Item 1. Business
ITEM 1 - BUSINESS
As used in this Annual Report on Form 10-K, the terms “we,” “us,” or “our,” refer to Fuel Tech, Inc. and our wholly owned subsidiaries.
GENERAL
We are a leading technology company engaged in the worldwide development, commercialization and application of sustainable state-of-the-art proprietary technologies for air pollution control, process optimization, water treatment and advanced engineering services. These technologies enable our customers to operate efficiently in a cost-effective and environmentally sustainable manner.
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The Company’s nitrogen oxide (NOx) reduction technologies include NOxOUT ® , HERT™ High Energy Reagent Technology™, and Advanced Selective Non-Catalytic Reduction (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 Selective Catalytic Reduction (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 1,300 units worldwide.
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Fuel Tech’s Air Pollution Control (APC) technologies include particulate control with Electrostatic Precipitator (ESP) products and services with experience on units up to 700 MW. Flue Gas Conditioning (FGC) systems include treatment using sulfur trioxide (SO3) and ammonia-based conditioning agents to improve the performance of ESPs by modifying the properties of fly ash particles. Fuel Tech’s particulate control technologies have been installed on more than 125 units worldwide.
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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, sulfur dioxide, and carbon dioxide. 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.
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Water treatment technologies include DGI ® Dissolved Gas Infusion Systems which utilize a proprietary channel injector and a patented saturator to provide a competitive advantage over conventional water and wastewater treatment by infusing oxygen, carbon dioxide or other gases into water. An innovative alternative to current technologies among other applications, DGI ® systems can deliver supersaturated oxygen solutions and other gas-water combinations to target process applications or environmental issues. This infusion process has a variety of applications in the water and wastewater segments, including irrigation, treatment of natural waters, aquaculture, supply of oxygen for biological remediation, wastewater odor management, pH adjustment, re-carbonization, and alkalinity control, etc. DGI ® technology benefits include improved treatment performance and reduced treatment time, and the potential for reduced energy consumption, along with lower installation and operating costs. The DGI ® technology is currently in the demonstration phase and we expect additional revenue generating demonstrations and opportunities throughout 2025. Third party validation testing of the efficiency of transferring oxygen to a treatment basin has been completed and results have been published.
Many of our products and services rely heavily on our Computational Fluid Dynamics (CFD) and Chemical Kinetics Modeling (CKM) capabilities, which are enhanced by internally developed, high-end visualization software. These capabilities, coupled with our innovative technologies and multi-disciplined team approach, enable us to provide practical solutions to some of our customers' most challenging issues.
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AIR POLLUTION CONTROL (APC)
Regulations and Markets: Domestic
The future growth of our APC technology segment is dependent upon the adoption and enforcement of environmental regulations in the United States (U.S.) and globally. 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:
Clean Air Act (CAA): The CAA requires the U.S. Environmental Protection Agency (EPA) to establish national ambient air quality standards (NAAQS) at levels that are protective of public health with an adequate margin of safety. The six pollutants specified include: Ozone, Particulate Matter, Nitrogen Dioxide, Sulfur Dioxide, Lead, and Carbon Monoxide. The NAAQS provisions require that states comply with ozone and particulate emissions standards. NOx emissions are a precursor to ozone formation and contribute to fine particulate emissions. 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 for attainment. The NAAQS ground-level ozone standards that were issued in 1997 were made more stringent in 2008 and again in 2015. The EPA kept the 2020 NAAQS ozone standard at 70 parts per billion, the same limit as 2015. The ozone NAAQs will be reviewed again in 2025, with industry analysts expecting no change in emissions requirements.
In March 2023, EPA issued a Federal Implementation Plan (FIP) to address NOx emissions from upwind sources on downwind states. The issuance of the FIP was preceded by the EPA’s rejection of the proposed State Implementation Plans (SIPs) submitted by many of the upwind states pursuant to the CAA. The issuance of the FIP, which was made pursuant to the Good Neighbor provision of the CAA, was likely to require a significant number of upwind sources to provide additional NOx controls to help downwind states meet the 2020 ozone NAAQS requirements starting in 2024 for utility power units and starting in 2026 for industrial sources. This FIP is also referred to as the EPA Good Neighbor Rule. The US Supreme Court ruled in June 2024 to stay the Rule for a number of affected states after other states had been granted a stay by various Circuit Courts. EPA vacated the entire Good Neighbor Rule in November 2024 and publicly stated it would look to address concerns raised by the US Supreme Court and reissue the Good Neighbor Rule. Without the Good Neighbor Rule, downwind states are on record that they may challenge the upwind states in court as to not meeting the Good Neighbor obligations as defined in the CAA. The downwind states may not be able to meet their emission standards due to the contribution of NOx emissions from upwind states. Fuel Tech will monitor the potential impact on these upcoming NOx emission requirements.
Clean Air Visibility Rule (CAVR): The CAVR, also known as the Regional Haze rule, is part of the Clean Air Act and was finalized in 2005. 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 extended the review period to every ten years. NOx emissions contribute to ground level ozone which can contribute to localized haze, and many State Implementation Plans (SIP) are addressing NOx reduction as part of CAVR compliance. Environmental organizations have filed lawsuits against EPA for failure to approve SIPs for the second round of CAVR compliance which is required prior to 2028. The overall obligation of CAVR is to return the U.S. scenic areas to “active” visibility by 2064.
New Unit Permits: New gas fired units for both electricity generation and industrial use will require Best Available Control Technology (BACT) as a permit requirement. SCR technology is very often BACT for NOx, and these permit requirements generate new market opportunities.
Consent Decrees: Consent decree activity through the U.S. Department of Justice or EPA may require emission sources to meet individual requirements. Sources may also agree to specific air pollution requirements with states or environmental groups.
Regulations and Markets: International
We also sell air pollution control systems outside the U.S., specifically in Europe, South Africa, CentrSouth America, India (under a license agreement) and in the Pacific Rim. The demand for our technologies comes from specific governmental regulations in NOx and particulate matter emission limits which vary by country. We expect that there will be further opportunities to implement our technologies globally in 2025.
The European Union’s Best Available Reference Technology (BREF) emission guidelines continue to be implemented gradually starting from large utility boilers down to small industrial units. The last major update of the BREF guidelines reduced NOx limit values by up to 25% which in some cases required an upgrade of the first-generation NOx abatement systems. That has presented new opportunities for Fuel Tech, especially on biomass and waste incineration plants. New system opportunities are also being identified and followed in hydrogen production, chemical production and in petrochemical industries. European engineering companies are supplying power generation and flue gas treatment systems to industrial and utility customers globally. Middle Eastern countries, especially Saudi Arabia have become a major focus for these companies due to the local initiatives for reducing pollution and improving tourism. Fuel Tech’s NOx control technologies can be integrated into both new and existing combustion systems supplied into this market.
In South Africa, the state-owned utility Eskom and metallurgical companies are continuing with refurbishing aging ESPs and adding FGC technology to further improve ESP performance. Fuel Tech is well placed to compete for this business with our local partner Lesedi.
Brazil’s Sau Paulo state has announced stricter NOx emission requirements which will impact local cement, steel and glass production industries. Fuel Tech has established local partnerships to bring our SNCR, SCR and FGC technologies to this market.
The Indian government has prioritized sulfur oxide treatment over NOx abatement in the refurbishment of thermal power units. However, new biomass fired boilers are expected to be outfitted with SNCR technology. Particulate matter emission reductions continue to be an area of focus in the country and that presents an ongoing opportunity for Fuel Tech’s FGC technology. These technologies will be implemented through a collaboration with our local partner ISGEC.
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Products
Our NOx reduction and particulate control technologies are installed worldwide on over 1,300 combustion units, including utility, industrial and municipal solid waste applications. Our products include customized NOx control systems and our proprietary ULTRA ® technology, which converts urea-to-ammonia on site and provides safe reagent for use in SCR systems.
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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 CFD models, which simulate fluid and gas 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 GSG™ Graduated Straightening Grid. Our SCR systems utilize urea or ammonia as the SCR catalyst reagent to achieve NOx reductions of up to 90% from industrial combustion sources.
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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.
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SNCR Systems: 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 range from $1,000 - $2,000/ton of NOx removed. Advanced SNCR (ASNCR) systems are also available to improve performance and minimize reagent costs through in-furnace monitoring and an advanced control system.
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I-NOx ® Systems: Our I-NOx ® systems can include SNCR components combined with SCR technology. 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 conventional SCR systems.
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ESP and FGC Processes and Services: ESP technologies for particulate control include ESP products and services including ESP Inspection Services, Performance Modeling, and Performance and Efficiency Upgrades, along with engineering capability for ESP retrofits. FGC systems include treatment using sulfur trioxide (SO3) and ammonia-based systems to improve the performance of ESPs by modifying the properties of fly ash particles. Our ULTRA ® technology can provide the ammonia system feed requirements for FGC applications as a safe alternative to ammonia reagent-based systems. FGC systems offer a lower capital cost approach to improving ash particulate capture versus the alternative of installing larger ESPs or utilizing fabric filter technology to meet targeted emissions and opacity limits. Fuel Tech’s particulate control technologies have been installed on more than 125 units worldwide.
A market factor for the APC product line is the continued use of coal and natural gas and the growth of biomass for global electricity production. The growth of natural gas in the U.S. for industrial applications in support of traditional electricity generation, as well as the increased demand in support of the growth of data centers which require significant power generation capability, 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 $11.2 million and $13.5 million for the years ended December 31, 2024 and 2023, respectively.
APC Competition
Competition with our 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 NOx up to 90%. SCR systems have a high capital cost of $300+/kW on retrofit coal applications. Companies including 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. The ammonia-based systems utilize either anhydrous or aqueous ammonia, both of which are hazardous substances. Competitors for ammonia based SNCR include CECO Environmental, B&W, and Yara, with CECO Environmental and B&W for urea based SNCR systems.
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ESP retrofit competitors include B&W and Southern Environmental. FGC competition includes Chemithon, Inc.
Lastly, with respect to urea-to-ammonia conversion technologies, our controlled urea decomposition system competes with ammonia-based processes.
APC Backlog
Consolidated APC segment backlog at December 31, 2024 was $6.2 million versus backlog at December 31, 2023 of $7.5 million. The Company expects to recognize revenue on approximately $4.5 million of the backlog over the next 12 months with the remaining recognized thereafter.
FUEL CHEM
Product and Markets
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, university and district heating markets. FUEL CHEM programs are currently in place on combustion units in North America, Mexico, Europe, and the Pacific Rim, 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. By attacking performance-hindering problems, such as slagging, fouling and corrosion, as well as the formation of sulfur trioxide (SO3), and ammonium bisulfate, our programs offer numerous operational, financial and environmental benefits to owners of boilers, furnaces and other combustion units.
A key market factor for this product line is the continued use of coal for global electricity productio n. In 2024, coal accounted for approximately 15% of all U.S. electricity generation and roughly 35% of global electricity generation. Maj or coal consumers include the U.S., China and India. 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. Sodium is typically found in the Powder River Basin coals of Wyoming and Montana. High sulfur content can give rise to unacceptable levels of SO3 formation especially in plants with SCR systems and flue gas desulphurization units (scrubbers). 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 utilizing more 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 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 $13.9 million and $13.6 million, for the years ended December 31, 2024 and 2023, respectively.
Competition
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. No technologically comparable substantive competition currently exists for our TIFI ® technology, which is designed primarily for slag control and SO3 abatement, but there can be no assurance that such lack of substantive competition will continue.
INTELLECTUAL PROPERTY
We own 36 granted patents worldwide including 13 US patents and 23 non-US patents. We have five patent applications pending: including two in the U.S. and three in non-U.S. jurisdictions. These patents and applications cover some 41 inventions, 24 associated with our NOx reduction business, eight associated with the FUEL CHEM business, and nine associated with water treatment. Our granted patents have expiration dates ranging from November of 2028 to August of 2042.
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.
EMPLOYEES
At December 31, 2024 , we had 72 employees, 67 in North America, and five in Europe. We enjoy good relations with our employees and are not a party to any labor management agreement.
HUMAN CAPITAL RESOURCES
We believe our employees are our most valuable asset and we endeavor to provide a safe, inclusive, high-performance culture where our people can thrive. As such, we continually work to recruit, develop, engage, train and protect our employees. The following are key human capital measures and objectives on which we currently focus.
Employee Total Compensation and Benefits Philosophy. We provide access to benefits and offer programs that support work-life balance and overall well-being, including financial, physical and mental health resources, such as those listed below.
Financial
Health and Wellness
Work-Life Balance
Competitive Base Pay
Medical, Dental and Vision Benefits
Paid time off, paid holidays and jury duty pay
Corporate Objectives Plan (Potential Annual Bonus Based on Achievement of Qualitative Milestones)
Flexible Spending Accounts and Health Savings Accounts
Paid Parental Leave (maternity, paternity, adoption)
Corporation Incentive Plan (Potential Annual Bonus Based on Company’s Achievement of Operating Income)
On-site and complimentary Vaccinations
Employee Assistance Program (mental health, legal, financial services)
401(k) Retirement Savings Plan with Company Match (Traditional and Roth)
Flexible Work Arrangements
Life Insurance
Tuition Reimbursement
Short-term and Long-term Disability Insurance
Complimentary on-line learning and training
Commitment to Safe Working Environment. All employees are required to understand and obey local laws, to report any suspected violations, and to act in accordance with our Code of Conduct.
Compensation Equity. We conduct comprehensive pay equity analyses encompassing all staff members and job levels at appropriate intervals. We believe we have made compensation adjustments to rectify compensation disparities. We have also implemented hiring and promotional practices to support our goal of ensuring offers to new employees or to employees being promoted internally are aligned with the market and equitable on an internal basis.
Talent Acquisition and Retention. We strive to attract, develop and retain high-performing talent, and we support and reward employee performance. Programs to strengthen our talent include an employee referral program, tuition reimbursement, continued training and development and succession planning. We prioritize employee engagement and transparency by implementing programs and processes to ensure our employees have opportunities to ask questions, voice concerns, and share feedback. This is accomplished in part by conducting employee satisfaction surveys as part of the annual review process, and quarterly town hall meetings. In 2024, our employee turnover rate was approximately 11%.
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AVAILABLE INFORMATION
We are a fully integrated company using a suite of advanced technologies to provide boiler optimization, efficiency improvement and air pollution reduction and control solutions to utility and industrial customers worldwide. Originally incorporated in 1987 under the laws of the Netherlands Antilles as Fuel-Tech N.V., we were domesticated in the United States on September 30, 2006, and continue as a Delaware corporation with our corporate headquarters at 27601 Bella Vista Parkway, Warrenville, Illinois, 60555-1617. Fuel Tech maintains an Internet website at www.ftek.com . Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available through our website as soon as reasonably practical after we electronically file or furnish the reports to the Securities and Exchange Commission. Our website also contains our Corporate Governance Guidelines and Code of Ethics and Business Conduct, as well as the charters of the Audit, Compensation, and Nominating and Corporate Governance committees of the Board of Directors. All of these documents are available in print without charge to stockholders who request them. Information on our website is not incorporated into this report.