Location of heat pump water heater - heated or unheated space?

[dwdanby]

Three bids told me heated space, and we were planning on the small furnace room. Fourth bid says my power company's rebate for this upgrade will be denied if the heater is installed inside the house. Where should a heat pump water heater be installed? and what are the space requirements? The furnace room is about 8' x 10'. Thanks!