FuelCell faces uncertain future
After terminating its CEO last week, FuelCell Energy warned investors this week that looming debt raises “substantial doubt” about its ability to stay in business.
The company said it is attempting to refinance debt with one lender to buy additional time to find a path to growth.
FuelCell has its headquarters in Danbury and in Torrington the company manufactures fuel cells that produce electricity through a chemical process.
On Tuesday, the company disclosed in a Securities & Exchange Commission filing that it expects to record a $22.9 million loss for the three-month period through the end of April, on revenue of $9.2 million that was down by more than half from the same period in 2018.
In conjunction with the investor warning, FuelCell disclosed a deal with ExxonMobil in which the giant is paying $10 million to acquire all patent rights associated with a fuel-cell system designed to help capture carbon emissions at energy plants.
FuelCell shares gained 28 percent on Wednesday to close at 51 cents, still less than half their value from early June.
In a February SEC filing, FuelCell listed Hudson Bay Capital Management as its single largest stockholder, with more than 5 million shares.
FuelCell has named its head in-house lawyer, Jennifer Arasimowicz, as company president after terminating Chip Bottone as CEO, as disclosed last week to the SEC.
The company’s board of directors is chaired by James England, who runs a Florida company that installs and services lawn sprinkler systems.
Job cuts after state aid
In reaching its 50th anniversary this year, FuelCell topped for the first
time $1 billion in accumulated deficits, with Bottone having failed to find a path to sustained growth after being hired in February 2010 as FuelCell’s chief commercial officer.
Bottone had previously spent 25 years with Ingersoll Rand, rising to president of a unit developing alternative energy systems, before leaving in 2008 and consulting prior to joining FuelCell.
Within a year of his arrival, the company promoted Bottone to CEO, replacing Dan Brdar who had led the company since 2006,
with Bottone inheriting stewardship of a supply arrangement to Posco, a South Korean utility which was building the world’s largest fuel-cell power plant at the time.
To meet demand for modules manufactured in Torrington, Bottone negotiated a $10 million loan package from the state of Connecticut to expand the plant, but after cutting 135 jobs there this year worked out a new timeline to meet its job commitments.
In a Tuesday SEC filing, FuelCell stated “there is substantial doubt about the (company’s) ability to continue to operate as a going concern within one year,” and did not rule out the
possibility of a deeper loss should it identify additional financial “impairments” based on a further review of its business.
Under Bottone, FuelCell had been attempting in the past year to pivot to a business model of owning fuelcell power plants, as an adjunct to its longtime focus on building and selling the systems to others.
FuelCell recently bought back a Bridgeport plant it had constructed in 2013 for Dominion, paying $36.6 million.
As of the end of April, FuelCell had less than $15 million in cash unrestricted by any loan contracts, and another $38 million restricted by contractual
terms pegged to its financial profile.
FuelCell faces an Aug. 9 deadline to refinance debt held by Hercules Capital or extend repayment dates, which failing to do so could trigger a default, with the company’s chief financial officer telling investors in March that the Hercules short-term debt totaled $25 million.
‘Grinding things out’
Hercules, based in Palo Alto, Calif. and with offices in New York City and Hartford, lists FuelCell under and extensive portfolio of “special situations” loans it makes, in some scenarios to public companies at critical junctures as they try to find
a path to sustainable growth.
Late last year, FuelCell had lined up $100 million in new financing from Generate Lending to provide capital for construction of new fuel cell plants, with the company’s backlog of projected orders at $1.3 billion at last report.
The company’s projects include electricity generators in Derby and at the U.S. Navy Submarine Base in Groton.
Nearly to the end, Bottone projected an upbeat image to investors on the company’s outlook, highlighting several upcoming projects during a March conference call, including with the New York-based
Long Island Power Authority.
Arasimowicz did not respond immediately Thursday to a Hearst Connecticut Media query on whether the company anticipates additional layoffs if it is unable to refinance its debt.
“The main emphasis for us (has been) execution,” Bottone said in early March. “We would say that’s pretty exciting, but when you’re grinding things out as we’ve done there’s a lot of things that went into delivering those results that will pay dividends for us in the future.”
Power generation equipment at the FuelCell Energy plant in Torrington.