Oct 22 2004
FuelCell Energy, Inc, a leading manufacturer of large stationary fuel cell power plants for commercial and industrial customers, announced today that it has entered into an agreement to combine its Canadian solid oxide fuel cell (SOFC) operations into Versa Power Systems (Versa). In exchange, FuelCell Energy will receive stock in Versa, increasing its ownership position in Versa from 16 percent to 42 percent. Consolidating SOFC technology development into a single entity provides a greater opportunity to commercialize SOFC products under the U.S. Department of Energy's (DOE) 10-year, $139 million Solid State Energy Conversion Alliance (SECA) Program. The closing is expected to take place on November 1, 2004.
"We believe that combining our Canadian SOFC operations with Versa, two entities with established core solid oxide fuel cell technology programs, will enhance our ability to advance to the latter phases of the SECA program," said Jerry D. Leitman, Chairman and CEO of FuelCell Energy, Inc. "We see Versa as the vehicle for successful commercialization of SOFC products that will be complementary to our larger-scaled Direct FuelCell power plants that we are delivering to commercial, industrial and government customers today."
"Having FuelCell Energy's Canadian operations join Versa will expand our technology base to further advance our SECA program efforts and enable us to pursue other government-sponsored SOFC development projects," said Robert Stokes, CEO of Versa. "Versa's joint venture partners are committed to developing our SOFC technology into commercial products for target markets including remote sites, telecommunications, commercial and residential buildings, back-up, mobile standby and auxiliary power units in sizes ranging from 3 to 100 kilowatts."
Versa, founded in September 2001, is a joint venture of the Gas Technology Institute, Electric Power Research Institute, the University of Utah, Materials and Systems Research Inc. and FuelCell Energy. Versa's proprietary intellectual property (19 patents and pending patent applications), mutually developed and owned by the joint venture partners, includes a patented planar SOFC system and process that uses a unique cell configuration and components designed to enable operation at much lower temperature with increased power density.
FuelCell Energy joined the Versa team to pursue the DOE's SECA Program in 2002. In April 2003, FuelCell Energy was selected by the DOE as the prime contractor for the cost-shared SECA program, with Versa as a sub-contractor. The $24 million, three-year Phase I award was finalized in September 2004. Other SECA team participants include Dana Corporation and Pacific Northwest National Laboratory.
FuelCell Energy's Canadian SOFC operations, formerly part of Global Thermoelectric Inc. acquired by FuelCell Energy in November 2003, launched its SOFC development program in 1998. FuelCell Energy's Canadian SOFC operations have developed a key proprietary fuel cell design and pilot manufacturing processes and methods. This cell design, combined with advanced stack technology, is now being tested in complete systems, with a focus on the development of stationary natural gas-fueled prototypes.
FuelCell Energy will be granted a second seat on Versa's board, which will increase from six to seven members. Currently, Dr. Hansraj C. Maru, FuelCell Energy's Chief Technology Officer, is a member of Versa's board.
Under the terms of the agreement, all SOFC intellectual property and the majority of the fixed assets of Fuel Cell Energy, Ltd., FuelCell Energy's Canadian subsidiary, will be combined with Versa in exchange for 5,714 shares. When the transaction is completed, the Company will own 7,714 shares, or 42 percent, of the common shares of Versa. No cash will be exchanged in this transaction and employees of FuelCell Energy, Ltd. will become Versa employees. With FuelCell Energy's SOFC operation being transferred to Versa, the Company does not expect to incur any continuing operating costs in fiscal 2005. The Company expects to incur future cash costs of approximately $1.5 million related to severance and facility consolidations in Calgary.
Prior to the completion of the transaction, all of the approximately 2 million issued and outstanding exchangeable shares of FuelCell Energy, Ltd. will be redeemed in exchange for shares of FuelCell Energy, Inc. common stock on a one-for-one basis. This has no impact on the total number of outstanding shares of FuelCell Energy's common stock.
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