Texaco bought a 20% equity stake in hydrogen storage specialistand fuel cell developer Energy Conversion Devices, Inc. (ECD)yesterday for $67.3 million. While the major producer has not lostsight of the importance of its upstream and downstream businessesnor the surge in mergers among its major competitors, it has chosento focus on a variety of new technologies that it believes willdetermine the future of the automobile and electric powerindustries.

Texaco and ECD have agreed to establish joint ventures for thecontinued development and commercialization of advanced energytechnologies, initially in the fields of ECD’s proprietary Ovonicsolid hydrogen storage technology and the Ovonic regenerative fuelcell. Troy, MI-based ECD develops and commercializes enablingtechnologies for use in the fields of alternative energy andinformation technologies. The company holds patents in materialsengineering, solid hydride storage, photovoltaic batteries,semiconductor applications and other areas.

“This is a potential game changing situation for the energybusiness. As we said in our talk [with analysts] in February, thiswill evolve slowly but there’s just no question but that the oilindustry over the next couple of decades will be subject totechnological change,” said Texaco Senior Vice President William M.Wicker.

“We got 20% of a very exciting company,” he added. “This is acompany unlike a lot of the companies that we talked to… Webelieve their batteries are a clear choice for the hybrid car. Webelieve their solar products are very exciting with a lot ofpotential applications. Their information storage technology is anarea with unbelievable potential. But I must say we wereparticularly drawn to their work in the hydrogen storage area.

“As you know, there’s a lot of work with respect to fuel cellsand fuel processes in terms of electric power generation and moreimportantly for Detroit, the automobile of the future. Manyobservers think that the concept of processing gasoline on board acar may in fact be too complicated, too costly or unrealistic. Andthe hydrogen storage problem is one where it is not easy tocompress, you can’t get enough of it and it takes too much energyto cool. We think ECD has a breakthrough technology in the hydrogenstorage area. In addition to that ECD will be developing adifferent type of fuel cell, different from the proton exchangemembrane that many people are working on. And we are veryinterested in that. To be frank,” said Wicker, “any one of theseproducts would be worth what we paid for 20% in the company and weare just delighted to make this investment.”

Texaco also will have two board seats on ECD. Its interest inECD will be managed by Texaco Energy Systems Inc., a subsidiaryestablished in 1999 to harness the company’s fuel conversionexpertise to advance commercialization activities in the areas offuel cells and hydrocarbons-to-liquids.

“While oil and gas will remain the dominant energy resource forthe foreseeable future, hydrogen will inevitably become part of theenergy mix, and Texaco aims to be a leader in the development andcommercialization of environmentally smart alternative energytechnologies,” said Wicker.

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