Weekly Update July 14-18
Bloom Energy, Substack Chat, and Premium Updates
Disclaimer: These materials are for information only, not investment advice. Neither Investing City LLC nor Infuse Partners LP accept any liability for actions taken based on this content.
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Bloom Energy is almost 25 years old but it’s just now hitting its stride. The company provides on-site energy using fuel cells. Basically, Bloom systems can produce energy from natural gas and oxygen. There are a lot more technical details but that’s the gist. This is attractive because the grid is so packed these days that it is faster to not have to interconnect to it. Being able to have independent, “islanded” energy as a way to, I don’t know, power a small data center would be quite attractive.
If you’ve ever looked at GE Vernova or Siemens Energy, you’ll know that turbine power demand right now is absolutely off the charts. The AI megatrend is alive and well and the main bottleneck is energy, not chips. These companies’ capacities are completely sold out for the next 4-5 years so the root bottleneck is turbine manufacturing capacity. Data centers require essentially 100% uptime so back-up generators and off-grid systems are coveted resources.
Bloom grew revenue 39% in Q1 and is about breakeven on the bottom line. The company is still run by its founder, KR Sridhar, who worked on the NASA Mars mission. Bloom’s fuel cell technology is environmentally more friendly but it’s roughly 2x the cost of a pure natural gas generator even despite the IRA regulatory incentives. The key here is that this cost has been dropping significantly (roughly 10-15% annually) and Bloom has very high efficiency for hydrogen power as well. It’s still very early days but if you’re bullish on hydrogen at all, Bloom is an interesting way to play that.
There is a significant amount of customer concentration and the big projects can make for lumpy quarterly growth so keep that in mind. A large South Korean distributor still makes up about a quarter of the business along with two other large customers.Combined, these three customers make up about half of overall revenue. For many investors that is simply too much concentration. However, this is an interesting bet on energy demand considering it’s now breakeven and there is a visionary founder at the helm.
Now onto what happened in the portfolio this week…