Kurt Goddard – VP, IR R. Daniel Brdar – Chairman, President and CEO Joseph G. Mahler – SVP, CFO, Secretary, Treasurer, and Corporate Strategy

Sarah [ph] – Lazard Capital John Quealy – Canaccord Colin Rush – ThinkEquity Walter Nasdeo – Ardour Capital Scott Reynolds – Thomas Weisel Peter Wright [ph] – Tradition [ph]

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the FuelCell Energy reports second quarter 2010 results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions) As a reminder, this conference is being recorded. I would like to introduce your host for today, Mr. Kurt Goddard, Vice President of Investor Relations. Sir, please go ahead.

: Before proceeding with the call, I'd like to remind everyone that this call is being recorded and that the discussion today will contain forward-looking statements, including the company's plans and expectations for the continuing development and commercialization of our fuel cell technology. I would like to direct listeners to read the company's cautionary statement on forward-looking information and other risk factors in our filings with the US Securities and Exchange Commission. Now I’d like to turn the call over to Dan Brdar. Dan? R. Daniel Brdar: Thank you. And thanks, everyone, for joining us this morning. As policymakers and power producers around the world seek solutions to their critical energy and environmental challenges, clean and efficient energy generation has become a worldwide priority. Throughout our target markets, awareness and understanding of the unique benefits of fuel cells and ultra-clean distributed generation is growing because our fuel cells solve critical energy problems that no other technology can. Our stationary fuel cells use a variety of fuels such as biogas or natural gas to generate ultra-clean base load electric power where it is needed. They do this more cleanly, quietly, and efficiently than conventional combustion-based technologies, and they produce power continuously unlike wind and solar. Recent decisions by policymakers and regulators also confirm the global need for clean, reliable base load distributed generation. During the quarter, two examples of these policy and regulatory initiatives were acted upon. In March, the South Korean government enacted a historic National Renewable Portfolio Standard, which includes fuel cells operating on natural gas. Here in the US, the California Public Utility Commission approved the first utility rate-based fuel cell power plant. In May, the first of the utility projects moved to closure and Pacific Gas and Electric ordered two 1.4 megawatt units for combined heat and power projects at California State Universities. As the only manufacturer of commercial megawatt class fuel cells for base load power generation, energy producers and consumers are turning to our products to solve their energy challenges. This is driving significant activity in our sales pipeline and in our markets. I’ll get into more detail about these and other results after Joe Mahler, our Chief Financial Officer, reviews the financials for the quarter. Joe? Joseph G. Mahler: Thank you, Dan. And good morning, everyone. FuelCell Energy reported total revenues for the second quarter of 2010 of $16.6 million compared to $22.9 million in the same period last year. Product sales and revenues in the first quarter were $13.0 million compared to $19.3 million in the prior year quarter, reflecting a shift toward stack modules sold to POSCO Power, our manufacturing and distribution partner in South Korea, compared to complete power plants sold in the prior year. The company's product sales backlog, including long-term service agreements, totaled $75.5 million as of April 30, 2010 compared to $59.2 million as of April 30, 2009, and $84.1 million as of January 31, 2010. Please note that these backlog figures do not include the recently executed contract with Pacific Gas and Electric Company that totaled approximately $12.6 million. Product margins improved over the prior quarter by $3.2 million driven by sales of lower cost megawatt class modules. The product cost to revenue ratio was 1.47:1 in the second quarter compared to 1.48:1 in the second quarter of 2009. The ratio was negatively impacted by a charge of approximately $1.8 million related to the fuel cell stack module enclosure and also lower sales compared to the prior year period. In our efforts to reduce weight and cost, the newest module enclosure design did not meet our requirements. Adjusted for this item, the cost ratio would have been 1.33, more in line with our expectations. Dan will cover this issue in more detail. No additional charges are expected. Research and development contract revenue was $3.6 million, which was comparable to the prior year quarter. The company’s research and development backlog totaled $9.9 million as of April 30, 2010 compared to $19.5 million as of April 30, 2009, and $11.9 million as of January 31, 2010. Total cash and investments in US Treasuries were $43.8 million as of April 30. Net cash use for the second quarter was $13.8 million compared to net cash use of $7.2 million for the first quarter. Increased cash use for the second quarter is in line with the company's expectations and reflects changes in working capital related to the timing of customer milestone payments. Capital spending for the second quarter was $1 million and depreciation expense was $1.8 million. We continue to expect average quarterly cash usage in the $10 million to $12 million range, and 2010 year-to-date cash usage is on plan. Let me turn to the six-month results for a moment. For the six months ended April 30, 2010, FuelCell reported revenue of $31.2 million compared to $44.6 million for the comparable prior year period. Product sales and revenues were $25.8 million compared to $38.3 million for the comparable prior year. There were two drivers to the lower reported sales. While the dollars are down, the megawatts sold in the periods are comparable due to the shift in product mix in power plants to modules. The second driver is slow North American sales. We are encouraged by the order from PG&E and also encouraged that our order pipeline is very active. Dan will speak more to this. Net loss to common shareholders for the six months ended April 30, 2010 improved by almost $8.5 million. The main driver was that margins for product sales and revenues improved by $7.9 million over the prior period on sales of these lower class megawatt class products. The up-rated 1.4 megawatt fuel cell stacks now in production are generating higher revenue with no commensurate increase in production costs. The level of improvement in manufactured cost becomes clear when you compare the margins from products sold last year to this year. With our product cost on target, we are focused on driving sales volume to enable company profitability. Dan? R. Daniel Brdar: Thank you, Joe. As interest in fuel cells grows and momentum continues to build in our industry globally, FuelCell Energy remains focused on moving to profitability by executing our core business strategy of driving down costs and developing our key geographic and vertical markets. Converting our growing sales pipeline in the backlog is our highest priority. While tight credit markets made it more difficult to finance capital projects of all kinds in North America, we are now seeing improved conditions in sales activity. Due to the abundance of supply and the low stable price of natural gas here in the US, we are seeing a significant increase in the level of natural gas based projects compared to a year ago. Also, biogas applications such as food and beverage processors and a municipal wastewater treatment market remain a major part of our sales pipeline as well, with biogas and natural gas fuel cells applications are finding increasing regulatory support and robust incentive programs to stimulate their adoption. In South Korea, the national assembly passed a Renewable Portfolio Standard in March that will become effective in 2012. Stationary fuel cells that operate on natural gas or biogas fully qualify under this program. Since the intermittent sources such as wind and solar cannot replace the need for base load electricity, South Korea’s approach is to pursue low-carbon, green energy solutions, including fuel cells, because our fuel cells electrochemically transform natural gas or biogas into electricity almost twice as efficiently as conventional technologies. They produce substantially less CO2 emissions and virtually zero pollutants. The South Korean RPS requires 4% clean energy generation by 2015 and 10% by 2022 compared to the current level of about 1%. The program will require 350 megawatts of additional renewable energy per year through 2016 and 700 megawatts per year through 2022. Our partner, POSCO Power, is working to capture a significant portion of the megawatts available under the RPS program. Under a long-term licensing agreement signed in October of 2009, POSCO will manufacture, test, and condition fuel cell modules using components supplied by FuelCell Energy. Under their strategy, we are able to capture market opportunities, further reduce product costs, and provide local jobs in response to government policies driving product adoption. In April, POSCO broke ground on their fuel cell module facility in Pohang, South Korea, which is being constructed next to their existing balance of plant facility. These plants will represent a combined investment of more than $100 million, demonstrating POSCO’s strong commitment to fuel cells, our partnership in the magnitude of the market opportunity. POSCO has ordered approximately 69 megawatts of our products to date and has begun construction on 11.2 megawatt fuel cell power plant in Daegu Metropolitan City. It will be the largest fuel cell power plant in the world. More than 26 megawatts of FuelCell Energy power plants are now in operation in South Korea, feeding the electrical grid and supplying the energy produced by traditional center power plants. In several locations, the byproduct heat provides heating and cooling for nearby buildings. POSCO is working closely with the utilities to generate power, fulfill their RPS goals, and contribute to the build-out of a smart grid, using ultra-clean fuel cells. In the US, the challenge of meeting our energy needs while reducing greenhouse gas emissions is becoming the center of current policy debate in Washington. Last week, Senate Majority Leader Harry Reid indicated that US Senate will address comprehensive clean energy legislation next month after President Obama urged the Senate to pass legislation that will move America towards a clean energy economy with limitations on greenhouse gas emissions. Due to their high efficiency and corresponding low greenhouse gas emissions, fuel cells can play an important role in realizing our energy and environmental policy goals. Due to the severity of the recent oil spill in the Gulf, the policy actions will likely place new limits on where and under what conditions offshore drilling will be allowed. This will place more emphasis on increased use of clean, abundant, domestic natural gas to address our growing energy needs. Fuel cells are well positioned to respond to these demands as one of the cleanest and most efficient ways to use natural gas. At a state level, California remains the leader in clean energy and distributed generation policies and programs. During the quarter, the California Public Utilities Commission authorized Pacific Gas and Electric and Southern California Edison to undertake 5.6 megawatts of fuel cell energy based projects to be cited at state universities. These units would the first megawatt class direct utility-owned fuel cells in the US. This important ruling opens another door to the adoption of fuel cells by utilities in the US. It will be a model for policymakers in other states and encourage utilities throughout the country to include fuel cells in their energy generation mix. As a result of the PUC decision, in May, Pacific Gas and Electric ordered two 1.4 megawatt DFC1500 power plants for two different university campuses; California State University, East Bay and San Francisco State University. Both power plants will be configured to use the waste heat from the fuel cells for facility heating, including the heating of a swimming pool. The units are expected to be operational early next year. Because of their low emissions, high efficiency, and quiet operation, these units are an excellent example of how California and other states can use distributed generation to meet their greenhouse gas emission targets, enhance the reliability of the transmission and distribution systems, and relieve grid congestion. These two PG&E power projects, which are now moving forward as a result of the CPUC ruling are representative of other power projects in our pipeline. In addition to the existing Self-Generation Incentive Program, California lawmakers are also working to promote clean energy generation through feed-in tariffs. The feed-in tariff for power plants using renewable fuels was enacted last October and the CPUC is in the process of working to set pricing with utilities and other regulators. A feed-in-tariff for combined heat and power applications is expected to be implemented after the renewable feed-in-tariff. In Connecticut, the Department of Public Utility Control has approved 43.5 megawatts of fuel cell projects under the state’s RPS program. We are pursuing a parallel path for financing these Connecticut projects and are working closely with commercial lenders to obtain financing, both for individual power projects and for the entire Connecticut portfolio. And we have also submitted to the US Department of Energy’s Loan Guarantee Program. 27 megawatts received approval under Phase 1 of the DOE program. Since our last update, we have submitted our Phase 2 applications to the Department of Energy and expect to hear the results of our applications in the coming weeks. If approved, we will then work to finalize term sheets and execute contracts. In Canada, the government of Ontario ruled in September that gas distribution companies like Enbridge may own and operate power plants that generate both electricity and heat, including fuel cells operated on natural gas up to 10 megawatts per facility. Enbridge, a world leader in natural gas distribution, is continuing to negotiate with the government for funds from Canada’s $1 billion Green Infrastructure Fund, similar to our American Recovery and Reinvestment Act, for 47 megawatts of DFC-ERG projects on their system in Toronto. We expect the government to take further steps to encourage clean energy generation, including the implementation of a revised feed-in tariff to support fuel cells operated on natural gas. We are working with Enbridge to deploy our jointly developed pipeline application for natural gas, a truly global market with substantial potential. This Direct Fuel Cell Energy Recovery Generator, or DFC-ERG power plant, was designed specifically for natural gas pipeline applications. The 2.2 megawatt DFC-ERG power plant located at a natural gas let down station in downtown Toronto, Ontario, produced impressive performance statistics after its first year of operation. The plant achieved an average electrical efficiency of 62.5% and the peak electrical efficiency topped 70%. This is superior to any other form of combustion-based power generation in the market and contracted very favorably with the average US fossil fuel power plant, which typically operate at 35% to 40% efficiency. This high efficiency resulted in a reduction of greenhouse gas emissions by 45%. Also worth noting is that the plant operated at 93% average availability during the first year and exceeded 96% availability during the last six months. We are very proud of the results that this power plant achieved during its first year of operation. When Enbridge conducted an assessment of the natural gas distribution system in Toronto, the Northeastern US, and California, they identified 250 to 350 megawatts of opportunities. Enbridge is now in discussions with potential project partners for US sites in addition to pursuing installations on their own gas distribution system in Toronto. In Europe, our discussions with potential new partners are progressing. Our license agreement with our former European partner concluded in December 2009, allowing us to form relationships with new partners who will work with us to open up this expansive geographic market. Because the European continent is a highly diverse marketplace, we envision working with multiple entities for different geographies and may partner with distributors or form value-added reseller relationships like we have with POSCO Power in Asia. As we grow our market opportunities in backlog, the other key element of our strategy has been to drive down our product costs. Since we began commercialization of our megawatt class products, we reduced our unit cost by more than 60%. This is reflected in our margin improvement. An example of this cost reduction effort is our success with increasing the output of the DFC-1500 from 1.2 megawatts to 1.4 megawatts and the DFC-3000 from 2.4 megawatts to 2.8 megawatts with no commensurate increase in production cost. We expect to reduce cost further through expanded global sourcing, higher volume purchasing, more competition among suppliers, and increased capacity utilization in our facilities. At this state, near development, our products have reached a point where volume can drive the company’s profitability. As Joe mentioned, a warranty charge was incurred during the quarter for the module enclosure. The fuel cell stacks are sealed in an insulated steel container designed to control their operating environment. Previously, the module enclosure was built of a thick plate steel with reinforcement. In order to reduce weight and cost, we moved to a bonded multi-layer panel construction, similar to what’s commonly used on chip decks and truck trailer walls. Once we began using the new material, we observed the lack of adequate bonding between the steel outer skin and the light-weight inner-panel core. This would have resulted in a module enclosure that would have not met the multi-year operational and aesthetic requirements of our products. We made the determination to replace the enclosures on the units in production with our previous steel plate design. Since this change was made to a batch of units in production, it’s a one-time charge that is not expected to incur cost beyond the second quarter. As part of our global sourcing program, we were able to qualify a new supplier on the previous design that meets the cost target for the enclosure. Excluding this one-time warranty charge, product cost remained on target. Turning to our research and development programs, in February, we were awarded a $2.1 million award from Air Products and Chemicals to demonstrate our DFC-H2, a 300 kilowatt fuel cell capable of hydrogen coproduction. The DFC-H2 were shipped from our factory and will be installed as part of a state-of-the-art hydrogen fueling station at the Orange County Sanitation District’s wastewater treatment facility in California. They will begin operating on natural gas by the fourth quarter, then switch over to biogas exclusively and begin coproducing hydrogen for vehicles by early 2011. Demonstrating FuelCell’s versatility, the DFC-H2 is another application for the expanding wastewater treatment market in which we are already well positioned. Our DFC-H2 is unique and that it produces three revenue streams for customers; electric power, hydrogen for vehicles, and heat. With our partner, Versa Power Systems, we continue to meet cost and performance objectives under Phase 2 of our $30.2 million DOE contract to develop large-scale, coal-based solid oxide fuel cells. Phase 2 of the program, which concludes at the end of September, is dedicated to the development of a minimum 25 kilowatt fuel cell stack. We are currently testing a stack with a higher capacity and preparing our application for Phase 3, in which a full scale system will be demonstrated. DOE’s ultimate objective of this program is to develop megawatt class solid oxide fuel cell power plants that can operate on coal-derived syn gas, thereby reducing greenhouse gas emissions from coal, one of our most abundant domestic resources, by 90%. These R&D programs highlight the essential and rapidly expanding role that fuel cells can play in solving the world’s critical energy challenges. Our distributed generation stationary fuel cells are generating efficient, reliable, and ultra-clean base load power in markets all around the world and are increasingly becoming integrated with energy and environmental policy in our target markets. We see this confluence of events ranging from a visionary RPS enacted by South Korea to the State of California supporting the first megawatt class fuel cell purchases by utility, to awareness of the benefits of clean and abundant natural gas here in America, all coming together to support demand for fuel cells. These activities are driving a continued growth of our sales pipeline. As policymakers, power producers, and energy consumers in these markets gain and share experience with our products, FuelCell Energy’s order volume is expected to grow proportionally and will continue on our path to profitability. Operator, at this time, we’d be pleased to take questions from our listening audience.

(Operator instructions) And our first question comes from the line of Sanjay Shrestha of Lazard Capital. Sarah – Lazard Capital: Hi, this is Sarah [ph] in for Sanjay. With Korea’s approaching RPS requirements and some good movement lately in California, do you expect a meaningful uptick in orders in the second half of this year? R. Daniel Brdar: Yes, we do. The activity level that we see in the marketplace really has us seeing customers moving towards, wanting to continue with their projects. Remember there are projects in California. There are time limits in terms of the availability of their incentive funds. We are seeing having the units installed in South Korea being a driver for other utilities so they can go see an operating unit, raises their confidence level that it really is an industrial grade product. So these things together are really driving what we are seeing as a pretty significant increase in the activity level in the pipeline. Sarah – Lazard Capital: Okay. And can you be any more specific on the mix of stacks versus plants and when you think that ratio may improve? R. Daniel Brdar: As we put more of our domestic activity into the pipeline, we will see that mix balance. So, for example, if you look at the recent quarters, it’s been largely fuel cell modules going to Korea. But with PG&E, for example, we will now start to see full power plant into our mix. And as we close more orders in the US, we will see that ratio come closer to what we’d expect to be 50/50. Sarah – Lazard Capital: Do you think that would be a 2010 event or maybe next year? R. Daniel Brdar: You will start to see some of that transition later this year because things like PG&E will actually be making this year. Other orders that will capture in the domestic marketplace will be able to get them produced or certainly well into production in the second half of 2010. Sarah – Lazard Capital: Okay. Thank you. R. Daniel Brdar: You’re welcome.

Thank you. And our next question comes from the line of John Quealy of Canaccord. John Quealy – Canaccord: Hi, good morning, guys. R. Daniel Brdar: Good morning, John. John Quealy – Canaccord: Couple questions. First, Dan, I may have missed this. On the POSCO, the 69 megawatts order to date, what’s in the backlog right now for POSCO to give you guys some visibility near-term? R. Daniel Brdar: Backlog is about 30 megawatts. John Quealy – Canaccord: Okay. And then in terms of -- we heard the scaling of their facility over in Korea. What’s the potential for follow-on orders for POSCO in the back half of the year, just getting a little bit more specific? R. Daniel Brdar: I think it’s very good. The RPS program becomes effective in 2012. And with long lead-time for equipment, that means their customers are going to have to place orders next year. And as POSCO brings their facility on line, they have to actually order material and components from us to be able to feed that facility. So, in order to actually have equipment that can be shipped in the back half of 2011 to begin operating in 2012 at customer sites, they are going to need to place an order with us later this year to be able to feed the facilities. John Quealy – Canaccord: And then, Dan, based on current capacity utilization, when you get those Korean orders, how quickly can you turn them? Obviously it’s a mix game. A lot of people what their fuel cells, et cetera. But how do you look at the turns for that POSCO business when it comes? R. Daniel Brdar: What POSCO is likely to do, because they are moving into a production environment, is they are going to want to have a steady flow, so they can sort of manage a level order of production within their own facilities. So what we will be doing actually is probably take that order and we will spread it over probably a year’s period of time. And what we will do is we will put order flow from the US in and around those units so that we can actually start to drive a better mix in our own facility. So I think it’s really going to be up to them to look at how we want to level over their facility and then we will turn them out as quickly as they need to because we have the ability to ramp up production pretty quickly. For us, it’s really just variable cost. It brings more people on because the capacity is already there to take the current level that we are running at and double it. John Quealy – Canaccord: And then just two more. On the cash burn, given where the cash is on the balance sheet and the projected usage in working cap the next couple quarters, can you talk about auctions for you folks? Is it a matter of getting the POSCO orders? How are you looking at cash flow over the next several quarters? Joseph G. Mahler: Yes. John, it’s Joe Mahler. We have $44 million on the balance sheet, John. So I think we have a little bit of flexibility. We obviously look at being opportunistic. We currently have this burn of -- we think it’s about $10 million to $12 million per quarter. We are looking at the order flow timing. We think not just the POSCO orders, but also the activity that we are seeing in California and potentially with Connecticut and Canada. We’d like to get some of that into the pipeline. And I think with that flexibility, I think we have a couple of paths and we’ll just keep looking at it. John Quealy – Canaccord: Okay. And then my last question, I know you guys have done a lot with Enbridge sort of on that industrial gas segment, if I can characterize it that way. There is a lot of talk in the industry with Marcellus and a lot of natural gas focused infrastructure getting put in in this country in the next several years into the decade. Can you talk a little bit about the fuel cell strategy about addressing that or talking to new partners? What are some of your thoughts on that strategy? R. Daniel Brdar: Well, because of the amount of activities going on in the gas side of things, we are finding that there are several people that want to know more about the product itself. And that’s a function of, do we want to do projects with other partners or with Enbridge. What we have found for some of the projects that we have been developing here in the US is at least in the early part of this to have Enbridge come in as a fellow gas distribution company who owns a unit with a pressure let down station adds a lot of credibility to that discussion. And I think now that they, in particular, are getting further along in terms of their own rollout plans, I think we are going to have the ability to do quite a bit of activity with them, because Enbridge has a lot of capabilities. They have a big balance sheet. They have got a lot of resources. So I think getting everybody to move forward on these next couple of projects will really start to drive lot of activity in the gas pipeline application in general. John Quealy – Canaccord: Great. Thanks, guys. R. Daniel Brdar: You’re welcome.

Thank you. And our next question comes from the line of Colin Rush of ThinkEquity. Colin Rush – ThinkEquity: Hi, guys. Can you give us an update on project financing with US banks as well as with the European banks and talk a little bit about where committees might be getting stuck in terms of products using your fuel cells? Joseph G. Mahler: Yes, Colin, it’s Joe Mahler here. What we’ve seen is, we’ve seen the project finance markets move a little bit laterally. We were starting to see some improvement and then we saw a little bit of a lateral move after this European -- what's happening in Europe these days. So you get -- like you mentioned, European banks -- we were talking to European banks. We had a little bit of pullback on that. What we are seeing is interest in our projects, especially from people who have been doing wind and then doing solar. They are looking at our projects because of the attributes that we bring to the table, 24/7 reliable base load. Commercial companies are having difficulty relying on solar as a roof-top play, as a real item in their business. So we are currently in the discussions with commercial financing players. We have gone to phase two on the DOE Loan Guarantee Program. We have been talking to senior debt type players. We are talking to a lot of people. In the California market, we are actually seeing some movement in the tax re-bonding arena a little bit faster than the other path. And that was a path that was very successful for us when we were selling capital equipment to wastewater treatment plants when we were going down a list of people like Riverside and Tulare and Turlock and Dublin San Ramon and those towns. And then we saw that trail off. And what trailed off was their ability to sell capital. To buy capital equipment is what slowed everything down. And now what we are seeing is we are seeing the tax re-bonding guys being a little more flexible as to what the structures can be around that. There is more of an attempt to capture investment tax credit. That’s done in the municipalities for a little bit of time, and that looks like it’s coming back around. So we are making adjustments based on what programs are available. The market seems to be trying to adjust. We have a lot of activity on the Connecticut projects, for example. We are dealing with commercial third parties on several of the projects. Those discussions are pretty far along. We also have, in essence, the parallel or even backup plan is 27 megawatts in the DOE loan guarantee. We expect to be successful there. We are looking to close some of these items out in California. And we are also seeing some commercial project activity on straight-up natural gas projects. So we are in discussions with players there. So in all of that, it leads to a high level of optimism on our part that the markets will move forward. And then in the third and fourth quarter, we hope to put that as orders in front of the marketplace. Colin Rush – ThinkEquity: Great. And can you talk a little bit about the necessity for any sort of warranty insurance products that might be able at this point to help finance yours more comfortable with the technology and the lifetime of the technology? Joseph G. Mahler: Yes. I mean, clearly if you are at a senior debt level, I mean, senior debt, commercial banks would love some kind of an insurance product. They are using them on solar. I’ve looked at some of the products that were available on solar. And we’re talking to the insurance company. It takes a little bit of time to get through that process. We have to make sure our stacks run through the entire five-year period. We haven’t quite hit those points yet. And everybody in this marketplace has the super-conservative moment in these markets. So, as you move away from them, what we are seeing is that the returns on our projects, because of our high availability, there is really good returns on the projects, which allows for enough cash flow that given enough return that people are willing to, I think, do these projects. So it depends on what level of the market you are talking to requires what level of protection. But we are seeing the developer side, the equity side and some debt -- some movement on the debt to take these projects. I mean, for example, in debt, maybe you don’t get 70% debt coverage, maybe you get 60% debt coverage. But we are seeing deals being worked right today at these levels. Colin Rush – ThinkEquity: Great. And then one final one from me. Can you guys give us an update on to one of the three solutions and if you’re seeing any innovations there in terms of controlling and managing the output as your solution integrates into a broader grid network or globalized network? R. Daniel Brdar: What we are seeing is -- when we talk to utilities and to people who are putting systems and solutions together, there is a fair amount of work that’s going on right now to really understand how things like fuel cells would play into the whole smart grid scenario, because as the utilities have sort of looked at their options, the feedback that we’ve been getting is the smart metering and so forth is sort of a low-hanging fruit, and after they get through that way, there is still a whole optimization that needs to be done based on where you have generation located in the system if you really want to get the fully capability out of it. So we are starting to have our discussions in terms of how do our units respond as it relates to grid activity, what can be done in terms of controlling the units remotely, because what we are funding is some of the utilities who are really looking at some of these solutions are really not aware of the extent of the capabilities that we have to actually take control of the units remotely, monitor and adjust their operating parameters and so forth. So we’re going to be in discussions on how our customers, particularly in places like South Korea where they are sort of out ahead of what’s going on here in the US in terms of deployment of fuel cells into the distribution system, how they can fit into a broader operating scheme. So I think that’s something we’re going to do more about in the coming months. Colin Rush – ThinkEquity: Great. Thanks so much, guys. R. Daniel Brdar: You’re welcome.

Thank you. And our next question comes from the line of Walter Nasdeo of Ardour Capital. Walter Nasdeo – Ardour Capital: Thank you. Good afternoon or good morning, guys. R. Daniel Brdar: Good morning. Walter Nasdeo – Ardour Capital: Most of my questions have already been touched upon. If I could, I’d like to take a little higher view of some of the things that are going on as far as timelines. I guess there is no doubt that there is a lot of opportunity and things are progressing in the right direction. But I’m really struggling with when over the course of the next couple of quarters we can start to see a significant movement towards gross margin positive and then kind of flowing right through. And so some of maybe the macro issues if you could discuss, you know, like the friction between North and South Korea now, is that coming into any play as far as your planning goes, if there is an issue there of a large political that can cause you a disruption and push you back one or two or three quarters in your development? And then maybe just if you could explain what the general sales cycle has become now that you do have products in the field. It shouldn’t be as much of an uphill battle for you to get out and actually have discussions with prospective clients. So if you could just maybe chat about that a little bit, I’d appreciate it. R. Daniel Brdar: Sure. Starting with Korea, we don’t see any indication and discussion with our partner that there is an expectation that the situation over there is going to get out of control. I think even President Lee came out and made a statement last week is that they had in terms of the South Korean ship that was sunk, it wasn’t something that anybody want to go to war over. The fact that the Korean National Assembly moved forward here just recently here in March to pass this national RPS says a lot about the high level commitment that there is to actually roll this program out. It was really part of President Lee’s platform when it came into office in terms of their ability to actually become a leader in green energy, and as a result of that, that becomes the next large export base for them. So we don’t really see any slowing down of that activity at all. And as we’ve discussed earlier, it will be going into effectiveness in 2012 and we think we’re going to have their hardware on the ground in 2011 to be able to start fulfilling those obligations. When we look through domestically, what we basically saw was the municipalities sorting through what their issues look like in terms of their willingness to spend capital. Some of our partners are adjusting some models -- financial models to find a way to help capture things like the investment tax credit. A lot of that has really been going through restructuring with the end user customers in terms of how they actually want to execute an order. And a lot of that has been happening here over the last several months and seems to be now reaching the part where it’s coming to a conclusion, which is good, as the customers are back re-engaged, they are spending, they are out visiting other sites where we have units. So we expect to see that order flow domestically and start to flow into our backlog here in the coming months. And in Europe, we’re just seeing a little bit of a distraction just on the macro environment over there in terms of our own ability to drive a partner to closure. There seems to be a lot of concern about their economy in general. And as a result, the bigger companies that we are talking to are very interested, but they are moving slowly, most because they are concerned about their core businesses and some of the changes that they see that could impact the core business that they are already in. Joe, do you want to add anything? Joseph G. Mahler: No, I think that’s good. Walter Nasdeo – Ardour Capital: Okay. And then just one briefly -- and Joe, you already have kind of mentioned a little bit about the CDUC in Connecticut there. This has been going on for a significant amount of time. What is your expectation? I know you -- you are moving -- as far as project financing and things like that, you seem to be moving in the right direction. But when do you expect to really try to capitalize on that over the course of the next few quarters? R. Daniel Brdar: You are talking about the Connecticut projects? Walter Nasdeo – Ardour Capital: Yes. R. Daniel Brdar: Yes, I think soon. I think that we are in very active discussions. The projects are not going away. I know they have been out a long time. It’s kind of amazing that the projects just hang right in there. Everybody is willing to work them. We are still spending money on development. We have potential partners actively involved and engaged in these projects. We think it’s relatively soon. Exactly when? We were frustrated too to that exactly when. But the pipeline seems to be robust, and we are working our tails off to try to get these close. Walter Nasdeo – Ardour Capital: Okay. All right. Thanks, guys. Appreciate it.

Thank you. And our next question comes from the line of Scott Reynolds of Thomas Weisel. Scott Reynolds – Thomas Weisel: Hey, guys, thanks for all the color on the call. I just had one quick question. I know you had some signing and permitting issues with the Trumbull project. So we are hoping that you could perhaps run through the top two or three key projects in Connecticut and give some timing around those. R. Daniel Brdar: Sure. Just to be clear, the signing and issues we refer to in Trumbull, that process was really all about what the state does in terms of citing any kind of infrastructure. Has that become clear as we met with the people that were putting up results into the project and as we met with members of the legislature? What it really came down to was it wouldn’t have mattered whether it was a fuel cell or a cell power. The issue that existed was it was a residential area. We are close to a residential area, and people in that area didn’t like that. The process did not allow them to have a voice. So that really became the focal point for it. We are actively now often in discussions about a couple of new locations for those projects. I think in terms of looking at the timing of them themselves, we really have two projects. One is we have people who are looking at the projects collectively as a portfolio, and we also have some other developers who are looking to move projects individually. I think, of those that are in the mix, the Milford project, sort of 10 megawatt DFC-ERG, is probably the furthest along in that process. But any of the other ones could jump ahead of them pretty quickly just because we’ve got multiple players looking at how they would execute them, mostly because there is a desire to move things as a portfolio because it just provides efficiency from a transaction standpoint for people who are bringing debt and for how they would structure their projects. Scott Reynolds – Thomas Weisel: All right. Thank you. R. Daniel Brdar: You’re welcome.

Thank you. (Operator instructions) And we have a question from the line of Peter Wright [ph], Tradition [ph]. Peter Wright – Tradition: Great. Thank you for taking my question. I’ve got a couple. The first one is on gross margin. If you look at the POSCO business, what has to happen when to convert pricing of those components sold into there from the mindset of kind of seeding a market to one of the cost-plus model? And from -- what has to happen and when would you expect kind of the conversion to positive margins on that specific business? Joseph G. Mahler: Yes, the margins -- the margins on the Korean business are positive, Peter. The only issue with the sales to Koreans is that it’s less sales dollars than -- so what -- less sales dollars is going to complete power plant. So arguably, if you were selling a power plant for 3,000 and you’re selling the modules to the Koreans for roughly 2,000, 2,100, you are at two-thirds. So two-thirds of the revenue passes through your financials. I mean, the production levels are relatively the same. So the issue is volume. I mean, we are at a point in the model -- in the business model here that we have products that should be profitable. They all should contribute margin. And it’s just a function of breaking the logjam. We are seeing in all of this pipeline activity. Our guys are responding to a tremendous number of opportunities and calls and site visits and solving problems with these power plants. And from a business modeling standpoint, it just drove volume at it. We are at a perfect position actually. I mean, for years we were seeding the marketplace with lot loser -- with the power plants were losing money for us, but now the model is open to us. So it’s really, in essence, is also frustrating for us too that we just can’t burst this thing out, push some volume through because it will drop to the bottom line. Peter Wright – Tradition: How should we think about incremental margins? So if you look at the 19 just in this quarter, the 19.12 cost of product versus the sales, how does that break -- that 19.12, how does that break down in materials versus labor versus depreciation, fixed overhead? Joseph G. Mahler: We really don’t break it down like that in our financial statement. Peter Wright – Tradition: Or you can just say immaterial or -- what I’m really trying to get at is incremental margin. How should we be thinking of kind of the incremental margin for every $1 million that you -- Joseph G. Mahler: Let me try to help you on a cost ratio standpoint. Okay? So the three components to the cost ratio are the product cost, which should be better and one-to-one. We are targeting in the 0.85 to 0.90 range for our product sales. That’s what our manufacturing product cost look like. We also have costs related to warranty and those types of costs, which we’ve been hit. The last two quarters we’ve been hit with some -- little surprise on our part in terms of the leadership [ph] we talked about this quarter. That has a pretty good impact on the cost ratio. And the third leg is service costs, and we still have some service costs that are coming through from legacy stack replacement where we still have some three-year stacks up here that we are going to replace now with five-year stacks. So if I look at the cost ratio for the quarter of 1.47 and I’ve got the product cost should be -- we're trying to drive it to one. So what affects that cost ratio in the quarter? Well, one is low sales has an impact on the cost ratio. We can deal with that probably on an -- I can walk you through that offline. I did walk through that last quarter. And then the things that impact you are the warranty expense. And in this quarter, if you took out the $1.8 million, you would drive the cost ratio down to 1.30, 1.35 range. And then if you took our service costs, these legacy costs out, service costs have about 20 to 30 cost basis effect on us. You can actually drive the thing down into the 1.10 to 1.20 range, and you’re getting closer to profitability. If you drive volume through this business, it will -- it goes there pretty quickly. I mean, any model I look at, it’s pushing volume through this thing, put some contribution into it, and then that enhances everything. Peter Wright – Tradition: Okay. On the California deal, the 12.6, what would you expect the service contract to look like, and if you could give some type of timeframe around what that number is? Joseph G. Mahler: It’s about -- it's -- we would expect the service agreement to be a five-year agreement for that and should be in like the $4 million to $5 million range from a backlog standpoint. Peter Wright – Tradition: I’m sorry, $4 million to $5 million. Joseph G. Mahler: Yes, $4 million to $5 million total value. Peter Wright – Tradition: Total value over the five years. Okay, great. And then the last question I have is, this is the first couple, so maybe this question is a little early. But I’m trying to understand how your customers are evaluating this. If I look at 1.4 megawatt versus a 2.8 solution, why have you been selling the 1.4s and what’s going to have to happen to migrate up to the 2.8? R. Daniel Brdar: A lot of it is really the side itself. When we look at places like the recent Pacific Gas and Electric orders, the particular sites we are putting them because the campus isn’t completely interconnected all the buildings. There is some separation in terms of what feeds our big campus. It’s basically what’s the size that would address a particular building where they are citing the units. I think as we look at things like Korea where they have been put on the grid, they are all 2.8 megawatt units. As we look at things like the projects in Connecticut, they are all 2.8 megawatt units. So what we’re really seeing is there is more of an application of the 1.4 megawatt unit when you are looking at actual onsite generation. And the 2.8 megawatt, it’s really where you are going to put the power into part of an RPS program. Peter Wright – Tradition: And if I could sneak one last question there, if you were to look at your capacity, today it’s 70-ish megawatts? R. Daniel Brdar: Correct. Peter Wright – Tradition: And to make that investment up to the 150, when do you expect to -- today, do you have visibility to when you think you might have to make that investment? R. Daniel Brdar: I think as soon as we get enough indication of sustainable order flow, we are ready to make -- we've done all the work to expand. So when does the backlog exceed 70 megawatts and when do we look at sustainable order flows? You go around the world. I mean, you got this 43 megawatts in Connecticut. We are looking at the Korean market to grow even bigger. The last year, they gave it for 30 megawatt over. Hopefully, we can get 30 megawatts again or even higher. You’ve got -- the Canadians are looking at 40 -- I think Dan said 47 megawatts in the Canadian market, and we see a very active California marketplace. So it could happen quickly. I mean, that’s the -- we are struggling to get some sales through the pipeline, but the amount of activity is very large. If we can break the logjam, we could be making that decision pretty quickly. Peter Wright – Tradition: Would you -- taking a guess, would you guess that a 2011 event or --? R. Daniel Brdar: To make the decision to expand? Peter Wright – Tradition: Right. R. Daniel Brdar: Yes. I mean, it’s certainly soon. I mean, it’s really a function of -- as soon as we see sustainable order flow coming into the backlog and the backlog itself increasing. So what you need is you need the Korean activity plus North America if you get more North American activity between California and Connecticut, I think you’re there. I mean, I think that could happen certainly by -- it could happen by the end of the year. It could be a 2011 event. Peter Wright – Tradition: And what is the number? How much investment would that take from your guys apart to go from 70 to 150? R. Daniel Brdar: Somewhere in the range of $35 million to $45 million. Peter Wright – Tradition: And how long would it take? R. Daniel Brdar: We are targeting somewhere around 18 months or so. Peter Wright – Tradition: Great. R. Daniel Brdar: I mean, that’s something -- the other thing you do in that equation is that if you’re getting some indications of sustainable order flow but you’re not quite ready to make the whole commitment, you might -- you can do some things to shorten the time period by looking at putting deposits on some of the long lead items and things like that. So we’ve got to look at this thing from a lot of different angles, and we’re ready to move. Peter Wright – Tradition: Great. Thank you.

Thank you. And that concludes our question-and-answer session for today. I would now like to turn the conference back to our speakers for any further remark. R. Daniel Brdar: I’d just like to thank everybody for joining us today, and we look forward to updating you on our third quarter call. We’ll hopefully be able to talk some more about some of the things that are on our pipeline that were looking eager to close. Thank you very much. We’ll talk to you soon.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day.