Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Q4 and Full Year 2020 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Thanks very much and good morning everyone. Welcome to Ballard's fourth quarter and full year 2020 financial and operating results conference call. With us today on the call, we've got Randy MacEwen, our President and CEO and Tony Guglielmin, our Chief Financial Officer. We'll be making forward-looking statements that are based on management's current expectations, beliefs and assumptions concerning future events. Actual results could be materially different. Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. So today, Randy is going to provide his perspective on Ballard's progress throughout 2020, as well as our focus for the current year. Tony is then going to review Q4 and full year financials followed by a Q&A session. I'll turn the call over to Randy.

Thanks, Guy. And welcome everyone to today's conference call. I'd like to start today's call by thanking all of the members of Ballard's global team. I'm immensely proud of how our team responded to the global pandemic. We were guided by our purpose to deliver fuel cell power for a sustainable planet and by our cultural values. In every decision we make, we put the safety, health and well-being of our employees, customers and partners, first. And we demonstrated once again Ballard's resilience and ability to adapt with both care and speed. I want to provide brief summary of Q4 and full year 2020 results. Ballard revenue was $28.6 million in the final quarter of the year, with total 2020 revenue of $103.9 million, consistent with our internal projections with the impact of COVID-19. Full year 2020 gross margin was 20%, adjusted EBITDA was negative $38.9 million, year-end cash reserves were $763.4 million and we ended the year with a 12-month order book for delivery in 2021 of $83.5 million. While Ballard's operations continued uninterrupted through the year, some customers, suppliers, partners and end users were forced to shut down temporarily at points during the year and some also deferred capital expenditures. So while our sales pipeline was very robust growing 55% in 2020, reflecting the continued increase in market interest. Order flow is muted. Looking forward to 2021, the impact of the pandemic continues to be uncertain, as a result and consistent with our practice in the early stage of market development and adoption, we're not providing specific financial guidance for 2021. What I do want to share with you is how excited and confident I am about our business, about the important work we're undertaking in 2021 and our long-term future. Customer engagement in all of our Medium and Heavy Duty Motive market segments, bus, truck, rail and marine, are at record levels. We're well positioned with technology, products, field experience, customer relationships, partners, brand and financial strength. As reviewed in our September Investor and Analyst Day, we have a clear strategy in deliverables in 2021, including on technology innovation, product cost reduction, capacity expansion, our Weichai-Ballard JV and our relationship with MAHLE.

Well, thanks Randy, and good morning, everyone. Top line revenue in Q4 was $28.6 million, down 32% year-over-year and on a full year basis, revenue was a $103.9 million, down 2% from 2019. For the full year, Power Products revenue increased 19%, while Technology Solutions revenue decreased 20%. Within Power Products, full year Heavy Duty Motive was up 35% to $47.7 million. This was due to a year-over-year increase in product shipments to customers, particularly sales to the Weichai-Ballard JV and the Synergy-Ballard JV in China. We also saw higher shipments of backup power products to customers in Europe. The decrease in Technology Solutions revenue to $45.3 million, was due primarily to decreased amounts earned from the TS program with Audi, the Siemens development program and the Weichai-Ballard joint venture technology transfer program. Gross margin was 20% for the quarter and for the full year, declines of 1 point in each time period. The Q4 and full year declines were the result of the decrease in total revenue and a shift in overall product mix. Cash operating cost increased 25% in Q4 to $16.4 million and for the full year increased 29% or $11.2 million to $50 million. This was primarily the result of higher research and product development costs, in next generation MEAs, stack and modules. We do expect higher cash operating costs again in 2021, as we increase our investment in additional technology and product innovation and the development across our key product markets of bus, truck, rail and marine. Adjusted EBITDA in Q4 was negative $14.5 million compared to negative $7 million in the same quarter of the prior year, and negative $38.9 million for the full year compared to negative $26.6 million. For the full year, this included Ballard's $12.6 million share of losses in joint…

The first question comes from Sameer Joshi with HC Wainwright. Please go ahead.

Thanks, Randy. Thanks, Tony for taking my call and Tony congratulations on the - and good wishes for the retirement.

Thank you, Sameer.

My first question is about the China JV and revenue contributions from that. At what level of revenue contributions from China do you see your equity distribution also breakeven? This year I think you had over $12 million of equity distribution losses from that JV. How should we look at 2021? Should we expect that contribution to be a positive contribution this year?

Yes. Hi Sameer, this is Tony. Yes, so the equity right, the equity contribution is net-wise negative in 2020 and we expect it to be negative as well in 2021. As Randy mentioned, we're expecting a fairly significant ramp up in deliveries from the China JV, but that will likely take place in the - more in the second half of the year once the policy framework gets finalized. So, we don't expect 2021 to be a break - the breakeven year for the joint venture, largely as a result of the delay in China policy. So I think realistically, we're looking more into 2022, that we would expect to start to see the JV getting closer to breakeven based on continued ramp up. So 2021 will continue to be negative contribution. Well at a level, not quite at the same level as 2021, but it will continue to be negative.

Understood, thanks for that. You just mentioned the order backlog as of December 31st, I assume was around $118 million, which was down around $10 million year-over-year. How does that compare in contrast with the strong sales pipeline? Is there - are there delays in order conversion or what's the reason for the drop in the backlog?

Yes. Samir, thanks for the question. We have seen this very significant increase in customer interest, really across the Board. If you look at our sales pipeline up 55%, a very significant portion of that comes from the Medium and Heavy Duty Motive markets of bus, truck, rail and marine and relatively speaking, a very good diversification across the markets, as well as across the geographic markets too. As I pointed out, in 2020, we did see a number of customers defer capital expenditures and not signing orders, as a result in some cases of COVID-19, a lot of organizations were reducing their CapEx budgets to moderate cash flow, as you would expect. So, I do think that had a fairly significant impact, but I think as we look forward, what we see is the sales pipeline, significant part of that we would hope to convert into orders in 2021 and 2022. And it is important to remember that, lots of times the sales pipeline takes time, from the time we receive interest, translate that through the sales force, different grades we have in the pipeline, ultimately to order book, because there, you know, it's a long sales cycle for these markets. So, I think you'll see some very good movement in 2021 and into 2022 as well.

Understood. One last one before I step back in queue. You listed a bunch of investments in the areas of damped acquisition and upgrades. So, should we - what is the budget for these investments and is it mostly going to be operational - operating expenses? Or are there any capital expenses associated with this investment as well?

Yes, certainly on the product innovation side that I referred to, that would be in the operating budget. In terms of production capacity expansion and localization, there could be additional CapEx spend as we look to deepen our manufacturing presence in China and Europe for example, no dollar amounts specifically that we can share today. And then as we look at M&A of course that would be investment of cash and potentially stock as well, for potential transactions.

Got it. Thanks a lot for taking my questions.

Sure.

The next question comes from Rupert Merer with National Bank. Please go ahead.

Good morning, everyone. And once again congratulations on your retirement, Tony. All the best.

Thank you, Rupert.

I'd like to start with the expectations for R&D this year. Can you talk about what we may see in R&D expenditures and if you can give some color on the activities you are going to focus on this year and maybe expected deliverables you could see this year from the R&D program?

Sure, Rupert, it's Tony here. Yes. So the R&D - the total budget from like looking at 2020 over '21, we do expect to increase our investment in the OpEx area, which as Randy mentioned a moment ago, it's probably going to be up $20 million plus dollars this year, year-over-year. So, this is a fairly significant increase, and this will kind of flow through our cash OpEx, in reported OpEx and that investment is across a number of programs. Certainly the work that we're doing on next generation high-power density modules, focus particularly on the truck market, that's one particular area. We are also launching some next generation MVAs and stacks this year. So, it's across our range of power levels and across MEA stacks and modules, as I say, with a focus particularly on the truck market. So, as I say, think about the potentially $20 million plus increase in our investments in the cash OpEx area this year.

Okay. Does that include your activities with MAHLE?

Well, that would include some of the development work, yes with MAHLE. That doesn't include any specific investment in - if you're thinking about, as has been discussed earlier about, any localization or joint venture, that's all to come. But yes, this would include the development work on this heavy duty or on the truck program that Randy alluded to in his remarks. Yes.

On your Investor Day, you talked about a three-year goal to reduce your cost by 70%. So, is it fair to assume that R&D expenditures this year are in programs that are going to be over the next three years? And maybe we shouldn't expect too many deliverables in the 12-month time frame?

Yes. When you look - at a couple of things. When you look at the MEAs and plate work that we're doing, we saw some very good progress last year. And in fact our product cost reduction in 2020 was higher than our plan. So, the actual realized cost reduction was higher than planned, for at the stack level in 2020. And when you look at the investments of in 2021, there will be developments that are crystallized and we'll be able to share in 2021. A significant portion of the additional spend, incremental spend is really around acceleration and also around expansion of the product portfolio, with different Power ranges and remember now, we're focused on bus truck, rail and marine. So, each of these markets, in some cases have different market requirement. So, really trying to address the unique market requirements at the module level, while continue to drive standardization at the MEA plate and stock level. There will be announcements this year on product improvements, on cost reduction at the stock level and at the module level. But you're right, some of the more earlier stage R&D activities do take crossover into multiple years. And certainly with the 3X3 plan, a cost reduction for 70% cost reduction over that, in the 2024 timeframe, there are clear timelines and deliverables in each year. And I'm very confident about the progress we're making against that.

Great, thanks for the color. And then secondly, just a quick follow-up on China. Your disclosures highlight that you still have some optimization work to do at the Weichai-Ballard JV on the production side. Just wondering if you can give some more color on what activities you have left in China.

Yes. So, the key areas for optimization are really are around yields on plate assembly, the production of plates. We just in December and into January have now achieved yield results that are consistent with what we're seeing in Vancouver. There are some pieces of equipment that some suppliers are making some small changes to, that could even help that further. So I actually believe we'll have higher yield from the Weichai-Ballard JV, than we'll see here in Vancouver, in the coming months. So, that's very encouraging. These are minor adjustments we're talking about here, nothing major in terms of time or spend, It's really about fine-tuning. I think the more important really deliverable is the unlocking of that market to get the policy framework clear, so order flow can be released and production can scale.

It sounds like you have some time for optimization, while you're waiting for those policies to come through. Anyway, I'll leave it there. Thank you very much.

Yes, thanks. Rupert. One thing I would note too is, looking at our own yield results in Vancouver over the last number of years, where we have the higher production runs, higher volume production runs, yield results are higher. So, we're looking forward to seeing that occur in the JV as well.

Right. Thank you.

The next question comes from Pearce Hammond with Simmons Energy. Please go ahead. Pearce Hammond, your line is live.

Sorry, I was on mute. Congrats on your 2020 accomplishments and Tony, all the best on - in your retirement.

Thank you.

In the earnings release, it seemed very clear that you could expand your geographic focus beyond your three core areas of China, California and Europe this year. What markets are you looking at? What are some of the criteria for entering those markets? Does it have to do with subsidies and market structure? And then lastly, would this be entering with the new JV partner or an existing partner? Thank you.

Yes. Pearce, thanks for that. So, we are looking at a couple of new geographic markets. I commented on some progress that we've already made, for example, in Australia, where we're seeing progress in New Zealand. I think you'll see something on that fairly soon and India is a market that we're seeing very strong interest coming out of the hydrogen fuel cell space at this point. And as we kind of look at markets, we think about what's the policy framework and support in those markets. What's the size of the addressable market, particularly for bus, truck, rail and marine? And what's the competitive dynamics and how we position those markets. So, those are a couple of things that we would look at. Whether we - we say enter those markets, whether we do that independently or with partners, every market is different. India is a very unique market, that's a market I think we certainly would look at a collaboration there. And - but other markets like Australia and New Zealand, very easy for us to set up an office with sales and support capabilities and service capabilities in those markets as well.

It's Tony here. Pearce, just to supplement too, I think just if I could, to Randy's comment to - I think what we're also starting to see as well is the demand pull from some of our customers in some of the newer markets that we're looking at, many of these customers are global by nature. And so, we'll end up being looking at new markets for things like the mining and marine which are truly international markets. So I think we'll - we may find ourselves following some newer customer opportunities around the world, because of where the customers are located as well.

That's great, thank you for that color. And then my follow-up is, you've talked a little bit about some of the initiatives on fuel cell cost reductions and that you've talked about, but is there any specific like technical or scientific advancements, that you would want to highlight today, that's helping reduce fuel cell cost?

Yes, I think we went through this fairly significantly during the September Investor and Analyst Day, where we looked at different operating - sorry, different technical parameters that we're looking at today, tomorrow and even a number of years from now. So, things like current density, power density, operating temperature, free start capabilities, the different parameters that we currently have and what those targets will look like as we move out in time. So, a lot of activity underway, a lot of exciting work that's been done in 2020. As an illustrative example, the ability for us to have thinner plates to help improve power density, was a pretty significant development for us in 2020. The ability to have new materials, in some cases thinner materials or lower cost materials, or materials with higher performance. There's a lot of work that needs to be done, in many cases actually working collaboratively with the supply chain to help them with their specifications, in order to improve their material side.

Excellent. Thank you for taking my questions.

Sure, thanks.

The next question comes from Michael Glen with Raymond James. Please go ahead.

Hey, good morning. And congratulations, Tony, on the retirement.

Thanks.

Just to start with - Randy you do seem to be speaking more favorably or optimistically, say for this China roadmap. I'm just wondering if there's anything in particular driving that? And, as we see that information come out, are there particular aspects of that roadmap that you'll be looking to see?

Yes. I think, you know, a couple of important developments. Even in December, China released a policy document that really goes to what they call Encouraged Industry. So, the fuel cell industry has now been designated as an Encouraged Industry, which just really means that, they are supporting the localization in China of international companies and those companies in theory should be treated very similarly to domestic players and you can do that without having a JV controlled by a Chinese partner. And so as we think about opportunities for continued value chain expansion in China, that's a very encouraging development for us. The other thing is just having spent six weeks in China, you get to see first-hand, the momentum in that marketplace. While we clearly had a stall out in China over the last year, because of the policy landscape, that hasn't changed the enthusiasm and excitement and the number of companies that are now entering as supply chain - potential supply chain partners. And that to me was very encouraging, because we're seeing, let me just use catalysts as an illustrative example, a number of new catalyst companies that are looking to move into this space and are working - we're working with now collaboratively to help them design the appropriate catalysts that can dramatically improve - improve performance and lower costs. So, there's a lot of work going on in the supply chain, that is very compelling and then actually seeing vehicles on the road, which you don't see anywhere else in the world, in any scale at all visiting. I think I was in 10 different cities and probably 5 cities I was in, I actually saw vehicles on the road. This is very compelling and so, there's a lot of activity going on. I got to meet with many politicians and policymakers at very senior levels and I have a very high conviction level on the growth we're going to see in the China market. And a very high conviction level on the role that Weichai-Ballard will play, going forward.

Okay. And just any like specific aspects that you're particularly looking for, as that - as that roadmap comes into form? Is there certain aspects that you are hoping will be contained in that?

Well, I think there probably won't be any surprises in my opinion in terms of the next phase. The question will be which demonstrations are awarded initially and I think there's probably an understanding at this stage, that at least 3 regions will be included. We expect that to be Shanghai, Guangdong and Beijing. And those are the 3 regions where you're seeing a lot of support. In fact, Shanghai just recently issued another policy document, supporting that deployment in scale of fuel cell vehicles. So, I think that's a very attractive marketplace and there are other policy frameworks that will be announced, I believe in 2021, beyond this cluster demonstration that's being financed through the Ministry of Finance. I think you'll see other developments coming out of the Ministry of Science and Technology, for example, that will support deployment of fuel cell vehicles in a very substantive way.

Okay. And just in terms of the recent meetings that you had with - with your - with your JV partner, like how - have they given you any insights into how they view the ramp, how they expect the ramp to take place in terms of volume and just in terms of something you mentioned last year on a conference call, did you happen to have the discussion with them about a potential IPO of the Weichai-Ballard JV?

So, we discussed both while I was there and we are - there's a lot of interest right now in the China market for fuel cell and hydrogen companies coming to market. In fact, there is a company currently going through the IPO process, REFIRE, Shanghai Reinventing Fire is currently going through the IPO process in China. That's a very good test case and we're studying that case with a lot of interest, of course. So yes, I would say there's an alignment of interest in view on long-term, looking at the opportunity to IPO the vehicle. When to do that and what the right circumstances are, will be things we'll continue to discuss. On the production ramp, we have a couple of different scenarios for 2021 and 2022, depending on when and how the policy framework gets clarified. And so, hopefully that will be soon, Congress is meeting currently in Beijing, right now. There are expectations that coming out of Congress, there should be more clarity on this, when the policy gets announced is difficult to know for certain. But, if that gets announced soon, I think that will add more certainty and then we can trigger one of our different scenario plans that we have with the JV.

Okay, that's great. Thanks for taking the questions.

Yes, thank you.

The next question comes from Aaron MacNeil with TD Securities. Please go ahead.

Hi, good morning all. Paul, if you're on the line or listening, congrats on the new role. Tony, I'll join everybody else and congratulate you again on your retirement.

Thank you.

Randy, you referenced in your prepared remarks, but based on the press release activity in Q1, it seems like the cadence and the magnitude of order flow has increased and would you characterize this as sort of a lumpy group of announcements, just based on pent-up demand due to COVID? Or can we view this kind of pickup in the first quarter as something more sustainable and indicative of some of the broader secular trends, as it relates to fuel cell commercialization?

Yes, I think the history of the industry has been lumpy announcements in very project-based work. Right. And I think you're right that we've seen here recently an increase in cadence and I think relative importance of some of the announcements as well and the indicators that some of those projects could lead to longer-term volumes as well. When you're meeting with the counterparties right now, I just recently met with CP for example, as - and got to hear directly from them, their vision on decarbonizing locomotives. And just the passion and the interest that the counterparties have today, is really quite different than you would have seen 2 or 3 years ago. And I think that's reflective of - at the Board level, these are important issues, ESG investing is really driving a lot of this as well in my opinion, across a number of different markets. And so I think the commitment level to decarbonize is much stronger and the understanding of the role that hydrogen can play to decarbonize is also much stronger. So, I'd like to - I'd like to hope that this is an indicator of what will happen going forward, but I think history has taught me not to be so bullish about that quite yet. I do think that the sales pipeline, rather than the announcement order, the sales pipeline to me is a more a stronger indicator of where the business is headed, than necessarily the timing and lumpiness of press releases.

Understood. And then, I know this is kind been brought up already as well. But, can you say how your backlog is broken down, in terms of fuel cell sales and then the Technology Solutions piece and are those different sort of buckets moving in different directions, right now? Like, can you give us any sense of - of kind of how - what that looks like in more detail?

Yes. I think, actually, in my mind, the sales pipeline is probably a better indicator of where the trends are, as compared to the order book. And if you look at the sales pipeline, it's interesting. A couple of years ago we targeted, trying to have diversification of effectively 40% from China/APAC, 40% from Europe and 20% from, call it North America or rest of world. And if you look at the sales pipeline, that's - the relative geographic split is very similar to that target we had set some years ago. And then of course, we're seeing a very heavy weighting. As you would expect, bus, truck, rail and marine, we characterize those four markets in that order, because we believe those are the - that's the sequence of adoption for those markets, bus truck, rail and marine. And we have what we call the scaffolding effect, whereas the bus market, we'll start to see penetration and scaling, then the commercial truck market will add on top of that, and as the bus and commercial truck market both scale, the rail market will add on top of that and sequentially with marine. And what I'm - what's been surprising to me, is the rail and marine market, I think will surprise to the upside. We're seeing a lot of interest in those two markets, that's showing up in the sales pipeline and customer engagement, that isn't even reflected in the sales pipeline. But I think for us, progress in 2021 on the commercial truck market is critically important. We're very pleased with the positioning we have in this market in China. The fuel cell policy in China is weighted towards commercial trucks. If you look at the - the number of vehicles with - and platforms that have Ballard technology certified in that market, as well as the Weichai positioning in the truck market in China, that's very encouraging. And then, the progress we'll make with MAHLE in 2021 on the commercial truck market is critically important. And then of course there are other activities we have that aren't disclosed yet. So, I think the sales pipeline is probably a better way to think about it than the order book. And that relative geographic split, as well as a fairly heavy weighting on the four applications, bus, truck, rail and marine and a really good diversification among those markets is showing up.

Understood. Maybe I'll just close up with a bit of an odd ball question. But, one of your competitors has essentially given away warrants to its customers in order to incentivize spending. And so for obvious reasons this is not - it's a double-edged sword. But, as it relates to Ballard, are you worried that investors may not be familiar with those details of how that customer engages with major customers and how your backlog versus their backlog may differ or even be worried, that this model will make that competitor a bit stickier with large potential customers or future customers, just given that growing and fairly high profile reference base of work?

Yes. I mean for us, we're just going to focus on technology innovation, product improvement, great customer experience and make sure we're positioned well in the markets. I'm not going to second-guess what that company did. They're doing very well in the Forklift Material Handling market and they've got a very entrenched position and kudos to them.

Okay, great. That's all from me. I'll turn it over.

The next question comes from Greg Wasikowski with Webber Research. Please go ahead.

Hey, good morning guys. Thanks for taking my questions. Just wanted to go after a point you just made Randy and seeing an acceleration in the marine market. So, I'm just curious, could you give us an update on the project that you have going with ABB? And then secondly, just from a new market as a whole, can you give us your thoughts on a timeline that we could see an acceleration for larger capacity hydrogen carriers as well as the potential for hydrogen being used as a proportion for longer haul tankers, cruise ships and container ships, that's obviously in the future, but your updated thoughts there would be great.

Yes. So, the focus in 2021 is to actually get the Type Approval for our FCwave product, it's a 200-kilowatt modular product. This will be the first product, first fuel cell product that I'm aware of, that will have Type Approval, which means it's specifically designed to meet the rigorous marine requirements. We've seen a lot of interest from customers and - and now have, I think close to 15 orders in the marine market. So, it's very compelling, the uptake we've had already and these of course are all demonstration projects, right. It's very early stage. These customers want to sample these products, trial them, pilot them and then move, like we did in the bus market from trials to larger opportunities. So, that's the timeline that we're on right now. In terms of ABB, ABB is a giant in the marine segment. We're very pleased with the relationship we have with them and a number of these projects we have, ABB is involved and we'll continue to look for opportunities to expand that relationship and work together. In terms of propulsive power for larger vessels, in my opinion this is many, many years away. We need to have a compelling Hydrogen Storage Solution, costs need to come down as well on the product side and we need to have reliabilities at much higher intervals that we do today. If you look at reliability today, for example, in 2020 during COVID-19, which was a challenging period, we had uptime or availability rates for vehicles in the field of about 97%. What we'd like to see that is, we're going to continue to see that number improve. Where we had any - any issues in the field, typically it's been some of the balance of plant components, things like compressors and hydrogen recirculation blowers and what we see is that, the new suppliers, companies like MAHLE, that are entering into the market and looking at developing new balance of plant components, with higher reliability and lower costs, are going to help address these markets where reliability requirements need to be higher and we are talking about longer extended range requirements. So, I think those markets are a ways away. I'm very encouraged by the work that Chart is doing, on looking at - you know, looking at liquid hydrogen and vaporization, a very talented company with a lot of innovation and very aggressive on the M&A and strategic collaboration front, I think they'll be a key player in this market as well.

That's really helpful, thank you. And then along those lines, as talking about the Global Energy Ventures MOU, it seems like Asia Pacific is at least the initial focus there. So specifically in China, I'm wondering what kind of appetite you've seen from China and understanding that, that still could be very much policy dependent, but is it something that you could ultimately facilitate or even promote, given your presence there?

Yes, great question. I'm going to suggest, probably 10 different meetings I was at, during that 6-week period where people raised the opportunity to collaborate with Ballard in the marine market. The Yangtze River Delta, the Pearl River Delta, have a number of marine vessels of all different kinds, with de-carbonization challenges. So, I believe China will be a very attractive market for them, for the Marine segment and it's an area of activity for us going forward.

Awesome, sounds good. All right, that's all I got. And Tony, wish you well in your retirement.

Thanks, Greg.

The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

Hi, good morning. A quick question on capacity additions. I think you said you're doing a 6X capacity expansion in Vancouver. What does that give you in terms of revenue capacity? And then maybe what you're thinking on adding capacity in Europe in particular, in terms of timeline?

Yes. So, Rob, so the 6X that's on here - the 6X capacity expansion we've discussed is for MEA capacity here in Vancouver and we see that MEA - that capacity investment taking us out through to about 2025 roughly, before we have to increase capacity again. So, I won't put a - I won't put a revenue target, a revenue number on it, because obviously a lot of those MEAs are going into our product and including some shipments to China. But, think about capacity through the mid-part of the decade and much beyond that, we're kind of focused, and I just focus on MEAs. The incremental cost to increase capacity again in MEAs is relatively modest. We're talking $10 million to $20 million to increase capacity of a like magnitude on MEAs. And of course, whether we think longer-term about MEA localization in other markets. The bigger the bigger question I think or the bigger capital question is more on capacity for stacks and modules. So, China of course, we're well situated with the joint venture to satisfy that market. With regard to our capacity on stacks and modules in - out of the Vancouver, we're certainly capacitized for the next couple of years. But I think we are - that's an area that we are looking at. We've talked in the past and one of our potential programs is localization of capacity in Europe, as an area of consideration for stacks and modules. So, I think it's safe to say between now and 2025, we will need to make some additional investment in stack and module capacity ex-China, which is - which is fine. So, and that the order of magnitude on that, to replicate a facility to do that, could be in $100 million range for the stack and module assembly facility, maybe a little higher. But that's kind of how we think about capacity over the next five years.

Okay, great. Thank you for that color. And then just specifically in MAHLE, I think you talked about some product development milestones next year. Could we see customer project activity in 2021 or would that be thereafter?

Well, we're certainly involved in customer discussions already with MAHLE and end customers, so, users OEMs. So, I don't know what announcements we - the time frame for announcements, I think to be more cautious, we probably say 2022, because the product will be effectively unveiled in 2021 and so, a lot of important work going on to get the product optimized for truck platforms, as well as with the right balance of plant components for higher reliability and lower cost.

Okay, thank you. I'll turn it over and best wishes. I have my best wishes to Tony on his retirement.

Great, thanks. Thanks so much.

Thanks, Rob.

Thanks, Rob.

The next question comes from PJ Juvekar with Citi. Please go ahead.

Yes, hi good morning. You know, looks like some of your orders, Randy, were slow to come in 4Q due to COVID. Do you think they were pushed into 1Q? You recently won an order of 50 buses from Wrightbus and then more orders from Van Hool, does that put you ahead of schedule in 1Q from where you thought you were? And I guess related to that, for all these buses in Europe, who is supplying hydrogen fueling and hydrogen fueling stations for this? And are you limited by how quickly that hydrogen infrastructure builds up?

Yes, so let me take the - first of all, the questions on the order book. And I do think we should expect to be cautious still here, COVID-19 is - is not finished yet obviously, and I think, in terms of order inflow, we should be cautious for the next couple of quarters still. But I think I'm very encouraged by what I've seen and I'm even more encouraged by the robust sales pipeline of very qualified commercial opportunities we have. In terms of supply of hydrogen at fueling stations and are we limited by fueling station, it's important to remember we focused on these use cases, we have centralized depot refueling and don't need to have a distributor refueling infrastructure. So that's an important point to understand and many of the end users are already used to having a diesel refueling station at their site and so, their operation isn't disrupted. All they're doing effectively is replacing a diesel refueling station with a hydrogen refueling station. And so, in terms of who's actually typically supplying that, there are a number of different companies that have been doing that, Linde, Air Liquide, Air Products the industrial gas giants. Then you have companies like Shell and BP, that have been active in that market as well. And then you have some additional players, companies like RISE in the UK, that are supplying hydrogen for bus and other applications. So a number of different players. I think what's encouraging is that, there is a universal conviction that the cost of delivered hydrogen will go down Circa 70% over the next decade.

Great, thank you for that color. And then I guess my next question is, you are really good at making MEAs and FC stacks, the, that's the same technology for electrolyzers and so would you potentially consider getting into electrolyzer production in the future and that will give you some hydrogen capability as well, to be a bit more vertically integrated?

Yes. So, a very good point. To clarify, not only we're good at MEAs in plates and stocks, we're also good at modules as well. But, yes, you're right, there is some overlap because electrolysis and fuel cell technology are effectively reverse processes and do use some of the same materials like membranes, like catalysts, like gas to fusion layers, for example. And so there's a lot of merit to your commentary, we are not looking at developing electrolysis greenfield in house. We would consider strategic collaboration and M&A opportunities on the electrolysis side, but we aren't looking to set that up internally on a standalone basis.

Thank you very much.

Thank you.

The next question comes from Craig Shere with Tuohy Brothers. Please go ahead.

Good morning. Congratulations on all the commercial progress lately. I just - just want to dig a little deeper on Aaron's order flow and Greg's maritime questions. If I'm understanding it correctly, the Canadian Pacific freight train and the Global Energy Ventures hydrogen carrier opportunities, are like step changes from what you laid out in your September Analyst Day, 2030 TAM outlook, because of the multi-fold increase in unit kilowatt requirements. If these initial demonstrations worked out, how material can those markets become and how soon do you think we'll know if those demonstration projects are working out?

Yes. So, great question. I think as we look at these markets, there is no doubt in my mind, these markets will be decarbonized. And then you say, okay, how can the rail market be decarbonized and I'll just use locomotives in North America as an illustrative example. It's something like under 1% of locomotive rail is electrified in North America. So, you have two options, you can go with overhead catenary wire, which is very expensive, or you can look at hydrogen. Those are in my opinion, the only two viable options for decarbonizing mobility, rail mobility in North America for freight. So, I think the market opportunity is compelling and if you look at markets where, I think the price of CO2, we'll prices - CO2 pricing and costs will increase over time, that could be quite additive to the model as well. I think from a market adoption perspective and a sequencing perspective, you should think about these pilot projects roughly taking a couple of years, two or three years. What I would suggest is, you will see likely the CP locomotive demonstrated in 2021 and then you will see over a two-year period, that trial and results from that trial. And what we've seen is that, from the bus - our experience from the bus market, is that, once users get comfortable with the technology, comfortable with the safety protocols and comfortable with working with new technology from an operator perspective, like bus drivers or rail operators, usually, they're very excited about it. I think this is a - both these markets, we characterized the size of those markets during the September conference call. I think we were very conservative in that characterization and what I've seen even since September, suggest to me those numbers are probably - are fairly muted.

Great, thank you for that. And on digging deeper into the fuel cell truck market, it seems more than the others we just talked about, the competition is just simply heating up. Westport recently announced the hydrogen combustion engine effort, Plug is working with Renault, Daimler and Cummins recently announced the link-up, can you elaborate on your MAHLE relationship and what you view as your competitive positioning, in the pending hydrogen fuel truck marketplace?

So, I think that's a fair observation, we are seeing of course many players rush to this market and why, because it's an attractive addressable market, that fuel cells are uniquely positioned to address. And so, yes, we are seeing an increased competitive landscape that validates our thesis for some time, on the attractiveness of this market. What, I think is important, very important to understand, is that Ballard has already proven the durability of our fuel cell technology in the field. So, as we mentioned earlier, over 70 million kilometers of in-revenue service of now 3300 buses and trucks in operation. No one else, no one else has that type of installed base for buses and trucks. And if you look at some of the units, we've had in the field operating in some cases over eight years, we've seen 38,000 hours of durability on same fuel cell stack. So, these are industry durability records and we're not talking about the passenger car market here, where you need 5,000, maybe up to 10,000 hours of durability, we're talking about a market where you need 30,000 to 40,000 hours of durability. And so we've proven that out in the field, not as a lab exercise, there is a concept. And I think as you look at brands looking to put technology into their vehicles, they're going to want to make sure they have not just safety and reliability, but also the durability for a total cost of ownership. So, I think we have a significant advantage on total cost of ownership, because of our durability - proven durability. And I also think, if you look at the MAHLE relationship and their positioning in the commercial vehicle market in what areas they have expertise in, its highly complementary to the work that we can do to increase performance and reduce cost on the stack. And if you look at some of the balance of plant components that they're currently designing and will be launching and integrated into our advanced fuel cell engine for the commercial truck market in Europe, I think it's an exciting collaboration. And if I was to compare it to other collaborations, I think it's - should be very strongly positioned.

Great, thank you. And my last one, the order book at year end was almost $118 million with $83.5 million to be delivered in 2021, but since year-end, to the point in prepared remarks, you announced the Canadian Pacific freight opportunity, the global energy hydrogen carrier opportunity, the UK passenger train opportunity and the bus orders with Wrightbus and Solaris and we're kind of guesstimating, just those combined might be $11 million in orders, could your order book for 2021 delivery already be approaching $100 million right now as we speak?

Yes. To me what I would prefer to focus on, is directionally what does the order book going to look like perhaps at the end of 2021 and I think with the sales pipeline activity we have, we expect to see some great conversion in 2021, but I don't want to in any way suggest what the 2021 outlook on revenue is going to be, just because with COVID-19 in the early stage of the market, our position is not to provide financial guidance.

Okay, thank you.

The next question comes from Jonathan Lamers with BMO Capital Markets. Please go ahead.

Good morning. Most of my questions were asked. On simplifying the customer experience, could you expand on what the customers are looking for there, what Ballard would be looking to acquire or could develop in-house?

Yes. So, great question Jonathan. Basically what we want to do is simplify the ability for customers and here I'm thinking of vehicle OEMs and then ultimately end users, but at the vehicle OEM, how do they integrate of fuel cell module into their vehicle platform. How do they integrate into a powertrain and then onto the vehicle itself? And so, today our scope of work is typically to provide the fuel cell engine, they need to - the vehicle OEM needs to take that engine, pair it up with the DC-DC converter, pair it up with the storage solution, integrate into an electric powertrain and then also make sure that the packaging for everything into their vehicle platform is effective and efficient as well. And in some cases, customers have that in-house capability, in other cases initially they're using systems - third-party systems integrators and what - really what we want to do, is simplify that experience for them, to bring more scope and importantly to optimize the solution. So, as an illustrative example and by the way I should have mentioned that, that package also includes batteries as well. So, as an example, what's the right DC-DC converter for a certain application, what's the right amount of fuel cells versus batteries for a certain application and use case duty cycle. And so, we want to provide more value and simplify that experience for the customer to reduce customer friction points and enable and accelerate adoption, while also getting more value for Ballard in the process. That optimization will also lead, to my opinion, to cost reduction.

Thanks. And one question on China, Randy. You mentioned that your trip increased your confidence that, the Weichai JV will play a meaningful role as the market grows, did you uncover any updated sense on the competitive dynamics, whether the competitors' products will meet the technical requirements needed to qualify for the subsidies, as well as Ballard's products can?

I would say it was the opposite. I actually had the opportunity to meet with a number of companies that could be competitors to Ballard and came away recognizing they have a lot of work to do to catch up.

Thanks. And for Tony, on the Technology Solutions business, the Audi program appears to be winding down from a revenue contribution perspective, are there any replacements for that business on the horizon?

Yes, and you're quite right. So the Audi program, as we've announced previously, that program is starting to reach the end of its TS program life and so yes, the revenue has ramped up. Yes, Randy if you go - I'll go back to the pipeline and referring to the pipeline Randy mentioned earlier, we do have a fairly significant number of TS programs that are in the pipeline at the moment, hopefully we'll be able to convert some of those over the course of the year. So, nothing that I think we can point to or want to point to at this particular point. But lots of interest coming from different markets. We've kind of talked about some new and evolving and developing markets, some of those could generate some additional engineering service in TS programs and some new markets. So hopefully, we'll have more to be - we can talk a bit more specifically about some of these, this year. But there is a decent amount of TS in that pipeline that Randy mentioned. Randy, you want to supplement or?

Yes, I think one important point too is, we've had a significant portion of our engineering labor force allocated against our Technology Solutions programs and for us, the ability to actually reallocate some of that talent towards some of the in-house programs, albeit increasing our cost structure is, I think, a really interesting opportunity, because this again feeds into the point about acceleration.

Okay. And one really basic question. On the sales pipeline, is the dollar base for that 55% increase, like just a bit larger than the Company's consolidated sales, how should we think about that?

It's significantly higher.

Yes, okay. I'll leave it there. Thanks.

The next question comes from Mac Whale with Cormark Securities. Please go ahead.

Thanks, guys, for letting me ask the question, I know it's going on a bit long here. Just very quickly, Randy, you talked about pent-up demand in China, when the announcements come out, do you think there is enough time left in '21, where you can deliver into that pent-up demand, so that maybe your - your estimates of what the market would be in '21 might still be, like I say, a year ago, might still be valid or do you - can you not just catch up?

Yes, great question. And that's a couple layers to it. First of all, we need to make sure what - how are the policies structured. In some cases, the policies may be structured, so that first to use gets highest - highest subsidies or get access to those subsidies, if there are limited subsidy pause in certain pockets as well. So there could be a race in some case, to use some of the higher subsidies that might become available. So, we'll have to see how the policy is structured and whether that incents rapid deployment, first of all. The second thing is that of course the JV does have some inventory and really what we want to see of course initially, are more deployments out of the JV, that relieve that inventory and allow us to recognize deferred revenue. So, that, that will be helpful. And then, of course, the third will be, as we move through that inventory at the JV and then move into additional sales beyond that, triggering more MEA volume purchase orders from dollar to support the JV activities. So, that's the way I would think about it.

Okay. Having all of the state for two decades now, it's interesting to the comment that you say about the competition not being ready. I can wholeheartedly back that up, if that matters to anyone, but it's interesting to me, I would say your position then is one in which your willing to allow - let me phrase it another way, you can disagree, but it's almost as if you were not that threatened by what you see. But is there not a risk that you - that a customer tries some competitor, they come away disillusioned with the capability of fuel cells and the industry loses a believer as opposed to Ballard losing a customer, could you not take your big balance sheet, drop pricing, drive demand, win big market share and dominate the industry and have happy customers? I'm just wondering how you see the balance sheet, in that game.

Yes, I want to clarify something. The question about competitors and where they - what status they're at, I again believe we have a strong leadership position in these Medium and Heavy Duty Motive markets and I was commenting specifically on some of the development activity, company development activity and product development activity in China. Of course, there are other competitors, Toyota, Hyundai, Daimler, etc. Again, most of them have been focused on the passenger car market and they are now pivoting and if you look at the time line for example for cell centric which is the JV between Daimler Truck and Volvo Truck, the timeline is many years after our timeline with MAHLE. So, we're - I think we're well positioned there. And of course you have other companies, Bosch for example is active and Cummins is active. So, there are credible competitors here. I don't want to be dismissive of the competition, to be clear. But what I do think is that, you mentioned will some customers potentially work with others and experience - have bad experiences. We have seen that over the last number of years and those customers are now with Ballard. I could - there are quite a few examples of that, particularly in the bus market, where they've tried others and there's a reason we have over 85% market share, because not only we're providing a product that has the highest performance in the field, but we take care of the customers from a customer service and customer experience perspective. So, I think as we look at opportunities going forward, I think the commitment level from customers isn't - isn't so vulnerable, that if they have a bad experience with a potential supplier, that's going to turn them off the market. I think it will enable them to turn to others. And if they're having that experiences, they're always welcome to come to Ballard.

Great, thanks. Thanks, Randy. And just an appreciation to you Tony over the years, with all your hard work and insight. So, thanks and good luck.

Thanks, Mac. Appreciate it.

This concludes the question-and-answer session. I would like to turn the conference back over to Randy MacEwen the CEO, for any closing remarks.

Great. So, the call went a little longer today and I appreciate your patience for that. So, thanks everyone for joining. Paul Dobson, our new CFO effective March 29 and I look forward to speaking with you in early May when we'll discuss our results for Q1 2021.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.