Well, gang, Energer Z is here and it's not pleased. Apparently piloted by Kenzo Kabuto-- who should be dead-- the prototype charges Kurogane House and Kouji has to take it on in Mazinger. Things don't go well: the robots have the same armament and Energer wins every clash. As Mazinger gets tossed around like a rag doll, the episode centers on the people inside of Kurogane House, where we spend most of the episode in a flashback and finally figure out the circumstances of the "deaths" (because who knows, really) of Tetsuya Tsurugi and Kenzo Kabuto.
Kenzo seems to have come for the arm of Zeus, which you'll recall was found buried deep inside Bardos Island by the Kabutos, Dr. Hell, Tetsuya and Tsubasa on their expedition. This arm, sliced from Zeus' arm by Hades in the distant past, is the source of Japanium ore, which is the source of Super Alloy Z, which is, of course, what Mazinger and Energer are made out of. Tetsuya says outright what you, if you watched Giant Robo, might have already guessed at: Japanium is sentient, and Photon Power is the life energy of Zeus.
Of course, it isn't long before ol' Dr. Hell decides he wants such a bombshell for himself, and so he betrays everybody. Of course, he's not the only one: it's revealed that Kenzo, hungry for power and possessed by a Kedora, also took part in this rebellion. As things turn out, Tetsuya holds Kenzo down, and Tsubasa has to make a shot that kills both men... except both men seem to be alive and kicking in the present, and though I've assumed they are ghosts, the show has made no explicit statement to that effect.
I should note that Tsubasa's voice actress is not very convincing during these flashbacks in the role of "naive young scientist, not yet hardened to the ways of the world."
And so, back in the present time, Pygman's proposal is this: give Dr. Hell Zeus' arm, and he, Tetsuya, the rampaging Energer Z, and Tsubasa's live-threatening spirit sickness will simply disappear. (No reason not to go along with this, right guys?) Tsubasa's response is this:
That's right, it was lying around at Kurogane House this whole time. Talk about a cliffhanger. Get hype for next week!