UPDATE 2-FuelCell narrows Q2 loss; shares soar

* Q2 loss/shr $0.29 vs loss estimate of $0.30

* Q2 revenue $23 mln vs $32 mln * Shares rise as much as 35 percent

(Adds analyst comments, updates share movement)

June 9 (Reuters) - FuelCell Energy Inc (FCEL.O) reported a narrower second-quarter loss, helped by lower product costs and other expenses, sending its shares up 35 percent.

"The credit crisis is creating delays in order flow affecting the company's cash estimates for the quarter and fiscal year," the manufacturer of fuel-cell power plants for electric power generation, said in a statement.

FuelCell added that it had cut operating costs and cash use in February 2009, including a 6 percent workforce reduction and a salary freeze for all but production level employees.

The company also said it expects reduced cash use in 2009, but forecast lower-than-anticipated cash use due to delays in the contract negotiation and closure process.

"We anticipate cash burn to continue through third quarter 2010, albeit at a slower rate," Raymond James analyst Pavel Molchanov wrote in a note to clients.

Separately, FuelCell said South Korean power producer POSCO Power ordered 30.8 megawatts of FuelCell's modules and components. As part of the deal, POSCO Power will purchase $25 million of FuelCell's common stock at $3.59 per share.

Molchanov said rising sales to customers like POSCO will contribute materially to the company's bottomline over the next 10-12 months.

"While we do not foresee profitability until 2011-2012, rising revenue and margin improvement should lead to a continual narrowing of losses in the next few years," the analyst said.

For the second quarter ended April 30, FuelCell posted a loss of $19.9 million, or 29 cents a share, compared with a loss of $25.8 million, or 38 cents a share, a year earlier.

Revenue came in at $23 million.

Analysts were expecting the company to post losses of 30 cents a share, before items, on revenue of $27.15 million, according to Reuters Estimates.

FuelCell's product cost-to-revenue ratio for the quarter was 1.48-to-1, down from 1.50-to-1 a year earlier. The company also reduced its research and development funding and administrative and selling spending.

Shares of the company were up 22 percent at $4.95 Tuesday afternoon on Nasdaq. Earlier they were up as much as 35 percent.

For the alerts, please double click [ID:nWNAB7973] (Reporting by Arup Roychoudhury in Bangalore; Editing by Anil D'Silva, Jarshad Kakkrakandy)

(arup.roychoudhury@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: arup.roychoudhury.reuters.com@reuters.net))