In a recent news release, Ballard Power Systems (NASDAQ: BLDP) announced its entry into definitive agreements with China’s Guangdong Nation Synergy Hydrogen Power Technology Co. Ltd. (“Synergy”) for the establishment of an FCvelocity®-9SSL fuel cell stack production operation in the City of Yunfu, which is located in Guangdong Province. The resulting fuel cell stacks will be packaged directly into locally-assembled fuel cell engines and integrated into zero-emission buses and commercial vehicles operating throughout China. Subject to closing, this transaction is expected to offer a minimum value of $168 million to Ballard over a period of five years.
Ballard will receive $18.4 million in Technology Solutions revenue in exchange for technology transfer services; production equipment specification and procurement services; and training and commissioning support, as needed to facilitate the establishment of a production line in Yunfu for the manufacture and assembly of the fuel cell stacks. Upon closing of the transaction in late-2016, a joint venture will be created to undertake the actual stack manufacturing operations, with Ballard owning 10 percent (in exchange for a contribution of roughly $3 million) and becoming the exclusive supplier of membrane electrode assemblies (MEAs) for each fuel cell stack manufactured by the joint venture. Minimum MEA volume commitments stemming from this agreement total in excess of $150 million over the initial five-year term from 2017 to 2021.
“There is unprecedented market interest for fuel cell buses and commercial vehicles in China – the largest market in the world,” Randy MacEwen, president and chief executive officer of Ballard, stated in the news release. “Our China strategy and business model is simple – we engage strong Chinese partners to localize fuel cell production in China to reduce costs, drive scale, mitigate market risk, avoid capital investment, and protect our core intellectual property.”
The Synergy agreement is expected to offer a number of high-value benefits to Ballard moving forward. By maintaining production of all MEAs at its existing headquarter facilities, the company will be able to effectively protect its core intellectual property while still capitalizing on attractive near-term and long-term deal economics and cash flows.
“This deal is transformational in terms of positioning fuel cells as a compelling solution for clean energy buses and commercial vehicles in China’s high-population cities where air quality is a top priority,” Frank Ma, chairman of Synergy, added in the news release. “By localizing stack and module production, we will drive costs down to enable sustainable market demand for fuel cell buses and commercial vehicles based on economics, zero emissions and passenger experience.”
When approved, the joint venture stemming from this agreement will maintain an exclusive right to manufacture and sell FCvelocity®-9SSL stacks throughout China, subject to certain performance criteria including compliance with a code of ethics, compliance with Ballard’s quality standards, compliance with Ballard’s branding policies and achievement of minimum annual MEA volumes. The transaction is currently expected to close before the end of 2016, following the completion of closing conditions and the reception of all necessary regulatory approvals.
For more information, visit www.ballard.com
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