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FuelCell Energy's (FCEL) Unit Signs 7.4MW Long-Term PPA

Zacks Equity Research

FuelCell Energy, Inc.’s FCEL unit Yaphank Fuel Cell Park, LLC recently announced that it has signed the first of three long-term power purchase agreements (PPA) under the Fuel Cell Resources Feed-In Tariff IV (FIT IV) program. The project is administered by PSEG Long Island.

Details of the Deal

The company inked a deal for a 7.4-megawatt (MW) fuel cell project located in Yaphank, NY, which is one of the three projects totaling 39.8 MW that is awarded to FuelCell Energy as part of the FIT IV competitive bid process.

The company has finished permitting, engineering and site design required to make progress in this innovative project construction in Long Island. Notably, power from the Yaphank project will be sold under a 20-year power purchase agreement. Moreover, the company will own, operate and maintain the fuel cell power plants, which are being installed.

Apart from the above project, the company has two other selected projects totaling 32.4 MW, which have made substantial progress and are expected to execute PPAs in the near term. The company expects to complete the development of these landmark projects and anticipates to commence construction in 2019.

Rising Usage of Fuel Cell Technology

Fuel cell generates clean electricity with high-power density, extended range and market-leading uptime based on rapid refueling. Of late, this technology is gaining sheer prominence and witnessing increased adoption on transit buses and commercial trucks. It is a viable option for vehicles, providing reliability and economic benefits.

To reduce carbon emissions from diesel-powered vehicles, the demand for fuel cell electric vehicles (FCEVs) is increasing. Courtesy of inherent zero emissions, FCEVs are increasingly favored over diesel-powered vehicles. Naturally, rising popularity of this technology has encouraged fuel cell producers like Plug Power PLUG and Ballard Power Systems BLDP to make acquisitions and sign contracts to reap the benefits of this space’s growth prospects.

Renewable Market Outlook

According to the U.S. Energy Information Administration, total renewables used in the electric power sector were 15% in 2016, which rose to 17% in 2017. A comprehensive study by the Department of Energy’s National Renewable Energy Laboratory (NREL) shows that renewables will contribute more than 80% of total electricity generation in the United States by 2050 compared with the present level of 30%. We may expect fuel cell to contribute a substantial portion to this renewable electricity generation of the United States, over time, which in turn should benefit Fuel Cell Energy.

Price Movement

Shares of FuelCell Energy have lost 72.3% in the past year, underperforming its industry’s decline of 0.7%.

Zacks Rank & Another Key Pick

FuelCell Energy currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another top-ranked stock from the same industry is Ameresco, Inc. AMRC, which also carries a Zacks Rank of 2.

Ameresco pulled off average four-quarter positive surprise of 164.96%. Its bottom line is expected to grow 17.5% over three-five year period.

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