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Texaco Buys Stake in New Power Technologies

Texaco Buys Stake in New Power Technologies

Texaco bought a 20% equity stake in hydrogen storage specialist and fuel cell developer Energy Conversion Devices, Inc. (ECD) last week for $67.3 million. While the major producer has not lost sight of the importance of its upstream and downstream businesses nor the surge in mergers among its major competitors, it has chosen to focus on a variety of new technologies that it believes will determine the future of the automobile and electric power industries.

Texaco and ECD have agreed to establish joint ventures for the continued development and commercialization of advanced energy technologies, initially in the fields of ECD's proprietary Ovonic solid hydrogen storage technology and the Ovonic regenerative fuel cell. Troy, MI-based ECD develops and commercializes enabling technologies for use in the fields of alternative energy and information technologies. The company holds patents in materials engineering, solid hydride storage, photovoltaic batteries, semiconductor applications and other areas.

"This is a potential game changing situation for the energy business. As we said in our talk [with analysts] in February, this will evolve slowly but there's just no question but that the oil industry over the next couple of decades will be subject to technological change," said Texaco Senior Vice President William M. Wicker.

"We got 20% of a very exciting company," he added. "This is a company unlike a lot of the companies that we talked to..... We believe their batteries are a clear choice for the hybrid car. We believe their solar products are very exciting with a lot of potential applications. Their information storage technology is an area with unbelievable potential. But I must say we were particularly drawn to their work in the hydrogen storage area.

"As you know, there's a lot of work with respect to fuel cells and fuel processes in terms of electric power generation and more importantly for Detroit, the automobile of the future. Many observers think that the concept of processing gasoline on board a car may in fact be too complicated, too costly or unrealistic. And the hydrogen storage problem is one where it is not easy to compress, you can't get enough of it and it takes too much energy to cool. We think ECD has a breakthrough technology in the hydrogen storage area."

In addition, he said ECD will be developing a different type of fuel cell, different from the proton exchange membrane that many companies are working on. "To be frank," said Wicker, "any one of these products would be worth what we paid for 20% in the company and we are just delighted to make this investment."

Texaco also will have two board seats on ECD. Its interest in ECD will be managed by Texaco Energy Systems Inc., a subsidiary established in 1999 to harness the company's fuel conversion expertise to advance commercialization activities in the areas of fuel cells and hydrocarbons-to-liquids.

"While oil and gas will remain the dominant energy resource for the foreseeable future, hydrogen will inevitably become part of the energy mix, and Texaco aims to be a leader in the development and commercialization of environmentally smart alternative energy technologies," said Wicker.

Rocco Canonica

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