News

Beacon Power Announces Second Quarter 2010 Results

August 11, 2010 by Jeff Shepard

Beacon Power Corp. announced its financial results for the second quarter ended June 30, 2010. For the second quarter of 2010, Beacon Power reported revenue of $166,000 and a net loss of $5.6 million, or ($0.03) per share, compared to revenue of $282,000 and a net loss of $4.8 million, or ($0.04) per share, in the second quarter of 2009. Gross profit for the second quarter of 2010 was $93,000, as compared to a gross loss of $4,000 during the second quarter of 2009. In the first six months of 2010, Beacon reported revenue of $401,000 and a net loss of $11.1 million, or ($0.06) per share, as compared to revenue of $393,000 and a net loss of $10.3 million, or ($0.09) per share, for the six months ended June 30, 2009.

During the first two quarters of 2010 and 2009, the company earned revenue primarily from frequency regulation service provided through an ISO New England pilot program begun in November 2008, as well as from the company’s research and development contracts. Beacon had 3 MW of frequency regulation capacity in service during the first two quarters of 2010, as compared to 1 MW in the first two quarters of 2009. The company’s frequency regulation revenue increased by approximately $151,000, or 130%, over the first half of 2009. The increase in revenue was limited due to lower average clearing prices from ISO-NE for frequency regulation during the first half of 2010, as well as the fact that ISO-NE currently does not include so-called "opportunity cost" in its calculation of its regular clearing price. Inclusion of that factor is expected to increase future revenues received by Beacon from ISO-NE by approximately one-third. Several other ISOs already include this factor in their pricing structure.

Beacon’s average gross margin on frequency regulation services during the second quarter of 2010 was 22.5%, as opposed to a negative gross margin of (28.8%) for the second quarter of 2009. This significant improvement was primarily driven by a change in the ISO-NE settlement structure in late April 2009 that enabled the company to net its energy consumption and pay the wholesale rate for net energy usage. However, because the pilot units are connected to the New England grid through a distribution line rather than a transmission line, the company continues to incur retail transmission and distribution (T&D) charges. These charges represented approximately $144,000, or 72%, of the company’s total cost of energy during the first half of 2010. The company will connect to the grid at transmission level in Stephentown, New York, and therefore will not incur T&D charges.

For the second quarter ended June 30, 2010, operations and maintenance expenses increased by $54,000, or 7%, compared to the equivalent period in 2009. On a year-to-date basis, operations and maintenance expenses increased by $244,000, or 16%. The increase was due primarily to occupancy expenses related to building maintenance, and increases in salaries and benefits related to new hires. Research and development expenses for the second quarter increased by $404,000, or 27%, in comparison to the equivalent period in 2009. For the six months ended June 30, 2010, research and development increased by $285,000, or 8%, over the comparable period in 2009. The increases were due to higher labor costs caused by higher allocations of manufacturing staff charged to R&D as our manufacturing staff works with engineering to improve the tools and procedures used in our operations as part of overall cost reduction efforts.

Selling, general and administrative expenses were $435,000 higher for the second quarter of 2010 than in the second quarter of 2009, and $483,000 higher on a year-to-date basis, primarily due to costs associated with new hires to market our turnkey systems and manage the Stephentown project. Depreciation expense in the first half of 2010 increased by $209,000 compared to the first half of 2009. This increase is primarily from the capitalization of flywheel and related equipment that were placed into service in the third and fourth quarters of 2009, as well as machinery and equipment purchased in the fourth quarter of 2009.

At June 30, 2010, the company had $11.4 million in cash and cash equivalents as compared to $3.2 million at June 30, 2009, and working capital of $3.8 million at June 30, 2010 as compared to ($1.2) million at June 30, 2009. Approximately $7 million of the cash on hand has been contributed to the Stephentown project with the DOE loan now closed, and is not available for general corporate operating purposes.