Lisa D. Lettieri – VP, IR & Corporate Communications R. Daniel Brdar – President, Chief Executive Officer Joseph G. Mahler – Chief Financial Officer

John Quealy - Canaccord Adams Pearce Hamond - Simmons and Company International Jeff Osborne – CIBC World Markets Stuart Bush - RBC Capital Markets Walter Nasdeo - Ardour Capital Investments David Snow - Energy Equities Larry P – Oppenheimer & Co.

Welcome to today’s teleconference. At this time all participants will be in a listen only mode. Later there will be an opportunity to ask questions during our Q&A session. As a reminder this call may be recorded. I will now turn the program over to Lisa Lettieri. Please go ahead.

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IR firm sponsors transcript of micro-cap company: Consulting company sponsors company's transcript in sector of interest: Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details. Lisa D. Lettieri: Thank you operator. Good morning everyone, and welcome to FuelCell Energy's first quarter results conference call. Delivering formal remarks today are Dan Brdar, Chariman and CEO, and Joe Mahler, our Senior Vice President and Chief Financial Officer. Before proceeding with the call, I'd like to remind everyone that this call is being recorded and that this presentation contains forward looking statements, including the company's plans and expectations for the continuing development and commercialization of our FuelCell technology. Listeners are directed to read the company's cautionary statement on forward looking information and other risk factors in its filings with the US Securities & Exchange Commission. I would like to now turn the call over to Dan Brdar. Dan? R. Daniel Brdar: Thanks Lisa. Good morning everyone, and thank you for joining us on FuelCell Energy's first quarter conference call. As many of you know, our strategy for obtaining profitability is to drive down the cost of our products to become increasingly competitive with group supplied electricity while expanding our market penetration in repeatable and renewable portfolio standards markets. The recently announced Posko Power Alliance is strategic in that it helps us with both tactics: lowering the cost of our products and additional market penetration in a rapidly growing multi-megawatt market that regards clean energy as a high priority. Posko Power is an ideal partner for us in Asia with the kind of expertise and purchasing power that will be a huge benefit to us. The 2.4 megawatt order we announced yesterday morning for two DFC1500's is certainly an early indicator of Posko's ability to deliver orders for multi-megawatt grid support applications. This will be our largest installation in the world and will serve as an effective demonstration of our DFC power plant's role in addressing global warming. Beyond Posko, we have a healthy pipeline of business in California where the regulatory environment requires greater amounts of clean power and we're bidding a number of megawatt class projects. We just announced the order from the city of Riverside, California, for a 1 megawatt plant that will run a wastewater treatment facility on bio-gas. In a few short weeks we will hear which projects were selected by the Connecticut Clean Energy Fund for Project 100. We bid, in cooperation with our distribution partners, over 98 megawatts of projects, ranging in size from 2.4 megawatts up to 28 megawatts. As evidenced by our recently announced orders, our strong order pipeline continues to move to megawatt and multi-megawatt installations, which is our fastest path to profitability. I'll go into more detail about the markets and our plans, but first I'll turn the call over to Joe for a financial review. Joe?

Thank you Dan and good morning everyone. Total revenues for the first quarter of fiscal 2007 were $6.8 million compared to the $5.9 million reported in the first fiscal quarter of 2006. Product sales and revenues were $4.9 million compared to $3 million, and research and development contract revenue was $1.9 million compared to $2.9 million in the prior year quarter. Product revenue included $1.8 million from the sale to Sierra Nevada of the power plant that was previously operating under APPA. Product revenue backlog, including long-term service agreements, increased to $36.7 million compared to $24.5 million at January 31, and $27.9 million at October 31, 2006. Backlog is increasing primarily due to orders for component sales, megawatt class products, and service contracts for our customers. Research and development revenues were lower year-over-year, and sequentially, as the company is transitioning the solid-oxide fuel cell development programs to the new large scale coal gas program announced in October, research and development backlog in January 31, 2007 was $29 million, up from $13 million a year ago. The net loss to common shareholders for the first quarter was $20 million, or $0.38 per basic undiluted share, compared to a net loss to common shareholders of $16.7 or $0.34 per basic undiluted share in the same quarter last year. The higher loss is due to an increase in inventory related to DFC1500 and DFC3000 products and long-lead components. These amounts are adjusted on receipt to net value which has the impact on our P&Ls. An increase in research and development year-over-year focused on cost reduction related to our multi-megawatt products. R&D costs were higher than the prior year, or flat with the prior quarter, as we increased our engineering staff at this time last year. G&A costs are in line. The ratio of cost to product sales and revenue is 2.73 to 1, from 3.12 in the year ago period and 3.19 in the prior quarter. The cost ratio was favorably impacted by the sale of the power plant to Sierra Nevada Brewery, offset by the increase in inventory. Net inventory increased $6.8 million in the quarter as we are building inventory in anticipation of megawatt and multi-megawatt orders. The inventory bills affect PT&L to the extent of adjustments per net-realizable value which varies by product line. Our product costs are being realized as expected under our cost-staff target program. Total cash and investments at January 31, 2007, was $98.3 million. Subsequent to January 31, Posko Power invested an additional $29 million in cash and the company issued $3.8 million unregistered common shares, adding strength to our balance sheet. Net cash and investments used during the quarter was $22.3 million. The increased cash use over recent quarters is due to the increase of inventory totaling approximately $6.8 million during the three months ended January 31, 2007. We have increased inventory, as I said before, with the DFC1500, DFC3000 power plants, and long-lead components. Cash used on CapEx in the quarter was approximately $1.6 million. Depreciation expense for the quarter was approximately $2.4 million. With the addition of the cash investment from Posko, declining product costs, and increasing order flow, we are well positioned to grow our key market. Dan? R. Daniel Brdar: Thank you Joe. We're pleased to report that we're continuing to make considerable progress in achieving our goals. The Posko Power agreement and investment that we announced late last month, along with megawatt and multi-megawatt orders we announced this week, are good examples of this progress. South Korea identified fuel cells as one of the top 10 drivers for their economy and late last year established a fuel cell incentive program that provides up to $0.28 a kilowatt hour for stationary fuel cell installations. With this level of national support, we felt it was imperative for fuel cell energy to develop an expanded relationship in Korea to broaden our megawatt and multi-megawatt markets and continue our cost reduction efforts. That effort culminated in the recently announced Posko Power relationship. With this step, we've aligned ourselves with a major Asian steel manufacturer and its subsidiary power company, the leading independent power producer in South Korea. As a major power producer, Posko Power has the market presence and utility relationships to successfully deploy multi-megawatt fuel cells for stationary power generation in Korea. In addition, Posko Power will employ its expertise in power plant design, its global sourcing capability, and access to lower-cost labor to build on STE's cost-reduction efforts. Their primary focus will be continued cost reduction on the balance of plant equipment for our DFC power plants. By using components and subsystems manufactured in Asia, and assembling the balance of plant in Korea, considerable cost savings can be realized. As part of their commitment to this effort, Posko Power will build a dedicated facility for the balance of plant manufacture. We expect them to identify the sight for this facility in the coming weeks and we believe they're well-positioned for success. At the same time we're continuing our own cost-op program. For 2007 production, the current cost of our sub-megawatt DFC300 is $4800 a kilowatt and the 1.2 megawatt DFC1500 is $4300 a kilowatt. As we go through the year we'll be implementing the value engineering and material sourcing changes for these products that were successfully implemented for the DFC3000. This should reduce our product costs another 20% to approximately $3800 a kilowatt for our 300-kilowatt products and $3400 a kilowatt for our 1.2-megawatt products at our current production volume. Units at these cost points would enter production in 2008 and as our production volume increases, these costs will continue to decline. As a result of our own cost-op success, and I want to emphasize that it does not take much incremental volume to drive positive gross margin for our products at an annual production rate of 35-50 megawatts depending on product mix, we become gross margin positive. With increasing repeatable order flow from California and Asia and some moderate success in Connecticut's Project 100, we will be approaching the type of volume needed to achieve our objectives. In addition to our value engineering and sourcing efforts for cost reduction, we're also aggressively pursuing some key technology improvements that will benefit all of our products. The first of these is an additional increase in the amount of power we can generate from a fuel cell stack. Last year we announced a 20% power up-rate for our products. That up-rate effectively reduced our product costs by 20% on a dollars-per-kilowatt basis. We're currently testing our next plan, 15% upgrade, in our labs and have successfully completed the first phase of testing in a sub-scale stack. While it takes extensive testing to confirm the improvements before we implement them in our commercial products. The second area of technology improvement is producing units with substantially longer stack life. Today, stack life is a major contributor to fuel cell life cycle costs. Units that we have been producing have a stack life of three years under normal operating conditions. We successfully completed extensive testing of a new stack design that’s expected to provide five year stack life. Our efforts are now focused on implementing the changes in our manufacturing facility, and future calls will keep you apprised of our progress on these efforts. Turning to Project 100, we’re enthusiastic about the potential orders that could come from the 98 megawatts of bids that we submitted in December. We don’t know how many megawatts of orders we’ll get, but we are confident that we put together a very competitive proposal and anticipate winning our fair share. We’ll know soon. What we do know is that we are ready to respond to increased order demand. We’ve completed a thorough assessment of our supply chain and their capabilities, and our plant has the equipment in place to produce up to 50 megawatts annually. With some modest success in Project 100, we’ll have some hiring to do in our facility, but we’re ready to move forward. Connecticut is targeted at, at least, 400 megawatts of clean power additions under its RPS mandate. Although wind and solar have their parts to play, fuel cells are the only technology that provides multi-megawatt power 24/7 without any issues. The bottom line is that if you want to make a significant low profile, cost efficient impact on CO2, NOX, SOX, and particular matter, the solution has to involve fuel cells. The world is addressing this and California understands this. At this point, it’s becoming increasingly clear that we’re witnessing a fundamental change in attitude about energy and the environment in this country. Over the past six months, environmental issues that once divided Americans no longer seem quite as controversial. Politicians, state governments, Fortune 500 companies, and public institutions no longer debate whether global climate change is occurring, but are instead focusing on what can be done about it and when. While most of America is still looking for its first serious initiatives, California has once again taken the lead on environmental and energy policy. As one of the world’s largest economies, California chose to tackle its own serious energy problems head on by crafting specific legislation and policy actions to reduce pollution, conserve energy, and encourage the use of ultra clean power generation. We’ve seen this in the successful generation incentive program that encourages on-site power generation and is enabling our growth in California. This program was recently extended to 2012. We, and our customers, have utilized the SGIP program to reduce the capital cost of our fuel cell installations. And there’s more underway for the state and the utilities to stimulate ultra clean power generation. In December, Governor Schwarzenegger signed California’s landmark Global Warming Solutions Act known as AB-32 which sets strict limits on greenhouse gas emissions such as carbon dioxide. Carbon dioxide emissions are directly related to efficiency. The more efficient the source of power generation, the less carbon dioxide it produces. Our DFC units are the most efficient way to produce power in their size and as a result, can play a significant role in reducing carbon dioxide. As a result, this law is expected to significantly enhance the competitive market position for our products. It’s in this environment that FuelCell Energy has emerged as a leader in providing our unique combination of ultra clean electric power that’s available around the clock. Yesterday we announced our latest order from the city of Riverside, CA for a 1 megawatt power plant that will run on anaerobic digester gas at the city’s wastewater treatment facility. Two weeks ago, we dedicated a 1 megawatt power plant at California State University-Northridge. A senior member of the California Air Resources Board, the agency that polices the state’s top air quality standards, commended FuelCell Energy for providing a concrete means for reducing greenhouse gases and cite our customers as examples that other California institutions should follow. As a result of our success, California continues to be a leading market for us with 11.5 megawatts installed and in backlog. Our order pipeline in California continues to grow. We’re leveraging our existing installations, wastewater treatment plants, manufacturing sites, and public institutions to showcase our products and demonstrate their value in addressing California’s high electricity cost and strict environmental regulations. Looking to the remainder of 2007, our goals remain to reduce the DFC300 and DFC1500 costs by another 20% by the end of the calendar year, increase megawatt and multi-megawatt orders in all our target markets, complete manufacturing implementation of our five year stack life design, demonstrate a 15% in stack power output, and manage cash in line with market demand. We will of course keep you up to date on our progress. Thank you for your attention and I would now like to open the call up for questions. Operator?

Great, now at this time if you would like to ask a question, please press the star and one on your touchtone phone. You may withdraw your question at any time by pressing the pound key. Once again, to ask a question, please press the star and one on your touchtone phone. We’ll pause a moment to allow questions to queue. We will take our first question from the site of John Quealy from Canaccord Adams. Please go ahead. John Quealy - Canaccord Adams: Hi, good morning. A couple questions. First, Danny made mention on the inventory build and its potential for hiring some new workers. Anticipating some of this new order flow, can you give us some magnitude on the number ahead that you’re looking at and in what locations? R. Daniel Brdar: Yeah, most of the hiring we’re talking about will be in our factory in Torrington and the amount of that really is directly related to how many orders we get. If we get 10-20 megawatts out of Project 100, we’ll have to go to a second shift in Torrington. That’s probably 100+ people. If we get more than that, we might have to go to a third shift. So, most of the hiring is going to be really the factory labor that we need to produce more units. John Quealy - Canaccord Adams: And you bring up a good point in terms of the handicapping of the Connecticut 100. Obviously there’s a lot of competing technologies outside of fuel cells for that. What would you folks be happy with in terms of hitting your milestones, and obviously any one of these orders would be the largest ever in the industry, but what’s your prediction, if you will, or handicap and what would you folks be happy with and put headcount to work? R. Daniel Brdar: In terms of handicapping, it’s a little tough because the Clean Energy Fund has been pretty closed about the process, so we don’t have a lot of insight into it. But I would look at anything more than 10+ megawatts as being a huge win for us. I think we have the potential to do more but only time will tell. We’re close enough that it’s just a matter of weeks before we’ve got some pretty good insight into how we did in that process. John Quealy - Canaccord Adams: Great, then my two last questions. One, on the self-generation initiative in California, I know you folks have done a great job of getting some of that funded, getting there early, and getting a lot of it. Can you give a little bit more details now that it’s been extended to 2012? Are more technologies available or companies to come in with some Gensets to try to get for that or get that business? How are you looking at that initiative in California? R. Daniel Brdar: Actually it’s getting increasingly more difficult for things like Gensets to come in. It’s getting to be the situation where we have the ability to capture an increasing amount of those dollars for our own customers, just because the pressure on engines has already been really significant, and now with some kind of CO2 legislation coming into play, they’re going to have a hard time with that market. John Quealy - Canaccord Adams: And that’s my last question, I always hit you with the CO2 question and it now sounds like we’ve got some major macro drivers towards CO2. Can you comment on conversations you’ve had with partners or customers about CO2 litigation and how your fuel cell stack plays a role in that? Whether it be just providing the equipment sale or potentially in any emission credits, how are you looking at that opportunity? R. Daniel Brdar: Well, we’ve got some strong partners that have a lot of presence in that market out there. I think what we’re all waiting to see exactly what goes into place in terms of how the programs are implemented, but I think what everybody realizes is, with us being the most efficient way to generate power out there, it’s going to be a strong benefit for us. So, we’ll just have to wait and see how the official rules unfold, but what we’re seeing is an increase in market activity. And I’m hoping there will be a chance to actually trade in some carbon trading for our partners as those mechanisms get put in place. John Quealy - Canaccord Adams: Alright, thanks folks.

We’ll take our next call from the site of Pearce Hamond from Simmons and Company. Go ahead. Pearce Hamond - Simmons and Company: Yes, good morning. I was wondering if you could quantify the percentages of CO2 reduction from a DFC system versus a standard Genset? R. Daniel Brdar: If you look at a Genset being 35-40% efficient, we’re close to 50%. It’s a direct ratio, those two, you know, 50% less CO2 per kilowatt-hour, versus a combustion-based technology like a gas engine or a gas turbine. Pearce Hamond - Simmons and Company: OK, great. And I appreciate the quantification on the megawatts necessary for gross margin break even. Would you care to refresh your thoughts on operating margin and net income break even levels, as well, for total number of megawatts? R. Daniel Brdar: We'll see how things flow through the P&L here, but our expectation is, from a cash-flow standpoint, we would go cash-flow positive at 75-100 megawatts, again depending on mix. With our growth really tending to be in the megawatt and multi-megawatt class, it looks like we're going to be at the lower end of that range. Pearce Hamond - Simmons and Company: OK, and is there any additional de-bottlenecking you might have to do at Torrington to have the 50 megawatts of capacity? R. Daniel Brdar: No, the big challenges that we would have really are just getting people on board quickly. We've already run the equipment at a 50-megawatt rate. So we really don't have any key issues there from an equipment standpoint. It's just getting people on board, trained, and ready to go. Pearce Hamond - Simmons and Company: Thank you very much. R. Daniel Brdar: Sure. Operator: Your next question will come from the side of Stuart Bush of RBC Capital Markets. Go ahead. Stuart Bush - RBC Capital Markets: Yes, hi, good morning. R. Daniel Brdar: Good morning Stuart. Stuart Bush - RBC Capital Markets: I was hoping you could walk us again through the time line, for how long after Project 100 makes its selection, to how low should we expect it to take to negotiate with the utilities, and then how long after that we would expect to see any revenue from the projects? R. Daniel Brdar: The schedule as we understand it is, the Clean Energy Fund will make selections on the 26th of March. There will be some kind of a public announcement, probably around the first week of April. It takes probably another 30 days to get through the discussions with the utilities, and there's probably another 30 days for PUC approval. So that puts us probably into the late June time frame for an actual award, at which point we would be off wrapping up the business. And depending on which projects get selected, we would start to see down payments starting to flow for equipment orders, probably in the July time frame. Stuart Bush - RBC Capital Markets: And then you would get the bulk of the revenue when it ships? Is that right? R. Daniel Brdar: No, we would structure most of these so we would get progress payments. We want to make sure we are managing working capital as we ramp up. So for a typical project, our payment terms would be 10% down, 40% on material, another 40% when we ship. Joe, anything you want to add to that? Joseph G. Mahler: Yeah, and Stuart, from a revenue-recognition standpoint, we're under percentage of completion, so delivery cycle on these projects would probably be somewhere from 9-15 months. It really depends on how many orders we get and we would be taking that over that cycle, which is how the revenue would be recognized. Stuart Bush - RBC Capital Markets: OK, so I guess along those lines, what is your best guess on guidance for your cash needs for fiscal '07 at this point? I guess you obviously have some sort of internal targets that you're assuming from Project 100 along with all of your other backlogs. So what would be your best guess for cash needs for this year? Joseph G. Mahler: Well, let me take that a little differently, Stuart, because we're really not in the business of guessing. [Laughter] But in any event, our cash flow right now is targeted to being very similar to our cash flow last year. The question you're asking is what happens if we get a Connecticut 100 project? Stuart Bush - RBC Capital Markets: Right. Joseph G. Mahler: Let's take, let's say 20 megawatts. So all the costs into the 20 megawatts would be about $80 million. The $80 million is the cash requirement. We would expect, depending on the...you know, there's a couple of paths how you would fund that. We have one scenario where we have our developers basically buy product from us. So we are a product supplier, they will buy product, the payment terms as Dan was describing will be somewhat our standard payment terms: we'll get 10-40-40-10, or something to that extent. So we'll get a significant amount of cash in the up-front periods, in order to build out the inventory and then get the remainder of the cash at the time. So in that scenario you'd have 50% of the cash. So you have $80 million times 50% is obviously $40 million. That all wouldn't hit you at one point in time, but over the life of that project, you'd have some kind of working-capital path that would be that kind of a number. Now, in that scenario, what we would expect to do, we've got a good customer, which would be the State of Connecticut, which is that we would be in effect able to borrow against that, which would really mitigate that cash flow. So we're not looking at a huge cash flow from an equity standpoint, for example, a huge cash-flow drain. The other scenario is that we won a project where we would be responsible for finding project finance. And in that case what we would expect is, we would get instruction to build financing, and then the take-out would be with the project-finance company. So again, we wouldn't see a significant drain on cash flow. Does that answer your question? Stuart Bush - RBC Capital Markets: Yes, that's very helpful, I think. One last question, and it sort of shifts more to your comments about the technology improvements that you're targeting. Joseph G. Mahler: Yeah. Stuart Bush - RBC Capital Markets: Can you give me some color on this 15% additional power increase that you're targeting? Does that involve tech changes to the stack, or to the balance of plant? And maybe just give me better color on what you guys are doing there, if you can. Joseph G. Mahler: Yeah. One of the things that's really unique about our technology, versus other fuel-cell technology, such as phosphoric acid, is that we're really nowhere near the theoretical limit of what you can do with a carbonate stack. So what we have been doing in our R&D efforts is looking at how we can improve the core technology to be able to take and draw more current from a stack. If you draw more current from a stack, you make more heat. So a lot of it comes down to, how do we manage heat better? So what we have been doing is coming up with some changes to the core fuel-cell design that will allow us to produce more power from an individual cell. The changes to the balance of plant really are not significant, in terms of their impact on power output. Our efforts there, really, are focused on cost reduction. So we're continuing to improve that core technology, and that's what we've been testing in what we call sub-scale stack. It's basically full-sized cells, but only at 10 kilowatt in height for the stack. And we're pretty pleased with the results we see there. Stuart Bush - RBC Capital Markets: Cool. So I guess that leads me to a last question then. Can you put any numbers around how close we are to the theoretical limits affecting stack efficiency? Joseph G. Mahler: In terms of what we can do in terms of output of the stack, we're probably, I'd say, about 75% of theoretical. Stuart Bush - RBC Capital Markets: Great, thanks a lot, guys. Joseph G. Mahler: Sure thing. Operator: We'll take our next question from the side of Walter Nasdeo from Ardour Capital. Go ahead. Walter Nasdeo - Ardour Capital: Thank you, good morning. R. Daniel Brdar: Good morning, Walter. Walter Nasdeo - Ardour Capital: Just briefly, can you give me an update on the status of the micro-turbine fuel-cell hybrid? How that's coming along? R. Daniel Brdar: Yeah, we actually shipped that unit to Montana where it's been running very well. The demonstration phase up there is over, and what we're finding is that there is some significant interest in Japan to take that unit and ship it over there to a major player in the Japanese market. So we're in the process of working out what that demonstration will look like in Japan. So we'll likely bring that unit back here, make sure it's current in terms of anything we've seen from its operation, and then ship the same thing off to Japan to do a demonstration over there. Because what we see in the Japanese market is, they're so driven by efficiency, that there is tremendous pent up interest in seeing this product operate over there. So we want to make sure that we continue to stimulate that. Walter Nasdeo - Ardour Capital: Okay. What size fuel cell are you using with what size micro-turbine right now? R. Daniel Brdar: What we've been doing for our demonstration project is one of our 250-kilowatt units with a capstone 60-kilowatt micro-turbine. Walter Nasdeo - Ardour Capital: Right, right. Do you envision being able to continually step that up in size on both, in using multiple micro-turbines, with a larger fuel cell going forward? R. Daniel Brdar: Yeah, in fact, if you really get out of the micro-turbine size and get to more an industrial- class gas turbine, the performance takes a pretty significant leap in terms of the kind of efficiencies we can achieve. We demonstrated at the customer's site with our demonstration unit, 56% efficiency, but we've been doing some work with some of the major turbine players. And we can pretty easily break the 62% efficiency level, by using a more commonly available gas-turbine design. Walter Nasdeo - Ardour Capital: Interesting, OK. And I just wanted to jump over to the sales side for a brief second. Can you...I know that right now it's kind of hit or miss, and you're going after contracts and things like that, but can you give us some sort of detail on what the sales cycle is shaping up to be, and what you are looking at doing as far as a sales force going forward? R. Daniel Brdar: If we look at where our orders are coming from right now, most of our order flow is going to be coming from California. What the team that we've got out there has done, is they've built a really strong pipeline of projects that we're starting to see those orders get announced. At that cycle, it's probably still about a year when you identify the customer, get through the whole process of getting incentive letters approved by the state, and so forth. We expect to see probably 10 megawatts out of the California market this fiscal year. The market that we see ramping up quickly here is Korea. Korea has built a team that really doesn't require a lot of our direct sales support. They've got pretty capable people on their own. We've seen the first order from them and we expect to see more megawatts come from them this fiscal year. And in Connecticut, of course, we expect to see some significant megawatts there. From our own sales force, what we're going to see probably is the need for some more people in California because we're bringing more partners on there. All the macro drivers are ripe to continue to grow the business there and we'll see what level of support we need in the other markets like Korea. Walter Nasdeo - Ardour Capital: What do you look for in a salesperson? Do you want somebody with a highly technical background or do you want a guy that just comes kind of out of the industrial machine group? R. Daniel Brdar: We really want somebody that understands energy business a little bit, but really has more of a development slant. The ability to go out and develop products, meet with a customer, understand what their needs are, and craft a project that solves some of their issues. They don't really have to be an expert in fuel cells or even power generation equipment per se. Walter Nasdeo – Ardour Capital: OK. Thank you very much guys. R. Daniel Brdar: Sure thing.

OK. Our next question is from the side of Jeff Osborne from CIBC World Markets. Go ahead. Jeff Osborne – CIBC World Markets: Good morning. Just a few quick question. I was wondering if we could just go into the R&D gross margin line a little bit. I know revenue was a little bit softer this quarter. You mentioned that the solid oxide to coal gas program transition. Just looking forward, should we continue to look at that kind of mid teens gross margin once that transition's done? R. Daniel Brdar: On the R&D contract line, the cost ratio there is about one to one. That pretty much should be the track on the R&D contract revenue. We should see some growth because our backlog is significantly higher than it has been in the past with the contract. Once we get that transitioned over and moving forward. Jeff Osborne – CIBC World Markets: Great, and then just the last question. On the inventory side, obviously a substantial ramp here, are you done with the ramp or should we be modeling quite a bit of working capital use in the March quarter as well as you gear up for some of those July contracts for the Project 100? R. Daniel Brdar: I think for the moment, we're done with the ramp. What we've done to the inventory is you wait forever for the regulatory cycle to close and you have to make some bets. We've increased our DFC1500 inventory. That inventory will go to megawatt sized jobs. Clearly the Korean 2.4 megawatt is two of those. So that will come in and come out, and that will be somewhat of a normal working capital cycle. We've also spent some money on DFC3000. That is looking for a home. That home should be Connecticut or it can be Korea, or even there are actually some opportunities in California for that. So we're expecting that to come out. But we are advancing our process. And then long lead components, we're just getting prepared so that we can reduce that total build out delivery cycle when these orders come through. So the inventory should be pretty stable at this point. When Connecticut 100 comes, depending on the size of the inventory, the size of the orders will determine what the working capital impact will be. Jeff Osborne – CIBC World Markets: For the moment you're kind of geared up for the 10-20 megawatts work on Project 100? R. Daniel Brdar: Yeah. We're gearing for that at this juncture...so probably on the low end of that. We're probably gearing for the 10 and if it's bigger than that, you'll see more impact. Jeff Osborne – CIBC World Markets: Very good, and just with all of the moving parts here and the better visibility, can you just provide an update as to CapEx for 2007? I know you mentioned a similar cash burn, but just in particular on the CapEx line, that would be appreciated. Joseph G. Mahler: Yeah, CapEx is as Dan was saying before, we're not expecting...we have 15 megawatts at capacity in our Torrington plant. We'll probably, depending on the amount of orders we get, look at maybe some process changes which would be some new capital up there, but not significant capital. Probably not dissimilar then, we have about a depreciation type maintenance run rate on CapEx which is about $5 million or somewhere in that range. I think that the big trigger here is, depending on how the order flow comes and the multi- megawatt orders come is, our decision making point as to go into 150 megawatts of capacity. That’s a cycle that’s going to take us 12-18 months to complete with some decent indication of sustainable order flow. I think that’s the CapEx decision that we’ll make and just to finish that though. The CapEx requirement to go to 150 is that we’re not really a capital intensive company. We’re really building about 50% of the product. The rest of the product we’re buying. The mechanical piece, the electronics piece, piping is all purchased from the outside. So, in that vein, we’re looking at somewhere between a $25 and $35 million capital cost to expand to $150 million. That’s kind of the picture of what we’re thinking with capital. Jeff Osborne – CIBC World Markets: Very good, thanks for the update.

Our next question comes from the site of David Snow from Energy Equities. Go ahead. David Snow - Energy Equities: Yeah, hi. I’m wondering if you could give a sum color on the Posco joint venture, compared to the two that you’ve done in the past with Japan and in Germany, in which I believe, if I recall, you got the margin on the fuel cell island and they got the margin on the balance of plant. I’m not sure if that’s correct, and if you could compare and contrast the current one versus those? R. Daniel Brdar: Sure, if you look at what we did in Europe with MTU, MTU is a little different. They actually are a licensee of our technology. They buy fuel cell components that we manufacture. They make their own stack, their own fuel cell module using our components, and then build their balance of plant in country. If you look at what we did with Marubeni in Japan, they never actually went to the OEM stage. Marubeni, while they’ve been doing a good job with developing the market there, don’t really have that capability themselves, which is part of why we’ve been looking for, that Asian partner that can actually start to produce product with us in Asia. But, what Posco will be doing is focusing primarily on the balance of plant. They will buy a complete fuel cell module from us, we’ll make the fuel cell components, make the stack, take it through some testing, and then ship that condition and tested stack that they’ll incorporate into their balance of plant. What the agreement also allows, is for us to be buying balance of plant from them. So this becomes part of our cost reduction where you basically can source the components, subsystems, and build that balance of plant and a labor market that’s half of what it is here in the US. So, it really presents some opportunities for some pretty significant cost-savings on the balance of plant. David Snow - Energy Equities: You’d use that balance of plant in the US market? R. Daniel Brdar: Yes. David Snow - Energy Equities: Really, you’d take heavy stuff from over there and ship it over here and still save a lot of money I guess? R. Daniel Brdar: Yeah actually, if you look at what we do now, there are components that we buy from Asia that get incorporated into what we’re building over here. So we’ve already done a little bit of sourcing over there, but if you think about it from a savings standpoint, the big impact over there is labor. The balance of plant, unlike our fuel cell stack, is about half labor. So if you’re going to a labor market, that’s half of what it is here in the US, and the components that you’re buying that also go into that are made in that region of the world. There’s some pretty significant potential savings that would overwhelm any cost of shipping it back to the US for the completed balance. David Snow - Energy Equities: So you’re going to get a bigger yield per order or per megawatt than was the case with MTU where you were just getting license revenues and they were getting a lot of the manufacturing profits. I would think that you would make the full profit on the fuel cell component and in addition you’ll get some savings, some significant benefits on the balance of plant. R. Daniel Brdar: As well as pretty significant royalty on the balance of plant they don’t make. David Snow - Energy Equities: Oh, royalty too on the balance of plant? R. Daniel Brdar: Yes. It’s a favorable deal for us. We’re pretty excited about it. David Snow - Energy Equities: And so, this will give you about the same margin of gross profit per megawatt that you would have on the US order? R. Daniel Brdar: Probably would be better. David Snow - Energy Equities: Better? R. Daniel Brdar: Yeah, we’ve seen better pricing there because of the incentive program. The value that we’re going to capture is really on our core technology, which is really where we want the business to go, in the long run anyway, and the royalty stream as well, all the pieces go in the right direction for Korea. David Snow - Energy Equities: Great, thank you. And will they be selling to Japan as well, do you think, or Asia in general, or just to Korea? R. Daniel Brdar: Well, we've really identified them as our Asian OEMs. So Meyer Beney was actually part of the discussion at one point in time, and they look at them as being a potential supplier for the completed product over there. So we would expect, after they show us some significant success in Korea, that we've started to broaden what we can do with the product that they're going to be making. David Snow - Energy Equities: Terrific. Thank you very much. R. Daniel Brdar: Sure. Operator: We'll take our next question from the side of John Adams from Canaccord Adams. Go ahead, please. John Adams - Canaccord Adams: Good morning, people. R. Daniel Brdar: Good morning, John. John Adams - Canaccord Adams: An easy question for you. The Costco order: how come it was two DFC1500s rather than one DFC3000? R. Daniel Brdar: Actually, we had a lot of discussion back and forth on that. And when you look at the marketplace over there, they see a need for both of those. And what they really wanted to do was to make sure that the first one they had, they got on the ground as fast as possible. And with us already having a 1500, we've been building in through inventory, they saw that as the fastest chance to get hardware on the ground. We'll see them order the 3000s going forward. John Adams - Canaccord Adams: Great, thank you. R. Daniel Brdar: Sure. Operator: Once again, if you'd like to ask a question, please press the star and one on your touch-tone phone. We'll take our next question from the side of Pearce Hamond from Simmons & Company. Go ahead. Pearce Hamond - Simmons & Company: Yes, just a follow-up. Any update on the Enbridge gas letdown stations? R. Daniel Brdar: They've actually been doing work on the site. They've got piping and everything else that they've been laying. The turbo expander that goes with that has been ordered, and I think the Enbridge team was actually down at the manufacturer this week, evaluating how the turbo expander is coming together. So they're making some pretty good progress there for their site in Toronto. Pearce Hamond - Simmons & Company: And when do you see the potential there materializing? Next year? The year after? R. Daniel Brdar: Well, they actually bid with us in Project 100 for a pretty substantial-sized project. So they're already off developing sites elsewhere. Pearce Hamond - Simmons & Company: Great, and then just housekeeping. How many megawatts were shipped during the quarter, and what's the backlog in megawatts right now? R. Daniel Brdar: Yes, hang on one sec...The shipment in the quarter was one unit, was a 250-kilowatt unit to Japan, and then I'm tracking, at the end of the quarter, the back-log was 9.3, and the backlog through today is 10.45. Pearce Hamond - Simmons & Company: Thank you very much.

Once again, to ask a question please press star one on your touch tone phone. We'll pause a moment to allow some questions to queue. And we'll take our last question from the side of Larry (inaudible) from Oppenheimer & Co. Go ahead Larry P. – Oppenheimer & Co.: Good morning. I'm just curious about two things. Number one, the MTU order you got in the last quarter, does that imply anything about their intentions about staying with you now that they're owned by the Swedes? R. Daniel Brdar: We understand with their new owner, they are still tasked with off developing the market and the orders they placed are for stacks that we're going to be delivering through the end of the fiscal year. So it looks like they are pretty much engaged in continuing to develop the market. It looks like they've stayed that way. So we're looking right now for new projects and then there is a possibility that we could take that…similar to what we did with Sierra Nevada, where we sold off that PPA, is get these maybe transferred in under these financing pooling concepts. So we've actually gotten a very encouraging response to that. Larry P – Oppenheimer & Co.: And last, what ever happened to Caterpillar? R. Daniel Brdar: Our Caterpillar actually was one of the companies that we bid with for Project 100. So they are actually out developing some of the larger megawatt class products. I think what they discovered, probably more than anything else, was that they came into the OEM piece thinking they were going to be able to take cost out very quickly, and they found out that we could take costs out a lot quicker than they could. Just like if we were going to try and cost reduce and engine, we don't have that expertise. So what they really focused their efforts on now are more the market development activities. We'll see them probably come back to the OEM piece when we're a little bit further down the cost path, but they participated in a pretty significant sized project for Project 100. So we were happy to see that. Larry P – Oppenheimer & Co.: Thank you R. Daniel Brdar: OK, thank you. I think that was the end of the calls that we have on the list. I want to thank everybody for joining us today, and we'll keep you apprised of our progress going forward.

This concludes today's teleconference, you may disconnect at any time. Thank you and have a great day.

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