Beacon Power Corp. (BCON) filed Quarterly Report for the period ended 2009-09-30.
Beacon Power Corporation designs and develops advanced products and services to support stable reliable and efficient electricity grid operation. The Company's primary business strategy is to commercialize its patented flywheel energy storage technology to perform frequency regulation services on the grid. Beacon's Smart Energy Matrix now in development following the successful conclusion of scale-power demonstrations in two states is a prototype for a non-polluting megawatt-level utility-grade flywheel-based solution that would provide sustainable frequency regulation services. Beacon is a publicly traded company with its research development and manufacturing facility in the U.S. Beacon Power Corp. has a market cap of $80.1 million; its shares were traded at around $0.632 with and P/S ratio of 1178.1.
Highlight of Business Operations:
On July 2, 2009, we announced that we received a conditional commitment from the DOE for a loan guarantee of approximately $43 million. The loan, which would be funded by the U.S. Treasury’s Federal Financing Bank, is expected to provide debt financing for approximately 62.5%, of the estimated $69 million total project cost of our planned 20-megawatt (MW) flywheel-based energy storage installation to be located in Stephentown, New York. Of the $26 million not financed by the loan, we have already incurred approximately $13 million in eligible project expenditures, which will be considered part of our equity contribution to the project. A significant portion of this in-kind contribution will come from the redeployment of 2 MW or more of energy storage from Tyngsboro to the Stephentown site. We are exploring funding alternatives for the remaining $13 million, including a direct equity investment in the project by one or more third parties and/or the sale of our stock. In addition, we are in the process of negotiating a statement of work relating to a grant from NYSERDA to pay for a portion of the interconnection and other aspects of the Stephentown facility. The value of the grant, if finalized, is expected to be approximately $2 million.
In volume production, our goal is to complete 20 MW facilities at a cost of approximately $25 to $30 million each, though the first 20 MW plant will cost approximately $69 million, of which approximately $50 million is direct equipment and facility costs. The remainder of the cost estimate includes substantial contingency, legal, consulting and administrative costs. Some of these costs are either unique to the DOE loan guarantee process or are greater than we expect to apply to subsequent similar facilities. In 2010 and beyond, we will continue to have capital needs that will require additional funding through equity and project financing to fund the ongoing deployment of frequency regulation installations. Our deployment plans are affected by a number of factors and activities, including but not limited to the following:
validate results of those studies. Based on the results, we will develop a conceptual flywheel design and simulation model for one or more applications. The value of the initial research and development work is estimated at $900,000, $500,000 of which has already been appropriated. Subsequent phases involve work estimated at up to an additional $2.1 million.
In 2009/2010 and beyond, we will need additional funding to expand our manufacturing capabilities and to build and install frequency regulation facilities in accordance with our business plan. We expect to raise the required funds in 2009 and 2010 through the DOE loan program guarantee and the sale of stock in the Company, supplemented where possible by government grants. As previously mentioned, NYSERDA committed a $2 million grant to us with respect to the Stephentown facility, and we have applied for two grants from the DOE with respect to two possible facilities following the Stephentown facility. Because the total budget for DOE frequency regulation grants is $45 to $50 million, and other companies may have applied for the same grants, there can be no assurance that either or both of our grant applications will be approved, or if approved, that any such grants will be in the amounts applied for. In the future, as the number of our regulation facilities increases and we develop sustainable cash flows from operations, we expect to fund additional installations from a combination of project financing, equity and available cash flow from existing regulation facilities.
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