DANBURY, Conn.--FuelCell Energy, Inc. (NasdaqNM:FCEL), a leading manufacturer of ultra-clean and efficient electric power generation plants for commercial, industrial and government customers, today announced it has finalized terms with the U.S. Department of Energy (DOE) for a $36.2 million Phase I award to develop a coal-based, multi-megawatt solid oxide fuel cell-based hybrid system. This award provides funding for the first stage of the 10-year, three-phased Fuel Cell Coal-Based Systems project, part of the DOE Office of Fossil Energy's Solid State Energy Conversion Alliance (SECA). Total project funding for this and the other two planned phases is anticipated to be approximately $180 million.

The program's overall objective is to develop solid oxide fuel cell (SOFC) technology, fueled by coal synthesis gas (coal gas) that will be used in highly-efficient central generation power plant facilities. The advanced fuel cell-hybrid system will have an overall efficiency of at least 50 percent in converting energy contained in coal to grid electrical power. In contrast, today's average U.S. coal-based power plant has an electrical efficiency of approximately 35 percent.

In addition, the envisioned SOFC-hybrid system is expected to capture 90 percent or more of the system's carbon dioxide emissions for environmentally safe disposal while being cost-competitive with other base load power generating technologies. The project will culminate with the fabrication and operation of a multi-MW proof-of-concept SOFC-hybrid power plant at a suitable location, using coal-derived synthesis gas as fuel. FuelCell Energy may consider submitting the project to the FutureGen Alliance Inc. for possible inclusion in the FutureGen Power Plant. FutureGen is a planned DOE research facility for advanced power systems that emit near-zero emissions, with a substantial increase over today's electric generating efficiency. As well as generating electricity, the system will produce hydrogen and sequester carbon dioxide.

Phase I project objectives include scale-up and performance enhancement of the existing SOFC cell and stack configuration, engineering design analysis for a proof-of-concept power plant and cost analysis. The Phase I project deliverable will be testing of a stack building block unit operating on simulated coal syngas. A further objective of the FuelCell Energy project will be to construct an 80-100kW capacity stack tower, comprised of these building block units, to validate design components associated with a multi-stack tower. The stack tower will be validation tested at the company's test facility toward the end of the Phase I program.

FuelCell Energy utilizes the cell and stack design of its technology team partner, Versa Power Systems Inc. (VPS), for all its SOFC development programs. VPS has been engaged in SOFC development since 1997 and is considered a world leader in SOFC cell and stack technology.

VPS provided the 3kW prototype stack and system for FuelCell Energy's DOE SECA Cost Reduction project, initiated in April 2003. In recently-completed Phase I testing, the 3kW SOFC prototype system operated for over 2000 hours and successfully met or surpassed all DOE performance metrics for power output, efficiency and degradation (life). Applicable elements of this existing SECA project will be integrated into the new project's technical objectives, based on similarities in cell and stack development.

"This substantial award by the DOE highlights the importance of developing the fuel cell technology required for large central power stations to produce affordable, efficient and environmentally-friendly electricity from coal," said Christopher R. Bentley, Executive Vice President of Government Research and Development Operations. "Based on our extensive experience and leadership developing high temperature megawatt-class fuel cell products, we are ideally positioned to develop this high efficiency SOFC-hybrid power plant that will use one of the nation's most abundant fuels and reduce our dependence on foreign oil while dramatically reducing green house gas emissions usually associated with coal-based power generation."

In February, FuelCell Energy was selected by the DOE as a prime contractor for this award and is responsible for the overall systems development of the power plant. Other team members for the newly awarded Fuel Cell Coal-Based Systems project include: Gas Technology Institute (GTI), providing advanced gasification clean-up technology; Nexant, Inc. providing coal gasification and carbon sequestration expertise; WorleyParsons Group Inc. providing engineering, procurement and construction support and SatCon Technology Corporation, providing power conditioning system engineering.

This latest SOFC technology development project continues FuelCell Energy's ongoing fuel cell development work with the DOE that dates back to 1976. FuelCell Energy completed an 11- year development program in 2004 for its DFC power plants and has been a prime contractor in the SECA program since 2003. Subsequent phases and amounts of this cost-shared coal-based SOFC program will be subject to DOE's selection process.

About FuelCell Energy, Inc.

FuelCell Energy develops and markets ultra-clean power plants that generate electricity with higher efficiency than distributed generation plants of similar size and with virtually no air pollution. Fuel cells produce base load electricity giving commercial and industrial customers greater control over their power generation economics, reliability and emissions. Emerging state, federal and international regulations to reduce harmful greenhouse gas emissions consider fuel cell power plants in the same environmentally friendly category as wind and solar energy sources -- with the added advantages of running 24 hours a day and the capacity to be installed where wind turbines or solar panels often cannot. Headquartered in Danbury, Conn., FuelCell Energy services over 50 power plant sites around the globe that have generated more than 124 million kilowatt hours, and conducts R&D on next-generation fuel cell technologies to meet the world's ever-increasing demand for ultra-clean distributed energy. For more information on the company, its products and its worldwide commercial distribution alliances, please see www.fuelcellenergy.com.