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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________________
FORM 10-K
(Mark One) 
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ____________to ____________
 Commission File Number: 001-38598 
________________________________________________________________________
Bloom_Logo (002).jpg
BLOOM ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
________________________________________________________________________
Delaware77-0565408
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
4353 North First Street, San Jose, California
95134
(Address of principal executive offices)(Zip Code)
(408) 543-1500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, $0.0001 par valueBENew York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.
________________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  þ    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  
Large accelerated filer þ     Accelerated filer   ¨      Non-accelerated filer   ¨      Smaller reporting company  ¨      Emerging growth company  ¨ 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
1


If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨    No  þ
The aggregate market value of the registrant’s Class A common stock held by non-affiliates of the registrant was approximately $2.4 billion based upon the closing price of $16.32 per share of our Class A common stock on the New York Stock Exchange on June 30, 2023 (the last trading day of the registrant’s most recently completed second quarter). Shares of Class A common stock held by each executive officer, director and holder of 10% or more of the outstanding Class A common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 12, 2024, there were 224,973,118 shares of the registrant’s Class A common stock, $0.0001 par value, outstanding.
________________________________________________________________________

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the 2024 Annual Meeting of Stockholders (the “2024 Proxy Statement”) are incorporated into Part III of this Annual Report on Form 10-K. The 2024 Proxy Statement will be filed with the U.S. Securities and Exchange Commission (“SEC”) within 120 days after the registrant’s year ended December 31, 2023.
2


Bloom Energy Corporation
Annual Report on Form 10-K for the Year Ended December 31, 2023
Table of Contents
 Page
Part I
 5
Item 1A — Risk Factors
 19
 42
 42
Part II
Consolidated Statements of Stockholders’ Equity (Deficit)
Part III
Part IV
Unless the context otherwise requires, the terms we, us, our, Bloom Energy, Bloom and the Company each refer to Bloom Energy Corporation and all of its subsidiaries.
3


SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Annual Report on Form 10-K other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “predict,” “project,” “potential,” ”seek,” “intend,” “could,” “would,” “should,” “expect,” “plan” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, our plans and expectations regarding future financial results, including our expectations regarding: our ability to expand into and be successful in new markets, including the hydrogen market; our expanded strategic partnership with SK ecoplant; statements about our supply chain; operating results; the sufficiency of our cash and our liquidity; projected costs and cost reductions; development of new products and improvements to our existing products; our manufacturing capacity and manufacturing costs; the adequacy of our agreements with our suppliers; legislative actions and regulatory and environmental compliance; impact of the Inflation Reduction Act (the “IRA”) on our business; competitive position; management’s plans and objectives for future operations; our ability to obtain financing; our ability to comply with debt covenants or cure defaults, if any; our ability to repay our debt obligations as they come due; trends in average selling prices; the success of our customer financing arrangements; capital expenditures; warranty matters; outcomes of litigation; our exposure to foreign exchange, interest and credit risk; general business and economic conditions in our markets; industry trends; the impact of changes in government incentives; risks related to cybersecurity breaches, privacy and data security; the likelihood of any impairment of project assets, long-lived assets and investments; trends in revenue, cost of revenue and gross profit (loss); trends in operating expenses including research and development expense, sales and marketing expense and general and administrative expense and expectations regarding these expenses as a percentage of revenue; future deployment of our Bloom Energy Servers and Bloom Electrolyzers; our ability to expand our business with our existing customers; our ability to increase efficiency of our products; our ability to market our products successfully in connection with the global energy transition and shifting attitudes around climate change; our business strategy and plans and our objectives for future operations; and the impact of recently adopted accounting pronouncements.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors including those discussed in Part I, Item 1A, Risk Factors and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements we may make in this Annual Report on Form 10-K. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur. Actual results, events or circumstances could differ materially and adversely from those described or anticipated in the forward-looking statements.
The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.
Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors including those discussed under Part I, Item 1A, Risk Factors and elsewhere in this Annual Report on Form 10-K.

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Part I
ITEM 1 — BUSINESS
Overview
Bloom Energy is uniquely situated to provide innovative technology solutions to customers at an important moment in the world’s transition to a net-zero carbon energy system. We manufacture one of the most advanced and versatile energy platforms, which delivers two products: the Bloom Energy Server® and the Bloom Electrolyzer™. With approximately 1.2 gigawatts of the Energy Servers accepted in more than 1,200 locations and 7 countries, our platform empowers businesses, essential services, critical infrastructure, energy companies, and communities with resilient, reliable, and sustainable energy solutions. Changing the future of energy is no small task, but our diverse group of thinkers, solvers and dreamers are up to the challenge. Our employees are driven by our mission: to make clean, reliable energy affordable for everyone in the world.
The market conditions for our platform are promising. The three most important indicators of a well-functioning, energy transition — cost, reliability, and emissions — are all facing stiff headwinds. Customers are demanding lower carbon and resilient energy today with the flexibility to move to net-zero solutions. Our platform is designed and produced to meet these demands and solve these challenges. Global electricity systems are now facing a range of significant challenges, including threats from extreme weather events, aging transmission and distribution systems, a wave of retiring generation assets, and unprecedented load growth that is far outpacing the installation of new renewable resources. Our time to power solutions and resiliency with 24x7x365 power generation address these needs.
The value propositions for our fuel cell-based power platform are very compelling. Built on the same solid oxide platform, we develop the Energy Server and the Electrolyzer with predominantly the same supply chain, manufacturing, and engineering expertise. These solutions share reliability, cost-down and efficiency advantages. We have driven down our costs due to our relentless commitment to innovation and discipline. By delivering either molecules of fuel or electrons, we can serve two different markets with one platform and that provides us with a diverse customer base. We have made significant progress toward our goal of utilizing our platform in a variety of new applications and we believe we are well-positioned as a core platform in the new energy transition to help organizations and communities achieve their net-zero objectives.
To date, nearly all of our revenue has been attributable to sales of our power generating Energy Server. The Energy Servers can use biogas, hydrogen, natural gas, or a blend of fuels to create quickly deployed resilient, sustainable, and cost-predictable power. The platform’s fuel flexibility combined with a skid mounted and modular package means that Bloom’s Energy Servers are well situated to serve as a rapidly deployable baseload electricity transition technology and solution today, without creating a stranded asset in the future. It can perform at significantly higher efficiencies than traditional, combustion-based resources. It can reduce carbon dioxide and air pollutants through a unique, non-combustion process that uses gas for a fundamentally different reason than any other technology — maximizing the utilization of hydrogen.
Our Energy Servers are inherently designed to deliver reliable electricity. They can provide reliability as a microgrid solution to customers who can’t afford power outages. Our microgrids continue to generate power for our customers even when the grid isn’t available. Our system also operates at a 99%+ availability due to its modular and fault-tolerant design, which includes multiple independent power generation modules that can be concurrently replaced during maintenance to provide uninterrupted service. Our Energy Servers also have the proven resiliency to withstand weather events, cybersecurity attacks, and other grid outages, providing reliable baseload power while the grid is still grappling with the proliferation of intermittent wind and solar generation. Our systems can be installed in a timeline far shorter than building new transmission lines, or any form of large-scale power generation. This ‘Time to Power’ value proposition is particularly meaningful for manufacturers, data centers, hospitals, and retailers, especially when the local utility is unable to provide the additional power to support their load growth or energy goals. We can be onsite and operating in months, while other power providers are quoting deliveries in years. With our Bloom Energy Server, we are also partnering with developers for significant opportunities in waste-to-energy. In some instances, we are providing power solutions to enable lower carbon intensity renewable fuels, and in other cases, we are providing solutions to use biogas for resilient power across dairies, landfills, and wastewater treatment facilities.
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The Bloom Electrolyzer, which produces hydrogen, opens new markets, partnerships, and geographies for the company. And the twenty plus years of expertise we have accumulated from building, installing and operating fuel cell systems is being leveraged to advance the electrolyzer systems we can deploy. The Bloom Electrolyzer is in the early stages of commercialization. But the results have shown its promise. In 2023, for example, we deployed the world’s largest solid oxide electrolyzer at our NASA Ames Research Center, located in Mountain View, California, and achieved a new record efficiency level of 37.5 kWh of electricity per kilogram of hydrogen generated. At its high efficiency, the Bloom Electrolyzer uses less electricity to produce hydrogen than other electrolyzers, thereby potentially lowering the overall cost of producing hydrogen, a critical factor in accelerating the transition to hydrogen as a fuel. The Idaho National Laboratory (INL) has been studying to see how well it could produce hydrogen from electricity and steam from a nuclear facility, and their 2023 results showed that it was the most efficient electrolyzer that they ever tested. The Bloom Electrolyzer diversifies and expands our addressable market to industries with hard-to-abate emissions, such as heavy industries and those seeking zero-carbon transportation fuels. In December 2023, we announced the Electrolyzer sale in South Korea to our partners SK ecoplant Co., Ltd. (“SK ecoplant”, formerly known as SK Engineering & Construction Co., Ltd.), a subsidiary of the SK Group, with the technology to be deployed in a government-led project to deploy hydrogen as an energy source in a large-scale green hydrogen for use as transport fuel.
We are growing our research and manufacturing capabilities based in the United States and South Korea to meet the opportunities in the global markets. As of December 31, 2023, we have 325 active patents in the U.S. and 145 active patents internationally. In 2023, we scaled up production at our multi-gigawatt factory in Fremont, California, while streamlining and consolidating operations from our Sunnyvale, California, facility to our Fremont facility. The consolidation and ramp in production capacity during 2023 enabled us to produce our Energy Server platforms more efficiently. The plans provide for an additional ramp up in production with incremental investments. We invested in our Newark, Delaware, factory during 2023 to increase production capacity, including a high volume electrolyzer manufacturing line for commercial deployment in North America and Europe. Our Delaware team celebrated its 10th anniversary, growing from one employee in 2013 to nearly 800 in 2023, with installed production capacity at two gigawatts per year. Moreover, our joint venture with SK ecoplant is now capable of full assembly.
The U.S. is currently our largest market in terms of revenue and installed base of the Energy Servers. Our major customers include companies in industries such as utilities, data centers, agriculture, retail, hospitals, higher education, biotech, and manufacturing. Many of our customers look to solve “time to power” issues where they cannot get energy fast enough from the grid or current energy providers to meet their commercial objectives. Moreover, our resilient technology provides secure power to critical facilities, including data centers, hospitals and high-tech manufacturing, while also serving to reduce greenhouse gas (“GHG”) emissions. We also work with several global financing and distribution partners who purchase and deploy our systems at end-customers’ facilities to provide “electricity-as-a-service.”
Our second-largest market in terms of revenue and installed base of the Energy Servers is South Korea, a world leader in the deployment of fuel cells for utility-scale electric power generation. We began commercial operation in South Korea in 2018 and have grown our footprint to more than 492 megawatts of deployed Energy Servers across South Korea. SK ecoplant serves as the primary distributor of our systems in the Republic of Korea. In October 2021, we announced an expansion of our existing partnership with SK ecoplant, which included purchase commitments of at least 500 megawatts of power for our Energy Servers between 2022 and 2024 on a take-or-pay basis, the creation of hydrogen innovation centers to advance green hydrogen commercialization, and an equity investment in Bloom Energy. In September 2023, upon automatic conversion of all 13,491,701 shares of the Series B redeemable convertible preferred stock into shares of our Class A common stock, SK ecoplant became a related party to us with beneficial ownership of 10.5% of our outstanding Class A common stock. On December 21, 2023, we expanded our partnership with SK ecoplant through an incremental purchase commitment of 250 megawatts through 2027 and extended the timing of delivery of the remaining take-or-pay commitment to a minimum purchase commitment under the original agreement. For additional information, please see Part II, Item 8, Note 11 — Related Party Transactions, and Note 17 — SK ecoplant Strategic Investment.
In fiscal 2023, we expanded our presence in the European market by signing contracts with customers in Italy, the U.K., Germany, and Belgium. We also strengthened our presence in Asia by signing additional contracts in Taiwan and Thailand. We are also operating smaller deployments in India and Japan with commercial customers, with additional projects in development in other Southeast Asia locations and Australia. We plan to continue our efforts to increase our operations internationally in 2024.

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Power-Related Industry Sectors
Distributed Electricity Generation:
There are numerous challenges facing the traditional system for producing and delivering electricity. We believe overcoming these challenges will transform how electricity is produced, delivered, and consumed. We believe this transformation will be similar to the seismic shifts seen in the computer and telecommunications industries, where centralized mainframe computing and landline telephone systems ultimately gave way to the more distributed technologies seen today, and the reimagining of business processes, culture, and customer experiences. As further described below, this could position us to provide a unique solution to meet customers’ challenges during this energy transition, especially with increasing power demands from the growth of artificial intelligence (AI) driven business services.
Providing a resilient energy solution is now a strategic imperative. The rising frequency and intensity of natural disasters and extreme weather in recent years underscores a critical need for greater grid resilience. According to the National Centers for Environmental Information, 2023 was the year with the most frequent billion-dollar weather and climate disaster events (28) ever recorded, including severe storms, tropical cyclones, flooding, winter storms, and wildfires.
Stakeholders across industries grapple with how to continue providing energy during more frequent and intense natural disasters while maintaining a course toward their climate targets. An increasing concern over the threat of cyber-attacks and physical sabotage to the centralized grid infrastructure compounds these climate threats. These acute issues add to a chronic concern; the fragility of decades-old energy system elements that have suffered from deferred maintenance and replacement. In an increasingly electrified world, power supply and reliability are critical. We believe distributed generation and microgrids can play an important role in improving the resilience of both businesses and the grid. As outages increase, businesses consider the “cost of not having power” instead of just the “cost of power.” Energy resilience is becoming an issue business leaders can no longer afford to neglect — both from a strategic and financial perspective.
There is a rise in centralized capacity constraints. The traditional centralized grid model is increasingly showing weaknesses. According to the North American Electric Reliability Corporation’s (“NERC”) 2022 Long-Term Reliability Assessment, more than half of the U.S. has a high or elevated risk of insufficient electricity supply over the next five years. Simultaneously, consumer and business demand for electricity is increasing rapidly. Electrification of transportation, increasing data center build out, and industrial decarbonization are expected to lead to a rapid increase in power demand. The expected capacity constraints in combination with increasing demands for electricity in the U.S. reflect two of the many reasons why microgrids, localized energy systems that can operate alongside a central grid or disconnect and operate autonomously, are playing an increasingly important role, providing a critical, twenty-four hours a day and seven days a week (“24x7”), always-on energy solution, powering critical infrastructure, offsetting demand on the grid, and supplying power to the grid when it is most needed.
There is an increasing focus on reducing harmful local emissions. Air pollution is a leading risk factor for mortality worldwide, and the economic impacts of poor air quality are substantial. Recent estimates find that every dollar invested in air pollution control since the passage of the Clean Air Act in the U.S. has produced an economic benefit of $30: a return on investment of 30:1. These benefits reflect the increased economic productivity of healthier, longer-lived citizens and reduced health care costs.
Clean Hydrogen Production:
Clean hydrogen is gaining considerable attention as a flexible zero-carbon fuel and energy storage medium. It can be stored and utilized in various industrial, transportation, and power generation applications. We believe clean hydrogen will be a critical factor in the energy industry of the future, a truly clean alternative for both natural gas and transportation fuels and an alternative means to store energy. The International Energy Agency (IEA) forecasts hydrogen demand will increase by 1.5X current demand by 2030 to reach more than 150 (Mt), with some forecasts setting the demand to be as high as 600 Mt by 2050. (Deloitte’s 2023 Global Green Hydrogen Outlook).
Hydrogen is one of the keys to a zero-carbon future. Hydrogen’s unique advantages — incredibly high energy density, zero carbon emissions, and being the most abundant element on earth — make it an especially attractive investment opportunity for those interested in a zero-carbon energy mix. The key limiting factor in using hydrogen, which does not readily exist in nature as a separate molecule, is that it cannot be mined, extracted or otherwise produced in its desired state without a manufacturing process. As the transportation and the electricity sectors transition to a zero-carbon future, there will be increasing demand for technologies that can both efficiently generate power using hydrogen and produce clean hydrogen at scale.
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In December 2023, we announced a sale to SK ecoplant of Bloom’s electrolyzer technology to deploy hydrogen as an energy source in a large-scale green hydrogen demonstration involving the local government. The first-of-its-kind demonstration for South Korea, which will commence in late 2025, includes 1.8 megawatts of Bloom’s industry leading solid oxide electrolyzer cells (“SOEC”) technology to develop green hydrogen at scale for use as transport fuel. For this project, Bloom and SK ecoplant will combine the Bloom Electrolyzer with SK ecoplant’s engineered infrastructure to produce hydrogen ready to be used as transport fuel.
Products & Services
Our solid oxide fuel cell technology platform is the foundation for our Energy Servers and Electrolyzers. Solid oxide fuel cells are more efficient than other fuel cell structures because they run at higher temperatures than other fuel cell technologies.
Bloom Energy Server
Our power generation platform, the Bloom Energy Server, is designed to deliver reliable, resilient, clean and affordable energy for utilities and organizations alike. Suitable to operate parallel with the grid, independent of the grid, or as part of a larger microgrid ecosystem, the Bloom Energy Server is based on our proprietary solid oxide technology that converts fuel, such as natural gas, biogas, hydrogen, or a blend of these fuels, into electricity through an electrochemical process without combustion. The electrical output of our Energy Server is designed to be connected to the customer’s main electrical feed, thereby avoiding the transmission and distribution losses associated with a centralized grid system. The modular nature of our solution enables any number of the Energy Servers to be clustered together in various configurations, providing solutions from hundreds of kilowatts to hundreds of megawatts. The Energy Server is designed to be easily integrated into community environments due to its aesthetically attractive design, compact space requirement, minimal noise profile and near-zero criteria air pollutants.
The Energy Server platform can be utilized in the following applications:
Carbon capture. Our Energy Servers, when combined with carbon capture technology, can provide zero-carbon electricity. Our natural gas or biogas-fueled Energy Server vents CO2 into the atmosphere as a byproduct. When used to facilitate carbon capture, the Energy Server is configured to vent CO2 for consolidation, compression, and processing for sequestration or other industrial applications. The compression and processing of the anode exhaust can be done by industrial gas companies. Bloom’s anode exhaust, once dried, has 95% purity of CO2. This makes it one of the purest streams of CO2 out of any power generation technology using natural gas, making it comparatively simple and inexpensive to capture.
Combined heat & power (CHP). High-temperature cathode exhaust from the Energy Server can be channeled, allowing the resulting exhaust heat to be fed to one or more heat recovery devices, such as a water heater or an absorption chiller to support air conditioning, refrigeration, and/or process fluid cooling for use in commercial buildings or other industrial plant. We released a combined heat and power offering that increases the efficiency of our technology to 85% with a goal of reaching, through continuous improvement, the 90% threshold. Compared to combustion technologies and other fuel cell products, the Bloom Energy Server has one of the highest electrical efficiencies in the industry.
Waste to Energy. Bloom Energy’s solid oxide fuel cells (“SOFCs”) provide an electrochemical pathway to convert biogas to electricity without combustion, producing carbon-neutral electricity with near zero air pollution and water usage. Bloom Energy Servers can utilize proven, off-the-shelf gas conditioning equipment to process raw biogas into a suitable fuel for power generation.
Marine Fuel Cells. Bloom’s platform is well positioned to address impending emissions regulations and offer higher efficiency than traditional power sources. Marine fuel cell powered ships can obtain immediate emissions reductions for the cleanest and most efficient operation by utilizing liquefied natural gas (“LNG”) as the primary fuel source.
Energy Server Competition
We primarily compete against gas engines, combined heat and power systems, and utility grids; we compete with diesel generators for grid-independent operations. Our solutions are based on superior reliability, resiliency, cost savings, predictability, and sustainability, all of which can be customized to the needs of individual customers. Customers do not currently have alternative solutions that provide all of these important attributes in one platform. As we work to drive costs
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down and make technological improvements, we expect our value proposition to become more competitive relative to grid power in additional markets.
Other sources of competition — and the attributes that differentiate us — include:
Intermittent solar power paired with storage. Solar power is intermittent and best suited for addressing daytime peak power requirements, while our Energy Servers are designed to provide stable baseload generation. Storage technology is intended to address the intermittency of solar power. However, the low power density of the combined technologies and the challenges of extended poor weather events that sharply decrease solar power production and battery recharging make the solution impractical for most commercial and industrial customers looking for on-site solutions to offset a significant amount of power. As a point of comparison, to provide the same power output as our Energy Servers, a photovoltaic solar installation will require 125 times more space. This allows us to serve a bigger portion of a customer’s energy requirements based on their available and typically limited space.
Intermittent wind power. Power from wind turbines is intermittent, similar to solar power. Typically, wind power is deployed for utility-side, grid-scale applications in remote locations but not as a customer-side, distributed power alternative due to prohibitive space requirements and permitting issues. Where distributed wind power is available, it can be combined with storage, with similar benefits and challenges to solar-and-storage combinations. Remote wind farms feeding into the grid do not help end customers avoid the vulnerabilities and costs of the transmission and distribution system.
Traditional co-generation systems. These systems deliver a combination of electric power and heat from combustion sources. We believe we compete favorably because of our non-combustion platform, superior electrical efficiencies, significantly less complex deployment (avoiding heating systems integration and requiring less space), superior availability, aesthetic appeal, and reliability. Unlike these systems, which depend on the full and concurrent utilization of waste heat to achieve high efficiencies, we can provide highly efficient systems to any customer based solely on their power needs.
Traditional backup equipment. As our Energy Servers deliver reliable power, particularly in grid-independent configurations where our Energy Servers can operate during grid outages, they can prevent the need for traditional backup equipment, such as diesel generators. By providing combustion-free power 24x7 rather than just as a backup, we generally offer a better integrated, more reliable, cleaner, and more cost-effective solution than these grid-plus-backup systems.
Other commercially available fuel cells. Our Energy Server uses advanced solid oxide fuel cell technology, which produces electricity directly from oxidizing fuel. The advantages of our technology include higher efficiency, long-term stability, elimination of the need for an external fuel reformer, ability to use biogas, natural gas, or hydrogen as a fuel, low emissions, and relatively low cost. There are a variety of fuel cell technologies, characterized by their electrolyte material, including:
Proton exchange membrane fuel cells (“PEM”). PEM fuel cells are typically used in onboard transportation applications, such as powering forklifts, because of their compactness and ability for quick starts and stops. However, PEM technology requires an expensive platinum catalyst, which is susceptible to poisoning by trace amounts of impurities in the fuel or exhaust products. These fuel cells require high-cost fuel input energy sources or an external fuel reformer, which adds to the product’s cost, complexity, and electrical inefficiency. As a result, they are not typically an economically viable option for stationary baseload power generation.
Molten carbonate fuel cells (“MCFC”). MCFCs are high-temperature fuel cells that use an electrolyte composed of a molten carbonate salt mixture suspended in a porous, chemically inert ceramic matrix of beta-alumina solid electrolyte. The primary disadvantages of current MCFC technology are durability and lower electrical efficiency compared to solid oxide fuel cells. Current versions of the product are built for 300 kilowatt systems and are monolithic rather than modular. Smaller sizes are typically not economically viable. In many applications where the heat produced by these fuel cells is not commercially or internally useable continuously, mitigating the heat buildup also becomes a liability.
Phosphoric acid fuel cells (“PAFC”). PAFCs use liquid phosphoric acid as an electrolyte. Developed in the mid-1960s and field-tested since the 1970s, they were the first fuel cells to be commercialized. PAFCs have been used for stationary power generators with output in the 100 kilowatts to 400 kilowatts range. PAFCs are best suited to combined heat and power output applications that require carefully matching and constant
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monitoring of power and heat requirements (heat is typically not required all year long thus significant efficiency is lost), often making the technology difficult to implement. Further, disadvantages include low power density and poor system output stability.
Value Proposition
Resiliency. Our Energy Servers avoid the vulnerabilities of conventional transmission and distribution lines by generating power on-site. The system operates at very high availability due to its modular and fault-tolerant design, which includes multiple independent power generation modules that can be hot-swapped to provide uninterrupted service. Unlike traditional combustion generation, Bloom Energy Servers can be serviced and maintained without powering down the system. Importantly, Bloom Energy Servers that utilize existing natural gas infrastructure rely on a redundant underground mesh network, intended to provide for extremely high fuel availability that is protected from the natural disasters that often disrupt the power grid.
Sustainability. Our Energy Servers uniquely address both the causes and consequences of climate change. Our projects lower carbon emissions by displacing less-efficient fossil fuel generation on the grid, which improves air quality, including in vulnerable communities, by generating electricity without combustion, offsetting combustion from grid resources as well as eliminating the need for dirtier diesel backup power solutions. Our microgrid deployments provide customers with critical resilience to grid instability, including disruptions caused by climate-related extreme weather events. Our Energy Servers are designed to achieve this while emitting near-zero criteria pollutants, consuming no water during steady-state operation, and minimizing land use impacts due to our high-power density.
Predictability. In contrast to the rising and unpredictable cost outlook for grid electricity, we offer our customers the ability to lock in the cost of electric power over the long term. Unlike the grid price of electricity, which reflects the cost to maintain and update the entire transmission and distribution system, our price to our customers is based solely on their individual projects. In regions where most of our Energy Servers are deployed, we provide electricity to our customers at a cost that is competitive with the grid price of electricity. Our solution provides greater cost predictability versus rising grid prices. Whereas grid prices are subject to frequent change based on the utility’s underlying costs, customers can contract with us for a known price in each year of their contract. Moreover, we provide customers with a solution that offers all of the fixed equipment and maintenance costs for the life of the contract. Our Energy Servers are designed to deliver 24x7 power with very high availability, mission-critical reliability and grid-independent capabilities.
Time to Power. Our Energy Servers were designed to provide ‘quick time to power’ — the ability to be deployed and generate power in weeks – an important value proposition for customers needing to ramp up power quickly. This capability is ideal for customers who need critical power but face utility capacity constraints, delays, or additional costs. The modularity, quick deployment, ease of installation, and small footprint of our Energy Servers facilitate ease of accessibility to power.
Bloom Electrolyzer
We believe we are uniquely positioned for the hydrogen future of tomorrow. The Bloom Electrolyzer is designed to produce scalable and cost-effective hydrogen solutions based on the same solid oxide platform as our Energy Server. The Bloom Electrolyzer is ideal for applications across gas, utilities, nuclear, concentrated solar, ammonia and heavy industries. Our solid oxide, higher-temperature Electrolyzer is designed to produce hydrogen onsite more efficiently than lower-temperature PEM and alkaline electrolyzers. Because it operates at higher temperatures, the Bloom Electrolyzer is designed to require less electric energy to break up water molecules and produce hydrogen. As electricity accounts for nearly 80 percent of the cost of producing hydrogen from electrolysis, using less electricity improves the economics of hydrogen production and helps bolster adoption. The Bloom Electrolyzer is designed to produce green hydrogen when using low- or zero-carbon electric power. The hydrogen produced onsite at a customer’s facility can be used as fuel or stored for consumption at a later point.
Value Proposition
Higher Efficiency. Fuel (steam) supplied to the Bloom Electrolyzer undergoes an electrochemical reaction at 700-900 degrees Celsius which is higher than other currently available technologies. This leads to a fundamental efficiency advantage to produce hydrogen by consuming less electricity.
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Scale. Bloom has reached scale in the Energy Server by growing revenues at a 30% compound annual growth rate over the last decade. Our commercial field experience in fuel cells directly transfers to our hydrogen production products, as we build upon the same core platform, supply chain, manufacturing process, partners, and advanced remote software monitoring across all our products and applications. Our experience as a developer of fuel cell projects, in addition to our role as an original equipment manufacturer (“OEM”), enables us to engage with customers and deliver turnkey projects.
Modular Design. As with the Bloom Energy Server, Bloom’s modular design allows for targeted maintenance in individual electrolyzer modules while the rest of the facility continues to operate. This helps to avoid lengthy and costly shutdowns.
Electrolyzer Competition
Given that the green hydrogen industry is at an early stage, no single technology has gained a leadership position. In electrolysis, electrical efficiency is a function of temperature, with higher efficiency favored by higher temperature due to better reaction kinetics at higher temperatures and lower polarization losses. The Bloom Electrolyzer, which uses SOEC, is differentiated from Alkaline, PEM, and Anion Exchange Membrane (“AEM”) electrolysis which are low temperature electrolysis methodologies using liquid water. With high temperature electrolysis, water needs to be heated, vaporized, and brought to operating temperature. The thermal energy requirements are reduced by using steam at or near operating temperature as the input to the Electrolyzer. Integrating SOEC with another process with available waste heat to provide thermal energy provides additional efficiency gains.
Research and Development
Our research and development organization has addressed complex applied materials, processing and packaging challenges by inventing many proprietary advanced material science solutions. Over more than a decade, Bloom has built a world-class team of solid oxide fuel cell scientists and technology experts. Our team comprises technologists with degrees in Materials Science, Electrical Engineering, Chemical Engineering, Mechanical Engineering, Civil Engineering and Nuclear Engineering, and includes 57 PhDs within these or related fields. This team has continued to develop innovative technological improvements for our Energy Servers. Since our first-generation technology, we have reduced the costs, increased the output of our systems, and increased the life of our fuel cells by over two and half times.
We have invested and plan to continue to invest a significant amount in research and development. See our discussion of research and development expenses in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for further information.
Intellectual Property
Intellectual property is an essential differentiator for our business, and we seek to protect our intellectual property through a combination of patents, copyrights, trade secrets, trademarks, employee and third-party non-disclosure agreements, and other contractual restrictions.
We have developed a significant patent portfolio to protect elements of our proprietary technology. As of December 31, 2023, we had 325 active patents and 141 patent applications pending in the U.S., and we had an international patent portfolio comprising 145 active patents and 414 patent applications pending. Our U.S. patents are expected to expire between 2022 and 2042. While patents are an essential element of our intellectual property strategy, our business is not dependent on any one patent or pending patent application.
We regularly review our development efforts to assess the existence and patentability of new intellectual property. We pursue the registration of our domain names, trademarks, and service marks in the U.S. and some international locations. “Bloom Energy” and the “BE” logos are our registered trademarks in certain countries for use with the Energy Servers and our other products. We also hold registered trademarks for, among others, “Bloom Box,” “BloomConnect,” “BloomEnergy,” and “Energy Server” in certain countries. In an effort to protect our brand, as of December 31, 2023, we had 7 registered trademarks and 1 pending application in the U.S. and 46 registered trademarks and 15 pending applications across Australia, Brazil, Canada, Chile, China, the European Union, India, Israel, Japan, Mexico, Oman, Singapore, South Africa, Republic of Korea, Saudi Arabia, Taiwan, the United Arab Emirates, and the United Kingdom.
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When appropriate, we enforce our intellectual property rights against other parties. For more information about risks related to our intellectual property, please see the risk factors set forth under the caption Part I, Item 1A, Risk Factors — Risks Related to Our Intellectual Property.
Manufacturing Facilities
Our primary manufacturing facilities for Energy Servers and Electrolyzers assembly are in Fremont, California, and Newark, Delaware. We own our 178,000 square-foot manufacturing facility in Newark, which was our first purpose-built Bloom Energy manufacturing center and was designed specifically for copy-exact duplication as we expand, which we believe will help us scale more efficiently. Our Newark facility includes an additional 25 acres available for factory expansion and/or the co-location of supplier plants.
In September 2023, as part of the approved restructuring plan (the “Restructuring Plan”), we initiated a closure of our 50,000 square-foot manufacturing, warehousing, research and development (“R&D”) facility in Sunnyvale, California, which lease expired in December 2023. Under the Restructuring Plan, we are consolidating the Sunnyvale facility with our manufacturing facility in Fremont, California, and performing an optimization of our manufacturing workforce. The restructuring activities are expected to be completed in the first half of fiscal 2024, subject to local law and consultation requirements, as well as our business needs. For more information about the restructuring, please see Part II, Item 8, Note 12 — Restructuring.
We lease various manufacturing facilities in California and Delaware. We leased an 89,000 square-foot R&D and manufacturing facility in Fremont, California, which became operational in April 2021. The lease terms of our Repair & Overhaul (“R&O”) manufacturing facilities in Newark, Delaware, with a total area of 56,000 square feet expire in December 2026 and April 2027. In September 2023, according to the Restructuring Plan, we approved the relocation of a portion of our R&O department of our Newark manufacturing and warehousing facility to Mexico. We expect the relocation to be completed in the fourth quarter of fiscal 2024.
Additionally, we leased a 164,000 square-foot manufacturing facility in Fremont, California that expires in February 2036. In July 2022 we announced the grand opening of this multi-gigawatt manufacturing facility, which represented a $200 million investment. This followed the expansion of the Company’s global headquarters in San Jose in June 2021 as well as the opening, in June 2022, of a new research and technical center and a global hydrogen development facility in Fremont with a total space of 73,000 square feet.
In 2020, we established a light-assembly facility in the Republic of Korea, in connection with our efforts to develop a local supplier ecosystem through a joint venture with SK ecoplant. Operations began in early July 2020. Based on the expanded relationship between us and SK ecoplant, the joint venture was further extended in 2022-2023.
Please see Part I, Item 2, Properties for additional information regarding our facilities.
Supply Chain
Our supply chain has been developed, since our founding, with a group of high-quality suppliers that support automotive, semiconductors and other traditional manufacturing organizations. The production of fuel cells requires rare earth elements, precious metals, scarce alloys and industrial commodities. Our operations require raw materials, and in certain cases, third-party services that require special manufacturing processes. We generally have multiple sources of supply for our raw materials and services except in cases where we have specialized technology and material property requirements. Our supply base is spread around many geographies in Asia, Europe and India, consisting of suppliers with multiple areas of expertise in compaction, sintering, brazing and dealing with specialty material manufacturing techniques. Where possible, we responsibly source components like interconnects and balance of system components from various manufacturers on both a contracted and a purchase order basis. We have multi-year supply agreements with some of our supply partners for supply continuity and pricing stability. We are working with our suppliers and partners along all steps of the value chain to reduce costs by improving manufacturing technologies and expanding economies of scale.
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There have been a number of disruptions throughout the global supply chain; demand for certain components has outpaced the return of the global supply chain to full production. Though the supply constraints for a majority of our raw materials and components are expected to ease in 2024, we have experienced an increase in lead times with respect to the delivery of some of our components due to a variety of factors, including supply shortages, shipping delays and labor shortages. Though we experienced delays from certain vendors and suppliers as a result of these factors, we were able to mitigate the impact so that we did not experience significant delays in the manufacture of our Energy Servers. For additional information on our supply chain, please see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Certain Factors Affecting our Performance.
Services
We provide operations and maintenance agreements (“O&M Agreements”) for all of our Energy Servers, which are typically renewable at the election of the customer on an annual basis. The customer agrees to pay an ongoing service fee, and in return, we monitor, maintain, and operate the Energy Servers systems on the customer’s or owner’s behalf. We currently service and maintain every installed Energy Server worldwide.
As of December 31, 2023, our in-house service organization had 136 dedicated field service personnel distributed across multiple locations in both the U.S. and internationally. Our standard O&M Agreements include full remote monitoring and 24x7 operational capability over the systems as well as scheduled and unscheduled maintenance, which in practice includes preventative maintenance, such as filter and adsorbents replacements and on-site part and periodic fuel cell replacements.
Our two Remote Monitoring and Control Centers (“RMCC”) provide 24x7 coverage of every Energy Server installation worldwide. By situating our RMCC centers in the U.S. and India, we are able to provide 24x7 coverage cost effectively and also provide a dual redundant system with either site able to operate continuously should an issue arise. Each Energy Server we ship includes instrumentation and a secure telemetry connection that enables RMCC to monitor over 500 system performance parameters in real time. This comprehensive monitoring capability enables the RMCC operators to have a detailed understanding of the internal operation of our Energy Servers. Using proprietary, internally developed software, the RMCC operators can detect changes and override the onboard automated control systems to remotely adjust parameters to maintain optimum system performance. In addition, we undertake advanced predictive analytics to identify potential issues before they arise and undertake adjustments prior to a failure occurring.
Our services organization also has a dedicated R&O facility, which is currently based in Delaware. As discussed in section Manufacturing Facilities, in September 2023 as part of the Restructuring Plan we approved the relocation of the R&O Department to Mexico. This will help to realign our operational focus to support our multi-year growth, scale the business, and improve our cost structure and operating margins. The facility undertakes full refurbishment of returned fuel cells with the capability to restore them to full power, efficiency, and life with a less than three-week turnaround.
Purchase and Financing Options
In order to appeal to the largest variety of customers, we make available several options to them. Both in the U.S. and internationally, we sell our Energy Servers directly to customers. In the U.S., we also enable customers’ use of the Energy Servers through a Power Purchase Agreement (as defined below) and a Managed Services Agreement (as defined below) (whereby we sell and lease back the Energy Servers in order to supply energy to our customers), each made possible through third-party financing arrangements.
Often, our offerings are designed to take advantage of local incentives. In the U.S., our financing arrangements are structured to optimize both federal and local incentives, including the Investment Tax Credit (the “ITC”) and accelerated depreciation. Internationally, our sales are made primarily to distributors who sell to, and install for, customers; these deals are also structured to use local incentives applicable to our Energy Servers. Increasingly, we use trusted installers and other sourcing collaborations in the U.S. to generate transactions.
With respect to the third-party financing options in the U.S., a customer may choose a contract for the use of the Energy Servers in exchange for a capacity-based flat payment (a “Managed Services Agreement”) or one for the purchase of electricity generated by the Energy Servers in exchange for a scheduled dollars per kilowatt hour rate (a “Power Purchase Agreement” or “PPA”.)
PPAs are typically financed on a portfolio basis whereby we make direct sales of PPAs to investors.
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For additional information about our different financing options, please see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations Purchase and Financing Options.
Sales, Marketing and Partnerships
We sell our products through a combination of direct and indirect sales channels. At present, most of our U.S. sales are through our direct sales force, which is segmented by vertical and type of account. We are expanding our relationship with utilities and other commercial customers across the U.S.. We have developed a network of strategic advisors that originate new opportunities and referrals to Bloom Energy, which has been a valuable source of high-quality leads.
We pursue relationships with other companies in areas where collaboration can produce product advancement and acceleration of entry into new geographic and vertical markets. The objectives and goals of these relationships can include one or more of the following: technology exchange, joint sales and marketing, installation, customer financing or service.
As we have cultivated sales as well as strategic and financing partners over the past several years, our sales have been concentrated among a few large customers and distributors each year. During the year ended December 31, 2023, revenue from two customers accounted for approximately 37% and 26% of our total revenue, respectively. Please see Part II, Item 8, Note 1 — Nature of Business, Liquidity and Basis of Presentation Concentration of Risk Customer Risk.
SK ecoplant in the Republic of Korea is our strategic power generation and distribution partner. In October 2021, we announced an expansion of our existing partnership with SK ecoplant, that includes purchase commitments for at least 500 megawatts of our Energy Servers between 2022 and 2024 on a take-or-pay basis, the creation of hydrogen innovation centers in the U.S. and the Republic of Korea to advance green hydrogen commercialization, and an equity investment in Bloom Energy. In September 2023, SK ecoplant became a related party to us with the beneficial ownership of 10.5% of our outstanding Class A common stock. On December 21, 2023, we further expanded our business partnership with SK ecoplant through the increase of SK ecoplant’s purchase commitments for Bloom Energy products of 250 megawatts through 2027 and extended the timing of delivery of the remaining take-or-pay commitment under the original agreement. For additional information, please see Part II, Item 8, Note 17 — SK ecoplant Strategic Investment.
Sustainability
We are driven by the promise of our contribution to the transformation and decarbonization of energy and transportation sectors globally. We are working to make our technology available across a growing list of applications including biogas, carbon capture, hydrogen, marine, combined heat and power, and microgrid projects critical to aligning with a 1.5 degree warming trajectory. Our natural gas-based Energy Servers are also an important source of near-term emission reductions, and we are committed to evolving the gas sector through our technology development and leading market-based activity.
Bloom Energy Servers produce clean, reliable energy without combustion that provide greenhouse gas, air quality, water, land-use and resilience benefits for customers and the communities they serve. The Bloom Electrolyzer is based upon the same solid oxide technology platform in a highly efficient and cost-effective hydrogen production process. Our innovative solid oxide fuel cell platform technology offers modular and flexible solutions configurable to address both the causes and consequences of climate change.
As a manufacturer, our commitment to sustainability is reflected not only through the impacts of our products in operation but also through our internal commitment to resource efficiency, responsible design, materials management and recycling. We endeavor to consistently increase our supply chain responsibility and approach to human capital management in ways that help us to continue to deliver products that add long-term societal value.
We take a cradle-to-grave perspective on product design and use. We strive to reuse components and recoverable materials where feasible and use conflict-free, non-toxic new resources where needed. We design our equipment so that components can be refurbished as needed instead of requiring new equipment. Finally, we seek to cover as many materials and components as practicable during end-of-life management, reusing these materials and components. From an approximately 30,000-pound Bloom Energy Server, the weight of components that go to the landfill without a recycling or refurbishment stream comprises approximately 510 pounds, or approximately less than 2% of the total Energy Server weight.
In 2023, we continued our responsibly sourced gas program by acquiring and retiring MiQ+ Equitable Origin certified-low-leak natural gas certificates, representing reduced release of harmful methane emissions stemming from upstream gas production. The program provides a validated leak rate that can be used to inform lifecycle carbon accounting and reinforces
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our commitment to environmental stewardship and gas sector transformation. Use of certified natural gas helps us take an immediate and impactful step to help eliminate harmful methane emissions as we lay the foundation for a net-zero future.
U.S. & Global Climate Issues
Climate change and resulting extreme weather are having significant economic, environmental and social impacts in the U.S. and around the world. These effects and anticipated future impacts have resulted in a wide array of market and regulatory responses, and we expect that these types of responses will continue. Our business can be impacted by climate change, and by those market and regulatory responses, in a variety of ways. We closely follow the impacts of climate change on the energy system, as well as the regulatory, policy and voluntary measures taken in response to those impacts, so that we may understand and respond to changing conditions that may affect our Company, our customers, and our investors and business partners. We are responsive to the recommendations from the Task Force on Climate-related Financial Disclosures (“TCFD”), as well as disclosure guidance from the Sustainability Accounting Standards Board (“SASB”). We issued our first TCFD and SASB-aligned Sustainability Report in 2021 covering 2020 followed by additional annual reports covering activities in 2021 and 2022. We plan to issue a sustainability report annually.
The direct impacts of climate change on energy systems, including the increased risk they pose to energy service disruption, may provide an opportunity for our extremely reliable and resilient energy generation. New or more stringent international accords, national or state legislation, or regulation of GHG emissions may increase demand for our bioenergy and hydrogen-based products, but they may also make it more expensive or impractical to deploy natural gas-fueled Energy Servers in some markets, notwithstanding their enhanced environmental performance relative to combustion-based technologies or may cause the loss of regulatory or policy incentives for those deployments. Examples include an anticipated GHG standard for participation in favorable fuel cell tariffs in California, new climate emissions restrictions or the introduction of carbon pricing, and the adoption of bans or restrictions on new natural gas interconnections by some local jurisdictions. For more on climate and environmental related risks, see Part I, Item 1A, Risk Factors Risks Related to Legal Matters and Regulations.
Permits and Approvals
Each Energy Server and Electrolyzer installation must be designed, constructed and operated in compliance with applicable federal, state, international and local regulations, codes, standards, guidelines, policies and laws. To operate our systems, we, our customers and our partners are each required to obtain applicable permits and approvals for the installation of the Energy Servers and the Electrolyzers, which may include federal, state, and local authority approvals; for the interconnection systems with the local electrical utility; and, where the gas distribution system is used, the gas utility as well.
Government Policies and Incentives
There are varying policy frameworks across the U.S. and internationally designed to support and accelerate the adoption of clean and/or reliable distributed power generation and hydrogen technologies, such as the manufacturing and deployment of our Energy Servers and our Electrolyzers. These policy initiatives often come in the form of tax incentives, cash grants, performance incentives, environmental attribute credits, permitting regimes, interconnection policies and/or applicable gas or electric tariffs.
The U.S. federal government provides businesses with the ITC under Section 48 of the Internal Revenue Code, available to the owners of our Energy Servers for the tax year in which the systems are placed into service. On August 7, 2022, the IRA under the fiscal year 2022 budget reconciliation instructions. On August 16, 2022, the IRA was signed into law. The IRA includes numerous investments in climate protection, and, among them, an extension and expansion of the ITC and the Production Tax Credit under Section 45 of the Internal Revenue Code, the addition of expanded tax credits for other technologies and for manufacturing of clean energy equipment, as well as terms allowing parties to more easily monetize the tax credits. The IRA contains a multi-tiered credit-amount structure for many applicable tax credits. Specifically, many of the credits have a lower base credit amount that can be increased up to five times if the taxpayer can satisfy applicable prevailing wage or apprenticeship requirements. The IRA also creates certain bonus tax credit amounts relevant to projects involving Bloom products that are placed in service, or of which construction begins, in 2023 and 2024 and that satisfy domestic content criteria and/or are located within an “energy community.” The IRA also creates tax credits for the production of hydrogen and carbon capture, as well as incentives for clean energy manufacturing. By implementing the IRA, the U.S. federal government aims to make an impact on energy markets so that cleaner options are more affordable to consumers.
Our Energy Servers are currently installed at customer sites in twelve states in the U.S., each of which has its own enabling policy framework. Some states have utility procurement programs and/or renewables portfolio standards for which our technology is eligible. Our Energy Servers currently qualify for a variety of benefits and incentives, such as tax exemptions,
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interconnection benefits, relief from utility charges and other forms of economic and energy benefits, in 21 states including Connecticut, New Jersey, Maryland, Massachusetts, New York, Pennsylvania, Rhode Island, Illinois, Indiana, Michigan, Ohio, West Virginia, Tennessee, Virginia, North Carolina, Delaware, Kentucky, Washington, New Hampshire, Vermont, and Maine. These policy provisions are subject to change.
Some municipal jurisdictions are considering or have recently enacted building codes or local ordinances that limit access to the natural gas pipeline distribution network, primarily in California and the Northeast. Specific policies vary widely as to whether or not they impact our ability to do business in a given jurisdiction and the vast majority apply only to new, rather than existing, buildings. While these jurisdictions comprise a small minority of our current and prospective business footprint, local consideration of such codes and ordinances continues to evolve.
Government Regulations
Our business is subject to a changing patchwork of energy and environmental laws and regulations that prevail at the federal, state, regional and local level as well as in those foreign jurisdictions in which we operate. Most existing energy and environmental laws and regulations preceded the introduction of our innovative fuel cell technology and were adopted to apply to technologies existing at the time, namely large coal, oil or gas-fired power plants, and more recently solar and wind plants.
Although we generally are not regulated as a utility, existing and future federal, state, international and local government statutes and regulations concerning electricity heavily influence the market for our Energy Servers and services. These statutes and regulations often relate to electricity pricing, net metering, incentives, taxation, competition with utilities, the interconnection of customer-owned electricity generation, interconnection to the gas distribution system, and other issues relevant to the deployment and operation of our products, as applicable. Federal, state, international and local governments continuously modify these statutes and regulations. Governments, often acting through state utility or public service commissions, change and adopt or approve different requirements for regulated entities and rates for commercial customers on a regular basis. These changes can have a positive or negative impact on our ability to deliver cost savings to customers.
At the federal level, the Federal Energy Regulatory Commission (the “FERC”) has authority to regulate, under various federal energy regulatory laws, wholesale sales of electric energy, capacity, and ancillary services, and the delivery of natural gas in interstate commerce. Some investment vehicles who own Bloom Energy Servers are subject to regulation under the FERC with respect to market-based sales of electricity, which requires us to file notices and make other periodic filings with the FERC. In addition, our project with Delmarva Power & Light Company is subject to laws and regulations relating to electricity generation, transmission, and sale at the federal level and in Delaware. To operate our systems, we obtain interconnection agreements from the applicable local primary electricity and gas utilities. In almost all cases, interconnection agreements are standard form agreements that have been pre-approved by the state or local public utility commission or other regulatory bodies with jurisdiction over interconnection agreements. As such, no additional regulatory approvals are typically required for deployment of our systems once interconnection agreements are signed, although they may be required for the export and subsequent sale of electricity or other regulated products.
Product safety standards for stationary fuel cell generators have been established by the American National Standards Institute (the “ANSI”). These standards are known as ANSI/CSA FC-1. Our products are designed to meet these standards. Further, we utilize the Underwriters’ Laboratory, or UL, to certify compliance with these standards. The Energy Server installation guidance is provided by NFPA 853: Standard for the Installation of Stationary Fuel Cell Power Systems. Installations at sites are carried out to meet the requirements of these standards.
Environmental laws and regulations can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines, and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties or third-party damages. In addition, maintaining compliance with applicable environmental laws, such as the Comprehensive Environmental Response, Compensation and Liability Act in the U.S., requires significant time and management resources.
Several states and regions in which we currently operate require permits where emissions of air pollutants would exceed applicable thresholds. In most states and regions where this is the case, permits have only been required for larger Energy Server installations. Other states and regions in which we operate, including New York, New Jersey and North Carolina, have specific air permitting exemptions for fuel cells.
For more information about the regulations to which we are subject and the risks to our costs and operations related thereto, please see the risk factors set forth under the caption Part I, Item 1A, Risk FactorsRisks Related to Legal Matters and Regulations.
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Backlog
The timing of delivery and installations of our products has a significant impact on the timing of the recognition of our product and installation revenues. Many factors can cause a lag between the time a customer signs a contract and our recognition of product revenue. These factors include the number of our Energy Servers installed per site, local permitting and utility requirements, environmental, health and safety requirements, weather, and customer facility construction schedules. Many of these factors are unpredictable and their resolution is often outside of our or our customers’ control. Customers may also ask us to delay an installation for reasons unrelated to the foregoing, including delays in their financing arrangements. Further, due to unexpected delays, deployments may require unanticipated expenses to expedite delivery of materials or labor to ensure the installation meets our timing objectives. These unexpected delays and expenses can be exacerbated in periods in which we deliver and install a larger number of smaller projects. In addition, if even relatively short delays occur, there may be a significant shortfall between the revenue we expect to generate in a particular period and the revenue that we are able to recognize. For our installations, revenue and cost of revenue can fluctuate significantly on a periodic basis depending on the timing of acceptance and the type of financing used by the customer.
Human Capital
We are committed to attracting and retaining exceptional talent. Investing in and inspiring our people to do their best work is critical for our success. As of December 31, 2023, we had 2,377 full-time employees worldwide, of which 1,948 were located in the U.S., 383 were located in India, and 46 were located in other countries. During 2023, our workforce decreased by 6% as compared to fiscal 2022, predominantly because of the restructuring actions we initiated in September 2023 with one of the goals being an optimization of our workforce across multiple functions. For additional information, please see Part II, Item 8, Note 12 — Restructuring.
In order to attract and retain our employees, we strive to maintain an inclusive, diverse and safe workplace, with opportunities for our employees to grow and develop in their careers. This is supported by strong compensation, benefits, and health and wellness programs. We are mission driven and hire and develop talent with a passion toward achieving our mission.
Inclusion and Diversity
Our cultural foundation is that of innovation, results, respect, and doing the right thing. One of our greatest strengths is a very talented and diverse employee population. We believe diverse talent leads to better decision making and best positions us to meet the needs of our customers, stockholders, and the communities in which we live and work.
We continuously evolve our hiring strategies, track our progress and hold ourselves accountable to advancing global diversity. We seek to hire employees from a broad pool of talent with diverse backgrounds, perspectives and abilities, and we believe diverse leaders serve as role models for our inclusive workforce. In fiscal 2023, we continued with our Effective Interviewing course for hiring managers and interviewers, which covered unconscious bias, legal questions, and a positive candidate experience.
Our continued engagement with organizations that partner with diverse communities have been essential to our efforts to increase women, veteran, and minority representation in our workforce. We are actively engaged with local community leaders to broaden our reach to underserved communities. One example is establishing the Smart Manufacturing Technology Earn and Learn program with Ohlone College, Fremont CA. Through the program we hired 8 interns and converted 3 to full time employees. We also partner with several veteran search firms to identify talent leaving the military. In fiscal 2023, we filled with veterans 40% of Bloom’s field service and remote monitoring service roles. In Delaware State, we have worked with the Dover Air Force base and Delaware National Guard for hiring events. Bloom was awarded the Warrior Friendly Business award for 2023 by the Delaware National Guard.
Finally, our University/Early Careers Program has allowed the company to focus on hiring a diverse early careers workforce. We are also partnering with City College of New York/Colin Powell School to identify summer intern talent. These are students from underrepresented minorities, with the majority of them being the first to attend college in their family. We also have partnerships with a number of HBCUs, including Delaware State University and Howard University. The result of these outreach commitments was that 64% of our interns were ethnically diverse and 40% were women. The City College of New York collaboration will be continuing in 2024 with more interns.
Our continued engagement with organizations that work with diverse communities has been vital to our efforts to increase women and minority representation in our workforce. Our “Careers at Bloom Silicon Valley” campaign targets recruiting diverse talent from underserved communities for hourly manufacturing roles. To promote inclusivity, we advertise
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our jobs in multiple languages and participate in community job fairs giving equal access to opportunities Bloom held numerous job fairs in the community including underserved areas around Fremont, Stockton, Salinas, Soledad, Seaside, Marina, Gilroy and Alameda in California State. To help preserve jobs in the community, Bloom partnered with local companies doing layoffs to hire manufacturing talent. Cepheid being one such organization that we hired 171 employees from.
Employee Demographics
We believe that our statistics are strong, our culture of inclusivity is stronger (as of December 31, 2023):
66% of our employee population in the U.S. is ethnically diverse
Women make up 25% of our employee population globally
Our senior leadership team of eleven individuals included on December 31, 2023 seven ethnically diverse individuals and two women
Women make up 16% of our leadership population (Director-level and above)
Ethnic minorities represent 43% of our leadership (Director-level and above)
Compensation and Benefits
Our talent strategy is integral to our business success, and we design competitive and innovative compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these programs (which vary by country/region) include annual bonuses, stock awards, an employee stock purchase plan, a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, parental leave, flexible work schedules, an extensive mental health program and fitness center. In fiscal 2023, we also introduced Tuition Reimbursement and family forming benefits. In addition to our broad-based equity award programs, we have used targeted equity-based grants to facilitate retention of critical talent with specialized skills and experience.
Seasonal Trends and Economic Incentives
Our business and results of financial operations are subject to industry-specific seasonal fluctuations with the majority of bookings completed in the second half of a fiscal year. The desirability of our solution can be impacted by the availability and value of various governmental, regulatory and tax-based incentives which may change over time.
Corporate Facilities
Our corporate headquarters and principal executive offices are located at 4353 North First Street, San Jose, CA 95134, and our telephone number is (408) 543-1500. Our headquarters is used for administration, research and development, and sales and marketing and also houses one of our RMCC facilities.
Please see Part I, Item 2, Properties for additional information regarding our facilities.
Available Information
Our website address is www.bloomenergy.com and our investor relations website address is https://investor.bloomenergy.com. Websites are provided throughout this document for convenience only. The information contained on the referenced websites does not constitute a part of and is not incorporated by reference into this Annual Report on Form 10-K. Through a link on our website, we make available the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: our Annual Reports 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) or 15(d) of the Exchange Act, as well as proxy statements and certain filings relating to beneficial ownership of our securities. The SEC also maintains a website at www.sec.gov that contains all reports that we file or furnish with the SEC electronically. All such filings, including those on our website, are available free of charge.
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ITEM 1A — RISK FACTORS

Investing in our securities involves a high degree of risk. You should carefully consider the material risks and uncertainties described below that make an investment in us speculative or risky, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before you decide to purchase our securities. A manifestation of any of the following risks could, in circumstances we may or may not be able to accurately predict, render us unable to conduct our business as currently planned and materially and adversely affect our reputation, business, prospects, growth, financial condition, cash flows, liquidity, and operating results. In addition, the occurrence of one or more of these risks may cause the market price of our common stock to decline, and you could lose all or part of your investment. It is not possible to predict or identify all such risks and uncertainties, as our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider presenting significant risks to our operations. Therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face.
Risk Factor Summary
The following summarizes the more complete risk factors that follow. It should be read in conjunction with the complete Risk Factors section and should not be relied upon as an exhaustive summary of all the material risks facing our business.
Risks Related to Our Business, Industry, and Sales
The distributed generation industry is an emerging market and distributed generation may not receive widespread market acceptance or demand may be lower than we expect.
Our products involve a lengthy sales and installation cycle, which may lengthen further as we seek larger transactions.
Our products have significant upfront costs, and we need to attract investors to help customers finance purchases.
The economic benefits of our Energy Servers to our customers depend on both the price of gas available from the local gas utilities and the cost of electricity available from alternative sources, including local electric utility companies.
If we are not able to reduce our costs or meet service performance expectations with respect to our products, our profitability may be impaired.
Deployment of our Energy Servers relies on interconnection requirements, export tariff arrangements and utility tariff requirements that are subject to change.
Deployment of our Energy Servers relies on fuel supply and fuel specification requirements, which may change.
We face significant competition.
We derive a substantial portion of our revenue and backlog from a limited number of customers.
Our future growth will depend on expanding and diversifying our products and market opportunities.
Our ability to develop new products and enter into new markets could be negatively impacted if we are unable to identify and successfully engage with partners to assist in such development or expansion.
Our products may not be successful if we are unable to maintain alignment with industry standards and requirements.
Risks Related to Our Products and Manufacturing
Our future success depends in part on our ability to increase production capacity for our products.
If our products contain manufacturing defects, our business and financial results could be harmed.
The performance of our products may be affected by factors outside of our control.
If our estimates of the useful life for our products are inaccurate or we do not meet our performance warranties and guaranties, our business and financial results could be harmed.
Our business is subject to risks associated with construction, utility interconnection, fuel supply, cost overruns and delays, including those related to obtaining government permits and other contingencies.
The failure of our suppliers to continue to deliver necessary raw materials or other components of our products in a timely manner and to specification could prevent us from delivering our products.
We have long-term supply agreements that could result in excess or, if one or more suppliers do not produce for any reason, insufficient inventory, above market pricing or higher costs, and negatively affect our results of operations.
We face supply chain competition which could result in insufficient inventory and affect our results of operations.
We, and some of our suppliers, obtain capital equipment used in our manufacturing process from sole suppliers and, if this equipment is damaged or otherwise unavailable, our ability to deliver our products on time will suffer.
Possible new trade tariffs could have a material adverse effect on our business.
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A failure to properly comply with foreign trade zone laws and regulations could increase the cost of duties and tariffs.
Significant disruption to the operations at our headquarters or manufacturing facilities could delay product production.
Our limited history of manufacturing new products, such as our Electrolyzers, makes it difficult to evaluate our future prospects and challenges we may encounter.
Risks Related to Government Incentive Programs
Our business currently benefits from the availability of rebates, tax credits and other financial programs and incentives, and changes to such benefits could cause our revenue to decline and harm our financial results.
We rely on tax equity financing arrangements to realize the benefits provided by U.S. federal tax benefits and accelerated tax depreciation and we also rely on incentives in the Korean, European and other international markets.
Risks Related to Legal Matters and Regulations
We are subject to laws and regulations, including environmental laws and regulations, regarding the delivery and installation of our products.
As we expand into international markets, we may be subject to local content requirements or pressures which could increase costs or reduce demand for our products.
With respect to our products that run, in part, on fossil fuel, we may be subject to a heightened risk of regulation to a potential for the loss of certain incentives, and to changes in our customers’ energy procurement policies.
Existing regulations and changes to such regulations may create technical, regulatory, and economic barriers, which could significantly reduce demand for our products or affect the financial performance of current sites.
We may become subject to product liability claims.
Litigation or administrative proceedings could have a material adverse effect on our business.
Risks Related to Our Intellectual Property
Our failure to effectively protect and enforce our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly.
Our patent applications may not result in issued patents, and our issued patents may be successfully challenged in litigation or post-grant proceedings.
We may need to defend ourselves against claims that we infringed, misappropriated, or otherwise violated the intellectual property rights of others, which may be time-consuming and would cause us to incur substantial costs.
Risks Related to Our Financial Condition and Operating Results
We have incurred significant losses in the past and we may not be profitable in future periods.
Our financial condition and results of operations and other key metrics are likely to fluctuate.
If we fail to manage our growth effectively, our business and operating results may suffer.
If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.
Our ability to use deferred tax assets to offset future taxable income may be subject to limitations.
Risks Related to Our Liquidity
We must maintain the confidence of our customers in our liquidity, including our ability to timely service our debt obligations and grow our business over the long term.
Our indebtedness, and restrictions imposed by the agreements governing our outstanding indebtedness, may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs.
We may not be able to generate sufficient cash to meet our debt service obligations or growth plans.
Risks Related to Our Operations
Expanding operations internationally could expose us to additional risks.
Data security breaches and cyberattacks could compromise our intellectual property or other confidential information and cause significant damage to our business, product performance, brand and reputation.
If we are unable to attract and retain key employees and hire qualified management, technical, engineering, finance and sales personnel, our ability to compete and successfully grow our business could be harmed.
Competition for manufacturing employees is intense, and we may not be able to attract and retain skilled employees.
Risks Related to Ownership of Our Common Stock
The stock price of our common stock has been and may continue to be volatile.
We may issue additional shares of our common stock in connection with future conversions of the Green Notes, which may dilute our existing stockholders and potentially adversely affect the market price of our common stock.
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We do not intend to pay dividends for the foreseeable future.
Provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit stockholders’ rights, and limit the market price of our common stock.
Increased scrutiny regarding ESG could result in additional costs and adversely impact our business.
Risks Related to Our Business, Industry and Sales
The distributed generation industry is an emerging market and distributed generation may not receive widespread market acceptance or demand may be lower than we expect, which may make evaluating our business and future prospects difficult.
The distributed generation industry is still an emerging market in the heavily regulated energy utility industry. It is uncertain whether potential customers will embrace distributed generation in general, or our Energy Servers in particular. Enterprises may be unwilling to adopt our Energy Server solution over traditional or competing power sources such as distributed solar or electricity from the grid. This could be due to the perception that our technology or our company is unproven, lack of confidence in our business model, unavailability of third-party service providers to operate and maintain the Energy Servers, lack of awareness of our product, or their perception of regulatory or political challenges, including challenges pertaining to technologies that use natural gas fuels or have carbon emissions.
The viability and demand for our Energy Servers in the distributed generation market may be impacted by many factors outside of our control, including:
market acceptance of our products (including, for example, anti-natural gas sentiment or misalignment with renewable and zero carbon procurement goals);
cost competitiveness, reliability, and performance of our products compared to traditional or competing power sources;
availability and amount of government subsidies and incentives;
the emergence, continuance, or success of, or increased government support for, other alternative energy generation technologies and products;
prices of traditional or competing power sources;
geopolitical and macroeconomic instability, including wars, terrorism, political unrest, actual or threatened public health emergencies and outbreak of disease, inflation, the recessionary environment, boycotts, adoption or expansion of government trade restrictions, and other business restrictions which may negatively impact the demand for our products, or which may cause our customers to push out, cancel, or refrain from placing orders; and
an increase in interest rates or tightening of the supply of capital in the global financial markets (including a reduction in total tax equity availability) which could make it difficult to finance our products.
If the market for our products and services does not continue to develop as we anticipate, our business will be harmed. As a result, predicting our future revenue and appropriately budgeting for our expenses is difficult, and we have limited insight into trends that may emerge and affect our business. If actual results differ from our estimates or if we adjust our estimates in future periods, our operating results and financial position could be materially and adversely affected.
Our products involve a lengthy sales and installation cycle, and if we fail to close sales on a regular and timely basis, our business could be harmed.
Our sales cycle is typically 12 to 18 months but can vary considerably. To make a sale, we must typically provide a significant level of education to prospective customers regarding the use and benefits of our products and technology. The period between initial discussions with a potential customer and the eventual sale usually depends on a number of factors, including the potential customer’s budget, selection of financing type, and term of the contract. In addition, we have started to focus on larger projects, which tend to have longer sales cycles. Prospective customers often undertake a significant evaluation process that may further extend the sales cycle, and which evaluation may be negatively impacted by general market and economic conditions such as inflation, rising interest rates, availability of capital, a recessionary environment, geopolitical instability, energy availability and costs, and the availability and effects of government initiatives. Once a customer decides to purchase our product, it takes a significant amount of time for us to fulfill the sales order. Generally, it takes between nine to twelve months or more from the entry into a sales contract until the installation of our products. The lengthy sales and installation cycles are subject to a number of significant risks, some of which are outside of our control. Due to the long sales and installation cycles, we may expend significant resources without being certain of generating a sale.
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The transfer of control of our product to our customer based on its delivery and installation has a significant impact on the timing of the recognition of our product and installation revenue. Many factors can cause a lag between the time that a customer signs a contract and our recognition of product revenue. These factors include the number of the Energy Servers installed per site, local permitting and utility requirements, environmental, health and safety requirements, weather, customer facility construction schedules, customers’ operational considerations, and the timing of financing. Many of these factors are unpredictable and their resolution is often outside of our or our customers’ control. Customers may also ask us to delay an installation for reasons unrelated to the foregoing, such as, for sales contracts, delays in their financing arrangements. Further, due to unexpected delays, deployments may require unanticipated expenses to expedite delivery of materials or labor to ensure the installation meets the timing objectives. These unexpected delays and expenses can be exacerbated in periods in which we deliver and install a larger number of smaller projects. In addition, if even relatively short delays occur, there may be a significant shortfall between the revenue we expect to generate in a particular period and the revenue that we are able to recognize.
Our products have significant upfront costs, and we need to attract investors to help customers finance purchases.
Our products have significant upfront costs, which may be a barrier for some customers who may not have the financial capability to purchase our products directly. To address this, we have developed various financing options that allow customers to use our products on a pay-as-you-go basis or through third-party financing arrangements. These options enable our customers to access our products without making a direct purchase. For more information on the different financing arrangements available, please see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations Purchase and Financing Options. If in any given quarter we or our customers are not able to secure funding, our financial condition and results of operations would be harmed. To attract new customers, we continually innovate our customer contracts which may have different terms and financing conditions from prior transactions.
We rely on and need to grow committed financing capacity with existing partners or attract additional partners to support our growth, finance new projects, and expand our product offerings. Additionally, our ability to deploy our backlog is directly tied to our ability to secure financing, which is often an unpredictable process. Attracting third-party financing is a complex process that is influenced by factors beyond our control, including the fluctuations of interest and currency exchange rates, the availability of tax credits and government incentives for investors, our perceived creditworthiness and the prevailing condition of credit markets. We finance our customers purchases of our products based on certain conditions, such as their credit quality and the expected minimum internal rate of return on the customer engagement. If these conditions are not met, we may not be able to finance their purchases of our products, which would have a negative impact on our revenue in a particular period. If we are unable to help customers arrange financing for our products, our business could be harmed. Additionally, the Managed Services Financing option, as with all leases, is also limited by the customer’s willingness to commit to making fixed payments, regardless of the products performance or our performance of our obligations under the customer agreement. If we are unable to arrange future financing for any of our current projects, it could negatively impact our business.
In the U.S., our capacity to offer our Energy Servers through financed arrangements depends in large part on the ability of financing parties to optimize the tax benefits associated with the Energy Servers, such as the ITC or accelerated depreciation. Interest rate fluctuations, and internationally, currency exchange rate fluctuations, may also impact the attractiveness of any financing offerings for our customers. Our ability to finance a PPA or a lease is also related to, and may be limited by, the creditworthiness of the customer.
In our sales process for transactions that require financing, we make certain assumptions regarding the cost of financing capital. Actual financing costs may differ from our estimates and financing may be more difficult or costly to secure, or may not be available, due to factors beyond our control, such as changes in customer creditworthiness, macroeconomic factors, like inflation, interest rates, a recessionary environment, geopolitical instability, and capital market volatility. The returns offered by other investment opportunities available to our financing partners and other factors may further affect financing availability. If the cost of financing ultimately exceeds our estimates, or we or our customers are unable to secure financing, we may not be able to proceed with some or all of the impacted projects, or our revenue from such projects may be less than our estimates.
The economic benefits of our Energy Servers to our customers depend on both the price of gas available from the local gas utilities and the cost of electricity available from alternative sources, including local electric utility companies, and such cost structure is subject to change.
We believe that a customer’s decision to purchase our Energy Servers is significantly influenced by its price, the price predictability of electricity generated by our Energy Servers in comparison to the retail price, and the future price outlook of electricity from the local utility grid and other energy sources. These prices are subject to change and may affect the relative
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benefits of our Energy Servers. Factors that could influence these prices and are beyond our control include the impact of energy conservation initiatives that reduce electricity consumption; construction of additional power generation plants (including nuclear, coal or natural gas); technological developments by others in the electric power industry; the imposition of interconnection, “departing load,” “standby,” power factor charges, greenhouse gas emissions charges, or other charges by local electric utility or regulatory authorities; and changes in the rates offered by local electric utilities and/or in the applicability or amounts of charges and other fees imposed or incentives granted by such utilities on customers. In addition, even with available subsidies for our products, in those areas where the current cost of grid electricity is low, including in some states in the U.S. and some foreign countries, our Energy Servers may not be economically attractive.
Furthermore, actual or perceived potential increases in the price of natural gas or other fuels or curtailment of availability (e.g., as a consequence of physical limitations or adverse regulatory conditions for the delivery or production of natural gas or other fuels) or the inability to obtain natural gas or other fuel service could make our Energy Servers less economically attractive to potential customers and reduce demand. While our Energy Servers can operate using hydrogen or biofuels, the availability and current high cost of those natural gas alternatives in a particular location may make them less attractive to potential customers, reducing the demand for our products.
If we are not able to reduce our costs or meet service performance expectations with respect to our products, our profitability may be impaired.
We need to reduce the manufacturing costs for our products to expand our markets. Additionally, certain of our existing service contracts rely on projections regarding service cost reductions that may not be realized. Increases in component and raw material costs could offset our cost-cutting efforts, slowing our growth and causing our financial results and operational metrics to suffer. For example, during the second half of 2021, we experienced price increases in raw materials, which are used in our components and subassemblies for our Energy Servers.
Our expenses have increased and may increase in the future due to factors such as increases in wages or other labor costs, marketing and sales. We need to reduce costs to expand into new markets (in which the price of electricity from the grid is lower) while maintaining our current margins. Any failure to achieve cost reductions could adversely affect our results of operations and financial condition and harm our business and prospects. Our inability to reduce product costs may impact our profitability, which could have a material adverse effect on our business and prospects.
Deployment of our Energy Servers relies on interconnection requirements, export tariff arrangements and utility tariff requirements that are each subject to change.
Because our Energy Servers are designed to operate at a constant output 24x7, while our customers’ demand for electricity typically fluctuates over the course of the day or week, there are often periods when our Energy Servers are producing more electricity than a customer may require, and such excess electricity is generally exported to the local electric utility. Export of customer-generated power from our Energy Servers is generally provided for in the markets in which we offer our fuel cells pursuant to applicable laws, regulations and tariffs, but not under all circumstances, and may be restricted or made costlier due to interconnection, relevant tariff or other issues. Many, but not all, local electric utilities provide compensation to our customers for such electricity under “fuel cell net metering” (which often differs from solar net metering) or other customer generation programs.
Utility tariffs and fees, interconnection agreements and fuel cell net metering requirements are subject to changes in availability and terms, and some jurisdictions do not allow interconnections or export at all. At times in the past, such changes have had the effect of significantly reducing or eliminating the benefits of such programs. Changes in the availability of, or benefits offered by, utility tariffs, the applicable net metering requirements or interconnection agreements could adversely affect the demand for our Energy Servers. For example, in California, the fuel cell net metering tariff expressly addressing fuel cells and providing certain incentives and export capability (referred to as the “Fuel Cell Net Energy Metering” (“FC NEM”)) expired at the end of 2023 and is no longer available to new customers. Existing customers can remain on the tariff if they comply with adopted greenhouse gas emission standards, which in some cases may result in increased cost. There are also some more generally applicable tariffs available for customers deploying new fuel cells, however, they have limitations and the loss of FC NEM may impact our ability to sell our Energy Servers for use in California. We cannot predict the outcome of the many regulatory proceedings addressing tariffs that would include customers utilizing fuel cells. If an economical tariff for customers utilizing fuel cells is not available in a given jurisdiction, it may limit or end our ability to sell and install our Energy Servers in that jurisdiction. Further, permits and other requirements applicable to electric and gas interconnections are subject to change. For example, some jurisdictions are limiting new gas interconnections, although others are allowing new gas interconnections for non-combustion resources like our Energy Servers.
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Deployment of our Energy Servers relies on fuel supply and fuel specification requirements, which are subject to change.
Our Energy Servers are designed to operate at a constant output 24x7. Therefore, they need a constant source of fuel such as natural gas, biogas, or hydrogen to keep them running. Fuel for our Energy Servers is typically provided by local gas utilities. Our customers rely on such utilities to provide a constant supply of fuel that meets our specifications. However, if new regulations require a switch to a different fuel for which there may be limited availability, such as biogas, it can create challenges for our products and their sales. Adverse fuel supply constraints or fuel outside of our fuel specifications may delay or prevent the deployment of our Energy Servers.
We face significant competition.
We compete for customers, financing partners and incentive dollars from other electric power providers. Our Bloom Energy Servers compete with a broad range of companies and technologies, including traditional energy suppliers, such as public utilities, and other energy providers utilizing traditional co-generation systems, nuclear, hydro, coal or geothermal power, companies utilizing intermittent solar or wind power paired with storage, and other commercially available fuel cell companies. We also compete with traditional backup energy equipment such as diesel generators. Our Electrolyzers compete with low temperature electrolyzer companies using Alkaline, Proton, PEM or AEM electrolysis. See our discussion of competition in Item 1 Business Energy Server Competition.
Many of our competitors, such as traditional utilities and other companies offering distributed generation products, have longer operating histories, customer incumbency advantages, access to and influence with local and state governments, and access to more capital resources than us. Significant developments in alternative technologies, such as energy storage, wind, solar or hydro power generation, or improvements in the efficiency or cost of traditional energy sources, including coal, oil, natural gas used in combustion, or nuclear power, may materially and adversely affect our business and prospects in ways we cannot anticipate. We may also face new competitors with better technologies, products, or resources. If we fail to adapt to changing market conditions and to compete successfully with grid electricity or new competitors, our growth will be limited, which would adversely affect our business results.
We derive a substantial portion of our revenue and backlog from a limited number of customers, and the loss of or a significant reduction in orders from a large customer could have a material adverse effect on our operating results and other key metrics.
In any particular period, a substantial amount of our total revenue has and could continue to come from a relatively small number of customers. As an example, in the year ended December 31, 2023, two customers accounted for approximately 37% and 26% of our total revenue. The loss of any large customer order or any delays in installations of new products with any large customer would materially and adversely affect our business results.
Our future growth will depend on expanding and diversifying our products and market opportunities, and if we are not successful, our operating results and future growth prospects could be adversely affected.
We plan to enhance our future growth opportunities by expanding the features of and uses for our Energy Servers, including providing options for carbon capture and heat output, by expanding our production and sales of our Electrolyzer, and by expanding the markets in which we sell our products. As a result, these opportunities will require our attention, which includes personnel, financial resources and management attention. If we do not appropriately allocate our resources to, or execute on, these opportunities, our business and results of operations could be adversely affected.
Our investments may not result in the growth we expect, or the timing of when we expect it, for a variety of reasons, including changes in growth trends, evolving and changing markets and increasing competition, market opportunities, technology and product innovation, and changes in policy support, taxation and subsidies, and regulation. We may introduce new technologies or products that do not work, are not delivered on a timely basis, are not developed according to product or cost specifications, are not well received by customers, or do not receive the policy, taxation and subsidies, or other regulatory support that was anticipated. Moreover, there may be fewer opportunities than we expect due to a decline in business or economic conditions or a decreased demand in these markets or for our new products from our expectations, our inability to successfully execute our sales and marketing plans, or for other reasons. In addition to our current growth opportunities, our growth may be reliant on our ability to identify and develop new opportunities. This process is inherently risky and may result in investments in time and resources for which we do not achieve any return or value. These risks are enhanced by attempting to introduce multiple breakthrough technologies and products simultaneously.
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Our growth opportunities are subject to constant and rapidly changing and evolving technologies and evolving industry standards and may be replaced by new technology concepts or platforms. If we do not develop innovative and reliable product offerings and enhancements in a cost-effective and timely manner that are attractive to customers in these markets, if we are otherwise unsuccessful entering and competing in these new product categories, if the new product categories in which we invest our limited resources do not emerge as opportunities or do not produce the growth or profitability we expect, or when we expect it, or if we do not correctly anticipate changes and evolutions in technology and platforms, our business and results of operations could be adversely affected.
Our ability to develop new products and enter into new markets could be negatively impacted if we are unable to identify and successfully engage with partners to assist in such development or expansion.
As we continue to develop new features and products and expand into new markets, including international markets, we may need to identify business partners and suppliers to facilitate such development and expansion. Identifying such partners and suppliers is a lengthy process and is subject to significant risks and uncertainties, such as an inability to negotiate mutually acceptable terms or such partner’s inability to execute as negotiated. In addition, there could be delays in the design, manufacture and installation of new products and we may not be timely in the development of new products or entry into new markets, limiting our ability to expand our business and harming our financial condition and results of operations.
Our products may not be successful if we are unable to maintain alignment with evolving industry standards and requirements.
As we invest in research and development to sustain or enhance our existing products, it is possible that the introduction of new technologies and the emergence of new industry standards or requirements could make our products less desirable or obsolete. Further, in developing our products, we make assumptions with respect to which standards, requirements, or policies will be demanded by our customers, standards-setting organizations and applicable law. If market acceptance of our products is reduced or delayed or the standards-setting organizations or legislative or regulatory authorities fail to develop timely, commercially-viable standards that support our products, our business would be harmed.
Risks Related to Our Products and Manufacturing
Our future success depends in part on our ability to increase production capacity for our products, and we may not be able to do so in a timely or cost-effective manner.
To the extent we are successful in growing our business, we may need to increase the production capacity of our products. Our ability to plan, construct and equip additional manufacturing facilities is subject to significant risks and uncertainties, including delays, cost overruns, geopolitical instability, and labor shortages. Expanding manufacturing capacity internationally may also expose us to new laws and regulations and carries risks. There is also a possibility that we may not be able to achieve our production targets for a variety of reasons, including reliance on third parties who do not fulfill their obligations to us.
If we are unable to expand our manufacturing facilities or develop our existing facilities in a timely manner, we may be unable to further scale our business, which would negatively affect our results of operations and financial condition. Conversely, if the demand for our products or our production output does not rise as expected, we may not be able to spread a significant amount of our fixed costs over the production volume, resulting in a greater than expected per unit fixed cost, which would have a negative impact on our financial condition and results of operations.
If our products contain manufacturing defects, our business and financial results could be harmed.
Our products are complex, and they may contain undetected or latent errors or defects. In the past, we have experienced latent defects that were discovered once the Energy Server was deployed in the field. Changes in our supply chain or the failure of our suppliers to otherwise provide us with components or materials that meet our specifications could introduce defects in our products. As we grow our manufacturing volume, the chance of manufacturing defects could increase. In addition, new feature launches, product introductions or design changes could introduce new design defects that may impact product performance and life. Any design or manufacturing defects or other failures of our products, including catastrophic product failures, could cause us to incur significant costs, a large field recall, divert the attention of our engineering personnel from product development efforts, and significantly and adversely affect customer satisfaction, market acceptance, and our business reputation.
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If any of our products are defective or fail because of their design, or if changes in applicable laws or regulations, or in the enforcement thereof, require us to redesign or recall our products, we also may incur additional costs and expenses. The process of identifying and recalling a product may be lengthy and require significant resources, and we may incur significant replacement costs, contract damage claims from our customers, product liability, property damage, personal injury or other claims and liabilities, and brand and reputational harm. Significant costs or payments made in connection with warranty and product liability claims and product recalls could harm our financial condition and results of operations.
Furthermore, we may be unable to correct manufacturing defects or other failures of our products in a manner satisfactory to our customers, which could adversely affect customer satisfaction, market acceptance, and our business reputation.
The performance of our products may be affected by factors outside of our control, which could result in harm to our business and financial results.
Field conditions, such as the quality of the fuel supply and environmental factors can impact the performance of our products in unpredictable ways. As we move into new geographies and deploy new features, products and service configurations, we encounter new field conditions from time to time (including as a result of climate change). Adverse impacts on performance may require us to incur significant service and re-engineering costs or divert the attention of our engineering personnel from product development efforts. Furthermore, we may be unable to adequately address the impacts of factors outside of our control in a manner satisfactory to our customers. Any of these circumstances could significantly and adversely affect customer satisfaction, market acceptance, and our business reputation.
If our estimates of the useful life for our products are inaccurate or we do not meet our performance warranties and guaranties, our business and financial results could be harmed.
We offer customers the opportunity to renew their O&M Agreements on an annual basis, for up to 20 years, at predetermined prices. We also provide performance warranties and guaranties covering the efficiency and output performance of our products. Our pricing of these contracts and our reserves for warranty and replacement are based upon our estimates of the useful life of our products and those components that are replaced as a part of standard maintenance, including assumptions regarding improvements in power module life that may fail to materialize. We do not have a long history at a large scale, and our estimates may prove to be incorrect. Failure to meet these warranty and performance requirements may require us to replace the products or to make cash payments to customers. Actual warranty expenses may exceed estimates. If our estimates are inaccurate or we fail to accrue adequate reserves to make cash payments as required, our business and financial results could be harmed.
Our business is subject to risks associated with construction, utility interconnection, fuel supply, cost overruns and delays, including those related to obtaining government permits and other contingencies that may arise in the course of completing installations.
Our financial results depend on the timely installation of our products, which may be on a fixed price basis, subjecting us to the risk of cost overruns or other unforeseen expenses in the installation process. Our products are subject to regulation and oversight in compliance with laws and ordinances relating to building codes, safety, environmental protection, and related matters in the jurisdictions where we operate, and typically require various local and other governmental approvals and permits, including environmental approvals and permits. Delays in obtaining these approvals and permits could stall the installation process of our products and adversely affect our revenue. For more information regarding these restrictions, please see the risk factors in the section titled “Risks Related to Legal Matters and Regulations.”
In addition, the completion of many of our installations depends on the availability of and timely connection to the natural gas grid and the local electric grid. In some jurisdictions, local utility companies or the municipality have denied our request for connection or have required us to reduce the size of certain projects. In addition, some municipalities have recently adopted restrictions that prohibit the installation of natural gas service to new construction. For more information regarding these restrictions, please see the risk factor titled “With respect to our products that run, in part, on fossil fuel, we may be subject to a heightened risk of regulation to a potential for the loss of certain incentives, and to changes in our customers’ energy procurement policies.” Any delays in our ability to connect with utilities, delays in the performance of installation-related services, or poor performance of installation-related services by our general contractors or sub-contractors could have a material adverse effect on our results and could cause operating results to vary materially from period to period.
As our business grows and we increase the number of distributors to sell our products, delays in project development, interconnection and permitting may affect our distributors’ ability to sell their inventories of our products and they may decide
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to decrease future orders of our products or we may choose to support deployment of their inventory with our end customers, either of which could adversely affect revenue and cash flows.
Furthermore, we rely on the ability of our third-party contractors to install products at our customers’ sites and to meet our installation requirements. We currently work with a limited number of contractors, which has impacted and may continue to impact our ability to make installations as planned. Our work with contractors may have the effect of our being required to comply with additional rules unique to our customers, site remediation, and other requirements, which can add costs and complexity to an installation project. The timeliness, thoroughness, and quality of the installation-related services performed by some of our contractors in the past have not always met our expectations or standards and may not meet our expectations and standards in the future.
Lengthy sales and installation cycles can increase the risk of customer disputes or delayed or incomplete installations. For example, see Part II, Item 7, Certain Factors Affecting Our Performance, Energy Market Conditions. Sometimes, a customer may cancel an order prior to installation, meaning we may be unable to recover some, or all of our costs incurred in connection with design, permitting, installation and site preparations. Cancellation rates can be as high as 5% to 10% in any given period due to factors outside of our control, such as permitting or regulatory issues, delays or unexpected costs in securing interconnection approvals, utility infrastructure, cost changes, or other reasons unique to each customer. Our operating expenses are based on anticipated sales levels, and many of our expenses are fixed. If we are unsuccessful in closing sales after expending significant resources or if we experience customer disputes, delays or cancellations, our reputation, business, financial condition, results of operations or cash flows could be materially and adversely affected. Additionally, under our revenue recognition policy, we do not recognize revenue on product sales until delivery or complete installation. Therefore, a small fluctuation in the timing of the sales transaction’s completion could cause our operating results to vary materially from period to period.
The failure of our suppliers to continue to deliver necessary raw materials or other components of our products in a timely manner and to specification could prevent us from delivering our products within required time frames and could cause installation delays, cancellations, penalty payments and damage to our brand and reputation.
We rely on a limited number of third-party suppliers, and in some cases sole suppliers, for some of the raw materials and components used to manufacture our products, including certain rare earth materials and other materials that are in limited supply. If our suppliers provide insufficient inventory to meet customer demand, or such inventory is not at the level of quality required to meet our standards, or if our suppliers are unable or unwilling to provide us with the contracted quantities (as we have limited or in some case no alternatives for supply), our results of operations could be materially and negatively impacted. If we fail to develop or maintain our relationships with suppliers, or if there is otherwise a shortage or lack of availability of any required raw materials or components, we may be unable to manufacture our products, or our products may be available only at a higher cost or after a long delay.
Due to increased demand across a range of industries, the global supply chain for certain raw materials and components, including semiconductor components and specialty metals, has experienced significant strain. The macroeconomic environment and geopolitical instability have also contributed to and exacerbated this strain. There can be no assurance that the impact of these issues on the supply chain will not continue, or worsen, in the future. Significant delays and shortages could prevent us from delivering our products to customers within required time frames and cause order cancellations, and could increase our costs, which would adversely impact our cash flows and the results of operations.
In some cases, we have had to create our own supply chain for some of the components and materials utilized in our fuel cells. We have made significant expenditures to expand and bolster our supply chain. In many cases, we entered into contractual relationships with suppliers to jointly develop the components we needed. These activities are time and capital intensive. In addition, some of our suppliers use proprietary processes to manufacture components. We may be unable to obtain comparable components from alternative suppliers without considerable delay, expense, or at all, as replacing these suppliers could require us either to make significant investments to bring the capability in-house or to invest in a new supply chain partner. Some of our suppliers are smaller, private companies, which are heavily dependent on us as a customer. If our suppliers face difficulties obtaining the credit or capital necessary to expand their operations when needed, they could be unable to supply necessary raw materials and components to meet our requirements, which would negatively impact our sales volumes and cash flows.
The failure by us to obtain raw materials or components in a timely manner or to obtain raw materials or components that meet our requirements could impair our ability to manufacture our products, increase the costs of our products, or increase the costs of servicing our existing portfolio of products. If we cannot obtain substitute materials or components on a timely basis or
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on acceptable terms, we could be prevented from delivering our products to our customers or service our existing fleet of products, which could result in sales and installation delays, cancellations, penalty payments, warranty breaches, or damage to our brand and reputation, any of which could have a material adverse effect on our business and results of operations. In addition, we rely on our suppliers to meet quality standards, and the failure of our suppliers to meet those quality standards could cause delays in the delivery of our products, unanticipated servicing costs, and damage to our brand and reputation.
We have, in some instances, entered into long-term supply agreements that could result in excess or, if one or more suppliers do not produce for any reason, insufficient inventory, above market pricing or higher costs, and negatively affect our results of operations.
We have long-term supply agreements with certain suppliers. Some of these supply agreements provide for fixed or inflation-adjusted pricing, substantial prepayment obligations and in a few cases, supplier purchase commitments. These arrangements could mean that we end up paying for inventory that we do not need or that is at a higher price than the market. Further, we face significant specific counterparty risk under long-term supply agreements when dealing with suppliers without a long, stable production and financial history. Given the uniqueness of our product, many of our suppliers do not have a long operating history and are private companies that may not have substantial capital resources. In the event any such supplier experiences financial difficulties, it may be difficult or impossible, or may require substantial time and expense, for us to recover any or all of our prepayments. We do not know whether we will be able to maintain long-term supply relationships with our critical suppliers or whether we may secure new long-term supply agreements. Additionally, many of our parts and materials are procured from foreign suppliers, which exposes us to risks including unforeseen increases in costs or interruptions in supply arising from changes in applicable international trade regulations such as taxes, tariffs, or quotas. Any of the foregoing could materially harm our financial condition and results of operations.
We face supply chain competition, including competition from businesses in other industries, which could result in insufficient inventory and negatively affect our results of operations.
Certain of our suppliers also supply parts and materials to other businesses, including businesses engaged in the production of consumer electronics and other industries unrelated to fuel cells. As a relatively low-volume purchaser of certain of these parts and materials, we may be unable to procure a sufficient supply of the items in the event that our suppliers fail to produce sufficient quantities to satisfy the demands of all of their customers, which could materially harm our financial condition and results of operations.
We, and some of our suppliers, obtain capital equipment used in our manufacturing process from sole suppliers, and if this equipment is damaged or otherwise unavailable, our ability to deliver our products on time will suffer.
Some of the capital equipment used to manufacture our products and some of the capital equipment used by our suppliers have been developed and made specifically for us, are not readily available from multiple vendors, and would be difficult to repair or replace if they did not function properly. If any of these suppliers were to experience financial difficulties or go out of business or if there were any damage to, or a breakdown of, our manufacturing equipment and we could not obtain replacement equipment in a timely manner, our business would suffer. In addition, a supplier’s failure to supply this equipment in a timely manner with adequate quality and on terms acceptable to us could disrupt our production schedule or increase our costs of production and service.
Possible new trade tariffs could have a material adverse effect on our business.
Our business is dependent on the availability of raw materials and components for our products. Prior tariffs imposed on steel and aluminum imports increased the cost of raw materials for our Energy Servers and decreased the available supply. Additional new trade tariffs or other trade protection measures could have a material adverse effect on our business, results of operations and financial condition.
A failure to properly comply with foreign trade zone laws and regulations could increase the cost of our duties and tariffs.
We have established foreign trade zones in California and Delaware, through qualification with U.S. Customs and Border Protection, which allow for “zone to zone” transfers between our facilities located in those states. Materials received in a foreign trade zone are not subject to certain U.S. duties or tariffs until the material enters U.S. commerce. We benefit from the adoption of foreign trade zones by reduced duties, deferral of certain duties and tariffs, and reduced processing fees, which help us realize a reduction in duty and tariff costs. However, the operation of our foreign trade zones requires compliance with applicable regulations and continued support of U.S. Customs and Border Protection with respect to the foreign trade zone
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program. If we are unable to maintain the qualification of our foreign trade zones, or if foreign trade zones are limited or unavailable to us in the future, our duty and tariff costs would increase, which could have an adverse effect on our business and results of operations.
Any significant disruption to the operations at our headquarters or manufacturing facilities could delay the production of our products, which would harm our business and results of operations.
We manufacture our products in a limited number of facilities, any of which could become unavailable either temporarily or permanently for any number of reasons, including equipment failure, material supply, public health emergencies, cyber-attacks or catastrophic weather, including extreme weather events or flooding resulting from the effects of climate change, or geologic events. Our headquarters and our Fremont manufacturing facility are located in the San Francisco Bay Area, an area that is susceptible to earthquakes, floods and other natural disasters. The occurrence of a natural disaster such as an earthquake, drought, extreme heat, flood, fire, localized extended outages of critical utilities (such as California’s public safety power shut-offs) or transportation systems, or any critical resource shortages could cause a significant interruption in our business, damage or destroy our facilities, our manufacturing equipment, or our inventory, and cause us to incur significant costs, any of which could harm our business, financial condition and results of operations. Our disaster recovery plans, and insurance may not be sufficient to restore our operations and to cover our losses, respectively.
Our limited history of manufacturing new products, such as our Electrolyzers, makes it difficult to evaluate our future prospects and the challenges we may encounter.
While we have a history of manufacturing and selling our Energy Servers, we have a limited history with regard to our Electrolyzers, which are based in part on the same technology. As a result, there is little historical basis to make judgments on the capabilities associated with our enterprise, management, and ability to produce Electrolyzers. Our ability to generate the profits we expect to achieve from the sale of Electrolyzers will depend, in part, on our ability to effectively manufacture Electrolyzers, respond to market demand, and add new manufacturing capacity in an efficient, cost-effective manner.
Risks Related to Government Incentive Programs
Our business currently benefits from the availability of rebates, tax credits and other financial programs and incentives, and changes to such benefits could cause our revenue to decline and harm our financial results.
We utilize governmental rebates, tax credits, and other financial incentives to lower the effective price of our products to customers in the U.S. and Japan, India, the Republic of Korea and Taiwan (collectively, our “Asia Pacific region”).
The U.S. federal government and some state and local governments provide incentives to current and future end users and purchasers of our Energy Servers in the form of rebates, tax credits and other financial incentives, such as system performance payments and payments for renewable energy credits associated with renewable energy generation. Our Energy Servers have qualified for tax exemptions, incentives, or other customer incentives in many states. Some states have utility procurement programs, Renewables Portfolio Standards (“RPSs”) or Clean Energy Standards (“CESs”) for which our technologies are eligible; our Energy Servers may not be eligible for other RPSs and CESs, particularly when fueled in whole or in part with natural gas. Financiers and Equity Investors (as defined below) may also take advantage of these financial incentives, lowering the cost of capital and energy to our customers.
For example, many of our installations in California interconnect with investor-owned utilities on Fuel Cell Net Energy Metering (“FC NEM”) tariffs. FC NEM tariffs were available for new California installations until December 31, 2023. To remain eligible for those FC NEM tariffs, installations currently on those tariffs are required to meet greenhouse gas emissions standards. Bloom has filed an Application for Rehearing and a Stay in the FC NEM proceeding that challenges the legality of implementing said greenhouse gas emissions standards, which require our systems to be significantly cleaner than the grid resources they are displacing. If that challenge is unsuccessful, however, compliance with the greenhouse gas emissions standards may be required for any customer that remains on the FC NEM tariffs in 2024 and could require acquiring in-state biogas that is scarce and where available comes at a significant cost. Other generally applicable tariffs are available for customers deploying fuel cells, and do not impose the greenhouse gas standards currently limited to FC NEM. We are working through the appropriate channels to determine whether to migrate certain customers to these generally applicable tariffs. We are also working through appropriate regulatory channels to establish alternative tariffs for our customers. If the cost to remain on the FC NEM tariffs is significant or suitable alternatives are not available, it may negatively impact our existing customer base and future demand for our products. Additionally, the uncertainty regarding requirements for service under any of these tariffs could negatively impact the perceived value of or risks associated with our products, which could also negatively impact demand.
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The U.S. federal government offers certain federal tax benefits, including the Production Tax Credit under Section 45 of the Internal Revenue Code (the “PTC”) and the Investment Tax Credit under Section 48 of the Internal Revenue Code (the “ITC”), both of which are currently set to be succeeded by “technology-neutral” versions set forth in Sections 45Y and 48E, respectively, for projects that commence construction beginning in 2025. The IRA offers a number of federal tax benefits, many of which we may utilize in connection with the sale of our Energy Servers and Electrolyzers. Our customers, financiers, and Equity Investors may expect us to be able to facilitate their optimization of the tax benefits available pursuant to the IRA. Each of these federal tax benefits have certain legal and operational requirements. For example, any taxpayer taking the benefit of the ITC must meet certain requirements regarding ownership and use for a period of five years. If the energy property is disposed of or otherwise ceases to be qualified investment credit property before expiration of such a five-year period, it could result in a partial reduction in incentives. There may be uncertainty as to how the new regulations promulgated under the IRA are interpreted. If IRS guidance regarding implementation of the IRA is delayed or viewed by investors as unclear, tax credit financing may be delayed or downsized, harming our ability to finance sales. Our failure to either (i) interpret the new requirements under the IRA regarding among other things, prevailing wage, apprenticeship, domestic content, siting in an “energy community,” accurately or (ii) adequately update our supply-chain, manufacturing, installation, and record-keeping processes to meet such requirements, may result a partial or full reduction in the related federal tax benefit and our customers, financiers and Equity Investors may require us to indemnify them for certain of such reductions. Changes in federal tax benefits over time also may affect our future performance. For example, currently commercial purchasers of fuel cells are eligible to claim the federal bonus depreciation benefit. However, under current rules it will be phased down, which began in 2023 and will continue until expiring at the end of 2026 in the absence of legislation. Similarly, commercial fuel cell purchasers can claim the ITC. Under current law, fuel cell projects must begin construction on or before December 31, 2024, in order to claim up to 50% ITC, after which part of this benefit will expire unless extended.
Some countries outside the U.S. also provide incentives to current and future end users and purchasers of our Energy Servers and Electrolyzers. For example, in the Republic of Korea, RPSs and CESs are in place to promote the adoption of renewable, low- or zero-carbon power generation. The Korean RPSs were replaced in 2023 with the Clean Hydrogen Portfolio Standard (“CHPS”). This may impact the demand for our Energy Servers in the Republic of Korea. Initially, we do not expect the CHPS to require 100% hydrogen as a feedstock for fuel cell projects.
Changes in the availability of rebates, tax credits, and other financial programs and incentives could reduce demand for our products, impair sales financing, and adversely impact our business results. Additionally, these incentives and procurement programs or obligations may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy. The continuation of these programs and incentives depends upon continued political support.
In the U.S., we rely on tax equity financing arrangements to realize the benefits provided by federal tax benefits and accelerated tax depreciation and in the event these programs are terminated, our financial results could be harmed. We also rely on incentives in the Korean, European and other international markets.
U.S. Equity Investors typically derive a significant portion of their economic returns through tax benefits when they finance an Energy Server. Equity Investors are generally entitled to substantially all of the project’s tax benefits, such as those provided by the ITC and Modified Accelerated Cost Recovery System (“MACRS”) or bonus depreciation. We expect that future Equity Investors will also be interested in taking the benefit of the PTC in connection with financing our Electrolyzers. The number of and available capital from potential Equity Investors is limited, we compete with other energy companies eligible for these tax benefits to access such investors, and the availability of capital from Equity Investors is subject to fluctuations based on factors outside of our control such as macroeconomic trends and changes in applicable taxation regimes. Concerns regarding our limited operating history at a large scale, lack of profitability and that we are the only party who can perform operations and maintenance on our Energy Servers have made it difficult to attract investors in the past. Our ability to obtain additional financing depends on the continued confidence of banks and other financing sources in our business model, the market for our Energy Servers and Electrolyzers, and the continued availability of tax benefits applicable to our Energy Servers and Electrolyzers, regardless of whether we arrange the financing, or our customers finance the products themselves. In addition, conditions in the general economy and financial and credit markets may result in the contraction of available tax equity financing. Similarly, in international markets such as Korea and Europe, economic benefits applicable to fuel cells may include subsidies for deployment as well as exemptions or reductions from taxes and fees. If as a result of changes to these benefits we, or in some cases our customers, are unable to enter into tax equity or other financing agreements with attractive pricing terms, or at all, neither we nor our customers, may be able to obtain the capital needed to finance the purchase of our products. Such circumstances could also require us to reduce the price at which we are able to sell our products in the applicable markets and therefore harm our business, financial condition, and results of operations.
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Risks Related to Legal Matters and Regulations
We are subject to laws and regulations that could impose substantial costs upon us and cause delays in the delivery and installation of our products.

The construction, installation, and operation of our products are generally subject to oversight and regulation in accordance with laws and ordinances relating to building codes, safety, environmental and climate protection, domestic content requirements and related matters, as well as energy market rules, regulations and tariffs, and typically require governmental approvals and permits, including environmental approvals and permits, that vary by jurisdiction. In some cases, these approvals and permits change or require periodic renewal. These laws and regulations can affect the markets for our products and the costs and time required for their installation and may give rise to liability for administrative oversight costs, compliance costs, clean-up costs, property damage, bodily injury, fines, and penalties. Capital and operating expenses needed to comply with these laws and regulations can be significant, and violations may result in substantial fines and penalties or third-party damages.
It is difficult and costly to track the requirements of every individual authority having jurisdiction over our installations, to design our products to comply with these varying standards, and to obtain all applicable approvals and permits. We cannot predict whether or when all approvals or permits required for a given project will be granted or whether the conditions associated with the approvals or permits will be achievable. The denial of a permit or utility connection essential to a project or the imposition of impractical conditions or excessive costs, such as costs for upgrading utility interconnection equipment, would impair our ability to develop the project. In addition, we cannot predict whether the approval or permitting process will be lengthened due to complexities and appeals. A delay in the review and approval of permits for a project can impair or delay our and our customers’ abilities to develop that project or may increase the cost so substantially that the project is no longer attractive to us or our customers. Furthermore, unforeseen delays in the review and permitting process could delay the timing of the installation of our products and could therefore adversely affect the timing of the recognition of revenue related to the installation, which could harm our operating results in a particular period. In many cases we contractually commit to performing all necessary installation work on a fixed-price basis, and unanticipated costs associated with approval, permitting or compliance expenses may cause the cost of performing such work to exceed our revenue. In addition, emerging federal and state emissions disclosure requirements may pose a burden to existing or potential customers. The costs of complying with all the various laws, regulations and customer requirements, and any claims concerning non-compliance, could have a material adverse effect on our financial condition or operating results.
In addition, the rules and regulations regarding the production, transportation, storage, and use of hydrogen, including with respect to safety, environmental and market regulations and policies, are in flux and may limit the market for our Electrolyzers and Energy Servers that operate using hydrogen.
The installation and operation of our products are subject to environmental laws and regulations in various jurisdictions, and there has been in the past and could continue to be uncertainty with respect to both how these laws and regulations may change over time and the interpretation of these environmental laws and regulations to our products.
We are committed to compliance with applicable environmental laws and regulations including health and safety standards, and we continuously review the operation of our products for health, safety, and environmental compliance. Our products produce small amounts of hazardous wastes and air pollutants, and we seek to address these in accordance with applicable regulatory standards. In addition, environmental laws and regulations in the U.S., such as the Comprehensive Environmental Response and Compensation and Liability Act, impose liability on several grounds including for the investigation and clean-up of contaminated soil and ground water, impacts to human health and damages to natural resources. If contamination is discovered at properties currently or formerly owned or operated by us, or properties to which hazardous substances were sent by us, it could result in our liability under environmental laws and regulations. Many of our customers who purchase our products have high sustainability standards, and any environmental non-compliance by us could harm our brand and reputation and impact customers buying decisions.
Maintaining environmental compliance can be challenging given the changing patchwork of environmental laws and regulations that prevail at the U.S. federal, state, regional, and local level and internationally. Most existing environmental laws and regulations preceded the introduction of our innovative fuel cell technology and were adopted to apply to technologies existing at the time (i.e., large coal, oil, or gas-fired power plants). Guidance from these agencies on how certain environmental laws and regulations may or may not be applied to our technology can be inconsistent.
In most jurisdictions where air permits and various land use permits are required for installation of larger Energy Server installations, the length of time to obtain these permits has increased. Moreover, the level of certainty around the issuance of such permits has decreased and where issued, the cost of compliance has been and can be prohibitive. We have experienced a
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reluctance in certain areas to issue permits for natural gas Energy Servers and, even when that reluctance is overcome, we have seen conditions imposed, including a requirement to blend costly renewable fuels or other similar measures that might advance climate goals. The timing associated with these processes and the cost associated with related conditions have impacted our selling activities.
Our technology is moving faster than the regulatory process in many instances and there are inconsistencies between how we are regulated in different jurisdictions. It is possible that regulators could delay or prevent us from conducting our business in some way pending agreement on, and compliance with, shifting regulatory requirements. Such actions could delay the installation of our products, could result in penalties, could require modification or replacement or could trigger claims of performance warranties and defaults under customer contracts that could require us to repurchase equipment, any of which could adversely affect our business, financial performance, and brand and reputation. In addition, new energy or environmental laws or regulations or new interpretations of existing laws or regulations could present marketing, political or regulatory challenges and could require us to upgrade or retrofit existing equipment, which could result in materially increased capital and operating expenses.
As we expand into international markets, we may be subject to local content requirements or pressures which could increase costs or reduce demand for our products.
Foreign jurisdictions where we conduct or wish to conduct our business may impose domestic content requirements (requiring goods, materials, components, services or labor to be supplied from or made in country). Domestic or local content requirements favor domestic industry over foreign competitors and there has been a significant increase in the use of these programs in recent years. For example, in the Republic of Korea, customers and prospective customers may be pressured to select domestic competitors over Bloom.
With respect to our products that run, in part, on fossil fuel, we may be subject to a heightened risk of regulation to a potential for the loss of certain incentives, and to changes in our customers’ energy procurement policies.
The current generation of our Energy Servers that run on natural gas generally produce fewer carbon emissions than the average U.S. marginal power generation sources that our projects displace. However, the operation of our current Energy Servers does produce some carbon dioxide (“CO2”), which contributes to global climate change. As such, we may be negatively impacted by CO2-related changes in applicable laws, regulations, ordinances, rules, or the requirements of the incentive programs on which we and our customers currently rely, as well as potential scrutiny around voluntary or regulatory carbon emissions reporting by our existing or potential customers. Changes in any of the laws, regulations, ordinances, or rules that apply to our installations and new technology could make it more difficult or costly to install and operate our Energy Servers, thereby negatively affecting our ability to deliver cost savings to our customers. Certain municipalities in which we operate have banned or are considering banning new interconnections with gas utilities, while others have adopted bans that allow new interconnections for non-combustion resources, such as our Energy Servers. Some local municipalities have also banned or are considering banning the use of distributed generation products that utilize fossil fuel. Additionally, our customers’ and potential customers’ energy procurement policies may prohibit or limit their willingness to procure our natural gas-fueled Energy Servers. Our business prospects may be negatively impacted if we are prevented from completing new installations or our installations become more costly as a result of laws, regulations, ordinances, or rules applicable to our Energy Servers, or by our customers’ and potential customers’ energy procurement policies.
Existing regulations and changes to such regulations may create technical, regulatory, and economic barriers, which could significantly reduce demand for our products or affect the financial performance of current sites.
The markets for our products are heavily influenced by laws, regulations and policies, including customers’ voluntary procurement standards, as well as by tariffs, internal policies and practices of electric utility providers. These regulations, tariffs, standards, and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. These regulations, tariffs, standards, and policies are often modified and could continue to change, which could result in a significant reduction in demand for our products. For example, utility companies commonly charge fees to industrial customers for disconnecting from the electric grid. These fees could change, thereby increasing the cost to our customers of using our products and making them less economically attractive.
At the federal level in the U.S., FERC has authority to regulate under various federal energy regulatory laws, wholesale sales of electric energy, capacity, and ancillary services, and the delivery of natural gas in interstate commerce. Also, several of the tax equity partnerships we are involved with are subject to regulation under FERC with respect to market-based sales of electricity, which requires us to file notices and make other periodic filings with FERC, which increases our costs and subjects us to additional regulatory oversight.
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Although we generally are not regulated as a utility, statutes, regulations, tariffs and market rules often relate to electricity and natural gas pricing, fuel cell net metering, incentives, taxation, and the rules surrounding the interconnection of customer-owned electricity generation for specific technologies. In the U.S., governments and market operators frequently modify these statutes, regulations, tariffs and market rules. Governments, often acting through state utility or public service commissions, as well as market operators, change, adopt or approve different utility requirements and rates for commercial and industrial customers on a regular basis. Changes, or in some cases a lack of change, in any of the laws, regulations, tariffs ordinances, or other rules that apply to our installations and new technology could make it more costly for us or our customers to install and operate our products and could negatively affect our ability to deliver cost savings to customers.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
We may become subject to product liability claims. Our Energy Servers are considered high energy systems because they consume or produce flammable fuels and may operate up to 480 volts. High-voltage electricity poses potential shock hazards, while natural gas and hydrogen, associated with both our Energy Servers and our Electrolyzers, are flammable gases and therefore a potentially dangerous fuel capable of causing fires and other harm. There can be no assurance that our products will continue to be certified to meet certain design and safety standards, and if our equipment is not properly handled or if there are undiscovered issues with our equipment, there could be a system failure and resulting damage, injury or liability.
These claims could require us to incur significant costs to defend. Furthermore, any successful product liability claim could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about us and could materially impede widespread market acceptance and demand for our products, which could harm our brand, business prospects, and operating results. Our product liability insurance may not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of or outside of our coverage may have a material adverse effect on our business and financial condition.
Litigation or administrative proceedings could have a material adverse effect on our business, financial condition and results of operations.
We have been and continue to be involved in legal proceedings, administrative proceedings, claims, and other litigation that arise in the ordinary course of business. For information regarding pending legal proceedings, please see Part I, Item 3, Legal Proceedings and Part II, Item 8, Financial Statements and Supplementary Data, Note 13 — Commitments and Contingencies. In addition, since our Energy Server and Electrolyzers are new types of products in nascent markets, we have in the past needed and may in the future need to seek administrative guidance, the amendment of existing regulations, or the development of new regulations, to operate our business in some jurisdictions. Such regulatory processes may require public hearings concerning our business, which could lead to subsequent litigation.
Unfavorable outcomes or developments relating to proceedings to which we are a party or transactions involving our products such as judgments for monetary damages, injunctions, or denial or revocation of permits, could have a material adverse effect on our business, financial condition, and results of operations. In addition, settlement of claims could adversely affect our financial condition and results of operations.
Risks Related to Our Intellectual Property
Our failure to effectively protect and enforce our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly.
Policing unauthorized use of proprietary technology can be difficult and expensive, and the measures we have taken to protect our intellectual property rights, including our trade secrets, may not be sufficient to prevent such use. For example, many of our engineers reside in California where it is not legally permissible to prevent them from leaving employment with us and working for a competitor. Also, litigation may be necessary to enforce our intellectual property rights, including to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation may result in our intellectual property rights being challenged, limited in scope, or declared invalid or unenforceable. We cannot be certain that the outcome of any litigation will be in our favor, and an adverse determination in any such litigation could impair our intellectual property rights, business, prospects, brand, and reputation.
We rely primarily on patents, trade secrets, and trademarks, and non-disclosure, confidentiality, and other types of contractual restrictions to establish, maintain, and enforce our intellectual property and proprietary rights. However, our rights under these intellectual property laws and agreements afford us only limited protection and the actions we take to establish,
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maintain, and enforce our intellectual property rights may not be adequate. For example, our trade secrets and other confidential information could be discovered by or disclosed in an unauthorized manner to third parties. Additionally, our owned or licensed intellectual property rights could be challenged, invalidated, or declared unenforceable in judicial or administrative proceedings, or circumvented, designed around by our competitors, infringed, or misappropriated. Competitors could copy or reverse engineer our products or develop and market products that are substantially equivalent to or superior to our own. Any of these issues, including the unauthorized use of our intellectual property by others, could reduce our competitive advantage and have a material adverse effect on our business, financial condition, or operating results. In addition, the laws of some countries do not protect intellectual property rights as fully as do the laws of the U.S. Many U.S.-based companies have encountered substantial intellectual property infringement in foreign countries, including countries where we sell products. Even if foreign patents are granted, effective enforcement in foreign countries may not be available. We may not be able to effectively protect our intellectual property rights in these markets or elsewhere. If an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our products at competitive prices may be adversely affected and our business, financial condition, operating results, and cash flows could be adversely affected.
In connection with our expansion into new markets, we may need to develop relationships with new partners, including project developers and/or financiers who may require access to certain of our intellectual property in order to mitigate perceived risks regarding our ability to service their projects over the contracted project duration. If we are unable to come to agreement regarding the terms of such access or find alternative means to address this perceived risk, such failure may negatively impact our ability to expand into new markets. Alternatively, we may be required to develop new strategies for the protection of our intellectual property, which may be less protective than our current strategies and could therefore erode our competitive position.
Our patent applications may not result in issued patents, and our issued patents may be successfully challenged in litigation or post-grant proceedings, either of which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that our pending patent applications will result in issued patents or that any of our issued patents will afford protection against a competitor. The status of patents involves complex legal and factual questions, and the breadth of claims allowed is subject to disagreement. As a result, we cannot be certain that the patent applications that we file will result in patents being issued or that our patents and any patents that may be issued to us in the future will afford protection against competitors with similar technology. In addition, patent applications filed in foreign countries are subject to laws, rules, and procedures that differ from those of the U.S., and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued in other regions. Furthermore, even if these patent applications are accepted and the associated patents issued, some foreign countries provide significantly less effective patent enforcement than the U.S.
In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of which would increase costs and may adversely affect our business, prospects, and operating results.
We may need to defend ourselves against claims that we infringed, misappropriated, or otherwise violated the intellectual property rights of others, which may be time-consuming and would cause us to incur substantial costs.
Companies, organizations, or individuals, including our competitors, may hold or obtain patents, trademarks, or other proprietary rights that they believe are infringed by our products or services. These companies holding patents or other intellectual property rights could make claims or bring suits alleging infringement, misappropriation, or other violations of such rights, or otherwise assert their rights by seeking royalties or injunctions. Several of the proprietary components used in our products have been subjected to infringement challenges in the past. We generally indemnify our customers against claims that the products we supply do not infringe, misappropriate, or otherwise violate third-party intellectual property rights, and we therefore may be required to defend our customers against such claims. If a claim is successfully brought in the future and we or our products are determined to have infringed, misappropriated, or otherwise violated a third-party’s intellectual property rights, we may be required to do one or more of the following:
cease selling or using our products that incorporate the challenged intellectual property;
pay substantial damages (including treble damages and attorneys’ fees if our infringement is determined to be willful);
obtain a license from the holder of the intellectual property right, which may not be available on reasonable terms or at all;
redesign our products or means of production, which may not be possible or cost-effective; or
in some instances, re-purchase products from our customers.
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Any of the foregoing could adversely affect our business, prospects, operating results, and financial condition. In addition, any litigation or claims, whether or not valid, could harm our brand and reputation, result in substantial costs and divert resources and management attention.
We also license technology from third parties and incorporate components supplied by third parties into our products. We may face claims that our use of such technology or components infringes or otherwise violates the rights of others, which would subject us to the risks described above. We may seek indemnification from our licensors or suppliers under our contracts with them, but our right to indemnification or our suppliers’ resources may be unavailable or insufficient to cover our costs and losses.
Risks Related to Our Financial Condition and Operating Results
We have incurred significant losses in the past and we may not be profitable in future periods.
Since our inception in 2001, we have incurred significant net losses and have used significant cash in our business. As of December 31, 2023, we had an accumulated deficit of $3.9 billion. We expect to continue to expand our operations domestically and internationally, including by investing in manufacturing, sales and marketing, research and development, staffing, and infrastructure to support our growth. We may continue to incur net losses in future periods. Our ability to achieve profitability will depend on a number of factors, including our ability to:
grow our sales volume;
expand into new geographical markets and industry market sectors;
attract and retain financing partners;
continue to improve the useful life of our technology and reduce our warranty servicing costs;
reduce the cost of producing our products;
improve the efficiency and predictability of our installation process;
introduce new products, including products for the hydrogen market;
improve the effectiveness of our sales and marketing activities; and
attract and retain key talent in a competitive labor marketplace.
Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.
Our financial condition and results of operations and other key metrics are likely to fluctuate, which could cause our results for a particular period to fall below expectations, resulting in a severe decline in the price of our common stock.
Our financial condition and results of operations and other key metrics have fluctuated significantly in the past and may continue to fluctuate in the future due to a variety of factors, many of which are beyond our control. For example, the amount of product revenue we recognize in a given period is materially dependent on the volume of installations of our products in that period and the type of financing used by the customer.
In addition to the other risks described herein, the following factors subject us to quarterly fluctuations in our financial condition and results of operations:
the timing of installations, which may depend on many factors such as availability of inventory, product quality or performance issues, local permitting requirements, utility requirements, environmental, health, and safety requirements, weather, availability of labor, health emergencies, and customer facility construction schedules;
size of particular installations and number of sites involved in any particular quarter;
the mix in purchase or financing options used by customers, the geographical mix of customer sales, and the rates of return required by financing parties;
disruptions in our supply chain;
whether we are able to structure our sales agreements in a manner that would allow for the product and installation revenue to be recognized upfront;
delays or cancellations of product installations;
fluctuations in our service costs, particularly due to unexpected costs and rising labor costs;
fluctuations in our research and development expense, including periodic increases associated with the pre-production qualification of additional tools as we expand our production capacity;
the length of the sales and installation cycle for a particular customer;
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the timing and level of additional purchases by new and existing customers, which may be impacted by macroeconomic factors including inflation, interest rates, the recessionary environment, and availability of capital;
the timing of the development of the market for our new features and products, including our Electrolyzer;
unanticipated expenses or installation delays associated with changes in governmental regulations, permitting requirements, utility requirements and environmental, health and safety requirements;
disruptions in our sales, production, service or other business activities resulting from disagreements with our labor force or our inability to attract and retain qualified personnel; and
unanticipated changes in government incentive programs available for us, our customers, and tax equity financing parties.
Fluctuations in our operating results and cash flow could, among other things, give rise to short-term liquidity issues. In addition, our revenue, key operating metrics, and other operating results in future quarters may fall short of our projections or the expectations of investors and financial analysts, which could have an adverse effect on the price of our common stock.
If we fail to manage our growth effectively, our business and operating results may suffer.
In order to grow effectively, we must efficiently operate our business, manage our capital expenditures and control our costs. If we experience a significant growth in orders without improvements in automation and efficiency, we may not be able to meet product demand in a timely manner. We may need additional manufacturing capacity and we and some of our suppliers may need additional capital-intensive equipment. Any growth in manufacturing must include scaling quality control as the increase in production increases the possible impact of manufacturing defects. In addition, any growth in the volume of sales of our products may outpace our ability to engage sufficient and experienced personnel to manage the higher number of installations and to engage contractors to complete installations on a timely basis and in accordance with our expectations and standards. Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results, and financial condition. Our future operating results depend to a large extent on our ability to manage this growth successfully.
If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.
We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002. The provisions of the act require, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. Preparing our financial statements involves a number of complex processes, many of which are done manually and are dependent upon individual data input or review. These processes include calculating revenue, deferred revenue and inventory costs. While we continue to automate our processes and enhance our review and put in place controls to reduce the likelihood for errors, we expect that for the foreseeable future many of our processes will remain manually intensive and thus subject to human error. If we are unable to successfully maintain effective internal control over financial reporting, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial reports. Any failure to maintain effective disclosure controls and procedures or internal control over financial reporting could have a material adverse effect on our business and operating results and cause a decline in the price of our common stock.
Our ability to use deferred tax assets to offset future taxable income may be subject to limitations that could subject our business to higher tax liability.
Our ability to use net operating loss carryforwards (“NOLs”) to offset future taxable income may be limited due to expiration, lack of taxable income in the future, changes in our stock ownership, and other factors that may be outside of our control. Our deferred tax assets may also expire or be underutilized, which could prevent us from offsetting future taxable income.
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Risks Related to Our Liquidity
We must maintain the confidence of our customers in our liquidity, including our ability to timely service our debt obligations and grow our business over the long term.
Currently, we are the only provider able to fully support and maintain our products. If potential customers believe we do not have sufficient capital or liquidity to operate our business over the long-term or that we will be unable to maintain or support our products, customers may be less likely to purchase or lease our products, particularly in light of the significant financial commitment required. In addition, financing sources may be unwilling to provide financing on reasonable terms. Similarly, suppliers, financing partners, and other third parties may be less likely to invest time and resources in developing business relationships with us if they have concerns about the success of our business.
Accordingly, in order to grow our business, we must maintain confidence in our liquidity and long-term business prospects among customers, suppliers, financing partners and other parties. This may be particularly complicated by factors such as:
our limited operating history at a large scale;
the size of our debt obligations;
profitability concerns;
unfamiliarity with or uncertainty about our products and the overall perception of the distributed generation market;
prices for electricity or natural gas;
competition from alternate sources of energy;
warranty or unanticipated service issues we may experience;
the perceived value of environmental programs to our customers;
the size of our expansion plans in comparison to our existing capital base and the scope and history of operations;
the availability and amount of tax incentives, credits, subsidies or other incentive programs; and
the other factors set forth in this “Risk Factors” section.
Several of these factors are largely outside our control, and any negative perceptions about our liquidity or long-term business prospects would likely harm our business.
Our indebtedness, and restrictions imposed by the agreements governing our outstanding indebtedness, may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs.
Given our substantial level of indebtedness, it may be difficult for us to secure additional debt financing at an attractive cost, which may in turn impact our ability to expand or maintain our operations, develop our products, and remain competitive in the market. Our liquidity needs could vary significantly and may be affected by general economic conditions, industry trends, performance, and many other factors not within our control.
The agreements governing our outstanding indebtedness contain, and other future debt agreements may contain, covenants imposing operating and financial restrictions on our business that limit our flexibility including, among other things:
borrow money;
pay dividends or make other distributions;
incur liens;
make asset dispositions;
make loans or investments;
issue or sell share capital of our subsidiaries;
issue guaranties;
enter into transactions with affiliates;
merge, consolidate or sell, lease or transfer all or substantially all of our assets;
require us to dedicate a substantial portion of cash flow from operations to the payment of principal and interest on indebtedness, thereby reducing the funds available for other purposes such as working capital and capital expenditures;
make it more difficult for us to satisfy and comply with our obligations with respect to our indebtedness;
subject us to increased sensitivity to interest rate increases;
make us more vulnerable to economic downturns, adverse industry conditions, or catastrophic external events;
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limit our ability to withstand competitive pressures;
reduce our flexibility in planning for or responding to changing business, industry and economic conditions; and/or
place us at a competitive disadvantage to competitors that have relatively less debt than we have.
Upon the occurrence of certain events to us, including a change in control, a significant asset sale or merger or similar transaction, our liquidation or dissolution or the cessation of our stock exchange listing, each of which may constitute a fundamental change under the outstanding notes, holders of certain of the notes have the right to cause us to repurchase for cash any or all of such outstanding notes. We cannot provide assurance that we would have sufficient liquidity to repurchase such notes. Furthermore, our financing and debt agreements contain events of default. If an event of default were to occur, the trustee or the lenders could, among other things, terminate their commitments and declare outstanding amounts due and payable and our cash may become restricted. We cannot provide assurance that we would have sufficient liquidity to repay or refinance our indebtedness if such amounts were accelerated upon an event of default. Borrowings under other debt instruments that contain cross-acceleration or cross-default provisions may, as a result, be accelerated and become due and payable as a consequence. We may be unable to pay these debts in such circumstances. We cannot provide assurance that the operating and financial restrictions and covenants in these agreements will not adversely affect our ability to finance our future operations or capital needs, or our ability to engage in other business activities that may be in our interest or our ability to react to adverse market developments.
We may not be able to generate sufficient cash to meet our debt service obligations or our growth plans.
Our ability to generate sufficient cash to meet our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive, and business factors. If we do not generate sufficient cash to satisfy our debt obligations, we may have to undertake alternative financing plans such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments, or seeking to raise additional capital. We cannot provide assurance that any of these alternatives would be available or permitted under the terms of our debt instruments then in effect. Furthermore, the ability to refinance indebtedness would depend upon the condition of the finance and credit markets at the time. Our inability to generate sufficient cash to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms or on a timely basis would have an adverse effect on our business, results of operations and financial condition.
Risks Related to Our Operations
Expanding operations internationally could expose us to additional risks.
Although we currently operate primarily in the U.S., we continue to expand our business internationally. We currently have operations in the Asia Pacific region and Europe. Any expansion internationally could subject our business to risks associated with international operations, including:
increased complexity and costs of managing international operations;
conformity with applicable business customs, including translation into foreign languages and associated expenses;
lack of availability of government incentives and subsidies;
financing challenges for our customers;
potential changes to our established business model, including installation and/or service challenges that we may have not encountered before;
cost of alternative power sources, which could be meaningfully lower outside the U.S.;
availability and cost of natural gas;
variability in gas specifications from jurisdiction to jurisdiction;
effects of adverse changes in currency exchange rates and rising interest rates;
difficulties in staffing and managing foreign operations in an environment of diverse culture, laws and regulations, and customers, and the increased travel, infrastructure, and legal and compliance costs associated with international operations;
our ability to develop and maintain relationships with suppliers and other local businesses;
compliance with product safety requirements and standards;
our ability to obtain business licenses that may be needed in international locations to support expanded operations;
compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations;
challenges in managing taxation in cross-border transactions;
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greater difficulties in securing or enforcing our intellectual property rights in certain jurisdictions;
difficulties in enforcing contracts in certain jurisdictions;
risk of nationalization or other expropriation of private enterprises;
trade barriers such as export requirements, tariffs, taxes, local content requirements, anti-dumping regulations and requirements, and other restrictions and expenses, which could increase the effective price of our products and make us less competitive in some countries or increase the costs to perform under our existing contracts;
difficulties in collecting payments in foreign currencies and associated foreign currency exposure;
restrictions on repatriation of earnings;
natural disasters (including as a result of climate change), acts of war or terrorism, regional conflicts, and public health emergencies; and
adverse social, political and economic conditions, including inflation, a recessionary environment, and disruptions in capital markets.
We utilize a sourcing strategy that emphasizes global procurement of materials that has direct or indirect dependencies upon a number of vendors with operations in the Asia Pacific region. Physical, regulatory, technological, market, reputational, and legal risks related to climate change in these regions and globally are increasing in impact and diversity and the magnitude of any short-term or long-term adverse impact on our business or results of operations remains unknown. The physical impacts of climate change, including as a result of certain types of natural disasters occurring more frequently or with more intensity or changing weather patterns, could disrupt our supply chain, result in damage to or closures of our facilities, and could otherwise have an adverse impact on our business, operating results and financial condition. In addition, the war in Ukraine resulted in increased sanctions that affected the price of raw materials used in our products, which had and could continue to have an adverse impact on our operating results.
Our cross-border transactions and international operations are subject to complex foreign and U.S. laws and regulations, including anti-bribery and corruption laws, antitrust or competition laws, data privacy laws, such as the GDPR, and environmental regulations, among others. In particular, recent years have seen a substantial increase in anti-bribery law enforcement activity by U.S. regulators, and we currently operate and seek to operate in many parts of the world that are recognized as having greater potential for corruption. Violations of any of these laws and regulations could result in fines and penalties, criminal sanctions against us or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in certain geographies, and significant harm to our business reputation. Our policies and procedures to promote compliance with these laws and regulations and to mitigate these risks may not protect us from all acts committed by our employees or third-party vendors, including contractors, agents and services partners. Additionally, the costs of complying with these laws (including the costs of investigations, auditing and monitoring) could adversely affect our current or future business.
The success of our international sales and operations will depend, in large part, on our ability to anticipate and manage these risks effectively. Our failure to manage any of these risks could harm our international operations, reduce our international sales, and could give rise to liabilities, costs or other business difficulties that could adversely affect our operations and financial results.
Data security breaches and cyberattacks could compromise our intellectual property or other confidential information and cause significant damage to our business, product performance, brand, and reputation.
We maintain information that is confidential, proprietary or otherwise sensitive in nature on our information technology systems, and on the systems of our third-party providers. This information includes intellectual property, financial information and other confidential information related to us and our employees, prospects, customers, suppliers and other business partners. Additionally, our information technology provides us with the ability to remotely control some variables of our products; they are connected to, controlled and monitored by our centralized remote monitoring service. We rely on our internal software applications for many of the functions we use to operate our business generally. Cyberattacks are increasing in frequency and evolving in nature. We and our third-party providers are at risk of attack through the use of increasingly sophisticated methods, including malware, phishing and the deployment of artificial intelligence to find and exploit vulnerabilities.
Our information technology systems, and those maintained by our third-party providers, have been in the past, and may be in the future, subjected to attempts to gain unauthorized access, disable, destroy, maliciously control or cause other system disruptions. In some cases, it is difficult to anticipate or to detect immediately such incidents and the damage they caused. While these types of incidents have not had a material effect on our business to date, future incidents involving access to our
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network or improper use of our systems, or those of our third parties, could compromise confidential, proprietary or otherwise sensitive information, as well as the operation of our products.
There is no assurance that any measures we may take to combat known and unknown cybersecurity risks will be sufficient to prevent future security breaches and cyberattacks. The security of our infrastructure, including the network that connects our products to our remote monitoring service, may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyberattacks that could have a material adverse impact on our business and our products in the field, and the protective measures we have taken may be insufficient to prevent such events. A breach or failure of our networks or computer or data management systems due to intentional actions such as cyberattacks, including ransomware attacks, phishing or denial-of-service attacks, negligence, or other reasons, whether as a result of actions by third-parties or our employees, could seriously disrupt our operations or could affect our ability to control or to assess the performance in the field of our products and could result in disruption to our business and legal liability.
In addition, security breaches and cyberattacks could negatively impact our brand and reputation and our competitive position and could result in litigation with third parties, regulatory action and increased remediation costs, any of which could adversely impact our business, our financial condition, and our operating results. Although we maintain insurance coverage that may cover certain liabilities in connection with some security breaches and cyberattacks, we cannot be certain it will be adequate for liabilities actually incurred or that any insurer will not deny coverage of future claims.
If we are unable to attract and retain key employees and hire qualified management, technical, engineering, finance and sales personnel, our ability to compete and successfully grow our business could be harmed.
We believe that our success and our ability to reach our strategic objectives are highly dependent on the contributions of our key management, technical, engineering, finance and sales personnel. The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our products and services and negatively impact our business, prospects and operating results. In particular, we are highly dependent on the services of Dr. Sridhar, our Founder, President, Chief Executive Officer and Director, and other certain key employees. None of our key employees are bound by employment agreements for any specific term and we cannot assure you that we will be able to successfully attract and retain the senior leadership necessary to grow our business. There is intense competition for talented individuals in our industry, particularly in the San Francisco Bay Area where our principal offices are located. Our failure to attract and retain our executive officers and other key management, technical, engineering, finance and sales personnel, could adversely impact our business, our financial condition and our operating results.
Competition for manufacturing employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.
We believe part of our success depends on the efforts and talent of our manufacturing employees and our ability to attract, develop, motivate and retain such employees. Competition for manufacturing employees is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.
Risks Related to Ownership of Our Common Stock
The stock price of our common stock has been and may continue to be volatile.
The market price of our common stock has been and may continue to be volatile. In addition to factors discussed in this Risk Factors section, the market price of our common stock may fluctuate significantly in response to numerous variables, many of which are beyond our control, including:
overall performance of the equity markets;
actual or anticipated fluctuations in our revenue and other operating results;
changes in the financial projections we may provide to the public or our failure to meet these projections;
changing market and economic conditions, including a recessionary environment, rising interest rates and inflationary pressures;
failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors;
the issuance of negative reports from short sellers;
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recruitment or departure of key personnel;
new laws, regulations, subsidies or credits, or new interpretations of them, applicable to our business;
negative publicity related to problems in our manufacturing or the real or perceived quality of our products;
rumors and market speculation involving us or other companies in our industry;
the failure or distress of competitors in our industry;
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships or capital commitments;
lawsuits threatened or filed against us; and
other events or factors including those resulting from war, natural disasters (including as result of climate change), incidents of terrorism or responses to these events.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. We are currently involved in securities litigation, which may subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
We may issue additional shares of our common stock in connection with future conversions of the Green Notes, which may dilute our existing stockholders and potentially adversely affect the market price of our common stock.
In the event that some or all of the Green Notes are converted, and we elect to deliver shares of common stock, the ownership interests of existing stockholders will be diluted, and any sales in the public market of any shares of our common stock issuable upon such conversion could adversely affect the prevailing market price of our common stock.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our capital stock and do not intend to pay cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit stockholdersrights, and limit the market price of our common stock.
Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our restated certificate of incorporation and amended and restated bylaws include provisions that:
require that our board of directors is classified into three classes of directors with staggered three year terms;
permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships;
require super-majority voting to amend some provisions in our restated certificate of incorporation and amended and restated bylaws;
authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
authorize only the chairman of our board of directors, our chief executive officer, or a majority of our board of directors to call a special meeting of stockholders;
prohibit stockholder action by written consent;
expressly authorize the board of directors to make, alter, or repeal our bylaws; and
establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
In addition, our restated certificate of incorporation and our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General
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Corporation Law, our restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Our restated certificate of incorporation and our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which thereby may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation and our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, our operating results, and our financial condition.
Moreover, Section 203 of the Delaware General Corporation Law may discourage, delay, or prevent a change in control of our Company. Section 203 imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock.
Increased scrutiny regarding ESG practices and disclosures could result in additional costs and adversely impact our business, brand and reputation.
Like many companies, we face increased scrutiny relating to our Environmental, Social and Governance (“ESG”) practices and disclosures. Investors are increasingly using ESG screening criteria in making investment decisions. Our disclosures on these matters or a failure to satisfy evolving stakeholder expectations for ESG practices and reporting may harm our brand and reputation and impact employee retention and our access to capital. In addition, our failure, or perceived failure, to pursue or fulfill our goals, targets, and objectives or to satisfy various reporting standards, could expose us to government enforcement actions and private litigation.
Our ability to achieve any ESG goal, target, or objective, is subject to numerous risks, many of which are outside of our control. Examples of such risks include the availability and cost of technologies and products, evolving regulatory requirements affecting ESG standards or disclosures, our ability to recruit, develop, and retain diverse talent in our labor markets, and our ability to develop and maintain reporting processes and controls that comply with evolving standards for identifying, measuring and reporting ESG metrics. As ESG stakeholder expectations, reporting standards, and disclosure requirements continue to develop, we may incur increasing costs related to ESG monitoring and reporting.

ITEM 1B — UNRESOLVED STAFF COMMENTS
None.

ITEM 1C — CYBERSECURITY
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program designed to assess, identify, and manage risks from potential unauthorized occurrences on or through our information technology systems that may result in adverse effects on the confidentiality, integrity, or availability of our information technology systems or any information residing therein. Our cybersecurity risk management program includes a cybersecurity incident response plan.
We design and assess our program based on the Center for Internet Security (“CIS”) 18 Framework. This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the CIS 18 Framework as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Our cybersecurity risk management program includes:
Periodic risk assessments are designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment.
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A security team principally responsible for managing our cybersecurity risk assessment processes, security controls, and response to cybersecurity incidents.
The use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls.
Our Internal Audit department which monitors certain IT systems controls that are integrated into our larger Sarbanes-Oxley control environment.
Periodic cybersecurity awareness training for our employees and contractors with access to our information technology systems.
A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents, including incidents that could be indicators of attack against availability, integrity and confidentiality of information systems.
A third-party risk management process for service providers, suppliers, and vendors that includes examining their security postures and assessing their data and system protection controls.
Our business has not been materially affected by cybersecurity incidents to date. For a discussion of how cybersecurity risks could materially affect us in the future, please see the risk factors set forth under the caption Part I, Item 1A, Risk Factors Risks Related to our Operations.
Cybersecurity Governance
Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit and Risk Committee (the “Audit Committee”) oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program. The Board receives periodic reports from the Audit Committee on these and other activities. The Audit Committee receives periodic reports from management on our cybersecurity risks, including presentations from our Chief Information Officer, internal security staff, and external experts. This includes updates to the Audit Committee, as appropriate, regarding any significant cybersecurity incidents, or multiple incidents that could be significant in the aggregate. These updates may occur in between regularly scheduled Audit Committee meetings.
At the management level, the Enterprise and Risk Management Committee (the “ERM Committee”) discusses cybersecurity topics, including any potentially material cybersecurity incidents, as part of its oversight of the company’s significant risks. Our management team, including the Chief Information Officer, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including:
periodic briefings from internal security personnel;
periodic reviews of risk management measures implemented to prevent, detect, mitigate, and remediate cybersecurity risks and incidents, including our incident response plan;
threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and
alerts and periodic reports produced by security tools deployed in our IT environment.
Our Chief Information Officer has more than 20 years of cybersecurity and information technology experience and she has served as the Chief Information Officer for multiple technology companies. Similarly, the members of the ERM Committee possess significant risk management experience obtained by their collective years of experience at Bloom and other companies of similar or greater complexity.

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ITEM 2 — PROPERTIES
The table below presents details for our principal properties:
FacilityLocationApproximate Square FootageHeldLease Term
Corporate headquarters1
San Jose, CA183,000Leased2031
Manufacturing, warehousing, research and development2
Sunnyvale, CA110,000Leased2024
Research and developmentMountain View, CA44,000Leased2024
Manufacturing, research and developmentFremont, CA326,000Leased*
Manufacturing and warehousingNewark, DE377,000Leased**
Manufacturing and warehousing3
Newark, DE178,000Ownedn/a

* Lease terms expire in December 2027, February 2036 and November 2037.
** Lease terms expire in February 2026, December 2026, April 2027, June 2028 and October 2028.
1 Our corporate headquarters is used for administration, research and development, and sales and marketing.
2 As of December 31, 2023, we were in the process of vacating the 50,000 sq. ft. manufacturing, warehousing and R&D facility which was closed per the Restructuring Plan (for additional information, please see Part II, Item 8, Note 12 — Restructuring).
3 Our first purpose-built Bloom Energy manufacturing center for the fuel cells and Energy Servers assembly and was designed specifically for copy-exact duplication as we expand, which we believe will help us scale more efficiently.
We lease additional office space as field offices in the U.S. and office and manufacturing space around the world including in China, India, the Republic of Korea, Taiwan, Japan, and the United Arab Emirates. To support our growth expectations, we invested in additional manufacturing capacity at a new facility in Fremont, California. In July 2022 we announced the grand opening of this multi-gigawatt manufacturing facility, representing a $200 million investment. It followed the expansion of the company’s global headquarters in San Jose in June 2021 as well as the opening of a new research and technical center and a global hydrogen development facility in Fremont. This facility provides additional capacity necessary for future growth.

ITEM 3 — LEGAL PROCEEDINGS
We are, and from time to time we may become, involved in legal proceedings or subject to claims arising in the ordinary course of our business. For a discussion of legal proceedings, see Part II, Item 8, Note 13 — Commitments and Contingencies. We are not presently a party to any other legal proceedings that, in the opinion of our management and if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.

ITEM 4 — MINE SAFETY DISCLOSURES
Not applicable.
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Part II
ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A common stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “BE.” On February 12, 2024, there were 567 registered holders of record of our Class A common stock.
We have not declared or paid any cash dividends on our capital stock and do not intend to pay any cash dividends in the foreseeable future.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return since our initial public offering of our common stock relative to the cumulative total returns of the NYSE Composite Index and the Nasdaq Clean Edge Green Energy Total Return Index. An investment of $100 (with reinvestment of all dividends, if any) is assumed to have been made in our common stock and in each of the indexes on December 31, 2018 and its relative performance is tracked through December 31, 2023.
This graph shall not be deemed to be “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, and the graph shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act. Note that past stock price performance is not necessarily indicative of future stock price performance.
Performance Graph 2023.jpg

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(in cumulative $)December 31, 2018March 31, 2019June 30, 2019September 30, 2019December 31, 2019March 31, 2020June 30, 2020September 30, 2020December 31, 2020March 31, 2021June 30, 2021
Bloom Energy Corporation$100.00$129.45$122.94$32.56$74.84$52.40$109.00$180.02$287.10$270.96$269.15
NYSE Composite Index$100.00$112.36$116.29$116.63$125.50$93.57$108.73$116.79$134.28$145.09$154.67
NASDAQ Clean Edge Green Energy Total Return Index$100.00$114.10$120.51$122.34$142.66$115.55$170.89$255.64$406.35$397.37$401.71
(in cumulative $)September 30, 2021December 31, 2021March 31, 2022June 30, 2022September 30, 2022December 31, 2022March 31, 2023June 30, 2023September 30, 2023December 31, 2023
Bloom Energy Corporation$187.51$219.65$241.88$165.26$200.20$191.48$199.59$163.73$132.78$148.20
NYSE Composite Index$151.70$162.04$158.30$138.45$129.58$146.89$149.67$155.57$151.79$167.12
NASDAQ Clean Edge Green Energy Total Return Index$363.73$395.61$376.27$304.70$332.41$276.34$305.95$301.25$251.14$248.97


Unregistered Sales of Equity Securities

None.

Issuer’s Purchases of Equity Securities

None.


ITEM 6 — [RESERVED]
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ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Description of Bloom Energy
Our mission is to make clean, reliable energy affordable for everyone in the world. We created the first large-scale, commercially viable solid oxide fuel-cell based power generation platform that empowers businesses, essential services, critical infrastructure and communities to responsibly take charge of their energy.
Our technology, invented in the U.S., is one of the most advanced electricity and hydrogen producing technologies on the market today. Our fuel-flexible Bloom Energy Servers can use biogas, hydrogen, natural gas, or a blend of fuels to create resilient, sustainable and cost-predictable power at typically significantly higher efficiencies than traditional, combustion-based resources. In addition, our same solid oxide platform that powers our fuel cells can be used to create hydrogen with our Bloom Electrolyzer. Hydrogen is increasingly recognized as a critically important tool for the decarbonization of the energy economy. Our enterprise customers include some of the largest multinational corporations in the world. We also have strong relationships with some of the largest utility companies in the U.S. and the Republic of Korea, with a growing presence in various international markets.
At Bloom Energy, we look forward to a net-zero future. Our technology is designed to help enable this future by delivering reliable, low-carbon electricity in a world facing unacceptable levels of power disruptions. Our resilient platform has kept electricity available for our customers through hurricanes, earthquakes, typhoons, forest fires, extreme heat and grid failures. Unlike traditional combustion power generation, our platform is community-friendly and designed to significantly reduce emissions of criteria air pollutants. We have made tremendous progress towards renewable fuel production through our biogas, hydrogen and electrolyzer programs, and we believe that we are well-positioned as a core platform and fixture in the new energy paradigm to help organizations and communities achieve their net-zero objectives.
We market and sell our Energy Servers primarily through our direct sales organization in the U.S., and we also have direct and indirect sales channels internationally. Recognizing that deploying our solutions requires a significant financial commitment, we have developed a number of financing options to support sales of our Energy Servers to customers who lack the financial capability to purchase our Energy Servers directly, and who may prefer to finance the acquisition using third-party financing or to contract for our services on a pay-as-you-go model.
Our typical target commercial or industrial customer has historically been either an investment-grade entity or a customer with investment-grade attributes such as size, assets and revenue, liquidity, geographically diverse operations and general financial stability. We have also expanded our product and financing options to below-investment-grade customers and have also expanded internationally, including deployments on a wholesale grid. Given that our customers are typically large institutions with multi-level decision-making processes, we generally experience a lengthy sales process. Once the sale is completed, we have a large multi-disciplined team to facilitate the deployment of our projects in a wide variety of locations under a myriad of regulatory environments.
Strategic Investment
On October 23, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with SK ecoplant in connection with our strategic partnership. Pursuant to the SPA, on December 29, 2021, we sold to SK ecoplant 10,000,000 shares of our zero coupon, non-voting redeemable convertible Series A preferred stock, par value $0.0001 per share (the “Series A RCPS”), at a purchase price of $25.50 per share for an aggregate purchase price of $255.0 million (the “Initial Investment”). On November 8, 2022, each share of Series A RCPS was converted into 10,000,000 shares of Class A common stock.
Simultaneous with the execution of the SPA, we and SK ecoplant executed an amendment to the Joint Venture Agreement (the “JVA”), an amendment and restatement to our Preferred Distribution Agreement (“PDA Restatement”), and a new Commercial Cooperation Agreement regarding initiatives pertaining to the hydrogen market and general market expansion for the Bloom Energy Server and Bloom Energy Electrolyzer.
On March 20, 2023, SK ecoplant entered into an amendment of the SPA (the “Amended SPA”) with us, pursuant to which on March 23, 2023, we issued and sold to SK ecoplant 13,491,701 shares of non-voting Series B redeemable convertible preferred stock, par value $0.0001 per share (the “Series B RCPS”), at a purchase price of $23.05 per share for cash proceeds of $311.0 million, excluding issuance cost of $0.5 million.
On March 20, 2023, in connection with the Amended SPA, we also entered into a Shareholders’ Loan Agreement with SK ecoplant (the “Loan Agreement”), pursuant to which we had the option to draw on a loan from SK ecoplant with a
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maximum principal amount of $311.0 million, a maturity of five years and an interest rate of 4.6%, should SK ecoplant have sent a redemption notice to us under the Amended SPA.
On September 15, 2023, we entered into the Amended and Restated JVA and the Share Purchase Agreement (together, the “Amended JV Agreements”) with SK ecoplant which changed the share of our voting rights in the Korean joint venture to 40% and increased the scope of assembly done by the joint venture facility in the Republic of Korea to full assembly.
On September 23, 2023, all 13,491,701 shares of the Series B RCPS were automatically converted into shares of our Class A common stock pursuant to the Certificate of Designation, dated as of March 20, 2023, setting forth the rights, preferences, privileges, and restrictions of the Series B RCPS, as amended by the Certificate of Amendment to the Certificate of Designation, dated as of April 18, 2023. Upon conversion of all the Series B RCPS into shares of our Class A common stock, SK ecoplant became a related party to us with the beneficial ownership of 10.5% of our outstanding Class A common stock.
For additional details about the transaction with SK ecoplant, please see Part II, Item 8, Note 17 — SK ecoplant Strategic Investment, and for more information about our joint venture with SK ecoplant, please see Part II, Item 8, Note 11 — Related Party Transactions.
Certain Factors Affecting our Performance
Energy Market Conditions
The global energy transition to a zero-carbon environment has created new challenges and opportunities for utilities, suppliers of energy solutions and customers. Shifts and uncertainty in market and regulatory dynamics and corporate and governmental policies are currently impacting the selling process and extending sales cycles and timelines for our natural gas-, biogas- and hydrogen-related products. Increasing electricity rates, decreasing energy reliability, and delays in the development of transmission infrastructure and grid interconnection have led to increased customer interest in our power solutions. At the same time, natural gas supply and pricing concerns due to geopolitical stresses and resulting market changes as well as increasing focus on sustainability targets have led to increased caution from potential customers. The increased use of renewable power generation and the weather effects of climate change have exacerbated aging grid fragilities, increased the occurrence of power outages, created grid transmission shortages, and lengthened already extensively delayed interconnection cycles. Low- and zero-carbon sources of baseload energy have also been curtailed and even banned in some locations, forcing utilities, states and countries to revisit less clean sources of baseload and intermediate power in an attempt to ensure energy reliability. This supply and demand mismatch globally has threatened energy security reliability, reduced the availability of energy, and increased the cost of energy.
Bloom’s power solutions enable customers to address these energy market challenges by offering fuel flexible solutions that are designed to provide cost predictable, resilient, and reliable energy in a timely fashion. As customers and utilities navigate the energy transition and evolving landscape, the ability of our power solutions to fit their economic, regulatory, and policy needs depends on a number of factors, including natural gas availability and pricing, electrical interconnection needs and availability, redundant back up power requirements, cost requirements, and sustainability profile. Even in those situations where the time to power from the utility is years away in light of the need to build out energy transmission infrastructure, these factors still may impact a customer’s buying decision. For example, although our power generation solutions can operate as microgrids, independent from the grid, if a customer desires back up power or a “grid parallel” solution in combination with the Bloom microgrid, required interconnection studies and lengthy interconnection queues remain, eroding the time to power value proposition. According to the Lawrence Berkeley National Lab, U.S. interconnection queue delays are growing, with a forty percent year over year increase in 2022. The typical project interconnection process for large scale projects grew to five years in 2022 compared to three years in 2015 and two years in 2008. In addition, many data center customers and other large power users have signed exclusivity arrangements with their utilities, and this often creates a more complicated dynamic for them to move to a behind the meter solution. To add to this, the rising cost of natural gas, increases in gas distribution rates, limited availability of natural gas supply, as well as disruptions to the world gas markets, has increased the cost of our power solutions for customers and, in certain cases where there is a lack of fuel supply, a complete inability to operate the systems. In the U.S., the lack or slow development of pipeline infrastructure is impacting the timing of customers being able to take advantage of our power solution opportunities. In certain jurisdictions in the U.S. and Europe, natural gas bans have been enacted that prevent the use of our power solutions unless alternative fuels are available. In addition, there is a growing hesitancy among potential customers to purchase our power solutions to run on natural gas. Increasingly, customers want a zero-carbon solution for power, and, although our power solutions are designed to run on biofuels or hydrogen (in addition to natural gas) and help our customers achieve their sustainability goals, these fuels continue to have very limited availability and, for most customers, are not yet economical. This impetus by customers to use zero-carbon solutions today, combined with the current lack of availability of zero-carbon fuels, is adversely impacting our power solution selling opportunities. In addition, many of our
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potential data center and industrial customers are pursuing greenfield opportunities where the development cycle is long and laden with permitting requirements and the uncertainty of these factors is leading to a more difficult customer decision-making process and longer sales cycles. For example, in the fourth quarter of 2022, we entered into a PPA contract for the sale of electricity to a customer for three greenfield sites that were at various stages of development (the “Project”). The first site was expected to be operational with power by the third quarter of 2024. We sold 73 megawatts of the Energy Servers to a Distributor with the expectation that the Distributor would support installation on the Project and install the Energy Servers at the three Project sites. The Project is currently delayed, and we are in discussions with the end customer regarding if and how to move forward. If the Project continues to be delayed or is terminated we may work with the Distributor to deploy the Energy Servers at our future installation sites with a different customer or customers or the Distributor may decide to reduce future orders or cancel existing orders until the Energy Servers are deployed, and either action could materially and adversely affect our product revenue and the timing of the associated cash flows in 2024.
Corporate procurement policies are also undergoing change that creates uncertainty; while some customers are increasingly focused on decarbonizing their own direct energy supply, including aligning the timing of their zero-carbon power generation with their energy consumption, others are shifting to prioritize overall carbon emissions from the energy system, both of which are impacting our sales.
The regulatory environment for energy solutions continues to shift. In South Korea, the government recently moved to a new, government-run bidding process for fuel cell purchases, which has impacted and may continue to impact demand for our power solutions. In the U.S., the ITC for fuel cells running on a non-zero carbon fuel currently expires at the end of 2024. In Ireland, which is a large data center market, a directive from the Minister of the Department of the Environment, Climate and Communications to restrict grid connections to data centers and other large power users, along with a halt in high-pressure gas installations has delayed our selling activities in Ireland. Delays in adoption of Renewable Fuel Standard regulations in the U.S. for the use of biogas to generate electricity for electric vehicles, and minimal governmental focus on utilization of biogas outside of its direct use by methane-fueled vehicles, have created uncertainty in prospects for broader biogas availability for industrial uses, including our power solutions. In addition, in most jurisdictions, air permits and various land use permits are required for installation of our solutions over a certain amount of mega-watts, and generally the length of time to obtain these permits increased, while the level of certainty of issuance has decreased and if issued, the cost of compliance requirements can be cost prohibitive. We have experienced a reluctance in certain states to issue permits for gas generation equipment. Even if issued, states may require a blend of costly renewable fuels or other measures to advance climate goals. This has adversely impacted our selling activities.
Significant governmental interest, investment and stimulation of clean hydrogen in the U.S., Europe and in many other regions across the globe have not yet had significant impacts on demand for hydrogen. To date, while the number of proposed hydrogen production projects has grown rapidly, only a small fraction has reached the final investment decision (FID) stage, and an even smaller fraction have been deployed. In addition, the infrastructure needed to transport hydrogen, whether through pipelines or maritime or land-based tankers, is currently only sufficient for existing uses, and has not begun to be extended for anticipated future uses, with hydrogen blending and other approaches remaining at pilot stages. It remains unclear whether regulators in some jurisdictions will allow hydrogen to be introduced into gas distribution systems, which could effectively preclude or severely limit our ability to transport hydrogen from the point of production to the point of consumption.
All of these factors have lengthened the selling cycles for our electrolyzer product and power solutions, and we have experienced delays in our anticipated bookings. Our revenue, margins, and cash flow in any given year are largely dependent on bookings during the prior year. Historically, the majority of our bookings have occurred in the second half of the year, with a significant portion occurring in the fourth quarter. That trend did not continue to the same degree in 2023. If a substantial portion of our anticipated bookings continue to be delayed, our future revenue, margins and cash flow could be materially adversely impacted.
Supply Chain Constraints
We continue to see effects from global supply chain tightness due to the current inflationary environment, war in Ukraine, and trade tensions between the U.S. and China. We are not aware of, and do not expect any significant direct impact on our business or supply chain from the Israel-Gaza Strip armed conflict. While we have not experienced any significant component shortages to date, we are facing pressures from inflation. These dynamics could worsen as a result of continued geopolitical instability. In the event we are unable to mitigate the impacts of delays and/or price increases in raw materials and components, it could delay the manufacturing and installation, and increase the costs of, our products, which would adversely impact our cash flows and results of operations, including our revenues and gross margin. We expect these supply chain challenges to continue in the short term.

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Customer Financing Constraints
Our ability to obtain financing for our Energy Servers depends partially on the creditworthiness of our customers, and deterioration of our customers’ credit ratings can impact the financing for their use of our Energy Servers. Regional banking and financial institution instability, such as the failure of Silicon Valley Bank in the first quarter of 2023, may make it more difficult for our customers to obtain financing. Rising interest rates have also increased the cost of financing for our customers. As interest rates rise, the financiers of our installations demand a higher rate of return, which puts pressure on our margins. We continue to work on obtaining the financing required for our 2024 installations, but if we are unable to secure such financing, our revenue, cash flow, and liquidity could be materially impacted. We expect that in the U.S., the IRA and the transferability of tax credits, should make the financing market more robust in 2024, thereby easing some of these customer financing constraints, but this cannot be assured.
Manufacturing and Labor Market Constraints
As recently as 2022, we experienced impacts from labor shortages and challenges in hiring for our manufacturing facilities. While these constraints abated in 2023 and we reduced headcount as part of the Restructuring Plan adopted in September 2023, we may still experience difficulties with hiring and retention, and may face additional labor shortages in the future. The Restructuring Plan included (i) an optimization of our workforce across multiple functions, (ii) a relocation of a portion of our R&O department of our manufacturing and warehousing facility in Newark, Delaware, to Mexico, and (iii) a closure of a manufacturing, warehousing, R&D facility in Sunnyvale, California. According to the Restructuring Plan, 74 full-time employees and 48 contractors separated from the Company in September 2023. An additional 71 full-time employees and 8 contractors separated from the Company in October 2023. Also, in October 2023 we communicated to 61 full-time manufacturing employees about their forthcoming separation from the Company. These employees were sent on paid leave and left the Company in January 2024. For additional information, please see Part II, Item 8, Note 12 — Restructuring. In addition, the current inflationary environment has led to rising wages and labor costs as well as increased competition for labor. In the event these constraints return, and we are unable to continue to mitigate the impacts of these challenges, it could delay the manufacturing and installation of our Energy Servers or Electrolyzers, and we may be unable to meet customer demand, which could adversely impact our cash flows and results of operations, including our revenues and gross margin.
Installations and Maintenance of Energy Servers
In 2023, our installation projects experienced some delays relating to, among other things, permitting, utility delays, and access to customer facilities. However, these delays did not significantly impact our revenue.
If we are delayed in or unable to perform maintenance, our previously installed Energy Servers would likely experience adverse performance impacts, including reduced output and/or efficiency, which could result in warranty and/or guaranty claims by our customers. Further, due to the nature of our Energy Servers, if we are unable to replace worn parts in accordance with our standard maintenance schedule, we may incur higher costs in the future. During the year ended December 31, 2023, we experienced no significant delays in servicing our Energy Servers.
Environmental, Social and Governance (“ESG”)
We are committed to a goal of providing consistent returns to our stockholders while maintaining a strong sense of good corporate citizenship that places a high value on the environment, welfare of our employees, the communities in which we operate, the customers we serve, and the world as a whole. We believe that prioritizing, improving, and managing our ESG related risks, opportunities, and programs help us to better create long-term value for our investors.
In April 2023, we released our 2022 Sustainability Report, Advancing the Mission of Decarbonization (the “Sustainability Report”), using generally accepted ESG frameworks and standards, including alignment with Sustainability Accounting Standards Board standards and the Task Force on Climate-related Financial Disclosures recommendations. In addition, the Sustainability Report also utilized certain Global Reporting Initiative standards and was mapped against the United Nations Sustainable Development Goals. We plan to issue a sustainability report on an annual basis.
Our mission is to make clean, reliable energy affordable for everyone in the world. To that end, we strive to empower businesses and communities to responsibly take charge of their energy while addressing both the causes and consequences of climate change. We aim to serve our customers with products that are resilient, providing uninterrupted power with predictable pricing over the long-term, while addressing sustainability issues by developing an increasingly broad portfolio of solutions for decarbonization.
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The Sustainability Report can be found on our website at https://www.bloomenergy.com/sustainibility. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this report.
Inflation Reduction Act of 2022
On August 16, 2022, President Biden signed into law the IRA. It contains provisions which have a significant impact on the development and financing of clean energy projects in the U.S. The IRA includes the extension and expansion of the ITC and the Production Tax Credit (the “PTC”) and the addition of expanded tax credits for other technologies and for manufacturing of clean energy equipment as well as terms allowing parties to more easily monetize the tax credits. The IRA also includes some targeted bonus credit incentives intended to encourage development in low-income communities, the use of domestically produced materials, and compliance with certain labor-related requirements.
The IRA contains several credits and incentive provisions that may be relevant to us, which we have summarized below:
Section 48 – the ITC, which provides a tax credit based on capital investment in a variety of renewable and conventional energy technologies to incentivize investment in new energy resources and more efficient use of fuel, including fuel cell technology;
Section 48C – Qualified Advanced Energy Project (reenacted), which provides the ITC through a competitive application process administered through the Department of Energy equal to 6% or 30% of the investment with respect to advanced energy projects;
Section 45V – Clean Hydrogen, which provides a PTC of up to $3 per kg of qualified clean hydrogen over a 10-year credit period for the production of qualified clean hydrogen at a qualified facility in the U.S.; and
Section 45Q – Carbon Capture Sequestration, which provides a credit ranging from $12-$17 or $60-$85 per metric ton based on the amount of carbon oxides captured from a qualified facility over a 12-year period.
We believe that the programs and credits included in the IRA align well with our business model and could provide significant benefits with respect to incentivizing the purchase of our current product offerings and technologies. In particular, the IRA authorized a competitive process to apply for credits to expand or enhance manufacturing capacity under IRC 48C, and we have applied for a credit under this provision; at this time, we cannot be assured our application will ultimately be accepted or result in our receipt of credits. Also, the new PTC for qualified clean hydrogen and credit for carbon capture could result in increased demand for commercial solutions to hydrogen production technology and carbon capture, including our solid oxide fuel-cell based Electrolyzer and Energy Servers.
New Foreign Tax Rules
In 2021 the OECD announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in. However, no material impact to our financial statements is expected due to the relatively small operations outside the U.S.
Liquidity and Capital Resources
We raised cash and supplemented liquidity through financing activities with SK ecoplant in the first quarter of 2023 and issuing the 3% Green Convertible Senior Notes due June 2028 (the “3% Green Notes”) in the second quarter of 2023. At the same time, we increased our working capital spent. In addition, we expanded our warehouse space in Delaware and California to store more inventory to meet the anticipated increase in demand. If this increase in demand does not materialize to the degree we anticipated, our liquidity and financial condition may be adversely impacted.
On March 20, 2023, we entered into the Amended SPA, with SK ecoplant, pursuant to which we issued and sold to SK ecoplant 13,491,701 shares of Series B RCPS for cash proceeds of $311.0 million, excluding issuance cost of $0.5 million.
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On March 20, 2023, in connection with the Amended SPA, we also entered into the Loan Agreement, pursuant to which we were entitled to draw down on a loan from SK ecoplant with a maximum principal amount of $311.0 million, if SK ecoplant sent a redemption notice to us under the Amended SPA or otherwise had reduced any portion of its current holdings of our Class A common stock. On September 23, 2023, all 13,491,701 shares of the Series B RCPS were automatically converted into shares of our Class A common stock. For further information on the strategic investment with SK ecoplant, see Part II, Item 8, Note 17 — SK ecoplant Strategic Investment.
On May 16, 2023, we issued the 3% Green Notes with an aggregate principal amount of $632.5 million due June 2028, unless earlier repurchased, redeemed, or converted, resulting in net cash proceeds of $612.8 million. On June 1, 2023, we used approximately $60.9 million of the net proceeds from this offering to redeem all of the outstanding principal amount of our 10.25% Senior Secured Notes due March 2027. The redemption price equaled 104% of the principal amount redeemed plus accrued and unpaid interest. We also used approximately $54.5 million of the net proceeds from the offering to purchase the privately negotiated capped call options (the “Capped Calls”). The remaining portion of the 3% Green Notes was planned to be used for working capital investment and general corporate purposes.
On August 24, 2023, as part of the PPA V Upgrade, we paid off the outstanding balance and related accrued interest of $118.5 million and $0.5 million, respectively, of our 3.04% Senior Secured Notes due June 30, 2031.
For further information on issuance of 3% Green Notes, redemption of our 10.25% Senior Secured Notes, and repayment of 3.04% Senior Secured Notes, please see Part II, Item 8, Note 7 — Outstanding Loans and Security Agreements.
As of December 31, 2023, we had cash and cash equivalents of $664.6 million. Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds of $601.1 million. We maintain these balances with high credit quality counterparties, regularly monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.
As of December 31, 2023, we had $842.0 million of recourse debt, $4.6 million of non-recourse debt and $9.0 million of other long-term liabilities. As of December 31, 2023, all of our debt was classified as long-term liabilities. For a complete description of our outstanding debt, please see Part II, Item 8, Note 7 — Outstanding Loans and Security Agreements.
The combination of our cash and cash equivalents and cash flow to be generated by our operations is expected to be sufficient to meet our anticipated cash flow needs for at least the next 12 months. If these sources of cash are insufficient or are not received in a timely manner to satisfy our near-term or future cash needs, we may require additional capital from equity or debt financings to fund our operations, our manufacturing capacity, product development, and market expansion requirements and to timely respond to competitive market pressures or strategic opportunities, among other things. We may, from time to time, engage in a variety of financing transactions for such purposes, including factoring our accounts receivable. During the year ended December 31, 2023, we factored $291.4 million of accounts receivable. However, we may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financing may place limits on our financial and operating flexibility. Although currently we do not have any floating-rate notes on the balance sheet, rising interest rates may increase our overall cost of capital, if and when we refinance our fixed-rate convertible notes. If we raise additional funds through further issuances of equity or equity-linked securities, our existing stockholders could suffer dilution in their percentage ownership of us, and any new securities we issue could have rights, preferences, and privileges senior to those of holders of our common stock.
Our future capital requirements depends on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the rate of growth in the volume of system builds and the need for additional manufacturing space, the expansion of sales and marketing activities both in domestic and international markets, market acceptance of our products, our ability to secure financing for customer use of our Energy Servers, the timing of installations and of inventory build in anticipation of future sales and installations, and overall economic conditions. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. Failure to obtain this financing in future quarters may affect our results of operations, including our revenues and cash flows.

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A summary of our consolidated sources and uses of cash, cash equivalents, and restricted cash was as follows (in thousands):

 Years Ended December 31,
 20232022
Net cash (used in) provided by:
Operating activities$(372,531)$(191,723)
Investing activities(83,725)(116,823)
Financing activities683,349 211,364 
Net cash provided by (used in) our PPA Entities (as defined below), which are incorporated into the consolidated statements of cash flows, was as follows (in thousands):

 Years Ended December 31,
 20232022
PPA Entities1
Net cash provided by PPA operating activities $10,036 $245,557 
Net cash used in PPA financing activities
(23,594)(259,854)
1 The PPA Entities’ operating and financing cash flows are a subset of our consolidated cash flows and represent the stand-alone cash flows prepared in accordance with U.S. GAAP. Operating activities consist principally of cash used to run the operations of the PPA Entities, the purchase of Energy Servers from us, and principal reductions in loan balances. Financing activities consist primarily of changes in debt carried by our PPAs, and payments from and distributions to noncontrolling partnership interests. We believe this presentation of net cash provided by (used in) PPA activities is useful to provide the reader with the impact on consolidated cash flows of the PPA Entities in which we had only a minority interest. In fiscal 2022 we sold PPA IIIa and PPA IV entities. In August 2023, we sold our last consolidated PPA entity — PPA V. For more details, please see Part II, Item 8, Note 10 — Portfolio Financings.
Operating Activities
Our operating activities consisted of net loss adjusted for certain non-cash items plus changes in our operating assets and liabilities or working capital. Net cash used in operating activities during the year ended December 31, 2023, was $372.5 million, an increase of $180.8 million compared to the prior year period. The increase in cash used in operating activities during the year ended December 31, 2023, as compared to the prior year period, was primarily a result of an increase in working capital of $379.4 million due to (1) an increase in inventory levels of $231.7 million to support future demand, (2) an increase in accounts receivable of $89.8 million, which was primarily due to the timing of revenue transactions and corresponding collections, and (3) the timing of payments to vendors.
Investing Activities
Our investing activities have consisted of capital expenditures, including investments to increase our production capacity. We expect to continue such investing activities as our business grows. Cash used in investing activities during the year ended December 31, 2023, was $83.7 million, a decrease of $33.1 million compared to the prior year period and was primarily due to the decrease in expenditures on tenant improvements for a newly leased engineering and manufacturing building in Fremont, California, which opened in July 2022. We expect to continue to make capital expenditures over the next few quarters to expand production capacity at our new manufacturing facility in Fremont, California, which includes the purchase of new equipment and other tenant improvements. We intend to fund these capital expenditures from cash on hand as well as cash flow to be generated from operations. We may also evaluate and arrange equipment lease financing to fund these capital expenditures.
Financing Activities
Historically, our financing activities consisted of borrowings and repayments of debt, proceeds and repayments of financing obligations, distributions paid to noncontrolling interests, contributions from noncontrolling interests, and proceeds from the issuances of our common stock. Net cash provided by financing activities during the year ended December 31, 2023, was $683.3 million, an increase of $472.0 million compared to the prior year period. The increase was primarily due to (1) proceeds from the issuance of the 3% Green Notes of $612.8 million, net of paid issuance costs of $19.7 million, (2) proceeds from the issuance of redeemable convertible preferred stock of $310.6 million, net of paid issuance costs of $0.4 million, as a
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result of SK ecoplant Second Tranche Closing, (3) proceeds from the issuance of common stock of $16.9 million, (4) a contribution from noncontrolling interest of $7.0 million, (5) proceeds from financing obligations of $5.0 million, and (6) proceeds from issuance of non-recourse debt of $4.6 million. This was partially offset by (1) a settlement of the 3.04% Senior Secured Notes due June 30, 2031 of $127.4 million, (2) repayment of 10.25% Senior Secured Notes due March 2027 of $64.0 million, (3) purchases of Capped Calls of $54.5 million, (4) repayment of financing obligations of $18.4 million, and (5) the acquisition of all interest in the PPA V for $6.9 million net of distributions to Intel’s noncontrolling interest of $2.3 million.
We believe we have sufficient capital to operate our business over the next 12 months. Our working capital was strengthened with the supplemented liquidity through financing activities with SK ecoplant in the first quarter of 2023 and issuing the 3% Green Notes in the second quarter of 2023. In addition, we may still enter the equity or debt market as needed to support the expansion of our business. Please refer to Part II, Item 8, Note 7 — Outstanding Loans and Security Agreements, and Part I, Item 1A, Risk Factors Risks Related to Our Liquidity Our indebtedness, and restrictions imposed by the agreements governing our outstanding indebtedness, may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs, for more information regarding the terms of and risks associated with our debt.
Purchase and Financing Options
Overview
In order to appeal to the largest variety of customers, we make available several options to them. Both in the U.S. and abroad, we sell the Energy Servers directly to customers. In the U.S., we also enable customers’ use of the Energy Servers through a power purchase arrangement or a managed services financing (whereby we sell and lease back the Energy Servers in order to supply energy to our customers), both made possible through third-party financing arrangements.
Often our offerings take advantage of local incentives. In the U.S., our financing arrangements are structured to optimize both federal and local incentives, including the ITC and accelerated depreciation. Internationally, our sales are made primarily to distributors who sell to, and install for, customers; these deals are also structured to use local incentives applicable to our Energy Servers. Increasingly, we use trusted installers in the U.S. to generate transactions.
Whichever option is selected by a customer in the U.S. or internationally, the contract structure will include obligations (“O&M Obligations”) on our part to operate and maintain the Energy Server (“O&M Agreement”). The O&M Agreement may either be (i) for a one-year period, subject to annual renewal at the customer’s option, which historically are almost always renewed year-over-year, or (ii) for a fixed term. In the U.S., the contract structure often includes obligations on our part to install the Energy Servers (“Installation Obligations”). Consequently, our transactions may generate revenue from the sale of the Energy Servers and electricity, performance of the O&M Obligations, and performance of the Installation Obligations.
In addition to customary workmanship and materials warranties offered with the sale of Energy Servers, we provide warranties and guaranties regarding the efficiency and output of our Energy Servers to the customer and, in certain financing structures, to the financing parties as well. We refer to a “performance warranty” as an obligation to repair or replace the Energy Servers as necessary to return performance of the Energy Servers to the warranted performance level. We refer to a “performance guaranty” as an obligation to make a payment to compensate for the failure of the Energy Servers to meet the guaranteed performance level. Our obligation to make payments under a performance guaranty is always contractually capped.
Energy Server Sales
There are customers who purchase our Energy Servers directly from us pursuant to customary equipment sales contracts. In connection with the purchase of the Energy Servers, the customers also enter into a contract with us for the O&M Obligations. The customer may elect to engage us to provide the Installation Obligations or engage a third-party provider. Internationally, sales often occur through distribution arrangements pursuant to which local construction service providers perform the Installation Obligations, as is the case in the Republic of Korea, and we contract directly with the customer to provide the O&M Obligations.
Customer Financing Options
With respect to the third-party financing options in the U.S., a customer may choose to contract for the purchase of electricity generated by the Energy Servers in exchange for a scheduled dollars per kilowatt hour rate (a “Power Purchase Agreement” or “PPA”), or the use of our Energy Servers owned by a financing party in exchange for a capacity-based payment and, in some cases, an output-based payment based on kw/hour (each, a “Managed Services Agreement”).
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PPAs are typically financed on a portfolio basis. In the past, we have financed portfolios through tax equity partnerships, acquisition financings and direct sales to investors (each, a “Portfolio Financing”). Capacity-based payments in a Managed Services Agreement are required regardless of the level of performance of the Energy Server. Managed Services Agreements are then financed pursuant to a sale-leaseback with a financial institution (a “Managed Services Financing”).
In the U.S., our capacity to offer our Energy Servers through either of these financed arrangements depends in large part on the ability of financing parties to optimize the tax benefits associated with the Energy Servers, such as the ITC or accelerated depreciation. Interest rate fluctuations, and internationally, currency exchange rate fluctuations, may also impact the attractiveness of any financing offerings for our customers. Our ability to finance a PPA or a Managed Services Agreement is also related to, and may be limited by, the creditworthiness of the customer. Additionally, a Managed Services Financing option is limited by a customer’s willingness to commit to making the capacity-based payment to a financing party regardless of performance.
In each of our financing options, we typically perform the functions of a project developer, including identifying end customers and financiers, leading the negotiations of the customer agreements and financing agreements, securing all necessary permitting and interconnections approvals, and overseeing the design and construction of the project up to and including commissioning the Energy Servers. Increasingly, however, we are making sales to third-party developers.
Each of our financing transaction structures is described in further detail below.
Portfolio Financings
In the past, we financed the Energy Servers subject to our PPAs through two types of Portfolio Financings. In one type of transaction, we sold a portfolio of PPAs to a tax equity partnership in which we held a managing member interest (such partnership in which we hold an interest, a “PPA Entity”). In these transactions, we sold the portfolio of the Energy Servers to a limited liability project company (such portfolio owner, a “Portfolio Company”) of which the PPA Entity was the sole member. Whether an investor, a tax equity partnership, or a single member limited liability company, the Portfolio Company was the entity that directly owned the portfolio. The Portfolio Company sold the electricity generated by the Energy Servers contemplated by the PPAs to the customers. We recognized revenue as the electricity was produced. Our current practices no longer contemplate these types of transactions. In fiscal 2023 we completed the process of restructuring our PPA Entities by (i) acquiring the outstanding equity interests of our previous investors and tax equity partners, (ii) selling 100% of the equity interests in the PPA Entities or the Portfolio Companies to new investors or tax equity partnerships in which we do not have an equity interest, and (iii) entering into new equipment supply and installation agreements and related agreements to upgrade and/or replace the Energy Servers. In August 2023, we sold our last consolidated PPA Entity, 2015 ESA Project Company, LLC (“PPA V”), in connection with the repowering of its portfolio of Energy Servers. For further discussion, see Part II, Item 8, Note 10 — Portfolio Financings.
Moving forward, we plan to finance PPAs by selling a portfolio of Energy Servers or a Portfolio Company to an investor or tax equity partnership (in either case, an “Equity Investor”) in which we do not have an equity interest (a “Third-Party PPA”). The Equity Investor owns the Portfolio Company or the Energy Servers directly, and in each case, sells the electricity generated by the Energy Servers contemplated by the PPAs to the customers.
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Portfolio Financing Chart V5 (002).jpg
When we finance a portfolio of the Energy Servers and the PPAs through a Portfolio Financing, we typically enter into, with the Portfolio Company or directly with the Equity Investor, as the case may be, a sale, engineering, procurement, and construction agreement (“EPC Agreement”) and an O&M Agreement, including the provision of performance warranties and guaranties. As owner of the portfolio of the PPAs and related Energy Servers, the portfolio owner receives all customer payments generated under the PPAs, the benefits of the ITC and accelerated tax depreciation, and any other available state or local benefits arising out of the ownership or operation of the Energy Servers, to the extent not already allocated to the customer under the PPA.
The sales of our Energy Servers in connection with a Portfolio Financing have many of the same terms and conditions as a direct sale. Payment of the purchase price is generally broken down into multiple installments, which may include payments prior to shipment, upon delivery, when the Energy Servers are physically ready for startup and commissioning (i.e., “Mechanical Completion”), and upon substantial completion (i.e., “Commencement of Operations”, “COO”).
Obligations to Portfolio Companies
Our Portfolio Financings involve many obligations on our part to the Portfolio Company or Equity Investor, as applicable. These obligations are set forth in the applicable EPC Agreements and O&M Agreements, and may include some or all of the following obligations:
designing, manufacturing, and installing the Energy Servers, and selling such Energy Servers to the Portfolio Company or Equity Investor;
obtaining all necessary permits and other governmental approvals necessary for the installation and operation of the Energy Servers, and maintaining such permits and approvals throughout the term of the EPC Agreements and O&M Agreements;
operating and maintaining the Energy Servers in compliance with all applicable laws, permits and regulations;
satisfying the performance warranties and guaranties set forth in the applicable O&M Agreements; and
complying with any other specific requirements contained in the PPAs with customers.
The O&M Agreement grants the Equity Investor the right to obligate us to repurchase the Energy Servers in the event the Energy Servers fail to comply with the performance warranties and guaranties in the O&M Agreement and we do not cure such failure in the applicable warranty cure period, or that a PPA terminates as a result of any failure by us to perform the obligations in the O&M Agreement.
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In some Portfolio Financings, we have also agreed to pay liquidated damages to the applicable Portfolio Company or Equity Investor, as the case may be, in the event of delays in the manufacture, installation, and commissioning of our Energy Servers, either in the form of a cash payment or a reduction in the purchase price for the applicable Energy Servers.
Administration of Portfolio Companies
In August 2023, we sold our last consolidated PPA Entity, PPA V. Before the sale, as we had determined that we were the primary beneficiary of this VIE, we consolidated 100% of the assets, liabilities, and operating results of PPA V, including the Energy Servers and lease income, in our consolidated financial statements. We recognized the Equity Investors’ share of the net assets of the investment entity as noncontrolling interests in the subsidiary in our consolidated balance sheets. We recognized the amounts that are contractually payable to these investors in each period as distributions to noncontrolling interests in our consolidated statements of changes in stockholders’ equity (deficit). PPA V contained debt that was non-recourse to us.
Our consolidated statements of cash flows reflect cash received from the Equity Investors in PPA V as proceeds from investments by noncontrolling interests in the subsidiary. Our consolidated statements of cash flows also reflect cash paid to these investors as distributions paid to noncontrolling interests in the subsidiary. We reflect any unpaid distributions to these Equity Investors in PPA V as distributions payable to noncontrolling interests in the subsidiary on our consolidated balance sheets.
For further information about our Portfolio Financings, see Part II, Item 8, Note 11 — Portfolio Financings.

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Managed Services Financing
Basic Managed Services Financing Image.jpg
Under our Managed Services Financing option, we enter into a Managed Services Agreement with a customer for a certain term. We sell the Energy Servers to the financier who then leases it back to us pursuant to a sale-leaseback transaction. In the past, certain sale-leaseback transactions failed to achieve all of the criteria for sale accounting and consequently the proceeds from the transaction were recognized as financing obligations within our consolidated balance sheets. For successful sale-and-leaseback transactions, the financier of the Managed Services Agreement typically pays the purchase price for the Energy Servers at or around acceptance, and we recognize the fair market value of the Energy Servers sold and respective installation services provided to the financier within product and install revenue, respectively, and recognize an operating lease right-of-use (“ROU”) asset and an operating lease liability on our consolidated balance sheets. Any proceeds in excess of the fair value of the Energy Servers are recognized as financing obligations.
The duration of our current Managed Services Agreement offerings is between five and ten years. Under some Managed Services Agreements, we agree to provide remarketing assistance in the event a customer does not renew its agreement. Our Managed Services Agreements typically provide for performance warranties of both the efficiency and output of the Energy Servers and may include other warranties depending on the type of deployment. We often structure payments from the
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customer as a dollar per kilowatt flat payment. In some cases, the structure may also include a variable payment based on the Energy Servers’ performance or a performance-related set-off. As of December 31, 2023, we had incurred no liabilities due to failure to repair or replace our Energy Servers pursuant to these performance warranties.
Delivery and Installation
Installation is required in order for our Energy Servers to reach full power. Our role in the installation process varies based on the terms of the contract and/or the country of installation which can include, but is not limited to, design, engineering, permitting, procurement, construction, installation, start-up, performance testing, and commissioning of the systems. Bloom may contract with subcontractors to provide all or any part of the work. Depending on the acceptance milestones, we recognize installation revenue once the project has reached full power, or mechanical completion or on a percentage of completion basis.
Performance Guarantees
As of December 31, 2023, we had incurred no liabilities due to failure to repair or replace the Energy Servers pursuant to any performance warranties made under the O&M Agreements.
For the O&M Agreements that are subject to renewal, our future service revenue from such agreements are subject to our obligations to make payments for underperformance against the performance guaranties, which are capped at an aggregate total of approximately $564.0 million (including $438.3 million related to portfolio financing entities and $125.7 million related to all other transactions, and include payments for both low output and low efficiency) and our aggregate remaining potential payment related to these underperformance obligations was approximately $491.9 million as of December 31, 2023. For the year ended December 31, 2023, we made performance guarantee payments of $25.9 million.
International Channel Partners
India. In India, sales activities are currently conducted by Bloom Energy (India) Pvt. Ltd., our wholly owned subsidiary; however, we continue to evaluate the Indian market to determine whether the use of channel partners would be a beneficial go-to-market strategy to grow our India market sales.
Japan. In Japan, sales activities are currently conducted by Bloom Energy Japan Limited, our wholly owned subsidiary.
The Republic of Korea. In 2018, Bloom Energy Japan consummated a sale of Energy Servers in the Republic of Korea to Korea South-East Power Company. Following this sale, we entered into a Preferred Distributor Agreement (“PDA”) in November 2018 with SK ecoplant for the marketing and sale of Bloom Energy Servers for the stationary utility and commercial and industrial South Korean power market.
As part of our expanded strategic partnership with SK ecoplant, the parties executed the PDA Restatement in October 2021, which incorporates previously amended terms and establishes: (i) SK ecoplant’s purchase commitments of at least 500 megawatts of power for our Energy Servers between 2022 and 2024 on a take-or-pay basis; (ii) rollover procedures; (iii) premium pricing for product and services; (iv) termination procedures for material breaches; and (v) procedures if there are material changes to the Republic of Korea Hydrogen Portfolio Standard. In December 2023, we further expanded our business partnership with SK ecoplant through the increase of SK ecoplant’s purchase commitments for Bloom Energy products of 250 megawatts through 2027 and extended the timing of delivery of the remaining take-or-pay commitment under the original agreement. For additional information, please see Part II, Item 8, Note 17 — SK ecoplant Strategic Investment.
Under the terms of the PDA Restatement, we (or our subsidiary) contract directly with the customer to provide operations and maintenance services for the Energy Servers. We have established a subsidiary in the Republic of Korea, Bloom Energy Korea, LLC, to which we subcontract such operations and maintenance services. The terms of the operations and maintenance are negotiated on a case-by-case basis with each customer but are generally expected to provide the customer with the option to receive services for at least 10 years, and for up to the life of the Energy Servers.
SK ecoplant Joint Venture Agreement. In September 2019, we entered into a joint venture agreement with SK ecoplant to establish a light-assembly facility in the Republic of Korea for sales of certain portions of our Energy Server for the stationary utility and commercial and industrial market in the Republic of Korea. The joint venture is a variable interest entity (“VIE”) of Bloom, and we consolidate it in our financial statements as we are the primary beneficiary and therefore have the power to direct activities which are most significant to the joint venture. The joint venture facility became operational in July 2020. Other than a nominal initial capital contribution by Bloom Energy, the joint venture is funded by SK ecoplant. SK ecoplant is our primary customer for the products assembled by the joint venture. In October 2021, as part of our expanded strategic
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partnership with SK ecoplant, the parties agreed to amend the joint venture agreement (“JVA”) to increase the scope of assembly work done in the joint venture facility. The joint venture was further developed in 2022 and 2023.
On September 15, 2023, we entered into the Amended and Restated JVA and the Share Purchase Agreement (together, the “Amended JV Agreements”) with SK ecoplant which changed the share of our voting rights in the Korean joint venture to 40% and increased the scope of assembly done by the joint venture facility in the Republic of Korea to full assembly. Neither the Amended JV Agreements, nor the fact that SK ecoplant is considered to be our related party after the conversion of Series B RCPS into shares of our Class A common stock (for additional information, please see Part II, Item 8, Note 11 — Related Party Transactions) changed our status as the primary beneficiary of the Korean joint venture. Therefore, we continue to consolidate this VIE in our financial statements as of December 31, 2023.

Comparison of the Years Ended December 31, 2023 and 2022
A discussion regarding our results of operations for 2023 compared to 2022 is presented in this section. A discussion of our results of operations for 2022 compared to 2021 can be found under Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2022.
Key Operating Metrics
In addition to the measures presented in the consolidated financial statements, we use certain key operating metrics below to evaluate business activity, to measure performance, to develop financial forecasts, and to make strategic decisions:
Product accepted — the number of customer acceptances of our Energy Servers in any period. We recognize revenue when an acceptance is achieved. We use this metric to measure the volume of deployment activity. We measure each Energy Server manufactured, shipped, and accepted in terms of 100 kilowatt equivalents.
Product costs of product accepted in the period (per kilowatt) — the average unit product cost for the Energy Servers that are accepted in a period. We use this metric to provide insight into the trajectory of product costs and, in particular, the effectiveness of cost reduction activities.
Period costs of manufacturing related expenses not included in product costs — the manufacturing and related operating costs that are incurred to procure parts and manufacture the Energy Servers that are not included as part of product costs. We use this metric to measure any costs incurred to run our manufacturing operations that are not capitalized into inventory and therefore, expensed to our consolidated statements of operations in the period that they are incurred.
Installation costs on product accepted in the period (per kilowatt) — the average unit installation cost for the Energy Servers that are accepted in a given period. This metric is used to provide insight into the trajectory of installation costs and, in particular, to evaluate whether our installation costs are in line with our installation billings.
Product Acceptances
We use acceptances as a key operating metric to measure the volume of our completed Energy Server installation activity from period to period. Acceptance typically occurs upon transfer of control to our customers, which depending on the contract terms is when the system is shipped and delivered to our customer, when the system is shipped and delivered and is physically ready for startup and commissioning (i.e., “Mechanical Completion”), or when the system is shipped and delivered and is turned on and producing power (i.e., “Commencement of Operations”, “COO”).
The product acceptances in the years ended December 31, 2023 and 2022 were as follows:
 
Years Ended
December 31,
Change
 20232022Amount %
 
Product accepted
2,682 2,281 401 17.6 %
Megawatts accepted, net268 228 40 17.6 %
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Product accepted increased approximately by 401 systems, or 17.6%, for the year ended December 31, 2023, as compared to the prior year period, which is the equivalent of 40 megawatts. Acceptance volume increased as demand increased for the Energy Servers.
The increase in acceptances of 268 megawatts achieved for the year ended December 31, 2023 was added to our installed base and, therefore, increased our total megawatts accepted, net, from 973 megawatts to 1,241 megawatts.
Purchase Alternatives
Our customers have several purchase alternatives for our Energy Servers. The portion of acceptances attributable to each purchase alternative in the years ended December 31, 2023 and 2022 was as follows:
 
Years Ended
December 31,
 20232022
 
Direct purchase (including third-party PPAs and international channels)
98 %98 %
Managed services
%%
100 %100 %
The portion of total revenue attributable to each purchase option in the years ended December 31, 2023 and 2022 was as follows:
 
Years Ended
December 31,
 20232022
 
Direct purchase (including third-party PPAs and international channels)
90 %91 %
Traditional lease
%%
Managed services
%%
Portfolio financings
%%
100 %100 %
Costs Related to Our Products
Total product related costs for the years ended December 31, 2023 and 2022 was as follows:
 Years Ended
December 31,
Change
20232022Amount%
   
Product costs of product accepted in the period$2,108/kW$2,453/kW$(345)/kW(14.1)%
Period costs of manufacturing related expenses not included in product costs (in thousands)$64,892 $56,630 $8,262 14.6 %
Installation costs on product accepted in the period$394/kW$456/kW($62/kW)(13.6)%
Product costs of product accepted decreased by $345 per kilowatt, or 14.1%, for the year ended December 31, 2023, as compared to the prior year period. The decrease in costs was primarily driven by our continued efforts to reduce material costs, implement cost reduction programs with our vendors, and reduce our labor and overhead costs through increased volume, improved processes, and automation at our manufacturing facilities.
Period costs of manufacturing related expenses increased by $8.3 million, or 14.6%, for the year ended December 31, 2023, as compared to the prior year period. Our period costs of manufacturing related expenses increased primarily as a result
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of costs incurred to support capacity expansion efforts, which are expected to be brought online in future periods, partially offset by a $5.3 million release from one-time benefit related to a grant from the Delaware Economic Development Authority.
Installation costs on product accepted decreased by $62 per kilowatt, or 13.6%, for the year ended December 31, 2023, as compared to the prior year period. Each customer site is unique and installation costs can vary due to a number of factors, including site complexity, size, and location of gas, among other factors. As such, installation on a per kilowatt basis can vary significantly from period to period. For the year ended December 31, 2023, this decrease in cost was primarily driven by the change in the mix of sites requiring Bloom installation.
Results of Operations
A discussion regarding the comparison of our financial condition and results of operations for the years ended December 31, 2023 and 2022 is presented below.
Revenue
 Years Ended
December 31,
Change
 20232022Amount%
(dollars in thousands)
Product$975,245$880,664$94,58110.7 %
Installation92,79692,1206760.7 %
Service183,065150,95432,11121.3 %
Electricity82,36475,3876,9779.3 %
Total revenue$1,333,470$1,199,125$134,34511.2 %
Total Revenue
Total revenue increased by $134.3 million, or 11.2%, for the year ended December 31, 2023, as compared to the prior year period. This increase was driven by a $94.6 million increase in product revenue, a $32.1 million increase in service revenue, a $7.0 million increase in electricity revenue, and a $0.7 million increase in installation revenue.
Product Revenue
Product revenue increased by $94.6 million, or 10.7%, for the year ended December 31, 2023, as compared to the prior year period. This increase was primarily driven by higher product acceptances of 17.6%, offset by the lower average selling price. Upgrades of our PPA portfolios contributed $20.7 million net increase in revenue recognized compared to the prior year.
Installation Revenue
Installation revenue increased by $0.7 million, or 0.7%, for the year ended December 31, 2023, as compared to the prior year period. This increase was primarily driven by the timing of key project milestones on sites requiring installations by us in the year ended December 31, 2023.
Service Revenue
Service revenue increased by $32.1 million, or 21.3%, for the year ended December 31, 2023, as compared to the prior year period. This increase was primarily driven by 223 megawatts of the Energy Servers reaching full power in fiscal 2023, which contributed to a $42.5 million increase in revenue from maintenance contracts associated with our fleet of the Energy Servers, partially offset by the impact of product performance guarantees of $8.5 million and a $0.7 million decrease in state incentives.
Electricity Revenue
Electricity revenue includes both revenue from contracts with customers and revenue from contracts that contain leases.
Electricity revenue increased by $7.0 million, or 9.3%, for the year ended December 31, 2023, as compared to the prior year period, primarily due to an accelerated amortization of incentive related deferred revenue of $5.0 million resulting from the PPA V Upgrade.
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Cost of Revenue
 Years Ended
December 31,
Change
 2023