FUELCELL ENERGY, INC. (FCEL) Business, 2008

FuelCell Energy, Inc. (“FuelCell Energy” or “Company”) is a world leader in the development and manufacture of fuel cell power plants for ultra-clean, efficient and reliable electric power generation. Our power plants are designed to meet the 24/7 baseload power needs of commercial, industrial, government and utility customers. Our products have generated over 260 million kilowatt hours (kWh) of electricity and are operating at over 50 locations around the world.

Our Company was founded in 1969. Our core fuel cell products (“Direct FuelCell®” or “DFC® Power Plants”) offer stationary power generation applications for customers. In addition to our commercial products, we continue to develop our next generation of carbonate fuel cells and planar solid oxide fuel cell (“SOFC”) technology with our own and government research and development funds.

Our proprietary DFC power plants electrochemically (without combustion) produce electricity directly from readily available hydrocarbon fuels such as natural gas and biogas. Customers buy fuel cells to reduce power costs and pollution, and improve power reliability. Electric generation without combustion significantly reduces harmful pollutants such as NOX and particulates. Higher fuel efficiency results in lower emissions of carbon dioxide (“CO2”), a major component of harmful greenhouse gases, and also results in less fuel needed per kWh of electricity generated and Btu of heat produced. Greater efficiency reduces customers’ exposure to volatile fuel costs and minimizes operating costs. Our fuel cells operate 24/7 providing reliable power to both on-site customers and for grid-support applications.

Compared to other power generation technologies, our products offer significant advantages:

· Virtually zero emissions, quiet operation

· High fuel efficiency

· Reliable, 24/7 baseload power

· Ability to site units locally

· Potentially lower cost power generation

· Byproduct heat ideal for cogeneration applications.

Typical customers for our products include manufacturers, mission critical institutions such as correction facilities and government installations, hotels, and customers that can use renewable gas for fuel such as breweries, food processors, and wastewater treatment facilities. Our megawatt (MW) class products are also used as grid support applications for utility customers. With increasing demand for renewable and ultra-clean power options and increased volatility in electric markets, our customers gain control of power generation economics, reliability, and emissions. Our fuel cells also offer flexible siting, easy permitting, and the ability to use multiple fuels.

Our DFC power plants are protected by 56 U.S. and 97 international patents and we have submitted 38 U.S. and 168 international patent applications.

We achieved significant milestones during 2008. We closed record orders, doubled sales and revenues, and reduced the cost of our products compared to the prior year.

In fiscal 2008, customers ordered 32.3 MW of fuel cells compared to 14.8 MW in the prior year. We ended fiscal 2008 with 32.5 MW in backlog with over 90 percent for MW-class products (1.2 MW and larger).

We also completed our design of the newest MW-class power plants that we anticipate will go into production in the third fiscal quarter of 2009. The new design incorporates new stacks with outputs of 350 kW each compared to 300 kW previously, along with lower component and raw material costs derived from process improvements, volume manufacturing and global sourcing. With production of these new models, we expect all future MW-class orders to be gross margin positive.

In mid-2008, we ramped to an annualized production rate of approximately 30 MW in response to worldwide demand for the Company’s MW-class power plants. Actual production in fiscal 2008 was approximately 22 MW compared to approximately 11 MW in 2007.

The market for alternative energy power generation is growing both in the U.S. and abroad and we expect to continue to benefit from this momentum. Driving this growth are concerns about the limited supply and rising cost of fossil fuels and environmental concerns. More than 66 percent of the world’s electric power is generated from carbon-based fossil fuels, and this is forecasted to continue to increase for some time. Countries, states, provinces, cities, and towns are looking for better solutions that use these fuels more efficiently, economically and at the same time, cleanly. With the primary source of electric generation still driven by fossil fuels, markets need new power generation products like DFC fuel cells that are not only more efficient and environmentally superior, but also cost effective and reliable.

On-Site Power. Stationary fuel cell power plants can be an economical alternative to utility-provided power and other distributed generation products. Wastewater treatment facilities and brewery companies, for instance, can use methane, a byproduct of their own processes, to operate their fuel cell power plants. This allows them to eliminate gas flaring and the use of conventional combustion-based power generation equipment, both of which add to pollution. These facilities also reduce their costs of operation because our fuel cell power plants can be up to 80 percent efficient when operated in combined heat and power (CHP) mode, producing significantly more high-value electricity than competing technologies. Customers gain the added benefits of quiet operation, and improved power reliability.

As we reduce our product costs, we are able to price our products competitively in our markets. In California, for instance, factoring in the value of the heat used for cogeneration, government incentives, and possible offsets due to emissions credits, the net cost to the end user of our products is approximately $0.10 to $0.12/kWh, depending on location and application - a level competitive with grid-delivered electricity and other distributed generation products in our target markets. Tougher emission standards increase the cost of competing products and as our costs continue to come down, we become increasingly more competitive in more markets.

Utility or RPS. States seeking to secure cleaner energy sources and greater energy independence are setting standards that require utilities to provide a certain amount of their electricity from renewable sources such as solar, wind, biomass-fueled technologies, and fuel cells.

There are currently 28 states and the District of Columbia that have instituted RPS mandates. These markets represent a potential for an estimated 88,000 MW by 2025. Fuel cells using biogas fuels qualify as renewable power generation technology in all the RPS states, with several states specifying that fuel cells operating on natural gas are also eligible for these initiatives.

Fuel cells can play a critical role in meeting RPS clean power mandates by generating highly efficient, 24/7 electric power that also balances other forms of intermittent power generation such as wind and solar as they are incorporated into the electric grid infrastructure. Increased use of wind, solar and traditional generation requires upgrades to the transmission and distribution system, whereas our fuel cells fit into the existing grid, augmenting power where needed. By producing power locally in the distribution system, our fuel cells can ease grid constraints, making room for additional central wind or solar in the system.

DFC fuel cells offer utilities and end-users economical, 24/7, reliable ultra-clean power that is easily sited in grid-constrained areas, avoiding substantial transmission and distribution equipment upgrades.

We have established a leading position in the sale of fuel cell power plants and strengthened our position by continuing to improve our product performance and availability, reducing costs for our products, and expanding repeatable markets for our DFC products. Our cumulative fleet availability remains at approximately 90 percent and our newer units are at approximately 95 percent availability.

Our business strategy is to expand our leadership position in key markets, build multi-MW markets and continue to reduce the cost of our products. A production mix more heavily weighted with MW-class products is our fastest path to achieve profitability. In 2009, our focus will be:

· South Korea - Our South Korean partner, POSCO Power, ordered 30.4 MW of our DFC power plants during fiscal 2008 and all of these orders were for MW-class power plants. POSCO Power’s total orders to date amount to 38.2 MW. In early 2007, we signed a 10-year manufacturing and distribution agreement with POSCO Power. Under the agreement, POSCO Power made a significant investment in a 50 MW fuel cell BOP manufacturing facility, which opened in September 2008. In the second half of 2009, we will begin shipping fuel cell stack modules to POSCO Power which will be integrated with BOP manufactured in South Korea.

In September 2008, South Korea, as part of President Lee’s “green growth” vision declared fuel cells a key economic driver for the country. This vision refers to the creation of sustainable growth that reduces greenhouse gas emissions and creates new growth engines and jobs with green technology and clean energy. We expect this public policy will foster a favorable environment for fuel cell power plant sales and for POSCO Power’s aggressive penetration of its market with our DFC power plants.

· California - California is a strong proponent of clean energy in the U.S. and an excellent market from which we expect continued growth. Eastern Municipal Wastewater District ordered a 750 kW power plant in fiscal 2008 and we shipped 4.45 MW of fuel cells to customers including Eastern Municipal Wastewater District, the City of Riverside’s Water Quality Control Plant, Gills Onions, Turlock Irrigation District, Camp Pendleton, and M&L Commodities. By comparison, we shipped 3.15 MW of orders to California customers in fiscal 2007.

In 2008, the California Public Utilities Commission raised the cap on monetary incentives for funds under the state’s Self-Generation Incentive Program (SGIP) for clean energy projects to 3 MW. The SGIP provides $4,500 per kW for power plants operating on biofuel and $2,500 per kW for power plants operating on natural gas. Under the revised SGIP, the first 1 MW of a project is entitled to 100 percent of the incentive; the second MW of power is eligible for 50 percent of the incentive; and the third MW receives 25 percent of the incentive. To fund the existing program’s expansion, the SGIP will be supplemented in 2008 and 2009 with an additional $96 million of unspent SGIP funds from prior years. All of these positive developments lead us to believe we will experience strong order flow in California.

· Wastewater Treatment / Biofuels – The wastewater treatment market continues to be among our strongest because our fuel cells are particularly economical and efficient for these customers. For example, in California, the SGIP provides incentive funding of up to $4,500 per kW for fuel cells running on biogas. Since our fuel cells operate on the biogas produced by the wastewater treatment process and their byproduct heat is used in the treatment process the efficiency of these installations can be as much as 80 percent. Fuel cells operating on biogas qualify for incentives in all 28 RPS states and Washington D.C.

There are currently 9 MW of our DFC fuel cell power plants installed or in backlog for wastewater treatment / biogas applications. We believe the domestic market opportunity is approximately 500 MW. Based on our installed base, market support for our products, and our marketing focus in this area, we expect wastewater treatment facilities to continue to be a strong market for our products.

· Natural Gas Pipeline Letdown Stations - Natural Gas Pipeline Applications - FuelCell Energy recently completed installation of a 1.2 MW fuel cell power plant for Enbridge, Inc. for inclusion in a Direct FuelCell-Energy Recovery Generation™ (DFC-ERG™) system in Toronto, Ontario, Canada. This system combines our fuel cells with a turbo expander to achieve up to 65 percent efficiency in power generation. The system generates ultra-clean electricity while recovering energy normally lost during natural gas pipeline operations. A second 9 MW DFC-ERG system is part of the 16.2 MW of projects in final negotiations under Round 2 of Connecticut’s Project 150. This system will be the largest fuel cell installation anywhere in the world upon completion. Three additional DFC-ERG systems are included in the 27 MW under consideration by the Connecticut Department of Public Utility Control (DPUC) in Round 3.

This DFC-ERG distributed generation technology is unique in that it converts more than 60 percent of the input energy into electricity. Natural gas transmission networks utilize long-distance pipelines operating at very high pressures. These pressures are required to maintain a high volume of flow in the system. Gas distribution lines to homes and businesses, however, use a much lower pressure for safety and to accommodate end use equipment. Pressure is reduced at local utility letdown stations to accommodate the distribution network. As pressure is reduced, the gas naturally cools because of the refrigerant effect of gas expansion. To prevent the gas systems and pipeline from freezing, the gas must be heated before it flows through the expansion process, usually with gas-fired boilers that produce CO2 and other pollutants. Additionally, the energy available in this letdown process is lost. With the DFC-ERG, the energy normally lost is harnessed by a turbo expander to drive an electric generator to produce additional electric power. Waste heat from the DFC-ERG provides the heat required by the expansion process, replacing gas-fired boilers. The utility grade electric power produced by the DFC-ERG system is used to service on-site power requirements or the power grid. The market in Toronto, the Northeastern U.S. and California represents an opportunity of 250-350 MW for DFC-ERG systems.

RPS programs mandate a certain percentage of electricity be generated from renewable and ultra-clean resources. Our multi-MW products in installations from 2 to 50 MW and our natural gas pipeline applications are well suited to address these markets. We are focusing on several near term opportunities:

· Connecticut – We and our partners submitted multi-MW bids to the Connecticut Clean Energy Fund (CCEF) in December 2006 under Round 2 of Connecticut’s Project 150. The DPUC awarded 16.2 MW of these projects using six of our DFC3000 power plants, including a 9 MW DFC-ERG project slated for Milford, Connecticut, that will be the largest fuel cell project in the world upon installation. During 2008, the Federal Investment Tax Credit (ITC) eight-year extension and increase to $3,000 per kW or 30 percent, whichever is less, passed in October, enabling the Round 2 project developers to enter into final negotiations for financing and equipment.

Under Round 3 of Connecticut’s Project 150, the CCEF recommended 27.3 MW of projects that use our power plants, including three DFC-ERG™ plants, a fuel cell/turbine hybrid power plant (DFC/T) and a DFC3000 project. A final decision is expected by the DPUC by January 28, 2009.

Reducing product cost is essential to our ability to further penetrate markets with our fuel cell power plants. Cost reductions are critical to attaining profitability and will reduce and eventually eliminate the need for incentive funding programs. Examples of product cost reduction are:

· We have reduced the cost of our MW-class power plants by approximately 85 percent since our ‘proof-of-concept’ 2 MW Santa Clara project in 1996-1997. In 2003, we implemented our commercial cost-out program, hiring additional engineers who focused on reducing the total life cycle costs of our power plants. We have made significant progress primarily through value engineering our products, manufacturing process improvements, technology improvements, and global sourcing.

· In fiscal 2008, we completed the design of our newest MW-class power plants that will go into production in the fourth fiscal quarter of 2009. With these new models, all future MW-class orders are expected to be gross margin positive. The cost reduction improvements are primarily driven by increasing the power output from 300 to 350 kW per fuel cell stack, combined with better component and raw materials pricing derived from volume manufacturing.

· In 2008 we began manufacturing our first five-year fuel cell stacks, representing a service cost reduction. Previously, estimated stack life was approximately three years.

· Continued increases in our production volume over our current rate will also result in additional cost reduction.

We sell both completed power plants and fuel cell modules (the part of a fuel cell that produces the power). Of the current product backlog, over 90 percent is for MW-class complete power plants and fuel cell modules. Based on the current backlog, we expect the mix of production to move primarily to DFC3000 power plants and fuel cell modules in fiscal 2009 and beyond. We believe we can reach gross margin breakeven at a sustained annual order and production volume of approximately 35 to 70 MW, that net income breakeven can be achieved at a sustained annual order and volume production of approximately 75 to 125 MW depending on product mix, volume mix of full power plants vs. modules only, future service costs, and other variables that may affect sales pricing.

Our core products, the DFC300, DFC1500 and DFC3000, are currently rated in capacity at 300 kW, 1.4 MW and 2.8 MW, respectively and are designed for applications up to 50 MW. During fiscal 2008, we completed new designs for our MW-class power plants that increased power output of the MW-class plants from their earlier ratings of 1.2 MW and 2.4 MW, respectively.

Our fuel cells operate on a variety of hydrocarbon fuels, including biogas, methanol, diesel, coal gas, coal mine methane and propane. DFC power plants are designed to achieve electrical efficiencies of 47 to 65 percent depending on configuration, location, and application, and up to 80 percent when used in a CHP system. They are designed for distributed generation applications to meet the baseload power requirements of a wide range of customers including wastewater treatment plants (municipal, such as sewage treatment facilities, and industrial, such as breweries and food processors), hotels, manufacturing facilities, universities, hospitals, government facilities, as well as grid support applications for utility customers. Our DFC power plants can be part of a total on-site power generation solution with our high efficiency products providing baseload power along with grid-delivered electricity. Our power plants can also work in conjunction with intermittent power, such as solar, or less efficient combustion-based equipment, providing peaking and load following energy. Our products are also ideal to meet the needs of utilities and RPS mandates.

A fuel cell electrochemically converts a hydrocarbon fuel into electricity without combustion. The primary byproducts of the fuel cell process are heat and water. CO2 is an additional byproduct although the high efficiency results in less CO2 per unit of power produced compared to other distributed generation. A fuel cell power plant can be thought of as having two basic segments: the fuel cell stack module, the part that actually produces the electricity, and the balance of plant (BOP), which includes various fuel handling and processing equipment such as pipes and blowers, and electrical interface equipment such as inverters to convert the fuel cell stack module’s DC electricity output to AC. Our fuel cells produce virtually no SOX, NOX, or particulate matter emissions.

Conventional fossil fuel power plants generate electricity by combusting hydrocarbon fuels, such as coal, oil, or natural gas. With reciprocating engines, fuel combustion takes place within the engine that drives a generator that produces electricity. In a gas turbine combined cycle plant, fuels such as natural gas, are burned in the gas turbine, which drives a generator. The exhaust heat from the gas turbine is used to boil water, which converts to high-pressure steam, which is used to rotate a steam turbine generating additional electricity. The combustion process typically creates emissions of SOX, NOX, CO2, carbon monoxide, particulates and other air pollutants.

The following table shows industry estimates of the electrical efficiency, operating temperature, expected capacity range and certain other operating characteristics of the principal types of fuel cells being developed for commercial applications:

Fuel Cell Type Electrolyte Electrical Efficiency Percentage Electrical Efficiency With Bottom Cycle Percentage Operating Temperature oF Expected Capacity Range By-Product Heat Use PEM Polymer Membrane 30-35 NA 180 5 kW to 250 kW Warm Water Phosphoric Acid Phosphoric Acid 35-40 NA 400 50 kW to 200 kW Hot Water Carbonate (Direct FuelCell®) Potassium/Lithium Carbonate 45-50 58 – 65 1,200 300 kW to 2.8 MW and larger Hot Water or High Pressure Steam Solid Oxide Stabilized Zirconium Dioxide Ceramic 45-50 58 - 65 1,400-1,800 3 kW to 1 MW and larger Hot Water or High Pressure Steam

Our carbonate fuel cell, known as the Direct FuelCell, operates at approximately 1200°F. This temperature avoids the use of precious metal electrodes required by lower temperature fuel cells, such as proton exchange membrane (“PEM”) and phosphoric acid, and the more expensive metals and ceramic materials required by higher temperature fuel cells, such as tubular solid oxide. As a result, we are able to use less expensive catalysts and readily available metals in our designs. In addition, our fuel cell produces high quality byproduct heat energy (700°F) that can be harnessed for CHP applications using hot water, steam, or chiller water to heat or cool buildings.

Our Direct FuelCell is so named because of its ability to generate electricity directly from a hydrocarbon fuel, such as natural gas or wastewater treatment gas, by reforming the fuel inside the fuel cell to produce hydrogen. We believe that this “one-step” reforming process results in a simpler, more efficient, and cost-effective energy conversion system compared with external reforming fuel cells. External reforming fuel cells, such as PEM and phosphoric acid, generally use complex, external fuel processing equipment to convert the fuel into hydrogen. This external equipment increases capital cost and reduces electrical efficiency. Additionally, natural gas and wastewater treatment gas have infrastructures that are already established. Consequently, our DFC products do not need to wait for the development of the hydrogen infrastructure for continued commercialization.

The worldwide market for alternative energy power generation is growing and we expect to continue to benefit from this momentum. Governments around the world, including the U.S. and South Korean governments, have tied the support of green energy programs to economic growth.

In October 2008, the U.S. Congress extended the Federal ITC for eight years and increased it to $3,000 per kW or 30 percent, whichever is less, for fuel cells. President-elect Barack Obama has called for the creation of up to 5 million jobs through investments in efforts to build a clean energy future. His clean energy proposals include the federal RPS, a Cap-and-Trade program, and ensuring that the government itself (the biggest energy user in the world) is energy efficient.

In South Korea, the Ministry of Knowledge Economy designated fuel cells as a key economic driver for the country under President Lee Myung-bak's green growth plan. The efficient production of electricity has important economic benefits for South Korea since it imports its fossil fuels. Additionally, the country’s clean energy program requires clean electricity to first be put on the utility grid, encouraging the deployment of MW-class systems.

We compete in the distributed generation marketplace. We believe distributed generation can be a more cost-effective solution than traditional grid-delivered electricity:

· Provides better economics. Distributed generation avoids transmission and distribution system investment by using the existing infrastructure close to the end user. Customers can use the heat byproduct from on-site power generation (combined heat and power) boosting efficiency and lowering energy costs. Distributed generation also offers the ability to control energy costs through fuel flexibility and efficiency.

· Increases reliability by locating power closer to the end user. On-site power generation bypasses the congested transmission and distribution system, increasing electrical reliability.

· Eases congestion in the transmission and distribution system. Each kW of on-site power generation removes the need for the same amount from the centralized transmission and distribution system, easing congestion that can cause power outages and hastening the grid recovery after electrical infrastructure problems have been resolved. In addition, distributed generation provides added strength to the grid by opening up distribution capacity for central wind or solar generation.

· Reduces the need for new large generation and associated transmission and distribution line investments and provides greater capacity utilization in less time. On-site, distributed generation can be added in increments that more closely match expected demand in a shorter time frame (weeks to months) compared with traditional central power generation plants and transmission and distribution systems (often 36 months or longer) that require more extensive siting and right of way approvals. Siting distributed generation can defer or avoid massive transmission and distribution investment such as unpopular above ground high voltage lines or expensive underground high voltage lines.

· Enables the use of more renewable fuel for power generation. Distributed generation enables end-users to use renewable biogas to generate highly efficient, clean power, and reduces the need for fossil fuels.

· Promotes greater energy independence. Distributed generation reduces dependence on foreign oil and on centralized power generators, giving customers more control over their power costs and supply.

· Enhances security. By locating smaller, incremental power plants in dispersed locations closer to energy consumers, distributed generation can reduce dependence on a vulnerable centralized electrical infrastructure.

Our fuel cell products are competitive in the marketplace because of superior product attributes including higher operational efficiency, lower emissions and the ability to utilize multiple fuels. Our fuel cells are unique among power generation technologies (including other fuel cells) in that they provide these attributes at a scale suitable to distributed generation. The only other commercial power generation technology with fuel efficiency comparable to our products – combined cycle power plants – achieves that efficiency only in systems rated at hundreds of MWs. The fact that fuel cells provide their high efficiency at small sizes, combined with the ultra-clean and quiet operating characteristics, makes them an ideal power generation technology for distributed generation. While most small-scale technologies have high emissions or low efficiency, our direct fuel cells provide the efficiency of a large combined cycle power plant in a size small enough to be located near the end user. This avoids the need to add transmission or distribution capacity, and provides a mechanism to strengthen the existing distribution system.

When power generation is installed near the end user, it becomes possible to provide additional value to local customers by using the fuel cell waste heat to provide hot water or steam. This thermal energy offsets other means of heat production, generally burning oil or gas, which further reduces CO2 and other emissions. Reduced transmission and distribution constraints and lower emissions are key benefits of distributed generation, which become feasible with a technology like the fuel cell.

Target applications include those where customers can use renewable fuels such as wastewater treatment facilities, breweries, and food processors. Other on-site applications include those facilities that require reliable, baseload power, ultra-clean distributed generation including manufacturers, mission critical institutions such as correction facilities and government installations, hotels, and hospitals.

As a result of the high efficiency and flexible siting of our fuel cell power plants, fuel cells in grid support can provide economical, baseload power in grid-constrained areas to avoid substantial transmission and distribution equipment upgrades. Our fuel cells produce clean power that meet RPS requirements, operate quietly, and can be installed in a third the time required for new central generation. For utilities, distributed generation can be a superior choice to new central generation and other forms of distributed generation.

Our original equipment manufacturer (“OEM”) and energy service company (“ESCO”) partners have extensive experience in designing, manufacturing, distributing selling and servicing energy products worldwide. We believe our strength in the development of fuel cell products coupled with their understanding of sophisticated commercial and industrial customers, products, and services will enhance the sales, service, and product development of our power plants.

POSCO Power. In February 2007, we signed a 10-year manufacturing and distribution agreement with POSCO, one of the world’s largest producers of steel. Our agreements include the rights to distribute and package DFC power plants in South Korea. POSCO Power, a POSCO subsidiary, has extensive experience in power plant project development, having built over 2,400 MW of power plants, equivalent to 3.7 percent of South Korea’s national capacity. POSCO Power made a substantial investment in its 50 MW fuel cell BOP manufacturing facility in Pohang, which opened in September 2008. In late 2009, POSCO Power will begin manufacturing the BOP, the non power producing portion of a DFC power plant.

To date POSCO Power has ordered 38.2 MW of our DFC power plants, 30.4 MW during fiscal 2008.

Enbridge, Inc. Enbridge is a global leader in energy transportation and distribution. We have a market development agreement for North America that includes current DFC product distribution and the new DFC-ERG™ power plant that they co-developed with us. A 1.2 MW DFC-ERG unit was installed at Enbridge’s headquarters in Toronto during the fiscal fourth quarter of 2008. We have also been selected for a 9 MW DFC-ERG installation at a natural gas let-down station in Milford, CT. under the Connecticut Project 150 Round 2 projects which are in final negotiations. Three additional DFC-ERG systems are included in the 27 MW under consideration in Round 3 by the DPUC.

Marubeni Corporation. Working with Marubeni, we have installed 4.75 MW and currently have 1.5 MW in order backlog from Marubeni. Four DFC300 units sold by Marubeni totaling 1 MW in output are operating at the Sharp Ltd. “super-green” factory in Kameyama Prefecture, where Sharp manufactures LCD screens for its flat-panel television displays. The 1 MW fuel cell installation provides baseload power to the facility, while 5 MW of Sharp’s own photovoltaic modules provide peaking power. Altogether, the system provides 30 percent of the plant’s energy needs.

MTU Onsite Energy GmbH. MTU Onsite Energy, a Tognum Group Company headquartered in Ottobrunn, Germany, was a co-developer of our DFC technology. Our first sub-MW power plant was a collaborative effort using our DFC technology and the Hot Module® BOP designed by MTU Friedrichschafen GmbH now known as MTU Onsite Energy (previously CFC Solutions). As an OEM developer of stationary fuel cell power plants, MTU Onsite Energy assembles and stacks the DFC components that we sell it and MTU Onsite Energy adds its mechanical and electrical BOP for ultimate sale to their customers. There are twelve installations for a total of 3.0 MW operating in Europe.

Caterpillar, Inc. DFC units have been shipped to several commercial Caterpillar customers including a municipal wastewater treatment application for the Sanitation Districts of Los Angeles County in Palmdale, California and the State University of New York College of Environmental Science and Forestry.

Energy Service Company Distribution Partners. We also partner with energy service companies that have expertise in the markets where we compete. These partners include: Alliance Power, Inc., Chevron Energy Solutions, LOGANEnergy Corp., The Linde Group and PPL Energy Plus.

We compete on the basis of our products’ reliability, fuel efficiency, environmental considerations, and cost. We believe that our DFC carbonate fuel cell offers competitive and environmental advantages over other fuel cell designs and combustion-based technologies for stationary baseload power generation.

Our DFC power plants specifically provide the following attributes that provide an advantage over other distributed technologies of similar size:

· Higher operational efficiency. Our DFC power plants are designed to achieve electrical efficiencies of up 47 percent and an overall energy efficiency of up to 80 percent for CHP applications. Our newest products, the DFC-ERG for natural gas letdown stations, and the DFC/T targeted for large load users, and achieve efficiencies of approximately 65 percent. This is significantly greater than the fuel efficiency of competing combustion-based technologies (25-35 percent) and the average U.S. fossil fuel power plant (33 percent), and results in a lower cost per kWh over the life of the power plant.

· Lower emissions. Our DFC power plant installations emit less carbon dioxide, and near zero SOX, NOX and particulate matter. They have been designated ultra-clean by the California Air Resources Board (“CARB”), and our DFC products are certified to CARB 2007 emissions standards.

Emissions of fuel cell power plants versus traditional combustion-based power plants are as follows:

Emissions (Lbs. Per MWh) NOX SO2 PM10 CO2 CO2 with CHP Average U.S. Fossil Fuel Plant 5.06 11.6 0.27 2,031 NA Microturbine (60 kW) 0.44 .008 0.09 1,596 520 – 680 Small Gas Turbine 1.15 .008 0.08 1,494 520 – 680 Direct Fuel Cell 0.01 0.0001 0.00002 980 520 – 680

· Fuel flexibility. Our DFC power plants can use many fuel sources, such as natural gas, biogas from wastewater treatment facilities, food processors and breweries, and coal gas (escaping gas from active and abandoned coal mines as well as synthesis gas processed from coal). This enhances independence from imported oil and gives customers fuel flexibility, allowing them to choose the least expensive alternative.

· Provide end users with greater control of their energy costs. The high efficiency of our DFC power plants and 24/7 operation gives customers predictability and savings on energy costs. The cost of utility-provided power continues to rise and is subject to significant volatility. Generating on-site power with known generating costs from a DFC power plant gives customers a predictable component of their operations that can be budgeted and controlled.

Several companies in the U.S. are involved in fuel cell development, although we believe we are the only domestic company engaged in significant manufacturing and commercialization of carbonate fuel cells. Emerging fuel cell technologies (and companies developing them) include PEM fuel cells (Ballard Power Systems, Inc., UTC Power, Samsung Everland, and Plug Power), phosphoric acid fuel cells (UTC Power and HydroGen) and solid oxide fuel cells (Siemens Power Generation, Cummins, General Electric, Delphi, Rolls Royce, Bloom Energy, and Acumentrics). Each of these competitors has the potential to capture market share in our target markets.

There are other potential carbonate fuel cell competitors internationally. In Asia, Doosan Corporation and IHI Corporation have been involved in carbonate development. Fuji Electric has been involved with both PEM and phosphoric acid fuel cells. In Europe, a company in Italy, Ansaldo Fuel Cells, is engaged in the development of a 100 kW carbonate fuel cell, although we believe MTU Onsite Energy has been the most active fuel cell company in Europe.

Other than fuel cell developers, we also compete with electricity provided by the electric grid and manufacturers of more mature combustion-based equipment, including various engines and turbines that have more established manufacturing, distribution, operating, and cost features. These manufacturers include: Caterpillar, General Electric, Cummins Inc., and Detroit Diesel Corporation (a subsidiary of DaimlerChrysler AG).

Significant competition may also come from gas turbine companies like General Electric, Ingersoll-Rand Company Limited, Solar Turbines Incorporated and Kawasaki, which have recently made progress in improving fuel efficiency and reducing pollution in large-size combined cycle natural gas fueled generators. These companies have made efforts to extend these advantages to smaller sizes. We believe, however, that these smaller gas turbines will not be able to match our fuel efficiency or favorable environmental characteristics.

We have a 65,000 square foot manufacturing facility in Torrington, Connecticut where we produce our repeating fuel cell components: the anode and cathode electrodes, metallic bipolar plates and the electrolyte matrix. These stack components are combined and assembled into modules that are currently delivered to our test and conditioning facilities in Danbury, Connecticut and then shipped to customer sites for installation with an assembled BOP.

Our overall manufacturing process (module manufacturing, final assembly, and test and conditioning) has a production capacity of 50 MW per year. We recently invested approximately $3.5 million to double our MW-class conditioning capacity to 50 MW and expect to continue to invest in those processes required to increase the overall production capacity to 60 MW. The timing of this additional investment will be based on future order volume. We believe manufacturing capacity can be increased to 125-150 MW within our existing Torrington facility through the addition of parallel production lines and additional machinery. We also have additional land surrounding our Torrington facility, on which we may be able to expand to 400 MW of annual production of our repeating fuel cell components.

Expansion of our manufacturing facilities beyond 60 MW may require new facilities for the fuel cell stack and module assembly, and testing and conditioning, which could be deployed regionally. These regional assembly, test and conditioning facilities are expected to provide additional cost savings from reductions in shipping costs, enhanced delivery times, and improved customer service.

During 2008, we ramped to an annualized production rate of approximately 30 MW in response to worldwide demand for our MW-class power plants. Actual production in fiscal 2008 was approximately 22 MW compared to approximately 11 MW in 2007. Future production volumes will be adjusted depending on customer demand.

We use various raw materials and components to construct a fuel cell module, including nickel and stainless steel, which are critical to our manufacturing process. In addition to manufacturing the fuel cell module in our Torrington facility, the electrical BOP and mechanical BOP are assembled by and procured from several key suppliers. All of our suppliers must undergo a qualification process, which takes four to twelve months. We continually evaluate new suppliers and are currently qualifying several new suppliers.

Reducing product cost is essential to our ability to further penetrate the market with our fuel cell power plants. Cost reductions will reduce and/or eliminate the need for incentive funding programs, allow our product pricing to compete with grid-delivered power and other distributed generation technologies, and are critical to attaining profitability.

We have reduced the cost of our MW-class power plants by approximately 85 percent since our ‘proof-of-concept’ 2 MW Santa Clara project in 1996-1997. In 2003, we implemented our commercial cost-out program, hiring additional engineers who focused on reducing the total life cycle costs of our power plants. Since 2003, we have made significant progress primarily through value engineering our products, technology improvements, and global sourcing.

In fiscal 2008, we completed the design of our newest multi-MW power plants that incorporate our second power increase for our MW-class products, increasing the output of our 300 kW fuel cell stack to 350 kW. We further reduced cost through improved component sourcing and raw materials pricing due to volume ordering and global sourcing. When these designs go into production in the fourth quarter of fiscal 2009, we expect them to be our first gross margin profitable units. We estimate continued increases in volume could result in an additional 10-20 percent cost reduction.

In 2008, we began manufacturing our first five-year stacks, representing a service cost reduction. Previously, estimated stack life was approximately three years.

Our service organization offers comprehensive service and maintenance programs including total fleet management, refurbishment and recycling services, and complete product support including spare parts inventory. The service organization’s primary task is to maintain a high level of service for our end user customers during the warranty and service agreement periods of the original DFC equipment. To provide a wide range of services to support the fleet during the warranty period, we have developed a service infrastructure for those customers who enter into long-term service agreements (typically five years), which has allowed us to capture revenue as the units in the field increase and enter the period past the standard one-year warranty period.

Our services include a 24/7 call center and a web-based information system network that allows remote access to plant performance data. We have also established parts warehouses that include a rotable pool of spare stacks in Connecticut and Asia. We have fully equipped regional field service teams, a stack repair/refurbishment center, and testing and conditioning facilities located in Connecticut. All personnel complete an operator and maintenance technician training program and work closely with the engineering and technology support organizations to service our products in the field. This infrastructure has enabled us to diagnose issues quickly and maintain high customer satisfaction.

We offer service agreements with a standard term of five years with flexible renewal options. Initial and renewal pricing for service contracts is based on the markets in which we compete as well as estimates of future costs. Under the standard provisions of these contracts, we provide services to maintain, monitor, and repair customer power plants to meet minimum operating levels. Should the power plant not meet the minimum operating levels, we may be required to replace the fuel cell stack with a new or used replacement. Our contractual liability under service agreements is limited to the amount of service fees payable under the contract.

Power purchase agreements (PPAs) are a common arrangement in the energy industry, whereby a customer purchases energy from an owner and operator of the power generation equipment. A number of our partners enter into PPAs with end users such as Marubeni in Japan and Alliance Power in the U.S. After purchasing DFC power plants from us, they own and operate the units, and recognize revenue as energy is sold to the end user.

We have seeded the market with a few Company-funded PPAs to penetrate key target markets and develop operational and transactional experience. To date, we have funded the development and construction of certain fuel cell power plants sited near customers in California, and own and operate 3 MW of assets through PPA entities in which we have an 80 percent ownership interest. As we enter into multi-MW projects in the RPS markets with the benefit of the federal Investment Tax Credit and accelerated depreciation in the Energy Policy Act of 2005, we believe future PPAs will attract third party financing or ownership.

The goal of our research and development efforts is to improve our core DFC products and expand our technology portfolio in complementary high temperature fuel cell systems. In addition, we are also conducting development work on advanced applications for other fuel cell technologies, such as SOFC and PEM.

A portion of our research and development has been funded by government contracts and is classified as cost of research and development contracts in our consolidated financial statements. We also fund our own research and development projects including extending module life, increasing the power output of our modules and reducing the cost of our products. Research and development that is not funded under a government contract is included in research and development expenses in our consolidated financial statements. For the fiscal years ended 2008, 2007, and 2006, total research and development expenses, including amounts received from the Department of Energy (“DOE”), other government departments and agencies and our customers, and amounts that have been self-funded, were $39.5 million, $40.9 million, and $35.0 million, respectively.

Since 1975, we have worked on the development of our DFC technology with various U.S. government departments and agencies, including the DOE, the Navy, Coast Guard, the Department of Defense, Environmental Protection Agency, Defense Advance Research Projects Agency and National Aeronautics and Space Administration. Government funding, principally from the DOE, provided approximately 18 percent, 33 percent, and 35 percent of our revenue for the fiscal years ended 2008, 2007, and 2006, respectively. From the inception of our carbonate fuel cell development program in the mid-1970s to date, more than $536 million has been invested relating to government programs in support of the development of our DFC and related technologies.

Significant research and development programs we are currently working on include:

Direct FuelCell/Turbine. The DOE’s Office of Fossil Energy established its Vision 21 Program in 1999 with the objective of developing a “21st Century Energy Plant” that can generate electricity, heat, and hydrogen from a variety of feedstocks such as fossil fuels and biomass with high efficiency and low environmental impact. Under this program, we were awarded a $19.4 million cost-shared contract to develop a fuel cell/turbine hybrid power plant (DFC/T). In 2006 and 2007, we successfully demonstrated a sub-MW DFC/T power plant for 8,000 hours and achieved a 56 percent electrical efficiency. The conceptual design of a MW class DFC3000/T was completed in 2008.

The Connecticut Clean Energy Fund has recommended a project to the Department of Public Utility Control under Round 3 of Connecticut Project 150 that includes a DFC3000/T power plant. The final decision is scheduled for January 28, 2009.

Co-production of Hydrogen and Electricity using DFC Power Plants. Our high temperature DFC power plant produces hydrogen internally from hydrocarbon fuels, and then converts it to electricity. These DFC products are capable of co-production of electricity and hydrogen at potentially attractive costs. This value-added proposition is attractive for industrial users of hydrogen. It also provides a technology bridge to the hydrogen infrastructure being developed by DOE in our nation’s bid for greater energy independence. A DOE-sponsored study performed by Air Products and Chemicals, Inc. (APCI), showed that a DFC300 power plant installed at a hydrogen refueling station for fuel cell vehicles can provide sufficient hydrogen to fuel a fleet of approximately 200 cars while providing enough electricity to power a community of 200 homes.

During 2005, we were selected by APCI to develop and demonstrate the next generation hydrogen energy station. The $10 million cost-shared project, co-sponsored by DOE, APCI, and ourselves, integrates our ultra-clean DFC power plant and APCI’s advanced gas separation technology to co-produce hydrogen and electricity at a vehicle refueling station from one single system, the “DFC/H2” operating on pipeline natural gas and renewable fuels such as biogas. Air Products estimates that the DFC/H2 system has the potential to be highly efficient and cost competitive with other conventional hydrogen production technologies. We are currently constructing a test system in advance of a field demonstration.

We are also developing an electrochemical hydrogen separator (EHS). Under sponsorship from Connecticut Clean Energy Fund, we designed and built a sub-scale (2 kW) EHS stack, and delivered it to the University of Connecticut for demonstration in February 2006 where it accumulated over six months of stable operation. Following this successful demonstration, we were awarded a $1.2 million contract by U.S. Department of Defense to scale-up the EHS stack to the appropriate size for co-production of high purity hydrogen from our DFC300 power plants. In 2007 we were awarded an additional $1.2 million to continue this program through in-house system testing. EHS provides an attractive alternative to mechanical separation technologies. Because it has no moving parts, it promises lower cost and the enhanced reliability needed for the hydrogen infrastructure.

SECA and Large Scale Hybrid Programs In 2008, we successfully completed the milestones for Phase I of the DOE’s Solid State Energy Conversion Alliance (“SECA”) Large Scale Hybrid Program. The goal of the program is to develop a multi-MW, highly efficient, central generation SOFC power plant operating on coal syngas. Phase I of the program was a two-year, $32.3 million cost-shared program.

In December of 2008, the DOE accepted our $21 million proposal for Phase II. The total program cost is $30.2 million of which $21 million will be funded by SECA. The program begins January 2009 and extends through September of 2010, and seeks to build a minimum 25 kW solid oxide fuel cell (SOFC) stack that meets certain performance requirements and cost targets as a manufactured product. The new stack will be integrated into a 250 kW to 1 MW fuel cell power module and a 5 MW proof-of-concept system operating on coal-based syngas (gas created from reacting coal with steam and oxygen). The module and proof-of-concept system will be designed, fabricated and tested in subsequent phases.

The advanced fuel cell-hybrid system is expected to have an overall efficiency of at least 50 percent in converting energy contained in coal to ultra-clean grid electrical power. In contrast, today’s average U.S. coal-based power plant has an electrical efficiency of approximately 33 percent. In addition, the envisioned SOFC-hybrid system is expected to separate 90 percent or more of the system’s carbon dioxide emissions for capture and environmentally safe disposal while being cost competitive with other baseload power generating technologies. The DOE anticipates commissioning multi-MW, proof-of-concept, coal-based power plant systems in the 2012 time frame.

We utilize the cell and stack design of our technology team partner, Versa Power Systems Inc. (VPS), for all our SOFC development programs. VPS has been engaged in SOFC development since 1997 and is considered a world leader in SOFC cell and stack technology. We have been a prime contractor in the SECA program since 2003. WorleyParsons Group Inc. is another team member, providing engineering support for design of the solid oxide fuel cell power plants that run on syngas from coal.

We presently are, and our fuel cell power plants will be, subject to various federal, state and local laws and regulations relating to, among other things, land use, safe working conditions, handling and disposal of hazardous and potentially hazardous substances and emissions of pollutants into the atmosphere. Emissions of SOX and NOX from our fuel cell power plants are much lower than conventional combustion-based generating stations, and are well within existing and proposed regulatory limits. The primary emissions from our DFC power plants, assuming no cogeneration application, are humid flue gas that is discharged at a temperature of approximately 700-800° F, water that is discharged at a temperature of approximately 10-20° F above ambient air temperatures, and carbon dioxide in per kWh amounts much less than conventional, fossil fuel, central generation power plants. In light of the high temperature of the gas emissions, we are required by regulatory authorities to site or configure our power plants in a way that will allow the gas to be vented at acceptable and safe distances. The discharge of water from our power plants requires permits that depend on whether the water is permitted to be discharged into a storm drain or into the local wastewater system. Lastly, as with any use of hydrocarbon fuel, the discharge of emissions must meet emissions standards. While our products have very low carbon monoxide emissions, there could be additional permitting requirements in smog non-attainment areas with respect to carbon monoxide if a number of our units are aggregated together.

We are also subject to federal, state, provincial or local regulation with respect to, among other things, emissions and siting. In addition, utility companies and several states have created and adopted or are in the process of creating interconnection regulations covering both technical and financial requirements for interconnection of fuel cell power plants to utility grids.

To compete in the marketplace, align effectively with business partners and protect our proprietary rights, we rely primarily on a combination of trade secrets, patents, confidentiality procedures and agreements and patent assignment agreements. In this regard, we have 57 current U.S. patents and 97 international patents covering our fuel cell technology (in certain cases covering the same technology in multiple jurisdictions). Fifty-six of the 57 U.S. patents relate to our Direct FuelCell technology. The remaining patent relates to PEM fuel cell technology. We also have submitted 38 U.S. and 168 international patent applications.

Our patents will expire between 2009 and 2027, and the current average remaining life of our patents is approximately 11.1 years. In 2008, seven new U.S patents were issued or allowed (one more patent was allowed in November of 2008). In fiscal 2008, two U.S. patents expired and one was abandoned. The expiration of these patents has no material impact on our current or anticipated operations. We also have approximately 28 invention disclosures in process with our patent counsel that may result in additional patent applications.

Many of our U.S. patents are the result of government-funded research and development programs, including a DOE cooperative agreement. One of our patents which resulted from government-funded research before January 1988 is owned by the U.S. government and has been licensed to us.

U.S. patents we own that resulted from government-funded research are subject to the government exercising “march-in” rights. We believe, however, that the likelihood of the U.S. government exercising these rights is remote and would only occur if we ceased our commercialization efforts and there was a compelling national need to use the patents.

We have also entered into certain license agreements through which we have obtained the rights to use technology developed under joint projects. Through these agreements we must make certain royalty payments on the sales of products that contain the licensed technology, subject to certain milestones and limitations.

We have two agreements with MTU Onsite Energy; a Cell License Agreement and a BOP License Agreement. Under our current Cell License Agreement, which extends through December 2009, we license our DFC technology to MTU Onsite Energy for use exclusively in Europe and the Middle East and non-exclusively in Africa and South America. We also sell our DFC components and stacks to MTU Onsite Energy under this agreement. Under the Cell License Agreement, MTU Onsite Energy also granted us an exclusive, royalty-free license to use any of their existing improvements to our Direct FuelCell that MTU Onsite Energy developed as of December 1999 under a previous license agreement. In addition, MTU Onsite Energy agreed to negotiate a license grant of any separate carbonate fuel cell know-how it developed during the term of the current Cell License once it was ready for commercialization. Under our BOP Cross Licensing and Cross-Selling Agreement, we sold MTU Onsite Energy MW-class modules and MTU Onsite Energy could sell their sub-MW class modules to us. Our BOP Cross Licensing and Cross-Selling Agreement with MTU Onsite Energy expired in July 2008.

Our consolidated revenues for the years ended October 31, 2008, 2007 and 2006 were $100.7 million, $48.2 million and $33.3 million, respectively. These consolidated revenues included product sales and revenues of $82.7 million, $32.5 million and $21.5 million, respectively, and revenues from research and development contracts of $18.0 million, $15.7 million and $11.8 million, respectively. Consolidated revenues from foreign locations were $50.0 million, $16.5 million and $6.7 million, respectively, based on customer location.

Backlog refers to the aggregate revenues remaining to be earned at a specified date under contracts we have entered into. Revenue backlog is as follows:

· Product order backlog was approximately $67.1 million and $42.5 million as of October 31, 2008 and 2007, respectively, representing 32.5 MW and 15.6 MW as of October 31, 2008 and October 31, 2007, respectively. Product orders represent approximately 74 percent of our total funded backlog as of October 31, 2008. Backlog for long-term service agreements was approximately $20.5 million and $15.3 million as of October 31, 2008 and 2007, respectively. Although backlog reflects business that is considered firm, cancellations or scope adjustments may occur and will be reflected in our backlog when known.

· For research and development contracts, we include the total contract value including any unfunded portion of the total contract value in backlog. Research and development contract backlog was approximately $4.8 million and $18.5 million as of October 31, 2008 and 2007, respectively. The unfunded portion of our research and development contracts amounted to approximately $1.1 million and $9.2 million as of October 31, 2008 and 2007, respectively. Due to the long-term nature of these contracts, fluctuations from year to year are not an indication of any future trend.

As of October 31, 2008 we had contracts for power plants totaling 3 MW under power purchase agreements ranging from 5-10 years. Revenue under these agreements is recognized as electricity is produced. This revenue is not included in backlog.

As of October 31, 2008 we had 534 full-time employees, of whom 225 were located at the Torrington, Connecticut manufacturing plant, and 309 were located at the Danbury, Connecticut facility or various field offices. None of our employees are represented by labor unions or covered by a collective bargaining agreement.

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, will be made available free of charge through the Investor Relations section of our Internet website (http://www.fuelcellenergy.com) as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. Material contained on our website is not incorporated by reference in this report. Our executive offices are located at 3 Great Pasture Road, Danbury, CT 06813.

The public may also read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC located at http://www.sec.gov.

Our executive officers and their ages and positions are as follows:

NAME AGE PRINCIPAL OCCUPATION R. Daniel Brdar President, Chief Executive Officer and Chairman of the Board of Directors 49 Mr. Brdar has been Chairman of the Board of Directors since January 2007, Chief Executive Officer since January 2006 and President since August 2005. Mr. Brdar, previously FuelCell Energy's Executive Vice President and Chief Operating Officer, joined the Company in 2000. Mr. Brdar held management positions at General Electric Power Systems from 1997 to 2000 where he focused on new product introduction programs and was product manager for its gas turbine technology. Mr. Brdar was Associate Director, Office of Power Systems Product Management at the U.S. Department of Energy where he held a variety of positions from 1988 to 1997 including directing the research, development and demonstration of advanced power systems including gas turbines, gasification systems and fuel cells. Mr. Brdar received a B.S. in Engineering from the University of Pittsburgh in 1981. Christopher R. Bentley Executive Vice President, Government R&D Operations, Strategic Manufacturing Development 66 Mr. Bentley has been responsible for Government Research and Development Operations and Strategic Manufacturing Development since January of 2005. He joined the Company in 1990 to develop manufacturing and operations capability in support of the DFC commercialization initiative. He served on the Board of Directors from 1993 to 2004. Prior to joining the Company, he was Director of Manufacturing (1985), Vice-President and General Manager (1985-1988) and President (1989) of the Turbine Airfoils Division of Chromalloy Gas Turbine Corporation, a major manufacturer of gas turbine hardware. From 1960 to 1985 he was with the General Electric Company where he served a four-year apprenticeship and completed the GE Manufacturing Management Program prior to a series of increasingly responsible manufacturing positions. Mr. Bentley received a B.S. in Mechanical Engineering from Tufts University in 1966. Bruce A. Ludemann Senior Vice President of Sales & Marketing 49 Mr. Ludemann joined the Company in April 2006. His responsibilities encompass all our business development activities across global markets. Prior to joining the Company, Mr. Ludemann had been a senior marketing and sales executive with Siemens for eight years, overseeing sales and marketing efforts for the firm’s Power Generation and Transmission & Distribution business units. Earlier, he was with ABB Power Transmission & Distribution Inc. for 13 years; the industrial control firm Square D; and Swiss electrical equipment manufacturer BBC Brown Boveri. He also served four years in the U.S. Navy specializing in electric power generation and distribution systems. Mr. Ludemann holds an Executive MBA from the University of Pittsburgh.

NAME AGE PRINCIPAL OCCUPATION Joseph G. Mahler Senior Vice President, Chief Financial Officer, Corporate Secretary, Treasurer, Corporate Strategy 56 Mr. Mahler joined the Company in October 1998 as Vice President, Chief Financial Officer, Corporate Secretary, and Treasurer. Mr. Mahler’s responsibilities include finance, accounting, corporate governance, strategy, treasury, information systems and human resources. Mr. Mahler was Vice President-Chief Financial Officer at Earthgro, Inc. from 1993 to 1998 and worked at Ernst & Young in the New York and Hartford offices from 1974 to 1992. He was a partner in the Hartford office’s Entrepreneurial Services Group. Mr. Mahler received a B.S. in Accounting from Boston College in 1974.