One-Megawatt Project for Sheraton San Diego Hotel & Marina Will Be the First Executed Under the Agreement
FuelCell Energy, Inc. (NasdaqNM:FCEL) and Alliance Power have formed a joint venture, Alliance Star Energy LLC, which has entered into a Master Energy Services Agreement (MESA) with Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT. The MESA provides the framework for fuel cell power plant projects for Starwood’s hotels and will streamline the process for business opportunities between Starwood and Alliance Star Energy. Initial focus will be in California, but the MESA is open to all of Starwood’s hotels and resort properties. The first project under this MESA is to provide one megawatt of fuel cell power to the Sheraton San Diego Hotel & Marina, the fourth hotel employing FuelCell Energy’s ‘ultra-clean’ Direct FuelCell (DFC) technology. Four 250-kilowatt DFC power plants will supply base load electricity for the 1,044-room hotel. The heat byproduct will be used for the hotel’s Lagoon Pool. Delivery is expected in the fourth calendar quarter of 2005.
The San Diego Regional Energy Office, administrator for The California Public Utilities Commission’s (CPUC) Self-Generation Incentive Program for the San Diego area, has issued a reservation letter that will provide incentive funding of up to $2.5 million of eligible project costs to the combined entity.
“The satisfaction with other projects at Sheraton hotels, and the enabling California Self Generation Incentive Program, has created a clear value proposition for our DFC power plants at Starwood’s properties throughout California,” said Herbert T. Nock, Senior Vice President of Marketing and Sales of FuelCell Energy. “This MESA is in line with our focus on developing repeatable business for our DFC products.”
The San Diego project and subsequent transactions under this MESA are to be based on power purchase agreements (PPAs). FuelCell Energy and Alliance Power expect that as its portfolio of PPAs grows under this MESA and other separate transactions, it will become more attractive to the financial markets. FuelCell Energy and Alliance Power will then aggregate its PPAs and seek third party financing.
About the CPUC Self-Generation Incentive Program
The CPUC Self-Generation Incentive Program was created to encourage customers of electrical corporations to install distributed generation that operates on renewable fuel and/or contributes to system reliability. Existing law defines ‘ultra-clean and low-emission distributed generation’ as an electric generation technology that produces zero emissions during operation or that produces emissions that are equal to or less than limits established by the California Air Resources Board (CARB). The program currently runs through 2007 and provides up to $67 million per year in incentive funding for ultra-clean and renewable generators, including fuel cells.
FuelCell Energy’s DFC300A and DFC1500 power plants were state certified to meet CARB’s stringent new distributed generation emissions standards for 2007. By meeting this standard, the Company’s DFC power plants are categorized as an ‘ultra-clean’ technology, exempting them from air pollution control or air quality district permitting requirements by CARB. In addition, this certification qualifies the Company’s products for preferential rate treatment by the CPUC, such as the elimination of ‘exit fees’ and ‘standby charges’ for customer electric generation utilizing ‘ultra-clean’ technologies.
FuelCell Energy’s Direct FuelCells efficiently generate clean electricity at distributed customer locations, including municipal/industrial wastewater treatment facilities, telecommunications/data centers, hotels, universities, manufacturing, hospitals, prisons, federal and grid support. Direct FuelCells convert readily available fuels, such as natural gas or waste gas, to electrical power with greater efficiency than any competing technology of comparable size, including other fuel cells. This high-efficiency technology generates more electric power from less fuel and has the lowest emissions of any fossil based electric generating technology because the fuel is not burned. DFC power plants can be sited at or near users, and the heat byproduct can be used for cogeneration applications such as district heating, hot water or absorption chilling for air conditioning.
Depending upon location, application and load size, the Company’s DFC power plants in a cogeneration configuration can achieve an overall energy efficiency of between 70 and 80 percent. The sub-megawatt fuel cell power plant is a collaborative effort using Direct FuelCell technology of FuelCell Energy and the Hot Module balance of plant design of MTU CFC Solutions, GmbH, a subsidiary of DaimlerChrysler.
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