This article outlines the concept, theory and performance of an engine for converting the heat in warm, saturated air to electrical energy. The engine comprises a drive balloon and a support balloon both connected to an electric generator by a rope. Warm, saturated air from a source such as a solar pond or the cooling tower of a power station is used to charge the larger drive balloon. The two balloons ascend several kilometers while performing work on the electric generator. At some maximum height the larger drive balloon discharges all its air into the cold upper atmosphere and, with the smaller balloon providing support for the larger balloon envelope, the two balloons are hauled back to ground by switching the electric generator to electric motor operation. The work done by the system on the electric generator during ascent exceeds the work done on the system by the electric motor during descent resulting in a positive work output. Condensation of water vapor in the drive balloon maintains the internal saturated air temperature above ambient temperature and provides an increasing lift force with height. Recycling the condensate adds to the work output of the engine and conserves water. The ideal thermal efficiency of the engine approaches 15%, corresponding to the large temperature difference available within the 10 km height of the troposphere. The engine power scales as the cube of the drive balloon diameter. Scaling by a factor of four up from the diameter of commercially available balloons provides power outputs in the MW range. (C) 2011 Elsevier Ltd. All rights reserved.