Interview: Ted Hollinger of Hydrogen Engine Center

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The following is an interview with Ted Hollinger, President of Hydrogen Engine Center. In a nutshell, what is Hydrogen Engine Center’s (HEC) main technology and what are its principal applications? Development of proprietary electronic controls and other technologies to allow for the use of hydrogen and other gaseous fuels for the generation of power. These technologies have applications in many areas, including but not limited to the distributed power industry, airport ground support, co-generation with certain manufacturing processes, buses, marine engines and agricultural irrigation pump systems. One of the main drivers you identify as necessary for strong uptake of your products is the high cost of gasoline and other fossil fuels. In the event that the energy bears are correct and that we are due for a major correction in the price of oil, how would this affect your growth prospects? Overall, how closely is demand for your products linked to the price of oil? The main driver is air quality. We believe that the increasing interest in, and control over, air quality and emissions on the part of the EPA, Kyoto, state regulators and other regulatory bodies and sources of influence will have a material, positive and long-term effect on interest in our products. High gas prices help, but are a secondary effect. You also mention growing worries about climate change as creating interest for your products. Have you been able to observe this, for instance in jurisdictions like California where greenhouse gases will soon be regulated? Yes, there are tighter emission laws today than ever before. In the next few years they’ll get even tighter. Under our agreement with Sawtelle & Rosprim, Inc we expect to work with that company to design and build the world’s first ammonia-fueled irrigation pump system for the purpose of meeting California’s new emissions requirements scheduled to go into effect in 2010. Plans include integrating the Company’s ammonia-powered engines with Sawtelle’s pump technologies and expertise to complete a prototype system for testing and evaluation. We expect that the prototype system will be tested in California during the 2007 irrigation season. In your latest Form 10-QSB, you cite a shortage of capital and problems with suppliers as reasons behind a change in your short-term focus away from developing the Oxx Power engines toward efforts to generate revenue through the sale of open power units and more conventional generator systems. When do you foresee a return to your primary strategic focus, and how will you seek to solve your capitalization and supplier issues? Although we cannot provide a schedule, HEC expects to get the next round of financing in the near future. Although HEC expects to be able to pursue its primary focus more aggressively after the financing is completed, it is important to note that, regardless of the status of the financing, the long-term vision of the Company has not changed For the 9 months ended September 30, 2006, net cash /used/ in operating activities grew by about 1,400% when compared to the same period in 2005. When can investors expect positive operating cash flows? Although we have an internal projection, we believe it is too early in our operations to share that information publicly. Investors hear a lot about the promises of hydrogen, especially for the transportation sector. Most firms currently working on hydrogen-related technologies are, however, development-stage companies with negative earnings. What makes HEC stand out from the crowd from an investment viewpoint? HEC has products in the field and hopes to be the first hydrogen company to reach break even. HEC’s engines and generator systems are cost effective and durable as well as easily serviced almost anywhere in the world. I’d like to give you this opportunity to make a final comment. HEC is leading the way in the use of hydrogen in industrial engine applications and distributed power generation. The Natural Resources Canada wind-to-hydrogen project is one of the first of its kind. We believe that airport vehicles, buses and marine engine applications are next.

DISCLOSURE: We do not have any positions in Hydrogen Engine Center.


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