Mr. Randy MacEwen reports

BALLARD INKS US$80M+ DEAL WITH VOLKSWAGEN

Ballard Power Systems Inc. has entered into a technology solutions transaction with Volkswagen Group for an aggregate amount of approximately $80-million (U.S.) for the transfer of certain automotive-related fuel-cell intellectual property and a two-year extension of an engineering services contract.

Dr. Ulrich Hackenberg, member of the board of management for technical development at AUDI AG and co-ordinator of the technical development of all brands in the Volkswagen Group, said: "Audi, VW and the Volkswagen Group are very pleased with the acquisition of a world-class automotive fuel-cell patent portfolio. We believe that this portfolio, together with the combined fuel-cell skills and expertise of our group and Ballard, will underpin our ability to play a leading role in fuel-cell automotive development and commercialization."

Randy MacEwen, Ballard president and chief executive officer, said: "This transaction extends and deepens our relationship with the Volkswagen Group, a leading global automotive manufacturer. The IP transfer surfaces significant value for Ballard. And extension of the engineering services contract reflects a growing positive sentiment toward fuel cells within the automotive sector, along with the outstanding progress made to date in our work with Volkswagen Group on its fuel-cell car programs."

Transfer of automotive-related IP

Ballard will transfer the automotive-related portion of fuel-cell IP assets previously acquired from United Technologies Corp. in return for payments from Volkswagen Group totalling $50-million (U.S.), a majority of which is expected to be received at the closing of the transaction during the current quarter. The remainder is expected to be received in early 2016.

Ballard will retain a royalty-free licence to utilize the IP transferred to Volkswagen Group in bus and non-automotive applications, as well as for certain limited precommercial purposes in automotive applications.

Extension of engineering services contract

The transaction also includes a two-year extension, through March, 2019, of the existing long-term engineering services agreement signed by Ballard and Volkswagen in 2013. This extension has an incremental value estimated at $30-million to $50-million (approximately $24-million (U.S.) to $40-million (U.S.)). Over the full six years, the contract has an estimated value of $100-million to $140-million (approximately $80-million (U.S.) to $112-million (U.S.)) and also includes a further optional two-year extension.

Ballard's continuing engineering services contract with Volkswagen Group involves the design and manufacture of next-generation fuel-cell stacks for use in the demonstration car program. Ballard engineers are leading critical areas of fuel-cell product design -- including the membrane electrode assembly, plate and stack components -- along with certain testing and integration work. Volkswagen Group's commitment to, and progress in, fuel-cell car development was underscored last November at the Los Angeles Auto Show, where fuel-cell concept cars representing Volkswagen and Audi brand models were introduced: Golf SportWagen HyMotion, Passat HyMotion and Audi A7 Sportback h-tron quattro.

Mr. MacEwen added: "Ballard's Technology Solutions group is helping customers accelerate fuel-cell development through the application of our world-class, customized engineering services capability, along with access to our deep IP portfolio and related know-how. This transaction with Volkswagen marks a milestone in the growth and delivery of Ballard Technology Solutions."

Ballard will provide further information regarding this transaction during the company's coming 2014 results and 2015 outlook conference call, scheduled for 1 p.m. EST (10 a.m. PST) on Thursday, Feb. 26, 2015.

We seek Safe Harbor.