State economic development officials have agreed to give a $4 million loan to a Danbury-based fuel cell company that is heavily dependent on government contracts and says it may “never become profitable.”
The company, Danbury-based FuelCell Energy — with a plant in Torrington — plans to use the loan from the Connecticut Development Authority and the state Department of Economic and Community Development to finance a $10 million expansion at its Torrington plant over the next three years, according to a statement issued last week by Gov. M. Jodi Rell.
The loan would pay for machinery and equipment, building improvements, and information technology expenses.
“This project is right for Connecticut, right for our economy, and right for our energy needs,” Rell said. “We’ll be adding 100 jobs to our economy, bolstering a Connecticut company that is making strides to decrease our dependence on foreign fossil fuels, and enhancing our position in an important industry.”
CDA President Marie O’Brien was unavailable for comment by press time.
The loan is the second made by state economic development officials to FuelCell Energy since 2001, when it received $1.5 million.
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Enron History
At that time, FuelCell Energy was perhaps best known for its proposed role in a deal between the state trash authority and Enron Corp. That project — which like another, more publicized $220 million deal between the Connecticut Resources Recovery Authority and Enron died with the latter’s sudden and spectacular financial collapse — called for the quasi-public agency to construct as many as five fuel-cell “farms” in CRRA-owned sites in Hartford and Shelton.
Components were to be manufactured by FuelCell Energy, in which Enron had taken a $5 million ownership stake.
The initial proposal was controversial because the farms would have been paid for with as much as $206 million in public funds, and Enron — which wasn’t expected to put any of its own money into the overall project — was to receive a 10 percent development or management fee.
The CRRA was then headed by ex-Gov. John G. Rowland’s former co-chief of staff, Peter N. Ellef, and the fuel cell farm project was pushed by Michael J. Martone, a friend of Rowland’s who had served as director of constituent services in the governor’s office. Martone was working as a lobbyist for the Hartford firm of Murtha Cullina, which had received the bulk of nearly $300,000 Enron paid to Connecticut lobbyists between 1999 and 2001.
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Major Losses
FuelCell Energy describes itself as a world leader in the development of stationary fuel cells for commercial, industrial, municipal, and utility customers. But in its latest annual report to the Securities and Exchange Commission — a 167-page filing made two days before the CDA approved the $4 million loan — the company disclosed the latest in a series of significant losses from its operations.
It said it had a $73 million loss its fiscal 2007 year, down from an $81 million loss in the previous 12 months, but up from a $70.8 million loss in fiscal 2005.
It also said the costs to manufacture and install its products “exceed current market prices,” and that as of October it had a product sales backlog of approximately $42.5 million.
“We do not expect sales from this backlog to be profitable,” it added. FuelCell Energy officials also acknowledged that they had “incurred losses and anticipate continued losses and negative cash flow.”
“We have been transitioning from a contract research and development company to a commercial products developer and manufacturer,” they said.
“As such, we have not been profitable since our fiscal year ended Oct. 31, 1997. We may never become profitable. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.”
