Good day, ladies and gentlemen, and welcome to the FuelCell Energy Reports Third Quarter 2015 Results Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host of today’s conference, Mr. Kurt Goddard, Vice President of Investor Relations. Sir, please begin.

Good morning, and welcome to the third quarter 2015 earnings call for FuelCell Energy. Yesterday evening, FuelCell Energy released financial results for the third quarter of 2015. The earnings release, as well as a presentation that will be referenced during this earnings call, is available on the Investor Relations section of the company website at www.fuelcellenergy.com. A replay of this call will be available about two hours after its conclusion on the company website. Before proceeding with the call, I would like to remind everyone that this call is being recorded and that the discussion today will contain forward-looking statements, including the company's plans and expectations for the continuing development and commercialization of our FuelCell technology. I would like to direct listeners to read the company's cautionary statement on forward-looking information and other risk factors in our filings with the U.S. Securities and Exchange Commission. Delivering remarks today will be Chip Bottone, President and Chief Executive Officer and Mike Bishop, Senior Vice President and Chief Financial Officer. Now, I would like to turn the call over to Chip Bottone. Chip?

Thank you, Kurt. Good morning, everyone, and welcome. Please turn to slide 4, third quarter 2015 highlights. Our team is continuing to execute on key strategic initiatives and is leveraging our market position to take advantage of global opportunities. Under the project developer modern we identify and develop projects, execute long-term power purchase agreements or PPAs, and then construct and subsequently sell to investor’s operational revenue generating power plants. Large-scale power consumers value the many attributes of our solutions and private capital is attracted to investor capital to own the generation assets. Three On-Site Combined Heat and Power, or CHP projects under this model are now in various stages of development. Together they represent over $50 million in future equipment and services revenue. All three have executed long term PPAs, two are with repeat customers. We are in discussions with numerous project investors and anticipate selling these projects near time they become operational or soon thereafter. We expect to announce additional PPA projects beyond these over the next several months. We are very pleased to announce in July the execution of a project development agreement with E.On Connecting Energies. This agreement introduces our utility ownership model for on-site power applications in our European served area. E.On’s parent company is the largest electric utility in the world and owns 60,000 megawatts of power generation in more than 15 countries. This is more than doubling the generating assets of Dominion, the owner of the Bridgeport fuel cell park. The agreement commences with the sale of 1.4 megawatt power plant directly to E.On for installation at a manufacturing facility in Germany. This is our first megawatt class commercial fuel cell installation in Europe and we believe it is the first commercial megawatt scale fuel cell plant in Europe for any manufacturer and also…

Thank you, Chip. Good morning and thank you for joining our call today. Please turn to slide 5 titled financial summary. I will start with a financial overview of the quarter. FuelCell Energy reported total revenues for the third quarter of 2015 of $41.4 million, compared to $43.2 million for the prior year period. Revenue was in line with our previously stated guidance of $38 million to $48 million per quarter and we also expect to be in this range in the fourth quarter. Gross profit for the third quarter of 2015 totaled $3.6 million, compared to $4 million for the same period last year. The gross margin percentage in the quarter was 8.7%, compared to 9.2% in Q3 2014 on sales mix. Total operating expenses were $10.7 million for the third quarter 2015, compared to $10 million in the prior year period, primarily on higher business development activity. Net loss to common shareholders for the third quarter of 2015 was $7.3 million or $0.02 per basic and diluted share. This compares to $ 7.8 million or $ 0.03 per basic and diluted share in the third quarter of 2014. Adjusted EBITDA, which is a measure of cash flow and is based on earnings before interest and taxes depreciation and amortization and other income and expense totaled negative $6 million for the third quarter of 2015. The company’s total liquidity at July 31, 2015 was $131 million, consisting of $93 million of cash and cash equivalents, including restricted cash, plus availability of $37 million on the project finance facility extended by our partner NRG Energy and $1 million of availability on the JPMorgan Revolver. As illustrated by the backlog graph on the slide, backlog totaled $338 million at July 31, 2015 compared to $350 million at the end of the…

Thank you, Mike. Please turn to slide 6, project activity. On to the project development agreement with E.On Connecting Energies, we will offer distributed CHP solutions with our megawatt and multimegawatt DFC power plants to E.On’s existing and perspective customer base in Europe. E.On will own the plants and sell power and heat under a PPA financing or leasing structure. With power generation in more than 15 countries, E.On has a very large geographic footprint and approximately 33 million customers. We see very strong potential from this relationship as we target E.On’s customer base with an initial focus in Germany, the United Kingdom and Italy. The 1.4 megawatt power plant comprising of first order from E.On will be configured for CHP operations and will be installed with the German headquarters of production facility of Friatec AG, a manufacturing company. E.On will own the plant while FuelCell Energy Solutions, our European based entity will install, operate and maintain the plant under a long term service agreement. An outright sale to E.On, this transaction illustrates our direct utility sales model. The historic utility model in Germany is under pressure due to the increasing solar and wind capacity and nuclear plants being shuttered in the coming years. Intermittency is a challenge to the German electric grid from the significant solar adoption that causes challenges to grip operators for changes in weather. Germany has extensive wind resources of north while the power needs are in the south and the public opposition to proposed transmission grid connecting these distant areas due to the cost and the statics. And finally, adoption of distributed generation is growing. As a forward thinking industry leader, E.On wants to be involved in distributed generation both to maintain its customers and generate financial return. Our FuelCell Solution addresses the needs of…

[Operator Instructions] Our first question comes from the line Jeff Osborne with Cowen and Company. Your line is now open. Please go ahead.

Great. Good morning and thanks for the details. Couple of questions. One I was wondering, Chip, if you can give us an update on the Long Island and New York in general, what you are seeing on the RFP activity there would be helpful.

Jeff, good morning. Thanks for calling in today. Yeah, so, I will speak New York in general because there is more opportunity than specially [indiscernible]. But in essence, New York in total is developing multiple RFPs for fuel cells and other equivalent type products to satisfy both – in certain places this demand for power is well [indiscernible] renewable objectives that they are trying to meet. So what we are seeing specifically, Jeff, is actually an expansion what was originally one RFP going to come out here, we’ve seen one come out already for the Eastern Long Island, there is another one coming out similarly and then of course the larger of them will be coming out later this year. But we also have opportunities with ConEd and some others. So in general, I think people are starting to appreciate the kind of things we can do and uniqueness of both the problem and the solutions we can offer specifically in New York.

That’s great to hear. Just two other questions. One is wondering if you can just go through the citing council process, obviously Beacon Falls is going through that. Is the Killingly project as well in that queue, or is that kind of to be determined in the future?

Yes, let me start with Beacon Falls, so there is a fairly defined process to get projects fully down and executable. A number of them – the latest development is going to citing council, which we are expecting positive response for that. So that once you get past that, Jeff, you continue to work on obviously the interconnection stuff that’s been put out there both for gas and electricity already and then it kind of continues down the path where we would basically find a contract path for that and financing. So, all those things are kind of moving down the path as necessary. We are looking at several other sites. There is actually specifically in Connecticut, there is two specific RFPs that has come out or will be coming out, one is – one that’s been out for comment, which is a large RFP basically 20 megawatts and above and then the second that is out now for comment is 2 megawatts to 20 megawatts. So we are developing sites Jeff as big as Beacon Falls 63 megawatts that would obviously fit into both the large one that if you did it in pieces could fit into the small one as well. As you mentioned, Willimantic is another site and we have others that we are working, which are in that 20 megawatt and below bucket along similar lines. And where those are generalized, but first thing you have to do is secure the sites themselves, which we’ve in the process of doing that by different means. And then secondly you have to talk obviously the council about tax treatment and citing council issues and things like that. So, all I would say is that we are developing multiple projects to fit into multiple RFPs going forward. And frankly at the same time, we are developing interest from investors that would actually own those projects as well. So there is a lot going on to get those things to go on.

Thank you for that. Is there an expected completion time from the citing council when you would hear either affirmative or need for additional information, whatever the outcome as it relates to Beacon Falls, is there a 60 day to 90 day confirmed process for that, or is it kind of TBD?

I think, it’s more TBD, Jeff. I mean it’s on the shorter end of that, I don’t know if it’s 30 days or 60 days, but obviously there is a queue there. But I think the folks that are doing this project obviously and ourselves have experience doing this have a pretty good track record, so we are expecting that it will be down to the most expedient way as possible.

Great. The last question I had was for Mike, with the three projects that are on the balance sheet representing $50 million in future revenue, just can you give us an update on those three and when you expect completion and how you're going to articulate that as it relates to guidance and margins would be helpful?

Sure Jeff good morning. As you mentioned, we do have three projects in the project asset category. The one that’s the furthest the long is the ECI, Irvine Medical Center that fuel cell is completely installed. We’re going through the interconnection process right now as we said in prior quarters. We expect that to be completed the end of this calendar year, that would likely fall into our first fiscal quarter of 2016. So that's when I would target completion of permanent financing revenue recognition for that project. The other two projects Pepperidge and Riverside those are later in fiscal 2016, I would say in the spring of summer timeframe for those two.

And how would the margin treatment be as that revenue comes in relative to what you’ve been experiencing today, is it similar or better, how shall we think about that?

When we think about margin for U.S. assets and when we do turnkey projects in the US., we target margins in the 15% range for those projects and then service margins as the project becomes operational is incremental to that and we target margins north of that number in the 20% range.

Excellent. Thanks much guys, appreciate it.

Thanks Jeff.

No problem, thank you.

Our next question comes from the line of Sven Eenmaa with Stifel, your line is now open.

Yes thanks for taking my questions. First wanted to ask about the DOE Project on carbon capture side, I understand it is, you’re in the site location process, but in terms of the time when would you expect to see that project moving to into revenue levels, and what would be a margin profile on something like this?

Sven this is Chip, good morning, thanks for joining. I’ll take a good bit of that and I will ask Mike to follow me up on that if I don't answer your question completely. So, as I said in the remarks, it’s kind of a two phase project here. The way we're looking at this is, the first phase if you well is couple of megawatts and that’s that $23.7 million and the way we've done that is, we would expect to find a site that’s capable of putting in the full 27 megawatts, our utility customer of some sort or IPP and so we would develop that over the next 18 months that particular piece of revenue. But we would necessarily stop and we do things in parallel, we do the second part in parallel and we might do another project in parallel as well. But specifically to that one, I would say that would roll out after the next 18 months, but I would expect additional projects in that period, we wouldn't do this thing in series. As per the margin, as I think we said in our public announcement about this, the $23.7 million project comes with $15 million grant from the Department of Energy, one of the highest they had given out during that RFP by the way, it is kind of show you the importance of what we're doing here. But we would expect to obviously have some costs associated with that as we do some onetime engineering on that that’s scalable, but we’d also expect whoever the project site might be or the investor to kick in some of that differential as well. So, it’s to be determined on the margin you had spent, but safe to say we are going to try to maximize whatever we can now.

Got it, and second question I wanted to ask in terms of the shipments here in this quarter and the upcoming quarter, do you expect to have any system revenue or full project revenue recognition in the next quarter from E. On side or is it all going to be kits and modules and also what was the kits and modules breakdown in the current quarter?

Sure Sven this is Mike, I will take that one, and good morning by the way. As we look at next quarter and you mentioned that E. On project that is in backlog as we execute on that project that will come through revenue recognition on a percentage of completion basis, you could see some of that coming in, in the fourth quarter as that project is now in backlog, then we will have a continued revenue recognition from kits and modules with POSCO coming through as well as we look at total backlog today, megawatt backlog it’s about 44 megawatts of which about 39 megawatts is made up of kits and modules to POSCO, the balance is made up of E. On project you mentioned as well as these project assets that I discussed on the balance sheet. And as I had mentioned in my remarks earlier, those projects will continue to come into revenue recognition in 2016.

Got it, and what was the breakdown in kits and modules in the current quarter?

So in the current quarter as far as total shipments and title transfer, it was a heavy quarter as we completed title transfer of the UI project that Chip mentioned. So when you look at modules that came through in the quarter to POSCO that was 5.6 megawatts. We had 8.4 megawatts of kits, which were shipped to POSCO and then also 5.6 megawatts of the UI project.

Got it; that's very helpful and last question in terms of, we saw your service margin expand nicely in the current quarter what are the expectations on service margins here in the upcoming quarters?

As we look at service margins we expect continued increase in both service revenue as these projects that we've talked about come online and we grow our installed base over time. Margins as I mentioned, we target project margins for service or service margins north of 20% and obviously the financial statements will have a blended rate consisting of legacy projects and new projects; and the margin will be variable quarter-to-quarter. There is a component of revenue that comes through when we do module exchanges for specific sites, which will drive revenue and have a different margin profile quarter-to-quarter depending on when that particular agreement was signed and the overall profile of that agreement, but I would say in general margins will continue to trend up over time.

Great, thanks very much.

Thank you, Ben.

Our next question comes from the line of Carter Driscoll with FBR, your line is now open.

Good morning. Thanks for taking my question. Just came back to the core opportunity, you talked about maybe just the number of utilities that are interested in your solution, kind of the engagement process early on, I realize it’s still very early and maybe geographically as it kind of fit the profile of what you are targeting domestically and are some of the discussions based on potential of carbon tax being implemented, sometime the future really just response to the recent EPA power changes and then I have a couple of follow-ups if I may?

Sure Carter, I will take that. Good morning, this is Chip. Yes, so relative to the, I mean the overall strategy we have is, you want to go after the biggest utilities first, right? Because obviously they have the biggest opportunity. So, what we've done so far on that regard in general is obviously we've got - in Korea we've got all the utilities as customers for the most part, including IPP; in Europe we just mentioned E. On which we started with the biggest in the world actually, but certainly the biggest in Europe as well. And then in the U.S. we have multiple utilities that are already current customers. So, on the West Coast you have PG&E and SC&E, which are the two biggest; on the East Coast you have the Dominion, United Illuminating, I don't know if I caught everybody, but if I didn't I apologize to them, but my point is, that these are all people that have pretty good bandwidth and obviously have both the need and the desire to put and distribute generation. The carbon capture thing builds on some of those like Dominion, but expands beyond some of those. So, you could think about the people that have coal assets, you can think about people in the Midwest, AEP, you can think about people in the South like Duke and Southern Company. So, I won't comment specifically on what we are doing with whom, but I can just tell you that this carbon capture opportunity is playing well with the interest from some existing people, but also other people have been brought to us for not just carbon capture, but when we get talking about carbon capture by the way a lot of them are involved with distributor generation strategies as well. So, it’s kind of a natural fit for us to expand our footprint with utility. So, we are having discussion with, I would say, all of the major players in the U.S. or if not all of them, but most of them that could really deploy what we do. So, I’m pleased with the progress we are making there.

Yes, sounds good. An excellent natural fit. Thanks for the color. Just shifting things over to Europe, obviously a nice win as you obviously talked about the largest utility in the world. I guess maybe if you could talk about there were a lot of priorities in the south than most of the generation in the north, is the opportunity much a constraint on the land as well as the fact that building and transmission line is going to face a lot of opposition from people not wanting in the backyard and then obviously the clean emission profiles and aspect to it. If you could kind of talk about which of those three is the more important or kind of put into priority list as to how you think about where those projects might be cited I think it’ll be helpful.

So I would say overall I’ll talk to Germany because I think it’s different if you go to the UK and you go to Idly but we are talking to E.On as a pretty broad span there and we’re you go to Italy but we are talking to E.On as a pretty broad span there and we’re talking about projects in different countries. But specifically to Germany, there is kind of like two major things going on right. One is, there is a huge portfolio shift of power generation assets going on primarily driven by the increase in wind and solar, and that’s causing a lot of stress financial and technical on what is traditionally been their base load power. To deal with that frankly E.On has split themselves off into two companies that I think will actually happen in 2016 while these generating assets are going to a new company and what they call renewable and distributed generation are going to the people that we’re dealing with right now which is called connecting energies right. So that’s a completely different business model. In short, that’s driving what we are doing. So the example of this customer that we have or E.On has here in Germany which is in the Heidelberg area were north or south and north is really not even existing customer of E.On. So they are really seeing this as a growth opportunity for themselves. The other thing is when the deregulated things not just specifically in Germany it creates that opportunity that I talked about. So I think what we are seeing is that as they grow strategically into more clean energy there is consequences that need to be dealt with. When you have intermittency and things like that and that’s that rebuilding of the customer base and by the way the old way to do it was the utility within the assets included in big plant I think are going to happen. I think the way we’re going to do that is we’re going to put distributed generation sizeable quantities megawatt and up at different site locations to deal with that issue and the deregulation opportunity creates opportunities for E.On to grow their business. So I think it’s pretty brilliant strategy which is frankly why we wanted to team up with them.

Yes, I know it’s going to be a great partner for you. And then just I guess lastly, I think you made a comment early talking about certain projects that you might keep with yourself rather than selling them. What types of characteristics would cause you to keep a project on your books rather than kind of getting rid of it for likely better term?

Sure, Carter. This is Mike. We certainly would never characterize getting rid of a project, all of our project from us, it’s long term service agreement, so long term venture with the customer and the end investor. When we look at ownership models for these assets that we’re currently building on our balance sheet, there is obviously strong demand out in the marketplace you could envision selling to a yieldco or an infrastructure fund. You could also envision tax equity type solutions which may or may not entail keeping the asset on balance sheet. So what we are trying to do is certainly maximize return to the company long term cash flows to the company and the project investor and are looking at a variety of different structures to enable that.

Fair enough. I’ll get back in the queue. Appreciate answering all my questions.

Thanks.

Our next question comes from the line of JinMing Liu with Ardour Capital. Your line is now open.

Good morning. Thanks for taking my questions.

Good morning, JinMing.

Yes. I have about couple of questions just about the carbon capture project. So first of all, how much of your cost share obligation will be?

So, JinMing, this is Chip. Specifically of that first project is what your question was?

Right. Probably talk about the 3.7.

So, the first project and the reason I wanted to differentiate that is because as we – let’s take the first project 2 megawatts and 23.7 megawatts, we were given award of $15 million from the Department of Energy to do this project. They are very exciting about as we are as well, so it’s a pretty sizeable but we’d expect that it’s a cost share meaning that industrial partners need to pay the difference of whatever it is or observe those costs. Our strategy is that, as we talk to these other places to put this perhaps is first one, that can be expandable to much bigger ones of 27 megawatts in total site that we would seek - the amount of people contributed to that. So it wouldn’t necessarily be all of us to do there but that’s just kind of the way the process start. It starts with a project we developed, we got it award and that we continue to work JinMing to that. But subsequent to that first initial chunk of 23.7 million, we would get back to what Mike was talking about before which is the kind of expected margins we would want to make. So when you kind of look at that one, no matter how it comes out, it would have a fairly minor impact in the overall margin of the business.

Okay, got that. And also – yes.

Go ahead.

Okay. About the $0.02 per kilowatt hour cost for the carbon capture, you say that member net off the potential electricity revenue or it’s just before that?

Yes, so that number – all those numbers I was talking about there came out of the work that we did with the Department of Energy which kind of created the buzz around what we the sole affordability thing. But the $0.02 per kilowatt is if you took that example that I gave you of 550 megawatt plant, you installed 420 megawatts of FuelCells and reduced the CO2 emissions 90%. The fact is that $0.02 a kilowatt would be the total impact without monetizing any of the CO2. So if you monetize CO2, then it could really mitigate all. So it takes into account all of that. Having said that, the reality is that with EPA is looking for is only a 30% reduction in emissions levels from coal fire power plant. So you would never probably actually get to that 90% number so the financial impact would be even smaller than what I just said because if you look at the clean energy plant that EPA is put out, it basically have a 30% reduction over about a ten year period of time. So we would build plants in this 27 megawatt shrunk if you will that would really not have much impact at all. So that was just a broad, if you took this thing to 90% reduction which nobody is forecasting, the battles with the project was asked to do which is frankly a low statistic. So we would see a rate fair impact even less of that when you put this incrementally to meet with the clean energy plant we really describing.

Okay. I see. Actually, that leads to another question, so your technology will take care of the carbon capture part, are you looking at or you working with some partners for the carbon storage or just monetize the sale?

Yes, so just for the audience here, yes, what we are focused on is efficiently capturing the CO2 and of course with our technology reducing the other emissions like harmful emissions as well, but that’s just part of the process in the CO2 [ph]. But anyway the CO2 you can deal with three ways, you can put it in the ground and sequester it, you can use and oil recovery which we have that in this country in various places or you can sell for more industrial application. But for the most part, I think the answer you have to find a way to sequester in the ground. And yes, there are people that are working on that. I can’t say it’s premature for me to say anything more than that, but there are people well versed and that we’re working on that way to cost effectively capture with sequester CO2 that we capture.

Okay, got that. Thank you.

Thank you.

I’m showing no further questions on the phone lines at this time. I would like to turn the call back to Chip Bottone for closing remarks.

Okay. I would like to just thank everybody for the broad range of questions that were posed today and just kind of summarize in a couple of ways. We’ve been talking about our business models, development model for quite some time and I think we are seeing the evidence of that is working and attracting more business, which is what we wanted. We had surfaced in the past things like carbon capture and frankly it’s gaining a lot of traction and as we said these are big projects and we are going to build on how do we produce the products and how do we operate the plants in the same model that we produced in a developer model. So from our perspective here is some of this stuff takes a little bit of time, but it’s basically just validation of what we said we were going to do and I think things like the support of the Department of Energy, EPA and some of the things, but we are doing other than carbon capture and just our normal core business is certainly encouraging to us that the – this is gaining momentum and we will have the production and then we will have obviously the revenue to follow with that. So, again, thank you very much for participating today and we look forward to seeing you on the next call for the fourth quarter. Have a great day everybody. Thank you.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program and you may now disconnect. Everyone have a great day.