Hydrogenics

The spike in oil prices definitely raises the awareness for alternative
energy sources. In fact, there are other reasons besides higher oil prices.
For example, the U.S. government (as well as a variety of states) have
adopted laws to regulate vehicle emissions. In fact, California wants to
mandate zero emission levels by 2003.

Or look at the worldwide demand for electricity. It is surging. Factors
for this include the heavy use of computers and the Net. A study shows that
while electricity accounted for 25% of U.S. energy consumption 25 years ago,
it now accounts for 37%.

Well, there is help. It comes from an alternative energy technology called
proton exchange membrane (PEM) fuel cells. The technology is fairly
reliable, has a long life span, lower life-cycle costs, and no environmental
side-effects.

How does it work? Basically, a fuel cell is a system that converts fuel
into power by using electrochemical reactions – which are twice as efficient
as the internal combustion engine. It’s quiet; has low vibrations; and the
only by-product is water (although, I not sure I would drink it).

And, yes, a fuel cell company plans to go public this week: Hydrogenics. The
lead underwriter is Salomon Smith Barney and the price range is $10-$12 (the
company intends to issue 7 million shares). The proposed ticker symbol is
HYGS.

Essentially, Hydrogenics is a developer of test stations for fuel cells.
With these test stations, customers can simulate and control the effect of
the power load, temperature, pressure and contaminants of a fuel cell. Of
course, with this information, customers can develop better fuel cell
designs. So far, the company has attracted top customers, such as General
Motors Corporation, 3M, and the United States Army.

Interestingly enough, Hydrogenics is using its testing technology in order
to develop products for third party fuel cell systems. Some of these
products are for extreme environments, such as adverse weather conditions or
military situations. For example, the company is developing a fuel cell
that can operate in -40C environments (which makes it possible to have fuel
cells in such places as Antarctica).

The financials are nascent. In 1999, sales were $2.7 million. Although,
losses were small: $165,000. As for the first six months of 2000, revenues
were $4.5 million and losses $1.7 million. But the losses were not the
result of operations, but charges for stock option grants. Excluding these,
the company was at break-even.

Actually, by being a testing equipment developer, the company has the
opportunity of being a fuel cell product innovator. However, the fuel cell
industry is still in its infancy and there is, as a result, lots of risk
with these stocks. But if Hydrogenics can continue its innovation, it
stands a chance of being a long-term winner.

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