SecProbe.io

September 29, 2011
Via E-mail

Mr. Michael Bishop Senior Vice President, Chief Financial Officer,
  Treasurer and Corporate Secretary   FuelCell Energy, Inc.  3 Great Pasture Road Danbury, CT  06813
Re: FuelCell Energy, Inc.
 Form 10-K for the Fiscal Year Ended October 31, 2010
Filed January 14, 2011 Form 10-Q for the Fiscal Quarter Ended July 31, 2011
Filed September 9, 2011 Form 8-K Dated September 6, 2011 Filed September 8, 2011 File No. 001-14204

Dear Mr. Bishop:
 We have reviewed your filing and have the following comments.  We have limited our
review to only your financial statements and re lated disclosures and do not intend to expand our
review to other portions of your documents.  In  some of our comments, we may ask you to
provide us with information so we may better understand your disclosure.

Please respond to this letter within te n business days by providing the requested
information or by advising us when you will provide the requested response.  If you do not believe our comments apply to your facts and circum stances please tell us w hy in your response.
 After reviewing the information you provide in response to these comments, we may
have additional comments.    Form 10-K for the fiscal year ended October 31, 2010

 Product Sales and Revenues, pages 56 and 59

1. Please revise future filings to discuss and quantify each of the underlying reasons for the
significant decrease in revenues each period. Pl ease also discuss whether this trend is
expected to continue.

Mr. Michael Bishop
FuelCell Energy, Inc. September 29, 2011 Page 2

Liquidity and Capital Resources, page 61

2. We reference the disclosure that you plan to  increase capacity from 70 MW to 90 MW of
annual production by investing $5 million to $7  million.  In addition, you estimate that
the further expansion to 150 MW of annua l production will requi re additional capital
investments of $35 million to $45 million.  Gi ven your limited cash flows, please revise
future filings to disclose how you plan to ra ise the capital required to increase production.
Please also include a discussion of the timefra me for when you expect the investments to
occur.
3. We see that revenue has decreased 20% from fiscal year 2009 to fiscal year 2010. During
that same period, inventories have increased 30 %.  Please revise future filings to discuss
the reasons for the investment in inventor y in light of declin ing revenues.

Consolidated Financial Statements

4. We see that you recognized revenue of $6.9 m illion related to service agreements during
fiscal year 2010.  Please revise future filings  to separately present revenue and related
cost of service revenues, as require d by Rule 5-03 of Regulation S-X.

Note 1.  Nature of Business a nd Significant Accounting Policies
 Nature of Business, page 80

5. In future filings please clarif y if the subsidiaries included in the first sentence of the
second paragraph on page 80 are 100% owne d or otherwise disclose the ownership
percentages.
 Inventories and Advanced Payments to Vendors, page 80

6. We reference the disclosure that prior to  November 1, 2009, you provided for a lower of
cost or market reserve to the cost basis of inventory, including advance payments to
vendors, at the time of purchase. Please clar ify your basis in the accounting literature for
this treatment and tell us how you consider ed the guidance in FA SB ASC 330-10-35-7 in
determining your accounting policy for invent ory prior to November 1, 2009.  Your
response should also discuss the timing of the purchase of your inventory in relation to
entering into a customer contract and whether there is a contract in  place at the time you
record the lower of cost or market reserve.
 Revenue Recognition, pages 68 and 81

7. We see that you recognize revenue from the sale  and installation of fuel cell power plants
under the percentage of completion method.  We also note the disclosure that prior to

Mr. Michael Bishop
FuelCell Energy, Inc. September 29, 2011 Page 3
 fiscal 2010, you did not pr ovide for a contract loss reserv e on product sales contracts as
products were in their early st ages of development and mark et acceptance, and the total
costs and timing of production for product sale s contracts as well as installation and
commissioning of these units could not be reas onably estimated.  Please tell us how you
applied the percentage of completion method of  revenue recognition prior to fiscal year
2010.  We reference FASB ASC 60 5-35-25-56 which states that the use of the percentage
of completion method depends on the ability to make reasonably dependable estimates
such as the extent of progress toward comple tion, contract revenues and contract costs.
In addition, FASB ASC 605-35-25- 90 states that when lack of dependable estimates
cause forecasts to be doubtful, the comple ted contract method is preferable.  Please
provide us your analysis of how you consid ered the accounting literature and explain to
us the why you believe the percentage of co mpletion method was appropriate for revenue
recognition prior to fiscal 2010.
8. Please also tell us whether prior to fiscal  2010 you were unable to estimate all costs
related to the fuel cell power plant projects or just costs related to the installation and
commissioning phases.  Please tell  us your estimate of the percentage of the total costs
that relate to the installati on and commissioning phases.

9. We reference the disclosure on pages 68 and 81 that revenue is recognized from sales of
your DFC power plants and modules proportionate ly as costs are incu rred and assigned to
a customer contract by comparing total expect ed costs for each contract to the total
contract value.  Please tell us how this practice is consistent  with the guidance in FASB
ASC 605-35-25-52.
10. Please tell us the average length of time for each phase of your contracts for each of your
DFC products.  Please also tell us how the base products are modified to accommodate
the end user.  Under FASB ASC 605-35-05 and 35-15, the revenue recognition models for Construction-Type and Production-Type Cont racts are appropriate for performance of
contracts for which specificati ons are provided by the customer for the construction of
facilities or the production of goods or the prov ision of related services.  In this regard,
please demonstrate that FASB  ASC 605-35 is the appropriate  revenue recognition model
for your DFC products.
11. Please tell us how your inability to provide for a contract loss reserv e is consistent with
the guidance in FASB ASC 605-35-25-45 through 50 which states that for a contract on which a loss is anticipated, GAAP requires r ecognition of the entire anticipated loss as
soon as the loss becomes evident.
 Warranty and Service Expense Recognition, pages 69 and 82

12. We see that you provide a sta ndard warranty on your products  for a term of 15 months
after shipment or 12 months after instal lation and that you estimate the accrual for
warranty obligations based on hi storical experience.  We also note disclosure in your

Mr. Michael Bishop
FuelCell Energy, Inc. September 29, 2011 Page 4
 Form 10-K for December 31, 2009 that you accrue for warranty costs on products that
have sufficient operating experience to allo w for management to reasonably estimate
warranty obligations and that for newe r products where you have limited operating
experience, warranty costs are currently expe nsed as incurred.  Please tell us what
changed from 2009 such that you are now able  to estimate the warranty reserve based on
historical experience.  If you are unable to estimate warranty  obligations, please tell us
why it is appropriate to record a sale prior to the expiration of the warranty period or until
a reasonable estimate of the obligation can be made.

13. We see that you issue LTSA contracts with certain customers ranging up to 20 years and
that you provide a reserve for the guarantees based upon historical fleet performance.
Please revise future filings to clarify how you use historical fleet performance to estimate
long-term warranty liabilities, considering your limited history of  claims with these
contracts.  Please tell us if you have sufficient historical data  to estimate the liability for
20 years into the future.
 Deferred Revenue, Royalty Income and Customer Deposits, page 83

14. With regard to the 2009 License Agreement, in  future filings please disclose the amount
of royalty revenue recognized during fiscal ye ar 2010. In addition, tell us the terms of the
upfront license fee, including whether the f ee is refundable.  Discuss your basis for
recognizing the revenue ratably over the term of  the License Agreement.  Refer to FASB
ASC 605-10-25 and SAB Topic 13A3.
 Note 12.  Segment Information, page 98

15. Please tell us how you concluded that res earch and development activities and the
production and sale of fuel cell products are one “activity” such th at you operate in one
business segment.  Please refer to the provi sions of FASB ASC 280- 10-50 and explain to
us how you determined your reportable segments.
 Form 10-Q for the fiscal quarter ended July 31, 2011

 Note 11. Registered Direct Offering, page 14

16. We note that you entered into an agreement to sell units consisting of shares of common
stock and warrants in January 2011 pursuant to  a registered direct  offering.  Please
provide us with a summary of the terms of th e warrants and tell us your consideration of
the accounting for the warrants under ASC 815- 40-25 (formerly paragraphs 14 – 18 of
EITF 00-19). Your analysis should also address how you considered any further
registration and prospectus de livery requirements that are outside of the control of the
company.

Mr. Michael Bishop
FuelCell Energy, Inc. September 29, 2011 Page 5
 Form 8-K Dated September 6, 2011

 Exhibit 99.1

17. We reference your disclosure of the non-GAAP product sales cost ratio before repair and
upgrade charges. In future filings, provide all disclosures required by Item 10(e)(1)(i) of
Regulation S-K, including  an explanati on why you believe this non-GAAP measure
provides useful information to investors.
18. Please tell us how your presentation tit led “Reconciliation of GAAP to Non-GAAP
Consolidated Statements of Operations” considers the guidance from Compliance &
Disclosure Interpretation 102.10.  Under the ci ted guidance, presen tation of a non-GAAP
statement of operations is not generally appropriate.
 We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing include s the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules requir e.  Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.
 In responding to our comments, please provi de a written statement from the company
acknowledging that:

 the company is responsible for the adequacy  and accuracy of the disclosure in the
filing;
 staff comments or changes to disclosure  in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
 the company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United
States.
You may contact Gary Todd at (202) 551- 3605 or me at (202) 551-3676 if you have
questions regarding these comments .  In this regard, do not hesita te to contact Martin James,
Senior Assistant Chief Accountant at ( 202) 551-3671 with any other questions.

Sincerely,
   /s/ Gary Todd  for
Brian Cascio
 cc: Richard Krantz