A method and apparatus for improving the water balance in a power unit by providing the exhaust gas from the cathode side of the fuel cell as a feed gas to the combustion system condensing at least a portion of water present in the effluent from the combustion system in a condenser, and then transferring water vapor from the uncondensed portion of the effluent from the condenser to the gas fed to the cathode side of the fuel cell. Water from the exhaust gas from the cathode side of the fuel cell is either captured in the condenser, or is reused in the feed gas of the cathode side of the fuel cell. By humidifying the air fed into system with the water vapor present in the exhaust gas, water is not lost from the system. Instead, the air is being fed into the system is humidified with this water, which in turn allows the humidifier to operated at higher temperatures and/or use smaller radiators and fans and/or draw less parasitic power, thereby increasing overall system efficiency.