| Item 1.01. | Entry into a Material Definitive Agreement. |
On May 19, 2023, FuelCell Energy Opco Finance
1, LLC (“Borrower”), a wholly owned subsidiary of FuelCell Energy Finance, LLC (“FCEF”), which, in turn, is a
wholly owned subsidiary of FuelCell Energy, Inc. (the “Company”), entered into a Financing Agreement (the “Financing
Agreement”) with, by and among Investec Bank plc in its capacities as a lender (“Investec Lender”), administrative agent
(“Administrative Agent”), and collateral agent (“Collateral Agent”); Investec, Inc. as coordinating lead
arranger and sole bookrunner; Bank of Montreal (Chicago Branch) in its capacity as a lender (“BMO Lender”) and as mandated
lead arranger; and each of Liberty Bank, Amalgamated Bank and Connecticut Green Bank as lenders (collectively with Investec Lender and
BMO Lender, the “Lenders”) for a term loan facility in an amount not to exceed $80.5 million (the “Term Loan Facility”
and such term loan, the “Term Loan”) and a letter of credit facility in an amount not to exceed $6.5 million (the “LC
Facility” and together with the Term Loan Facility, the “Financing Facility”).
Borrower’s obligations under the Financing
Agreement are secured by the Company’s interest in six operating fuel cell generation projects: (i) the Bridgeport Fuel Cell
Project, located in Bridgeport, Connecticut; (ii) the Central CT State University Project, located in New Britain, Connecticut; (iii) the
Pfizer Project, located in Groton, Connecticut; (iv) the LIPA Yaphank Project, located in Long Island, New York; (v) the Riverside
Regional Water Quality Control Plant Project, located in Riverside, California; and (vi) the Santa Rita Jail Project, located in
Alameda County, California (each, a “Project” and collectively, the “Projects”).
Immediately prior to the closing on the Financing
Facility, which closing occurred on May 19, 2023, the Company caused to be transferred to Borrower all of the outstanding equity
interests in: (i) Bridgeport Fuel Cell, LLC (the “Bridgeport Project Company”), the entity that owns the Bridgeport Fuel
Cell Project; (ii) New Britain Renewable Energy, LLC (the “CCSU Project Company”), the entity that owns the Central CT
State University Project; (iii) Groton Fuel Cell 1, LLC (the “Pfizer Project Company”), the entity that owns the Pfizer
Project; (iv) Riverside Fuel Cell, LLC (the “Riverside Project Company”), the entity that owns the Riverside Regional
Water Quality Control Plant Project; (v) SRJFC, LLC (the “Santa Rita Project Company”), the entity that owns the Santa
Rita Jail Project; and (vi) Fuel Cell YT Holdco, LLC (the “Class B Member”), the entity that owns the Company’s
Class B membership interest in YTBFC Holdco, LLC (the “Yaphank Tax Equity Partnership”), the tax equity partnership with
Renewable Energy Investors, LLC (the “Class A Member”), as tax equity investor, which Yaphank Tax Equity Partnership,
in turn, owns Yaphank Fuel Cell Park, LLC (the “Yaphank Project Company”), the entity that owns the LIPA Yaphank Project.
At the time of closing on the Financing Facility:
(i) the Bridgeport Fuel Cell Project was encumbered by senior and subordinated indebtedness to Liberty Bank, Fifth Third Bank and
Connecticut Green Bank in the aggregate amount of approximately $11.4 million; and (ii) the Pfizer Project, the Riverside Regional
Water Quality Control Plant Project and the Santa Rita Jail Project were subject to sale and leaseback transactions and agreements with
PNC Energy Capital, LLC (“PNC”) in which the lease buyout amounts, including sales taxes, were approximately $15.7 million,
$3.7 million and $2.8 million, respectively. In connection with closing on the Financing Facility, all of the foregoing indebtedness and
lease buyout amounts were repaid and extinguished with proceeds of the Term Loan and funds of approximately $7.3 million that were released
from restricted and unrestricted reserve accounts held at PNC at the time of closing, resulting in the applicable project company’s
re-acquiring ownership of the three leased projects from PNC. In addition, in connection with closing on the Financing Facility, proceeds
of the Term Loan were used to repay a portion of the Company’s long-term indebtedness to Connecticut Green Bank in the amount of
approximately $1.8 million.
At the closing, the entire amount of the Term Loan
portion of the Financing Facility, $80.5 million, was drawn down. After payment of fees and transaction costs (including fees to the Lenders
and legal costs) of approximately $2.9 million in the aggregate, the remaining proceeds of approximately $77.6 million were used as follows:
(i) approximately $15.0 million was used (in addition to the approximately $7.3 million released from restricted and unrestricted
reserve accounts held at PNC) to pay the lease buyout amounts and sales taxes referred to above and to re-acquire the three projects owned
by PNC as referred to above; (ii) approximately $11.4 million was used to extinguish the indebtedness to Liberty Bank, Fifth Third
Bank, and Connecticut Green Bank relating to the Bridgeport Fuel Cell Project; (iii) approximately $1.8 million was used to repay
a portion of the Company’s long-term indebtedness to Connecticut Green Bank; (iv) $14.5 million was used to fund a capital
expenditure reserve account required to be maintained pursuant to the terms and conditions of the Financing Agreement (which will be classified
as restricted cash on the Company’s Consolidated Balance Sheet); and (v) approximately $34.9 million was distributed to the
Company for use as the Company determines in its sole discretion. In addition, in connection with the extinguishment of the Company’s
indebtedness to Liberty Bank and Fifth Third Bank referred to above, approximately $11.2 million of restricted cash was released to the
Company from Liberty Bank and Fifth Third Bank. Taking into consideration the release of such funds, the total net proceeds to the Company
from these transactions were approximately $46.1 million (which will be classified as unrestricted cash on the Company’s Consolidated
Balance Sheet).
The Term Loan portion of the Financing Facility
will accrue interest on the unpaid principal amount calculated from the date of such Term Loan until the maturity date thereof at a rate
per annum during each Interest Period (as defined in the Financing Agreement) for such Term Loan equal to (A) with respect to SOFR
Rate Loans, (i) the Adjusted Daily Compounded SOFR for such Interest Period with respect to SOFR Rate Loans plus (ii) the
Applicable Margin, and (B) with respect to Base Rate Loans, (i) the Base Rate from time to time in effect plus (ii) the
Applicable Margin (in each case as defined in the Financing Agreement). The Applicable Margin for SOFR Rate Loans is 2.5% for the first
four years of the term and thereafter, 3%. The Applicable Margin for Base Rate Loans is 1.5% for the first four years of the term and
thereafter, 2%. At the closing, in connection with the draw down of the entire amount of the Term Loan, Borrower elected to make such
draw down a SOFR Rate Loan with an initial Interest Period of three months. After the initial Interest Period of three months, Borrower
may elect both the applicable Interest Period (i.e., one month, three months or six months) and whether the Term Loan will be treated
as a SOFR Rate Loan or a Base Rate Loan for such Interest Period. Interest payments are required to be made quarterly.
Quarterly principal amortization obligations are
also required to be made (based on 17-year principal amortization designed to be fully repaid in 2039), with quarterly amortization payments
based on a 1.30x debt service coverage ratio sizing based on contracted cash flows (before giving effect to module replacement expenses
and module replacement drawdown releases). The Term Loan has a seven-year term, maturing on May 19, 2030.
Pursuant to the terms and conditions of the Financing
Agreement, Borrower is required to maintain a capital expenditures reserve to pay for expected module replacements. The total reserve
balance is required to reach $29.0 million, $14.5 million of which was funded out of the closing advance of the Term Loan and the remainder
of which is to be funded pursuant to an agreed upon funding schedule through cash flows generated by the Projects set forth in the Financing
Agreement.
Pursuant to the terms and conditions of the Financing
Agreement, Borrower is required to maintain a debt service reserve of not less than six months of the scheduled principal and interest
payments. The letter of credit component of the Financing Facility is for the purpose of obtaining letters of credit to satisfy such obligation;
at the closing, an Irrevocable Letter of Credit was issued by Investec Bank plc as the issuing bank in favor of the Collateral Agent for
the benefit of the Lenders in the amount of $6.5 million to satisfy the debt service reserve funding obligation.
Pursuant to the Financing Agreement, within 30
days of the financial close of the Financing Agreement, Borrower is required to enter into one or more hedge transactions, with a Lender
or an affiliate thereof pursuant to one or more interest rate agreements, to hedge Borrower’s interest rate exposure relating to
the Term Loan from floating to fixed. Such hedge transactions are required to be in effect at all times during the entire amortization
period and have an aggregate notional amount subject to the hedge transactions at any time equal to at least seventy five percent (75%)
and no more than one hundred five percent (105%) of the aggregate principal balance of the Term Loan outstanding (taking into account
scheduled amortization of the Term Loan).
Upon closing, on May 19, 2023, Borrower entered
into an ISDA 2002 Master Agreement (the “Investec Master Agreement”) and an ISDA Schedule to the 2002 Master Agreement (the
“Investec Schedule”) with Investec Bank plc as a hedge provider, and an ISDA 2002 Master Agreement (the “BMO Master
Agreement”) and an ISDA Schedule to the 2002 Master Agreement (the “BMO Schedule”) with Bank of Montreal (Chicago Branch)
as a hedge provider. On May 22, 2023, Borrower executed the related trade confirmations for these interest rate swap agreements with
these hedge providers to protect against adverse price movements in the floating SOFR rate associated with 100% of the aggregate principal
balance of the Term Loan outstanding. Pursuant to the terms of such agreements, Borrower will pay a fixed rate of interest of 3.716%.
The net interest rate across the Financing Agreement and the swap transaction is 6.366% in the first four years and 6.866% thereafter.
The obligations of Borrower to the hedge providers under the interest rate swap agreements are treated as obligations under the Financing
Agreement and, accordingly, are secured, on a pari passu basis, by the same collateral securing the obligations of Borrower under the
Financing Agreement, which collateral is described below.
The Financing Agreement contains certain reporting
requirements and other affirmative and negative covenants which are customary for transactions of this type. Included in the covenants
are covenants that: (i) the Yaphank Project Company obtain ongoing three year extensions of its current gas agreement; (ii) any
annual operating expense budget that exceeds 115% of the Base Case Model (as defined in the Financing Agreement) for that year be approved
by the Required Lenders (i.e., Lenders constituting more than 50% of the amounts loaned); (iii) Borrower maintain a debt service
coverage ratio of not less than 1.20:1.00 (based on the trailing 12 months and tested every six months); and (iv) the Class B
Member is required to exercise its option to purchase the Class A Member’s interest in the Yaphank Tax Equity Partnership during
the six month period following the “flip Point” as set forth in the limited liability company agreement for the Yaphank Tax
Equity Partnership. The Financing Agreement also contains customary representations and warranties and customary events of default that
cause, or entitle the Lenders to cause, the outstanding loans under the Financing Agreement to become immediately due and payable.
The Term Loan may be prepaid at any time at the
option of Borrower without premium or penalty other than any “liquidation costs” if such prepayment occurs other than at the
end of an Interest Period. In addition, there are certain mandatory repayments required under the Financing Agreement, including in connection
with any sale or disposition of all of the Projects or of any of the LIPA Yaphank Project, the Bridgeport Fuel Cell Project or the Pfizer
Project. If the Company disposes of any of the Riverside Regional Water Quality Control Plant Project, the Santa Rita Jail Project or
the Central CT State University Project, Borrower is required to prepay an amount of the Term Loan based on the then stipulated value
of the disposed Project.
Simultaneously with Borrower entering into the
Financing Agreement, FCEF (as pledgor), Borrower and each of the Bridgeport Project Company, the Pfizer Project Company, the Riverside
Project Company, the Santa Rita Project Company, the CCSU Project Company and the Class B Member, each as a subsidiary grantor party
and guarantor, entered into an Omnibus Guarantee, Pledge and Security Agreement (the “Security Agreement”) with Investec Bank
plc as Collateral Agent, pursuant to which, as collateral for the Term Loan Facility, the LC Facility and the hedge agreements (i) FCEF
granted to Collateral Agent a security interest in all of FCEF’s equity interest in Borrower; (ii) Borrower granted to Collateral
Agent a security interest in all of Borrower’s assets consisting of its equity interests in the Bridgeport Project Company, the
Pfizer Project Company, the Riverside Project Company, the Santa Rita Project Company, the CCSU Project Company and the Class B Member;
(iii) each of the Bridgeport Project Company, the Pfizer Project Company, the Riverside Project Company, the Santa Rita Project Company
and the CCSU Project Company granted to Collateral Agent a security interest in all of each such entity’s assets consisting principally
of the respective generation facilities and project agreements; and (iv) the Class B Member granted to Collateral Agent a security
interest in all of such Class B Member’s assets, consisting principally of its equity interest in the Yaphank Tax Equity Partnership.
Pursuant to the Security Agreement, each of the subsidiary grantor parties jointly and severally guaranteed payment of all of the obligations
secured by the Security Agreement.
Simultaneously with the execution of the Financing
Agreement, Borrower, Investec Bank plc as Collateral Agent and Administrative Agent and Liberty Bank as Depositary Agent entered
into a Depositary Agreement (the “Depositary Agreement”) pursuant to which Borrower established certain accounts at Liberty
Bank, all of which were pledged to Collateral Agent as security for the Term Loan Facility, the LC Facility and the hedge agreements,
including a Revenue Account; a Debt Service Reserve Account; a Redemption Account (for prepayments); a Capital Expenditure Reserve Account;
and a Distribution Reserve Account (in each case as defined in the Depositary Agreement). Pursuant to the terms of the Financing Agreement
and the Depositary Agreement, Borrower may make quarterly distributions to FCEF and the Company provided that: (i) no Event of Default
or Default (in each case as defined in the Financing Agreement) exists under the Financing Facility; (ii) all reserve accounts have
been funded; (iii) no letter of credit loans or unpaid drawings are outstanding with regard to any drawn down letter of credit under
the LC Facility; (iv) Borrower has maintained a greater than 1.20:1.00 debt service coverage ratio for the immediate 12 month period;
and (v) no Cash Diversion Event (i.e., certain events that would adversely impact distributions to the Class B Member in connection
with the LIPA Yaphank Project, as further defined in the Financing Agreement) has occurred. Beginning with the quarter ending June 2025
and continuing until the quarter ending March 2026, prior to making contributions to the Debt Service Reserve Account or the Capital
Expenditure Reserve Account or having funds available for distribution, out of operating cash flow, Borrower is required to make a quarterly
payment to the Administrative Agent (on behalf of the Lenders) in the amount of $675,000 per quarter to be applied to outstanding principal.
The foregoing description of the Financing Agreement,
the Security Agreement, the Depositary Agreement, the Investec Master Agreement, the Investec Schedule, the BMO Master Agreement, and
the BMO Schedule is qualified in its entirety by reference to the full text of the Financing Agreement, the Security Agreement, the Depositary
Agreement, the Investec Master Agreement, the Investec Schedule, the BMO Master Agreement, and the BMO Schedule, copies of which are attached
as Exhibit 10.1, Exhibit 10.2, Exhibit 10.3, Exhibit 10.4, Exhibit 10.5, Exhibit 10.6, and Exhibit 10.7,
respectively, to this Current Report on Form 8-K and are incorporated herein.
| Item 1.02. | Termination of a Material Definitive Agreement. |
The information in Item 1.01 of this Current Report
on Form 8-K is hereby incorporated by reference into this Item 1.02.
Termination of Certain Agreements with PNC
On October 31, 2016, Groton Fuel Cell 1, LLC,
a wholly owned subsidiary of the Company, which is referred to above and herein as the “Pfizer Project Company,” entered into
a Purchase and Sale Agreement and a Lease Agreement with PNC, pursuant to which the Pfizer Project Company became the lessee of a 5.6
megawatt (“MW”) fuel cell power plant located on the Pfizer Inc. campus in Groton, Connecticut (also referred to above and
herein as the “Pfizer Project”) through a sale-leaseback transaction. In addition, in connection with this sale-leaseback
transaction, FCEF and PNC entered into a Pledge Agreement pursuant to which FCEF granted PNC a security interest in, and a lien on, among
other things, all of its membership interests and other equity interests in the Pfizer Project Company.
In connection with the closing of the Financing
Facility described above, the Pfizer Project Company requested a payoff letter from PNC with respect to the repayment, in full, of all
outstanding obligations under the Lease Agreement. On May 19, 2023, using a portion of the proceeds from the closing of the Financing
Facility, the Pfizer Project Company paid approximately $15.7 million to PNC in repayment, in full, of all outstanding obligations (including
sales tax obligations) under the Lease Agreement. No early termination penalties were incurred in connection with this repayment. Upon
payment of such amount by the Pfizer Project Company to PNC on May 19, 2023, all of the Pfizer Project Company’s obligations
under the documents evidencing the lease (including, but not limited to, the Lease Agreement and the Pledge Agreement) were satisfied,
terminated and released (except for any such provisions that expressly survive such termination), all collateral and liens under the Pledge
Agreement were released, $4.2 million was released by PNC from restricted and unrestricted reserve accounts previously required to be
maintained by the Pfizer Project Company (which amount was used to repay the Pfizer Project Company’s obligations under the Lease
Agreement), and the Lease Agreement, the Pledge Agreement, and any other related agreements were terminated.
Termination of Certain Agreements with Liberty Bank, Fifth Third
Bank, and Connecticut Green Bank Related to the Bridgeport Fuel Cell Project
On May 9, 2019, in
connection with the closing of the purchase of the membership interests of Bridgeport Fuel Cell, LLC (which is referred to above and herein
as the “Bridgeport Project Company”) and the 14.9 MW Bridgeport Fuel Cell Project, the Bridgeport Project Company
(a subsidiary of the Company following such closing) entered into a Credit Agreement with Liberty Bank, as administrative agent and
co-lead arranger, and Fifth Third Bank as co-lead arranger and interest rate swap hedger (the “Bridgeport Credit Agreement”),
whereby Fifth Third Bank and Liberty Bank each provided financing in the amount of $12.5 million towards the purchase price for the
Bridgeport Project Company acquisition. As security for the Bridgeport Credit Agreement, Liberty Bank and Fifth Third Bank were granted
a first priority lien in (i) all assets of the Bridgeport Project Company, including its cash accounts, fuel cells, and all other
personal property, as well as third party contracts including the Energy Purchase Agreement between the Bridgeport Project Company and
Connecticut Light and Power Company dated July 10, 2009, as amended; (ii) certain fuel cell modules that are intended to be
used to replace the Bridgeport Fuel Cell Project’s fuel cell modules as part of routine operation and maintenance; and (iii) FCEF’s
(then the direct parent of the Bridgeport Project Company) ownership interest in the Bridgeport Project Company.
In addition, on May 9,
2019, the Bridgeport Project Company entered into a subordinated credit agreement with Connecticut Green Bank whereby Connecticut Green
Bank provided financing in the amount of $6.0 million (the “Subordinated Credit Agreement”). This $6.0 million consisted
of $1.8 million in incremental funding that was received by the Bridgeport Project Company and $4.2 million of funding previously
received by the Company with respect to which the Bridgeport Project Company became the primary obligor. As security for the Subordinated
Credit Agreement, Connecticut Green Bank received a perfected lien, subordinated and second in priority to the liens securing the $25.0 million
loaned under the Bridgeport Credit Agreement, in all of the same collateral securing the Bridgeport Credit Agreement.
In
connection with the closing of the Financing Facility described above, the Bridgeport Project Company requested payoff information
from Liberty Bank (as administrative agent under the Bridgeport Credit Agreement) and Connecticut Green Bank with respect to the payment,
in full, of all outstanding obligations under the Bridgeport Credit Agreement, the Subordinated Credit Agreement, and all related promissory
notes. On May 19, 2023, using a portion of the proceeds from the Financing Facility, the Bridgeport Project Company paid (i) approximately
$8.4 million to Liberty Bank in payment, in full, of all outstanding obligations to Liberty Bank and Fifth Third Bank under the Bridgeport
Credit Agreement and the related promissory notes issued by the Bridgeport Project Company in favor of Liberty Bank and Fifth Third Bank,
and (ii) approximately $3.0 million to Connecticut Green Bank in payment, in full, of all outstanding obligations under the Subordinated
Credit Agreement and the related promissory note issued by the Bridgeport Project Company in favor of Connecticut Green Bank. No early
termination penalties were incurred in connection with these payments. Upon payment of such amounts by the Bridgeport Project Company
to Liberty Bank, Fifth Third Bank, and Connecticut Green Bank on May 19, 2023, (a) all of the Bridgeport Project Company’s
obligations under (I) the Bridgeport Credit Agreement and the related promissory notes issued by the Bridgeport Project Company in
favor of Liberty Bank and Fifth Third Bank, and (II) the Subordinated Credit Agreement and the related promissory note issued by
the Bridgeport Project Company in favor of Connecticut Green Bank were satisfied, terminated and released (except for any such provisions
that expressly survive such termination), (b) all collateral and liens under the related security agreements and pledge and security
agreements were released, (c) approximately $6.2 million was released by Liberty Bank from the reserve accounts previously required
to be maintained by the Bridgeport Project Company under the Bridgeport Credit Agreement, (d) approximately $3.3 million was released
by Fifth Third Bank from the reserve accounts previously required to be maintained by the Bridgeport Project Company under the Bridgeport
Credit Agreement, and (e) the Bridgeport Credit Agreement, the Subordinated Credit Agreement, the related promissory notes, the related
security agreements and pledge and security agreements, and any other related agreements were terminated.
Termination of Related Interest Rate Swap Agreement and Transactions
with Fifth Third Bank
An
interest rate swap agreement was required to be entered into with Fifth Third Bank in connection with the Bridgeport Credit Agreement
to protect against movements in the floating LIBOR index. Accordingly, on May 16, 2019, an
interest rate swap agreement (the “Swap Agreement”) was entered into by the Bridgeport Project Company with Fifth Third Bank
in connection with the Bridgeport Credit Agreement for the term of the loan. The net interest rate across the Bridgeport Credit
Agreement and the swap transactions resulted in a fixed rate of 5.09%.
In
connection with the closing of the Financing Facility described above, the Bridgeport Project Company requested information from
Fifth Third Bank regarding the termination of the swap transactions contemplated by the Swap Agreement. The Bridgeport Project Company
and Fifth Third Bank agreed that, in consideration of the payment by Fifth Third Bank to the Bridgeport Project Company of approximately
$0.2 million, all of the rights and obligations of the Bridgeport Project Company and Fifth Third Bank arising out of such swap transactions
were terminated and waived as of May 19, 2023. In connection with such payment and agreement, the Swap Agreement is effectively terminated.