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Fuel Cells Discussed on Investors Net Radio Show

The information presented in these interviews is pretty basic, starting with a primer on the big changes underway in the utility industry. Hugh Holman (see the UFTO home page for his earlier report) is one of the very few Wall Street analysts concentrating on energy technology. He makes a good case that this area could be the “next big thing,” and we’ve already had a taste of it starting this January.

The programs give a good overview perspective on fuel cells, and it’s interesting to hear spokesmen from Plug and Ballard explain their positioning and strategies, and to hear the financial reporters starting to “get it.” We have to remember that most people know very little about all of this — maybe these shows can help us explain it to friends and family ( “and management?” . . . no . . better not say that).

You can listen to the archived broadcasts over the internet, using RealPlayer, or order transcripts.
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(PR Newswire article this morning)

Fuel Cell or ‘Fool Cell?’ Engines Highlight ‘Tech Check’ Radio With CIBC Analyst Hugh Holman and Paul Lancaster Of Ballard Power Systems

Is the venerable but polluting internal combustion engine in autos and buses about to go the way of black and white TV? How long will it be until we’ll be speeding along the roadways emitting nothing more toxic than water vapor?

To hear the latest developments in the race to bring the first commercially produced and priced fuel cell engines to transportation users worldwide, tune in to [Wed Mar 29] today’s “Tech Check” Radio program produced by Informed Investors Radio.

. . . Vancouver, BC-based Ballard Power Systems (Nasdaq: BLDP) has made great strides in developing PEM (proton exchange membrane) technology and is a leader worldwide in developing fuel cell technology for transportation uses. It also has a major commitment in stationary and portable power segments. Paul Lancaster, VP of Corporate Development, will discuss Ballard’s most recent developments and answer questions.

Analyst Hugh Holman of CIBC World Markets is again a guest. In last week’s program, Holman largely focused on fuel cell companies providing stationary power for residential use and other stand-alone markets, with a particular emphasis on developments at Plug Power (Nasdaq: PLUG).

This week, Holman will discuss fuel cells and transportation. Also, listeners of last week’s program sent provocative questions relating to Canadian company Global Thermoelectric (Toronto: GLE) and its solid oxide fuel cell (SOFC) program. Holman will discuss pros and cons of the PEM vs. the SOFC.

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http://www.broadcast.com/shows/informedinvestors/
http://www.broadcast.com/shows/informedinvestors/archive.html

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March 22, 2000 –PART 1
http://playlist.broadcast.com/makeram.asp?id=375291
[this link will immediately start downloading the RealPlayer audio file]

Honey, Don’t Forget to Pack the Fuel Cell.
Soaring energy costs have rejuvenated thoughts of alternative energy. Meet some of the players.

Theme: Sector news–especially the tech sector–from the analysts, fund managers, industry pundits and company executives is the focus. Expect timely, in-depth news for improving investment decisions.

Snapshot: With gas prices rising faster than the Fed Funds rate, Wall Street has discovered fuel cell companies. Developments in this nascent, but potentially enormous industry will almost certainly have major effects on both the transportation and power generation industries. To get the inside scoop on what is powering the surge in the fuel cell-related stocks, catch analyst Hugh Holman of CIBC World Markets and Gary Mittleman, CEO of Plug Power (Nasdaq:PLUG).

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March 29, 2000 –PART 2
http://playlist.broadcast.com/makeram.asp?id=376499

Energy Tech Part 2: Fired Up About Fuel Cells
Another look at this exploding group, which may change the way we fuel our cars and homes. Ballard Power Systems is scheduled, and so is Hugh Holman, an energy technology analyst at CIBC World Markets. He’ll review types of fuel cells, industry drivers and trends, and what to watch the rest of the year.

Snapshot: “Energy Tech Part 2: Fired Up About Fuel Cells” Having set records for traffic last Wednesday, we’ll take another look at this exploding group, which may change the way we fuel our cars and homes. Ballard Power Systems is scheduled, and Hugh Holman, Energy Technology analyst at CIBC World Markets, returns to review types of fuel cells, industry drivers and trends and what to watch the rest of the year.

Ballard and GPU Joint Venture

Subject: UFTO Note – Ballard and GPU Joint Venture
Date: Fri, 20 Dec 1996 10:44:23 -0800
From: Ed Beardsworth

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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Below is a recent press release on a joint venture between Ballard and GPU. Ballard also announced receiving $30 Million from the Canadian government to support commercialization of stationary fuel cell power plants. —

BALLARD POWER SYSTEMS INC. SIGNS $31.2 MILLION AGREEMENT WITH GPU INTERNATIONAL TO FORM VENTURE TO COMMERCIALIZE FUEL CELL STATIONARY POWER PLANTS

Dec. 17, 1996

Ballard Power Systems and GPU International, Inc. (GPUI), a subsidiary of GPU Inc., a major international electric company based in New Jersey, announced today that they have formed a venture for the commercialization of Fuel Cell Stationary Power Plants using the Ballard Proton Exchange Membrane (PEM) Fuel Cell.

Under the terms of the agreement, which is subject to final regulatory approval, Ballard Power Systems has created a new subsidiary, Ballard Generation Systems Inc., to commercialize Fuel Cell Stationary Power Plants. Ballard Generation Systems will develop, market and manufacture Fuel Cell Stationary Power Plants worldwide and will be based in Burnaby, B.C. Ballard Power Systems, the parent company, will supply the fuel cells for these power plants. GPU International will invest US$23.25 million (Can$31.2 million) over the next two years in the subsidiary, Ballard Generation Systems, for up to a 19.3% share of Ballard Generation Systems, two 250 kW fuel cell power plants for field trials, and non-transferrable warrants to purchase 100,000 Common shares in Ballard Power Systems at a price of $27.45 per share.

In addition to GPUI’s investment in Ballard Generation Systems, it will bring to the company its considerable expertise in world energy markets and an understanding of user requirements which will contribute to the development of Ballard Fuel Cell Stationary Power Plants.

GPU International is the non-regulated arm of GPU, Inc. GPU serves a worldwide population of over 13 million people with 4.4 million customers located in 12 countries. It had 1995 revenues of over US$3.8 billion and assets of about US$10 billion. GPU, Inc. shares are on the New York Stock Exchange.

“Under growing deregulation, Ballard Fuel Cell Stationary Power Plants will become an important part of the energy market. These power plants will provide power for a broad range of market applications including Premium Power,” said Bruce L. Levy, President and CEO of GPU International. “We see that by combining Ballard’s clear lead in proton exchange membrane fuel cells and power plants with GPU’s expertise in the world energy business, we can together build a growing, successful and profitable business.”

“We are pleased to welcome GPU as a strategic partner and investor in our stationary power business,” said Firoz Rasul, President and Chief Executive Officer of Ballard. “GPU has distinguished itself as a leader in the deregulated electric power industry worldwide and has participated in the commercialization of innovative energy products and applications. Ballard Fuel Cell Power Plants will address the needs of the substantial markets that are emerging for environmentally clean, high quality power generated at the customer’s site.”

“GPU International has made investments in power-related projects throughout the world,” said GPUI’s Levy. “We feel that fuel cell power plants will open up considerable new markets in the power business within the next 5 years.”

“To marshal the resources needed to bring each of our products to market effectively, our plan is to join forces with a carefully chosen team of marketing and manufacturing partners,” said Mossadiq Umedaly, Vice President and Chief Financial Officer of Ballard Power Systems. “GPUI brings deep insight in the international electric power markets, which will contribute to the commercial success of Ballard Fuel Cell power plants. The equity participation by GPUI also enables Ballard to capitalize on the value of its stationary power plant technology beyond the fuel cell, and establishes the value for this subsidiary, before GPUI’s investment of $31.2 million at more than $130 million.”

Ballard Power Systems is the world leader in the development of proton exchange membrane fuel cell power systems. The heart of its products is the Ballard Fuel Cell, a proprietary zero-emission engine that converts natural gas, methanol, or hydrogen fuel into electricity without combustion. Ballard Fuel Cells are currently being used by leading international companies including Daimler-Benz, General Motors, Hitachi, Honda, Volkswagen and Volvo to develop zero-emission vehicles and clean stationary power plants.

Ballard’s Common shares are listed on The Toronto Stock Exchange under the trading symbol “BLD” and on the Nasdaq National Market System under the symbol “BLDPF”.

/For further information: Paul Lancaster, Ballard Power Systems Inc. (604) 454-0900, fax (604) 412-4700; Michael A. Lundy, Lundy Associates, Inc. (201) 660-1100, fax (201) 660-1104 or Patrick M. Dool, GPU International, Inc. (201) 263-6951, fax (201) 263-6977/ (BLD. BLDPF)

Prospects for Ballard and ERC Fuel Cells

Subject: UFTO Note: Prospects for Ballard and ERC Fuel Cells
Date: Mon, 02 Sep 1996

UFTO NOTE: Stock Price Prospects for Ballard and ERC, Fuel Cell Developers

KIIS STRATEGY FOR START UPS: KEEP IT INSOLVENT, STUPID! By Robert Metz (Originally published Aug 26 in `Money Talks,` an interactive investment magazine at http://www.talks.com.)

Summary: Two developmental fuel cell firms that could hit home runs or go broke depending on the success of their technologies. For high share price: lose money, sell more stock: your investment banker will tout your stock.

There is an old joke about a company that loses money on every sale but makes it up in volume. Here’s a variation on that joke involving fuel cells:

Fuel cells are like batteries with this difference: when a battery runs down, you recharge it by pumping in more electricity. A fuel cell combines hydrogen and oxygen to make electricity. The exhaust: pure water, son! But fuel cells, which make electricity without combustion, are larger, less powerful and vastly more costly than internal combustion engines.

The joke: Ballard Power loses millions building fuel cells for vehicles. As a result, Ballard must raise cash through repeated equity offerings. Contrast Ballard with Energy Research Corp. which develops its non- polluting fuel cells for electric utilities. Its utility clients seek a clean means of producing electricity that will replace their dirty, coal-burning plants.

Like Ballard, Energy Research is developmental. Yet an ER cell does supply power to homes in Santa Clara. And ER earns a little money, too.

The punch line: Burnaby, Canada-based Ballard (BLDPF, Nasdq) is the preferred investment. Don’t laugh! Ballard Power has achieved a market capitalization seven times that of Energy Research (ERCC, Nasdq).

Why? Canadian bankers are almost constantly touting Ballard. They earn fees for selling each Ballard equity offering to the investing public. All this `sponsorship` as it’s called on Wall Street, creates a high share price.

They say that mutual funds are not bought, they are sold, no-load mutual funds to the contrary notwithstanding. This is true of shares in developmental firms, too. Brokers dazzle, talking of millions of family cars traveling the highways of the world powered by non-polluting fuel cells.

Get this! Energy Research needs no outside capital. So it isn’t touted. Keep in mind that my source on these two companies is admittedly long ERCC and short BLFPF. He asked me not to disclose his name. Ballard, with whom he talks, obviously would not take his calls if he were named.

Let’s look directly at the numbers. Energy Research has 4 million shares outstanding. When at 13, the shares were worth $52 million. Ballard has 15.2 million common shares out and 1.5 million warrants to buy shares at a low price. With the stock at 21, BLFPF’s market cap is roughly $340 million. Those are the key numbers for innovative developmental firms. Such companies tend either to soar or go broke. It’s either/or, as a rule.

There are other reasons why traders prefer Ballard, not the least of which is glamour. Imagine a vehicle that uses hydrogen as fuel and which dribbles onto the pavement nothing more toxic than water vapor. Is there such a vehicle? Yes, G.M. and Daimler Benz have both purchased fuel cells from Ballard. Honda and Volkswagon are also pursuing fuel cells. Ballard’s ebullient CEO, Firoz Rasul, insists the technology is ready. He says his company is banking on environmental regulations to spur demand for its fuel cells. But he admits that the the final call is the car makers’.

The public got a glimpse of Ballard’s technology in June. Daimler-Benz showed the press a working prototype powered by Ballard’s fuel cells. Except for bulky rooftop hydrogen tanks, the system fit under the hood and seats of a Vito `minivan` from Daimler’s Mercedes-Benz automobile unit.

The cell has few moving parts, no sparks or fumes. Methanol can be used to fuel the cells. Whoops! It must first be converted into hydrogen through a process that releases carbon dioxide. Is this for you? The last vehicle Germany sent us with hydrogen on board was the Hindenburg.

When is the fuel cell coming to a highway near you? Mercedes’ Chief Executive, Helmut Werner, is optimistic that fuel cell technology will find a permanent place in his company’s product line up. He crows that the work is going faster than he expected, but his on-the-road target is 12 years out. If you paid for a Mercedes Benz vehicle with Ballard Fuel Cell, it’d cost you, say, $500,000. That same sum would buy about five Rolls Royce cars.

Cost is the rub with Energy Research as well. ERCC’s fuel cells, like those of Ballard, are custom built. Both must be mass producd if the cost is to sink to a level that makes these fuel cells both practical and affordable.

It’s been a long journey just getting this far. The fuel cell was thought up in the 1830s. The fuel cell is a vastly more efficient than rival power means. Utilities produce electricity by burning coal, oil, and natural gas. The heat produced is used to super heat water, turning it to steam which turns the vanes in a turbine which spins a generator and produces electicity.

There is energy loss every step of the way. Utility power plants may extract only 25 percent of a given fuel’s energy potential. `Co-generate` the heat the process throws off and get a total of 30 percent of the energy.

Energy Research’s Santa Clara fuel cell can use kerosene, gasoline or methane, any hydrocarbon at all, to recover 50 percent of the fuel’s energy. Using the heat for co-generation may squeeze out 80 percent of potential.

Fuel cells offer far more efficiency than any other practical process. Yet fuel cells remain prohibitively expensive for most uses. Do note that NASA has used fuel cells to power manned space programs for decades.

As my source views it, Energy Research with its unglamorous partners, some 30 of the nation’s largest utilities, is more likely to win the brass ring. Keep in mind both companies are betting heavily on fuel cells. Either one or both could score. But shares of either one or both could go to zero.

Keep this in mind: there is no infrastructure to support an automobile that burns hydrogen. Gas stations don’t stock the alternative methane, either. Utilities, by contrast, have access to fuels suitable for fuel cells.

Wait! If ERCC misses the bullseye with fuel cells, it does have another arrow: batteries. So the stock may be worth more than current price. The fan says ER’s nickel zinc battery will zap nickel cadmium and nickel metal hydride batteries. Or so its `conservative` management avers. ER is supposedly negotiating with two companies to commercialize the nickel zinc battery. The first of two deals could be done in a month, the fan says.

ER could become multi billion dollar company either with its fuel cells or with its batteries. My source, who, you’ll must keep in mind, is long ERCC and short BLFPF, says ER is `a triple digit stock if it hits with both.`

But, he adds, `If we knew for sure either or both technologies would work ERCC would already be in triple digits. Maybe neither will work and the stock will go to zero.` But it seems to him ER’s goals are realistic since a 30 utility `Fuel Cell Commercialization Group` is working with ERCC.

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| *** UFTO *** Edward Beardsworth * Consultant |
| 951 Lincoln Ave. tel 415-328-5670 |
| Palo Alto CA 94301-3041 fax 415-328-5675 |
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