Ballard Power Systems (TSE: BLD [1]) has signed a five-year agreement with New Flyer Industries to supply hydrogen fuel cell modules to the latter’s shuttle buses.

The modules will be integrated into New Flyer's existing shuttles, and as part of the agreement, New Flyer will also design and build a shuttle bus specifically for Ballard’s fuel cells.

The agreement also means Ballard and New Flyer will work together to jointly bid on transit agency shuttle bus programs in Canada, starting with publicly-funded programs.

According to Ballard’s president and CEO John Sheridan, the companies are currently working on providing BC Transit with 20 heavy-duty 40-foot fuel cell buses.

"New Flyer is excited to team once again with Ballard to leverage its hydrogen fuel cell technology in the bus industry," added John Marinucci, New Flyer’s president and chief executive officer, in a statement.

"The market demands that we find and utilize innovative technology to advance the development of zero-emission buses that are both environmentally-friendly and fuel efficient."

Reaction to the news was lukewarm.

“While we are not particularly enthused about the commercial opportunities for fuel cell buses, Ballard is in the business of selling fuel cells, and an exclusive relationship to supply fuel cells to a company like New Flyer is a good thing,” noted BMO Capital Markets financial analyst Brian Piccioni in a note to clients.

The automotive fuel cell pioneer was once an investor darling, but has now started to divest itself of some automotive units (see Ballard selling auto fuel cell business to Daimler, Ford [2].)

Ballard shares, which traded as high as $90 in its heyday in 2001, made modest gains on the news, trading at $4.87 today.