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BLDP: The Rapid Global Commercial Deployment of Fuel Cell Systems

IN FOCUS: BALLARD POWER SYSTEMS, ITS GROWTH STRATEGY AND THE RAPID GLOBAL COMMERCIAL DEPLOYMENT OF FUEL CELL SYSTEMS.

The alphaDIRECT Insight

We believe that the underlying strengthening of the fuel cell business is reflected in Ballard’s record revenue year and strong 2017 year-end results. The Company achieved positive adjusted EBITDA for a full fiscal year and we believe Ballard is well positioned to satisfy the growing global interest and increased demand for fuel cell-powered transportation applications. In our view, Ballard is poised at the intersection of three global megatrends, namely, decarbonization, air quality, and electrification of transport which are all part of the global movement toward significantly reducing or even eliminating internal combustion engines from urban centers. In vehicle use cases where customers require long range, rapid refueling and full route flexibility, fuel cells offer a compelling value proposition. We believe that fuel cells offer a viable customer solution in the near- and mid-term timeframe for a growing range of heavy and medium duty vehicles. Additionally, Ballard anticipates growth in global markets like China, Europe and North America over the medium term.

Shawn Severson: First, thank you for taking the time to speak with us and the investment community today, Randy. Ballard Power Systems had a very strong 2017 in terms of executing your growth strategy for fuel cell products and services, particularly in the transportation space and continuing to deliver positive financial results. Could you discuss the factors that are opening a path for the rapid commercial deployment of fuel cell engines?

Randy MacEwen: Thanks Shawn, I appreciate the chance to share an update on our corporate strategy.

You are correct – we had a strong 2017, and this is reflected in the underlying strengthening in our business and strategy. To begin, let me spend just a moment on our 2017 financial results. Ballard delivered record revenue of $121.3 million, positive Adjusted EBITDA of $3.3 million for the full year and year-end cash reserves of $60.3 million. I believe we are the first publicly-traded fuel cell company to achieve positive Adjusted EBITDA for a full fiscal year. With our top line growth, bottom line performance and strong balance sheet, Ballard is relatively well positioned as we move forward in the exciting fuel cell industry.

You are quite right that certain key global factors have converged in a way that provides a compelling opportunity for zero-emission fuel cell technology and underpins our strong financial performance.

We are poised at the intersection of three megatrends – decarbonization, air quality and electrification of transport. These megatrends are global, secular and converging. We are now seeing countries and cities around the globe stating their intention to limit or outright ban internal combustion engines, or ICEs, by specific dates between 2025 and 2040 – including Norway, India, Britain, France, Germany, The Netherlands, China, and California in the U.S. – all seemingly moving in this same direction.

This global movement has now increased the focus on electrification of propulsion systems as a logical alternative to ICEs. For certain limited applications and use cases, battery electric vehicles, or BEVs, offer a viable alternative.  For other applications and use cases – where long range, heavy payload, fast refueling and route flexibility are important – then fuel cell electric vehicles, or FCEVs, offer an attractive zero-emission solution. In FCEVs, you typically package and optimize fuel cells and batteries together in complementary hybrid integration, where  an onboard fuel cell system recharges the battery in order to extend vehicle range and enable fast refueling.

These trends have led to a situation in which clean energy FCEVs are now being viewed as a practical and highly attractive alternative for vehicles in particular use cases.

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