Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems, Second Quarter 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. I would now like to turn the conference over to Guy McAree, Director of Investor Relations. Please go ahead.

Welcome to Ballard's second quarter 2020 financial and operating results conference call. With us today on the call, we have Randy MacEwen, Ballard's President and CEO; and Tony Guglielmin, our CFO. We're going to 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 a complete disclaimer and related information. Before we get started, I'd like to remind everyone that we're planning a virtual investor and analyst day 2020 on Tuesday, September 29. This year basic information regarding that event is now available on our website, and we'll be adding dial-in information in the coming weeks to enable interested investors to participate in this live video stream day which is set to kick off at 10 am eastern time on September 29. On today's conference call, Randy is going to provide a business update and Tony will then review second quarter 2020 financials followed by a Q&A session. And I will turn the call over to Randy.

Thanks Guy and welcome everyone to today's conference call. On our second quarter financial results, Ballard delivered top-line revenue of $25.8 million, gross margin was 21%, adjusted EBITDA was negative $8.6 million, and we finished the second quarter with $170.3 million in cash reserves. Results were consistent with our expectations reflecting some modest impact as a result of COVID-19. Consistent with the revenue cadence of the past few years, we expect a strong second half. Although we've seen some delays in certain programs and activities during the past quarter as a result of COVID-19, conversely, we've recently seen a significant increase in quoting activity with the quality of opportunities improving and project sizes increasing. Indeed our sales pipeline has grown almost 50% in 2020 compared to the end of 2019, with most of that growth coming in the past few months. I want to repeat this point during the pandemic; our sales pipeline is at record highs, up almost 50% over the past few months, with quoting activities particularly high across our heavy-duty motive segments of bus, commercial truck, rail, and marine. Now, as noted on our last earnings call in the context of the COVID-19 pandemic, our top priority remains the health and safety of our employees, contractors, customers, and partners. We continue to comply with the most conservative public health guidelines including having most employees working remotely and implementing precautionary and prudent measures at our facilities globally. We've preserved business continuity to align with our customer deliverables including continued operations at our essential manufacturing and testing operations in Vancouver as well as essential field service support to customers in China, Europe and North America. On the supply chain side, we experienced some modest impacts in Q2 but have worked to mitigate overall 2020 risk including by increasing our inventory positions in key materials. Although the situation remains fluid, we're not expecting any major supply chain disruptions for the remainder of 2020. On the demand side, while we continue to experience some modest delays in customer projects, programs and order intake, we believe the overall COVID-19 context will represent long-term demand acceleration as I described in a recent blog posted on our website. There have been several important policy and commercial developments in our target geographic markets since our last earnings call. Let me first start with Europe where momentum continues to build. On May 27, the European commission proposed its €750 billion economic recovery plan with the green deal at its core. The plan puts a focus on kick-starting a clean hydrogen economy with renewable hydrogen, cleaner transport and logistics as key elements. On July 8 the European commission released a plan entitled a hydrogen strategy for climate neutral Europe which cemented hydrogen as a key priority to achieve the European green deal and a clean energy transition. The plan sets out a phased approach to develop renewable hydrogen. In the first phase from 2020 up to 2024, the strategic objective is to install at least 6 gigawatts of renewable hydrogen electrolyzers in the EU and the production of up to 1 million tons of renewable hydrogen to decarbonize existing hydrogen production and facilitate the uptake of hydrogen fuel cell buses and heavy trucks. In the second phase from 2025 to 2030, the strategy is for hydrogen to become an intrinsic part of an integrated energy system with a strategic objective to install at least 40 gigawatts of renewable hydrogen electrolyzers and the production of up to 10 million tons of renewable hydrogen. In this phase renewable hydrogen is expected to gradually become cost-competitive with other forms of hydrogen production, and the plan calls for parallel demand-side policies to support scaling of trucks, rail, and maritime transport applications along with a build-out of a network of hydrogen refueling stations. In the third phase from 2030 onwards and towards 2050, renewable hydrogen technology should reach maturity and be deployed at large scale to reach all hard to decarbonized sectors. The European commission expects investments over the next decade to 2030 could range between €24 billion and €42 billion for electrolyzers, €220 billion to €340 billion for scaling up solar and wind energy production capacity, and €65 billion for hydrogen transport, distribution storage and hydrogen refueling stations. And we can now add Germany, Norway and Spain to the growing list of countries that have announced hydrogen strategies or road maps with each of these countries recently unveiling their respective national hydrogen strategies. Germany announced its national hydrogen strategy with 38 measures across the hydrogen value chain including fuel cell vehicles. Germany also announced a massive COVID-19 stimulus package including €9 billion earmarked for green hydrogen and a commitment to 5 gigawatts of green electrolyzer capacity by 2030 with a further 5 gigawatts by 2040. Norway's strategy has a focus on the maritime sector, heavy transport and industrial processes as the most relevant uses for hydrogen. And in July, Spain announced its hydrogen roadmap, an €8.9 billion plan through 2030 with 57 specific measures and specific goals for 2030. There is also a growing call in the UK for a comprehensive hydrogen strategy including for fuel cell electric vehicles particularly targeting zero-emission bus fleets and strategies for decarbonizing heavy goods vehicles, shipping, rail, and aviation. During the quarter, Ballard received follow-on orders from Wrightbus, a long-time bus OEM partner, for 15 additional modules to power buses planned for deployment in the UK. At the present time, we have orders on hand from Wrightbus for a total of 50 modules to power UK buses in London, Aberdeen, and other cities. So Ballard is well-positioned in the European market where we are currently powering 65 fuel cell electric buses in Europe with aggregate mileage of over 7 million kilometers. Let me now turn to the United States. In California, on June 25, the California Air Resources Board passed its landmark advanced clean truck regulation requiring truck manufacturers to transition from diesel trucks to electric zero-emission trucks with a plan for every new truck sold in California to be zero-emission by 2045. Manufacturers to certify medium and heavy-duty chassis or complete vehicles with combustion engines are now required to sell zero-emission trucks as an increasing percentage of their annual sales in California starting in model year 2024. For 2024, 9% of all on-road class 4 to 8 truck sales must be zero-emission incrementally scaling up to 50% for 2030 and 75% for 2035. Similarly, for class 7-8 tractors, the requirements are 5% for 2024, 30% for 2030, and 40% for 2035. In the past few weeks, 15 states including California, New York, New Jersey, Massachusetts, North Carolina, and Pennsylvania have signed a MoU committing them all to mandating that 30% of heavy and medium-duty trucks sold must be zero-emission by 2030 with all heavy and medium-duty truck sales being zero-emission by 2050. The momentum is now building throughout the U.S. for decarbonizing commercial trucks. There was also important progress in California over the past few months on the zero-emission bus front. Several California transit agencies including Orange County, AC Transit, and Sunline published zero-emission bus rollout plans in compliance with CARB Regulations, with many of these plans expecting to use fuel cell electric buses going forward. For example, in June, OCTA, which operates more than 500 buses serving a population of approximately 3 million people, unveiled its zero-emission bus rollout plan. In its plan, OCTA noted that a 100% fuel cell electric bus fleet scenario showed a lower overall cost than a mixed fleet scenario and that fuel cell electric buses offered extended range and a better match to their operating parameters. By comparison, it was noted that many routes cannot be effectively served by battery electric buses without mid-route charging and that the current range of battery electric buses may require more vehicles and drivers than fuel cell electric buses to meet similar service levels. Based on the results of their analysis, OCTA's zero-emission bus rollout plan focuses on using 100% fuel cell electric buses for fixed route operations. In California, Ballard is now powering 37 fuel cell electric buses with cumulative mileage of over 2 million kilometers. Turning to the large China market, I'm pleased to confirm that the Weichai-Ballard joint venture has begun production activities together with assembly of next-generation LCS fuel cell stacks and LCS-based modules. We expect all manufacturing and assembly processes to be optimized, with the start of a production ramp through the remainder of this year. For Ballard, this has been somewhat of a soft launch given the travel and social distancing restrictions resulting from COVID-19. However, we anticipate a more formal opening ceremony at a future date to celebrate the commissioning of this important operation. As a reminder, the joint venture is located in the city of Weifang in Shandong province, housed in a newly constructed 19,200 square meter facility currently staffed with approximately 130 employees. This is an exciting step forward in our partnership strategy with Weichai and our supply of fuel cell products for buses, commercial trucks, and forklifts in the China market. In parallel with the work of the joint venture, Weichai has built four hydrogen refueling stations in Shandong province to support seven fuel cell electric bus lines, with a total of over 200 fuel cell electric buses that have already traveled more than 1.2 million kilometers to-date. There's also work currently underway to develop a series of fuel cell electric vehicles for the China market, including four fuel cell bus models, two heavy-duty fuel cell truck models and two logistics truck models, all of which are being developed at Weichai's OEM subsidiaries Zhongtong bus, AsiaStar and Sinotruk. This provides significant market opportunities for the sale of fuel cell modules and stacks to power the growing range of fuel cell electric vehicles expected to be deployed in China in the coming years. We're also excited about continued progress at the Synergy Ballard joint venture in Guangdong province in which Ballard holds a 10% ownership interest. As a reminder, that JV is manufacturing Ballard's previous generation FCvelocity®-9SSL fuel cell stacks. Subsequent to the quarter, we received a follow-on order for $7.7 million of MEAs from this joint venture given growing market demand. On the China policy front, we're still awaiting the release of the updated national policy on hydrogen and fuel cells which has been delayed and is now expected this quarter. There has, however, been continued progress on the provincial and local levels. On June 24, Shandong province released the medium and long-term development plan for the hydrogen energy industry in Shandong province 2020 to 2030, by which the province targets the adoption of 3,000 fuel cell electric vehicles and 30 HRSs by 2022, 10,000 fuel cell electric vehicles and 100 HRSs by 2025, and 50,000 fuel cell electric vehicles and 200 HRSs by 2030. Shidao city in Shandong province has also committed to significant hydrogen and fuel cell electric vehicle plans, including 2,000 fuel cell electric vehicles, 10 fuel cell bus lines, and 25 HRSs by 2025 and 8,000 fuel cell electric vehicles, 30 fuel cell bus lines, 2 fuel cell tram lines, and 50 HRSs by 2030. During the second quarter, Guangzhou city with a population of 11 million people released its hydrogen energy industry development plan 2019 to 2030. This is an aggressive plan that sets 2030 targets including for fuel cell electric vehicles to account for at least 30% of public transport and sanitation vehicles and more than 100 HRSs. In terms of metrics in China, including field deployments, there are approximately 3,200 commercial trucks and buses with Ballard fuel cell technology currently operating in China. To-date, these vehicles have traveled an estimated 40 million kilometers on China's roads, with vehicles monitored by Ballard delivering approximately 98% fuel cell availability in the first half of the year. We're also continuing to power the world's first fuel cell tram line that went into service on the Galming line in the city of Foshan, Guangdong province. These five trams have now accumulated over 50,000 kilometers of service. To accommodate the growing number of fuel cell electric vehicles operating in China, we estimate today there are now 52 hydrogen fueling stations in service and an additional 50 under construction. I would like to note as well that earlier this week we announced that fuel cell electric vehicles powered by Ballard have now cumulatively traveled over 50 million kilometers, an industry-leading indicator of durability and performance and enough to circle the globe 1250 times. As noted earlier by Guy, we're planning our virtual investor and analyst day 2020 on September 29. We're looking forward to this event where we will have more time to provide you with enhanced visibility on our corporate strategy, updates on progress against our key markets and our plans, our unique selling proposition and sustainable competitive advantages, our current and planned value chain positioning, our technology and product roadmap and cost down plans, our progress on the implementation of advanced manufacturing here in Vancouver, progress at the Weichai-Ballard joint venture and progress in our ESG initiatives. This will be an exciting day and we look forward to having the opportunity to hear from our senior leadership team on the impressive work that Ballard is doing to build an attractive business. And with that, I will turn the call over to Tony to briefly review the Q2 financials.

Thanks Randy and good morning everyone. Top line revenue in the second quarter was $25.8 million, up 9% year-over-year. In the quarter, power products revenue was up 62% driven by heavy-duty motive which was up $6.1 million to $12.5 million. This was due primarily to higher shipments of fuel cell products to China. Just a reminder on the treatment of revenue from sales to our Weichai-Ballard joint venture in China, in which we have a 49% interest. We recognize 51% of the revenue upon shipment of products by Ballard to the joint venture while the remaining 49% is only recognized when the JV sells and ships products to its end customers in China. As of the end of Q2 this year, $16.3 million of revenue associated with product shipments to the JV in relation to the $44 million order placed in May of 2019 has yet to be recognized. In addition, $2.1 million of MEA revenue related to the $19.2 million order received in December 2019 has also yet to be recognized. We expect this total of $18.4 million in revenue to be recognized as the associated products are sold and shipped by the joint venture to its customers. Turning to technology solutions, the decline in TS revenue to $9.8 million in Q2 was due primarily to decreases in revenue from the Audi program, the technology transfer program with our Weichai-Ballard JV, and from the development program with Siemens. This decline reflects both a reduction in the scope of certain programs given the plan completion of some activities as well as the impact of customer requested program changes and deferrals resulting from COVID-19, which included the impact of COVID-19 travel restrictions. As a result, we expect full year revenue for technology solutions to be down on a year-over-year basis. Gross margin was 21% in Q2; down 2 points year-over-year. This decline was largely the result of the shift in product and service revenue including the lower TS revenue. Cash operating costs increased 38% year-over-year to $11.6 million. This was primarily attributable to increased expenditures in technology and product development work related to our next generation stacks and modules for the bus, truck, train and marine markets. Adjusted EBITDA in Q2 was negative $8.6 million, a decrease of $3.6 million compared to the same quarter last year. This also included Ballard's $2.9 million share of losses related to the Weichai-Ballard joint venture. Ballard's net loss in Q2 was a negative $11.4 million compared to negative $7 million in Q2 last year and earnings per share was negative $0.05 in Q2 compared to negative $0.03 in Q2, 2019 and both the net loss and EPS numbers include the same Ballard share of losses from the Weichai-Ballard JV. Cash used by operating activities was $14.8 million in Q2 consisting of cash operating losses of $5.3 million and working capital outflows of $9.5 million. The change in working capital was largely due to higher accounts receivable related to timing inventory and as Randy mentioned, higher inventories in anticipation of shipments in the second half of the year. In terms of liquidity during Q2, we generated additional net proceeds of $12.2 million from the ATM program we launched in Q1, ending Q2 with cash reserves of $170.3 million and no debt. We ended Q2 with an order backlog of $155.5 million and a 12-month order book of $101 million down slightly from Q1 as a result of lower order intake in the quarter due to COVID-19. Lastly, I wanted to add that during the quarter we rang the opening bell on the NASDAQ stock exchange virtually of course to celebrate the company's 25th anniversary on NASDAQ. And with that let me turn the call back over the operator for questions.

We will now begin the question-and-answer session. Our first question comes from Craig Irwin with Roth Capital Partners. Please go ahead.

Good morning and thanks for taking my questions. So Randy, Joe Bamford, CEO Wrightbus is a really good customer of yours, and he's out there talking about doing 3,000 fuel cell buses over the next few years. It seems like there is pretty good regulatory support in the UK and they're trying to work out the funding for that, although it is apparently in their stimulus. Can you maybe just help us with a little visibility on the potential tempo of orders if we do see the funding materialized as expected and are there many other customers like this that have aggressive programs to serve the European opportunity?

Craig good morning and thanks for the question. You're right Joe Bamford has been a great customer for us and a great friend in fact. He is very active in the UK market agitating to have zero-emission buses not just 3,000 potentially up to 5,000 zero-emission buses over the next number of years and looking for a pretty significant portion to be fuel cell buses and it's quite influential in that market. One interesting thing about Joe is that not only does he own Wrightbus but he also owns a company called Ryse Hydrogen which is providing hydrogen fueling stations including for an existing project with Transport for London. So Joe is quite active in that market. It's a local producer, a manufacturer of buses and has very good market share in that market. In terms of the cadence of orders, I think it's a little too early to comment on that. We're pretty excited about what we're seeing in their sales pipeline with different cities in the UK as well as in Europe generally. To the second part of your question, of course Wrightbus is a great leader in this market but there are others as well. Solaris is very actively bidding in a number of key countries on Mainland Europe and you've got other players who have been very active for a long period of time continuing to look at opportunities for fuel cell buses and have launched some very good projects with very good products. So I think we're going to see a significant uptick in Europe as well as the UK over the next couple of years. When we look at the growth that I mentioned earlier in our sales pipeline, a very significant portion is coming from the bus market and we're seeing a strong contribution from Europe, I would suggest, over the next 12 to 36 months.

Thank you for that. So, the next question I wanted to ask is about the China market. So thank you for the update on the infrastructure in China. I know that that's very important because of the structure where people have to run the buses before they actually get the official release of funds. Can you maybe share with us where you think the discussions for regulatory support stand right now? I know there's a lot of optimism that this is going to be reinstated but what do you think has to happen or what's the potential timing for clarity around that?

Yes Craig, this is a very active discussion right now in China year-to-date and I know there are a lot of players, a lot of different provinces and key centers that are positioning to secure support as demonstration regions in China. And so, it's a very sensitive moment I would suggest in China right now. I think we'll see clarity within the next 60 days.

Excellent, that's a short time and I like that. Next question is Audi. So, Audi did just trickle down a little bit this quarter. I guess we can call it Audi Volkswagen, has been a very good customer for you on the services side. And if we track all the revenue and the capacity from the different contracts that they've announced, they really look like they're starting to bump up against the end of their capacity at this point. Many of us expected there to be a commercial endpoint for Audi Volkswagen. Are you potentially looking at a new phase of the relationship with Audi or do you expect similar services opportunity to recur maybe with Audi or another? And maybe will this shift into a different type of relationship where you might provide component or manufacturing support?

Yes the plan, Craig, was for the Audi development program to complete next year. And certainly we're continuing to chart to that plan, there has been some reduced scope this year. Audi has had some budget constraints as a result of some of the financial distress in the overall markets of automotive particularly in light of COVID-19. So, we've been quite responsive to some of their requests for changes. I think it's and we're going to let Audi lead the communications on what their plans are for fuel cell passenger cars. More broadly, what I would say is that not just Audi but the passenger car OEMs generally, we've seen a very strong shift from any of these companies to also look at how they can leverage their technology for the commercial vehicle market. And so, that's something that I think we're increasingly seeing from the passenger car OEMs. I think longer-term we're still quite bullish about the passenger car market particularly when you look at vehicles that have high utilization and when you start thinking about digital connected autonomous vehicles with more power demand, just to support electronics onboard but are on shared mobility platforms and being used say 15 to 20 hours a day rather than a typical vehicle today one hour a day. Utilization rates go up and the need for fast refueling and long range become important. So, longer-term we're very excited about the passenger car market. That's an industry that is very challenged right now in 2020. And so, I think there are still a lot of budgetary issues that we're seeing in the near term from those types of enterprises.

Great. And then last question if I may before I jump back in the queue. I appreciate the discussion about the $18.4 million in differed revenue recognition from joint venture revenue. Can you maybe discuss the gating factors for us to see this revenue recognized for Ballard? And what is your current thinking about the tempo of release for that $18.4 million?

Yes. That's a great question, Craig. There are a number of gating factors there. One of course is to make sure that the products that are assembled at the JV are ready for the market. So, that's really optimizing production and ramping through production. Second, is making sure that the vehicles that are being certified go through the right steps to make sure that customers have confidence. So, even though we're talking about in the case of Zhongtong bus, AsiaStar bus, and Sinotruk, companies that are within the Weichai group, we need to make sure that they're comfortable doing the testing and understand the safety protocols. In some cases, these are new platforms, new customers, and so they're getting familiar with our operations. And then there is other customers outside of the Weichai group that are being introduced to the Weichai-Ballard joint venture products as well including for example Yutong the world's largest bus OEM. It's just a matter of Weichai-Ballard joint venture working with these end-market customers and being on the JV and making sure that they're ready to take those at the right time. The other aspect of this has been really getting the hydrogen fueling stations in place as well. There were four in Zhongtong right now. There are plans that I mentioned earlier to scale up the number of hydrogen refueling stations; that's going to be critical. I expect you'll see likely just in Zhongtong province alone, it's something in the range of a 14 or 15 cities that would do fairly sizable bus demonstration projects in the next couple of years. These initial orders will be the first part of that.

Yes Craig, it's Tony here to just supplement Randy's comment. In terms of the timing, as Randy alluded to there are a number of gating items that include, of course, the fact that the joint venture is really only starting to become fully operational. But certainly, we will start to see that $18.4 million in our books in the second half of the year and perhaps into early 2021, which ties a bit to Randy's comment about the typical backend of the year being a little stronger than the front end of the year. This will be a contributing factor to why we're feeling a little bit more bullish on the backend as well.

Okay. And just a point of clarification. Do we need to see a positive outcome on the China regulatory side for that to be released in the fourth quarter or is this expected to be released under most circumstances?

Yes. We do expect of course the policy to come out. If it was deferred, I don’t expect it to have an impact here on the revenue piece we're talking about. But it would have an impact on some order uptake in later this year for the JV.

Great. Thanks again for taking my questions. Congrats on the progress.

Yes, thank you Craig.

Our next question comes from Amit Dayal with H.C. Wainwright & Co. Please go ahead.

Thank you. Good morning, everyone. I appreciate you taking my question.

Good morning, Amit.

With respect to the revenue split also 2020 between China and other markets, would it be possible to get some color on how that may shape up for 2020? And then going into 2021 as you ramp up in China, how that picture may look like at the end of next year.

Yes sure Amit, it's Tony here. So, for 2020 this year, China and when I say China, I'm including here not only the power products but also, of course, the ongoing technology solutions program with Weichai which is of course revenue and it's a good portion of our TS revenue. China this year will probably be somewhere in the order of 60% odd of our revenue this year, plus or minus for 2020. For 2021, we actually expect to see Europe start to become a larger portion of the total revenue contribution. And that's for two reasons. Number one is this Randy was describing we are starting to see some good momentum in the European bus market and we do have a fair amount in our order book, in our backlog related to Europe. The other one is just regarding the China revenue particularly as you recall the revenue that we're booking in Ballard related to Weichai will become MEA revenues. It's already now that it’s been the second half of the year MEA revenue. So, proportionately speaking MEA revenue while significant in volume is a lower dollar value. So, that shift next year, we'll start to. I think at ballpark even out and we would expect beyond 2021 Europe will become an even increasingly larger portion.

Amit, it's Randy here. Thanks for the question. And just to supplement a few points. Our strategic objective is to have balanced revenue in our key geographic markets. So, we characterize our key geographic markets as China, the European theater, and California. Going forward, if you looked at over the next five years, I'd expect to see a balance of about 40% of our revenue coming from China, about 40% coming from Europe, and about 20% coming from North America but primarily California. The second point to that Tony mentioned is while the revenue from China at the Ballard level becomes somewhat constrained because we're selling MEAs rather than full systems, the significant value creation occurring at our joint venture. We expect to see future value creation and value distributions either dividends or cash distributions coming from the JV. First we'll see EBITDA contribution and we'll see cash distributions, and ultimately we would expect to see that platform potentially to IPO and to see value creation there as well.

And Randy, yes. And that's how we've kind of modeled it out as well for our future projections. So, good to hear this mix and the diversification that you are starting to see already looks good from this point right now.

Yes. I'd just add to that. The sales pipeline that I referred to earlier, a lot of that growth that we saw over the last few months is coming from the European market.

It looks like last year the discussion was about China and all the policies over there, but in the last few months it looks like Europe is sort of superseding what China is doing.

What's interesting is that you've got very strong European policy, very strong policy in California, and we will see a new China policy. Within the span of a relatively confined period, let's call it four or five months, we are likely to see all three of our key regions come out with strong supportive policy.

Yes, looks like it. So, then when we look at the pipeline that's building against this environment, how should we think about that pipeline converting to orders and backlog? Maybe it's a little early now, but are there any catalysts that potentially move some of these from pipeline to orders quickly or will these take a little more time, I guess?

Yes. The type of projects we're typically involved in, the sales cycle is a little protracted, and it's not something that happens over a couple of weeks. We've seen rare instances of that, but it's the exception, not the rule. What I can say, looking at the sales pipeline, it's very encouraging for 2021 and 2022 in terms of the growth rate that we'll see in the heavy-duty motive segment.

Got it. And then, but the competition appears to be coming up to recent IPOs over here in the U.S. markets when I'm reading about players emerging in China as well both on the infrastructure side and mainly on the vehicle side as well. Your thoughts on how you are positioned relative to some of these players, we are getting a little bit more press and promotion of the fragment.

Yes. This is something we want to spend a bit of time on in the September IR day, it's really clearly articulating the unique selling proposition that Ballard has and the very strong position we think we have from the competitive differentiation. But one I'll just highlight here, a two maybe. It's just the real world road experience we have obviously with 50 million kilometers of vehicle experience on the road with Ballard technology inside, industry-leading of course. And then the durability actually having vehicles in the field operating over 38,000 hours as an illustrative example is an industry record that, from our understanding, I'm not aware of any others. When you look at the field experience we have, performance and durability in these heavy and medium-duty motive applications, I think is very compelling.

Got it. And then, with respect to the JV, are there any additional investments that you need to be making into the plant and at what point does this start operating sort of on its own cash flows?

Yes, so our capital commitment as you call it, we do have the requirement to make some additional capital contributions into the JV through next year. We made an additional capital contribution in the quarter. I apologize, I don’t have the number right in front of me, but it was in the neighborhood of 30 odd million left to contribute, that's the contractual capital contribution which we will make. We're not anticipating any additional cash requirements beyond what's already included in our disclosure around the ongoing commitments. So, in that regard, we think with the JV starting to move more product sales, it will become cash flow breakeven and then EBITDA contributing in the next couple of years. That's from our perspective, we expected and Randy alluded to some dividends which probably will come at the end of the five-year period. Beyond those contractual equity commitments, no additional cash haul.

Understood. Thank you for that, Tony. So, that's all. And Tony, I appreciate you taking the questions, thank you so much.

Thanks, Amit.

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

Good morning.

Good morning, Rob.

I just want to dig in a little bit more of the sales pipeline. You talked about quoting larger size orders, could you just kind of characterize what's happening in the marketplace and what kind of size or the ranges you're using? Are these more real deployments moving from test deployments or what are you seeing in the marketplace at this point?

Good morning, Rob and thanks for the question. I think there are a couple of elements there. One is that there is a recognition that in order to drive down the cost of hydrogen, you need larger sized deployments of buses in commercial charts, even in rail and marine. You have higher demand for hydrogen and high utilization of your fueling infrastructure cost. I think that's been recognized. So, we're seeing larger projects to get better economics overall including the hydrogen cost. I'd like to point out we've been at this at Ballard for some time with demonstration projects particularly in the U.S. and Europe. We're not seeing the next step of that. Rather than having 10 and 15 buses, it was a long ago where two to five buses were the typical deployment. Now we see in the last few years that scaled up to say 10 to 15. Now we’re looking at hundreds of fuel cell buses going forward and thousands eventually for larger scale deployments. When we've got 3,200 commercial trucks and buses operating in China, it's a very good data point that the numbers are starting to move north. The other thing that's really interesting outside of mobility is stationary is showing some significant pick up in interest as well with much larger opportunities on the stationary side.

Okay. Thanks for the color. And then for the China JV ramp in production and now that you're ramping. Could you give us a sense of how many units in or kind of the plan of the ramp and then maybe when you see you can start to see visibility on the cost down with volume ramp that you sort of planned for. How do you see that playing out?

I apologize, I'm going to have to ask you to be a little patient on this one, Weichai would like to get ahead first on the communication side. We want to be respectful of that request. Certainly at the September IR day, we'll provide more visibility on this front.

Okay good, thank you. I'll turn over.

Okay, thanks Rob.

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

Hey, good morning. Hey Randy, can you just give some update in terms of medium and heavy-duty truck market? Clearly you have a strong alignment in China with a partner to grow in that market. But as we think about Europe and North America, how should we think about your approach to that opportunity? Should we think about another JV with an incumbent OEM or other approaches that you're thinking about there?

Yes, Michael. Thanks for the question. It's a really interesting time right now where you've got basically the large truck OEMs and as well as all the tier 1 suppliers looking at this market very carefully. I think there's a recognition now with California and with Europe having very strong policy that requires zero emissions. With batteries in our view not able to satisfy many of the use cases that fuel cells are really the only zero-emission option longer-term. We're seeing all these OEMs and tier 1 suppliers carefully studying and actually accelerating their review of the fuel cell opportunity for commercial trucks. So, I think what you can expect is a very comprehensive relationship that Ballard will strike with a major name brand partner particularly with strong European exposure. We're not in a position yet to comment more on that but there's a lot of work that's being going on for the last six months on this front. We expect significant more work for the remainder of 2020. We'd expect to be in a position later this year to provide some really good visibility on what I think is perhaps the most exciting part of our business plan going forward.

Okay. Now, that's very encouraging to hear. And then, clearly you've talked about you're up with respect to what's taking place with hydrogen. Can you speak to perhaps some of the specific strategies in place at Ballard to ensure that you receive your fair share of these opportunities? How should we think about the competitive environment over there? We've seen a number of other companies step in with some capital deployments towards fuel cell development. How should we think about the competitive environment with these customers as well?

Sure, yes. No, we're really looking at opportunities to increase our presence in Europe. On the fuel cell side, we do have obviously an existing facility in Hobro, Denmark. We have our marine set of excellence that will be commissioned in the coming months. A lot of activity in the marine market by the way, and I think that market will surprise to the upside. I think as you look at our M&A strategy particularly, we're quite active looking at M&A opportunities and a number of them are in the European market. I think this will help strengthen our European positioning. Just kind of look at the deployments in the market share. We're probably somewhere around 85% market share for fuel cell buses that have been deployed. We're also looking at collaboration in consortium models. You've seen what we've announced last year with the H2 Bus Europe consortium where we brought together leading players including now on the hydrogen fueling side and electrolysis side including Rise Hydrogen as I mentioned earlier from Joe Bamford and including on the tank side, Hexagon and Wrightbus with the buses. So, bringing together a consortium to lead forward on volumes, lean forward on the cost structure and to drive about a €375,000 fuel cell bus cost with a €5 per kilogram of green hydrogen delivered to the vehicle and maintenance cost of about €0.30 per kilometer, which is one we continue to work to drive down. There are a number of different ways we're approaching this. I think coming back to your initial question, Michael, about the truck market and the collaboration we're looking at in Europe with a key player for the commercial truck market tied with our own physical presence and capabilities in Europe, looking to strengthen that and grow our European business as well as through M&A plus consortium models. We're working on all three of these parallel.

Okay. And we think about, especially in the competitive environment, there's been some larger entities that significantly increased the capital deployments to fuel cell development. How do you other ways that we can think about benchmarking like what you have in terms of the product versus what they have in development or they are bringing into market?

Yes. I think when you look at most of the companies that are looking to bring fuel cell technology to the market, regardless of whether it’s China, Europe, or North America. In most cases, those technologies have been designed for the passenger car market 5,000 hours of durability. We've designed our fuel cell technology for 30,000 to 40,000 hours of durability. There’s no dispute that Ballard is way ahead in the market on fuel cell technology, the core fuel cell technology, stacks, MEAs, plates, understanding what balance and plan components are required to match up with the stacks. Optimizing your control strategy at the module level as well. I don’t think there is any doubt in the market that we are the leader on durability for these heavy-duty motive markets. So, if you kind of look at the technology and product offerings for others, one of the key questions I would ask is what durability has been proven? If there's any need to invest as you point out significant capital over the number of years while we continue to improve to our next generation.

Okay, thanks for the info. I'll now jump into the queue.

Okay, thanks Michael.

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

Hi, good morning everyone.

Good morning.

Given one of your previous answers you may differ this question to later. But looking at the JV in China, how long do you think it'll be before you might lean on that JV for product to sell outside of the Chinese market?

Rupert, thanks for the question. Great question. I think one of the really constructive things we did and how we structured arrangements with the Weichai-Ballard joint venture was to have that optionality. The JV is an exclusive platform both for Weichai and Ballard for the bus, truck, and forklifts in the China market that Ballard has exclusive rights to purchase those products outside of China. This means as we're looking at scaling in Europe and scaling in North America and other markets, we're seeing for example India becoming very active. As we see this market scale, we have the ability to manufacture in region or continue to manufacture in Vancouver if we choose. We also have the optionality of sourcing from the JV. As we described in September, the JV has significant production capacity expansion capabilities as well. I think it provides us a lot of optionality. I think we'll have that optionality as soon as 2021. It'll be a function of how we're satisfying the market requirements in those specific markets. What's the most cost-effective way and what is the market looking for? We do see some instances of course where markets are becoming much more insular and looking for more locally produced products.

Rupert, Tony here. Just to supplement. When you were driving from Randy, we have the right to buy finished products from the joint venture for the rest of the world. Beyond that, we are also benefiting substantially from supply chain. The joint venture, our joint venture in China has qualified a number of low-cost balance of plan components; we're calling this balance of plan components and the module is probably 60%-70% of the total cost of the module. Even if we're not going to be buying modules from the joint venture, we're benefiting already from new supply chain that's driving down our current balance of plan cost that we're actually in our current product today for the rest of the world. It’s really a combination and not just with the full product but also supply chain. Before we have again back to so not to punch too far but we'll be getting into particularly getting into that balance of plan cost down in September. We'll give you some more concrete examples. But we're seeing that benefit already.

Yes. There's been very strong progress. It's been unbelievable how quickly things operate in China, particularly with the Weichai supply chain muscle. The conversion of some of our balance of plan components over to China source materials adds significantly lower cost while still maintaining quality has been a key deliverable. A lot of progress made so far in 2020 on that. This means we're getting the advantage of the scale that comes from the China market being applied to those balance of plan components to this other markets as well.

And maybe asking for a bit of a preview here and feel free to refer this question as well. But if you look at what your costs are today and where they need to be in the future. Also, your sense on how much of the cost that will come with supply chain and scale versus how much work needs to be done on the R&D side.

So, what we'd show in September is about a 70% cost reduction at the stack level and about a 70% cost reduction at the module level. We'll allocate what portion of that comes from design engineering changes versus supply chain versus volume assumptions. The volume assumptions will be tied up with our business plan. This won't be unreasonable volume assumptions. In aggregate, they roll up to about a 70% cost reduction. What's really interesting is on the stack side, we covered our 3/3 program. On the stack side, we're very well advanced. I would say probably 80%-90% of that cost reduction is highly probable at this stage with very low development risk.

Okay. Thanks for the color, I'll get back in the queue.

Thanks, Rupert.

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

Hi good morning, all. Thanks for taking my questions. Randy, you mentioned the strong growth in Europe over the next few years. I think Tony mentioned earlier that this is partially due to projects in the backlog. So, I guess I'm wondering from a backlog perspective how we think that European opportunity will play out. Do you expect that COVID will have a lingering impact on the trajectory of the overall backlog over the coming quarters or do you see an inflection point now that things have somewhat stabilized?

Yes, good question, Aaron. Thanks for the question. I think we'll likely see some of the COVID challenges we've seen including with some of the European customers likely clear in 2020 with that cloudiness disappearing by the end of the year and much more clarity in 2021. What I'd say is that if you look at the cadence or the sequence of growth in the European market, the bus market will be first. The commercial truck market you're going to see very strong progress from Ballard in the commercial truck market in Europe over the next six to twelve months. The rail market is going to start to contribute, and we're seeing a lot of quoting activities from our partner in the rail market in Europe and then marine will come subsequently as well. We'll see a scaffolding effect where you see the growing bus market, you add on truck. Both those markets are growing. You add on rail. All three of those markets are growing and you add on marine. We see a very strong scaffolding effect of these four markets where we have the same core competencies, the same technology, and in some cases the same products leveraged across these heavy-duty motive applications. I think we'll see that scaffolding appear most prominently in Europe first, with China and North America having a similar scaffolding effect subsequently.

Hi Aaron, it's Tony. I'll just supplement as well. Again, Randy alluded to the pipeline and the record pipeline historically and to be completely transparent. We haven't talked a lot about our pipeline in the past. We've generally focused in on the twelve-month order book and the backlog which is the committed orders for delivery. So, we talked about a 100 million odd twelve-month order book, a 155 backlog. I think we're getting at what we're getting to here is an opportunity to provide some more transparency on that pipeline because Randy alluded to some markets like the marine market and rail market and even the stationary power. There is an awful lot coming into our pipeline that speaks to some of the scaffolding. We will provide a bit more transparency on the pipeline including that scaffolding effect of revenue over the next number of years. It's an increasingly growing market. Historically for us of course, it's been bus orders. We throw in Weichai, but it's really diversifying both geographically and by market. As I said, we have not really delved into that in that much in the past but we will certainly going forward.

Okay. I'm not going to ask you to specify which quarter you believe it will happen, but it seems you're suggesting there might be an inflection point in the backlog in the near future. Is that an accurate assessment?

Yes. I mean I think what we've indicated recently is that we're likely to see relatively strong growth rates over the next few years, 30% to 40% in that range. As you get closer to the 2024 requirements in California, 2025 requirements in Europe, there is a lot of work that needs to occur, not just from us but partners and hydrogen refueling infrastructure to support that. You'll see a very steep curve from 2023 onwards and that will occur in Europe and in California, at the same time when China probably had scaled at that point as well. Our costs and our ability to respond in those markets even more capably from a cost side will be very helped by the scaling effect we're going to see earlier in China.

Okay. And then, moving on to the JV side. I know you're mentioning the smaller dollars but can you remind us if the MEAs that relate to the 2000 unit commitment from Weichai are already included in the backlog and what the timeline for Weichai related backlog additions might look like if they're not over the coming quarters. I guess I'm just trying to get a sense of how the 2000 unit commitment might impact your backlog over the coming quarters.

Sure. To speak specifically. There is really that backlog. Let's focusing in on the 2000 unit order. As you may recall, we shipped 500 odd parts kits over the course of last year earlier this year. That would have been in first satisfaction of the 2000. We also then announced a $19.2 million MEA order last December that we've started shipping and we'll be shipping. Between that $44 million order and the $19 million order, that starts to account for a good portion of that 2000 units. There's probably a little bit more MEAs to fully satisfy it. It's safe to say it's either in the revenue it's that or that revenue to be recognized I mentioned earlier and some incremental MEAs yet to be shipped. I think the next thing I would watch for beyond that is expecting, we anticipate getting another order for MEAs probably later this year for 2021. That will be the next significant order of Ballard related to the incremental and above the 2000 odd.

Okay great, that's great color. And then finally for me and this is just a point of clarification. Did I hear correctly that you are working towards transitioning the JV into a separate public entity? If that's incorrect that's fine, but maybe you could clarify what the longer-term ownership plan is for the JV?

Yes. I think Weichai has a history of doing this where they have investments in companies in China that they then take a portion of that company public. Certainly, that's something that Weichai and Ballard had contemplated upfront when we put together this joint venture. There are some fuel cell companies that have gone public Iwa Tang or Sino Hi-Tech as it's referred to, went public this year. In China, Re-Fire is likely to go public as well. I think it'll be a very attractive IPO market for a number of years for hydrogen and fuel cell related technologies in China. When you have Weichai behind an IPO, I think it’s a different credibility factor than some of the others. So yes, that is a longer-term plan to unlock value that I don't think is currently expressed in the current Ballard valuation.

Okay, understood. Thanks for answering my questions, I'll turn it over.

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

Hi, good morning or good afternoon now here on the East Coast. In terms of timing on a follow-up order, you kind of alluded to that in getting some MEA orders for the next 2000. But presumably, once you start to optimize the ramp-up at the JV you would want to see month-over-month an increase in production and shipment. So, can you speak a bit to visibility beyond the 2000 units and what sort of a production ramp would look like in terms of just targeting and you going forward?

Yes, Mac. I think the 2000 units really aren't dependent on the announcement of the China, new China policy whereas orders beyond that are. We want to make sure that when I say they're dependent, the volume is going to be dependent on how the policy shakes out which jurisdictions and what the requirements are. I think we need to wait for that before we can forecast what 2020 will look like in terms of the JV moving units and what that means for MEA sales. But I think, kind of use that 2000 as a base load level. We expect, of course, to see a growing number each year just looking only at Shandong province requirements as an illustrative example there needs to be a scaling effect.

Okay. And presumably because you have these different initiatives underway and discussions ongoing that these potential buyers will be relatively ready to go after an announcement is made about the policy. What's the sort of lag in policy to orders that you expect?

Yes. I think most of the end market I'll call, the vehicle OEMs outside of the Weichai group are quite active now looking at the technology. Hopefully, we'll see a number of them get platforms tested and certified added to the MLIT list, so that lag factor is shorter. Historically, it's usually taken about six months in some cases for those platforms to get registered, but the time is getting more compressed. Perhaps that won't be as gating as it was a number of years ago when it first was introduced. Generally speaking, I would expect that we would forecast seeing an order from the JV in late 2020 that will set the stage for 2021 MEA supply, and then we'd expect to see some scaling.

Okay great, thanks. I have the rest of my questions are sort of technical modeling questions. I'll take them offline, later this afternoon. Thanks, guys.

Great, thanks Mac.

Our next question comes from Anne Margaret Crow with Edison. Please go ahead.

Thanks. Good afternoon gentlemen, thanks for taking my call. It's really good to see the progress that's being made within the fuel cell market and particularly at Ballard. I wanted to just explore a little bit more what was happening in China. The first thing was, how does your work with Weichai fit in with the work that they're doing with Sirius Power on the solid oxide front? The second one was, it's good to see that you had got an order recently from the Synergy Group. Did you expect to get the $150 million minimum revenue from them by the end of 2021?

Yes. So Anne Margaret, thanks for the question. First on Weichai strategy and the relationship with Sirius. I think Weichai is very interested in having optionality on other fuel cell technologies and is looking at Sirius and obviously has an investment in Sirius and looking at commercial collaboration with a joint venture in China with Sirius. I think the primary market that they're looking at is likely more stationary applications. There is a thesis that perhaps solid oxide fuel cells may be able to satisfy onboard power generation for vehicles. I think most people have discounted solid oxide for that. If anyone's going to be able to do it, it's likely going to be Sirius. It's a pretty tough putt for solid oxide fuel cell technology to get there in my opinion. As some context, the former CTO of Weichai had a prior history at Eaton where he developed some solid oxide fuel cell technology and has a real affinity for that technology. So, that was part of the history of that relationship as well. It's a very good relationship between Sirius and Weichai. Sirius is a very credible company. They’re doing an outstanding job on their commercial collaboration front, their technology developments, and strong balance sheet. I've got a lot of respect for the CEO at Sirius as well. On the Synergy Group front, of course, we were delighted to get the follow-on order, which was something we had, the size of that follow-on order was bang on with what we expected and what they committed to do last year for 2020. That was very encouraging to see them come through with their commitment. In terms of future orders, we'll have to see how that market plays out particularly again with the China policy coming out in the next say 60 to 90 days and how that Synergy-Ballard JV stack technology meets the market requirements. We'll have to wait on that.

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.

Thank you for joining us today. We look forward to speaking with you again on September 29th during our Investor & Analyst Day 2020 and subsequently in November when we'll discuss results for Q3. Thanks again.

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