Caterpillar Inc. ( CAT) and FuelCell Energy, Inc. ( FCEL) have announced their first joint saleof an ultra-low emissions fuel cell power generation plant in the state of California. The 250-kilowatt Direct FuelCell(R) (DFC(R)) power plant will be used

by the Los Angeles County Sanitation Districts (Districts), which expect the new

plant to provide energy cost savings compared to current utility rates in the Los

Angeles area.

The sale, completed by Quinn Power Systems Associates, the Caterpillar dealer representing a portion of southern California, will include site engineering and installation of the FuelCell Energy DFC300A power plant and related equipment

The Districts are a group of independent special districts serving about 5.4 million residents living in Los Angeles County. The Districts, which treat about 530 million gallons of wastewater each day, are industry leaders in recovering and utilizing biogas and biomass byproducts from wasteto generate electricity.

"We believe California represents an exciting market for fuel cell power generation equipment," said James J. Parker, Caterpillar vice president with for the Power Systems Marketing Division. "As the world leader in distributed power generation, we see a growing need for all of Caterpillar’s broad power generation product line, which delivers low operating costs, proven reliability and global distribution and support."

"This is a significant transaction for FuelCell energy and it represents our fifth order for a wastewater treatment application in the U.S. and Japan, a clear market for DFC power plants," said Jerry D. Leitman, chairman and CEO of FuelCell Energy. "This sale marks the first project with Caterpillar in California, and demonstrates our ability to leverage Caterpillar’s dealer relationships, along with turn-key project delivery and service capabilities."

The Districts plan to install the fuel cell unit at its Palmdale Water Reclamation Plant in northwest Los Angeles County. Delivery of the unit is expected in the fourth quarter of 2004. The District is receiving $1.125 million in renewable incentive funding for the project from the California Public Utilities Commission. However, full details of the sale were not disclosed.

In April 2002, Caterpillar and FuelCell Energy signed an alliance agreement to distribute and develop ultra-low emission fuel cell power generation products for industrial and commercial use. The agreement calls for the companies to jointly develop power plants in the 250 kW to 3MW size range, incorporating FuelCell Energy’s fuel cell module.

Direct FuelCells generate electricity with no combustion. They are, in effect, like continuously operating batteries that generate electricity as long as fuel, such as natural gas, is supplied. Since the fuel is not burned, there are virtually no emissions. In addition, because DFC power plants are designed to generate hydrogen internally, they are commercially available today without waiting for development of a hydrogen supply infrastructure

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