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CORRESP
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filename1.htm

      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

    August
      7,
      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 the Staff’s questions per our telephone
      conversations relating to FuelCell Energy, Inc. (“FuelCell” or the “Company”).
      The Staff’s questions have been included prior to the Company’s
      response.

              1.

              In
                the Guarantee dated May 27, 2004, FuelCell guarantees the obligations
                of
                the Series 1 Preferred Stock. In that guarantee, however, FuelCell
                also
                guarantees the obligations of FuelCell Energy, Ltd. pursuant to the
                terms
                of the Joint Development Agreement made between Global Thermoelectric
                Inc.
                and Enbridge as of July 31, 2000. Please explain (1) what the Joint
                Development Agreement is and (2) if the Company had considered the
                relationship of FIN 45 to that
                agreement.

    Ms.
      Kate
      Tillan

    Securities
      and Exchange Commission

    August
      7,
      2006

    Page
      2

    FuelCell
      Response:

    (1)
      Joint Development Agreement

    The
      Joint
      Development Agreement was initially entered into in July 2000 between Global
      Thermoelectric, Inc. (“Global”) and Enbridge, Inc. (“Enbridge”) prior to
      FuelCell’s acquisition of Global. The agreement essentially consists
      of:

            -

              a
                research and development program whereby the two entities would work
                towards developing commercially viable versions of Solid Oxide Fuel
                Cell
                products (Global’s responsibility) and performing market research,
                securing test locations, etc. (Enbridge’s responsibility)

            -

              a
                grant of exclusive distribution authority whereby Global appointed
                Enbridge as the exclusive distributor of specific SOFC products in
                a
                specified territory. The two entities also agreed to commence negotiations
                to establish a definitive distribution
                agreement.

    The
      Joint
      Development Agreement was subsequently amended to (a) extend certain dates
      established to negotiate a definitive distribution agreement outlined in the
      initial agreement and (b) transfer all of Global’s rights, title and interest in
      the Joint Development Agreement to FuelCell Energy, Ltd. This agreement was
      subsequently assigned to Versa Power Systems, Inc. (“Versa”) upon the sale of
      the Solid Oxide Fuel Cell assets of FuelCell Energy, Ltd. to Versa in November
      2004.

    There
      were no obligations in the Joint Development Agreement that required recognition
      in FuelCell’s consolidated financial statements.

    (2)
      Assessment of FIN 45 “Guarantor's
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others”.

    The
      Company advises the Staff that there were no contractual obligations in the
      Joint Development Agreement that would have required recognition by FuelCell
      Energy, Ltd.

    With
      regard to the guarantee by FuelCell of both the Series 1 Preferred share
      obligations and the Joint Development Agreement, the Company believes that
      FIN
      45 does not apply as the guarantee was issued by FuelCell to Enbridge relating
      to the obligations of FuelCell Energy, Ltd. (including obligations of FuelCell
      Energy, Ltd. under the Joint Development Agreement). In addition, this agreement
      would not have resulted in recording any new obligations. FuelCell was merely
      guaranteeing compliance of its subsidiary under the existing Joint Development
      Agreement with Enbridge. The relevant references from FIN 45 are Paragraph
      4 and
      Paragraph A23;

    Ms.
      Kate
      Tillan

    Securities
      and Exchange Commission

    August
      7,
      2006

    Page
      3

    -
      Paragraph 4 of FIN 45 states that “the scope of this Interpretation does not
      encompass indemnifications or guarantees of an entity’s own future performance
      (for example, a guarantee that the guarantor will not take a certain future
      action)”.

    -
      Paragraph A23 of FIN 45 excludes guarantees issued among corporations under
      common control from the recognition, measurement, and disclosure provisions
      of
      FIN 45.

    Based
      on
      the above, the Company has concluded that FIN 45 is not applicable in this
      circumstance.

            2.

              In
                the Company’s response dated July 12, 2006, the Staff found confusing the
                first paragraph of our response responding to comment number 2. That
                comment related to how the preferred stock would be accounted for
                in
                separate, stand-alone financial statements of the subsidiary and
                the
                parent.

    FuelCell
      Response:

    The
      first
      paragraph in our response dated July 12, 2006 to comment number 2 was as
      follows:

    “The
      Company believes the preferred shares should not be accounted for as equity
      of
      FuelCell Energy, Ltd. if it were to present stand-alone financial statements,
      and should be accounted for as equity of FuelCell Energy, Inc. in its
      stand-alone (i.e., parent-only) financial statements. The Company believes
      that
      if stand-alone financial statements were presented for both FuelCell Energy,
      Ltd. and FuelCell Energy, Inc., the preferred shares would be disclosed as
      legal-form equity issued by FuelCell Energy, Ltd.”

    Ms.
      Kate
      Tillan

    Securities
      and Exchange Commission

    August
      7,
      2006

    Page
      4

    The
      Company advises the Staff that the first sentence is referring to how the Series
      1 Preferred shares would be accounted
      for in
      stand-alone financial statements of FuelCell and FuelCell Energy, Ltd. and
      the
      second sentence is referring to the required disclosures
      in those
      statements. The Series 1 Preferred shares would not be accounted for as equity
      of FuelCell Energy, Ltd. in stand-alone financials. Nonetheless, disclosure
      would be required that FuelCell Energy, Ltd. was the issuer of this legal-form
      equity and that these shares are being accounted for as equity in FuelCell’s
      financial statements.

            3.

              (a)
                Article 7 of the Charter of FuelCell Energy, Ltd. seems to impose
                restrictions on the ability of FuelCell Energy, Ltd. to take certain
                acts
                without the consent of the holders of Preferred Stock. Please comment.

    FuelCell
      Response:

    If
      FuelCell Energy, Ltd. fails to remain current with its dividend obligations,
      Article 7 does impose the following restrictions on FuelCell Energy, Ltd.:

              -

              From
                paying dividends on junior stock.

              -

              From
                issuing senior stock or from redeeming, purchasing or making capital
                distributions to any junior or pari passu
                stock.

              -

              Setting
                aside any money or making any payments for any sinking fund or other
                retirement fund applicable to any junior
                stock.

    FuelCell
      Energy, Ltd. is current with its dividend obligations.

    (b)
      The Staff would like verification confirming that Global had the ability to
      convey its assets without the consent of the holders of the Series 1 Preferred
      stock.

    Ms.
      Kate
      Tillan

    Securities
      and Exchange Commission

    August
      7,
      2006

    Page
      5

    FuelCell
      Response:

    The
      terms
      of the Preferred Stock of Global were the same as the terms of the Series 1
      Preferred stock issued by FuelCell Energy, Ltd. The Company confirms that there
      was in fact no consent required from Enbridge for the conveyance of assets
      prior
      to the sale of Global, as the Global dividend payments on the Series 1 Preferred
      stock were current.

    (c)
      On November 1, 2004, FuelCell pledged to Enbridge its shares of Versa Power
      Systems, Inc. What was the purpose of that Pledge
      Agreement?

    FuelCell
      Response:

    As
      discussed in response number 1 above, the rights, title and interests in the
      Joint Development Agreement had been transferred to FuelCell Energy, Ltd. upon
      the sale of Global. This agreement was subsequently assigned to Versa upon
      the
      sale of the Solid Oxide Fuel Cell assets of FuelCell Energy, Ltd. to Versa
      in
      November 2004. The Series 1 shareholder agreement contains no requirement to
      obtain shareholder consent for the transfer of assets, however, FuelCell Energy
      Ltd. obtained Enbridge’s consent to assign the Joint Development Agreement to
      Versa. Enbridge and FuelCell Energy, Ltd. assigned the Joint Development
      Agreement to Versa because Enbridge’s original investment was connected to this
      solid oxide research and development and Enbridge wanted the Joint Development
      Agreement to follow the technology and assets.

    In
      conjunction with Enbridge’s consent to assign the Joint Development Agreement to
      Versa, which resulted in FuelCell having no further responsibility for the
      Joint
      Development Agreement, FuelCell agreed in the Pledge Agreement to provide
      Enbridge with a security interest in 5,714 shares of Versa. This pledge
      agreement was not meant to convey that there was any legal requirement to obtain
      consent from Enbridge for the transfer of assets from FuelCell Energy, Ltd.
      to
      Versa. The Company confirms that the Series 1 shareholder agreement contains
      no
      requirement to obtain shareholder consent for the transfer of assets.

    Ms.
      Kate
      Tillan

    Securities
      and Exchange Commission

    August
      7,
      2006

    Page
      6

            4.

              Does
                the dividend obligation on the Series 1 Preferred stock continue
                after
                2020?

    FuelCell
      Response:

      The
        Company expects either redemption or conversion of the Series 1 Preferred
        stock
        in 2020. Following redemption or conversion, there would no longer be a dividend
        obligation. The terms of the Series 1 Preferred shares entitle holders to
        dividends as long as such shares are outstanding.

      The
        Company is able to control this process. On and after July 31, 2010, the
        Series
        1 Preferred shares are redeemable by FuelCell Energy, Ltd. for Cdn$25 per
        share
        plus any accrued and unpaid dividends. If FuelCell Energy, Ltd. waits until
        July
        31, 2020 to call for redemption, it is likely that the holder of these shares
        would convert them into FuelCell common stock at a conversion price equal
        to 95%
        of the then current market price of shares of FuelCell common
        stock.

    Ms.
      Kate
      Tillan

    Securities
      and Exchange Commission

    August
      7,
      2006

    Page
      7

    FuelCell
      acknowledges the following:

              -

              FuelCell
                is responsible for the adequacy and accuracy of the disclosure in
                its Form
                10-K for the year ended October 31,
                2005;

              -

              Staff
                comments or changes to disclosure in response to Staff comments do
                not
                foreclose the Commission from taking any action with respect to FuelCell’s
                Form 10-K for the year ended October 31, 2005;
                and

              -

              FuelCell
                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.

    Sincerely,

    /s/
      Richard A. Krantz

    Richard
      A. Krantz

    cc:
      Joseph G. Mahler