After closing up 12 cents to $6.93 on the Toronto Stock Exchange yesterday, shares of the world's leading fuel cell maker have jumped 41 per cent since the beginning of January. On the Nasdaq Stock Market, the stock rose 11 cents (U.S.) to $6.01.

The rally is driven by a number of factors that have combined to put fuel cell technology back in the spotlight, analysts say. They include the U.S. government's pledge to wean itself from its dependence on foreign oil by stepping up research into energy alternatives, such as hydrogen fuel cells.

The stock has also responded to last week's news that Burnaby, B.C.-based Ballard has secured an $8.3-million contract to service fuel cell-powered buses, which are being road tested in seven European cities.

The contract is tied to an extension of road demonstration projects that began in 2003, and require Ballard to provide mechanical support and motoring services to 27 buses that are powered by its fuel cell stacks.

"Investors see this as a sign that the niches they are working in are somewhat developing," said Walter Nasdeo, an analyst with Ardour Capital Investments, a New York firm that focuses on alternative energy stocks. Ballard is the world's leading developer of fuel cells, which yield electricity, heat and water by catalyzing the reaction of oxygen and hydrogen.

Tipped as a potential successor to the internal combustion engine, they have been embraced by environmentalists as part of the solution to global air pollution caused by fossil fuels, and the depletion of conventional energy sources.

But as fuel cells may not be adopted in commercial quantities by the auto sector for another 10 to 15 years, analysts say it is vital that firms such as Ballard find alternative markets for their products.

One of the company's targets this year is to ship a minimum of 280 fuel cell units for use as an alternative power source in the Japanese residential market.

Ballard and Japanese partner are supplying the one kilowatt combined heat and power fuel cell units to and under a $25-million government-sponsored subsidy program.

Another objective for 2006 is the shipment of 300 fuel cell stacks, which are designed as a possible replacement for lead acid batteries in the fork-lift truck and materials handling sectors. Later this year, fork lifts powered by Ballard fuel cells will be tested in Wal-Mart Stores Inc. distribution centres in Ohio. The aim is to demonstrate that they are more efficient then lead-acid batteries.

Still, analysts remain cautious on the outlook for the stock. "They are no closer to any meaningful sales," said Jon Hykawy of Research Capital in Toronto.

He was referring to the fact that engineering services revenue accounted for 40 per cent of Ballard's total revenue of $17.6-million in the fourth quarter of 2005. That was down from a total revenue of $20.5-million in the year-earlier quarter.

In a recent report, David Smith of Citigroup Global Markets Inc., said the fuel cell sector faces so many uncertainties that he has placed a speculative risk rating on the stock with a $5 price target.

The risks include its reliance on the development on refuelling infrastructure, and onboard hydrogen storage capabilities, which may take several years to evolve.

"Specifically, at Ballard's current valuation of roughly $600-million, the stock trades at multiples of other fuel cell companies that we believe have many more near-term opportunities than the automotive market that Ballard has become so closely tied to," Mr. Smith said.

Ballard Power Systems' stock has responded to last week's news that the Burnaby, B.C.-based company has secured an $8.3-million (U.S.) contract to service fuel cell-powered buses, which are being road tested in seven European cities.

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