FuelCell Energy, Inc. and Alliance Power have formed a joint venture, Alliance Star Energy LLC, which has entered into a Master Energy Services Agreement with Starwood Hotels & Resorts Worldwide, Inc. 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(R) (DFC(R)) 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.

“Starwood is again leading the industry with innovation and environmental stewardship with another one of its properties receiving the benefits of FuelCell Energy’s technology,” said Joe Terzi, Vice President of Operations, Southern California Division, Starwood Hotels. “We’re pleased that the Sheraton San Diego Hotel & Marina is the first property outside of the East Coast to receive this technology. Our partnership with the fuel cell industry is benefiting this hotel, and the State of California.”

“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.”

“We are very encouraged about the progress we are making in developing business under our alliances with FuelCell Energy,” said James Michael, President of Alliance Power. “Alliance Star Energy benefits from the prior successes of Alliance Power and FuelCell Energy in California and brings our combined expertise to a premier customer.”

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.
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