FuelCell faces un­cer­tain fu­ture

The News-Times - - BUSINESS - By Alexander Soule

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.”

Hearst Connecticu­t Me­dia file photo

Power gen­er­a­tion equip­ment at the FuelCell En­ergy plant in Tor­ring­ton.

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