Ballard Power Systems Inc. (NASDAQ: BLDP) announced on the first trading day of 2015 that it has given termination notice on two licensing agreements in the China market. This was the result of material breaches of these agreements by Azure Hydrogen. Ultimately, the breaches by Azure, coupled with the contract terminations, will negatively impact the company’s 2014 financial performance.
Source: Thinkstock
In the fourth quarter of 2014, Ballard previously expected to collect roughly $4.5 million from Azure and at the same time expected to recognize additional revenue of more than $3 million under the Azure contracts.
Unfortunately, the company will not record any revenue under these contracts in the fourth quarter. It expects to record an impairment of $4.5 million for the outstanding receivables owed by Azure. Ballard also mentioned in the press release that it will not achieve its 2014 revenue and adjusted EBITDA guidance.
Ballard President and CEO Randy MacEwen stated:
While we are clearly disappointed with this outcome with Azure and the negative impact on our 2014 financial results, we remain confident in the long-term attractiveness of the Chinese market for our fuel cell solutions.
According to the press release, the licenses from Ballard were described as:
The first license agreement, originally announced on September 26, 2013, is related to the assembly of Ballard’s FCvelocity-HD7 Bus power modules in China for the Chinese market. The second license agreement, announced on June 19, 2014, is related to the assembly of Ballard’s ElectraGen Telecom Backup Power systems in China for the Chinese market.
Shares of Ballard were down 7% at $1.84 in the first hour of trading. The stock has a consensus analyst price target of $3.70 and a 52-week range of $1.55 to $8.38. The market cap is about $238 million.
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