Ballard Power System Inc. (BLDP) was originally called Ballard Research. Founded in 1979, the company initially conducted research and development on lithium batteries. It began developing fuel cells in 1983, and entered into various strategic alliances regarding fuel cell R&D. Partners included Daimler AG (DDAIF) and Ford Motor Company (F). The company completed a major restructuring from 2007 to 2009, with a strategic focus on shifting the clean energy fuel cell products for near-term markets, instead of long-term automotive fuel cells.

The company has four main subsidiaries and affiliates: Ballard Material Products Inc, a Delaware-based corporation that develops and manufactures carbon fibers for the automotive and fuel-cell markets; Dantherm Power A/S, a Denmark-based corporation that develops clean energy backup power systems; Automotive Fuel Cell Cooperation Corp (AFCC), another British Columbia business that develops fuel cells for the automotive market; and finally, BDF IP Holdings Limited, a Canadian company that holds intellectual property assets.

At present, Ballard is recognized for its expertise in the development and commercialization of proton exchange membrane (PEM) fuel cell progress. Thus, its principal business is designing, manufacturing, and selling fuel cells products. The two main markets for this key product (which garnered over 50% of 2010 revenues) are the motive power (material handling and buses), and stationary power (backup power and generator) areas. However, despite the emphasis on fuel cell design, there are three main product lines: Fuel cell products (which sell in the aforementioned markets), Contract Automotive (contract and technical manufacturing services, primarily for AFCC, Ford, and Daimler), and Material Products (carbon fibers produced primarily for automotive transmissions and gas diffusion layers for fuel cells).

The company has had a busy past few years. It completed its exit from the automotive business on January 31, 2008, selling its assets in the sector to AFCC. Much of 2009 was spent reorganizing using funds from a restructuring transaction with Superior Plus Income Fund. It should be noted that the Superior Plus deal allowed the fund to use Ballard’s old corporate entity as a means to complete its own change into a corporation. At the same time, Ballard purchased a 19.9% equity interest in AFCC. In 2010, Ballard acquired a controlling interest (52%) in Dantherm power, which utilizes Ballard’s hydrogen fuel cell technology to develop backup power. Part of the deal is a technology transfer, which management anticipates will give Ballard an edge over competitors going forward.

At present, it is focusing heavily on the transit market, buses in particular. With regards to this segment, Ballard has focused more on its European market, where expansion has been considerable, rather than the United States. However, given the recent focus on clean energy, and stricter regulations coming out of the Department of Energy, it is likely that the company will turn to the U.S. markets, California in particular, in the near future. Furthermore, the relaxing of several regulations regarding green energy augurs well for the company in the long term.

Investors should note that despite the long-term potential, this stock is quite risky. The company’s new direction is relatively new, and the green energy segment is known for its volatility. Investors should carefully assess on all aspects of the company and its stock before considering an investment.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.