July 22 th  2002

POWER TO THE PEOPLE;WILL KINGSTON FIRM'S FUEL CELL TECHNOLOGY FREE US FROM THE TYRANNY OF HYDRO?               

Source:  Ottawa Sun

               Their company, Fuel Cell Technologies Ltd., is looking to grab a large chunk of a
               multi-billion-dollar international market which promises to let homeowners and small business
               operators unhook from hydro grids and produce their own heat and light.

               As the name implies, the firm produces fuel cells, free-standing units about the size of large
               refrigerators, which use an electrochemical reaction to combine oxygen and hydrogen to
               produce heat and hydro. The hydrogen comes from a traditional fuel source, like propane or
               natural gas.

               Unlike a regular furnace, however, there is no fuel burning, and as a result no pollution. The
               process creates only a harmless steam vapour instead of sulphur and particulates.

               Fuel Cell Technologies began its life as a subsidiary of aluminum giant Alcan in 1989, when it
               was known as Alupower Canada Ltd. In those days the technology used aluminum as fuel, a
               technology that worked well, but was fairly expensive. 

               Stannard, who is now the president of Fuel Cell Technologies, was its first employee.

               BABIES WITH THE BATHWATER
               Five years later the world of aluminum was turned upside down, Stannard said in an
               interview, when the former Soviet Union started flooding the market with product.

               As a result, Alcan retrenched and closed more than 50 hi-tech startups around the world,
               "and a lot of promising babies were thrown out with the bathwater." That included Alupower.

               A group of employees started Fuel Cell Technologies in 1994, using mainly their severance
               pay from Alcan as seed money. Remarkably, said Stannard, the new venture turned a profit
               in four of its first five years, "something very unusual in the fuel cell business."

               The company grew steadily, nearly doubling its workforce in a couple of years, he said, and
               was then faced with a dilemma -- keep churning out the same product or expand and
               produce fuel cell devices for a broader market.

               It opted for growth, which meant it needed R&D capital, so Fuel Cell went public through a
               reverse takeover of Edmonton-based ThermicEdge Corp.

               "We took a chance," said Stannard. "We wanted to develop a solid oxide fuel cell which
               could run using a variety of fuels, including natural gas or propane."

               The company has a number of demonstration units in the field, including two at Yosemite
               National Park in California, with a couple of others being prepared for shipment to Stockholm
               in the next few days, and expects to be producing them for commercial sale within two
               years.

               California, the northeastern U.S., Japan and northern Europe will probably offer the greatest
               market potential initially, Stannard said, because electricity costs are so high, meaning the
               units will quickly pay off.

               As commercial production begins, the per unit cost of fuel cells will drop rapidly, he
               predicted. With today's limited, labour-intensive production, each of the fuel cells is worth
               more than $ 100,000. Five years from now, he said, the company hopes to get that down to
               $ 4,000-$ 5,000. At that price, he said, they will pay for themselves in a year or two through
               savings on heat and hydro.

               "People won't buy one because it's groovy, they'll buy it because it makes economic sense,"
               said Stannard. The fuel cells reduce emissions and provide lower-cost heat and electricity.

               There are concrete signs of the company's growth plans on an adjacent lot, where
               construction has begun on a new 20,000-sq.-ft. production facility, which Stannard said will
               be capable of turning out 10,000 fuel cells a year working a single shift.

               That's where he expects annual sales to be within 4-5 years, as Fuel Cell Technologies
               carves out a share of what he estimates will be total worldwide sales of millions of units
               annually. 

               Meanwhile, the company is still selling some aluminum-based systems, mainly for use
               underwater to keep divers warm while they work or to provide a heat and hydro source in
               remote submersibles. That's only about 20% of the business now, said Stannard, "but it's
               important because it makes money and broadens our product offering." It's a niche with very
               limited future growth potential, however, he said.

               STOCK POTENTIAL
               Stannard hopes the company's share price will be revived as it moves closer to commercial
               production. Lately the stock has been trading in the 80cents range, but he said a number of
               analysts who cover the company are looking for it to grow to $ 2-$ 3 based on market
               forecasts.

               "We're not an exotic dot.com that is going to rocket up to $ 90," he said "although on one wild
               and crazy day a couple of years ago the stock did touch $ 6 for about one nanosecond."

               The company still has enough cash to get it at least close to commercial production, Stannard
               said. Just over a year ago it raised $ 7 million in a public offering in a time of brutal markets,
               and is going through that at a rate of $ 350,000- $ 400,000 per month.

               "We have enough left at least for a year or two," he said. "There's no panic."