FuelCell Energy Signs 10-Year Manufacturing and Distribution Agreement with South Korea’s POSCO Power

February 21, 2007 by Jeff Shepard

FuelCell Energy, Inc. (FCE) announced an expanded agreement with its Korean strategic distribution partner, POSCO. Under the agreement, POSCO’s subsidiary POSCO Power will become a provider of FCE’s Direct FuelCell® (DFC®) power plants in Korea, and will manufacture the balance of plant equipment for the plants.

Under the 10-year license and distribution agreement, POSCO Power will create a fuel cell sales and service organization, and employ its expertise in power plant design and raw materials procurement to reduce power plant costs. Fuel cell stack modules will be manufactured by FCE in Connecticut and shipped to Asian customers for installation with POSCO Power balance of plants. POSCO Power also will build a facility to manufacture the balance of plant (non-fuel cell stack portion of FCE’s DFC power plants) in Korea.

As part of the alliance with FCE, POSCO Power will pay FCE a 4.1% annual royalty on fuel cell related sales by POSCO Power over the term of the agreement subject to minimum royalties. POSCO has also agreed to invest $29 million in FCE through the purchase of common stock at $7.59 per share, a premium over the 20-day average FCE stock closing price. This will result in POSCO purchasing approximately 3.8 million shares which are restricted for six months.

In addition to Korea, POSCO has the right to sell DFC power plants worldwide except in North America, Europe, the Middle East and Japan. Capitalizing on POSCO’s strong manufacturing capabilities and economies of scale, FCE also has the option to purchase POSCO Power’s balance of plants for sale to FCE’s customers in other parts of the world.