Press Release

Fuel cell fervour goes flat

In tough markets, the riskiest sectors get trampled the hardest as investors run for safer ground, which has been bad news for many of Aim's fuel cell companies. However, it now appears that even decent newsflow is not enough to tempt investors back.

The irony is that the investment case for the sector is stronger than ever in terms of the continued high oil price and progress some companies are making towards commercialisation. Analyst Andrew Shepherd-Barron of KBC Peel Hunt believes that some credit is being given to companies that are making tangible progress, although he points out that companies are not helping themselves by pushing time lines back: 'While the market is looking for commercial traction, it is actually giving benefit where it is due.'

However, some analysts are in a less forgiving mood. For instance, Citigroup's Nick Williamson slapped a sell rating on ITM Power following its interim results, criticising a 'scatter-gun approach', and sending its shares down 20 per cent to a two-and-a-half-year low.

And even when the newsflow is positive, it is falling on deaf ears. For instance, last month Ceres Power announced a strengthening of its relationship with Centrica, including a £20m investment in the company at 300p a share and a commitment to purchase 37,500 fuel cell-powered combined heat and power units over the next four years. But this hasn't helped the shares, which have fallen to 258p, down 18 per cent in three months.

It's a similar story at rival Ceramic Fuel Cells, which in the past week has announced co-operation agreements with two fuel cell component makers in Germany on top of last month's collaboration deal to access the Japanese market. Shares in the company are down 40 per cent in the past quarter. Progress at other fuel cell technology businesses has also been rewarded with market falls. Shares in Acta, which recently sold its first disposable fuel, have halved in the past 12 months.

The most resilient fuel cell stocks have been Protonex and Idatech, not surprising since they are closest to commercial production. Idatech sold 22 back-up power fuel cell units in 2007 and has since announced further commercial orders. Protonex expects a commercial product later this year.