VANCOUVER, British Columbia-- Ballard Power Systems Inc. (CA:BLD)(BLDP) -Ballard Power Systems today announced the closing of a transaction with Japanese partner EBARA Corporation (EBARA) and their jointly-owned company, EBARA BALLARD Corporation, that will provide funding for the next generation of cogeneration fuel cell stack and system technology. An MOU related to the transaction was signed in May. The agreement will provide Ballard approximately US$30 million in cash over four years, through development funding and equity contributions.

About the Transaction

The transaction covers a broad range of activities that will enhance Ballard's competitive position and commitment to the Japanese stationary cogeneration market. Under its terms:

- Ballard will receive US$18 million for the ongoing development of the current and next generation 1 kW combined heat and power cogeneration fuel cell stack, subject to the completion of the work pursuant to technical milestones under the development program. This funding would be received over the next four years.

- EBARA BALLARD (owned 51% by EBARA and 49% by Ballard) will gain rights, over time, through an exclusive, royalty-bearing license, to assemble, service, develop, manufacture and sell stationary cogeneration fuel cell stacks in Japan, as part of a joint long-term strategy to localize development and manufacturing in Japan for the Japanese market.

- Ballard will retain all rights related to stationary cogeneration fuel cell markets outside of Japan.

- Ballard will receive an equity investment from EBARA of US$11.7 million in two equal payments. The first half of the equity investment was received at closing, with the payment by EBARA to Ballard of U.S. $5,850,000 in exchange for 1,004,178 Ballard Common shares. The second half of the equity investment will be made in September 2006.

"The agreement with EBARA serves to strengthen Ballard's already robust position in Japan and opens the doors to other markets where we have the exclusive right to access and leverage our fuel cell technology," said Dennis Campbell, Ballard's President and Chief Executive Officer. "Our next generation technology development is well underway, with a focus on reduced cost and increased durability to a targeted lifetime of 40,000 hours, for a market launch in 2008."

About Fuel Cell Cogeneration in Japan

Cogeneration systems are installed directly at consumers' homes and simultaneously generate electricity and hot water. The unique value proposition of fuel cell powered cogeneration for the Japanese market is that it reduces dependency on grid-based power in a country with some of the world's highest electricity rates. Customers save money and the fuel cell technology supports the government's Kyoto Accord commitment by reducing carbon dioxide emissions by up to 40% compared to conventional electric generation using fossil fuels.

The Japanese government is very focused on its energy policy and in providing product introduction subsidies and support for alternative energy technologies. This year alone, US$23 million in product introduction subsidies are slated for the installation of 400 fuel cell cogeneration systems.

"There is a very compelling business case for the success of Ballard(R) fuel cell technology in Japan, including the high cost of electricity, the growing demand for energy in the residential and consumer sector, and a strong national energy policy focused on sustainability and energy-independence," said Mr. Campbell. "With this latest transaction with EBARA and EBARA BALLARD now complete, Ballard is positioned for ongoing success in the Japanese cogeneration market."

About Ballard

Ballard Power Systems is recognized as the world leader in developing, manufacturing and marketing zero-emission proton exchange membrane fuel cells. Ballard's mission is to develop fuel cell power as a practical alternative to internal combustion engines through technology leadership.

To learn more about what Ballard is doing with Power to Change the World(R), visit www.ballard.com.

About EBARA Corporation

EBARA Corporation is globally recognized as a major developer, manufacturer and distributor of fluid machinery and systems, precision machinery and environmental engineering systems, and as a leader in zero-emission energy technology.

About EBARA BALLARD

EBARA BALLARD is working with the largest natural gas company in Japan, Tokyo Gas, and is also working with Nippon Oil, the leading Japanese oil company, on a kerosene-fueled cogeneration system. Tokyo Gas began commercialization in February 2005, and Nippon Oil has publicly stated their intentions to begin commercial sales of combined heat and power fuel cell systems in 2006.

EBARA BALLARD is based in Tokyo, Japan and its mandate is to develop, manufacture and sell fuel cell power generators incorporating the Ballard(R) fuel cell to customers in Japan.