A global leader in fuel cell technology Ballard Power Systems, Inc. (BLDP) has decided to terminate its agreement with China’s Azure Hydrogen (Azure). Ballard has already sent a termination notice for its two contracts with Azure. The company had to take this drastic step due to material breaches of these agreements by Azure.
The termination of the contracts will not only impact the financial performance of the company for 2014 but will also unsettle its plans to expand its operations in China. The market also reacted negatively to the news with the shares dropping 7.58% to close at $1.83 on Jan 2.
The first contract was entered into in Sep 2013 under which Ballard Power was supposed to support Azure’s zero emission fuel cell bus programs for the Chinese market. The second contract was inked in Jun 2014, with the intention of Ballard imparting its expertise in relation to an assembly license for Telecom Backup Power systems for the China market.
The sudden termination of these contracts will have a negative impact on the financial performance of Ballard Power in 2014. Ballard had expected to collect $4.5 million from Azure in the fourth quarter but under the changed circumstances the company now expects to record an impairment of $4.5 million in the final quarter. The company expects 2014 revenues and adjusted EBITDA to be lower than the prior expectation.
Ballard Power Systems currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in this space include Rogers Corporation (ROG), AU Optronics Corp. (AUO) and KEMET Corp. (KEM). Rogers Corporation sports a Zacks Rank #1 (Strong Buy), while AU Optronics Corp and KEMET Corp carry a Zacks Rank #2 (Buy).
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