Document:

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EXHIBIT NO

   10.48       Contract Change No. 2 to SMUD I.

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SMUD
SACRAMENTO MUNICIPAL UTILITY DISTRICT 6201 S STREET, P.O. BOX 15830,
SACRAMENTO CA 95852-1830 (916) 452-3211

CONTRACT NO.    H-126     CHANGE NO.     2                FOR INTERNAL USE ONLY
             ----------               -------
  DARPA Fuel Cell Hybrid Vehicle Project
----------------------------------------------------     W.O./DIST. NO.
               CONTRACT TITLE                                        -----------

Development of reformer and fuel cell power system
----------------------------------------------------     PROJECT     -----------
              CONTRACT SCOPE

               for hybrid electric vehicle               COST CENTER -----------
----------------------------------------------------
                                                         RESOURCE    -----------

      THIS AGREEMENT made by and between SACRAMENTO MUNICIPAL UTILITY
DISTRICT, hereinafter called the District, and H POWER CORPORATION,

hereinafter designated as H Power, WITNESSETH; That the parties hereto
mutually agree to the following changes in the above numbered contract
between the parties, hereinafter call the "original contract":

IN SECTION 5.G, AUDITS, REPLACE PARAGRAPH 5.G.2) AS FOLLOWS:

      For years in which H Power expends $300,000 or more in federal awards,
      H Power shall have an audit made for that year by an independent
      auditor, in accordance with 32 CFR Part 34 (DoD Administrative
      Requirements for Grants and Agreements with For-Profit Organizations). The
      auditor shall determine and report whether:

      a)    H Power has an internal control structure that provides reasonable
            assurance that it is managing Federal laws and regulations,
            and with the terms and conditions of the award.

      b)    Based on a sampling of Federal award expenditures, H Power has
            complied with laws, regulations, and award terms that may have a
            direct and material effect on Federal awards. This audit shall be
            performed annually within six months of the end of H Power's
            fiscal year for each year in which Federal funds are received
            under this Agreement, including the year in which the Agreement
            expires or is terminated pursuant to paragraph 26.

      This contract change is subject to all provisions of the original
contract and all provisions of any previous Contract Changes which are not
expressly superceded in this Contract Change.

    SACRAMENTO MUNICIPAL UTILITY DISTRICT               H POWER CORPORATION
                                               --------------------------------
                                                         CONTRACTOR

By  /s/ Jan Schori                             By /s/ Arthur Kaufman 4/30/99
   ---------------------------------------     --------------------------------
                                    DATE                                 DATE

Type name        JAN SCHORI                   Type Name      ARTHUR KAUFMAN
          --------------------------------                ---------------------

Title          General Manager                Title          Vice President
         ---------------------------------                ---------------------

CONTRACT TEMPLATE

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IN SECTION 5.G, AUDITS, ADD PARAGRAPH 5.G.3) AS FOLLOWS:

3)    For years in which H Power expends less than $300,000 in federal
      awards, the District may require, at its option, an agreed upon
      procedures audit performed by a qualified independent Certified Public
      Accountant (CPA) to ensure that H Power has complied with Federal laws
      and regulations and with the terms and conditions of the award. This
      audit will be conducted in accordance with the American Institute of
      Certified Public Accountants' (AICPA's) generally accepted auditing
      standards (GAAS) and attestation standards.

AMENDED SECTION 6, TERM, AS FOLLOWS:

6.   TERM.    This Agreement shall commence upon the effective date and
shall, unless earlier terminated pursuant to paragraph 26 and subject to
paragraph 26, continue in effect until June 30, 1999.

IN SECTION 7, PROJECT REPORTS AND OTHER DOCUMENTATION, REPLACE PARAGRAPH A,
MONTHLY REPORTS AS FOLLOWS:

A.   MONTHLY REPORTS.    Upon request, H Power shall provide to the SMUD
Project Manager a monthly summary report of all activities during the
previous month toward accomplishing Project objectives. Included in the
monthly report shall be the status of Project tasks, the current projection
for completion of tasks, a summary of expenditures during the applicable
month, a projection of future costs for the Project, and a discussion of
problems and potential problems that SMUD may need to take action upon or
communication to DARPA.

      This Contract Change is subject to all provisions of the original
contract and all provisions of any previous Contract. Changes which are not
expressly superceded in this Contract Change.

SACRAMENTO MUNICIPAL UTILITY DISTRICT         JS                     AK
                                          ------------         ----------------
                                             INIT.             CONTRACTOR INIT.<PAGE>

Exhibit No.
-----------

10.49        --  Contract change No. 3 to SMUD I.

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                                 Page 1 of 3

SMUD LOGO

SACRAMENTO MUNICIPAL UTILITY DISTRICT 6201 S Street, P.O. Box 15830,
Sacramento CA 95852-1830 (916) 452-3211

                                             -----------------------------------
CONTRACT NO.    H-126    CHANGE NO.   3             FOR INTERNAL USE ONLY
             ----------             -----    -----------------------------------

 DARPA Fuel Cell Hybrid Vechicle Project     W.O./DIST. NO.
-----------------------------------------    -----------------------------------
            CONTRACT TITLE
  Development of reformer and fuel cell     PROJECT
-----------------------------------------   ------------------------------------
            CONTRACT SCOPE
   power system for hybrid electric bus      COST CENTER
-----------------------------------------   ------------------------------------

                                            RESOURCE
                                            ------------------------------------

     THIS AGREEMENT made by and between SACRAMENTO MUNICIPAL UTILITY DISTRICT,
hereinafter called the District and H POWER CORPORATION.

hereinafter designated as H Power, WITNESSETH; That the parties hereto
mutually agree to the following changes in the above numbered contract between
the parties, hereinafter call the "original contract".

THE GENERAL INTENT OF THIS CONTRACT CHANGE IS TO REDUCE THE RESPONSIBILITIES
OF H POWER RELATED TO FUEL SYSTEM AND VEHICLE INSTALLATION WORK. SMUD WILL
CONTRACT DIRECTLY FOR MATERIALS, PARTS AND LABOR TO COMPLETE INSTALLATION OF THE
10 KILOWATT FUEL CELL SYSTEM.

IN SECTION 2. PROJECT FUNDING, REPLACE PARAGRAPH E AS FOLLOWS:
---------------------------------------------------------------

E.    SMUD agrees to provide to H Power funds received from DARPA in the
amount of four hundred forty-eight thousand dollars ($448,000.00). These funds
shall be provided in accordance with paragraph 5.E of this Agreement. The
portion of these funds paid to H Power under Participation Agreement No. G-225
amounted to $250,000, thus DARPA funds remaining to be paid to H Power amount
to one hundred ninety-eight thousand dollars ($198,000).

IN SECTION 4, PROJECT SCOPE, REVISE THE FOLLOWING TASKS AND SUBTASKS OF THE
----------------------------------------------------------------------------
STATEMENT OF WORK (ATTACHMENT NO. 1) TO REDUCE THE RESPONSIBILITIES OF H POWER:
-------------------------------------------------------------------------------

Subtask 2.3:    Hydrogen Storage

This subtask provides for the fuel system design, specifications and materials
lists necessary to install a compressed hydrogen fuel system in a light duty
shuttle bus.

    This Contract Change is subject to all provisions of the original contract
and all provisions of any previous Contract Changes which are not expressly
superseded in this Contract Change.

  SACRAMENTO MUNICIPAL UTILITY DISTRICT               H POWER CORP
----------------------------------------   -------------------------------------
                                                       CONTRACTOR

By  /s/ Jan Schori               7/2/99    By  /s/ Arthur Kaufman
  --------------------------------------      ----------------------------------
                                  Date                                    Date

Type Name     JAN SCHORI                   Type Name   ARTHUR KAUFMAN
          ------------------------------             ---------------------------

Title         General Manager              Title        Vice President
      ----------------------------------         -------------------------------

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                                 Page 2 of 3

Subtask 2.8:    Electric Drive System Integration

This task provides the modifications to integrate the fuel cell system with
the vehicle drive train. Wiring harnesses will be designed where
modifications are necessary for the main drive power and auxiliary power
system wiring. These and other control, instrumentation and power wiring shall
be included in design documents provided to SMUD and other project
participants for use in completing required modifications.

Subtask 2.9:    Vehicle Installation and Tests

2.9.1   The fuel cell stack modules and support systems will be installed in
        the test and demonstration vehicle to provide a fully functioning
        fuel cell and battery hybrid power system.

2.9.2   The testing and initial demonstration of the vehicle will be
        supported by H Power on an as needed basis to assure proper operation
        of all power system component parts and the integrated system. Fuel
        cell and fuel supply systems will be tested and performance data will
        be collected and reported to SMUD and DARPA.

2.9.3   The off-board fuel supply system will be supported by H Power on an
        as needed basis to assure no detrimental effects result from fueling
        and refueling operations during the installation, test and
        demonstration periods.

IN SECTION 5.E, INVOICES AND PAYMENTS, REPLACE SUBPARAGRAPH 2) AS FOLLOWS:

2)  Milestone payments shall be based on completion of payable milestones as
    described in Attachment 1, Statement of Work. Upon completion of a payable
    milestone, H Power shall submit documentation describing and certifying
    such completion. Payments shall be made on the basis of milestone
    accomplishments as follows:

<TABLE>
    <S>                                                         <C>
    a)  Completion of Subtasks 1.4, 1.6.2, 3.1                  $130,000 (paid under G-225)

    b)  Completion of Subtasks 1.1.2, 1.2, 1.3 1.4, 1.5, 3.4    $ 83,000

    c)  Completion of Subtasks 1.6.3, 2.1, 3.5                  $ 40,000

    d)  Completion of Subtasks 2.2, 2.3, 2.4, 2.5, 2.6          $ 20,000

    e)  Completion of Subtasks 2.7.1 and 2.7.2                  $ 20,000
</TABLE>

This Contract Change is subject to all the provisions of the original
contract and all provisions of any previous Contract Changes which are not
expressly superseded in this Contract Change.

SACRAMENTO MUNICIPAL UTILITY DISTRICT         JS                        AK
                                         ---------------        ---------------
                                             Init.              Contractor Init.

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                                 Page 3 of 3

<TABLE>
    <S>                                                         <C>
    f)  Completion of Subtasks 2.7.3 and 2.7.4                  $  7,000

    g)  Completion of Subtasks 2.9.1                            $ 18,000

    h)  Completion of Subtasks 2.9.2                            $  5,000

    i)  Completion of Subtasks 1.7, 2.10, 3.6                   $  5,000
                                                                --------
                 Total under Contract H-126                     $198,000
</TABLE>

AMEND SECTION 6, TERM, AS FOLLOWS:

6.  TERM.  This Agreement shall commence upon the effective date and shall,
unless earlier terminated pursuant to paragraph 26, and subject to paragraph
26, continue in effect until May1, 2000.

REPLACE SECTION 13, PROJECT PROPERTY OWNERSHIP, WITH THE FOLLOWING:

13.  PROJECT PROPERTY OWNERSHIP.  Title to all nonexpendable and expendable
tangible personal property purchased or otherwise created through the direct
Project work of H Power shall be deemed to have vested in H Power upon
purchase, fabrication, manufacture or by other means of acquisition. The
Project vehicle which will result from completion of vehicle integration
activities of H Power and other participants in the project, as further
described in the Statement of Work, will remain in complete and functional
condition, with fuel cell power system installed, until such time as H Power
determines that the power system must be removed, but not earlier than May 1,
2000. The parties may extend this time by mutual written agreement.

REPLACE SECTION 26, TERMINATION, WITH THE FOLLOWING:

26.  TERMINATION.  Either Party may terminate this Agreement at any time
upon giving of no less than 60 days prior written notice to the other Party.
Upon notice of termination, H Power shall immediately cease work under this
Agreement and shall take all steps reasonably necessary to mitigate any costs
or expenses for which SMUD or DARPA may be liable hereunder. Notwithstanding
anything to the contrary contained herein,  SMUD shall not be liable for any
cost or expense incurred by H. Power after termination of this Agreement.

This Contract Change is subject to all the provisions of the original
contract and all provisions of any previous Contract Changes which are not
expressly superseded in this Contract Change.

SACRAMENTO MUNICIPAL UTILITY DISTRICT         JS                        AK
                                         ---------------        ---------------
                                             Init.              Contractor Init.

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