Interview with: R. Daniel Brdar, Chairman, President and CEO - featuring: their Continental Trade Exchange, one of the world's largest barter systems, which permits companies and individuals to exchange goods and services utilizing an electronic currency known as "trade dollars" (T$), which are used in lieu of cash to purchase the various offerings of other members of the barter network development and production of stationary fuel cells for commercial, industrial, municipal and utility customers.

FuelCell Energy, Inc. (FCEL-NASDAQ)

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With Concerns About The Environment And Energy Costs Causing Companies To Turn To Alternative Energy, FuelCell Energy’s On-Site Clean Power Plants That Run 24/7 Have An Edge Over Other Power Sources

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Industrial Goods
Industrial Electrical Equipment

FuelCell Energy, Inc.

3 Great Pasture Road
Danbury, CT 06813
Phone: 203-825-6000

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R. Daniel Brdar
Chairman, President and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
Published – October 26, 2007

Named FuelCell Energy's Chief Executive Officer at the start of 2006, and Chairman in January 2007, Mr. Brdar has an extensive track record as a member of the company's management team. During his tenure, he led manufacturing, sales and marketing, and product development operations, and was responsible for the company's successful cost-out efforts.

Mr. Brdar has 24 years of combined technology development and new product introduction experience in a variety of executive positions around the industry. Prior to joining FuelCell Energy, he held management positions at General Electric, where he focused on new product introduction programs for its GE Power Systems business unit, and was product manager for its gas turbine technology. Prior to GE he was Associate Director, Office of Power Systems Product Management, at the U.S. Department of Energy where he was responsible for directing the research, development and demonstration of advanced power systems including advanced gas turbines, gasification systems and fuel cells.

He earned his Bachelor of Science Degree in Engineering from the University of Pittsburgh in 1981.

Company Profile:
FuelCell Energy is the world leader in the development and production of stationary fuel cells for commercial, industrial, municipal and utility customers. FuelCell Energy's secure, ultra-clean and high efficiency DFC(r) fuel cells are generating power at over 50 locations worldwide. The company's power plants have generated more than 180 million kWh of power using a variety of fuels including renewable wastewater gas, biogas from beer and food processing as well as natural gas and other hydrocarbon fuels. FuelCell Energy has partnerships with major power plant developers, trading companies and power companies around the world. The company also receives substantial funding from the U.S. Department of Energy and other government agencies for the development of leading edge technologies such as hybrid fuel cell/turbine generators and solid oxide fuel cells.

CEOCFO: Mr. Brdar, you have been CEO for a little over a year-and-a-half, how has FuelCell Energy changed under your leadership?
Mr. Brdar: “We have continued the strategy we had in place when I became CEO, so the company itself has not changed a great deal. However, a lot of the change that has taken place under my leadership is how the company has allowed me to bring in some additional talent to some key spots in the organization.”

CEOCFO: What is the vision?
Mr. Brdar: “The vision is to grow the markets for our products and to drive our costs down so that we can become profitable as a company.”

CEOCFO: Who is using your products and how do you get them to use more?
Mr. Brdar: “We have a product targeted at a couple of different market segments. We make a fuel cell power plant that is designed for commercial, industrial, and utility customers. Our customers include wastewater treatment facilities, hotels, universities, and hospitals. In addition, we are starting to move into utilities applications as well. The key for us to get customers to buy more of our product is to get the word out because many people do not know, particularly through the industrial and commercial sector, that there is a commercial fuel cell that is available for on-site power generation. Part of getting that message to them, is having successful installations at our early adopter customers, because then by word-of-mouth, they bring in other people in their space.”

CEOCFO: What are the advantages for using fuel cell energy?
Mr. Brdar: “For the product that we are putting in the market place, you are talking about a way to make electricity on-site in one of the cleanest, most efficient ways possible. In addition, our customers are using the product because they are saving money relative to what they would pay their local utility. A fuel cell creates electricity through an electro-chemical process so it does not combust fuel. As a result, you do not have the kind of pollution you would get from traditional power generation equipment. The advantage that we have in particular is we make a high-temperature fuel cell, which means we are also very high efficiency. High efficiency is very important in today’s environment where you have high fuel costs, because the more efficient you are, the less fuel you use to generate a kilowatt-hour of electricity. That also means the more efficient you are, the less CO2 you produce, and we are living in a world that is increasingly moving to do something to respond to all the CO2 that we have been putting into the atmosphere for all these years.”

CEOCFO: If a company is using your product, do they know what their energy costs are going to be because it is all coming out of the fuel cell?
Mr. Brdar: “Yes. Typically, what we do is if we put in a fuel cell at a commercial installation and provide a five-year service agreement because your average industrial customers do not know what the cost is going to be to maintain a fuel cell. They do not necessarily even have the skills to do that. They have a defined purchase price for the equipment, they know what their fuel costs are going to be and they know what the service costs are going to be because we provide that service for them. So as a result, they can calculate their cost of the electricity and compare that against what they are paying their local utility to buy power. If they have troubles with that assessment, we can help them understand whether they can truly save money or not.”

CEOCFO: Have you been helped by the current energy crisis?
Mr. Brdar: “Concerns about energy costs have certainly brought a lot of attention to alternative energy as a whole - for us in particular, being the only company making large-scale fuel cells for stationery power and offering them on a commercial basis. It has really turned a spotlight to some alternatives other than things like solar power. What the marketplace is starting to understand is we need to have alternative solutions for energy. Things like solar and wind are good at what they do, but they are very intermittent sources. Solar is great when the sun is shining, wind is great when the wind is blowing, but you need something like a fuel cell that can be very clean and runs 24/7.”

CEOCFO: What is involved in installation; is it a long and costly process?
Mr. Brdar: “A good example is if you look at the Sheraton San Diego; it happens to be a location with a premiere site for the Starwood Hotel chain. They wanted to have a hotel that made use of green power. They looked at what their options were and they decided they wanted to put in one megawatt of our fuel cells. As far as the location for it, they have a location where there were two tennis courts. They gave us one of their tennis courts to put on a megawatt of fuel cell power plants. They will have guests playing tennis next to a megawatt power plant. That tells you a lot about how clean and quiet the product is. The product is designed to be very modular so it comes in preassembled skids that go in and, get assembled together very quickly, and then it starts up and produces power on a continuous basis. We’ve designed the product make installation and long term operation very straightforward for the end-user.”

CEOCFO: Please tell us about POSCO Power and the South Korean market!
Mr. Brdar: “POSCO Power is our partner for South Korea. POSCO Power is a subsidiary of POSCO, which is the fourth largest steel company in the world. They are our partner to deploy our products into the Korean marketplace. They have a strategic relationship now with KEPCO, the major electric utility in South Korea who provides 95% of the power generation for the country. What we are doing initially is providing complete fuel cell power plants to POSCO, so they can install large-scale applications. What POSCO is going to migrate to over time to is buying a fuel cell module from us and make what we call ‘balance of plant equipment in Korea. The balance of plant equipment does things like take odorants out of natural gas, converts the DC electricity from the fuel cell to AC power, and it contains switch-gear protection so that it can be connected to the utility transmission system. They will actually become a manufacturer of part of our product combining the core fuel cell module from FuelCell Energy with their own balance of plant. So far, they have been very successful in that marketplace. We just signed our agreement with them in February of this year (2007). They have already ordered 7.8 megawatts worth of product. In October, they are going to be breaking ground on their facility to produce the balance of plant equipment for the Korean market. The relationship is off to a great start.”

CEOCFO: Is the international arena a growth factor for you?
Mr. Brdar: “Yes it is. It is interesting that we have a technology that was developed very much in partnership with the US Department of Energy. What we are seeing is foreign countries that are very conscious of the environment like Japan and Korea adopting this US technology just as quickly as places like California that are always in the forefront. There has always been a tendency for us to think very domestically about our markets and the opportunities to deploy the products, but because we are in a world that increasingly concerned about the environment and energy, we are seeing strong global demand for our products.”

CEOCFO: You mentioned a strategy for reducing operating costs, what are you doing there and what work needs to be done?
Mr. Brdar: “We have been attacking this in two ways; one is to reduce the initial cost of the product itself; that is where the biggest opportunity has been. We put in place a cost reduction program where we work with our engineering team, find ways to engineer costs out of the product. We work with our technology team to find ways to make more power from a fuel cell stack; if we make more power out of a fuel cell stack, its unit cost is lower. We have been very successful with that. When we started the program, our first units cost twice what they do today, so in just a few years we have been able to dramatically cut the cost of the product. The other part of cost reduction we have been working on is cutting the operating and maintenance cost for the product. That is driven by the life of the fuel cell stack, how long it operates before it needs to be replaced. We have taken that fuel cell stack from what was initially a three-year design and developed and tested a five-year design that we are now flowing to manufacturing. We have also begun testing what we believe will be a seven-year design. As long as we continue to drive down the first cost of that product and we continue to drive down the operating and maintenance cost, as a company we can quickly get out of the mode of relying on subsidies that are necessary for a lot of these new technologies in the alternative energy space.”

CEOCFO: You have announced a new order from Ford Motor Company, what is happening there?
Mr. Brdar: “Ford Motor Company has a significant push to become more green in their operating practices and to take a different look at how they have traditionally done business and be an environmental leader in their space. One of the things that they have at this particular site as they do in many of their manufacturing operations, they have a paint booth, which has fumes and waste products that if released to the atmosphere, would be toxic. What we have done is found a way to work with them to take those paint fumes from the solvents and use them as a fuel in our fuel cells. You are taking something that would have been a waste product and now turning it into clean energy. It is a great fit between their objectives to become more green in their practices, and the product that we have to offer. Once we do that with Ford, there is really a lot of opportunity to do similar practices with others, not just other paint booths, but other manufacturing operations that have similar kinds of waste gases that are actually a good fuel for our fuel cell.”

CEOCFO: Will you need additional facilities as you continue to grow?
Mr. Brdar: “Our current manufacturing facility in Torrington, Connecticut, has plenty of capacity for our near term needs. We believe we can produce up to about 240 megawatts a year at the current site. We also have part of our manufacturing process where we take the components that make up the fuel cell and turn them into a stack and take it through a one-time testing process. That stack assembly and testing process, as we grow, could be located in facilities closer to our regional markets. For example, as California starts to grow, our business model would be to get as much scale out of a core manufacturing facility in Connecticut, then those components would be assembled in a facility in the regional market close to the end user customer. We will continue to expand based on our regional market demands. We will continue to expand our core manufacturing facility but it becomes more of a hub-and-spoke type model as our business grows.”

CEOCFO: Why should potential investors be interested and what does not jump off the page that people should know?
Mr. Brdar: “One of the biggest issues that we have is helping people understand FuelCell Energy and the fuel cell space. When most people think about fuel cells, they think about fuel cells for their cars. That is what has gotten a lot of attention in the press and that is what people on an individual basis can relate to. Part of it is to get them to understand that we are not in the transportation sector, because most people realize fuel cells for transportation are at least ten years away. We are not in that business. We are in the business of making highly efficient, ultra-clean power-generation equipment for commercial, industrial and utility customers.

We are making a commercial product that is suitable and available for the market today - that is part of the challenge. We are also an early leader in our space, we do not find ourselves out there competing against five other fuel cell companies for the orders that we have. We are typically competing against what a customer pays their local utility. As a small company, we are trying to penetrate this market by ourselves, which takes a little time. We see large companies like GE (General Electric), Siemens and others who are developing fuel cell products, but we have a several-year lead. With investors who know us well, you find our investment base has been stable and we have had a lot of the same institutional investors for a long period of time. They understand the company and the strategy and see the progress we are making. They also see the opportunity that is available to us. The opportunity is driven by the pressure we see today on the environment and energy. People are looking for ways to reduce our reliance on Middle-East oil and to do things cleanly because of the impact of pollution on our environment and economy. People are looking for more cost-effective ways to control their own energy cost and quality. When people start looking at fuel cells for stationary power and they look at who has a product to offer, they quickly discover we at FuelCell Energy are uniquely positioned to capitalize on the macro environment that is taking place now.”

CEOCFO: What should people remember most when they read this interview?
Mr. Brdar: “They should remember Fuel Cell Energy is a company that is making a highly efficient, ultra clean, reliable fuel cell product for commercial, industrial, and utility customers and we are offering them today.”


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“Concerns about energy costs have certainly brought a lot of attention to alternative energy as a whole - for us in particular, being the only company making large-scale fuel cells for stationery power and offering them on a commercial basis. It has really turned a spotlight to some alternatives other than things like solar power. What the marketplace is starting to understand is we need to have alternative solutions for energy. Things like solar and wind are good at what they do, but they are very intermittent sources. Solar is great when the sun is shining, wind is great when the wind is blowing, but you need something like a fuel cell that can be very clean and runs 24/7.” - R. Daniel Brdar does not purchase or make
recommendation on stocks based on the interviews published.