Eighteen months after announcing a distribution alliance,

FuelCell Energy

(FCEL) - Get Report

and

Caterpillar

(CAT) - Get Report

announced their first joint sale of an "ultra-low emission" fuel-cell power plant in California, which will service 5.4 million residents.

In a statement Tuesday after the bell, the companies said the sanitation districts of the County of Los Angeles will use a 250-kilowatt Direct FuelCell power plant. Full financial details of the agreement were not available, but the companies said the sanitation districts will get $1.125 million in renewable incentive funding from the California Public Utilities Commission.

Shares of FuelCell rose $1.35, or 12%, at $12.50 in Wednesday Instinet premarket trading, while Caterpillar was up 30 cents at $71.75.

The new plant, with a fourth-quarter delivery date, is expected to provide energy cost savings for the districts, which treat about 530 million gallons of wastewater daily. The districts use biogas and biomass byproducts from waste to generate electricity, the companies said.

Caterpillar and FuelCell formed a partnership in April 2002 to distribute and develop ultra-low emission fuel cell power generation products for industrial and commercial use.

Direct FuelCell power plants generate electricity with no combustion. The companies described them as "large continuously operating batteries that generate electricity as long as fuel, such as natural gas, is supplied. Since the fuel is not burned, there are virtually no emissions."