FBR Positive on FuelCell Energy (FCEL) Following Talks with CEO Bottone; Affirms at 'Outperform'
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FBR & Co. affirms FuelCell Energy (Nasdaq: FCEL) with an Outperform rating and $9 price target following recent discussions with management.
Analyst Carter Driscoll said,
We recently caught up with CEO Chip Bottone to discuss the company's near-term and longer-term prospects. While we expect the timing of the pending awards from the multiple RFPs (FCEL bid into ~125 MW in 1H16) and potential ITC extension will affect the stock over the next few months, we believe the carbon capture opportunity is somewhat overlooked. We think FCEL is close to announcing its first site deployment in conjunction with the DOE, which we expect in early C4Q16, and believe it could be a catalyst for the stock. FCEL is also working with Exxon Mobil to further refine the use of its technology for carbon capture at gas-fired plants, and we believe that Exxon Mobil will monitor the first site deployment to better gauge its own deployment time line. While the technology still has to be proven out in the field, the potential market opportunity appears to be very large. In contrast to existing carbon capture technologies, fuel cells are modular, produce net energy, and are less expensive.
First carbon capture site announcement expected in FY16 could be a catalyst. In 3Q15, the DOE awarded FCEL a multi-phase cost-sharing award worth $23.7 million to install and operate a 2 MW fuel cell system at a U.S.-based coal plant. We believe FCEL's first carbon capture site could be announced in C4Q16. If successful, the next phase of the project will likely involve up to another 11 installations, potentially worth ~$120 million in additional revenue.
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