Fuel Cell Energy l China

8/3/2019 Fuel Cell Energy l China

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FuelCell Energy in China:

Introducing Clean Coal Energy to

the Chinas Power Generation

Written and Prepared for FuelCell Energy Inc.

United States of America

Western Connecticut State

University (WCSU)

Cardellino, Marco

Crocco, Cristiana

Guedelha, Jessica

Ly, Freddy

Nosal, Laurel

The Peoples Republic of China

SIAS International University

(SIAS)

Yang, Yang (Vicky)

Xu, Jing (Ariyo)



RESEARCH QUESTION

What strategic steps should FuelCell Energy,

Inc. undergo to partner with Clean Coal

Technology providers and be a part of the

solution to the Chinas energy crisis and to the

Chinas environmental situation?





FUELCELL ENERGY, INC.

MISSION STATEMENT

We are a world leader in the development

and production of stationary fuel cells for

commercial, industrial, government and

utility customers

VISION STATEMENT

We believe our fuel cells will play animportant role in helping to solve the

worlds crucial energy challenges

Fuel Cell Module

Mechanical Balance

Of Plant (MBOP)

Electrical Balance

Of Plant (EBOP)

Fuel Cell Module

Mechanical Balance

Of Plant (MBOP)

Electrical Balance

Of Plant (EBOP)



FUELCELL ENERGY, INC. IN CHINA - INTERNAL FOCUS

CHINAS BUSINESS PRACTICES

Unfamiliarity with negotiationtechniques

LIMITED INTERNATIONAL PRESENCE

South Korea, Japan, Germany, Canada

PRODUCT COSTS

High cost structure / No economies of scale

FINANCIAL STATUS

High dependence on external funding

for price competitiveness

Unable to achieve breakeven

WEAKNESSESSTRENGTHS

BRAND EQUITY

Strong current reputation in SouthKorea based on trust and reliability

INTELLECTUAL PROPERTY

48 Domestic patents and 84

International

PARTNERSHIPS

Reliable International partners

RESEARCH & DEVELOPMENT Technologies that expand Direct

FuelCell® (DFC®) market applications

Support next generation product

development such as planar solid oxide

fuel cell (SOFC)

TECHNOLOGY

24/7/365 Servicing & Reliability47-60% Fuel efficiency with DFC

systems

TALENT

Expertise in the technology /

maintenance

Expertise in the industry



KEY FOCUS

Chinas Environment with focus on energy

consumption, emissions and environmental drivers.

CHINAS ENVIRONMENT

What strategic steps should FuelCell Energy, Inc. undergo to partner with Clean

Coal Technology providers and be a part of the solution to the Chinas energy

crisis and to the Chinas environmental situation?



CHINAS ENVIRONMENT

( 117 %

(57

%( 234 %

Source: The US-China Business Council (www.uschina.org/statistics/economy.html), Datamonitor, Industry Profile 2009,

E.I.A. International Energy Annual 2006



CHINAS ENVIRONMENT

Economic GrowthIndustrialization

Modernization

Pollution driving the need for Clean Energy

Government Solutions

11th Five-Year Plan

Stimulus Package ($587 Billion U.S. Dollars)

Alternative Energy (Non-efficient)

Need for Clean Coal Energy (Consumption of 3 Billion tons of

coal annually in energy production)

CHINAS KEY ENVIRONMENTAL DRIVERS



KEY FOCUS

A global look at energy consumption;

Segmentation of energy market in China;

and Clean Coal technology.

SEGMENTATION OF THE ENERGY MARKET






SEGMENTATION OF THE ENERGY MARKET - GLOBAL

70%

20%

6%

3%

1%

0%

24%

39%

2%

25%

8%

1%

29%

35%

6%

24%

6%

1%

Coal

Oil

Hydro

Gas

Nuclear

Other Global Energy Consumption: 2009

World

US

China



SEGMENTATION OF THE ENERGY MARKET - IN CHINA

48%

52%

China Coal Market Segmentation

2009

Industrial

Steam

Power

Generation

9%

6%

6%

4%75%

China Electricity Market Share

2008

China HuadianCorp.

China Power

Investment

Huaneng Power

International, Inc.

Datang Intern.

Power Generation

Co. Ltd.

Other

Chinas power generation relies on 70 % coal

Huaneng Power International and Datang International PowerGeneration are the major

player in Chinas coal-fired power generation (total power configuration: 15.4 TW)

KEY FACTORS



SEGMENTATION OF THE ENERGY MARKET - CLEAN COAL

Fuel cell technology and gasification (syngas) have potential to:

Substitute turbine powered energy

Reduce emissions(sulfur, nitrogen, and mercury) in power generation sector

by extending at the same time the life-span of nonrenewable resources (coal)

Introducing The Clean Coal Power Initiative (CCPI) to Chinas government

KEY FACTORS

Fuel Cell Module

Mechanical Balance

Of Plant (MBOP)

Electrical Balance

Of Plant (EBOP)

Solid Oxide

FuelCell EnergyTechnology



KEY FOCUS

Key players in coal - fired power plants

and reasons for collaboration.

TARGET UTILITIES






TARGET UTILITIES

HuaNeng Power International¶s Power Plants

Datang International¶sPower Plants

Quantity of Power Plants in the Province

NIMTE

MAP KEY



Business Practices

Location

Infrastructure

Mission Statement

TARGET UTILITIES

Business Practices

Location

Infrastructure

Mission Statement

Why is FuelCell Energy a good fit?

What can FuelCell Energy offer?

How can FuelCell Energy create a strategic partnership?

How will FuelCell Energy benefit?

Where will FuelCell Energy be located in China?



KEY FOCUS

An external focus of FuelCell Energys opportunities

and threats in Chinas market.

FUELCELL ENERGY EXTERNAL FOCUS






FUELCELL ENERGY, INC. IN CHINA EXTERNAL FOCUS

OPPORTUNITIES

INTELLECTUAL PROPERTY RIGHTSIntellectual property rights at risk

in the foreign market

COMPETITOR TECHNOLOGIES

Substitute products with no

emissions (solar and wind)

POLITICALREGULATIONS

Currency exchange rate (CNY

under appreciated)

Chinas government andprotectionist policies

Chinas government prioritizes

economic growth over

environmental protection

THREATS

ECONOMICGDP growth

Currency (CNY appreciated)

POLITICAL / LEGAL / REGULATORY

Renewable energy targeted for

20% of power supply

China's government stimulus

package ($586 million dollars)

BUSINESS PRACTICES

Guanxi and long-term-relationships with local government

and partners

SOCIO-CULTURAL

Strong green movement





STRATEGIC ISSUES/ CRITICAL SUCCESS FACTORS

SOFC is best suited for clean coal solution

R&D and New Product Applications

Limited Commercialization (R&D Contracts)

CONTRACTUAL LIMITATIONS

Cooperative relationship with NIMTE

Research and develop SOFC technology

Build relationship and value while DOE

contracts are still in progress

New Product Applications

Suggest alternative proprietary technology

SUGGESTED STRATEGY

FuelCell Energy Team Awarded $30.2 Million Contract to Further DevelopClean Coal-Based Power Plant in Phase II of Energy Department ProgramProject to build 25 kilowatt solid oxide fuel cell stack leverages success of

Phase I prototype developed in partnership with Versa Power Systems



It is clear that Chinas patent grants continue to grow not only

domestically but also to foreign companies.

Intellectual Property Rights at risk in Chinas market


INTELLECTUAL PROPERTY RIGHT ISSUES

UNDERSTAND CURRENT TRENDS

223,860

301,632352,406

501,786

44,142 50,150 59,57680,206

0

100,000

200,000

300,000

400,000

500,000

600,000

2006 2007 2008 2009

T o t a l P a t e n t s G r a

n t e d

Grants of Patents In China

2006-2009

Domestic

Foreign

Source: SIPO Online: Grants for Three Kinds of Patents Received from Home and Abroad Years 2006-2009




KNOW KEY OFFICES AND REGULATORS

State Administrative on Industry and

Commerce Trademark Offices (SAIC)

Regulates many areas that are key to

businesses and is home of the trade mark

office

State Intellectual Property Office (SIPO)

Home of the patent office responsible

for patent work and foreign related affairs

in the field of intellectual property

National Copyright Administration (NCA)

Home to all issues of copyrightsincluding management of foreign

copyrights management

GOVERMENTAL IP REGULATORS IN CHINA

Guanxi approach strategy with Ningbo

Institute of Material Technology and Engineering

Located in the Zhenhai District, Ningbo, China

Study in technologies including SOFC

Possibility of feasible studies that show benefits

of clean coal technology that support FuelCell

Energys products

GUANXI APPROACH

VALUE ADDED FOR BOTH PARTNERS

Ningbo can help FuelCell Energy step into Chinas

energy market

FuelCell Energy can help Ningbo study theconcept of clean coal

VALUE ADDED IN THE COMMUNITY

FuelCell Energy will become a part of the solution

to Chinas environmental situation

This value in the community will create an

incentive for Ningo officials to help FuelCell Energy

with any issues such an IP

ADVANTAGES OF GUANXI



Interpersonal

Harmony

Endurance

Pride, Face

Thrift, Saving

Interpersonal

Holistic Thinking

Social Status

Personal Connection

Middle Man

CULTURAL TRAINING

Guanxi approach

Define boundaries

Understand Cultural business values

Manage each impression

UNDERSTAND YOUR PARTNERS

Choose appropriate partners

Huaneng Power International Inc.

Datang International Power Gen. Ltd.

Ministry of Environmental Protection

Create a relationship value

Cultural relationship building practices

Strategic partnership

Partnership maintenance

STRATEGIC ISSUES CRITICAL SUCCESS FACTORS

BUSINESS PRACTICES IN CHINAS CULTURE

SUGGESTED STRATEGY

GUANXI

ZHONG JIAN REN

SHEHUI DENGJI

RENJI HEXIE

ZHENGTI GUANNIAN

JIEJIAN

MIANZI

CHIKU NAILAO



CHINAS ENVIRONMENT

STRATEGIC ISSUES / CSFSEGMENTATION OF THE ENERGY MARKET

Understand key strategic issues

Understand significant obstacles

Understand critical success factors

FUELCELL ENERGY

Understand FuelCell EnergysStrengths and weaknesses in

Chinas market

Understand the coal consumptionin China and how it affects the

environment

Understand how this creates a

need for the DFC and SOFC systems

and clean coal technology

Understand why the China Huaneng and

Datang Group will be key strategicpartnerships for FuelCell Energy

Understand the potential of clean coal in

China

Understand Chinas coal fired power plant

needs for DFC and SOFC systems

It is highly suggested that FuelCell Energy begin with:

(1) Implementing cultural training, (2) Developing

Guanxi relationship with Ningbo Institute.

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