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2016 IPO Prospects: Bloom Energy Likely to Stay Private

Posted on Thursday, Jun 16th 2016

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According to the Department of Energy, the fuel-cell industry grew to $2.2 billion in 2014, up from $1.3 billion in 2013. The $2 trillion a year electric power industry is poised to grow 80% by 2040 while fuel cell market estimates range from $5.2 billion in 2019 to $40 billion in 2022. Bloom Energy is estimated to account for 40% of the large stationary fuel cell market.

Bloom Energy’s Offerings

Sunnyvale, California-based Bloom Energy makes large stationary power devices that use fuel cells to convert natural gas or methane into electricity. It was founded in 2001 by K.R. Sridhar who was a researcher at NASA working on a project to sustain life on Mars. When that project was canceled, he founded a company to commercialize the fuel cell developed for that project.

These power units produce power on premise, thereby reducing reliance on grid power and saving on utility bills and power back up costs. Today its power devices are used in office buildings, retailers, data centers, and other customer locations. Its customers include premier paying customers like Apple, Google, Adobe, AT&T, Walmart, eBay, IKEA, Coca-Cola, and The Home Depot, to name a few. It recently bagged two deals to power Morgan Stanley’s headquarters in Times Square in New York City and AEG’s Staples Center sports arena in Los Angeles. Bloom Energy claims to have installed more than 200 megawatts of its fuel cell units in the US.

Bloom Energy’s Financials

Bloom Energy does not disclose its financials but according to a report from 2013, Bloom Energy had pro forma revenue of $42 million in Q1 2013, down from $101 million in Q3 2012. Q3 2012 pro forma loss was nearly $32 million. It also reported a 26% quarter-over-quarter revenue increase, and had booked 87 new commercial customers in that quarter.

However, profitability is a big concern. Manufacturing, installing, and maintaining costs can be high. Cost for generating 1 kilowatt with a Bloom Box is estimated to be $7000 to $8000 while other public companies are showing that costs are approaching $3000 per kilowatt. Its fate is also subject to the volatility in the price of natural gas. So far, Bloom Energy has relied on state subsidies for distributed energy as well as venture funding.

In 2002, Sridhar convinced John Doerr of Kleiner Perkins Caufield & Byers to invest in the company. Its board members include Steve Case, co-founder of America Online, and Colin Powell, former US Secretary of State. Such high-profile support helped it raise $1.2 billion in all from investors including Advanced Equities Financial, AdvancedStage Capital, Credit Suisse Group, DAG Ventures, E.ON Venture Partners, Goldman Sachs Ventures, Kleiner Perkins Caufield & Byers, Mobius Venture Capital, New Enterprise Associates, and New Zealand Superannuation Fund.

Its last round of funding in 2011 for $150 million valued it at $2.9 billion. Publicly trading competitor FuelCell Energy Inc, which recently reported a 27% increase in losses and a 24% decline in revenues saw its market cap drop to $156 million.

In December 2014, it raised $130 million in a convertible note offering. Michael Dempsey, an analyst at venture capital research firm CB Insights says that the convertible note offering is an indication that another equity round could only have been executed at a dramatically reduced valuation.

Industry analysts are ever hopeful of an IPO for Bloom Energy as its revenue is substantial enough. However, it would trigger a reduced valuation in the current market, which would not go down well with investors. Profitability remains a concern for the company and the industry.

Photo credit: Bloom Energy/Flickr.com.

 

This segment is a part in the series : 2016 IPO Prospects


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