United States of America Western Connecticut State University (WCSU) Cardellino, Marco Crocco, Cristiana Guedelha, Jessica Ly,

Freddy Nosal, Laurel

The People s Republic of China SIAS International University (SIAS) Yang, Yang (Vicky) Xu, Jing (Ariyo)

FuelCell Energy in China: Introducing Clean Coal Energy to the China s Power Generation
Written and Prepared for FuelCell Energy Inc.

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 China s energy crisis and to the China s environmental situation?

AREAS OF DISCUSSION

FUELCELL ENERGY, INC.

VISION STATEMENT We believe our fuel cells will play an important role in helping to solve the world s crucial energy challenges MISSION STATEMENT We are a world leader in the development and production of stationary fuel cells for commercial, industrial, government and utility customers

Fuel Cell Module

Mechanical Balance Of Plant (MBOP)

Electrical Balance Of Plant (EBOP) Mechanical Balance Of Plant (MBOP)

Electrical Balance Of Plant (EBOP) Fuel Cell Module

FUELCELL ENERGY, INC. IN CHINA - INTERNAL FOCUS

STRENGTHS
BRAND EQUITY Strong current reputation in South Korea 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 & Reliability 47-60% Fuel efficiency with DFC systems TALENT Expertise in the technology / maintenance Expertise in the industry

WEAKNESSES
CHINA S BUSINESS PRACTICES Unfamiliarity with negotiation techniques 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

KEY FOCUS

CHINA S ENVIRONMENT

China s Environment with focus on energy consumption, emissions and environmental drivers.

What strategic steps should FuelCell Energy, Inc. undergo to partner with Clean Coal Technology providers and be a part of the solution to the China s energy crisis and to the China s environmental situation?

CHINA S ENVIRONMENT
( 234 % ( 57 %

( 117 %

Source: The US-China Business Council (www.uschina.org/statistics/economy.html), Datamonitor, Industry Profile 2009, E.I.A. International Energy Annual 2006

CHINA S ENVIRONMENT
CHINA S KEY ENVIRONMENTAL DRIVERS Economic Growth Industrialization 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)

KEY FOCUS

SEGMENTATION OF THE ENERGY MARKET

A global look at energy consumption; Segmentation of energy market in China; and Clean Coal technology.
What strategic steps should FuelCell Energy, Inc. undergo to partner with Clean Coal Technology providers and be a part of the solution to the China s energy crisis and to the China s environmental situation?

SEGMENTATION OF THE ENERGY MARKET - GLOBAL

Other 1% 1% 0% 6% 8% 1% Gas 3% Hydro 6% 2% 6% Oil 20% 29% Coal 24% 70% 35% 39% 24% 25%

Global Energy Consumption: 2009

Nuclear

World US China

SEGMENTATION OF THE ENERGY MARKET - IN CHINA

China Coal Market Segmentation 2009 China Electricity Market Share 2008
China Huadian Corp. China Power Investment

9%
Industrial Steam Power Generation

6% 48% 52% 75% 6% 4%

Huaneng Power International, Inc. Datang Intern. Power Generation Co. Ltd. Other

KEY FACTORS
China s power generation relies on 70 % coal Huaneng Power International and Datang International Power Generation are the major player in China s coal-fired power generation (total power configuration: 15.4 TW)

SEGMENTATION OF THE ENERGY MARKET - CLEAN COAL

Mechanical Balance Of Plant (MBOP)

Electrical Balance Of Plant (EBOP) Fuel Cell Module

Solid Oxide FuelCell Energy Technology

KEY FACTORS 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 China s government

KEY FOCUS

TARGET UTILITIES

Key players in coal - fired power plants and reasons for collaboration.

What strategic steps should FuelCell Energy, Inc. undergo to partner with Clean Coal Technology providers and be a part of the solution to the China s energy crisis and to the China s environmental situation?

TARGET UTILITIES

MAP KEY HuaNeng Power Internationals Power Plants Datang Internationals Power Plants Quantity of Power Plants in the Province

NIMTE

TARGET UTILITIES

Business Practices Location Infrastructure Mission Statement

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

FUELCELL ENERGY EXTERNAL FOCUS

An external focus of FuelCell Energy s opportunities and threats in China s market.

What strategic steps should FuelCell Energy, Inc. undergo to partner with Clean Coal Technology providers and be a part of the solution to the China s energy crisis and to the China s environmental situation?

FUELCELL ENERGY, INC. IN CHINA EXTERNAL FOCUS

OPPORTUNITIES
ECONOMIC GDP 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-termrelationships with local government and partners SOCIO-CULTURAL Strong green movement

THREATS
INTELLECTUAL PROPERTY RIGHTS Intellectual property rights at risk in the foreign market COMPETITOR TECHNOLOGIES Substitute products with no emissions (solar and wind) POLITICAL REGULATIONS Currency exchange rate (CNY under appreciated) China s government and protectionist policies China s government prioritizes economic growth over environmental protection

KEY FOCUS

STRATEGIC ISSUES/ CRITICAL SUCCESS FACTORS

Overview of possible strategic issues and potential solutions.

What strategic steps should FuelCell Energy, Inc. undergo to partner with Clean Coal Technology providers and be a part of the solution to the China s energy crisis and to the China s environmental situation?

STRATEGIC ISSUES/ CRITICAL SUCCESS FACTORS

CONTRACTUAL LIMITATIONS SOFC is best suited for clean coal solution R&D and New Product Applications
Limited Commercialization (R&D Contracts) FuelCell Energy Team Awarded $30.2 Million Contract to Further Develop Clean Coal-Based Power Plant in Phase II of Energy Department Program Project to build 25 kilowatt solid oxide fuel cell stack leverages success of Phase I prototype developed in partnership with Versa Power Systems

SUGGESTED STRATEGY 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

STRATEGIC ISSUES/ CRITICAL SUCCESS FACTORS

INTELLECTUAL PROPERTY RIGHT ISSUES
Intellectual Property Rights at risk in China s market Grants of Patents In China 2006-2009
600,000 501,786 500,000

Total Patents Granted

400,000 301,632 300,000 223,860 200,000 100,000 0 2006 2007

352,406 Domestic Foreign 80,206

44,142

50,150

59,576

2008

2009

UNDERSTAND CURRENT TRENDS

It is clear that China s patent grants continue to grow not only domestically but also to foreign companies.

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

STRATEGIC ISSUES/ CRITICAL SUCCESS FACTORS

GUANXI APPROACH GOVERMENTAL IP REGULATORS IN CHINA
KNOW KEY OFFICES AND REGULATORS
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 Energy s products

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 copyrights including management of foreign copyrights management

ADVANTAGES OF GUANXI
VALUE ADDED FOR BOTH PARTNERS Ningbo can help FuelCell Energy step into China s energy market FuelCell Energy can help Ningbo study the concept of clean coal VALUE ADDED IN THE COMMUNITY FuelCell Energy will become a part of the solution to China s environmental situation This value in the community will create an incentive for Ningo officials to help FuelCell Energy with any issues such an IP

STRATEGIC ISSUES CRITICAL SUCCESS FACTORS

BUSINESS PRACTICES IN CHINA S CULTURE
Cultural relationship building practices Strategic partnership Partnership maintenance
GUANXI
Personal Connection

ZHONG JIAN REN

Middle Man

SHEHUI DENGJI
Social Status

SUGGESTED STRATEGY
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

RENJI HEXIE
Interpersonal Harmony

ZHENGTI GUANNIAN
Interpersonal Holistic Thinking

JIEJIAN
Thrift, Saving MIANZI Pride, Face CHIKU NAILAO
Endurance

RECOMMENDATIONS
FUELCELL ENERGY CHINA S ENVIRONMENT

Understand FuelCell Energy s Strengths and weaknesses in China s market

Understand the coal consumption in China and how it affects the environment Understand how this creates a need for the DFC and SOFC systems and clean coal technology

RECOMMENDATION It is highly suggested that FuelCell Energy begin with: (1) Implementing cultural training, (2) Developing Guanxi relationship with Ningbo Institute.
Understand why the China Huaneng and Datang Group will be key strategic partnerships for FuelCell Energy Understand the potential of clean coal in China Understand China s coal fired power plant needs for DFC and SOFC systems
SEGMENTATION OF THE ENERGY MARKET

Understand key strategic issues Understand significant obstacles Understand critical success factors

STRATEGIC ISSUES / CSF