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. 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?

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…

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.…

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.

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?

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?

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?

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?

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.

Yes, good morning. I was wondering if you could quantify the percentages of CO2 reduction from a DFC system versus a standard Genset?

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.

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.

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.

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?…

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?

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.

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…

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.

You’d use that balance of plant in the US market? R. Daniel Brdar : Yes.

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.

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.

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.

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.

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.

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.…

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.