Bloom Energy Corp.

white house 10.03

became a hot topic more than a decade ago and promised to provide the utilities industry with appliances that could power buildings across the country. Today, it is a reminder that a rapidly changing industry can hamper the most motivated entrepreneurs.

The founder of Bloom,

CR Sridhar,

helped develop fuel cells for NASA before the company was founded in 2001. The following year he picked up his technology in three U-Haulls and flew to California.

Fuel cells use chemical reactions to produce electricity, and their proponents say they will one day be promoted as a clean and reliable source of energy. They doubted large-scale commercialization, but Mr. Sridhar told a powerful story: Bloom would sell the technology in Bloom Boxes, which run on natural gas and supply electricity at lower costs than the utility companies of the grid.

Gas for power supply

In Flowering Fuel Cells oxygen ions are mixed with hydrogen and carbon atoms to form natural gas to produce electricity, water and carbon dioxide.

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Silicon Valley bought it, and the attention of the press followed. Bloom’s first investor was a venture capitalist.

John Doerr,

Known for its early offer

Amazon.com Inc.

and Alphabet Inc. at Google. The Board of Directors consists of

General Colin Powell

and the former Chief Electrician General Co.

Jeff Immelt.

One of the first customers was Google,

eBay Inc.

и

Walmart Inc.

Like many Silicon Valley start-ups, Bloom presented a bold technological and profitable vision that encourages investors to look beyond profitability. Mr. Cridar’s vision: A planter in every house in America. It’s about seeing the world as it can be, he said in 2010 for 60 minutes, not what it is.

The world Mr. Sridhar envisioned didn’t come. His start-up company in San Jose, California, has not installed fuel cells in his homes and instead has a niche customer base of companies willing to pay a premium for a continuous local power supply. In 2009, according to the board of directors reviewed by the Wall Street Journal, it predicted profits through 2010; however, it has never reported profits because it has lost more than $3 billion since its inception.

Mr Sridhar’s proposal to destroy the energy market came at a time when the world was trying to understand how to get rid of fossil fuels. Instead, the energy industry has broken Sridhar’s strategy by focusing on wind and solar energy, which are cheaper and produce cleaner energy than Bloom cells, which emit carbon dioxide. Electricity is in most places still cheaper than at Bloom.

At the same time Bloom had supply problems, her cells remained expensive and did not meet the expectations of the number of customers she would attract, according to former directors and employees, administrative documents and public filing.

After Bloom’s auditor had expressed concerns about the company’s reported earnings, the results for the two years since the $270 million IPO in March were revised, resulting in a 15% decline in reported earnings. The growth of Bloom is sometimes difficult to estimate due to accounting practices.

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Bloom Energy CEO KR Sridhar with a fuel cell on eBay 2010.

Photo:

Justin Sullivan/Getty Pictures

Last year Hindenburg Research was a short seller and announced the introduction of an electric bus in September.

Nikola Korp.

misled investors by refuting Nicola’s report, which claimed that Bloom’s technology was not clean, environmentally friendly or even vaguely profitable, and was cited in a secret liability estimated at $2.2 billion. Bloom spokesman Justin Saya said the company stuck to its response after Hindenburg drew the wrong conclusions.

Mr. Sridhar, who rejected the interview, said in an e-mail that I know that a small group of enemies wants to write a false version of our story by adding something: Innovations in the energy sector have always been controversial. The light bulb, the first power stations, wind turbines, solar energy, electric cars – they all had their own sceptics.

Sridhar’s job is to align his vision with the real world, he said.

Bill Kurtz,

Commercial Director of Bloom from 2008 to 2018 and Chief Financial Officer until 2015, who remains a shareholder and supporter of Bloom.

It’s a long way, Kurtz said. How do you sell a dream and at the same time give it a sense of reality? He and other former CEOs praised Bloom’s technology and Mr. Sridhar’s charismatic leadership. He expressed his conviction that the CEO’s goal was to revolutionize the energy industry, but said the barriers to profitability were still significant.

Bloom won’t say how many of his drawers work. The fleet provides approximately 526 megawatts of electricity worldwide, according to an SEC report last month, and a small natural gas-fired power plant that will produce approximately 328 megawatts when it comes into operation in 2018.

A satisfied customer is the Staples Center in Los Angeles, which installed two 250-kilowatt boxes in 2015. They provide about 25 percent of the energy in the arena, said Bill Pottorff, senior vice president of arena operations and design. Referring to estimates from the Bloom plant, he said carbon dioxide emissions have been reduced by £4 million: This is the best sustainable development project we have undertaken.

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It is about seeing the world as it can be, not as it is, said Mr. Sridhar in 2010; above, Mr. Sridhar in March.

Photo:

Beth LaBerge/Presse Associée

Mr Immelt, who joined Bloom’s board of directors last year, said in a statement at the time of Bloom’s purchase of 70,000 shares in August of this year that the company had the potential to expand into marine and other growth markets. I’ve been looking at these markets for decades and I know that new technologies take time to develop, he said. Bloom has laid a solid foundation, and better days lie ahead. Mr. Immelt refused to comment.

Mr. Dorr’s company, Kleiner Perkins, sold the rest of his Bloom stock last month, an SEC offer. Mr Dorr, who is still Director of Bloom, and Mr Kleiner did not reply to requests for comments.

The shares of fuel cell companies have risen sharply this year as part of the alternative energy boom, in the hope that these companies will become major players in the hydrogen economy. Bloom shares closed Monday at $27.63, 23% below the post-IPO high in 2018 and above the $2.70 low in October 2019. Bloom reported sales of $ 200.3 million for the third quarter of October, compared to $ 224.3 million for the same period last year. The loss per quarter was $12 million.

NASA Roots

Fuel cells, versions of which appeared in the 1800s, supported space missions, including Apollo’s flights to the moon. They supply industrial equipment. Hydrogen fuel cells, which do not emit carbon dioxide, have become a technology that can help companies meet their climate targets, and car manufacturers have begun to focus on reducing costs. Some of them, in particular

Toyota Motor Corp.

to have multiple fuel cell cars on the road.

The Bloom Boxes, which were renamed Bloom Energy Server around 2011, look like large refrigerators and contain fuel cells the size of a floppy disk. As a rule, they are close to the buildings they maintain and can be operated independently of the electricity grid. A typical server costs over $1 million, and most customers either rent it or agree to buy electricity.

Dr. Sridhar contributed to the development of a fuel cell module for the Mars exploration project for the National Aeronautics and Space Administration, which cancelled the Mars project in 2001.

He founded Bloom in search of an earthly application. If his boxes produce electricity locally, his argument was supported, they can bypass the grid and provide a cleaner power supply. In the cells of Bloom, oxygen ions are mixed with hydrogen and carbon atoms, which form natural gas for the production of electricity, water and carbon dioxide.

In 2002, Mr Dorr made a firm bet on Bloom and joined the Board of Directors, which he described as his first investment in clean technology. Mr Powell joined the Board of Directors in 2009 and remains the director; Mr Powell’s spokesman has not responded to requests for comments.

In July 2008 Bloom delivered its first major customer, Google, without public announcement. The staff of Bloom have been welcomed, said a former executive, and there is a funding round on the agenda. Bloom told the investors that the boxes produce about 783 pounds of carbon dioxide in megawatts per hour, far less than coal-fired power plants. Google declined a comment.

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Bloomboxes in 2010 on eBay, which switched to carbon-free electricity last year Bloom says eBay is no longer acustomer.

Photo:

Justin Sullivan/Getty Pictures

The boxes sold by Google cost more than $16,000 per kilowatt, or approximately $1.6 million per box, according to a presentation to the Board of Directors in March 2009. Bloom sold them for much less money, according to a presentation that recognized the need to reduce production costs to ensure profitability. US$1 per kilowatt by the end of 2011.

The former director said that problems in the Bloom supply chain will silence Bloom. The company had problems purchasing parts, called hot boxes for the fuel cells, and these boxes continued to malfunction internally for the first few months, costing the company money to repair or replace them, according to former executives and a 2009 board document. In 2008 the Russian suppliers of scandium, a rare earth metal and the most important ingredient, raised their prices.

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Dr. Sridhar described on eBay how sand is a part of Bloom cells.

Photo:

Kim Coulich/Corbis/Getty Pictures

However, in January 2009, Bloom painted a rosy picture as he sought $ 150 million in funding. In an interview with investors that month, he said that he had proven the viability of the boxes and that he had a ready-made supply chain and a road to profitability, with the goal of being in the black by 2010.

Walmart installed a Bloom server in a Lancaster, California store in 2009 and currently has more than 30 Bloom plants elsewhere in California, a Walmart spokeswoman said.

In 2010 Bloom presented its product for the first time in public at eBay’s head office, where it installed servers by opening known attributes.

Apple Inc.

The event. A YouTube video shows Mr. Sridhar on stage explaining the Bloom Box by pulling sand out of a container to show that the cells are made of everyday materials.

I think we’ve just witnessed a wonderful new combination…

Martha Stewart

и

Steve Jobs,

Mr. Dorr told the crowd. It seems that Google IPO-KR waited until the very last moment to take a step forward.

Bloom delivered only 194 boxes the next year and lost $225 million, according to a board presentation in February 2012. This is a far cry from its presentation to investors in January 2009, in which it presented an estimate of the potential IPO for 2011 and stated that it would ship up to 1,000 boxes and have an expected net income of between $88.8 million and $183.2 million in 2011.

Mr Saya of Bloom’s stated that the company had always made forecasts and disclosed information on the basis of the information available. Events may not always have gone as we expected, but that’s not unique to Bloom, he said. Bloom refused to comment on the management and investor documents.

In 2011, Bloom had reduced the cost of building its boxes to an average of $6,300 per kilowatt, according to the documentation on board in February 2012, which meant that the $2,500 target was not met.

The company has spent millions of dollars to maintain them as part of its customer service programs, in part due to unexpected problems with the technology, showing the documents on board. To be profitable, Bloom needed its fuel cells to last for at least five years, but the first cells often took no more than a year and a half, according to SEC 2018 documentation. Bloom never made a profit on its service company because the maintenance costs were higher than the income from service contracts.

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M. Sridhar and Caliph. Govin Gavin Newsome in March at the Bloom campus where the reconstruction of the fans to fight the Covida pandemic began 19.

Photo:

Beth LaBerge/Presse Associée

When Bloom became public in July 2018, her shares flew into the air. Revenue for 2018 was $632.6 million compared to $365.6 million in 2017, in part due to the reintroduction of government tax rebates for the Bloom technology. The loss was $273.5 million.

Lost Green Vocation

But at this point, Mr. Cridar’s green service has lost its appeal. Utilities have cleaned up the grid, shut down many coal-fired power stations and reduced the cost of wind and solar power. Companies that could pay a premium for fuel cells could buy carbon-free electricity for less money.

Greener grid

Bloom Energy Server emits less carbon dioxide than the American grid, but stocks are declining.

CO2 emission level of the US grid,per year

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In 2019, Silicon Valley Power, a city department in Santa Clara, California, tried to demand that all new generators connected to the grid should be emission-free. That means Bloom couldn’t connect the new boxes within the city limits.

Bloom sued the utility to block the ordinance and said it would not reduce emissions. It was postponed in January 2020 when a judge ordered the utility company to first carry out an environmental study to demonstrate the benefits of the proposed measures under government legislation. Silicon Valley Power is completing its research.

We just want to be as renewable as possible and emit as few greenhouse gases as possible.

Manuel Pineda,

Senior Electrical Assistant at Silicon Valley Power and Deputy Director of the City of Santa Clara. Mr Bloom Saya stated that the decision confirms the company’s arguments.

Last year Ebay moved its headquarters to carbon-free electricity. Bloom stated that eBay was no longer a customer. Ebay did not respond to requests for comments.

In 2019, Bloom had difficulty penetrating new markets in the United States, where the cost of electricity for its servers is still higher than the cost of electricity fed into the grid, according to two former employees.

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Former Vice President Al Gore (Center) and Mr. Sridhar present the Bloom Box 2015 at the Staples Center.

Photo:

Ringo Chiu/Zuma Press

And their sales in the United States depend heavily on a federal tax credit that benefits their customers and financial partners by making their servers more attractive. The loan expires at the end of 2021 and Bloom has stated that, if there is no subsidy, it may be necessary to reduce the price of its servers, which will affect its prospects of profitability.

Saya of Bloom’s said the company disagrees with the view that its technology is difficult to compete in the field of clean energy, citing an analysis showing that its servers can reduce grid emissions by helping to move natural gas plants.

Share your thoughts with

What do you think is the most promising clean energy technology? Take part in the interview below.

Repeat the results

In February, Bloom announced that it would revise some of its results for most of 2018 and 2019 to correct the way in which it accounted for its managed services contracts, under which Bloom sold, leased and subleased fuel cells to a financial partner.

Bloom treated the contracts like cash advances. Their accountant, PricewaterhouseCoopers LLP, asked Bloom to record income while customers pay their rent. In March, Bloom reported an inflated total turnover of $192.1 million as of March 30. September 2019. Sales for 2019 decreased from USD 929.1 million to USD 786.2 million based on the fourth quarter forecast.

According to Bloom, PwC has not yet raised this issue in the documents accompanying the repeated statement and has not claimed any error. On the fourth. In September Bloom announced the replacement of PwC by Deloitte & Touche LLP. PwC and Deloitte did not comment. Mr Saya stated that the recalculation would only affect the time at which the company registers certain revenues.

The restatement did not relate to a financial transaction that enabled Bloom to generate significant revenue but which, according to the SEC’s information, nevertheless generated a low net cash flow. A subsidiary will be established in June 2019.

South Co.

an Atlanta-based energy company, acquired a $166.4 million stake in a subsidiary of Bloom called Diamond State Generation Partners LLC, which owned a 30-megawatt Bloom fuel cell facility in Delaware. The agreement gave Diamond the money to improve the aging of the fuel cells by purchasing new Bloom cells.

Following the transaction, Bloom Diamond deconsolidated because it found, on the basis of SEC documents, that it no longer had a controlling interest in the subsidiary. This allowed Bloom to set aside $176.4 million in income. If Diamond had remained consolidated, the accounting rules would not have allowed Bloom to recognise the income, as the company would have paid for it itself.

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We have overcome enormous challenges and made further progress, says Sridhar; the Bloom fuel cell in 2010.

Photo:

Justin Sullivan/Getty Pictures

The deal appears to have led to income growth and Mr. Sridhar told investors that Bloom’s second quarter was the highest on record. In fact, the agreement with the South resulted in a loss of about $8.2 million for Bloom after the expenses calculated by the magazine on the basis of the public announcement. And the deal required Bloom to provide millions of dollars in cash to minimize the risk of investments from the South. The Southerners refused to comment.

Bloom denied the magazine’s analysis and said he had earned about $15 million in cash from the Southern deal, by the way he deconsolidated the diamond. It is specified that the number cannot be determined on the basis of publicly available information.

In December, Bloom completed the upgrade of its Delaware servers with a new financial partner. The upgrade brought in $223.9 million until 2019, an increase of 24% over the previous year. Without these adjustments, revenues would have decreased by 11%.

Mr Saya of Bloom’s said that modernisation has generally brought more financial benefits to the company than the part done with the South.

Bloom uses a different disclosure model that highlights the company’s growth without specifying the cost of that growth. In his profit reports he indicates a growth rate that he calls acceptance – the number of servers he sold and deployed during the period. Bloom said payment acceptance in 2019 was 48% higher than in 2018.

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Mr. Sridhar on the New York Stock Exchange when trading in Bloom shares began in July 2018

Photo:

Richard Drew/Presse Associée

This includes the replacement of old boxes, which Bloom buys back and writes off as a loss – which the company does not include in its calculations, but discloses elsewhere in its SEC files. Excluding the publicly announced replacements, including those in Delaware, the increase in registrations in 2019 was 7.4%, as evidenced by Bloom’s observations.

Mr Saya of Bloom’s said that the company sees the improved fuel cells as an acceptance because they are new products and they lead to new maintenance contracts. He said Bloom’s turning the corner on profitability.

In recent years Bloom has found new growth opportunities in South Korea, where the development of fuel cells is supported by government mandates. Since last year Bloom has been working with a Korean shipbuilder on the development of fuel cells for ships.

Samsung Heavy Industries Co.

Samsung refused to comment.

In recent months Dr. Bloom has presented plans to switch to hydrogen fuel cells and is also developing batteries to power transport ships.

Although Bloom’s internal performance has changed somewhat over time, this year the company has managed to achieve the kind of rapid cost reduction it hoped for ten years ago. In October, it told investors that the average cost of building a server had dropped from about $18,000 per kilowatt in 2008 to $2,420 per kilowatt, a significant drop from the $2,500 goal it had set for 2011.

Mr. Sridhar said about the October call: We have overcome great difficulties and made more progress.

Write to Rebecca Davis O’Brienne at [email protected] and Catherine Blunt at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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