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NRG invests additional $35M in FuelCell Energy for 6% of company; establishes $40M financing facility

3 August 2014

FuelCell Energy, Inc., which designs, manufactures, operates and services carbonate fuel cell power plants, announced a broadening and deepening of its existing relationship with NRG Energy including a $35.0-million investment in FuelCell Energy common stock by NRG Energy and the establishment of a new $40.0-million revolving construction and term loan facility by NRG Energy for FuelCell Energy to use for project development.

NRG Energy now owns approximately 17.0 million shares of the FuelCell Energy’s common stock, or 6.0%, including 2.4 million shares owned prior to this transaction.

We believe that clean distributed power generation from fuel cells will be one of the key technologies that drive our country toward a cleaner energy future. We want to actively participate in the construction of FuelCell Energy power plants in order to promote choice and meet the specific needs of our existing and future customers.

—Mauricio Gutierrez, COO, NRG Energy

FuelCell Energy intends to use the net proceeds from the offering for project development, project finance, working capital support and general corporate purposes. The terms of the equity transaction include a warrant giving NRG the right to purchase an additional 2.0 million shares of common stock at a price $3.35 per share. The warrant has a term of three years.

In addition to the common stock investment, NRG Energy has extended a $40 million revolving construction and term financing facility for the purpose of accelerating project development by FuelCell Energy and its subsidiaries. The company’s project finance subsidiaries may draw on the facility to finance the construction of projects through the commercial operating date (COD) of the power plants. The company has the option to continue the financing term for each project after COD for a maximum term of five years per project. The interest rate is 8.5% per annum for construction-period financing and 8.0% thereafter.

A key advantage of this new credit facility is that it enables FuelCell Energy to undertake project development and then sell the fully operational power plants to long term project investors. This facility should help us accelerate the pace of adoption and also improve our margins as the access to credit will allow us to execute more quickly, thereby minimizing construction-period financing and allowing us to optimize the ownership and financing of projects once they are completed.

—Michael Bishop, CFO, FuelCell Energy

Draws under the credit facility are subject to traditional project finance conditions precedent, including the existence of a power purchase agreement (PPA) with the end-user of the power and customary project documentation, economic performance and compliance with applicable laws and regulations. Projects must be located in the United States or pre-designated neighboring countries including Canada and some Caribbean nations.

FuelCell Energy is expected to construct the projects and operate and maintain them for the term of the corresponding PPAs pursuant to arms’-length agreements with the project companies, whether or not the project companies continue to be subsidiaries of FuelCell Energy.

Technology. The carbonate fuel cell derives its name from its electrolyte, comprising potassium and lithium carbonates. To produce electricity, carbonate fuel cells take a fuel source, such as natural gas or renewable biogas, and internally reform it to create hydrogen and carbon dioxide. Spent fuel exits the anode and is consumed to supply oxygen (O2) and CO2 to the cathode. Heat and water vapor (H2O) exit the cathode. The resulting electrochemical reactions in the fuel cell anode and cathode produce direct current (DC) power, which is then converted to alternating current (AC) power by the electrical balance of plant. The cathode exhaust supplies heat to warm the incoming fuel and externally to the customer for facility heating and cooling or for making steam.

In addition to its ongoing work with carbonate fuel cell technology, FuelCell Energy is, under contract with the United States Department of Energy (DOE), engaged in solid oxide fuel cell (SOFC) power plant development with operating temperatures between 700°C and 1000°C, as a future product option that will enhance FCE’s high temperature fuel cell product portfolio.

Working through a cooperative agreement with the National Energy Technology Laboratory (NETL), FCE aims to develop a cost competitive, multi-MW coal-based Solid Oxide Fuel Cell (SOFC) Power Plant with near zero emissions.

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