A Expense
$2,328.98
11.50%
Depretiation & Amortization
NA
Other Expenses
NA
Total Operating Expenses
NA
Operating Income
Nonoperating Income
Nonoperating Expenses
Net Income
Numbers obtained from Doosan.com
$1,065.93
5.26%
$166.36
0.82%
($282.43)
-1.39%
$120.14
0.59%
85
Vertical Analysis: Balance Sheet
$ Totals (in millions) 2013
Percent
Cash
$1,161.52
4.04%
Total Receivables
$6,045.18
21.02%
Total Inventory
$2,392.06
8.32%
Other
$1,762.46
6.13%
$11,361.23
39.50%
$7,992.96
27.79%
Noncurrent Assets
$17,404.33
60.50%
Total Assets
$28,765.56
100.00%
Accounts Payable
$3,344.75
11.63%
Short Term Debt
$3,726.09
12.95%
Other Current Liabilities
$3,834.46
13.33%
Total Current Liabilities
$10,905.30
37.91%
Long Term Debt
$4,248.97
14.77%
Other Liabilities
$5,250.97
18.25%
Total Liabilities
$20,405.24
70.94%
$8,360.32
29.06%
$28,765.56
100.00%
Current Assets
Fixed Assets
Total Equity
Total Liabilities & Equity
Numbers obtained from Doosan.com
86
Appendix
Research Data
Figure 1
Source: Hoover’s
Figure 2
Source: Hoover’s
87
Figure 3. Horizontal Analysis: Income Statement
Sales
COGS
Gross Margin
2013
187.66
180.54
7.12
2012 Variance
120.6
67.06
120.16
60.38
0.44
6.68
Selling/General/Admin. Exp. Total
Depretiation & Amortization
Other Expenses
Total Operating Expenses
21.22
4.10
11.62
217.47
18.22
5.19
17.95
156.33
3.00
-1.09
-6.33
61.14
Operating Income
Nonoperating Income
Nonoperating Expenses
-29.81
-1.16
-3.97
-32.13
-1.40
-2.30
2.32
0.24
-1.67
-34.36
-35.5
1.14
Net Income
Numbers obtained from Hoover’s
Figure 4. Horizontal Analysis: Balance Sheet
Cash
Total Receivables
Total Inventory
Other
Current Assets
2013
67.70
49.59
56.19
15.86
189.33
2012 Variance
57.51
10.19
35.98
13.61
47.70
8.49
4.73
11.13
145.93
43.40
Fixed Assets
Noncurrent Assets
Total Assets
24.23
24.08
237.64
23.26
22.30
191.49
0.97
1.78
46.15
Accounts Payable
Short Term Debt
Other Current Liabilities
Total Current Liabilities
24.54
6.93
74.80
106.27
12.25
5.16
67.48
84.90
12.29
1.77
7.32
21.37
Long Term Debt
Other Liabilities
Total Liabilities
52.68
91.11
250.06
3.98
88.10
176.98
48.70
3.01
73.08
-12.41
237.65
14.51
191.49
-26.92
46.16
Total Equity
Total Liabilities & Equity
Numbers obtained from Hoover’s
88
Figure 5. Vertical Analysis: Income Statement
Sales
COGS
Gross Margin
$ Totals (in millions)
2013
Percent
187.66
100.00%
180.54
96.21%
7.12
3.79%
Selling/General/Admin.
Exp.
Total
Depretiation & Amortization
Other Expenses
Total Operating Expenses
21.22
4.10
11.62
217.47
11.31%
2.18%
6.19%
115.89%
Operating Income
Nonoperating Income
Nonoperating Expenses
-29.81
-1.16
-3.97
-15.89%
-0.62%
-2.12%
-34.36
-18.31%
Net Income
Numbers obtained from Hoover’s
Figure 6. Vertical Analysis: Balance Sheet
Cash
Total Receivables
Total Inventory
Other
Current Assets
Numbers obtained from Hoover’s
$ Totals (in millions) 2013
Percent
67.70
49.59
56.19
15.86
189.33
28.49%
20.87%
23.65%
6.67%
79.67%
Fixed Assets
Noncurrent Assets
Total Assets
24.23
24.08
237.64
10.20%
10.13%
100.00%
Accounts Payable
Short Term Debt
Other Current Liabilities
Total Current Liabilities
24.54
6.93
74.80
106.27
10.33%
2.92%
31.48%
44.72%
Long Term Debt
Other Liabilities
Total Liabilities
52.68
91.11
250.06
22.17%
38.34%
105.23%
Total Equity
Total Liabilities & Equity
-12.41
237.65
-5.22%
100.00%
89
Figure 7. Financial Ratios
Profitability Ratios
2013
2012
2011
-18.31%
-29.43%
-37.25%
2.77
-2.45
3.40
Return on Sales
Net Income
Net Sales
Return on Equity
Net Income
Owner's Equity
Return on Assets
Net Income
Assets
-14.46%
-18.54%
-24.89%
Asset Turnover
Net Sales
Assets
78.98%
62.98%
66.75%
Assets to Equity
Assets
Owner's Equity
-19.67
13.20
-13.65
Activity Ratios
Avg. Collection Period
Inventory Turnover Ratio
Fixed
Ratio
Asset
2013
2012
2011
Accounts Receivable
Avg. Sales per Day
95.53
108.90
65.36
Cost of Goods Sold
Avg. Inventory
3.61
2.75
3.34
Net Sales
Net Fixed Assets
7.74
5.18
5.12
2013
2012
2011
Turnover
Leverage Ratios
Debt ratio
Total Liabilities
Total Assets
1.05
0.92
1.07
Debt to Equity ratio
Total Liabilities
Owner's Equity
-15.32
8.07
-10.20
90
Earnings before interest and taxes
-7.80
-14.55
-16.83
93.90
99.40
111.08
2013
2012
2011
1.78
1.76
1.16
$83.07
$55.73
$18.78
1.29
1.20
0.84
Times Interest Earned
Interest Expense
No. of days payable ratio
Accounts Payable
Avg. purchases per day (or
COGS)
Liquidity Ratios
Current Ratio
Net Working Capital ($
mil.)
Quick Ratio
Current Assets
Current Liabilities
Current Assets - Current Liabilities
Current Assets - Average
Inventory
Current Liabilities
Source: Prof. Bunnell’s Excel template; numbers obtained from Hoover’s
91
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