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FuelCell Energy’s New Modules Wearing Out Faster Than Expected

Future warranty expenses poised to spike as the company slashes warranty accruals.

January 11, 2022

Following years of warranty defect litigation, FuelCell Energy (FCEL), a maker of stationary fuel cell power plants, is warning new products are wearing out faster than originally anticipated. In its latest 10-K, FuelCell says it— and its customers and suppliers— have discovered new products are not deteriorating rapidly:

“ products including module decay rates which have…exceeded and may continue to exceed design expectations.”

If decay rates continue above expectations, expect revenue recognition delays or sales losses in 2022. FuelCell’s warranty costs may also spike. Though it acknowledges new products are deteriorating at an accelerated rate, FuelCell slashed its warranty accrual for the year ending October 31, 2021 by 25.7% to $72,000.

Separately, we recently warned the SEC is investigating FuelCell over a $6.5 million Paycheck Protection Program (PPP) loan it took during the height of the pandemic. The company repaid the forgiveable loan after the SEC began probing whether it was necessary.

Since turning over the information requested, FuelCell’s latest annual report indicates the SEC has not communicated with the company regarding the inquiry in FY21.


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