Interim Report APRIL - JUNE 2015

The CEO's comments

PowerCell Sweden AB is a leading- edge company that develops, manufactures and sells fuel cells, fuel reformers and systems for the global market. The company is an industrial spinoff from the Volvo Group that has been researching and developing fuel cells for various applications over the last 15-20 years.

Yet another customer cooperation - PowerPac (Fuel cell S2 is powered by reformed hydrogen from diesel fuel)
The interest in PowerCell's main product PowerPac is very large, and the company will initially focus on the telecommunications industry, whilst we are very responsive to market signals from other application areas. At present there are agreements on three test projects during autumn 2015, and a continuation of the cooperation with Vodacom in South Africa as well as the establishment of test operations of cooling systems for vehicles with ASKO in Norway.

The third project, which was completed in Q2, included PowerCell in a unique collaboration between Midroc New Technology (one of PowerCell's main shareholder, which in turn is owned by Mohammed Al-Amoudi) and GORD (Association for research and development for the six Gulf states). In a special full-scale plant in Qatar's capital Doha, PowerCell's PowerPac will be evaluated in late 2015/2016. In the long term, this can mean that a wide range of Gulf countries will choose PowerCell's technology in major investments in sustainable development.

Storing energy in hydrogen
One exciting area is the storage of energy from small-scale solar and wind power in electrolytic hydrogen. The excess electricity that the solar/wind turbines generate above current demand can be converted to hydrogen gas and then stored in a tank. The latter can be used in a fuel cell to generate new electricity when needed. The interest in solving the energy supplies locally is increasing sharply since energy network providers charge high fees so the desire to have a self- sufficient house increases. In 2020 there will be a requirement that all new buildings shall be nearly zero energy, which means they will have to produce almost as much energy as they consume.

First orders for a low-energy house
PowerCell signed its first order in Q2 to deliver an FC (UPS Fuel Cell - Uninterrupted System), based on the S1 fuel cell platform to a self-sufficient 'off grid' - low energy house in Angered, Gothenburg. The solar cells on the house roof will produce electricity during daylight hours and the electricity will be used to produce hydrogen from water using an electrolyzer. During evenings and nights and during the winter season it will use electricity from the fuel cell, which runs on stored hydrogen. The fuel cell produces not only electricity, but also heat that is channelled into the house's hot water tanks and will be used for heating and hot water. The hydrogen in the tanks will also be used as a filling station for the household's planned hydrogen car. The project will be implemented in autumn 2015 and will be a reference plant for future projects that have great potential for different types of property owners.

Hydrogen powered cars are the future
Fossil fuels like gasoline and diesel have for more than 100 years been the dominating fuel sources. Emissions from fossil fuels have caused damage to both the environment and people, and created enormous challenges for the future climate threats.

Hydrogen may be the solution that everyone is looking for. When Toyota's fuel cell vehicle Mirai was presented in Los Angeles in 2014, Toyota's Chairman Takeshi Uchiyamada said; "Hydrogen is the fuel for the next century".

Toyota has also noted that the future is not in the battery, where its technology is at the forefront, but in hydrogen fuel cells. It is not far-fetched that other major vehicle manufacturers will follow Toyota. PowerCell is part of a technology partnership with a number of these manufacturers, including Volkswagen and BMW. Any series deliveries for the automotive industry can only be expected after 2020. The important thing is to eventually reach larger manufacturing volumes, causing the price to drop and the technology to become more attractive.

Hydrogen filling station next to PowerCell
What is needed for this to happen is a hydrogen infrastructure, which is being rolled out on a larger scale in e.g. US, Japan and Germany. Within the organization Hydrogen Sweden, about thirty gas stations is mentioned in the long term in Sweden. During autumn 2015, a filling station will be built next to PowerCell's premises in Gothenburg, one at Arlanda Airport, one in Sandviken and there is already one built in Malmö.

First orders of the fuel cell platform S2
As previously reported, the company's new fuel cell platform S2 was launched at the Hannover Fair in April. The reception and the interest were very positive and during the fair we established several new contacts regarding potential supplies. PowerCell received the first order of the S2 platform in June. A German company ordered two fuel cell stacks of model S2, 25kW each. The fuel cell stacks will be delivered during autumn 2015.

The S2 is a complement to PowerCell's first-generation fuel cell stack, the S1 (1-5 kW), as it includes major outputs from 5 kW up to 25 kW. PowerCell S2 stack of 25 kW will be tested as a so-called Range Extender in the Volvo Cars hydrogen demonstrator during autumn/winter 2015/2016.

The S3 platform
The continued successful development of the S3 platform, a 100 kW fuel cell stack platform for automotive applications, within an EU project (Autostack Core) with the 13 partners including BMW, VW, and a number of large suppliers and research institutes (including DANA, Freudenberg, SolviCore). The design is based on industrial components that are suitable for volume production.

We have the advantage that we can use the same technology in many different segments, which means that our sales will be made to several areas simultaneously. It provides industrial scale and reduces risks.

To summarize, the on-going process of industrialization and intensive development phase, to create the conditions for serial production, which according to the plan is charged to earnings Q2, has characterized the quarter. There has been a clear increased focus on customer projects that will generate revenues in the coming quarters.

With the above said, I look forward to an exciting future for PowerCell and our shareholders.

Per Wassén
CEO

Upcoming reports
· Interim Report Q3, November 2, 2015
· Year-end Report 2015 7 March 2016

Gothenburg, August 17, 2015

Magnus Johansson
Chairman of the Board

Göran Linder
Director of the Board

Dirk de Boever
Director of the Board

André Martin
Director of the Board

Per Wassén
CEO