February 11, 2015 / 5:08 PM / 3 years ago

Ballard sells some fuel cell patents to Volkswagen, shares spike

Feb 11 (Reuters) - Canadian fuel cell maker Ballard Power Systems Inc’s shares soared 63 percent after it said Volkswagen AG would pay more than $80 million to buy some patents and extend a service contract.

Ballard said on Wednesday it would sell to the German carmaker the automotive-related portion of the fuel cell patents it had bought from United Technologies Corp last April.

The deal also extends by two years, through March 2019, Ballard’s existing four-year contract for designing and manufacturing fuel cell stacks used in Volkswagen’s demonstrations car program.

Volkswagen has the option to extend the contract, signed in 2013, by another two years.

“While timing of the vehicle commercialization is years away, this revenue stream is very high margin,” Cowen and Co analysts wrote in a note.

Engineering services accounted for about 40 percent of Ballard’s third-quarter sales.

The business is gaining importance over product development, in the near term, the analysts said.

Ballard said it would retain a royalty-free license for the patents it was selling to use in buses, non-automotive applications and some pre-commercial automotive uses.

The company provides backup power systems to telecom networks as well as for distributed power generation. It also provides fuel cell stacks for forklift trucks and buses.

The Burnaby, British Columbia-based company has been trying to add clients for its high-margin backup-power unit for the auto industry. Its customers include BAE Systems Plc, Toyota Motor Corp and Belgian bus maker Van Hool.

Ballard’s shares were up 50.7 percent at C$3.21 on the Toronto Stock Exchange, after touching a three-month high of $3.47. The company’s U.S.-listed shares were up 50.9 percent at $2.55 on the Nasdaq at midday.

Shares of Ballard’s competitors, Plug Power Inc, FuelCell Energy Inc and Hydrogenics Corp were up between 2 percent and 7 percent. (Reporting by Shubhankar Chakravorty in Bengaluru; Editing by Joyjeet Das)

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