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FUELCELL ENERGY, INC._October 31, 2024

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended October 31, 2024

For the transition period from to

Commission file number: 1-14204

FUELCELL ENERGY, INC.

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

3 Great Pasture Road

Danbury, Connecticut 06810

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (203) 825-6000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻No☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ◻No☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2024, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $424,996,599 based on the closing sale price of $27.84 as reported on the NASDAQ Global Market, which was retroactively adjusted for the 1-for-30 reverse stock split effective as of 5:00 p.m. ET on November 8, 2024.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class Outstanding at December 23, 2024

DOCUMENT INCORPORATED BY REFERENCE

Document Parts Into Which Incorporated

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FUELCELL ENERGY, INC.

INDEX

Page

Description Number

Part I

Item 1 Business 3

Item 1A Risk Factors 27

Item 1B Unresolved Staff Comments 44

Item 1C Cybersecurity 44

Item 2 Properties 46

Item 3 Legal Proceedings 46

Item 4 Mine Safety Disclosures 46

Part II

Item 6 Reserved 49

Item 7A Quantitative and Qualitative Disclosures About Market Risk 76

Item 8 Financial Statements and Supplementary Data 78

Item 9A Controls and Procedures 130

Item 9B Other Information 131

Part III

Item 10 Directors, Executive Officers and Corporate Governance 132

Item 11 Executive Compensation 132

Item 14 Principal Accountant Fees and Services 133

Part IV

Item 15 Exhibits and Financial Statement Schedules 134

Signatures 144

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PART I

Item 1.BUSINESS

Index to Item 1. BUSINESS Page

Forward-Looking Statement Disclaimer 4

Risk Factor Summary 6

General Information 8

Business Overview 9

Our Market Opportunity 9

Our Business Strategy 10

Our Business Model and Competitive Advantages 11

Product Platforms and Applications 12

Our Product Platform Applications – Current and Future 13

Our Markets 14

Levelized Cost of Energy 15

Competition 15

Our Commitment to Sustainability 16

Advanced Technologies Programs 17

License and Joint Development Agreements with EMTEC 17

Company Funded Research and Development 19

Proprietary Rights and Licensed Technology 19

Manufacturing and Service Facilities 20

Raw Material Sourcing and Supplier Relationships 21

Engineering, Procurement and Construction 22

Services and Warranty Agreements 22

Significant Developments in Government Activity 22

Government Regulation 23

Significant Customers 23

People and Organizational Development 23

Available Information 24

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Forward-Looking Statement Disclaimer

This Annual Report on Form 10-K contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). All statements other than statements of historical fact included in this Form 10-K, including statements regarding the Company’s future financial condition, results of operations, plans, objectives, expectations, future performance, business operations and business prospects, are forward-looking statements. Words such as “expects,” “anticipates,” “estimates,” “goals,” “projects,” “intends,” “plans,” “believes,” “predicts,” “should,” “seeks,” “will,” “could,” “would,” “may,” “forecast,” and similar expressions and variations of such words are intended to identify forward-looking statements and are included, along with this statement, for purposes of complying with the safe harbor provisions of the PSLRA. Forward-looking statements are neither historical facts, nor assurances of future performance. Instead, such statements are based only on our beliefs, expectations, and assumptions regarding the future. As such, the realization of matters expressed in forward-looking statements involves inherent risks and uncertainties. Such statements relate to, among other things, the following:

● the expected timing of completion of our ongoing projects,

● our business plans and strategies,

● the markets in which we expect to operate,

● expected operating results such as revenue growth and earnings,

● future funding under Advanced Technologies contracts,

● the expected cost competitiveness of our technology,

The forward-looking statements contained in this report are subject to risks and uncertainties, known and unknown, that could cause actual results and future events to differ materially from those set forth in or contemplated by the forward-looking statements, including, without limitation, the risks described under Item 1A - Risk Factors of this report and the following factors:

● general risks associated with product development and manufacturing,

● general economic conditions,

● changes in interest rates, which may impact project financing,

● supply chain disruptions,

● changes in the utility regulatory environment,

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● rapid technological change,

● competition,

● market acceptance of our products,

● factors affecting our liquidity position and financial condition,

● government appropriations,

● our ability to successfully market and sell our products internationally,

● our ability to develop additional commercially viable products,

● our ability to implement our strategy,

● our ability to protect our intellectual property,

● litigation and other proceedings,

● our need for and the availability of additional financing,

● our ability to generate positive cash flow from operations,

● our ability to service our long-term debt,

We cannot assure you that:

● we will be able to meet any of our development or commercialization schedules,

● our power plants will be commercially successful,

The forward-looking statements contained herein speak only as of the date of this report and readers are cautioned not to place undue reliance on these forward-looking statements. Except for ongoing obligations to disclose material information under the federal securities laws, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.

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Risk Factor Summary

Our business is subject to numerous risks and uncertainties, including those described in Item 1A “Risk Factors”. These risks include, but are not limited to the following:

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● We may be affected by environmental and other governmental regulation.

● We are subject to risks inherent in international operations.

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General Information

Information contained in this report concerning the electric power supply industry and the distributed generation market, the distributed hydrogen market, the energy storage market and the carbon capture market, our general expectations concerning these industries and markets, and our position within these industries and markets are based on market research, industry publications, other publicly available information and assumptions made by us based on this information and our knowledge of these industries and markets, which we believe to be reasonable. Although we believe that the market research, industry publications and other publicly available information, including the sources that we utilized in preparing certain portions of this report, are reliable, they have not been independently verified by us and, accordingly, we cannot assure you that such information is accurate in all material respects. Our estimates, particularly as they relate to our general expectations concerning the electric power supply industry and the distributed generation market, the distributed hydrogen market, the energy storage market and the carbon capture market, involve risks and uncertainties and are subject to change based on various factors, including those discussed under the section of this report entitled “Item 1A - Risk Factors.”

Unless otherwise specifically noted herein, all degrees refer to Fahrenheit (“F”); kilowatt (“kW”) and megawatt (“MW”) numbers used in this report designate nominal or rated capacity of the referenced power plant which is the design rated output of the referenced power plant as of the date of initiation of commercial operations; “efficiency” or “electrical efficiency” means the ratio of the electrical energy generated in the conversion of a fuel to the total energy contained in the fuel (lower heating value, the standard for power plant generation, assumes the water in the product is in vapor form; as opposed to higher heating value, which assumes the water in the product is in liquid form, net of parasitic load); kW means 1,000 watts; MW means 1,000,000 watts; “kilowatt hour” (“kWh”) is equal to 1kW of power supplied to or taken from an electric circuit steadily for one hour; and one British Thermal Unit (“Btu”) is equal to the amount of heat necessary to raise one pound of pure water from 59oF to 60oF at a specified constant pressure.

All dollar amounts are in U.S. dollars unless otherwise noted.

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Business Overview

At FuelCell Energy, our purpose is to enable a world powered by clean energy. Founded in 1969 and headquartered in Danbury, Connecticut, we are a global leader in delivering a variety of clean energy solutions to address some of the world’s most critical challenges around energy access, resilience, reliability, affordability, safety and security. Since our inception, FuelCell Energy has been innovating and developing commercial technologies that produce clean electricity, heat, clean hydrogen, and water. We are also proud to be at the forefront of what we believe to be one of the most critical technologies required to achieve the world’s overall emissions objectives: carbon capture.

Our business model focuses on generating recurring revenue through power purchase agreements and long-term service agreements, in addition to non-recurring revenue generated through power platform and component sales and research contracts related to the development of our Advanced Technologies.

Our commercial product portfolio is based on our carbonate electrochemical platform. We offer our products in several different configurations for a wide range of power and chemical applications, including electricity, hydrogen, high grade heat (including steam), water and CO2 upgradable to food and beverage grade and/or usable in cement or other industrial products, and to concentrate and separate CO2 from fossil-fueled industrial applications allowing the sequestration and/or utilization of the CO2. We also continue to invest in the development and commercialization of our solid oxide fuel cell platform. Our efforts include actively seeking strategic partnerships and opportunities that would enable us to deploy this technology as part of larger-scale energy, emissions reduction and hydrogen generation projects.

We target a range of markets and applications with our products, including utilities and independent power producers, data centers, wastewater treatment, commercial and hospitality, food and beverage, and microgrids, among others. We market our products primarily in the United States, Europe and Korea, and we are also pursuing opportunities in other countries around the world. We target for expansion and development markets and geographic regions that benefit from and value clean distributed generation; are located where there are high energy costs, poor grid reliability, and/or challenged transmission and distribution lines; can leverage the multiple value streams delivered by our platforms (electricity, hydrogen, thermal, water, and carbon recovery); are aligned with regulatory frameworks that harmonize energy, economic and environmental policies; and are committed to reducing their Scope 1 and Scope 2 emissions.

As a company, we are committed to helping our customers reduce their environmental impact. We are equally committed to reducing our environmental impact and have developed and begun implementing a plan to reduce our carbon emissions to net zero by 2050. Our platforms have a direct impact on reducing our customers’ Scope 1 and Scope 2 emissions, thus lowering the global environmental footprint of baseload, or primary, power generation.

In addition to our core commercial products, we engage strategically in research and development, both company-funded and carried out under grants from and commercial agreements with private companies and various government agencies through our Advanced Technologies programs. We focus on generating revenue from our core recurring and non-recurring revenue sources, while working to identify the next trends in clean energy we believe we can commercialize, take to market, and grow into future revenue streams.

Our Market Opportunity

While there have been many challenges for the clean energy sector during the past 18-24 months, we continue to believe a large and growing addressable market opportunity exists for our commercially available solutions and those solutions which we are actively developing for commercialization. Through the capabilities of our platforms, we provide clean, reliable baseload, or primary power generation (baseload, or primary, power generation is power generated over a period of time at a steady rate), hydrogen production, high grade heat, carbon recovery from the fuels utilized by our platforms, isolation and removal of CO2 from exhaust streams, and the ability to use biofuels, renewable natural gas (“RNG”), and a hydrogen-hydrocarbon fuel blend for power generation feedstock. In addition, we are focused on advancing the commercialization of our platform technologies to enable the use of pure hydrogen for baseload power generation, to perform electrolysis to convert water and electricity into hydrogen, and to isolate and remove CO2 from external exhaust streams.

Additionally, through the deployment of our power generation platform solutions, we can deliver the benefits of clean, distributed power generation, including the desirable value stream of thermal energy, and avoid the need for massive,

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expensive, difficult to permit, long distance transmission infrastructure and the above ground risks that the traditional transmission grid creates.

CO2 is also a valuable input ingredient in many products and processes. We believe that, by using more CO2 (carbon capture utilization) and emitting less CO2 through the efficiencies of our platforms and by capturing CO2 at the source point, the use of our platforms can positively impact climate change while improving air quality compared to traditional combustion power generation. Our platforms are capable of delivering CO2 for food and beverage use, pH balancing of water supply, extending the shelf life of food vital to global food supply and food security, as a binder in a number of materials from concrete to sustainable building materials and the production of synthetic fuels, polymers and other minerals.

See the section below entitled “Our Markets” for information regarding our existing and target markets.

Our Business Strategy

In 2019, we launched our “Powerhouse” strategy to strengthen our business, maximize operational efficiencies and position us for future growth. Having made progress in achieving key initiatives under the original three pillars of our strategy, in fiscal year 2022, we updated the three key pillars of our strategy to “Grow, Scale and Innovate.” In conjunction with the restructuring and revised strategic plan that our Board of Directors approved, and we announced, in November 2024, we have refined and updated certain aspects of this strategy and have further updated the three key pillars of our strategy to “Focus, Scale and Innovate.”

Focus — Penetrate Significant Market Opportunities

Scale — Scale Our Existing Platform to Support Growth

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Innovate — Innovate for the Future

Our Business Model and Competitive Advantages

Our business model is based on multiple revenue streams, targeting both recurring revenue and non-recurring revenue. Recurring revenue is delivered through recurring electricity, capacity, and renewable energy credit sales under power purchase agreements (“PPAs”) and tariffs for projects we retain in our generation operating portfolio, as well as service revenue, mainly through long-term service agreements. Non-recurring revenue is generated through power platform and component sales, as well as from public and private industry research contracts related to the development of our Advanced Technologies (which are discussed in more detail below).

We are a complete solutions provider for our platform solutions, controlling the design, sales, manufacturing, installation, operations, and maintenance of our patented fuel cell technology under long-term power purchase and service agreements. When utilizing long-term PPAs, the end-user of the power or utility hosts the installation and only pays for power as it is delivered, avoiding up-front capital investment. We also develop projects and sell equipment directly to customers, providing a complete solution of engineering, installing, and servicing the fuel cell power plant under an engineering, procurement, and construction agreement (“EPC”) and a long-term maintenance and service agreement. (See the sections below entitled “Engineering, Procurement and Construction” and “Service and Warranty Agreements” for more information.) We maintain the long-term recurring service obligation and associated revenues running conterminous with the life of such projects.

Customers and developers generally have the option to either purchase our fuel cell platforms outright or to enter into a PPA under which the customer or developer (i.e. the end-user of the power) commits to purchase power as it is produced for an extended period of time, typically 10 to 20 years. We may elect to retain ownership of a project, or we may elect to sell all or some of the project to a third party. If a project or project asset is sold, revenue from the sale is recognized and reflected in the Product revenues line item of our Consolidated Statements of Operations and Comprehensive Loss, and we recognize revenue separately for the long-term maintenance and service agreement with respect to the project over the term of that agreement. If a project is retained, we recognize electricity, capacity and/or renewable energy credits monthly over the term of the PPA. We report the financial performance of retained projects as Generation revenues and Cost of generation revenues in our Consolidated Statements of Operations and Comprehensive Loss.

Our decision to retain ownership of certain projects is based in part on the recurring, predictable cash flows these projects can offer us, the proliferation of PPAs in the industry and the potential access to capital. Retaining ownership of PPAs affords us the full benefit of future cash flows under the PPAs, which are expected to be higher than if we sell the projects, although retaining ownership requires more upfront capital investment and financing. We plan to continue to grow our operating portfolio of retained projects prudently and in a balanced manner, while also selling projects to customers or project investors when selling presents the best value and opportunity for our capital needs or meets the customer’s desired ownership structure. Additionally, we may monetize certain environmental and incentive tax credits through lending institutions and tax investors, including through entering into sale-leaseback and partnership-flip structures that reduce our required net capital investment in a project while still allowing us to retain ownership of the project.

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We operate and maintain our project platforms for the life of the project regardless of the ownership structure. For all operating fuel cell platforms not operating under a PPA, customers enter into long-term service agreements with us, some of which have terms of up to 20 years. We report the revenue earned under long-term maintenance and service agreements as Service agreements revenues in our Consolidated Statements of Operations and Comprehensive Loss.

Given the long history of investment in and deployment of our solutions, we believe we have distinct competitive advantages that underpin and enable our strategy, including a strong portfolio of products, intellectual property, deep technical expertise, strategic innovation and development relationships, and a track record of operational excellence.

Product Platforms and Applications

Our product portfolio is based on our carbonate electrochemical platform. Depending on its configuration, this platform supports power generation and combined heat and power applications using a variety of fuels, including a 50/50 blend of hydrogen and natural gas or biogas blends, biogas, renewable natural gas, and natural gas. The fuel cells utilized in these platforms react fuel electrochemically, without combusting the fuel, which avoids emissions produced by combustion such as nitrogen oxides (“NOx”), sulfur oxides (“SOx”) and particulates. In the electrochemical process, fuel and air are reacted in separate chambers in the fuel cell stack. The reactions producing CO2 happen before the fuel is mixed with air, and the CO2 is concentrated and therefore easy to recover and capture. Our carbonate platforms are enabled to recover and capture their own CO2 for use or sequestration before it is emitted into the air. These platforms are unique in their ability to also capture CO2 from an external source, utilizing the flue stream of a power plant or an industrial boiler as a replacement for ambient air intake.

We are also continuing to strategically invest in the development and commercialization of our solid oxide fuel cell platform, including actively seeking strategic partnerships that will enable us to deploy this technology as part of larger-scale energy, emissions reduction and hydrogen generation projects. Our solid oxide platform can operate on pure hydrogen fuel. We believe this feature will gain importance in the future as hydrogen becomes more widespread as a fuel. Our solid oxide platform can be used in electrolysis, which is the reverse of fuel cell operation – producing hydrogen from power and water.

Our multi-featured platforms can be configured to provide a number of value streams, including electricity, hydrogen, high grade heat (including steam), water and CO2 upgradable to food and beverage grade and/or usable in cement or other industrial products, and to concentrate and separate CO2 from fossil-fueled industrial applications allowing the sequestration and/or utilization of the CO2.

We are focused on using our proprietary technology to pursue the following four significant applications, each of which we believe is important to the global energy transition and to limiting climate change, reducing NOx, SOx, and particulate pollution, limiting noise pollution associated with traditional power generation and fostering more efficient utilization of land compared to traditional power generation and intermittent renewable energy platforms:

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Product Efficiency and Effectiveness

The electrical efficiency of our carbonate fuel cell solutions ranges from approximately 47% to 60% upon initial operations of our platforms depending on the configuration. When configured for combined heat and power (“CHP”), our system efficiencies can potentially reach up to 90%, depending on the application. Our solutions are designed to deliver high electrical efficiency where the power is used, avoiding transmission line losses, which average about 5% for the U.S. grid.

With respect to carbon capture capability, we have demonstrated up to 95% carbon capture from simulated coal power plant sources while simultaneously producing baseload power. For harder to capture streams, such as natural gas power generation or industrial boiler capture, we can achieve similarly high capture levels but with reduced power output.

Our Product Platform Applications – Current and Future

Carbonate-Based Distributed Generation

Our proprietary, patented platforms generate electricity directly from fuel, such as hydrogen, hydrogen and natural gas blends, biogas, renewable natural gas, and natural gas.

We market different configurations and applications of our platform to meet specific market needs, including:

Carbonate-Based Distributed Hydrogen

Tri-gen platforms are configurable to deliver on-site hydrogen for transportation, industrial applications, natural gas blending, repowering combustion-based equipment with zero carbon hydrogen, and other uses. Our Tri-gen hydrogen platform utilizes proprietary fuel cells configured to simultaneously generate three value streams — power generation, hydrogen, and water.

Solid Oxide-Based Electrolysis

We have developed a proprietary solid oxide electrolysis technology which is expected to enable production of hydrogen with high electrical efficiency. We believe that our platform will deliver higher efficiency than our competitors and competing technologies with or without the addition of waste heat. Our solid oxide stacks in electrolysis mode split water into hydrogen and oxygen using supplied carbon-free electricity. The hydrogen can be stored as compressed gas, creating the ability to produce a virtually limitless supply.

The largest factor in the cost of electrolysis-produced hydrogen is the cost of electricity. Consequently, efficiency is one of the most effective ways to lower cost. We believe our solid oxide platform is among the most efficient available electrolysis technologies. We believe this translates to 20% to 35% less electrical energy needed per kg of hydrogen production compared to lower efficiency and low-temperature electrolysis. For example, at an energy cost of $0.10/kWh, that difference results in $1 to $1.50 lower hydrogen cost with our SOEC platform. We believe our solid oxide platform offers one of the best chances of achieving the $1 per kg levelized cost of hydrogen targeted by the U.S. Department of Energy by 2050. Applications for this technology include centralized large scale hydrogen production from grid-scale

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renewables or nuclear power, and decentralized hydrogen production for industrial, transportation, repowered combustion generation assets, and synthetic or sustainable fuels for use in aviation and other applications.

We have operated a sub scale demonstration project of our solid oxide electrolysis technology in our Danbury test facility, which demonstrated the high electrical efficiency discussed above. We have also been awarded a pilot program to provide a packaged 150 kg/day system for demonstration at Idaho National Laboratory, which has passed Idaho National Laboratory’s acceptance testing in November 2024 and will be delivered and installed in 2025.

We are focused on the development and commercialization of a new module design that is expected to enhance our ability to compete for large scale infrastructure projects. Learning from our work on carbon capture, we are developing a module that incorporates all hot gas piping inside the module. Additionally, the module is being designed to enable a vertical array plant, improve the serviceability of the platform, enable module “hot swap” to maintain overall plant operations at all times, and streamline our go-to-market strategy.

We have also adopted this module-centric strategy to allow us to concentrate our resources on developing the high-efficiency stacks, allowing the complexities and expenses of platform customization, site design, balance of plant procurement and EPC work to be managed by the large-scale project developers. This strategy has the added benefit of streamlining our manufacturing processes, simplifying our supply chain, and lowering our working capital intensity. Lastly, focusing on the core module technology and design allows us to dedicate our engineering resources to the advancement of the stack and module technology, including both performance and cost, and maintaining a competitive edge versus the competition.

Solid Oxide-Based Long Duration Hydrogen-Based Energy Storage

We are in the process of developing a solution for long duration energy storage using our proprietary solid oxide electrolysis technology. Our solid oxide stacks are designed to alternate between electrolysis and power generation mode, with one of our design goals being improved integration of intermittent wind and solar power generation sources into the modern electrical grid via long duration storage of energy. Hydrogen-based long duration energy storage has the ability to transform the way intermittent resources are supported today as an alternative to combustion energy sources for continuous or peaking power to fill in when intermittent resources are not online. Instead of producing power from fuel and air, a solid oxide fuel cell stack in electrolysis mode splits water into hydrogen and oxygen using supplied carbon-free electricity. During high demand periods or periods when intermittent resources are offline, the stored hydrogen can be sent back to the same solid oxide stacks, which react it with air to produce power and to regenerate the water, which will be stored for the next cycle.

Carbon Capture, Recovery and Utilization

Our Markets

We target four distinct market opportunities:

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We market our clean energy solutions worldwide, with a longstanding presence in the United States, Europe and Korea, the largest developed fuel cell market. The utilities and independent power producer market has historically been our largest market with customers that include utilities on the East and West coasts of the United States, such as UIL Holdings Corporation, Inc. (owned by Avangrid, Inc., a wholly owned subsidiary of Iberdrola), the Long Island Power Authority (“LIPA”) and Southern California Edison. In Europe, utility customers include E.ON Connecting Energies, one of the largest utilities in the world. In Korea, we are contracted to operate and maintain a number of large-scale utility platform deployments, including a 20 MW power plant project for Korea Southern Power Company (“KOSPO”), a 20 MW power plant project for Noeul Green Energy Co., Ltd., and a 59 MW power plant project for Gyeonggi Green Energy Co., Ltd.

Our power platforms are producing power for a variety of industrial, commercial, municipal and government customers, including manufacturing facilities, pharmaceutical processing facilities, universities, healthcare facilities and wastewater treatment facilities. These institutions expect efficient, clean, and continuous power to reduce operating expenses, reduce greenhouse gas emissions and avoid pollutant emissions to meet their sustainability goals, while boosting resiliency and limiting dependence on the distribution grid. CHP applications further support economic and sustainability initiatives by minimizing or avoiding the use of combustion-based boilers for heat. Our patented power platforms are unique in their ability to run on biogas.

Levelized Cost of Energy

Our fuel cell projects deliver power at a rate comparable to pricing from the grid in our targeted markets. Policy programs that help to support adoption of clean distributed power generation often lead to below-grid pricing. We measure power costs by calculating the Levelized Cost of Energy (“LCOE”) over the life of the project.

There are several primary elements to LCOE for our fuel cell projects, including:

● Capital cost;

● Operations and maintenance cost; and

● Fuel expense.

Given the level of integration in our business model of manufacturing, installing and operating fuel cell power platforms, there are multiple areas and opportunities for cost reductions. We are actively managing and reducing costs in all three LCOE areas, including cost reduction initiatives with respect to system components and raw materials, advanced lean manufacturing principles, improvements in lifetime product costs through continued system and platform engineering, and improvements in output and efficiency. We are also investing in platform design to reduce overall EPC cost associated with the installation of our platforms.

Competition

The market for clean energy is highly competitive. Many factors, including government incentives and specific market dynamics, affect how clean energy can deliver outcomes for customers in a given region. While clean energy often competes against the electric grid, which is readily available to prospective customers and supplied by traditional centralized power plants, including coal, gas, hydro, and nuclear plants, clean energy is increasingly able to compete with the grid and long-distance transmission of electricity in terms of levelized cost of electricity. Clean energy sources that customers may consider beyond our solutions include products such as wind turbines, solar arrays, linear generators and hydro facilities, as well as a range of hydrogen and fuel cell solutions from both incumbent and developing competitors.

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Our platforms are based on a range of technologies and target a variety of applications, each of which have incumbent and developing competitors. Several companies in the U.S. are engaged in fuel cell development, although, to our knowledge, we are the only domestic company engaged in manufacturing and deployment of stationary natural gas or biogas fueled carbonate fuel cells. In addition to different types of stationary fuel cells, some other technologies that compete in the distributed generation marketplace include micro-turbines, turbines, and reciprocating gas engines.

Our stationary fuel cell platforms also compete against large scale solar and wind technologies, although we complement the unreliable intermittent nature of solar and wind power with the continuous, reliable power output of our fuel cells. Utility scale solar and wind power require specific geographies and weather profiles, transmission for utility-scale applications, and a source of back up capacity for when the sun or wind is not available. They also require a significant amount of land compared to our fuel cell power plants, making it difficult to site megawatt-class solar and wind projects in urban areas. While fuel cells emit negligible amounts of NOx, SOx and particulate matter, fuel cells do emit some carbon dioxide when fueled with natural gas or carbon-neutral biogas (although, while operating on biogas, the platform’s emissions would be considered carbon neutral), but in both cases less per kWh than other less-efficient systems. In many markets, baseload fuel cells avoid more emissions than wind or solar systems of similar capacity because they operate for many more hours of the day compared to these intermittent resources.

Product development cycles are long and product quality and efficiency are critical to success. Research and development investments are crucial in this business, as are focused intellectual property strategies and protection of such, as new technologies and solutions could make our solutions less competitive.

We continue to invest in exploring new ways of further improving the efficiency and effectiveness of our platforms. Our objective is to continue to improve our competitive position, including innovating in areas such as offering multiple platform solutions, and methods for producing clean hydrogen, solid oxide, and carbon separation and carbon capture in order to add value for customers looking for clean and renewable energy and to aid in their decarbonization goals.

Our Commitment to Sustainability

As a company, we are committed to helping our customers reduce their environmental impact. We are equally committed to reducing our environmental impact and have therefore developed and begun implementing a plan to reduce our carbon emissions to net zero by 2050. As part of this commitment, during fiscal year 2024, we:

● Successfully integrated an ESG governance model into our business processes.

Our platforms have a direct impact on reducing our customers’ Scope 1 and Scope 2 emissions, thus lowering the global environmental footprint of baseload, or primary, power generation. However, our platforms are designed to go beyond power generation, delivering hydrogen, carbon recovery, carbon capture, water, and thermal energy in various applications. As a result of our platforms’ ability to deliver multiple value streams, we help our customers reduce their Scope 1 and Scope 2 emissions on-site without buying off-site carbon/environmental offsets, which do not positively impact the local communities’ air quality or emissions. As a company, we are focused on addressing immediate environmental impacts such as NOx, SOx, and particulate emissions and the multi-decade impacts on climate change. In the future, we plan to commercialize our hydrogen, long-duration energy storage, and carbon capture technologies intended to drive next generation solutions to help customers attain their decarbonization goals and continue to advance core industries, such as steel manufacturing, cement production, and glass making.

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Our commitment to sustainability is also evident in the design, manufacturing, installation, and on-going servicing of our fuel cell energy platforms, which are engineered for the circular economy. For example, when our platforms reach the end of their useful lives, we have the capability to refurbish and re-use certain parts and also recycle more than 90% by weight of what we cannot re-use. This is a departure from combustion-based, wind, and solar power generation methods that typically produce a significant amount of unrecyclable waste, which increases landfill use, and in the case of solar, creates the possibility of toxic material contamination. Our balance of plant (“BOP”), i.e., the mechanical and electrical components surrounding the fuel cell, is designed to have an operating life of 25-to-30 years, at which time metals such as steel and copper are reclaimed for scrap value. For context, by weight, approximately 93% of our entire energy platform can be re-used or recycled at the end of its useful life.

Advanced Technologies Programs

Our Advanced Technologies programs include research and development and demonstration programs funded by third parties. We undertake both privately funded and publicly funded research and development to develop and grow these opportunities, reduce product and output costs, and expand our technology portfolio. Our Advanced Technologies programs are currently focused on continued development and commercialization of our solutions that advance solid oxide fuel cells, distributed hydrogen, and carbon capture. We report the revenue earned under these programs as Advanced Technologies contract revenues in our Consolidated Statements of Operations and Comprehensive Loss.

We have historically worked on technology development with various U.S. government departments and agencies, including the U.S. Department of Energy (the “DOE”), the Department of Defense (the “DOD”), the Environmental Protection Agency (the “EPA”), the Defense Advanced Research Projects Agency (“DARPA”), the Office of Naval Research (the “ONR”), the Department of State (the “DOS”) and the National Aeronautics and Space Administration (“NASA”). Government funding, principally from the DOE and DOS, provided 4%, 3% and 6% of our revenue for the fiscal years ended October 31, 2024, 2023, and 2022, respectively. In addition to these U.S. government departments and agencies, we also work to develop technologies through privately funded programs with companies like Canadian Natural Resources, Drax Group and ExxonMobil Technology and Engineering Company (formerly known as ExxonMobil Research and Engineering Company) (“EMTEC”).

Beyond the external funding sources described above, we intend to prudently invest capital to accelerate commercialization of solid oxide fuel cells, carbon capture and separation, and long-duration energy storage solutions, as discussed below in more detail in the section entitled “Company Funded Research and Development.”

License and Joint Development Agreements with EMTEC

EMTEC and FuelCell Energy began working together in 2016 under an initial joint development agreement with a focus on better understanding the fundamental science behind carbonate fuel cells for use in advanced applications and specifically how to increase efficiency in separating and concentrating carbon dioxide from the exhaust of natural gas-fueled power generation.

In June 2019, we entered into a license agreement with EMTEC to facilitate the further development of our carbon capture platform (the “EMTEC License Agreement”). Pursuant to the EMTEC License Agreement, we granted EMTEC and its affiliates a non-exclusive, worldwide, fully-paid, perpetual, irrevocable, non-transferable license and right to use our patents filed on or before April 30, 2021, and any data, know-how, improvements, equipment designs, methods, processes and the like provided directly by the Company or its affiliates to EMTEC or its affiliates under any agreement or otherwise, on or before April 30, 2021, to the extent it is useful to research, develop and commercially exploit carbonate fuel cells in applications in which the fuel cells concentrate carbon dioxide from external industrial and power sources and for any other purpose attendant thereto or associated therewith, in exchange for a $10 million payment. Such right and license is sublicensable to third parties performing work for or with EMTEC or its affiliates but is not otherwise sublicensable.

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The EMTEC License Agreement facilitated the execution of the Joint Development Agreement between the Company and EMTEC (which was originally effective as of October 31, 2019) (as amended, the “Joint Development Agreement”). The initial focus of the Joint Development Agreement was to further enhance carbonate fuel cell technology for the purpose of capturing carbon dioxide from industrial facilities. The Joint Development Agreement, which initially had a two-year term, commenced effective as of October 31, 2019. In a series of amendments to the Joint Development Agreement, which were effective as of October 31, 2021, April 30, 2022, December 1, 2022, and August 31, 2023, the Company and EMTEC extended the term of the Joint Development Agreement such that it was to expire by its terms on March 31, 2024 and increased the maximum amount of research costs to be reimbursed by EMTEC from $45.0 million to $67.0 million. The original terms of the Joint Development Agreement and the terms of the amendments thereto are described more fully in the Current Reports on Form 8-K filed by the Company on November 6, 2019, November 2, 2021, May 5, 2022, December 19, 2022, and August 28, 2023.

Effective as of March 31, 2024, we and EMTEC entered into Amendment No. 5 (“Amendment No. 5”) to the Joint Development Agreement. In Amendment No. 5, the Company and EMTEC further extended the term of the Joint Development Agreement such that it will end on December 31, 2026 (unless terminated earlier), so that we and EMTEC may pursue continued work to allow for technical readiness of the Generation 2 Technology fuel cell module as well as additional continuous technology development.

In parallel with the Joint Development Agreement, we and EMTEC will pursue pioneer commercial deployments of the Generation 2 Technology with third parties, with us as the fuel cell module manufacturer for such deployments.

In furtherance of the ultimate goal of commercializing the Generation 2 Technology, Amendment No. 5 provides us, among other rights and benefits, with the ability to pursue new carbon capture projects with third parties for the remaining duration of the term of the Joint Development Agreement using Generation 1 Technology or Generation 2 Technology (provided that the use of Generation 2 Technology must be limited to the use of Generation 2 physical fuel cell properties and design elements in Generation 1 Technology modules), with any new sales of such activities, authorized work, and carbon capture projects, when summed together, having the capability of capturing no more than 250,000 tons of CO2 on a cumulative annual basis.

Under Amendment No. 5, following expiration of the term of the Joint Development Agreement, the Company will also have the opportunity to continue to service continuing obligations for such projects entered into during the term of the Joint Development Agreement (e.g., completion of contracted builds, service and repair/replacement of components, etc.). To allow the Company to pursue such projects, in Amendment No. 5, EMTEC also granted to the Company a worldwide, non-exclusive, royalty-free, irrevocable (during the term of the Joint Development Agreement), non-sub-licensable license to EMTEC’s Generation 1 Technology as well as to EMTEC’s Generation 2 Technology physical fuel cell properties and design elements (including EMTEC’s background information and background patents relating to Generation 2 Technology physical fuel cell properties and design elements).

Amendment No. 5 also removed the cap on the maximum amount of research costs to be reimbursed by EMTEC, and instead includes an expected annual budget for the anticipated work through the remaining term of the Joint Development Agreement of at least $10.0 million per year, subject to approval by EMTEC. Research costs will be set forth in project descriptions that are subject to mutual agreement and pre-approval by us and EMTEC in writing. As has been the case for the entire term of the Joint Development Agreement, project descriptions will continue to be described in written, mutually agreed upon documents. In addition, in Amendment No. 5, the hourly rates for the Company’s engineers, scientists, and all other full-time employees were increased by 15% over the rates established in the original Joint Development Agreement, and such rates will increase by 3% annually beginning on March 31, 2025.

For our use in power applications and hydrogen applications, the Joint Development Agreement includes certain worldwide, non-exclusive, perpetual, irrevocable licenses to practice the Program Results (as defined in the Joint Development Agreement), EMTEC’s background information and background patents for Generation 1 Technology, and EMTEC’s background information and background patents for Generation 2 Technology. Amendment No. 5 makes clear that such licenses will continue on a royalty-free basis going forward.

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Company Funded Research and Development

In addition to research and development performed under research contracts, including as described under the heading “Advanced Technologies Programs” above, we also fund our own research and development activities to (i) advance our core carbonate and solid oxide cell module capabilities and (ii) support the commercial fleet with product enhancements and improvements.

We work to continuously improve and mature our products and implement lessons learned into our product designs and manufacturing process subsequent to introduction. We also continue to invest in improvement initiatives with respect to our core molten carbonate technology. For example, we have identified improvement opportunities ranging from improved thermal management by reducing internal temperature to improving the performance of our electrical balance of plant and implemented design changes to our commercial platforms which are expected to improve overall product performance.

As it relates to our fuel cell modules, these improvements center around delivering more uniform temperature distribution within the stack modules with the intent of improving output over the life of the modules to achieve the product’s expected design life. Continued extension of design life and output of our modules over time is a core research and development focus. In addition, we are also investing in our commercialization of our patented technologies, such as carbon capture and separation, solid oxide fuel cells, and solid oxide electrolysis cells for hydrogen production and energy storage as we believe these technologies represent significant future market opportunities.

We are also focused on the development and commercialization of a module design that enhances our ability to compete for large scale infrastructure projects. This work focused on developing a module that incorporates all hot gas piping inside the module. This design is expected to greatly improve serviceability and operational availability. This module-centric strategy allows us to concentrate our resources on developing the high-efficiency stacks and allowing the engineering work surrounding the balance of plant design, site design, and EPC work to be managed by the large-scale project developers. We believe that focusing on the core module technology and design allows us to dedicate our engineering resources to the advancement of the stack and module technology, including both performance and cost, and maintaining a competitive edge versus the competition.

Company funded research and development is included in Research and development expenses (operating expenses) in our consolidated financial statements. The total research and development expenditures in the Consolidated Statements of Operations and Comprehensive Loss, including third party and Company-funded expenditures, are as follows:

Years Ended October 31,

Cost of Advanced Technologies contract revenues $ 17,509 $ 13,185 $ 15,184

Proprietary Rights and Licensed Technology

Our intellectual property consists of patents, trade secrets, institutional knowledge and know-how that we believe is a competitive advantage and represents a barrier to entry for potential competitors. We have extensive experience in designing, manufacturing, operating and maintaining fuel cell power plants. This experience cannot be easily or quickly replicated and, combined with our trade secrets, proprietary processes and patents, safeguards our intellectual property rights.

As of October 31, 2024, we (excluding our subsidiaries) had 148 U.S. patents and 307 patents in other jurisdictions covering our fuel cell technology (in certain cases covering the same technology in multiple jurisdictions), with patents directed to various aspects of our carbonate technology, solid oxide fuel cell (“SOFC”) technology, proton exchange membrane (“PEM”) fuel cell technology and applications thereof. As of October 31, 2024, we also had 28 patent applications pending in the U.S. and 86 patent applications pending in other jurisdictions.

As of October 31, 2024, our subsidiary, Versa Power Systems, Ltd. (“Versa”), had 19 U.S. patents and 68 international patents covering SOFC technology (in certain cases covering the same technology in multiple jurisdictions). As of October 31, 2024, Versa also had 13 pending U.S. patent applications and 30 patent applications pending in other jurisdictions. In addition, as of October 31, 2024, our subsidiary, FuelCell Energy Solutions, GmbH, had license rights to 2 U.S. patents and 7 patents outside the U.S. (in certain cases covering the same technology in multiple jurisdictions) for carbonate fuel cell technology licensed from Fraunhofer IKTS.

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We continue to innovate, and no patent expiration, either individually or in the aggregate, is expected to have any material impact on our current or anticipated operations.

Certain of our U.S. patents are the result of government-funded research and development programs, including our DOE programs. U.S. patents we own that resulted from government-funded research are subject to the government potentially exercising “march-in” rights. We believe that the likelihood of the U.S. government exercising these rights is remote and would only occur if we ceased our commercialization efforts and there was a compelling national need to use the patents.

Manufacturing and Service Facilities

We operate a 167,000 square-foot manufacturing facility in Torrington, Connecticut where we produce the individual cell packages and assemble fuel cell modules for our carbonate fuel cell products. This facility also houses our global service center. Our completed modules are conditioned in Torrington and shipped directly to customer sites. We continue to invest in manufacturing capability with the goal of reducing production bottlenecks and driving productivity, including investments in automation, laser welding, and the construction of additional integrated conditioning capacity. We also constructed a SureSource 1500 in Torrington during fiscal year 2022, which operates as a testing facility for qualifying new supplier components and performance testing and validation of continued platform innovations. Additionally, we completed the construction of an on-site fuel cell demonstration and test unit in fiscal year 2024. This platform allows for component testing, with the goal of accelerating the integration of alternate suppliers and allows prospective customers to observe demonstrated capabilities of the fuel cell platform, such as carbon separation, including for the sampling and testing of separated CO2 to verify quantity, quality or purity requirements for food and beverage companies. As of October 31, 2024, the Torrington facility was operating at a 27.7 MW per year annualized production rate on a single production shift. Maximum annualized capacity (module manufacturing, final assembly, testing and conditioning) is 100 MW per year under the Torrington facility’s current configuration when being fully utilized. The Torrington facility is sized to accommodate the eventual annualized production capacity of up to 200 MW per year with additional capital investment in machinery, equipment, tooling and inventory.

We design and manufacture the core fuel cell components that are stacked on top of each other to build a fuel cell stack. For megawatt-scale power plants, four fuel cell stacks are combined to build a 1.4 MW fuel cell module. To complete the power platform, the fuel cell module or modules are combined with the BOP. The mechanical BOP processes the incoming fuel such as natural gas or biogas and includes various fuel handling and processing equipment such as pipes and blowers. The electrical BOP processes the power generated for use by the customer and includes electrical interface equipment such as an inverter. The BOP components are either purchased directly from suppliers or the manufacturing is outsourced based on our designs and specifications. This strategy allows us to leverage our manufacturing capacity, focusing on the critical aspects of the power plant where we have specialized knowledge and expertise and possess extensive intellectual property. BOP components are shipped directly to a project site and are then assembled with the fuel cell module into a complete power plant.

The Torrington production and service facility and the Danbury corporate headquarters and research and development facility are ISO 9001:2015 and ISO 14001:2015 certified and our Field Service operation (which maintains the installed fleet of our platforms) is ISO 9001:2015 certified, reinforcing the tenets of our quality management system and a focus on safety, continuous improvement, and commitment to quality, environmental stewardship, and customer satisfaction. Sustainability is promoted throughout our organization. We manufacture our products and manage them through end-of-life using environmentally friendly business processes and practices, certified to ISO 14001:2015. We continually strive to improve how we plan and execute across the entire product life cycle. We maintain a chain of custody and responsibility of our products throughout the product life cycle and strive for “cradle-to-cradle” sustainable business practices, incorporating sustainability in our corporate culture. When our platforms reach the end of their useful lives, we can refurbish and re-use certain parts and then recycle most of what we cannot re-use. By weight, approximately 93% of the entire power plant can be re-used or recycled at the end of its useful life.

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technologies are optimized for efficiency and complement the low direct material cost of the stack. The current annualized production capacity of the Calgary facility is 6 MW of SOEC production based on currently installed equipment. During the fiscal years ended October 31, 2024 and 2023, we entered into lease expansions, extensions and amending agreements which expanded the space leased in Calgary to include an additional approximately 68,000 square feet, for a total of approximately 100,000 square feet of space. In addition, long-lead process equipment has been ordered to facilitate the expansion of manufacturing capacity for the solid oxide platforms in Calgary. Upon the completion of the Calgary capacity expansion, we believe that the total annualized SOEC manufacturing capacity could potentially be increased to up to 80 MW per year. However, in November 2024, we announced a global restructuring of our operations in the U.S., Canada, and Germany that aims to reduce operating costs, realign resources toward advancing the Company’s core technologies, and protect the Company’s competitive position amid slower-than-expected-investments in clean energy. This restructuring plan also includes the deferment and cancelation of certain previously planned capital and project expenditures. As a result of this restructuring plan, we have deferred the capital spending required to complete the Calgary expansion and do not currently have an estimated completion date for this project. For more information about our restructuring plan, please see Part II, Item 8, Note 4 — Restructuring and Note 22 — Subsequent Events.

We have a manufacturing and service facility in Taufkirchen, Germany that has the capability to perform final module assembly for up to 20 MW per year of sub-megawatt fuel cell power platforms to service the European market. Our European service activities are also operated out of this location. Our operations in Europe are certified under both ISO 9001:2015 and ISO 14001:2015.

As we continue our focus on business in international markets such as Europe and Asia, we plan to explore manufacturing and assembly opportunities in those markets to achieve more efficient product manufacturing and supply chain operations, as well as meet the increasing government requirements for the inclusion of locally sourced content and components in order to benefit from enhanced clean energy investment incentives.

Raw Material Sourcing and Supplier Relationships

We use various commercially available raw materials and components to construct a fuel cell module, including nickel and stainless steel, which are key inputs in our manufacturing process. Our fuel cell stack raw materials are sourced from multiple vendors and are not considered precious metals. We have a global integrated supply chain with qualified sources of supply, many of which are located locally in the regions in which we have established manufacturing and service operations including Europe and Asia. We have not sourced or procured, and do not source or procure, directly or indirectly, any materials from Russia.

From time to time, we may enter into over-the-counter financial hedges to mitigate market price volatility associated with our underlying physical commodity exposure (and other asset classes) consistent with our Financial Risk Management Policy. These hedges are non-speculative in nature, are entered into with investment grade-rated multinational financial institutions and are governed under the terms of the International Swaps and Derivative Association. While we manufacture the fuel cells in our Torrington facility, the electrical and mechanical BOPs are assembled by and procured from several suppliers. All of our suppliers must undergo a stringent and rigorous qualification process. We continually evaluate and qualify new suppliers as we diversify our supplier base in our pursuit of lower costs, security of supply, and consistent quality. We purchase mechanical and electrical BOP components from third party vendors, based on our own proprietary designs.

Assuring the absence of conflict minerals in our power platforms is a continuing initiative. Our fuel cells, including the fuel cell components and completed fuel cell module, do not utilize any 3TG minerals (i.e., tin, tungsten, tantalum and gold) that are classified as conflict minerals. We utilize componentry in the BOP such as computer circuit boards that utilize trace amounts of 3TG minerals. For perspective, total shipments in fiscal year 2023 weighed approximately 4.6 million pounds, of which only 14.0 pounds, or 0.000299%, represented 3TG minerals, so the presence of these minerals is negligible. Our conflict mineral disclosure filed with the Securities and Exchange Commission (“SEC”) on Form SD contains specific information on the actions we are taking to avoid the use of conflict minerals.

As we continue to grow our business, we remain focused on improving quality, increasing the competitive supply landscape, maintaining existing supplier relationships, as well as building strong new key supplier relationships to expand our supply chain options.

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Engineering, Procurement and Construction

We provide customers with complete turn-key solutions, including development, engineering, procurement, construction, interconnection and operations for our fuel cell projects. We have developed relationships with many design firms and licensed general contractors and have a repeatable, safe, and efficient execution philosophy that has been successfully demonstrated in numerous jurisdictions, both domestically and abroad, all with an exemplary safety record. The ability to rapidly and safely execute installations minimizes high-cost construction period financing and can assist customers in certain situations when the commercial operations date for a project is time sensitive.

Services and Warranty Agreements

Ou commercial product portfolio is based on our carbonate electrochemical platform. We offer a comprehensive portfolio of services, including engineering, project management and installation, and long-term operating and maintenance programs, including trained technicians that remotely monitor and operate our platforms around the world, 24 hours a day and 365 days a year. We directly employ field technicians to service the power platforms and maintain distribution centers near our customers to support the high availability of our platforms.

For all operating fuel cell platforms not under a PPA, customers purchase long-term service agreements (“LTSAs”), some of which have terms of up to 20 years. Pricing for LTSAs is based upon the value of service assurance and the markets in which we compete and includes all future maintenance and fuel cell module exchanges. Each model of our carbonate electrochemical platform has a target design life of 25-to-30 years. The fuel cell modules, with legacy modules having a 5-year target cell design life and current production modules having a 7-year target cell design life, go through periodic replacement, while the BOP systems, which consist of conventional mechanical and electrical equipment, are maintained over the life of the project.

Under the typical provisions of both our LTSAs and PPAs, we provide services to monitor, operate, service and maintain power platforms to meet specified performance levels. Operations and maintenance are key drivers for power platforms to deliver their projected revenue and cash flows. The service aspects of our business model provide a recurring and predictable revenue stream for the Company. We have committed future production for scheduled fuel cell module exchanges under LTSAs and PPAs through the respective expiration dates of such LTSAs and PPAs, which range through 2042. The pricing structure of the LTSAs incorporates these scheduled fuel cell module exchanges and the committed nature of this production facilitates our production planning. Many of our PPAs and LTSAs include guarantees for system performance, including electrical output and heat rate. Should the power platform not meet the minimum performance levels, we may be required to replace the fuel cell module with a new or used replacement module and/or pay performance penalties. Our goal is to optimize the power platforms to meet expected operating parameters throughout their contracted service terms.

In addition to our service agreements, we provide a warranty for our products against manufacturing or performance defects for a specific period of time. The warranty term in the U.S. is typically 15 months after shipment or 12 months after acceptance of our products. We accrue for estimated future warranty costs based on historical experience.

Significant Developments in Government Activity

For many countries around the world, 2024 has proven to be more tumultuous than the prior year. This is the case, at least in part, due to the national elections which have taken place or will take place in over 70 countries. In the United States, for example, Congress largely avoided advancing energy legislation, while U.S. regulators, including the U.S. Treasury and Internal Revenue Service (“IRS”), DOE, EPA and others worked to implement various parts of the Inflation Reduction Act (the “IRA”), which was enacted in August of 2022.

Since enactment of the IRA, we have filed multiple comment letters, including formal comments related to the promulgation of rules to govern Sections 45V, 48E and 45Y of the Internal Revenue Code (the “IRC”). The Company’s comments are largely aligned with the industry’s views, which have focused on statutory intent, compliance with existing regulations, achieving technical accuracy and other fine points that are relevant to our sector and our business. It is important to note that the IRA introduced a series of new tax credits and also reformulated existing tax credits, some of which have been in place since the 1970s to incentivize development of renewable, clean energy. And while the Treasury and IRS have not yet issued final rules governing the new hydrogen credit (45V) or the new investment and production

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credits, 48E and 45Y, respectively, the statute itself stipulates that the tax credits available under Section 48 and 45 of the IRC will expire for the vast majority of taxpayers on December 31, 2024.

Lastly, the IRA reinforced the concept of transferrable credits, allowing the owner of an eligible clean energy project to transfer the tax credit to another taxpayer, setting a new standard and creating opportunity for many companies like FuelCell Energy.

Government Regulation

Our Company and our products are subject to various federal, provincial, state and local laws and regulations relating to, among other things, land use, safe working conditions, handling and disposal of hazardous and potentially hazardous substances and emissions of pollutants into the atmosphere. Emissions of SOx and NOx from our power plants are substantially lower than conventional combustion-based generating stations and are far below existing and proposed regulatory limits. The primary emissions from our power plants, assuming no cogeneration application, are humid flue gas that is discharged at temperatures of 700-800° F, water that is discharged at temperatures of 10-20° F above ambient air temperatures, and CO2 in per-kW hour amounts that are, due to the high efficiency of fuel cells, significantly less than conventional fossil fuel central generation power plants. Depending on the jurisdiction, whether our plants require water discharge permits is dependent upon whether the discharge is directed to a storm drain or wastewater system.

Significant Customers

Information concerning the Company’s dependence on significant customers is incorporated herein by reference to Note 1. “Nature of Business, Basis of Presentation and Significant Accounting Policies–Concentrations” of the Notes to the Consolidated Financial Statements.

People and Organizational Development

We are committed to our continued efforts to increase diversity and foster an inclusive work environment that supports the global workforce and the communities we serve. We recruit the best qualified employees regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws (domestic and foreign) applicable to discrimination in the workplace. Our diversity, equity, inclusion and belonging principles are also reflected in our employee training and policies.

As of October 31, 2024, we had 584 full-time employees, of which 465 were located in the United States, 99 were located in Canada, 11 were located in Germany, 8 were located in Korea and 1 was located in Singapore. There were no part time employees as of October 31, 2024.

We increased our diverse team member population by 5% in fiscal year 2024 compared to fiscal year 2023.

In November 2024, we announced a global restructuring of our operations in the U.S., Canada, and Germany that aims to reduce operating costs, realign resources toward advancing the Company’s core technologies, and protect the Company’s competitive position amid slower-than-expected-investments in clean energy. The restructuring plan included a reduction in our workforce of approximately 13% or 75 employees in November 2024 and includes reduced spending for product development, overhead and other costs. This followed a 4% or 17 employee reduction in workforce in September 2024. For more information about these restructuring actions, please see Part II, Item 8, Note 4 — Restructuring and Note 22 — Subsequent Events.

Compensation and Benefits

As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefit programs for all of our team members in order to attract and retain superior and diverse talent. In addition to competitive base wages, additional programs include an annual Management Incentive Plan, Long-Term Equity Incentive Plans, and a Company matched 401(k) Plan.

Workforce Environmental Health and Safety

We take workplace jobsite safety and environmental compliance very seriously. Under our robust environmental, health and safety (“EH&S”) program, we strongly encourage the reporting of near misses to identify opportunities for

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improvement and we are constantly evaluating our EH&S protocols in an effort to keep our facilities and workspaces environmentally friendly and safe for our team members, stakeholders, customers, and visitors.

We are committed to EH&S excellence. Our Environmental Management System is certified to ISO 14001:2015, and our Occupational Health & Safety Management System is certified to ISO 45001:2018. Health and safety is both a bottom-up and top-down priority as the Company’s Board of Directors is actively engaged in ongoing review of our polices, protocols and performance.

Our EH&S core principles are:

● Zero injuries / incidents;

● Compliance with all legal obligations;

● Pollution prevention;

● Waste reduction; and

● Continual improvement.

We are also in the process of performing life cycle analyses on our products, as well as our production and office locations, and developing a roadmap to net zero carbon emissions.

Our safety performance is excellent and is demonstrated by experience modification rates below the industry average of 1.0 for the last 7 fiscal years: 2018: 0.62, 2019: 0.65, 2020: 0.59, 2021: 0.68, 2022: 0.088, 2023: 0.89 and 2024: 0.83. We have maintained an “A” rating since 2016 providing “Safety Tier 1” performance with ISNetworld, a database for online contractor safety management designed to streamline companies' and contractors' compliance pre-qualification processes. Because EH&S compliance is a priority for us, we also leverage ISNetworld to qualify contractors that work on our projects.

Available Information

We file annual, quarterly and current reports, proxy statements and other information electronically with the SEC. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are made available free of charge through the “Investors” section of the Company’s website (http://www.fuelcellenergy.com) as soon as practicable after such material is electronically filed with, or furnished to, the SEC. Material contained on our website is not incorporated by reference in this report. Our executive offices are located at 3 Great Pasture Road, Danbury, CT 06810. The SEC also maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC located at http://www.sec.gov.

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Information about our Executive Officers

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ITEM 1A.RISK FACTORS

An investment in our common stock involves a high degree of risk. Prior to making a decision about investing in our securities, you should carefully consider the specific risk factors discussed below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. If any such risks actually occur, our business, financial condition, or results of operations could be materially and adversely affected. In such cases, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business, Industry and Supply Chain

We have incurred losses and anticipate continued losses and negative cash flows.

We have transitioned from a research and development company to a commercial products manufacturer, services provider and developer. We have not been profitable since our year ended October 31, 1997. We expect to continue to incur net losses and generate negative cash flows until we can produce sufficient revenues and gross profit to cover our costs. We may never become profitable. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future. For the reasons discussed in more detail below, there are uncertainties associated with our achieving and sustaining profitability. We have, from time to time, sought financing in the public markets in order to fund operations and will continue to do so. Our future ability to obtain such financing could be impaired by a variety of factors, including, but not limited to, the price of our common stock and general market conditions.

Our cost reduction strategy for manufacturing may not succeed or may be significantly delayed, which may result in our inability to deliver improved margins.

Our cost reduction strategy for manufacturing is based on the assumption that increases in production will result in economies of scale. In addition, our cost reduction strategy relies on advancements in our manufacturing process, global competitive sourcing, engineering design, reducing the cost of capital and technology improvements (including stack life and projected power output). Failure to achieve our cost reduction targets could have a material adverse effect on our results of operations and financial condition.

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We have debt and finance obligations outstanding and may incur additional debt in the future, which may adversely affect our financial condition and future financial results.

As of October 31, 2024, our total consolidated debt and finance obligations outstanding (“indebtedness”) was $135.9 million ($131.7 million, net of deferred finance costs).

Our ability to make scheduled payments of principal and interest and other required repayments depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flows from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as selling assets, restructuring operations, restructuring debt or obtaining additional equity capital on terms that may be onerous or dilutive.

We may incur additional indebtedness in the future in the ordinary course of business, which could include onerous restrictions on us. If new debt is added to current debt levels, the risks described above could intensify. Our debt agreements contain representations and warranties, affirmative and negative covenants, and events of default that entitle the lenders to cause our indebtedness under such debt agreements to become immediately due and payable.

We rely on project financing for our generation operating portfolio, which includes debt and tax equity financing arrangements, to realize the benefits provided by investment tax credits and accelerated tax depreciation. In the event that interest rates continue to rise or there are changes in tax policy, our financial results could be harmed.

Rising interest rates may increase our cost of capital. Part of our business strategy is to generate positive cash flows after debt service from our generation operating portfolio. Rising interest rates may have an adverse impact on the cost of debt and thus result in lower cash flows after debt service than we realize today. We also expect that projects we retain in our generation operating portfolio will receive capital from tax equity investors who derive a significant portion of their economic returns through tax benefits. Tax equity investors are generally entitled to substantially all of the project’s tax benefits, such as those provided by the U.S. investment tax credit (“ITC”) and Modified Accelerated Cost Recovery System or bonus depreciation. Our ability to obtain additional financing in the future depends on the continued confidence of financing sources in our business model and the continued availability of tax benefits applicable to our products. If we are unable to enter into tax equity financing agreements with attractive pricing terms, or at all, we may not be able to obtain the capital needed to finance the build out of our generation assets which would impact our overall liquidity and our business, financial condition and results of operations.

Unanticipated increases or decreases in business growth have resulted and may continue to result in adverse consequences to our financial condition and business strategy.

We operate a 167,000 square-foot manufacturing facility in Torrington, Connecticut where we produce the individual cell packages and assemble the fuel cell modules for our carbonate fuel cell products. The maximum annualized capacity (module manufacturing, final assembly, testing and conditioning) is 100 MW per year under the Torrington facility’s current configuration when being fully utilized. The Torrington facility is sized to accommodate the eventual annualized production capacity of up to 200 MW per year with additional capital investment in machinery, equipment, tooling and inventory.

We have a manufacturing and service facility in Taufkirchen, Germany that has the capability to perform final module assembly for up to 20 MW per year of carbonate sub-megawatt fuel cell power platforms to service the European market. Our European service activities are also operated out of this location.

Our manufacturing and research and development facility in Calgary, Alberta, Canada is focused on the engineering and development of our SOFC and SOEC technologies. This facility also houses our SOFC and SOEC stack research and development effort and includes equipment for the manufacturing of solid oxide cells and stacks, including advanced manufacturing capabilities. Beginning in fiscal year 2022, we started making additional investments in the Calgary facility to establish a center of competence and excellence for solid oxide cell and stack research and manufacturing. This facility includes equipment for the manufacturing of solid oxide cells and stacks, including an advanced automated stack manufacturing line which has been developed to ensure that the labor and overhead which are required to produce these technologies are optimized for efficiency and complement the low direct material cost of the stack. The current annualized production capacity of the Calgary facility is 6 MW of SOEC production based on currently installed equipment. During the fiscal years ended October 31, 2024 and 2023, we entered into lease expansions, extensions and amending agreements which expanded the space leased in Calgary to include an additional approximately 68,000 square feet, for a total of

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approximately 100,000 square feet of space. In addition, long-lead process equipment has been ordered to facilitate the expansion of manufacturing capacity for the solid oxide platforms in Calgary. Upon the completion of the Calgary capacity expansion, we believe that the total annualized SOEC manufacturing capacity could potentially be increased to up to 80 MW per year. However, in November 2024, we announced a global restructuring of our operations in the U.S., Canada, and Germany that aims to reduce operating costs, realign resources toward advancing the Company’s core technologies, and protect the Company’s competitive position amid slower-than-expected-investments in clean energy. This restructuring plan also includes the deferment and cancelation of certain previously planned capital and project expenditures. As a result of this restructuring plan, we have deferred the capital spending required to complete the Calgary expansion and do not currently have an estimated completion date for this project. If our restructuring plan does not result in the intended benefits or savings or results in unanticipated costs, including but not limited to additional charges and/or higher than expected costs, or if we are unable to successfully implement our restructuring plan during the expected timeframe, our results of operations and financial condition could be materially adversely affected. For more information about our restructuring plan, please see Part II, Item 8, Note 4 — Restructuring and Note 22 — Subsequent Events.

If our business does not grow as quickly as we expect, our existing and planned manufacturing facilities would, in part, represent excess capacity for which we may not recover the cost. In that circumstance, our revenues may be inadequate to support our committed costs and our planned growth, and our gross margins and business strategy would be adversely affected. If our business grows more quickly than we anticipate, our existing and planned manufacturing facilities may become inadequate and we may need to seek out new or additional space, or retrofit or further equip our existing facilities, at considerable cost to us.

If our goodwill and other indefinite-lived intangible assets and long-lived assets (including project assets) become impaired, we may be required to record a significant charge to operations.

We have recorded significant impairment charges, and may in the future be required to record significant impairment charges, to operations in our financial statements should we determine that our goodwill, other indefinite-lived intangible assets (i.e., in process research and development (“IPR&D”)) and other long-lived assets (i.e., project assets, property, plant and equipment and amortizing intangible assets) are impaired. Such charges might have a significant impact on our reported financial condition and results of operations. Project assets and property, plant and equipment impairment charges totaled approximately $1.3 million, $2.4 million and $1.8 million for the fiscal years ended October 31, 2024, 2023 and 2022, respectively.

As required by accounting rules, we review our goodwill for impairment at least annually as of July 31 or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit that has goodwill is less than its carrying value. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill might not be recoverable include a significant decline in projections of future cash flows and lower future growth rates in our industry. We review IPR&D for impairment on an annual basis as of July 31 or more frequently if facts and circumstances indicate the fair value is less than the carrying value. If the technology has been determined to be abandoned or not recoverable, we would be required to record a charge reflecting impairment of the asset. We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. We consider a project asset commercially viable and recoverable if such project asset is anticipated to be sellable for a profit, or generates positive cash flows, in excess of the cost of the project asset once it is either fully developed or fully constructed. If any of our project assets are not considered commercially viable or costs are not deemed to be recoverable, we would be required to record a charge reflecting the impairment of such project assets.

Our Advanced Technologies contracts are subject to the risk of termination by the contracting party and we may not realize the full amounts allocated under some contracts due to the lack of Congressional appropriations or early termination.

A portion of our revenues has been derived from long-term cooperative agreements and other contracts with the DOE and other U.S. government agencies. These agreements are important to the continued development of our technology and our products. We also contract with private sector companies under certain Advanced Technologies contracts to develop strategically important and complementary offerings.

Generally, our privately funded Advanced Technologies contracts, including our EMTEC Joint Development Agreement, contracted demonstration projects undertaken with EMTEC or other ExxonMobil affiliates, and our government research and development contracts are subject to the risk of termination at the convenience of the contracting party and may contain

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certain milestones and deliverables which we may not be able to meet if actual results or the timing of deliverables differ materially from our original estimates or contractually agreed timelines. Furthermore, with respect to government-funded contracts, irrespective of the amounts allocated by the contracting agency, such contracts are subject to annual Congressional appropriations and the results of government or agency sponsored reviews and audits of our cost reduction projections and efforts. We can only receive funds under government-funded contracts ultimately made available to us annually by Congress as a result of the appropriations process. Accordingly, we cannot be sure whether we will receive the full amounts awarded under our privately funded, government research and development or other contracts. Termination of the contracts or failure to receive the full amounts under any of our Advanced Technologies contracts could materially and adversely affect our business prospects, results of operations and financial condition.

Utility companies may resist the adoption of distributed generation and could impose customer fees or interconnection requirements on our customers that could make our products less desirable.

Investor-owned utilities may resist adoption of distributed generation fuel cell plants as such plants are disruptive to the utility business model that primarily utilizes large central generation power plants and associated transmission and distribution. On-site distributed generation that is on the customer-side of the electric meter competes with the utility. Distributed generation on the utility-side of the meter generally has power output that is significantly less than central generation power plants and may be perceived by the utility as too small to materially impact its business, limiting its interest. Additionally, perceived technology risk may limit utility interest in stationary fuel cell power plants.

FCEL US Equity

FCEL · 10-K · period ended 2024-10-31

Item 1.BUSINESS

ITEM 1A.RISK FACTORS

FCEL US Equity☆

FCEL · 10-K · period ended 2024-10-31

Item 1.BUSINESS

ITEM 1A.RISK FACTORS

FCEL US Equity