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Fuel cell stocks rise on Bush speech

DETROIT, Jan 29 (Reuters) - Stocks in companies that develop hydrogen fuel cells were up on Wednesday after President Bush called in his State of the Union speech for $1.2 billion to develop hydrogen-powered vehicles.

Shares of Ballard Power Systems Inc. were up 12 cents, or about 1 percent, at $10.80 in trading on the Nasdaq stock exchange, while shares of Plug Power Inc. and Millennium Cell Inc. were up about 5 percent. The company shares already had risen on Tuesday in advance of the president's speech.

"Certainly we need to see how and where this money is going to be allocated," said Eric Prouty, an analyst at Boston-based investment banking firm Adams, Harkness and Hill. But he said the president's speech "takes fuel cell vehicles out of the realm of "Star Trek" type technology."

Fuel cells create electricity without pollution by combining hydrogen and oxygen into water. In his speech, Bush said fuel cells could not only reduce pollution from vehicles, but also reduce American dependence on imported oil.

"With a new national commitment, our scientists and engineers will overcome obstacles to taking these cars from laboratory to showroom -- so that the first car driven by a child born today could be powered by hydrogen and pollution free," Bush said in his speech.

While automakers have been touting the benefits of fuel cells, they have also warned that high costs and many technical hurdles must be overcome before fuel cells could replace internal-combustion engines in vehicles .

Several automakers have shown prototype fuel-cell vehicles, and a few have leased them to universities and other institutions for additional testing. But automakers say mass production of fuel-cell vehicles is at least a decade away, and would likely require billions of dollars in infrastructure for delivering hydrogen.

Ballard has been the main partner with Ford Motor Co. and DaimlerChrysler AG in efforts to develop fuel-cell powered vehicles, and has provided fuel cells to other automakers as well. Millennium Cell has developed a storage system for hydrogen in vehicles, while Plug Power has a partnership with Honda Motor Co. Ltd.

Prouty predicted stocks in fuel cell companies would remain volatile, noting that many of the companies have yet to report a profit on fuel cells, and had seen their shares fall as energy prices fell.

"It's a sector that I think had really fallen out of favor for a while that now people are taking another look at," he said. (Reporting by Justin Hyde, Tom Brown, editing by David Gregorio; [email protected]; Reuters Messaging: [email protected]; 313-870-0200)