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Item 1. Business

2021-03-15 compared with 2020-03-12 · 68 added, 77 removed, 106 unchanged (58% of the section changed)

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These technologies enable our customers to operate efficiently in a cost-effective and environmentally sustainable manner.

The Company’s nitrogen oxide (NO x ) reduction technologies include advanced combustion modification techniques and post-combustion NO x control approaches, including NO x OUT ® , HERT™, and Advanced SNCR systems, ASCR™ Advanced Selective Catalytic Reduction systems, and I-NO x ® Integrated NO x Reduction Systems, which utilize various combinations of these systems, along with the UDI™ Urea Direct Injection system for SCR reagent supply, and the ULTRA ® process for safe ammonia generation.

These technologies have established Fuel Tech as a leader in NO x reduction, with installations on over 1,100 units worldwide.

The Company’s nitrogen oxide (NOx) reduction technologies include advanced combustion modification techniques and post-combustion NOx control approaches, including NOxOUT ® , HERT™, and Advanced SNCR systems, ASCR™ Advanced Selective Catalytic Reduction systems, and I-NOx ® Integrated NOx Reduction Systems, which utilize various combinations of these systems, along with the UDI™ Urea Direct Injection system for SCR reagent supply, and the ULTRA ® process for safe ammonia generation.

These technologies have established Fuel Tech as a leader in NOx reduction, with installations on over 1,200 units worldwide.

Fuel Tech’s APC technologies include particulate control with Electrostatic Precipitator (ESP) products and services including complete turnkey capability for ESP retrofits, with experience on units up to 700 MW.

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Our FUEL CHEM technologies revolve around the unique application of chemical injection programs which improve the efficiency, reliability, fuel flexibility, boiler heat rate and environmental status of combustion units by controlling slagging, fouling, corrosion, opacity and acid plume, as well as the formation of sulfur trioxide, ammonium bisulfate, particulate matter (PM2.5), sulfur dioxide (SO2), and carbon dioxide (CO2).

We use our patented TIFI ® Targeted In-Furnace Injection™ processes to apply specialty chemical programs to units burning a wide variety of fuels including coal, heavy oil, biomass, and municipal waste.

We use our proprietary TIFI ® Targeted In-Furnace Injection™ processes to apply specialty chemical programs to units burning a wide variety of fuels including coal, heavy oil, biomass, and municipal waste.

These TIFI programs incorporate design, modeling, equipment, reagent, and service to provide complete customized on-site programs designed to improve plant operations and provide a return on investment in addition to helping meet emission regulatory requirements.

Water treatment technologies include DGI™ Dissolved Gas Infusion Systems which utilize a patented nozzle to provide a competitive advantage over conventional utility and industrial aeration.

Water treatment technologies include DGI™ Dissolved Gas Infusion Systems which utilize a patented nozzle and a patent-pending saturator to provide a competitive advantage over conventional utility and industrial aeration.

An innovative alternative to current aeration technology among other applications, DGI systems can deliver supersaturated oxygen solutions and other gas-water combinations to target process applications or environmental issues.

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DGI technology benefits include reduced energy consumption, installation costs, and operating costs, while improving treatment performance.

The water treatment technology is not yet operational and there are currently no revenues associated with it.

The DGI technology is currently in the demonstration phase with limited revenues.

Many of our products and services rely heavily on our computational fluid dynamics and chemical kinetics modeling capabilities, which are enhanced by internally developed, high-end visualization software.

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Regulations and Markets:

The continued growth of our APC technology segment is dependent upon the adoption and enforcement of environmental regulations in the U.S.

The future growth of our APC technology segment is dependent upon the adoption and enforcement of environmental regulations in the U.S.

and globally.

In the U.S., federal and state laws regulating the emission of NO x are the primary driver in our APC technology segment.

In the U.S., federal and state laws regulating the emission of NOx are the primary driver in our APC technology segment.

The principal regulatory drivers currently in effect are as follows:

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The NAAQS provisions require that states comply with ozone and particulate emissions standards.

NO x emissions are a precursor to ozone formation and also contribute to fine particulate emissions (PM 2.5 ).

NO x emissions were targeted as contributors to fine particulate emissions and ozone emissions.

Since 1990, programs have been established by the EPA at the regional and federal level to help states in their mission to define and meet their State Implementation Plans (SIPs) for attainment.

NAAQS PM standards were issued in 1997, with more stringent standards issued in 2006 and 2012.

The NAAQS ozone standards issued in 1997 were made more stringent in 2008.

On October 1, 2015, the EPA strengthened the NAAQS for ground-level ozone by reducing the minimum acceptable level from 75 to 70 parts per billion (ppb).

Implementation of the 2015 NAAQS standards started in 2018 with finalization of the area designations.

A number of Eastern States are considering NOx reduction system upgrades for existing sources to meet the 70 ppb requirement.

2020 NAAQS ozone standards are expected to remain at the 2015 limit.

NOx emissions are a precursor to ozone formation and also contribute to fine particulate emissions (PM2.5).

Since 1990, EPA rules and programs have been established at the regional and federal level to help states in their mission to define and meet their State Implementation Plans (SIPs) for attainment.

The NAAQS ground-level ozone standards that were issued in 1997, were made more stringent in 2008 and again in 2015.

EPA has kept the 2020 NAAQS ozone standard at 70 parts per billion, the same limit as 2015.

Clean Air Visibility Rule (CAVR):

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Under CAVR, certain States are required to submit implementation plans to the EPA to comply with the Regional Haze requirements, and updates are required every five years.

A new CAVR was issued in January 2017 which requires states to implement new air pollution controls by 2021.

A new CAVR was issued in January 2017 which requires states to implement new air pollution controls implementation plans in 2021.

The overall obligation of CAVR is to return the US scenic areas to “active” visibility by 2064.

New Unit Permits:

New gas fired units for both electricity generation and industrial use will require BACT technology as a permit requirement.

New gas fired units for both electricity generation and industrial use will require BACT as a permit requirement.

SCR technology is very often BACT for NOx, and these permit requirements generate new market opportunities.

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Fuel Tech’s NOx control technologies can be integrated into these systems.

The Indian government's initial compliance deadline of December 2017 has been delayed, but adoption of emission control technologies has started and it is expected to continue in 2020.

The primary control technology under implementation is FGD systems for SOx abatement.

The Indian government appears to be backing off the original NOx emission control targets for pre-2016 coal fired stations and this action is expected to significantly reduce demand for SNCR systems from levels previously projected.

Particulate Matter (PM) emission reductions continue to be an area of focus in the country which presents an opportunity for Fuel Tech’s DFGC technology application.

The Indian government has adopted a higher NOx emission standard for legacy power plants than what was initially agreed to in 2015 as part of the Paris Agreement.

As a result, SNCR systems will be limited to WTE / industrial units for the foreseeable future.

Particulate Matter (PM) emission reductions continue to be an area of focus in the country and that presents an opportunity for Fuel Tech’s DFGC technology application which involves sulfur trioxide and ammonia injection.

These technologies will be implemented through a collaboration with our local partner ISGEC.

Elsewhere in Southeast Asia, particulate emissions due to poor performing ESPs have been gaining attention by local authorities.

Elsewhere in Southeast Asia, particulate emissions due to poor performing ESPs have been gaining attention from local authorities.

Power generators in several countries like Vietnam, Malaysia and the Philippines are actively looking for corrective options and this presents Fuel Tech with opportunities to bring our DFGC technology to these markets.

Our NO x reduction and particulate control technologies are installed worldwide on over 1,200 combustion units, including utility, industrial and municipal solid waste applications.

Our products include customized NO x control systems and our patented ULTRA ® technology, which converts urea-to-ammonia on site and provides safe reagent for use in Selective Catalytic Reduction (SCR) systems.

Our NOx reduction and particulate control technologies are installed worldwide on over 1,200 combustion units, including utility, industrial and municipal solid waste applications.

Our products include customized NOx control systems and our patented ULTRA ® technology, which converts urea-to-ammonia on site and provides safe reagent for use in Selective Catalytic Reduction (SCR) systems.

SCR Systems and Services:

Our SCR systems control NOx emissions from industrial and utility sources including boilers, incinerators, kilns, reformers and many other types of heat recovery equipment firing coal, natural gas, oil, and a variety of process gases and waste fuels.

The SCR systems typically include urea or ammonia storage and delivery subsystems, reagent injection systems in the form of an Ammonia Injection Grid (AIG), catalyst reactor vessel and SCR catalyst.

In addition, other related services, including start-ups, maintenance support and general consulting services for SCR systems, AIG design and tuning to help optimize catalyst performance, and catalyst management services to help optimize catalyst life, are now offered to customers around the world.

We also specialize in computational fluid dynamics models, which simulate fluid flow by generating a virtual replication of real-world geometry and operating inputs.

We design flow corrective devices, such as turning vanes, ash screens, static mixers and our patented GSG ® Graduated Straightening Grid.

ULTRA Technology:

Our ULTRA ® process is designed to convert urea to ammonia safely and economically for use as a reagent in the SCR process for NOx reduction.

Recent local objections in the ammonia permitting process have raised concerns regarding the safety of ammonia shipment and storage in quantities sufficient to supply SCR.

In addition, the Department of Homeland Security has characterized anhydrous ammonia as a Toxic Inhalation Hazard commodity.

The safe conversion of urea to ammonia just prior to injection into the flue gas duct is particularly important near densely populated cities, major waterways, harbors or islands, or where the storage or transport of anhydrous or aqueous ammonia is a safety concern.

UDI™ Urea Direct Injection systems utilize direct injection of urea reagent without the need for an ammonia injection grid.

SNCR Systems:

Our NO x OUT ® and HERT™ SNCR processes use non-hazardous urea as the reagent rather than ammonia.

Both the NO x OUT ® and HERT™ processes on their own are capable of reducing NO x by up to 25% - 50% for utilities and by potentially significantly greater amounts for industrial units in many types of plants with capital costs ranging from $5 - $20/kW for utility boilers and with total annualized operating costs ranging from $1,000 - $2,000/ton of NO x removed.

Our NOxOUT ® and HERT™ SNCR processes use urea or ammonia reagent injected into a variety of combustion furnaces to reduce NOx by up to 25% - 50% for utilities and by potentially significantly greater amounts for industrial units.

Capital costs ranging from $5 - $20/kW for utility boilers and with total annualized operating costs ranging from $1,000 - $2,000/ton of NOx removed.

Advanced SNCR systems are also available to improve performance and minimize reagent costs through in-furnace monitoring and an advanced control system.

I-NOx ® Systems:

Our I-NOx ® systems can include LNB, OFA, and SNCR components, along with SCR technology, Ammonia Injection Grid (AIG), and Graduated Straightening Grid (GSG™) system.

Together, these systems provide up to 90% NO x reduction at significantly lower capital and operating costs than conventional SCR systems while providing greater operational flexibility to plant operators.

Our I-NOx ® systems can include burner modifications, and SNCR components, along with SCR technology, Ammonia Injection Grid (AIG), and Graduated Straightening Grid (GSG™) system.

Together, these systems provide up to 90% NOx reduction at significantly lower capital and operating costs than conventional SCR systems while providing greater operational flexibility to plant operators.

The capital costs for I-NOx ® systems can range from $30 - $150/kW depending on boiler size and configuration, which is significantly less than that of conventional SCRs, which can cost $300/kW or more, while operating costs are competitive with those experienced by SCR systems.

Our SCR systems utilize urea or ammonia as the SCR catalyst reagent to achieve NO x reductions of up to 85% from industrial combustion sources.

ULTRA Technology:

Our ULTRA ® process is designed to convert urea to ammonia safely and economically for use as a reagent in the SCR process for NO x reduction.

Recent local objections in the ammonia permitting process have raised concerns regarding the safety of ammonia shipment and storage in quantities sufficient to supply SCR.

In addition, the Department of Homeland Security has characterized anhydrous ammonia as a Toxic Inhalation Hazard commodity.

Our ULTRA ® process is believed to be a market leader for the safe conversion of urea to ammonia just prior to injection into the flue gas duct, which is particularly important near densely populated cities, major waterways, harbors or islands, or where the transport of anhydrous or aqueous ammonia is a safety concern.

Ammonia feed systems provide reagent flexibility for SCR reagent feed system, while our UDI™ Urea Direct Injection systems utilize direct injection of reagent without the need for an ammonia injection grid.

SCR Processes and Services:

Our SCR group provides process design optimization, performance testing and improvement, and catalyst selection services for SCR systems on coal-fired boilers.

In addition, other related services, including start-ups, maintenance support and general consulting services for SCR systems, Ammonia Injection Grid design and tuning to help optimize catalyst performance, and catalyst management services to help optimize catalyst life, are now offered to customers around the world.

We also specialize in computational fluid dynamics models, which simulate fluid flow by generating a virtual replication of real-world geometry and operating inputs.

We design flow corrective devices, such as turning vanes, ash screens, static mixers and our patented GSG ® Graduated Straightening Grid.

Our models help clients optimize performance in flow critical equipment, such as selective catalytic reactors in SCR systems, where the effectiveness and longevity of catalysts are of utmost concern.

The Company’s modeling capabilities are also applied to other power plant systems where proper flow distribution and mixing are important for performance, such as flue gas desulfurization- scrubbers, electrostatic precipitators, air heaters, exhaust stacks and carbon injection systems for mercury removal.

Our SCR systems utilize urea or ammonia as the SCR catalyst reagent to achieve NOx reductions of up to 85% from industrial combustion sources.

ESP Processes and Services:

ESP technologies for particulate control include Electrostatic Precipitator (ESP) products and services including ESP Inspection Services, Performance Modeling, and Performance and Efficiency Upgrades, along

with complete turnkey capability for ESP retrofits.

Flue gas conditioning (FGC) systems include treatment using sulfur trioxide (SO3) and ammonia (NH3) based systems to improve the performance of ESPs by modifying the properties of the fly ash particle.

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Burner Systems:

Low NO x Burners and Ultra Low NO x Burners (LNB and ULNB) are available for coal-, oil-, and gas-fired industrial and utility units.

Each system application is specifically designed to maximize NO x reduction.

Computational fluid dynamics combustion modeling is used to validate the design prior to fabrication of equipment.

NO x reductions can range from 40%-60% depending on the fuel type.

Over-Fire Air (OFA) systems stage combustion for enhanced NO x reduction.

Additional NO x reductions, beyond Low NO x Burners, of 35% - 50% are possible on different boiler configurations on a range of fuel types.

Combined overall reductions range from 50% - 70%, with overall capital costs ranging from $10 - $20/kW and total costs ranging from $300 - $1,500/ton of NO x removed, depending on the scope.

A market factor for the APC product line is the continued use of coal for global electricity production.

Coal currently accounts for approximately 25% of all U.S.

electricity generation and roughly 59% of Chinese electricity generation.

Major coal consumers include China, the United States and India.

Low NOx Burners and Ultra Low NOx Burners (LNB and ULNB) are available for coal-, oil-, and gas-fired industrial and utility units.

Over-Fire Air (OFA) systems stage combustion for enhanced NOx reduction.

Combined overall reductions with LNB and OFA range from 50% - 70%, depending on the fuel type, with overall capital costs ranging from $10 - $20/kW and total costs ranging from $300 - $1,500/ton of NOx removed, depending on the scope.

A market factor for the APC product line is the continued use of coal and the growth of biomass for global electricity production.

The growth of natural gas in the U.S.

for industrial applications has increased the need for SCR technology since it often meets the definition of Best Available Control Technology and is required on new industrial units.

Sales of APC products were $14.1 million , $38.4 million , and $27.8 million for the years ended December 31, 2019, 2018 and 2017 , respectively.

for industrial applications has increased the need for SCR technology since it often meets the definition of BACT and is required on new industrial units.

Sales of APC products were $8.6 million and $14.1 million for the years ended December 31, 2020 and 2019 , respectively.

APC Competition

Competition with our NO x reduction suite of products may be expected from companies supplying SCR Systems and ammonia SNCR Systems, urea SNCR systems, ESP retrofits and FGC technologies.

Competition with our NOx reduction suite of products may be expected from companies supplying SCR Systems, SNCR systems, ESP retrofits and FGC technologies.

In addition, we experience competition in the urea-to-ammonia conversion market.

The SCR process is an effective and proven method of control for removal of NO x up to 90%.

The SCR process is an effective and proven method of control for removal of NOx up to 90%.

SCR systems have a high capital cost of $300+/kW on retrofit coal applications.

Companies including GE, Babcock Power, Babcock & Wilcox (B&W) Company, CECO Environmental and Mitsubishi Hitachi, are active SCR system and reagent feed system providers.

The use of both urea and ammonia as the reagent for the SNCR process can reduce NO x by 30% - 70%, depending on a number of factors.

Companies including GE, Babcock Power, Babcock & Wilcox (B&W) Company, CECO Environmental and Mitsubishi are active SCR system and reagent feed system providers.

The use of both urea and ammonia as the reagent for the SNCR process can reduce NOx by 30% - 70%, depending on a number of factors.

Ammonia can be effective on incinerators and on Circulating Fluidized Bed combustion units, but has limited applicability for most utility boilers, where urea is dominant.

Both urea and ammonia SNCR system capital costs range from $5 - $20/kW, with annualized operating costs ranging from $1,000 - $3,000/ton of NO x removed.

The ammonia-based systems utilize either anhydrous or aqueous ammonia, both of which are hazardous substances.

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and Chemithon, Inc.

Lastly, with respect to urea-to-ammonia conversion technologies, a competitive approach to our controlled urea decomposition system competes with Harmon and Wahlco, which manufacture a system that hydrolyzes urea under high temperature and pressure.

Lastly, with respect to urea-to-ammonia conversion technologies, our controlled urea decomposition system competes with Hamon and Wahlco, which manufacture a system that hydrolyzes urea under high temperature and pressure.

Consolidated APC segment backlog at December 31, 2020 was $5.3 million versus backlog at December 31, 2019 of $9.7 million.

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The FUEL CHEM ® technology segment revolves around the unique application of specialty chemicals to improve the efficiency, reliability and environmental status of plants operating in the electric utility, industrial, pulp and paper, waste-to-energy, and university and district heating markets.

FUEL CHEM programs are currently in place on combustion units in North America,

Mexico and Europe, treating a wide variety of solid and liquid fuels, including coal, heavy oil, black liquor, biomass and municipal waste.

FUEL CHEM programs are currently in place on combustion units in North America, Mexico and Europe, treating a wide variety of solid and liquid fuels, including coal, heavy oil, black liquor, biomass and municipal waste.

Central to the FUEL CHEM approach is the introduction of chemical reagents, such as magnesium hydroxide, to combustion units via in-body fuel application (pre-combustion) or via direct injection (post-combustion) utilizing our proprietary TIFI ® technology.

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Coal currently accounts for approximately 21% of all U.S.

electricity generation and roughly 59% of Chinese electricity generation.

electricity generation and roughly 33% of global electricity generation.

Major coal consumers include the United States, China and India.

Additional market dynamics include a growing, worldwide utilization of biomass for both steam and electrical production, as well as the strengthening of the pulp and paper industry worldwide, resulting in black liquor recovery boilers needing to maximize throughput.

A new potential driver in the US is the Affordable Clean Energy (ACE) Rule finalized by EPA in 2019 as a replacement for the Clean Power Plan which EPA repealed.

This Rule calls for the use of a wide range of available boiler heat rate improvement technologies to improve efficiency to reduce greenhouse gas emissions.

Additional market dynamics include a growing, worldwide utilization of biomass for both steam and electrical production, and the continued use of heavy fuel oil for power generation.

The principal markets for this product line are electric power plants burning coals with slag-forming constituents such as sodium, iron and high levels of sulfur.

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As coal units strive to compete in electricity supply markets, lower cost, higher slagging fuels can create more operational challenges which TIFI Programs can help mitigate.

The current Mexican government is favoring indigenous fuel sources for power generation because the international market for high sulfur fuel oil (what Mexico produces) has been significantly reduced with the adoption of the new International Maritime Organization (IMO) restrictions.

Fuel Tech’s TIFI systems can help with SO3 mitigation at these oil fired power generation units.

The combination of slagging coals and SO3-related issues, such as “blue plume” formation, air pre-heater fouling and corrosion, SCR fouling and the proclivity to suppress certain mercury removal processes, represents an attractive market potential for Fuel Tech.

Sales of the FUEL CHEM products were $16.4 million , $18.1 million , and $17.4 million for the years ended December 31, 2019, 2018 and 2017 , respectively.

Sales of the FUEL CHEM products were $14.0 million and $16.4 million, for the years ended December 31, 2020 and 2019 , respectively.

Competition for our FUEL CHEM product line includes chemicals sold by specialty chemical companies, such as Imerys, Environmental Energy Services, Inc., and SUEZ Water Technologies.

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Jurisdictions.

These patents and applications cover some 29 inventions, 15 associated with our NOx reduction business, 12 associated with the FUEL CHEM business, and two associated with water treatment.

Our granted patents have expiration dates ranging from July of 2020 to September of 2039.

Management believes that the protection provided by the numerous claims in the above referenced patents or patent applications is substantial, and afford us a significant competitive advantage in our business.

These patents and applications cover some 27 inventions, 13 associated with our NOx reduction business, 11 associated with the FUEL CHEM business, and three associated with water treatment.

Our granted patents have expiration dates ranging from January of 2021 to November of 2035.

Management believes that the protection provided by the numerous claims in the above referenced patents or patent applications is substantial and affords us a significant competitive advantage in our business.

Accordingly, any significant reduction in the protection afforded by these patents or any significant development in competing technologies could have a material adverse effect on our business.

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We enjoy good relations with our employees and are not a party to any labor management agreement.

HUMAN CAPITAL RESOURCES

We manage our Company according to a set of core principles.

Included among these are respect for the individual, aspiring to excellence, safety and security, and appropriate reward for outstanding effort.

We have put in place an employee compensation plan that recognizes hard work with above average salaries and equity incentive awards.

We have returned to face-to-face work in our day-to-day activities, but we have implemented training and provided guidance for our teams to operate safely even in a face-to-face environment.

As a technology company, we prize and reward educational achievement.

Among our employees are found a large cohort of doctorates as well as other advanced degrees and professional certifications.

We expect that these approaches to managing and empowering our human capital will continue to guide our progress in the future.

RELATED PARTIES

Bailey, a member of our Board, is a stockholder of American Bailey Corporation (ABC), which is a related party.

Please refer to Note 12 to the consolidated financial statements in this Form 10-K for information about our transactions with ABC.

Additionally, see the more detailed information relating to this subject under the caption “Certain Relationships and Related Transactions” in our definitive Proxy Statement to be distributed in connection with our 2020 Annual Meeting of Stockholders, which information is incorporated by reference.

There are no material Related Party transactions to disclose.

The Company's lease of certain office space to American Bailey Corp.

reported in our Form 10-K for the year ended December 31, 2019 ended as of December 31, 2019.

AVAILABLE INFORMATION

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business