Mr. Randy MacEwen reports

BALLARD CLOSES LANDMARK JOINT VENTURE DEAL FOR LOCAL PRODUCTION OF FUEL CELL STACKS IN CHINA; EXPECTED TO GENERATE $170M MINIMUM REVENUE OVER 5-YEARS

Ballard Power Systems Inc. has closed its joint venture transaction with Guangdong Nation Synergy Hydrogen Power Technology Co. Ltd. for the establishment of an FCvelocity-9SSL fuel cell stack production operation in the city of Yunfu, in China's Guangdong province. As of closing, Ballard received initial payments totalling $10.9-million.

The transaction has an estimated minimum value to Ballard of $170-million over five years and includes these key elements:

• Ballard is expected to receive $20-million in technology solutions revenue for technology transfer services, test equipment, production equipment specification and procurement services, training, and commissioning support in relation to the establishment of a production line in Yunfu for the manufacture and assembly of FCvelocity-9SSL fuel cell stacks, with most of this revenue expected to be recognized in 2017.

• A joint venture named Guangdong Synergy Ballard Hydrogen Power Co., Ltd. (JVCo) has been registered to undertake the FCvelocity-9SSL fuel cell stack manufacturing operations, with JVCo owned 90 per cent by Synergy and 10 per cent by Ballard.

• On commissioning of the stack production line, expected in late 2017, Ballard will be the exclusive supplier of membrane electrode assemblies (MEAs) for each fuel cell stack manufactured by JVCo, with minimum annual MEA volume commitments on a "take or pay" basis totalling in excess of $150-million over the initial five-year term, from 2017 to 2021.

Randy MacEwen, Ballard's president and chief executive officer, said: "Our localization strategy in China is risk adjusted, capital light and IP-protected. We expect this landmark stack assembly transaction to deliver a number of high-value benefits to Ballard, including attractive near-term and long-term deal economics and cash flows, positive market reception, scaling of MEA production with guaranteed volumes, and capital efficiency. And, Ballard is not exposed to any compromise of our core intellectual property since we will maintain MEA production at our headquarters in Canada."

After commissioning of the operation, JVCo will have an exclusive right to manufacture and sell FCvelocity-9SSL stacks in China. Exclusivity will be subject to certain performance criteria of the joint venture, including compliance with: a code of ethics; Ballard's quality policies and branding practices; payment terms; and certain intellectual property covenants, as well as achievement of the minimum annual "take or pay" MEA volumes. Ballard will have the exclusive right to purchase FCvelocity-9SSL fuel cell stacks and subcomponents from the joint venture for sale outside China.

Ballard will contribute approximately $1.0-million for its 10-per-cent interest in JVCo. Under the terms of the agreement, Ballard has the right to appoint one of the three JVCo board directors and Ballard's CEO was appointed to the board of JVCo effective as of closing. Ballard has veto rights over certain key JVCo decisions and has no further obligation to provide future financing to JVCo.

The fuel cell stacks manufactured by JVCo are expected to be used primarily in locally assembled fuel cell engines to provide propulsion power for zero-emission buses and commercial vehicles in China.

About Ballard Power Systems

Ballard Power Systems provides clean energy products that reduce customer costs and risks, and helps customers solve difficult technical and business challenges in their fuel cell programs.

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