There may come a day when Ballard Power Systems (TSX:BLD) returns to making hydrogen fuel cells for cars. But that day is still a long way off, says Randy MacEwen, Ballard’s new CEO.
Though hydrogen power appeared to have hooked a lot of investors in November at the Los Angeles Automotive Show – where Toyota, Hyundai, Honda, Audi and Volkswagen all previewed new fuel cell models – MacEwen isn’t chumming those waters.
Investors who took the bait in hydrogen’s heydays, when Ballard stock rose above $192 per share – only to lose an arm and a leg when it fizzled – might not bite anyway.
But as MacEwen pointed out, the company’s engineering expertise and intellectual property portfolio will be valuable assets when hydrogen fuel cell cars take off – something MacEwen thinks will happen, eventually.
In the meantime, though, he plans to keep the company focused on its core businesses, only one of which is automotive – fuel cell stacks for buses.
“When the auto market really starts to scale, I can’t tell when that’s going to happen. I don’t think anyone can, and I don’t think we should go back to where we were 20 years ago, where people tried to tell you and they were wrong.
“I believe it will happen. When it does, there’s a core technology that’s required. We have it here. So that’s going to lead to engineering services with auto companies. But it’s also going to lead to product sales.”
MacEwen, who has spent the last 10 years in Southern California, has deep knowledge of the clean energy space, a track record of turning struggling companies around and a reputation for industry foresight.
That foresight includes anticipating investor fatigue and executing a successful merger of the hydrogen fuel cell company Stuart Energy with Hydrogenics Corp. (TSX:HYG) before the tech bubble of 1999-2000 popped.
He now sees good things on the horizon, not just for Ballard, but the fuel cell sector in general, which is what brought him back to Canada, and back into the hydrogen fuel cell business.
Born in Prince Edward Island, MacEwen grew up in Toronto. He earned a BA from York University, followed by a law degree from the University of Western Ontario.
His first job was in corporate law with Torys LLP, where he spent six years. He credits Torys for giving him a full-spectrum education in business – from corporate finance to mergers and acquisitions.
One of Torys’ clients was Stuart Energy, which MacEwen had helped take public. The company ended up hiring him as executive vice-president of corporate development.
While at Stuart Energy, MacEwen was involved in the acquisition of Belgium’s Vandenborre Technologies NV and its technology. But his biggest deal was a $155-million merger with Hydrogenics. When he joined Stuart Energy, its revenue was $5 million; when it merged with Hydrogenics, revenue rose to $35 million.
Before the merger, MacEwen had begun to realize the fuel cell business would take much longer to grow than anyone expected and had already moved on when the bloom faded.
“As I was talking to investors, they were saying, ‘We’re cycling out of the fuel cell industry. We don’t believe this anymore,’” MacEwen said.
Investors were shifting to other clean-energy technologies with better prospects of short-term returns, such as solar power – so that’s where MacEwen went.
He moved his family to Southern California to become the executive vice-president of corporate development for a photovoltaics company called Solar Integrated Technologies, which was listed on the London Stock Exchange but wanted to list on the Nasdaq.
“I joined the company ostensibly to support a Nasdaq IPO,” MacEwen said.
So did John Palumbo, who was the company’s new CFO. The PV space was enjoying the same kind of ebullience that hydrogen had enjoyed, and a number of solar power companies went public prematurely – Solar Integrated among them.
“It was basically a horror story,” Palumbo said. “It was poorly managed and we were quickly running out of capital.”
MacEwen was quickly bumped up the ladder into the CEO’s position, and Palumbo credits him with helping to turn the company around.
“He’s very well-rounded,” said Palumbo, CEO of PartsChannel Inc. “He’s a lawyer by training, but I felt he had a very strong finance background, capital markets background and good strategic planning.”
When MacEwen joined Solar Integrated, it was generating less than $10 million in annual revenue; by 2009, revenue was up to $95 million.
But when China entered the PV manufacturing business, flooding the market with low-cost PV components, it was the death-knell for many solar power startups. Several promising North American and European PV makers went out of business, including Energy Conversion Devices, which acquired Solar Integrated in 2009 and then went bankrupt in 2012.
MacEwen was already out of the solar power business by then, but not because of any perspicacity on his part.
“I wish I could tell you I was brilliant, I saw it earlier – I didn’t,” he said.
After the sale of Solar Integrated, MacEwen had struck out on his own with his clean-tech consulting firm, NextCleanTech LLC.
With his reputation for turning companies around, he was in demand by struggling clean-tech companies. He advised boards and management teams, and in one case stepped in as interim CEO of a company called Sparq Systems Inc., a solar technology company that, in October, raised US$11 million in venture capital.
When former Ballard CEO John Sheridan announced his retirement, MacEwen was identified as a prime candidate.
But why would MacEwen want to relocate his wife and 14-year-old son from Southern California back to Canada to return to a sector that has performed so poorly?
“I’m an uninteresting guy,” he explained. “I don’t do a lot, outside of work, other than family and a few sports. One thing I spend an enormous amount of time on is following all the clean-tech verticals.”
Apart from playing a bit of squash and golf, mostly he spends his free time absorbing annual financial reports and clean-tech periodicals.
For a decade, he has followed Ballard and other leading fuel cell companies – Hydrogenics, Plug Power Inc. (Nasdaq:PLUG), FuelCell Energy Inc. (Nasdaq: FCEL), and Intelligent Energy Holdings plc (LSX:IEH). All have diversified, in one way or another, into areas outside of the automotive space. All have seen their order books increase over the last year, MacEwen said, and their share prices have also been moving up.
Two years ago, Ballard’s stock had dropped to a historic low of $0.59 per share. It has slowly been recovering and was trading last week at around $2.50 per share.
“I do believe the industry is on the cusp of something special,” MacEwen said.
He said the way forward for Ballard is to continue to focus on its core businesses and continue to scale through acquisitions, as it continues to build a large portfolio of fuel cell patents.
Since it divested itself of its automotive fuel cell division in 2007, Ballard has been focused on four products: backup fuel cell power for telecoms, larger stationary power systems, fuel cell stacks for hydrogen buses and fuel cells for forklifts. Another important business unit is its engineering services. About 90 of the company’s 400 employees are in that unit.
Ballard has never turned a profit – but neither have any of the other leading fuel cell companies. MacEwen wants Ballard to be the first to turn that corner, but isn’t making promises on when that will happen.
“While we’re not profitable, we have moved the yardsticks on the financial performance,” he said, pointing to a revenue growth rate of 20% to 30% over the last three years.
MacEwen officially moved to Vancouver October 4, but has been travelling nearly non-stop since he got here, meeting with global customers and partners. His wife and son are still in Southern California.
“My son is still finishing his school year there, and we have a house we have to sell, so there’s a lot of moving parts there,” he said. “They plan to come up next summer.”