October 2, 2013

Hydrogenics Corporation
(HYG TSX, HYGS-NASDAQ, $12.10)
INITIATING COVERAGE Rating: Buy Target Price: $15.50 (+28.0%)
Initiating Coverage
Rating Target Revenue 2013E (MM) EBITDA 2013E (MM) EPS (F.D.) 2013E Share data (estimated pro forma) Shares O/S (Basic) (MM) Market Cap (MM) Enterprise Value (MM) Average Weekly Volume (THSD) Dividend Yield Net Cash (MM) Fiscal Year End Financials F2013E Revenue (MM) $44.4 EBITDA (MM) $(6.6) EPS (F.D.) $(1.10) DCF/Share $13.8 Buy $15.50 $44.4 $(6.6) $(1.10)

Fuel Cells on the Move in 2013: HYGS Established Leader in H2 Generation, Emerging One in P2G Storage
Increasing renewable generation intensifying grid imbalance issues:
Renewables are filling the gap created by mothballing of nuclear and phasing out of coal-fired plants. Renewables crossing 1015% of grid capacity can cause failures due to inherent instability of supply and the obvious lack of storage buffers in traditional grid designs. Currently, no generally applicable utility-grade, bulk storage solution meets the complete demand for capacity, price and duration. Utilities are therefore forced to either curtail renewable generation or accept hefty incremental costs in paying customers to purchase the excess capacity.

F2014E $62.4 $1.6 $0.02 $15.6

9 $108.9 $98.5 65 N/A $12.3 31-Dec F2015E $84.3 $7.5 $0.69 $17.6

Power to Gas (P2G) storage solution: HYGS emerging as a leader:

Generating H2 using renewables and injecting it in gas pipelines for storage (P2G) is gathering momentum due to its price, simplicity, versatility and scalability. P2G is a high-capacity, long-term, demand responsive and transportable solution that is able to use existing infrastructure without modification, and is economical. HYGS has close ties with E.ON, the largest EU utility, and has won 7 out of 19 projects in Germany, currently the most advanced energy storage market; 10 projects remain unawarded. HYGS has 12 MW P2G units deployed, 10MW being developed for commercial roll-out.

An established H2 generation leader, experiencing new growth opportunities

Company Description: Hydrogenics Corporation is a

globally recognized developer and provider of hydrogen generation and fuel cell products and services, serving the growing industrial, utilities and clean energy markets. Based in Mississauga, Ontario, Canada, Hydrogenics has manufacturing and operations in Belgium and Germany.

Leading share of industrial H2 market, outperforming rival 2:1, over 60 years of legacy. H2 generation demand should grow due to the build-out of refuelling stations, with fuel cell electric vehicles (FCEVs) debuting in 2015. EU gas utilities are leveraging P2G to stay relevant and enhance the value of their network; they constitute a large and easily penetrable market for P2G. Enbridge is building the first North American P2G storage system in Ontario, with HYGS as partner, and expects this to be followed by a 510MW commercial facility.

Power systems unit firing on all cylinders:

Commscope FC units for telecom back-up power delivered in Q2/13. Larger telecom orders from Commscope expected in 2014 after hot/cold season tests. $92M order from a European propulsion OEM will drive multi-year revenue. Fast-growing power systems revenue puts HYGS within arms reach of break-even.

History has been hard, but future looks bright (finally):

We understand HYGS history of operational losses and ongoing investor pain. HYGS past investments have seeded this harvest, with clear signals from last 3 quarters. HYGS leading share of industrial H2 market provides a hedge for the investor, while exposure to significant growth all from powerful partners provides the upside. We see multiple areas for revenue growth, leading to positive cash flow by H2-CY2014.

Valuation: Our $15.50 target price is derived using a DCF methodology based on a 13%
discount rate and 4% terminal growth. We believe HYGS is a leading pure play in the hydrogen-based renewables industry, which is growing its revenue at a CAGR of 30%+ in the near and medium term; its peers are growing at an average of 1819%. Our target implies 1.8x 2014E EV/Sales. HYGS is currently trading at 1.5x 2014E EV/Sales; its peers are trading at an average of 3.3x. Given 2013 revenue acceleration, our estimates for 39% revenue growth in 2014 (vs. 19% for peers), formidable strategic partners/customers, a dominant position in Germany and a possible medium-term take-out from the likes of any one of Siemens, other turbine OEMs or gas utilities, we believe HYGS should trade at a premium multiple, justifying our valuation and target.

Source: BigCharts.com

Please see end of this report for important disclosures

Dev Bhangui Senior Analyst, Disruptive Technologies and Innovations 647.426.1658 dbhangui@byroncapitalmarkets.com

Lino Camargo Associate, Equity Research 647.426.0289 lcamargo@byroncapitalmarkets.com

Hydrogenics Corporation

Investment Thesis
Mississauga, Ontario-based Hydrogenics (HYGS) is a leader in industrial and commercial hydrogen generation systems, their applications and fuel cell (FC) solutions. HYGS has manufacturing facilities in Belgium and Germany. Over the last 60 years, HYGS and its predecessors have built partnerships with tier 1 players in the hydrogen value chain, some of which are strategic investors in the company and leverage their distribution muscle to market HYGS products worldwide. A pioneer and emerging player in the P2G (Power to Gas) method using hydrogen-based energy storage, HYGS has a leading share of the German renewables energy storage market, considered the most progressive, fast growing and demanding in the world. After many years of posted losses, HYGS sits at an inflection point due to multiple growth opportunities, which we expect to occur concurrently and in the near term. This growth is driven by increasing interest from auto OEMs in fuel cells driving hydrogen refueling station build-outs, the close relationship between HYGS and E.ON driving P2G energy storage and large OEM orders for power systems, which have already resulted in a record backlog. Germany will reduce coal generation capacity to cut GHG emissions and nuclear plants in the wake of the Fukushima disaster. This has further intensified Germanys need for renewable storage. As such, several P2G-based energy storage projects are expected to move quickly from demo to roll-out. Roll-out projects are expected to be at least 10x demo size, and HYGS is well positioned to experience this accelerated growth in the coming quarters. In addition to recently winning the bid for a 1MW P2G facility with its strategic investor Enbridge, we expect HYGS to also build the subsequent 510MW capacity commercial unit. While several technologies have been battling each other for a piece of the renewable energy storage market, hydrogen-based solutions hold an edge due to their economics, response, simplicity, higher capacity and location flexibility in storage and consumption, which are particularly appealing to the utilities. Leveraged to the fast-growing hydrogen economy, investors should view HYGS as a hydrogen pure play, which has a limited downside risk due to a strong legacy foundation of recurring revenue in traditional industrial hydrogen supply, combined with significant upside in hydrogen fueling stations for transportation infrastructure, back-up power for telecom and P2G energy storage, as well as potential to build-own-operate some of these assets through Enbridge, its partnerinvestor. While history does not conjure pleasant memories, given the performance trends apparent in the last three quarters, the outlook for the company, our discussions with management and checks with industry players leads us to believe that HYGS is in the initial stages of history-reversing value creation. We suggest investors buy the stock and benefit from this opportunity. Our $15.50 target price is derived using a DCF methodology based on a 13% discount rate and 4% terminal growth. We believe HYGS is a leading pure play in the hydrogen-based renewables industry, which is its growing revenue at a CAGR of 30%+ in the near and medium term. Its peers are growing at an average of 1819%. Our target implies 1.8x 2014E EV/Sales. HYGS is currently trading at 1.5x 2014E EV/Sales; its peers are trading at an average of 3.3x. Given 2013 revenue acceleration, our estimates for 39% revenue growth in 2014 (vs. 19% for peers), formidable strategic partners/customers, a dominant position in Germany and a possible medium-term take-out from the likes of any one of Siemens, other turbine OEMs or gas utilities, we believe HYGS should trade at a premium multiple, justifying our valuation and target.
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Hydrogenics Corporation

Industry Background
The Situation: Renewables are filling large gap in our ever-increasing energy needs Various countries are not expected to be on track to meet IPCC-based emission targets set for 2020. On the other hand, there are fears that if we continue to consume the fossil fuels at the current rate of acceleration (see Exhibit 1), some of these resources, such as oil, will peak and begin their decline as soon as 2015. As populous countries in emerging markets and BRICS in particular are posting higher economic growth rates, this issue will become exacerbated. Continued global warming will not only increase the frequency of natural disasters like flooding, droughts, etc. but also building our defenses for the fall-out will cost us in billions of dollars, which can be avoided. To curb and control global warming, we need to keep the Earth temperature rise below 2C (3.4F) compared to the pre-industrial times. Exhibit 1 World Fuel Consumption Is Ever Increasing

Source: Peak Oil

It is estimated that by 2050, all the energy we need could come from renewable or sustainable sources. Solar, wind, geothermal, biofuels, biomass and others have been worked on in tandem with a view to find solutions. Currently, none of these alternatives rank economically on par with the fossil fuels and have yet to reach mass adoption rates. Economics for adoption is a game of appropriate price points and scale. Governments around the world have made massive investments in funding renewables innovation, research and product development. They have passed subsidies and have issued mandatory policies for transportation and utility industries with a view to encourage end users and bring price points down for mass market adoption. Consequently, renewables production really took off after 2001 for wind and after 2005 for solar, and today in Germany the renewable power generation capacity can support 50% of the consumption on a typical summer weekend.
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Hydrogenics Corporation

Exhibit 2 New vs. Decommissioned Power, EU Region

Source: CleanTechnica

But continued challenges to this picture exist and new ones emerge. Nuclear disasters like Fukushima have evoked strong negative public opinion, forcing many nations to take several nuclear reactors off line (Exhibit 2). Coal plants continue to be shut down to reduce GHG emissions. Renewable power has to fill this large and increasing gap, as shown in Exhibit 3. Exhibit 3 Share of Renewables in Power Generation is increasing

Source: IEC White Paper, Grid integration of large-capacity Renewable Energy sources and use of large-capacity Electrical Energy Storage, Oct. 2012

Dev Bhangui 647.426.1658 dbhangui@byroncapitalmarkets.com Lino Camargo 647.426.0289 lcamargo@byroncapitalmarkets.com

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Hydrogenics Corporation

The Issue: Increasing proportion of renewable power causes electrical grid imbalance As such, an increasing proportion of our energy consumption will come from renewable sources (as shown in Exhibit 3), causing its own issues integration and imbalance. With electricity generally created on-demand, the traditionally designed electricity grid has no inherent storage capacity and this causes problems with increasing penetration of renewables. Energy sources like solar and wind are inherently variable. Sun will shine and wind will blow at their whim and they could generate supply peaks during demand troughs. This supply excess introduced into the grid causes imbalance, overheats transmission network and leads to a safety triggered shutdown. An excess beyond 1015% can cause blackouts. Utilities have not yet found cost-effective means of storing this energy. As such, they often curtail the energy produced by renewables or pay customers to off load excess power (bearing negative tariffs) to prevent such imbalances. Asset utilization for renewables is far below that of conventional systems and full potential cannot be realized until suitable storage mechanisms are in place. This is a sad state of affairs, as significant investment and tax dollars have gone into this sector. The Solution: P2G storage Industry has tried various solutions to solve this issue pumped hydro, compressed air and batteries have been the most common. Pumped hydro is the most tried and tested and accounts for 80% of energy storage from renewable excess production (EPRI 2012 report). But this solution is limited by geography, cannot respond quickly to renewable power downs (such as when wind dies suddenly) and not feasible for flat terrains like Holland. Others like compressed air and batteries face geographic, capacity or high cost drawbacks. Utilities need massive amounts of capacity to store the excess renewable energy at low costs. They also need flexibility to move these massive amounts from places of storage to places of consumption. Exhibit 4 Hydrogen Energy Storage vs. Alternatives A Comparison

Source: Electricity Storage Association

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Hydrogenics Corporation

As illustrated in Exhibit 4, the hydrogen-based P2G method provides an effective solution. It is comparable in capacity to Pumped Hydro Storage and Compressed Air Energy Storage but more cost effective and responsive to demand variations. Renewable power could be used to generate hydrogen via electrolyzers. The hydrogen produced could be stored in existing natural gas pipelines (P2G) and transported, to be used where and when needed. One of the obvious benefits provided by P2G and the subject of focus from various technology blogs and articles is seasonal storage and timeshift. In low season when supply exceeds demand, the energy created by renewables is stored to be utilized during the high season, when demand exceeds supply. Similarly, during evenings and nights, when electrical tariffs are lower, the excess energy produces hydrogen which is stored and utilized during day time when the demand and tariffs are higher. Besides salvaging the excess renewables energy that is curtailed by utilities, P2G projects can make money capturing the spread between high and low tariffs. Based on the tariff structure in the US, and at current P2G pricing levels of $0.5/MW, break-even point on investment can be reached in 2.5-4 years. Exhibit 5 Power to Gas The How to Schematic

Source: North Sea Power to Gas Platform and KEMA

Thus, P2G acts as a shock absorber for the electricity grid, providing dynamic response and the necessary capacity to cope with the variability in output of renewable electricity sources. First, P2G has fast load following capability; second, it is flexible in terms of location of storage and scale; third, there is enough capacity in the gas grid for energy storage on a seasonal scale (energy capacity of gas pipelines is 3x electrical grids); and hydrogen, when injected, travels across the existing natural gas pipeline network and can be tapped at various industrial and commercial consumption points. Thus, P2G can turn renewables into dispatchable power plants, helping maintain a balanced electricity grid. The P2G solution integrates power and gas infrastructure in an unprecedented way, creating value from both and helping extend their life span (Exhibit 5).
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Hydrogenics Corporation

However, in countries like Germany, significant excess capacity in electrical power production has compressed the tariff spreads enough whereby any type of storage cannot be financially justified. In addition, the new generation of power plants are cheaper and respond faster to issues caused by power-ups and downs inherent with the sun fading and the wind dying. Non-believers in energy storage proclaim that the storage market need is questionable and it will not develop as envisaged. However, as the Storage Benefit Analysis table below in Exhibit 6 illustrates (, only $311/Kw out of $13,463/Kw of benefit (which is only 6.5%) is delivered by time shift versus several benefits provided by storage in areas of load following, regulation, transmission and distribution support and black starts. Exhibit 6: Economic Analysis of Bulk Storage Benefits for Electric Grid

Source: Sandia Labs (excerpt from an economic analysis of bulk storage for Renewable energy applications, 2011)

Hydrogen can also be used to power fuel cells a cheaper, safer and longer-life alternative for transportation, stationary back-up and motive power than batteries. Due to its capacity, hydrogen can offer long driving ranges and short fueling times. Advantages of H2 over alternatives are illustrated in Exhibits 7 and 8. The technical superiority of H2 over BEV in Exhibit 7 and massive cost advantages over all other alternatives in Exhibit 8 are especially apparent.

Dev Bhangui 647.426.1658 dbhangui@byroncapitalmarkets.com Lino Camargo 647.426.0289 lcamargo@byroncapitalmarkets.com

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Hydrogenics Corporation

Exhibit 7 Comparison of Rated Power, Energy Content and Discharge Time of Different EES Technologies

Source: IEC Electrical Storage Whitepaper 2011 and Fraunhofer ISE

Exhibit: 8 Technical and Economical Features of Various Power Storage Technologies

Source: European Commission Directorate-General for Energy, Working Paper)

Japanese auto OEMs such as Toyota have recognized the hydrogen fuel cell potential to power the autos and are releasing models expected to be in commercial production by 2015. After neglecting the FC potential in favour of solar and batteries and lagging the European Union (EU), the U.S. Department of Energy has now made an about-turn in its FC policy in a bid to catch up with California Hydrogen Highway, which is leading the effort.
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Hydrogenics Corporation

The Office of California Governor Edmund G. Brown has published its 2013 Zero Emissions Vehicle (ZEV) Action Plan, which includes a roadmap toward putting 1.5 million ZEVs on California roads by 2025. Hydrogen fueling infrastructure investment has been keeping with the auto industry. In 2010, there were 200 fueling stations worldwide, which grew to 340 in 2011. Currently, there are 503 (according to H2 Stations.org) and this is expected to grow to 5,200 by 2020, providing a growth thrust to hydrogen generation and FC-based transportation and motive power industry. Exhibit 9: Hydrogen Demand for Transportation

Source: Pike Research

Opportunities
Increasing renewable energy capacity intensifying grid imbalance issues: A lag with respect to IPCC 2020 emission targets, phasing out of coal plants and mothballing of nuclear reactors in the wake of the Fukushima disaster have left a large and increasing energy generation gap which renewables must fill. Germany currently produces 50 GW of renewable power, sufficient to satisfy almost half of a typical summer weekend base load need, and is projected to reach 179 GW by 2020, according to Frost & Sullivan's Energy group. However, once in excess of 1015% of grid capacity, integration of renewables, in absence of a flexible storage, causes grid imbalance issues and blackouts. Utilities therefore ironically curtail renewable capacity, which has been expensive to install. Sources of variability in renewable energy production sun and wind producing excess capacity during demand troughs cannot be controlled, but effective storage can be. Utilities need
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Hydrogenics Corporation

storage capacities which are large, can be used for the long term, cheap and can provide rapid response to demand. Industry has tried various solutions to solve this issue pumped hydro, compressed air and batteries have been the most common. Currently, pumped hydro accounts for 80%+ of storage due to its vast capacity and quick response. But this solution is limited by geography to build large reservoirs at an elevation, not feasible for flat terrain nations like Holland. Harnessing the stored energy from pumped hydro needs electricity generation and transmission network, making it less cost effective. Similarly, compressed air storage has been used but low energy density of air and geographic dependence of underground caverns limits large storage. Other geography independent methods, such as batteries and supercapacitors, have been used, but large capacity can be provided only for a short period of time (few minutes) and batteries occupy a large ground footprint, besides being expensive. All these methods have another limitation: energy is stored where it is produced (could be remote areas or offshore, in case of wind farms) and has to be transported to the place of consumption, adding to the costs. Estimates vary for the addressable market for energy storage but there is no denying that it is experiencing massive growth. Lux Research estimates it at 50 GW growing to 165 GW by 2017. Exhibit 10 shows the estimated total addressable storage market and projected energy investment from the industry to 2020. Exhibit 10 Addressable Market for Energy Storage and Industry Investment

Source: American Vanadium

P2G, an economical storage solution that enables place and time arbitrage: HYGS emerging as a leader: Storing large capacity over long periods of time requires a stable, scalable and cost-effective medium that is not dependent on geography. Hydrogen solves all of these issues. Hydrogen is one such carrier which is stable in the liquid and gaseous form and can be stored for long periods of time (such as a season). It is also miscible with other gases such as natural gas, and hence can use existing gas pipelines without any modification at 515% concentrations.
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Hydrogenics Corporation

P2G has emerged as a large and utility-scale solution and is experiencing a significant momentum via utility adoption. Renewables produce power that is used to run electrolyzers to produce hydrogen. Hydrogen is fed into existing natural gas pipeline infrastructure, where it could be stored throughout the low season. At the time of consumption, it could be transported by the same pipeline to a combined cycle gas power plant or could be piped into end-user homes, recovering the energy during its use. This application is scalable, avoids multiple conversion inefficiency losses and uses existing gas networks, without any modifications. Due to hydrogens embrittlement and leakage characteristics, the infusion cannot exceed 15%. However, since the gas infrastructure capacity is 3x the electrical grid capacity, even a limit in high single-digit percentage will likely provide enough storage capacity for several years. In the P2G method of energy storage implementation, Germany is the most progressive nation and HYGS is a well-acknowledged leader. HYGS holds key patents on ways to introduce H2 into gas pipelines without affecting the grid balance, which needs a thorough understanding of utility processes involved in maintaining that balance. Of the 18 German demo projects in the 12 MW range, nine have been decided. HYGS has won seven versus two for the competition and is awaiting the decision on balance. We expect HYGS to win at least 50% of the remaining demo projects. Recently, the 2 MW facility, where E.ON partnered with Swiss Gas, was opened commercially. The next 1 MW order is expected to be delivered this quarter. With a stamp of German approval and a formidable partner like E.ON, arguably the largest utility in the world, HYGS is well positioned. Everyone in Europe has been watching the German progress on P2G. U.K., which has a similar issue as Germany with high and rising percentage of renewable energy production, is expected to follow Germanys lead. Revenue from P2G initiatives in Germany will make an impact on HYGS financials only when the country moves from demo-sized 12MW capacities to commercial stages of 10 MW or larger capacity modules. If this happens, P2G contracts priced at ~$1.5$2.0M/MW should be able to add significant growth in 2014. The latest E.ON P2G order for a 1 MW PEM electrolyzer was followed by a similar-sized P2G order by Enbridge for energy storage into its facilities. Enbridge considers this a commercial facility to be connected to the grid, to be followed by a 510 MW facility, and is working to try and improve Canadian legislation on gas injection. We expect the P2G Enbridge facility to be built in Southern Ontario, a region attractive for P2G due to proximity to refineries, salt caverns, a natural gas network and energy variability driven by healthy wind generation near Lake Huron. Such a facility is expected it to be the first of its kind in North America. Due to close a strategic relationship between the two, we will not be surprised if HYGS has an opportunity to jointly own some of these P2G assets as the initiative progresses. Despite the current P2G momentum, there is a sobering thought for the long term. Currently, nearly 50% of Germanys 60 GW electrical energy consumption can be supplied by solar on a summer weekend (as experienced in July 2012 and 2013). Currently installed capacity in Germany is 34.5 GW (solar) and 30.5 GW (wind). Installed capacity via conventional sources was estimated to be another 61 GW (according to Germany Trade and Invest, 2013). Thus, Germany faces significant excess energy capacity. Hence, the price spread between peak and trough energy prices has decreased significantly, neutralizing the time shift arbitrage. The new generation power plants can provide fast response to demand fluctuations and, in some cases, are cheaper than current storage alternatives.
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Hydrogenics Corporation

Refurbishing and extending the life of existing pumped hydro storage would be the cheapest way of increasing storage, but even that has been made uneconomical by the above factors. H2 storage needs gas pipelines, which most electrical utilities dont own and have to partner with a gas utility (E.ON partnered with Swiss Gas at the recently commercialized P2G facility at Falkenhagen). Hence, for electrical utilities in Germany, storage may not hold any appeal as a supply-demand shock absorber but as a means of converting excess into profitable export. Even with the winding down of nuclear and coal plants, surpluses of around 40 GW are expected by 2020. At $0.5M/MW of storage costs in 2013, and assuming future cost reduction of 50%, we expect the addressable storage market in German electricity grid to be $10$20B. HYGS: An established leader in H2 generation, experiencing new growth opportunities: HYGS facilities in Belgium have over 60 years of history in electrolyzer-based generation for industrial hydrogen. While 95% of the industrial H2 is produced by steam reformation of natural gas or methane and then carried to the consumption sites in compressed form by bottles or tankers, some applications need on-site generation or high purity. Hydrogen production through hydrolysis of water is the only solution. This is a $100$200M/year market growing at 510%/year Hydrogenics commands a steady 2530% market share, outselling its nearest competitor two-to-one. It competes on quality, reliability and years of reputation. The company uses Air Liquide and Linde as its preferred supply partners, who dominate the industrial hydrogen landscape. High-purity hydrogen is required in glass, power plant cooling, semiconductor fabrication, etc. as steam reformation leaves unacceptable impurities like CO, carving a niche for electrolytic hydrogen. While we have covered the revenue growth in electrolyser orders due to P2G momentum Via E.ON and Enbridge contracts as described above, other opportunities in P2G for selling hydrogen generation solutions abound and are discussed below. Gas companies own an extensive network of pipelines used to supply natural gas to households, commercial and industry major consumers are refineries and combined cycle generation plants owned by electric utilities. An increasing proportion of renewables in the power mix threatens the future of gas companies. There is increasing evidence that gas companies are investing in P2G as a means of extending the economic life of their assets, capturing value and staying relevant. As an example, a major entity driving P2G adoption is North Sea Power to Gas Platform. It is a consortium of 11 leading gas companies in Europe (includes gas utilities of Switzerland, Sweden, Austria, Germany, Denmark, Belgium and Netherlands) which have joined forces in the newly established Power to Gas Platform to further develop the concept of P2G: the conversion of renewable power into gas. The group expects to utilize excess power from intermittent wind and solar, store it in the gas grid for short- and long-term usage, transport it to remote parts where it is needed and where the electrical grid is inadequate, and provide H2 from renewable sources as feedstock for industry and mobility. P2G is of particular interest for the North Sea area, as its on and offshore natural gas infrastructure is well developed. In addition, the combined generating capacity of offshore wind farms on the North Sea could reach around 100 GW by 2030, while the PV capacity installed in the countries surrounding the North Sea is expected to increase from 35 GW in 2012 to almost 60 GW in 2020. Hydrogenics is a member of the group and will likely benefit
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Hydrogenics Corporation

from MFN-like status for its P2G solutions. At current prices, this addressable market is ~$15$20B. In another P2G initiative, Audi is expected to open a renewable energy e-gas plant in Werlte, Germany. The power-to-gas facility Audi built in Germany works in two steps: electrolysis and methanation. In the first step, the plant uses surplus green electricity to break water down into oxygen and hydrogen in three electrolyzers. While the hydrogen could one day power fuel-cell vehicles, for now, in the absence of an area-wide infrastructure, a second step is carried out directly: methanation. The hydrogen is reacted with CO2 (obtained from its own bio gas plant) to produce synthetic methane, or Audi egas. It is virtually identical to fossil natural gas and will be distributed via an existing infrastructure, the German natural gas network, to the CNG filling stations. The plant is scheduled to begin feeding Audi e-gas to the grid this fall. The Audi e-gas plant will produce about 1,000 metric tons of e-gas per year, chemically binding some 2,800 metric tons of CO2. This roughly corresponds to the amount that a forest of over 220,000 beech trees absorbs in one year. Water and oxygen are the only byproducts. Besides, avoiding CO2 emissions, syngas holds significant potential in curtailing controversial fracking activity currently used to unlock the natural gas trapped in rock formations. Exhibit 11: Projections for H2 Retail Fuel Stations Growth in the EU

Source: Company Presentation EU Hydrogen FCEV Coalition Workshops

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Hydrogenics Corporation

In addition, recently, the traditionally slow growth hydrogen generation business received another shot in the arm, by the build out of hydrogen fueling stations, due to auto OEMs interest in bringing FCEVs to the market by 2015. Through powerful partners, such as Linde and Air Liquide, Hydrogenics has helped build 45 out of 200 built globally until 2010 2011. About 5,200 fueling stations are expected to be operational by 2020 worldwide. Exhibit 11 shows projections for H2 retail fuel station growth in the EU. California, the EU and Japan are regions experiencing the highest activity in such a build out, due to push and incentives from local governments. The U.S. offers a 30% investment tax credit up to $200,000/station built until 2014. In FY2012, Japan invested ~$240M in fuel cell and hydrogen energy programs, nearly twice as much as the U.S., and included $37.71M for hydrogen infrastructure & vehicle demonstration projects. The addressable market in fueling stations is expected to be $2B, according to Hydrogenics. Power systems unit firing on all cylinders: HYGS as a public company is unique due to nearly 40% ownership by strategic entities Commscope, Enbridge and GM. Two of those investors contributed to the massive yearover-year growth of the company during the last year when Commscope placed a significant fuel cell order for telecom tower back-up. HYGS then won a massive $92M multi-year order for a power propulsion system (fuel cells) with prominent European OEM (unnamed at clients request) with whom it has been working with for the last 10 years. Besides the initial phase of $36M for delivery within two years, the order comes with a $10M advance for product development and exclusivity for eight years (read: recurring revenue and a captive customer for years to come). All units for the Commscope telecom order were delivered by Q2/13 and are being tested in the field for hot and cold seasons. If the tests go well (we believe they will), we expect larger roll-out orders commencing at the end of 2013/early 2014. Delivery of several demo orders has primed the commercial rollout funnel where the orders are expected to be magnitudes larger, potentially catapulting HYGS above the break-even point earlier than expected, which is in FY2014. Power systems target opportunities in telecom and data centre back-up power, material handling and propulsion equipment, with an addressable market estimated at $2$3B.

Dev Bhangui 647.426.1658 dbhangui@byroncapitalmarkets.com Lino Camargo 647.426.0289 lcamargo@byroncapitalmarkets.com

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Hydrogenics Corporation

Exhibit 12 DC Back-up Power Addressable Market

Source: Company Presentation

History is tough but future looks equally bright (finally): We understand the pain of a tech investor invested in a company ahead of its time. HYGS is one such story with a sordid past. Several years of losses, financings, reverse splits have have inflicted pain and made investors leery of the space and the players. However, all these years of investments have seeded tomorrows harvest, and since the last year, prospects have changed dramatically. Going forward, we view HYGS as a significantly hedged play due to the decades old and relatively shielded industrial H2 business of $25M/year as profitable and provides a safety net, upon which growth layers in power systems, hydrogen fueling stations and P2G energy storage systems will be built, inflecting the company quickly beyond the break-even point and toward financial self-sustainability. Growth is further de-risked by HYGS go-to-market strategy by partnering with long-term customers like Linde and Air Liquide, and strategic investors like Commscope and Enbridge. Larger competitors like Siemens (which are major vendors of wind generation equipment in Germany) are watching HYGS growing success, profile and prominent wins in Germany, and may have made acquisition overtures in the past and are likely to keep HYGS on their active radar of potential targets, providing an additional value realization for patient investors. All of these catalysts coming together almost concurrently convince us of a potential bright future for HYGS to be fully visible by H2-2014.

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Exhibit 13: HYGS Go-to-Market Strategy Leverages Established Networks

Source: Company Presentation

Risks
Fuel cells may not be able to reach commercializable mass-market price points: Stacking of PEM cells is a precision activity and since build volumes are low, stacks are built manually. Stack building is a manually intensive and highly skilled activity, and hence labour intensive. High costs of platinum catalysts and high maintenance to prevent CO poisoning and reduced catalytic activity also significantly add to the costs. Both of these factors make fuel cells, especially PEM cells, an expensive choice, eroding their smaller footprint advantage. While research is ongoing for CO resistant catalyst coatings on electrodes, or to operate FCs at higher temperatures to increase their efficiency and CO resistance, production of FCs may not scale high enough to bring the costs down by incentivizing better catalyst materials or robotizing assembly, which will lower the productions costs and, consequently, mass acceptance. P2G may not take off with German electrical utilities dampening short-term upside for electrolyzers: Imminent commercialization expected to be driven by German electrical utilities may not materialize due to Germanys energy excess situation (discussed earlier). German utilities like E.ON may not undertake the P2G commercial roll-out with units of 10 MW and larger in the near term. Mitigant: we believe the medium-term P2G upside will be driven by gas utilities, such as the North Sea Alliance Platform, for a myriad of reasons, discussed earlier. Another strike on electrolyzers is that round-trip efficiency for P2G using electrolytic H2 is low at 20% (wind to electrolysis to H2 to fuel cells to electricity) versus 50% for H2
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Hydrogenics Corporation

production from steam reformation of natural gas. H2 produced from electrolyzers is expensive versus that produced from methane reformation. So long as high H2 purity and on-the-site production is not necessary, it dampens the P2G business case for hydrolyzers Customer concentration: HYGS record backlog and its near-term revenue conversion are driven by three-four customers. In Q2/13, four customers constituted 55% of revenues. Current revenue inflection, if unmatched by follow-on orders from these customers may be short-lived. For example, Commscope may not follow through with orders in early 2014 on telecom back-up power, due to delays in testing and ultimately orders from its carrier customers. Mitigants: major customers as strategic investors and P2G pioneer advantage.

Valuation
Hydrogenics has entered H2-FY2013 with a record $50M backlog 1.6x its FY2012 revenue. Most of the backlog is translated into revenue in two quarters. New generation electrolyzer products are being readied for 10 MW and larger-scale P2G projects. New products are also being developed for strategic partner and P2G customer Enbridge, on track to build and commission the first P2G facility in North America. HYGS is also developing next generation products and solutions in propulsion systems for its $92M OEM customer. Outlook is further brightened by nine P2G projects in Germany, where HYGS has won a lions share of wards so far, are yet undecided. We are also awaiting results of hot/cold season tests on the hundreds of telecom back-up FC units delivered to Commscope the largest strategic investor and customer. With a significant footprint with several dominant carriers and tower asset owners, we believe the power systems units sales funnel is primed. We believe HYGS is sitting on several, simultaneous layers of sales growth in 2013 and 2014. Its customers are market leaders in their own sector and some are investors. Most have just moved off successful demo stages and are transitioning to commercial stages, orders of magnitude larger than demo stages. As such, we believe HYGS will be cash flow and EPS positive in H2-FY2014, creating significant shareholder value, and we urge potential investors to buy before this value creation. Our $15.50 target price is derived using a DCF methodology based on a 13% discount rate and 4% terminal growth. We believe HYGS is a leading pure play in the hydrogen-based renewables industry, which is growing its revenue at a CAGR of 30%+ in the near and medium term. Its peers are growing at an average of 1819%. Our target implies 1.8x 2014E EV/Sales. HYGS is currently trading at 1.5x 2014E EV/Sales; its peers are trading at an average of 3.3x. Given 2013 revenue acceleration, our estimates for 39% revenue growth in 2014 (vs. 19% for peers), formidable strategic partners/customers, a dominant position in Germany and a possible medium-term take-out from the likes of any one of Siemens, other turbine OEMs or gas utilities, we believe HYGS should trade at a premium multiple, justifying our valuation and target.

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Exhibit 14: Peer Comparables

EV $237.0 $80.8 $82.4 $43.4 $160.1 $230.2 $69.6 $345.3 $98.5

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Company Maxwell Technologies Electrovaya ITM Power Proton Power Ballard Power Systems FuelCell Energy Plug Power Capstone Turbine Average Hydrogenics $12.1 $108.9

Ticker MXWL EFL ITM PPS BLD FCEL PLUG CPST

Last Price $9.1 $1.1 $0.7 $0.0 $1.7 $1.3 $0.7 $1.2 2013E $192.8 $4.6 $1.7 NA $60.4 $179.7 $31.3 $128.5 $85.6 $44.5 2013E $19.0 ($4.1) ($8.7) NA ($15.8) ($23.6) ($22.0) ($18.9) ($10.6) ($6.6)

Market Cap $262.9 $79.0 $91.7 $29.8 $171.0 $243.9 $72.8 $353.7

HYGS

Revenue (US$M) 2014E 2015E $205.5 NA $15.2 $44.5 $6.3 $12.0 NA NA $75.9 $97.7 $200.3 $256.7 $60.0 NA $149.4 $186.8 $101.8 $119.5 $62.5 $84.3

EBITDA (US$M) 2014E 2015E $25.4 NA $0.1 $2.1 ($6.4) ($5.0) NA NA ($10.4) $4.5 ($3.3) NA ($9.9) NA ($9.2) $12.8 ($1.9) $3.6 $1.6 $7.5

EPS (US$M) 2013E 2014E 2015E $0.2 $0.4 NA ($0.1) ($0.0) NA ($0.1) ($0.1) ($0.0) NA NA NA ($0.2) ($0.2) ($0.1) ($0.2) ($0.1) NA ($0.5) ($0.2) NA ($0.1) ($0.0) $0.0 ($0.1) ($0.0) ($0.0) ($1.10) $0.02 $0.69

Company Maxwell Technologies Electrovaya ITM Power Proton Power Ballard Power Systems FuelCell Energy Plug Power Capstone Turbine Average Hydrogenics

Ticker MXWL EFL ITM PPS BLD FCEL PLUG CPST

HYGS

EV/EBITDA 2013E 2014E 2015E 12.2x 9.1x NM NM 673.0x 38.1x NM NM NM NM NM NM NM NM 35.6x NM NM NM NM NM NM NM NM 27.3x 12.2x 341.1x 33.7x -15.0x 62.8x 13.1x 2015E NM 1.3x 6.1x NM 1.4x 1.2x NA 1.9x 2.4x 1.2x

EV / SALES 2013E 2014E 1.2x 1.1x 12.4x 3.7x 48.6x 11.7x NM NM 2.3x 1.8x 1.6x 1.5x 1.9x 1.0x 2.7x 2.3x 10.1x 3.3x 2.2x 1.6x

Hydrogenics Corporation

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Source: Capital IQ Estimates, Bloomberg and Byron Estimates

Exhibit 15: Income Statement (US$)

Hydrogenics Corporation Income Statement USD$ '000 FY2011A 23,832 18,344 5,488 0 5,724 4,919 805 14% 8,259 6,787 1,472 18% 7,897 6,239 1,658 21% 9,926 8,616 1,310 13% 31,806 26,561 5,245 0 12,312 8,770 3,542 29% 9,771 7,205 2,566 26% 11,200 7,920 3,280 29% 11,169 8,015 3,154 28% 44,452 31,910 12,542 28% Mar-12A Jun-12A Sep-12A Dec-12A FY2012A Mar-13A Jun-13A Sep-13E Dec-13E FY2013E FY2014E 62,450 42,470 19,980 32%

Revenue Cos t of Sales Gross Profit Gros s Margin %

Operating Expenses General & Administrative % Revenues Research & Development % Revenues Other Operating Expense/(Income) % Revenues Total Operating Expenses % Revenues 11,740 0 2,934 0 50 0 14,724 61.8% (9,236) -39% (8,286) -35% (171) (9,746) -41% (9,746) -41% (3,181) -55.6% (3,145) -38.1% (3,081) -39.0% (3,181) -55.6% (3,145) -38.1% (3,081) -39.0% (63) (78) (88) (74) (3,272) -33.0% (3,272) -33.0% (3,093) -54.0% (2,332) -28.2% (3,163) -40.1% (2,649) -26.7% (11,675) -37% (303) (12,679) -40% (12,679) -40% (3,297) -57.6% (2,592) -31.4% (3,372) -42.7% (2,846) -28.7% (12,107) -38% (1,018) -8.3% (820) -6.7% (85) (1,551) -12.6% (1,551) -12.6% (3,389) -34.7% (3,185) -32.6% (94) (4,516) -46.2% (4,516) -46.2% 2,953 51.6% 1,149 20.1% 0.0% 4,102 71.7% 3,221 39.0% 843 10.2% 0.0% 4,064 49.2% 3,462 43.8% 1,573 19.9% (5) -0.1% 5,030 63.7% 3,115 31.4% 1,041 10.5% 0.0% 4,156 41.9% 12,751 0 4,606 0 (5) 0% 17,352 54.6% 3,622 29.4% 938 7.6% 0.0% 4,560 37.0% 4,875 49.9% 1,080 11.1% 0.0% 5,955 60.9% 3,600 32.1% 1,100 9.8% 0.0% 4,700 42.0% (1,420) -12.7% (1,216) -10.9% (90) (1,660) -14.8% (1,660) -14.8%

3,700 33.1% 1,000 9.0% 0.0% 4,700 42.1% (1,546) -13.8% (1,342) -12.0% (90) (1,686) -15.1% (1,686) -15.1%

15,797 36% 4,118 9% 0% 19,915 44.8% (7,373) -17% (6,563) -15% (359) (9,413) -89% (9,413) -21%

15,791 25% 3,650 6% 0% 19,441 31.1% 539 1% 1,569 2.5% (400) 139 0.2% 139 0.2%

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($1.58) ($1.58) ($0.48) ($0.48) ($0.42) ($0.42) ($0.40) ($0.40) ($0.42) ($0.42) ($1.72) ($1.72) ($0.20) ($0.20) ($0.53) ($0.53) ($0.19) ($0.19) ($0.20) ($0.20) ($1.10) ($1.10) $0.02 $0.02

EBIT (Operating income) EBIT Margin %

EBITDA EBITDA Margin %

Net Interest Exp.

EBT Incl. Unusual Items EBT Margin %

Tax Income (Expense)

Net Income Net Margin %

EPS (GAAP) Bas ic Fully Diluted

Hydrogenics Corporation

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Source: Company Reports, Byron Capital Markets

Hydrogenics Corporation

Appendix A: Management and Board of Directors

Management President and Chief Executive Officer Daryl Wilson was appointed President and Chief Executive Officer in December 2006. Prior to joining Hydrogenics, he held senior leadership positions at Royal Group Technologies Inc., ZENON Environmental Inc., TOYOTA and DOFASCO Inc. Mr. Wilson is a director of ATS Automation Tooling Systems Inc. In 1990, Mr. Wilson earned an MBA from McMaster University in Operations Management/Management Science. He is a Professional Engineer and holds a Bachelors degree in Chemical Engineering from the University of Toronto. Mr. Wilson is a Chartered Director (C.Dir), having graduated in 2009 from Directors College. Robert Motz was appointed Chief Financial Officer, Corporate Secretary of Hydrogenics Corporation, in Nov. 2012. Mr. Motz was previously Chief Financial Officer and then Chief Executive Officer of Aeroquest International Limited from 2008 to 2012 (at the time a TSX-listed company). Prior to his role at Aeroquest, Mr. Motz served in a senior financial leadership role at Agility Logistics, Co., AMJ Campbell Inc. and Motorola Canada Limited. Mr. Motz is a Chartered Accountant and a Chartered Professional Accountant, having received his designation in 1987. Wido Westbroek joined the company in 2006 as Vice President, Operations, of the Belgium OnSite Generation business and subsequently was appointed Vice President and General Manager for Hydrogenics Europe n.v. in 2007. Mr. Westbroek was appointed to his current position in Aug. 2011. His former career, spanning 18 years, was with Powerlasers, a developer and manufacturer of unique laser welding technology and a maker of auto parts for automotive OEMs based in Canada and the U.S. Mr. Westbroek received his Bachelor of Science in Physics at the University of Waterloo in Ontario. Filip Smeets joined Hydrogenics in 2011 as General Manager of the Belgian-based OnSite Generation business. Mr. Smeets was previously a general manager with Cabot Corporation, a global performance materials company, headquartered in Boston, Massachusetts. During his 12-year tenure at Cabot Corporation, he held increasingly responsible positions in marketing and business leadership. Mr. Smeets received his Master's degree in Chemistry from the University of Antwerp in Belgium.

Chief Financial Officer and Corporate Secretary

Vice President, Sales and Marketing

General Manager, OnSite Generation

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Hydrogenics Corporation

Board of Directors Douglas S. Alexander, Chairman, joined the board in May 2006 and has served as Chairman since May 2009. He is a director and member of the Audit Committee of Critical Outcome Technologies Inc., Biorem Inc. and Equitable Life Insurance Company, and has served as the Chief Financial Officer of various Canadian public companies for 15 years. Mr. Alexander was formerly the lead director and chair of the Audit Committee of Saxon Financial Inc. He served as a director of Stuart Energy from 2003 to January 2005. From 1999 to 2004, Mr. Alexander was Executive Vice President and Chief Financial Officer of Trojan Technologies Inc., an international environmental high technology company. Mr. Alexander is a Chartered Accountant and is a member of the Institute of Chartered Accountants in Scotland and Ontario. He is also a Chartered Director, having graduated from the Directors College, a joint-venture between McMaster University and the Conference Board of Canada. Mr. Michael Cardiff has been an Independent director of Hydrogenics Corporation since November 2007. Mr. Cardiff is the Chief Operating Officer of SAP Canada. Prior to that, he held numerous senior positions in a number of technology companies, including multinationals such as EDS and IBM, as well as start-up companies such as Fincentric, Convergent Technologies, Tandem and Stratus Computer. Mr. Cardiff is currently a director of Medic Alert. He has also served as a director of Burntsand Inc., Descartes Systems Group, Husky Injection Molding Systems, Solcorp, Visible Genetics, Spectra Security Software Visible Decisions and the Toronto Film Festival, Roy Thomson Hall. Mr. Cardiff has received many awards including A Canadian Export Life Time Achievement Award. He is a member of and holds the ICD.d designation from the Institute of Corporate Directors. Mr. Joseph Cargnelli is Chief Technology Officer, Director of Hydrogenics Corporation. Mr. Cargnelli is one of the founders and served as a director from January 1996 to January 2005, when he resigned in connection with the closing of the Stuart Energy acquisition. Mr. Cargnelli was re-elected at the meeting of shareholders on May 17, 2005. Mr. Cargnelli served as the Treasurer from January 1996 until July 2000. Mr. Cargnelli was appointed as the Vice President, Technology in July 2000. His title was changed to Chief Technology Officer in April 2003. Mr. Cargnelli earned both a Masters of Applied Science degree in Mechanical Engineering and a Bachelor of Applied Science degree in Mechanical Engineering from the University of Toronto. From April 1992 to April 1993, Mr. Cargnelli served as a Research Engineer with the Laboratory of Advanced Concepts in Energy Conversion Inc., a laboratory engaged in the research, development and demonstration of alkaline fuel cells and hydrogen storage methods. Mr. Cargnelli is a member of the Professional Engineers of Ontario. Mr. Henry J. Gnacke has been an Independent Director of Hydrogenics Corporation since May 2008. Mr. Gnacke is a Director at Variety Foods Services Inc. He is also a senior advisor to Mobias Motors and is currently a Senior Director at OHorizons LLC., a corporate advisory firm, specializing in acquisitions and operations in the Automotive sector. Formerly, he was the Executive Director, Global Purchasing Supply Chain at General Motors Corporation. He was responsible for Alternative Propulsion Technologies and specifically Fuel Cell propulsion and storage systems. Mr. Gnacke has over 30 years of experience and has held numerous positions at General Motors Corporation, including several international assignments in the Middle East, Asia and Europe. Mr. Gnacke is the nominee of General Motors Corporation in connection with the strategic alliance with General Motors
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Hydrogenics Corporation

Corporation. Mr. Gnacke is a Chartered Director (C.Dir), having graduated from D irectors College in 2012. Mr. Norman M. Seagram is an Independent Director of Hydrogenics Corporation. He served as Chairman of the Board from July 2000 to December 2006, as Lead Director from JanuarySeptember 2007, and subsequently as Chairman until May 2009. Mr. Seagram was President of Sportsco International LP (SkyDome) from February 2001 to March 2003. From September 1996 to May 1997, he was President and Chief Executive Officer of Molson Inc. (now Molson Coors), a company he had previously served for 24 years in a variety of senior management positions. From October 1992 to August 1996, Mr. Seagram was Chairman and Chief Executive Officer of Air Liquide Canada, Inc., a producer of industrial gases. He is Chairman of the Toronto Symphony Foundation, a trustee of Trinity College School and the Toronto Symphony Foundation, and a director of Harbourfront Foundation. He has served on the advisory board of the Faculty of Applied Science and Engineering, University of Toronto and INSEAD, Fontainebleau, France. He is a former director of the Toronto Economic Development Corporation (TEDCO). Daryl Wilson, President and Chief Executive Officer (see above) Share Ownership of Management and Directors (as of May 8, 2013) Beneficial Owner Shares DSUs RSUs Stock Options Total Securities Douglas S. Alexander, Chairman 998 42,632 Nil Nil 43,630 Michael Cardiff, Director Nil 20,417 Nil Nil 20,417 Joseph Cargnelli, Director 156,100 24,015 56,574 64,500 301,189 Henry J. Gnacke, Director Nil 13,730 Nil Nil 13,730 Norman M. Seagram, Director 1,428 49,175 Nil Nil 50,603 Don Lowry, Director Nil 477 Nil Nil 477 Daryl Wilson, Pres. & CEO 4,000 78,636 108,989 185,399 377,024
Source: Company Reports
Source: Hydrogenics Corporation

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Hydrogenics Corporation

Appendix B: Business Description

Hydrogenics reports the top line of its financial performance in two business segments: OnSite Generation (electrolysers) and Power Systems (Fuel Cells). Below, we provide a description of both lines of business.
Hydrogenics Lines of Business

OnSite Generation OnSite Generation business segment is based in Oevel, Belgium, and develops products for industrial gas, hydrogen fueling and renewable energy storage markets, using water electrolysis technology. Onsite Generation includes the design, development, manufacture and sale of hydrogen generation products. The products developed in this business line are mainly sold to leading merchant gas companies, oil and gas companies, fueling stations, electric power utilities, and small, medium and large scale energy storage products. Given the potential opportunities, the company has expanded into a new energy storage application, Power to Gas , a technology that converts electrical power to fuel. So far, this business remains included in OnSite; nonetheless, it is expected to benefit both the electroylizer and fuel cell segments. Power Systems Power Systems is based in Mississauga, Ontario, Canada, with a satellite facility in Gladbeck, Germany, and develops products for energy storage, stationary and motive power applications. It is based on Proton Exchange Membrane (PEM) fuel cell technology, which transforms chemical energy liberated during the electrochemical reaction of hydrogen and oxygen into electrical energy. This division includes the design, development,

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Hydrogenics Corporation

manufacture and sale of fuel cell products, and is well supported by commercial product and project work. Hydrogen generation systems, which use alkaline and PEM water electrolysis technologies, are sold directly to industrial customers, as well as through leading merchant gas channel partners. Also, this division targets back-up power for telecom and data centre installations, motive power applications and heavy-duty applications, such as buses, trucks and utility vehicles. Hydrogenics Product Line The companys product line is divided into three categories:
I) Industrial Hydrogen Generators by Electrolysis
INDOOR INSTALATION INDOOR INSTALATION The HySTAT Outdoor Version is a turnkey hydrogen generation plant that comes installed inside a modified ISO high cube shipping container. The container hosts the electrolyzer and the optional utility equipment such as the water treatment system & cooling systems. All mechanical and electrical interconnections are made inside the container, which simplifies and reduces the installation costs on site. The container is weatherized and can be installed in temperatures ranging from -20C to A HySTAT10-60 units consists of a hydrogen generating unit with our proprietary IMET cell stack, a control/power panel with controlled AC/DC conversion to produce hydrogen in a safe and reliable way. POWER PLANT SOLUTIONS Hudrogenics offer complete packages to deliver hydrogen in a safe and reliable way to cool down generators with no concessions on quality of its equipment. This ensures hydrogen availability at all time .

The HySTAT Indoor Version is a modular electrolyzer composed of skids and enclosures that are easily interconnected.

HyLYZER PEM Electrolysis Technology is a modular electrolyzer which uses clean deionized water and either AC or DC electricity to produce up to 1.1 and 2.2 normal cubic metre per hour (Nm 3/h) of hydrogen. The electrolysis reaction takes place within a proton exchange membrane (PEM) cell stack. Models: - HyLYZER- 1 Nm3/h - HyLYZER- 2 Nm3/h

INDOOR LARGE CAPACITY

It is adapted specifically to meet the requirements of higher capacity installation in excess of 500Nm3/h.

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Hydrogenics Corporation

II) Energy Storage and Fueling Solutions

POWER-TO-GAS Hydrogenics is pioneering Power-to-Gasan innovative energy conversion and storage solution using electrolysis. Power-to-Gas is a highly effective way of integrating renewables. It can provide a rapid, dynamic response to the Independent Grid Operators signal to adjust to the variations in renewable generation output. Unlike other energy storage technologies, Power-to-Gas provides the means to both store and transport energy.

III) Fuel Cell Power Systems

MOBILITY POWER It offerstransportation application to displace outdated petroleum burning technology with clean, efficient, reliable and abundant hydrogen power. Hydrogenics products: HyPX Power Packs for powering electric motors in place of conventional lead-acid battery packs HyPM HD Fuel Cell PowerModules

HYDROGEN FUELING STATIONS

Defence, Aerospace and Security Hydrogenics provides a link to a cleaner energy future by filling the energy gaps in the air, space, land and underwater.

The HySTAT fueling station uses dvanced electrolysis technology to split water into hydrogen and oxygen, using only electricity.
Hydrogenics offers complete hydrogen fueling stations with modular capacities ranging from 20 kg to 130 kg/day and beyond. T

The hydrogen is dispensed at 350 or 700 bar.

REMOTE COMMUNITIES Hydrogenics build and install standalone hydrogen energy storage and power stations for remote communities. For 1MW and larger scale renewable energy systems, a Hydrogenics HES consists of Hydrogenics modules that can be configured and integrated:

Defence, Aerospace and Security Hydrogenics offers solutions to leave behind burning oil, gas and diesel for the advantages of advanced hydrogen technologies for remote and intermittent power needs. Power Systems products are operating in remote locales and commercial/industrial facilities around the globe: HyPM XR Fuel Cell Power Modules HyPMRacks with multiple fuel cell modules and power electronics in 19-inch server equipment racks

HySTAT Electrolysis Systems HyPM XR Fuel Cell Systems

Source: Company Reports

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Hydrogenics Corporation

Fuel cells 101 (Excerpts from FuelCellToday)

A fuel cell is like a battery in that it generates electricity from an electrochemical reaction. Both batteries and fuel cells convert chemical energy into electrical energy and also, as a by-product of this process, into heat. However, a battery holds a closed store of energy within it and once this is depleted the battery must be discarded, or recharged by using an external supply of electricity to drive the electrochemical reaction in the reverse direction. A fuel cell, on the other hand, uses an external supply of chemical energy and can run indefinitely, as long as it is supplied with a source of hydrogen and a source of oxygen (usually air). The source of hydrogen is generally referred to as the fuel and this gives the fuel cell its name, although there is no combustion involved. Oxidation of the hydrogen instead takes place electrochemically in a very efficient way. During oxidation, hydrogen atoms react with oxygen atoms to form water; in the process, electrons are released and flow through an external circuit as an electric current. Fuel cells can vary from tiny devices producing only a few watts of electricity up to large power plants producing megawatts. All fuel cells are based on a central design using two electrodes separated by a solid or liquid electrolyte that carries electrically charged particles between them. A catalyst is often used to speed up the reactions at the electrodes. Fuel cell types are generally classified according to the nature of the electrolyte they use. Each type requires particular materials and fuels and is suitable for different applications.

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Hydrogenics Corporation

IMPORTANT DISCLOSURES Analyst's Certification All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of the subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report. The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete. Byron Capital Markets Ltd. (Byron) is a Member of IIROC and CIPF. Byron compensates its research analysts from a variety of sources. The research department is a cost centre and is funded by the business activities of Byron including institutional equity sales and trading, retail sales and investment banking. Since the revenues from these businesses vary, the funds for research compensation vary. No one business line has greater influence than any other for research analyst compensation. Dissemination of Research Byron endeavours to make all reasonable efforts to provide research simultaneously to all eligible clients. Byron equity research is distributed electronically via email and is posted on our proprietary website to ensure eligible clients receive coverage initiations and ratings changes, targets and opinions in a timely manner. Additional distribution may be done by the sales personnel via email, fax or regular mail. Clients may also receive our research via a third party. Company Specific Disclosures: None Investment Rating Criteria STRONG BUY The security represents extremely compelling value and is expected to appreciate significantly from the current price over the next 12-18 month time horizon. BUY The security represents attractive value and is expected to appreciate significantly from the current price over the next 12-18 month time horizon. The security is considered a BUY but in the analysts opinion possesses certain operational and/or financial risks that may be higher than average. The security represents fair value and no material appreciation is expected over the next 12-18 month time horizon. The security represents poor value and is expected to depreciate over the next 12-18 month time horizon.

SPECULATIVE BUY

HOLD

SELL

Other Disclosures This report has been approved by Byron for distribution in Canada for the use of Byrons clients. Client s wishing to effect transactions in any security discussed should do so through a qualified Byron salesperson, registered in their jurisdiction. Informational Reports From time to time, Byron will issue reports that are for information purposes only, and will not include investment ratings. These reports will be clearly labeled as appropriate.

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