Fuel Tech, Inc.

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Fuel Tech, Inc.

512 Kingsland Drive
Batavia, Illinois 60510-2299
Telephone: (630) 845-4500
Toll Free: (800) 666-9688
Fax: (630) 845-4501
Web site: http://www.fueltechnv.com

Public Company
Incorporated: 1987 as Fuel-Tech N.V.
Employees: 105
Sales: $52.93 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: FTEK
NAIC: 541330 Engineering Services; 562910 Remediation Services

Illinois-based Fuel Tech, Inc., is making a name for itself as a growing company with cost-effective products that can help thousands of power plants produce less pollution and run more efficiently. The company's primary business is air pollution control. Its signature product is NOxOUT, a nitrogen oxide reducing system for coaland oil-fired boilers, incinerators, furnaces, and other combustion sources that is installed in over 400 units worldwide. The company's FUEL CHEM products, designed to reduce residue buildup and corrosion in furnaces and boilers, are being used internationally in over 80 combustion units burning a wide variety of fuels including coal, heavy oil, biomass, and municipal waste.


Fuel Tech was founded in 1981 in Cambridge, Massachusetts, by William M. Haney III, a Harvard College undergraduate at the time. Haney set up the company to improve methods of burning fossil fuels by using technology that reduced emissions of nitrogen oxides (NOx), a pollutant produced by vehicles, power stations, and factories and considered a principal component of acid rain, smog, and ground-level ozone. At the time, stationary sources accounted for about one-half of NOx emissions and many industrialized nations, especially in central Europe where acid rain was causing forests to die, were desperately seeking efficient and economical ways to reduce harmful air pollutants.

In 1982, a New York Times article heralded a "Renascence of undergraduate student entrepreneurs at Harvard College," and reviewed, alongside a photo of Haney, a number of student-created companies including Fuel Tech. In August 1983, Fuel Tech obtained a licensing agreement from Columbia Chase Corp., of Braintree, Massachusetts, for use of Columbia's processes and technologies for making fuel more economical and less polluting. In May 1984, Fuel Tech acquired International Power Chemicals Inc., a subsidiary of Rolfite. The amounts of the initial cash payment and final purchase price were not disclosed.

In 1985, with 22-year-old Haney at the helm, and operations located in Stamford, Connecticut, the company began to develop NOxOUT, its signature nitrogen oxide reduction technology for factories and power stations. Fuel Tech began working with a process that was initially designed in 1976 by the California-based Electric Power Research Institute. Fuel Tech further developed the process, which involved injecting a urea-based liquid into the flue gas of a boiler, furnace, or incinerator to turn nitrogen oxides into water and air. Urea is created industrially in huge quantities as a byproduct of natural gas exploitation. Electric Power sold a worldwide marketing license for NOxOUT to the company in 1987. Fuel Tech claimed its improved system, which employed an enhanced formula of chemicals and specially designed injectors, allowed more effective nitrogen reduction at a greater range of temperatures than the original process.

In 1987, the company incorporated as Fuel-Tech N.V. under the laws of the Netherlands Antilles. Fuel Tech, Inc., became the company's wholly owned U.S. subsidiary and continued to be headquartered in Stamford, Connecticut. The company, which had been financed since 1984 primarily by Schroders, a merchant bank in London, England, was by the end of 1987 about 90 percent British financed. The London-based European operation was headed by Jeremy Peter-Holbyn, a British engineer and businessman.

In April 1988, the company, through its specially created West German subsidiary, launched a joint venture with a German chemical company and bank to promote NOxOUT in West Germany, Switzerland, Austria, and Sweden with a full-scale trial at a European coal-fired power station. Fuel Tech claimed its technology reduced nitrogen oxide emissions by 70 percent and cost $15 to $30 per kilowatt of installed capacity, about one-fourth the cost of a rival Japanese process. In October 1988, 12 European countries signed a treaty to reduce emissions of nitrogen oxides by 30 percent by 1998. By the end of 1988, Fuel Tech had 15 field demonstration sites worldwide and its first orders for paid installations of NOxOUT systems from a California petroleum refinery and a West German utility power plant. In 1988, the company's $12 million in sales were generated primarily through other product lines, which included fuel additives, fuel treatment products, and industrial burners.


In January 1990, Fuel-Tech N.V. established Nalco-Fuel Tech, Inc. (NFT), a 50-50 joint venture with Naperville, Illinois-based Nalco Chemical Company, then the world's largest chemical water treatment company. The new company, based in Naperville, was created to market, install, and supply NOxOUT technology in the United States. By September, 20 American companies affected by state and local ozone regulations had bought NOxOUT systems. The year also brought new federal regulations in the United States in the form of the Clean Air Act Amendments (CAAA) of 1990, which established timetables for NOx emissions reductions for varying sources.

Fuel Tech's agreement with Nalco was expanded to include the worldwide market in February 1991. As part of the new agreement, NFT opened operations in Europe through a subsidiary in Germany, where it had orders for NOxOUT systems for six municipal waste incinerators. In March 1992, NFT introduced NOxOUT Plus, which the company claimed reduced nitrogen oxide emissions by 80 percent from any incinerator, boiler, or heater that burned coal, oil, or waste.

At the start of 1993, NFT had overseas offices in Essen, Germany, and Taipei, Taiwan, with over 60 NOxOUT installations either under contract or in operation in the United States, Sweden, Switzerland, Czechoslovakia, Germany, and Taiwan. Despite the potential for increased business from the 1990 passage of the CAAA, by August 1993 the company had sold only 12 NOxOUT systems in the United States, the bulk of which had been installed in new industrial or utility boilers to meet requirements of the 1970 Clean Air Act. In September 1993, Fuel-Tech N.V. began trading on the NASDAQ under the symbol FTEKF, and in November announced that it had raised $6.25 million to support NFT through a private sale of 625,000 shares of its common stock to a group of British investors.


Fuel Tech is a worldwide leader in the development and commercialization of advanced technologies designed to enable more efficient and environmentally acceptable combustion of a wide variety of solid and liquid fuels, primarily in boilers and furnaces. With its strong tradition of customer focus and proprietary, cost-effective engineering solutions, the Company is now experiencing accelerating growth as it benefits from ever-tightening global air pollution control requirements, as well as market-driven shifts to lowercost, and often more problematic, fuel sources, which demand innovative combustion optimization solutions by utility and industrial power generators.

In January 1994, Fuel Tech formed Clean Diesel Technologies, Inc., (CDTI) as a wholly owned subsidiary to develop technologies to reduce the level of emissions produced by diesel engines. In March 1994, NFT formed the Catalyst Systems Division to market new air pollution control technologies, including selective catalytic reduction (SCR) processes, under the names NOxMASTER and NOxOUT SCR. August brought NFT its first utility retrofit sale of NOxOUT technology in the United States that was directly related to the CAAA of 1990.

In March 1995, Fuel Tech N.V. reported that the last quarter of 1994 was its first profitable period due primarily to increased sales in the United States as companies took steps to comply with the first significant CAAA regulations deadline of May 1995. NFT also registered its first profitable period in the same quarter. In July 1995, NFT received $10 million in new orders for NOx reduction systems, including large first-time orders from Poland and the People's Republic of China. In December, Fuel Tech spun off its Clean Diesel subsidiary as a stand-alone company, retaining a 27 percent stake after raising $11.3 million through a rights offering to company shareholders.

In February 1996, NFT landed its first commercial order for its FUEL CHEM business, which was based on a proprietary chemical process aimed at improving the efficiency of industrial boilers rather than reducing their pollutants. March brought news that 1995, with just over $23 million in total sales, was the first year that NFT was profitable. In October 1996, NFT signed an agreement with Fuel Tech's former subsidiary, CDTI, to cooperate on the commercialization of low-emission diesel technologies. Terms called for NFT to focus on stationary diesel power generation and for CDTI to develop the transportation sector.


November 1997 brought the biggest news of the year when Fuel-Tech N.V. announced the acquisition of Nalco Chemical Company's 50 percent share of NFT. Nalco actually sold its half of NFT to American Bailey Corporation (ABC), a privately held investment and management company led by former Conoco Inc. executive Ralph E. Bailey. ABC then sold its interest in NFT to Fuel Tech in exchange for a 25 percent stake in the company. Bailey was appointed chairman and CEO of Fuel Tech, and his brother, Douglas G. Bailey, was seated on the board. New contracts awarded to NFT by customers outside the United States in 1997 included orders from the United Kingdom, Italy, Germany, Slovakia, Korea, and Taiwan.

Fuel Tech's air pollution control business surged in early 1998 with the company landing $6.6 million worth of new contracts in January. Acquisition transactions were officially completed in May 1998 and Fuel Tech N.V. changed from a holding company to an operating company doing business through its subsidiary, Fuel Tech, Inc. In November, the company announced that it would continue trading on the NASDAQ Small Cap market and changed its symbol from FTEKF to FTEFC.

In March 1999, Fuel Tech reported a net profit for 1998 of $539,000 on sales of $25.8 million. The company's first profitable year was due in part to growing revenues from its FUEL CHEM Division, which had more than $5 million in specialty chemicals sales for the year. The company also changed its NASDAQ trading symbol to FTEK in March. May 1999 marked the deadline imposed by the 1994 Memorandum of Understanding between 11 northeastern states, known as the Ozone Transport Region, to reduce NOx emissions from utilities by 55 to 65 percent in relation to 1990 levels.


Fuel Tech is founded by Harvard undergraduate William M. Haney III.
The company is incorporated as Fuel-Tech N.V. under the laws of the Netherlands Antilles.
Fuel Tech sells its first installation of nitrogen oxide reduction technology.
Clean Air Act Amendments establish timetables in the United States for NOx emissions reductions; Nalco Chemical Company and Fuel Tech establish Nalco-Fuel Tech, Inc. (NFT).
Fuel Tech acquires all of NFT; America Bailey Corporation acquires part of Fuel Tech.
Peabody Energy agrees to jointly market Fuel Tech products in the coal-fueled utility market.
Fuel Tech lands $15.3 million in contracts with the People's Republic of China.
Company changes legal name, moves headquarters, and hires a new president and CEO.

As reported by the company in March 2000, regulatory-driven business pushed the company's 1999 net sales up almost 30 percent to a record $33.3 million. As a result, net profits were up almost 500 percent to $3 million. NOx reduction contracts alone had been worth more than $19.5 million for the year. In March 2000, a federal appeals court upheld the Environmental Protection Agency's (EPA) 1998 Ozone Transport State Implementation Plan (SIP) Call regulations, which proposed ozone reductions of 85 percent from 1990 levels in 22 midwestern and southeastern states. The SIP Call mandated reduced levels by May 2004. In July 2000, Fuel Tech restructured its European operations when it announced plans to shut down its German unit, Fuel Tech GmbH, in order to focus on its Italian company, Fuel Tech Srl.

In March 2001, Fuel Tech reported a significant drop in net sales for 2000 to $21.9 million, with an even more dramatic decline in net profits to only $415,000. The company blamed its poor performance partly on the uncertainties and delays caused by court battles over the EPA's SIP Call regulations. In May 2001, Fuel Tech announced its first commercial contract for its proprietary Targeted-In-Furnace-Injection (TIFI) technology. Developed by the FUEL CHEM Division, TIFI technology used the company's proprietary advanced computing and visualization capabilities to target the injection of specialty chemicals into furnaces and boilers. The process was designed to improve unit performance and efficiency by controlling residue buildup, corrosion, and fouling.


Net sales for 2001, as reported by the company in March 2002, dropped to $17.7 million, leading to a net loss for the year of $1.6 million. Orders for NOx reduction systems, however, began to increase in early 2002 and in the first 90 days the company announced over $16 million in contracts from utility and industrial operators taking their first steps to comply with a looming May 2004 SIP Call deadline. On July 29, 2002, Fuel Tech N.V. began trading on the NASDAQ National Market.

The company released its 2002 annual financial report in late February 2003, which showed a year-to-year revenue increase of 85 percent to $32.6 million and a return to profitability with net income of $3.1 million. In June 2003, the company signed a strategic agreement with Peabody Energy, the world's largest coal company, to jointly market Fuel Tech's FUEL CHEM and TIFI technology in the coal-fueled utility market. In October, Fuel Tech acquired the fuel treatment chemical business of Martin Marietta Magnesia Specialties, LLC, a subsidiary of Martin Marietta Materials, Inc., and the leading U.S. producer of magnesia-based chemical products. In December, Chairman and CEO Ralph E. Bailey announced a shakeup of management, a consolidation of the company's financial and human resources in the company's operational headquarters in Batavia, Illinois, and the relocation of corporate headquarters within Stamford to a building shared with American Bailey Corporation.

As reported by Fuel Tech in late February 2004, net sales for 2003 were up 10 percent to $35.7 million. Net income was down to $1.1 million, the company explained, due in part to the addition of sales and marketing resources for its FUEL CHEM business, where sales were up 45 percent for the year. In May 2004, the company signed an alliance agreement with Duke Power, one of the nation's largest electric utilities, for the supply of NOxOUT systems for as many as 24 units through 2007. Fuel Tech announced another major order in October for NOxOUT systems for five coal-fired boilers at a major unnamed southeastern utility.

When the annual financial report for 2004 was released in March 2005, air pollution control revenues had fallen from $25.4 million in 2003 to $14.6 million for the year. Companywide net sales were down to $30.8 million but net income rose to $1.7 million. FUEL CHEM revenues were up nearly 60 percent to a record $16.2 million. By May 2005, Fuel Tech's air pollution control business was on the rebound as utilities rushed to comply with the EPA's SIP Call deadlines, which had been expanded in December 2003 to include ten more states and additional NOx reductions by 2010 and 2015. In September 2005, Fuel Tech landed a major NOxOUT contract, worth $9.3 million, in the People's Republic of China, and in November announced another $6 million Chinese contract.

In March 2006, Fuel Tech reported that net sales for 2005 were up 72 percent to $52.9 million and net income for the year had soared to $7.6 million. Air pollution control sales had gone up 124 percent to a record $32.6 million. Foreign sales also set a record at $11.2 million for the year. In March 2006, the company appointed John F. Norris, Jr., a former senior executive at American Electric Power and Duke Energy Corporation, as president and CEO of Fuel Tech, Inc. In June, Norris was also named president and CEO of Fuel-Tech N.V., replacing Ralph E. Bailey, CEO since 1998 and holder of 23 percent of Fuel Tech's shares. Bailey remained executive chairman of Fuel-Tech N.V. and Fuel Tech, Inc. In September, the company changed its legal domicile from Netherlands Antilles to Delaware, and its legal name from Fuel-Tech N.V. to Fuel Tech, Inc. In October, the company moved its corporate headquarters from Stamford, Connecticut, to Batavia, Illinois. In November, Fuel Tech reported that net sales for the first nine months of 2006 climbed 56 percent to $57.1 million, up $20.4 million from the comparable year-earlier period.

With cost-effective, environmentally friendly products aimed at helping power plants create less pollution and run more efficiently, and with growing worldwide regulatory pressure for better air quality and public health, Fuel Tech in early 2007 looked like it had great potential for growth.

Ted Sylvester


ALSTOM; BASF Catalysts LLC; Foster-Wheeler Ltd.; Mobotec USA Inc.; Peerless Mfg. Co.; The Babcock & Wilcox Company.


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