FuelCell Energy, POSCO Power Sign Agreement To Localize Products For South Korean Market

(Comment on this article at http://www.financialwire.net/2009/10/29/fuelcell-energy-posco-power-sign-agreement-to-localize-products-for-south-korean-market/)

October 29, 2009 (FinancialWire) -- FuelCell Energy, Inc. (NASDAQ: FCEL), a leading manufacturer of high efficiency ultra-clean power plants using renewable and other fuels for commercial, industrial, government, and utility customers, announced the signing of a Licensing Agreement allowing POSCO Power to manufacture fuel cell stack modules from cell and module components provided by FuelCell Energy.

These fuel cell modules will be combined with balance-of-plant manufactured in South Korea to complete electricity-producing fuel cell power plants for sale in South Korea. The License Agreement includes an upfront license fee of $10 million which was paid at signing as well as an ongoing royalty, initially set at 4.1% of the revenues generated by sales of the fuel cell stack modules by POSCO Power. Additionally, POSCO Power closed on its previously announced purchase of $25 million in FuelCell Energy common stock at a purchase price of $3.59 per share, the price agreed to on June 9, 2009.

Direct FuelCell power plants generate electricity directly for South Korea's power grid. As part of a drive to establish fuel cells as its country's leading form of alternative energy, POSCO Power has ordered more than 68 megawatts of FuelCell Energy's DFC units to date and built a facility to manufacture balance-of-plant systems in South Korea.

Currently, approximately 23 MW of FuelCell Energy power plants are installed in South Korea, including six DFC3000 megawatt-class power plants. Sites include POSCO Power's headquarters and balance-of-plant manufacturing facility in Pohang; a paper company Natura; independent power producers HS Holdings and MPC; and electric utilities KOMIPO, KOSEP, and EWP, which are members of the KEPCO family of companies in South Korea.

South Korea has committed two percent of its gross national product to clean energy projects -- more than any other developed country. FuelCell Energy power plants operating on natural gas and biogases enable South Korean utilities to comply with the country's aggressive clean electricity targets because they emit near-zero pollutants and they are a low-carbon solution. DFC power plants also meet South Korea's need for green technologies that contribute to increased domestic employment. Currently, South Korea is pursuing the passage of an $85.8 billion renewable energy plan that includes a renewable portfolio standard mandating 11 percent clean energy by 2030 -- a total of 7,150 MW -- which includes fuel cells on natural gas and further increases the market potential for DFC power plants.

Under the agreement, POSCO Power will manufacture fuel cell modules from components and cells manufactured in the U.S. by FuelCell Energy, in a new facility it intends to construct adjacent to its current fuel cell balance-of-plant operation in Pohang. FuelCell Energy will provide training for POSCO Power personnel.

"Our strategy is to localize certain power plant manufacturing to reduce cost and ensure our products meet the specific needs of individual markets," said R. Daniel Brdar, chairman and CEO of FuelCell Energy. "As POSCO Power increases its plant output, the demand for our fuel cell components increases. Increased demand in South Korea will drive expansion of our manufacturing plant in Connecticut and additional jobs."

At 47 to 60 percent electrical efficiency, DFC power plants are more efficient than any combustion-based technologies in their size range. Improved efficiency translates into more electricity for less fuel, while significantly reducing CO2. The result is fuel cost savings while generating ultra-clean electricity that meets South Korea's low-carbon objectives.

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