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CORRESP
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      Unassociated Document

              RICHARD
                A. KRANTZ

              Financial
                Centre

              695
                East Main Street

              P.O.
                Box 10305

              Stamford,
                CT 06904-2305

              Main
                (203) 462-7500

              Fax
                (203) 462-7599

              rkrantz@rc.com

              Direct
                (203) 462-7505

              Also
                admitted in New York

              and
                Massachusetts

    May
      5,
      2006

    Ms.
      Kate
      Tillan

    Assistant
      Chief Accountant

    United
      States Securities and Exchange Commission

    450
      Fifth
      Street, N.W.

    Washington,
      D.C. 20549

              Re:

              FuelCell
                Energy Inc.

              Form
                10-K for the year ended October 31,
                2005

              Filed
                January 17,
                2006

              File
                No.
                001-14204

    Dear
      Ms.
      Tillan:

    This
      correspondence is in response to your letter dated March 31, 2006 to Joseph
      G.
      Mahler, Senior Vice-President and Chief Financial Officer of FuelCell Energy,
      Inc. (“FuelCell” or “the Company”). We will respond to the comments in the order
      presented.

    Form
      10-K for the year ended October 31, 2005

    Financial
      Statements

    Consolidated
      Balance Sheets, page 67

            1.

              The
                Company acknowledges the Staff’s comment and upon further analysis of (1)
                the guidance provided by EITF D-98 and (2) by analogy to the
                guidance provided by EITF 00-19 related to the delivery of registered
                shares in paragraphs 14 and 18, the Company believes that classification
                of its Series B preferred stock in temporary equity would be consistent
                with this accounting literature. The Company proposes to reclassify
                the
                Series B preferred stock into temporary equity by amending its most
                recently filed Form 10-Q for the period ended January 31, 2006 and
                in
                future filings. The proposed amended Form 10-Q/A has been included
                at
                Appendix A for the Staff’s reference.

          Ms.
            Kate Tillan

          Securities
            and Exchange Commission

          May
            5, 2006

          Page
            2

    In
      arriving at the conclusion to reclassify the balance by amending its first
      quarter 2006 Form 10-Q (as opposed to a restatement of the fiscal 2005 10-K),
      management reviewed the accounting, historical disclosures and proposed
      accounting changes with the Company’s Independent Registered Public Accounting
      Firm. In addition, management has analyzed the materiality of this
      reclassification in accordance with SAB 99, Topic M, and does not believe it
      would be considered significant to the users of its financial statements.

    SAB
      99
      states that the FASB rejected a formulaic approach to discharging the onerous
      duty of making materiality decisions. SAB 99 goes on to state that “magnitude by
      itself, without regard to the nature of the item and the circumstances in which
      the judgment has to be made, will not generally be a sufficient basis for a
      materiality judgment.” SAB 99 defines materiality as “the omission or
      misstatement of an item in a financial report is material if, in the light
      of
surrounding
      circumstances,
      the
      magnitude of the item is such that it is probable
      that the judgment of a reasonable person relying upon the report would have
      been
      changed or influenced by
      the
      inclusion or correction of the item.”

    Assessment
      of Surrounding Circumstances:

    Management
      notes that Note 12 (Shareholders’ Equity) of the Notes to Consolidated Financial
      Statements in the Form 10-K discloses the conversion characteristics of the
      Series B preferred stock, which includes a paragraph stating that if there
      is a
      fundamental change in the ownership or control of the Company, that holders
      may
      require the Company to purchase their shares at a redemption price of 100%
      of
      the liquidation preference, which is stated as $1,000 per share. Additionally,
      in the first quarter Form 10-Q, the Company started disclosing on the face
      of
      the balance sheet that the Series B preferred stock contains a liquidation
      preference of $105,875,000. Finally, the Company has previously publicly filed
      the complete Certificate of Designation for the Series B preferred stock as
      an
      exhibit to the S-1 registering the Series B preferred shares. Thus, we believe
      that an investor in the Company would have public access to all of the terms
      and
      conditions of the Series B security. A reclassification on the financial
      statements does not, in management’s view, provide any additional information
      not already available to investors.

          Ms.
            Kate Tillan

          Securities
            and Exchange Commission

          May
            5, 2006

          Page
            3

    Management
      also analyzed the following considerations outlined within SAB 99:

            ·

              Consideration
                -
                whether the misstatement arises from an item capable of precise
                measurement or whether it arises from an estimate and, if so, the
                degree
                of imprecision inherent in the
                estimate.

    Management
      response
      - not
      applicable, this is a reclassification of amounts properly calculated and
      included in the balance sheet, rather than an error in calculation.

            ·

              Consideration
                -
                whether the misstatement masks a change in earnings or other
                trends.

    Management
      response
      - not
      applicable, this is a balance sheet reclassification and does not impact
      earnings or other trends.

            ·

              Consideration
                -
                whether the misstatement hides a failure to meet analysts’ consensus
                expectations for the enterprise.

    Management
      response
      - not
      applicable, this is a balance sheet reclassification and does not impact
      analysts’ consensus expectations for the enterprise.

            ·

              Consideration
                -
                whether the misstatement changes a loss into income or vice
                versa.

    Management
      response
      - not
      applicable, this is a balance sheet reclassification and does not impact the
      income statement.

            ·

              Consideration
                -
                whether the misstatement concerns a segment or other portion of the
                registrant’s business that has been identified as playing a significant
                role in the registrant’s operations or
                profitability.

    Management
      response
      - not
      applicable, this is a reclassification of preferred stock and does not impact
      the earnings or financial condition of any one portion of the Company’s
      business.

            ·

              Consideration
                -
                whether the misstatement affects the registrant’s compliance with
                regulatory requirements.

            Ms.
              Kate Tillan

            Securities
              and Exchange Commission

            May
              5, 2006

            Page
              4

    Management
      response
      - not
      applicable, management is not aware of any regulatory requirements that this
      reclassification would affect.

            ·

              Consideration
                -
                whether the misstatement affects the registrant’s compliance with loan
                covenants or other contractual
                requirements.

    Management
      response
      - not
      applicable, the Company does not have any loan covenants or other contractual
      requirements that would be impacted by this type of reclassification.

            ·

              Consideration
                -
                whether the misstatement has the effect of increasing management’s
                compensation - for example, by satisfying requirements for the award
                of
                bonuses or other forms of incentive
                compensation.

    Management
      response
      - not
      applicable, management’s compensation is not tied to shareholders’
equity.

            ·

              Consideration
                -
                whether the misstatement involves concealment of an unlawful
                transaction.

    Management
      response
      - not
      applicable, this reclassification does not involve an unlawful
      transaction.

    Probability
      that the judgment of a reasonable person relying upon the report would have
      been
      changed or influenced:

    Management
      does not believe that users of the Company’s financial statements would be
      influenced by this type of balance sheet reclassification, which is contingent
      upon a remote event (fundamental change) that would most likely take the form
      of
      a business combination and conversion of the Company’s outstanding shares,
      rather than a full liquidation of assets. Due to the Company’s relatively early
      stage of development, the numerous risks involved when investing in such an
      early stage company still trying to commercialize its technology, and limited
      access to debt markets, management does not believe a reasonable person relying
      on the Company’s financial report would be influenced by a misclassification of
      the Series B preferred stock. In the event an investor was concerned about
      the
      liquidation preferences of the Company’s various stakeholders, management
      believes that adequate disclosure was available in Note 12 to the Form 10-K
      report to understand the conversion characteristics of the Series B preferred
      stock. Management believes that investors are primarily concerned with the
      Company reducing product costs, increasing order volume, ensuring the
      reliability of its power plants, and meeting customer expectations for our
      products.

          Ms.
            Kate Tillan

          Securities
            and Exchange Commission

          May
            5, 2006

          Page
            5

    Furthermore,
      in the case of a debtors’ or potential debtor’s reliance on the Company’s
      financial statements, the Series B preferred stock ranks junior to all existing
      and future debt obligations with respect to rights upon any potential
      liquidation. The Company currently has minimal debt obligations primarily
      related to a State of Connecticut economic development loan of less than
      $900,000.

    Conclusion

    Based
      on
      the considerations noted above in accordance with the guidance provided in
      SAB
      99 Topic 1M, management’s assessment is that reclassification of the Series B
      preferred stock to redeemable preferred stock (outside the general heading
      of
      stockholders’ equity) would not be considered material for the readers of the
      Company’s financial statements.

    The
      Company would also like to advise the Staff that it filed a Form 8-K
      on April 27, 2006 to disclose that 39,755 shares of Series B preferred stock
      were converted into 3,383,403 shares of FuelCell common stock during the month
      of April. As a result of this conversion, 66,120 shares of Series B preferred
      stock remained outstanding. Accordingly, this conversion will be reflected
      in
      the Company’s Form 10-Q for the period ended April 30, 2006 as a reduction in
      the Series B preferred stock balance and an increase to common stock and
      additional paid-in-capital within shareholders’ equity.

            2.

              FuelCell
                acknowledges the Staff’s comment and has outlined below its consideration
                of whether the put option to sell shares of the Company’s Series B
                Preferred stock should be separated from the host contract under
                SFAS 133
                and EITF 00-19.

    SFAS
      133,
      paragraph 12, states that “an embedded derivative instrument shall be separated
      from the host contract and accounted for as a derivative instrument pursuant
      to
      this statement if and only if all of the following criteria are
      met:

          Ms.
            Kate Tillan

          Securities
            and Exchange Commission

          May
            5, 2006

          Page
            6

            12c.

              A
                separate instrument with the same terms as the embedded derivative
                instrument would, pursuant to paragraphs 6-11, be a derivative instrument
                subject to the requirements of this
                Statement.”

    In
      determining whether a separate put option to sell shares of the Company’s Series
      B Preferred stock would be considered a derivative, pursuant to paragraphs
      6-11,
      the Company considered the scope exclusion provided in paragraph 11a of SFAS
      133. SFAS 133 paragraph 11 states that “Notwithstanding the conditions of
      paragraphs 6-10, the reporting entity shall not consider the following contracts
      to be derivative instruments for purposes of this Statement” and paragraph 11a
      states “Contracts issued or held by that reporting entity that are both (1)
      indexed to its own stock and (2) classified in stockholders’ equity in its
      statement of financial position.” In considering the paragraph 11a scope
      exclusion in SFAS 133, the Company assessed paragraphs 12-32
      of EITF 00-19 and concluded that such scope exclusion would not apply because
      the embedded put option would not be classified in stockholders' equity if
      it
      was a freestanding derivative. Paragraph 12 of EITF 00-19 states, "Contracts
      that include any provision that could require net-cash settlement cannot be
      accounted for as equity of the company (that is, asset or liability
      classification is required for those contracts)." Paragraph 14 of EITF 00-19
      adds that "if the contract permits the company to net-share or physically settle
      the contract only by delivering registered shares, it is assumed that the
      company will be required to net-cash settle the contract." As such, because
      the
      contract only provides for delivery of registered shares upon a fundamental
      change of control  (i.e., if the Company does not elect to cash settle the
      obligation, it must deliver registered shares upon a fundamental change of
      control), the Company must assume, for purposes of EITF 00-19, that the put
      option will be net-cash settled, precluding classification in stockholders'
      equity.

    The
      Company also analyzed whether this embedded put option would be a derivative
      pursuant to paragraph 6 of SFAS 133, which indicates that a derivative
      instrument is a financial instrument or other contract having the
      characteristics described in paragraphs 6a (underlying and notional), 6b (no
      initial net invest