Tracy Krumme – VP, IR and Corporate Communications Doug Bailey – Chairman, President and CEO Dave Collins – SVP, Treasurer and CFO

John Quealy – Canaccord Genuity Lucas Pipes (ph) – Fred Beans Graham Madison – Lazard Capital Markets Rick Hoss – Roth Capital Partners Jeff Osborne – Stifel Nicolaus Dan Mannes – Avondale Partners Carter Shoop – Deutsche Bank Steven Charest – Divine Capital Market

Good day ladies and gentlemen, and welcome to the third quarter 2010 Fuel Tech Incorporated earnings conference call. I will be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) I will now like to turn the call over to Tracy Krumme, Vice President Investor Relations and Corporate Communications.

Thank you very much. Good morning everyone and thank you for participating on today’s conference call to discuss our third quarter results. Joining me on the call is Doug Bailey, Chairman, President and Chief Executive Officer; David Collins, Senior Vice President, Treasurer and Chief Financial Officer; and Ellen Albrecht, Vice President and Controller. As a reminder, the matters discussed in this conference call except for historical information are forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in our forward-looking statements. The factors that could cause results to differ materially are included in our filings with the SEC. The information contained in this call is accurate only as of the date discussed and investors should not assume that statements made in this call remain operative at a later date. Fuel Tech undertakes no obligation to update any information discussed in this call and as a reminder, this conference call is being broadcast over the Internet and can be accessed at our website, www.ftek.com. With that said, I would now like to turn the call over to Doug Bailey. Doug, please go ahead. Doug Bailey Thank you, Tracy and good morning to everyone. We appreciate all of you joining us on this call this morning. Our financial results for the third quarter include revenues of $20.3 million, an increase of 23% over the comparable prior year period. We reported net income for the quarter of $0.8 million or $0.03 per diluted share, which was an increase of $0.06 from the third quarter of 2009 and an increase of $0.04 from the second quarter of 2010. In two minutes, Dave Collins, our Senior Vice President, Treasurer and Chief Financial Officer will discuss our financial operating results in greater detail. Dave will also cover our balance sheet in detail, but note that we remain successfully (ph) strong with cash and cash equivalents of $23.9 million, $35.5 million in working capital and debt was only $2.2 million. We have an attractive business model, which generates a significant amount of positive cash flow and topline growth curves. As most of you know, Fuel Tech as a fully integrated company uses the extensive suite of technologies to provide boiler optimization and efficiency improvements along with air pollution reduction and control solutions to both utility and industrial customers worldwide. For reporting purposes, we broadly group those technologies into two principle business segments, one is return on investment driven specialty chemical business for efficiency improvement that we call FUEL CHEM, and the second is regulatory driven business for air pollution control or ATC that consists of engineering design services, a large portion of which are capital project related. So let’s begin with our FUEL CHEM business where segment revenues were $10 million for the quarter, down 3% from the comparable 2009 quarter but up 4% from the second quarter of 2010. Gross margins increased to 53% for the quarter, up from 42% in the same quarter last year. This margin increase was principally due to risk-share demonstrations and the associated costs that were present in the third quarter of last year but they were not repeated in the third quarter of this year. While electricity demand today still remains sluggish, as we have reported to you in prior calls, the recent trends are encouraging and showing improvement over last year. Total power generation through the first half of 2010 was now up 3.5% year-over-year and coal-fired generation was up 6% though production remains below pre-recession levels. Nevertheless (ph), the coal-fired generation continues to account for 45% to 50% of total power production. Despite the sluggish economy and weakness in the power market, this was still the strongest nine-month period in terms of revenue recorded for our FUEL CHEM business. While we continue to be impacted by a number of plants that are running below expectations as natural gas and alternative energy sources run heavier loads, we are winning new business in this challenging environment and commencing new programs at coal-fired units, which is offsetting some of the revenues lost from unit sales (inaudible) reduced powder level or even shutdown repair at the time. As power generating stations continue to be under pressure, we achieved maximum availability, higher efficiency and minimal environmental emissions at the lowest possible cost, fuel flexibility has become more critically financially and operationally than never before. The growing divergence of pricing for major US coal fields is a significant driver for our business as utilities are increasingly attracted by the compelling economic benefits of shifting from Appalachian coals, generally one of the fuels with higher heat content and fewest operational issues to the lower price, you have lower quality coals originating in the Illinois Basin and Powder River Basin. Given this lagging and fouling challenges by higher levels of sodium found in Powder River Basin coal, and iron and sulfur found in Illinois Basin coals, this ongoing shift in fuel preference should enable Fuel Tech to market its programs to an expanded base of Illinois and Powder River Basin coal users. Additionally, as gas prices remain low, coal units are having to compete with lower cost gas units and therefore are looking to increase fuel flexibility to more pricing (inaudible). This trend is ebbed in by four new shifting or targeted (inaudible) injection contracts, two that were awarded during the third quarter, and two that were awarded subsequent to the quarter end. Of these four awards, three were the result of utility switching to TRB and Illinois Basin fuels. Moving to our air pollution control business segment, we generated revenues of $10.3 million in the third quarter, up 66% from the comparable 2009 quarter. This increase reflects favorable timing of the completion on existing capital project orders for pollution controller business. Gross margins were 34% compared to the quarter same period a year ago, and this reflects the company’s ability to maintain margins despite a fluctuation in product mix. During the third quarter, we announced contract awards with a value of $8.8 million. Our APC backlog at September 30th was $20.3 million, down 3% from the $21 million in the second quarter of 2010. We were pleased during the quarter to have received NOx reduction projects on three coal-fired boilers from a major domestic power producer as part of a larger alliance agreement calling for the supply of SMGR (ph) related services for multiple coal-fired generating units. We’ve already received SMGR awards for five units from this alliance partner and we anticipate announcing additional orders very soon. Quotation activity in the APC segment remains quite active, very robust due in part to the EPA’s robust proposed transport rule, which was initially released on July 6, 2010, and is expected to be finalized in June 2011. If you’ve listened to our calls before or have followed the progress on this topic, you’ll recall that the transport rule is intended to replace the clean air interstate rule or CAIR. CAIR was issued by the EPA in 2005 with the intent to reduce sulfur dioxide and nitrogen oxide emissions in 28 eastern states. The rule was vacated by the U.S. Appeals court for the District of Colombia on July 11, 2008, and subsequently modified in December 2008 allowing it to remain intact until a new rule was promulgated by the EPA. The transport rule is the EPA’s response to the court’s concern. While proposal timing is generally none, the reduction levels are naught (ph), creating uncertainty for utilities regarding which unit should be upgraded versus which should be shut down. With the (inaudible) of regulatory proposals and (inaudible) anticipated over the next two to five years, utilities have a very complex set of decision ahead to address and compliance. While equipment solutions rates broadly in terms of their cost, Fuel Tech should benefit the utilities for power producers favor the more lower capital cost solution given the uncertainty surrounding future regulations. Additionally, the rule will begin compliance in 2012 leaving utilities with very little time to comply, particularly when considering the rules will not be finalized until mid-2011. It is uncertain if the final transport rule will allow for interstate trading of emission allowances only or if they will include a defined level of interstate trading. With more extensive trading with our combustion technologies and SMGR systems, our flexible, low capital cost solutions that have actually thrived in cap and trade environments. With limited trading, our combined technologies with our advanced SGR (ph) approach can approach NOx reduction levels of conventional SGR systems with very significant capital savings. But no matter the outcome, as prospective customers take their step toward implementing their compliance plan in a capital-constrained environment, we believe that with our lower capital cost solutions, our broad suite of technology that enable (inaudible) approach, and our shorter lead time installations, Fuel Tech will benefit from this accelerating compliance as our technologies become the preferred solution for NOx control. Other APC opportunities are emerging on the industrial market where the boiler maximum achievable controlling technology and solid waste incinerator rules are expected to be finalized in December. These EPA requirements potentially affect more than 1600 plant sites and include stringent controls for a number of pollutants. The final form of these complex rules still remains uncertain, but compliance will be required by 2013, creating near-term opportunities for Fuel Tech. Now, turning to the China market, we’ve seen a level of activity increase as APC projects have been announced since December 30th of last year. During the third quarter this year, we were awarded a (inaudible) SMGR project at an industrial plant in Guangzhou City, the capital of Guangdong province, this project is designed to satisfy NOx emission requirements in anticipation of the November Asian Games, represented our fourth NOx control order and eight unit awards in Guangzhou City. The company also received its first ULTRA project on two district key units in China, and China is and will be an increasingly active market for Fuel Tech’s ULTRA technology and we are pleased to be fulfilling this significant and growing need. We anticipate further award announcements yet this year. Similar to the domestic U.S. APC market, the market in China is dependent upon regulatory requirements. As we’ve consistently stated, we believe this market will emerge in a major way when the country’s 12th five-year plan goes into effect in 2011. After soliciting public opinion and analyzing economic data, China will set specific targets for economic growth, economic restructuring, consumer prices, environmental protection, and low carbon developments in the plant, which should be approved in March 2011. Based upon the NOx emission control policy guidelines, which were already released in January of this year by China’s Ministry of Environmental Protection, we do believe that our broad suite of low capital cost technologies fits very nicely into this specific NOx control technologies called out in that policy. In particular, our unique ability to combine technologies on the project specifications, ranging from low NOx burners and over-fire air to NOx reducing hybrid systems affords us a competitive position in bidding on power plant units that are as small as 50 megawatts to as large as 1000 megawatts. We’ve seen an increased order flow from discussions with power plants and industrial units in anticipation of these upcoming regulations. Additional bid activities for combination of systems requiring multiple fuel technologies have increased as well. (Inaudible) we announced the first low NOx burner and over-fire air projects in China earlier this year. As stated in the publication of the government’s NOx control technology policy directive, which sets the framework for the 12th five-year plan, low NOx combustion technologies are the first priority consideration for retrofit plants. So, much work has gone into positioning Fuel Tech for the important NOx control market in China. Just yesterday, Dr. Linda Lin at our Beijing Fuel Tech team posted (inaudible) NOx in in particular, control and boiler energy efficiency improvement technologies workshop, which was held in Suzhou, a city in the province of Jiangsu. The goal of this workshop was to help educate potential clients on systems to alleviate ever-worsening air quality issues by helping the power sector to utilize fossil combustion and generate fossil power at higher efficiencies. Over 200 participants were in attendance, including power plant managers and engineers, utility owner executives, senior personnel and environmental engineering firms, and government officials. The need for ongoing information exchange in the areas of air pollution control and energy efficiency was quite evident by the interest of participants and sponsors associated with this workshop. (Inaudible) Fuel Tech to showcase its technologies, we believe this latest workshop will facilitate our sales efforts and help us become successful in China over the next decade. Now, I’d like to turn the call over to Dave Collins to discuss in greater detail our financial results. Dave?

Thank you, Doug, and good morning, everyone. As Doug mentioned, consolidated revenues for the September quarter increased by $3.8 million or 22% to $20.3 million, from $15.5 million at the same prior year quarter. Further, our consolidated revenues for the nine months ended September 30th, 2010 increased $4.1 million or 8% to $56.8 million from $52.7 million in the prior year. During these periods, we enjoyed year-over-year and quarter-over-quarter increases in both domestic and international revenues. Our domestic revenues for the quarter and year-to-date period increased 21% and 8%, while our international revenues also increased for both the quarter and year-to-date period by 35% and 7%, respectively. Net income for the current quarter improved $1.5 million or $0.06 per share to $817,000 or $0.03 per share from a loss of $698,000 in the same prior year quarter. Our FUEL CHEM segment reported its highest quarterly revenues for 2010 totaling $10 million for the current quarter, and totaled $29 million for the first nine months of 2010. While our quarter revenues were essentially flat with the prior period, the nine months revenues increased $506,000 or 1.8% over the prior year. As previously discussed, contributing to the nine months revenue growth was the one-time risk-share payment recognized during the first quarter, which totaled approximately $2 million and (inaudible) successful demonstration conducted during the second half of 2009. As of September 30th, 2010, the company did not have any contingent risk-share payments of this kind of outstandings. For the first nine months of 2010, our coal generated revenues have increased by $799,000, which does include the $2 million risk-share payment I mentioned or 3%, offset by a decrease of $294,000 or 10% in our non-coal fired unit revenues over the same prior quarter. Thus far in 2010, we have announced four new commercial FUEL CHEM programs, the latest being just yesterday. Of the four new additions, one unit began pumping during the first half of this year; the additional three are expected to start up prior to year end. Our international FUEL CHEM demonstrations are ongoing despite current delays at customer sites. These delays are customer origin and we remain ready to complete the demonstration upon notification. APC segment revenue increased by $4.1 million, or 66% to $10.3 million from $6.2 million in the prior year. For the first nine months of 2010, APC’s segment revenue increased by $3.6 million or 15% to $27.8 million from $24.2 million. Our backlog of $21 million at the end of September is comprised of domestic backlog of $15 million and international backlog of $5 million, which does include $4 million for China. We anticipate that a large portion of the current backlog will be worked up during the remainder of 2010. We have announced bookings of $8.8 million during the third quarter, and we expect to see continued order activity at the APC segment as Air Pollution Control Regulations are further clarified, and as international business continues to expand. On a consolidated basis, gross margin increased 4.2% in the current quarter to 43.3% from 39.1% in the prior year. Consolidated gross margins for the nine month period increased by 3.8% to 43.5% from 39.7% in the prior year. Quarterly gross margins for the FUEL CHEM segment increased 10.3% in the current quarter to 52.5% from 42.2% in the prior year. This increase was principally driven by costs associated with demonstrations that were in a risk-share period in the same quarter of 2009. The nine months gross margin for FUEL CHEM has increased by 10.2% to 51.7% from 41.5% from the prior year. Approximately 3.5% of the six months margin improvement, one due to the risk-share revenue recognized in the first quarter with the remainder of the margin improvement due to the demonstration costs recognized in the prior year. FUEL CHEM segment gross margin for the remainder of 2010 are expected to be in line with historical levels. Gross margin for the APC segment improved marginally for the current quarter to 34.3% from 33.9% in the prior year. Gross margin percentages for the nine-month period declined 2.6% to 35% from 37.6% in the prior year. Contributing to the lower gross margin was the more concentrated mix of lower margin equipment and installation projects. Specifically, we have a large equipment order that combines significant low margin installation work and will continue for the remainder of 2010. We therefore expect that our APC segment margins will remain suppressed for the remainder of this year. Our core project margins continue to be in excess of 40%. Selling, general and administrative costs for the current quarter was $7.8 million, essentially flat with the prior year total of $8 million. Our SG&A costs for the first nine months of 2010 are down $1.8 million of 7% to $23.3 million from $25.1 million in the prior year. The majority of this positive variance for the nine-month period can be attributed to reduced personal related cost, which includes reduced stock compensation expense of $912,000, reduction of unutilized corporate resources of $1.2 million, and other expenses including outside consultants of $487,000, offset by increases in personnel related cost, which includes incentive plan expense and recruitment fee for executive officer positions of $825,000. We expect our stock compensation expense charge to be further reduced from our current levels by approximately $1.2 million on an annual basis in 2011 as the large 2006 grant becomes fully vested. We will continue to monitor our SG&A spending and where needed take action to maintain reasonable spending levels. Also reflected in the current quarter is a $768,000 gain from the revaluation of the contingent liability recorded in connection with the acquisition of substantially all the assets of Advanced Combustion Technology in January of 2009. Investment in research and development activity was up slightly in the current quarter and nine-month period over the prior year. This increase is primarily attributed to expenditures related to new FUEL CHEM product offerings. We continue to look for specific development opportunities within our existing portfolio of products, and we will be opportunistic in identifying in new development projects as our markets continue to develop. Our tax rate for the remainder of 2010 is expected to be 46.1%, down slightly from the 50% used in the prior quarter. This rate is reflective of the expected impacts of our permanent item within the overall rate reconciliation and is dependent on the current level of free tax operating profit realized by the company. Any increase in operating profits above expected levels will dilute the permanent add backs and reduce our overall rates. Net income for the current quarter improved by $1.5 million to $817,000 from a loss of $698,000 in the prior year. Our nine months net income has improved by $3.3 million to $722,000 from the loss of $2.5 million prior year. Included in our reported results for the three and six-month periods of 2010 are non-cash stock compensation charges of $1.2 million and $3.7 million respectively. Our cash balance increased by $2.9 million during the first nine months of 2010 to $23.9 million, and our working capital is $35.5 million. We continue to generate strong cash flows from operations and through the first nine months have reported a positive cash flow generated from operations of $4.7 million. Cash used in investing activities was predominantly related to the purchase of equipment for our FUEL CHEM demonstration and commercial program. Cash used in financing activity is attributed to a repayment of a portion of debt in China used for the startup of our Beijing Fuel Tech office. Fuel Tech’s domestic and international market interest in sales activity continues at a strong pace, especially in our APC business segment. While we are encouraged about the business prospects for the remainder of 2010, we do not believe it’s prudent to provide any additional quantitative revenue or earnings guidance at this time Now I would like to turn the call back to Doug.

Thanks Dave for that report. Just to echo what Dave has said, we are encouraged by the outlook of our business. So we come through a recessionary period and yet we see strong signs of opportunities for our business, quotation activity level has now increased dramatically, and we look forward to presenting a good plan for 2011. I know you have a number of questions. I would like to turn the call back to our audits to ask questions to the team here at the table and give you further insights into how we look at our business. Back to the operator.

(Operator Instructions) Your first question comes from the line of John Quealy with Canaccord Genuity. John Quealy – Canaccord Genuity: Hi. Good morning everyone. Going back to the backlog. I just want to make sure I heard you correctly, about $20 million in APC backlog. Did you say the large portion of that would be recognized in Q4? And if that’s true, can you try to give us a little bit of quantification? Is that 50%, 60% is going to be recognized in that period?

You’re correct. The large portion, I think will roll somewhere between four and six as of yearend from that current backlog. We expect to continue booking orders here in Q4. So what that number is somewhat of a moving target. But you’re correct, it’s $20 million as of the end of Q3, 50% to 60% will be rates (ph). John Quealy – Canaccord Genuity: Okay. And then, just another clarification. On the stock comp expense, it sounds like the five-year vesting has stopped on the ‘06. And usually, does this have to do with I think you gave some board level grants in the June quarter. So, should we see the stepdown in the expense in the June quarter or can you just help give us a little bit more detail on what we should look for in ‘11?

Sure. The stock compensation charge (inaudible) four years. The grant that we call here is related to the employee grant, that does not include the director grants. So, it was a separate grant done in 2006. John Quealy – Canaccord Genuity: And again, the quantification is on the employee plan, $2 million savings. Is that right or did I hear that wrong?

$1.2 million. John Quealy – Canaccord Genuity: $1.2 million?

(Inaudible). You have to keep in mind, that’s the grant that’s rolling out from 2006. It was somewhat inordinately large grant. Whether or not we will continue that going forward, it depends on the decisions of the board and the executive management. So, we will expect to continue grants and some stock in the future. So it’s not a complete elimination I guess. John Quealy – Canaccord Genuity: Right. Now, that’s helpful. And then, back to the base business, can you talk a little bit about China? You’ve had some good success there. We’ve heard from competitors that sales cycles seem to be lengthening. Can you just comment on that and talk about the level of competition both in country and (inaudible) on how that opportunity shaping up?

Well, I think they’ll definitely be significant competition both from present participants and additional participants as the country really accelerates its spending. All of our projects typically have a long sales cycle. I don’t expect the China market to be dramatically different in sales cycle. However, I will say this. One thing I have observed is that the decision making is very fast in China. Once plans are in place, the policies are known, the mandates are understood, I don’t see a lot of slowness in decision making. We’re trying to position our company to be recognized as the preferred provider of solutions in those segments of the market where we are best capable of offering the combination of best technology and affordable economics. And so, if I were to look forward, I would think that the sales cycle while, inherently long in business like this, they very well be shorter in China than it is here. (Inaudible) for air pollution control markets, they are largely related to the level of complexity and planning around the customer space in meeting those other directives. The more clarity you have with your regulations, it becomes pretty capable for our customers to put their plans in place. I think Fuel Tech will be particularly competitive where moderate levels of NOx reductions are mandated. I think it’s positioned to be competitive where larger levels at larger plants are required particularly for some of the more inferior coal that China burns. And that’s why we position the technical solution portfolio to range across all markets. So we’re quite confident that the timeframe for decision making will accelerate given the way decisions are made over there. But I think you’re going to see that after March of 2011 when the regulations are fully and firmly in place. John Quealy – Canaccord Genuity: Okay. And thank you. And my last question, with regards to the cost and commodity side of the business on FUEL CHEM. I assume you didn’t hit any volume discounts for mag hydroxide. Can you just comment on pricing for that material as you look into ‘11 please?

We don’t have pricing at this time (inaudible). If there is discounts and so on, I wouldn’t expect it to change significantly.

I think it would be stable.

Yes, I would think so too.

Your next question comes from the line of Jeremy Sassaman with Fred Beans. Please proceed sir. Lucas Pipes – Fred Beans: Good morning, this is Lucas Pipes (ph) calling for Jeremy. Thanks very much for taking my question. You mentioned in your prepared remarks that the EPA is working on regulations for other emissions from those covered under the proposed transport rule. Could you tell us a little bit more about how this could create new business opportunities for Fuel Tech? Thank you.

These are for emissions of pollutants other than NOx. Lucas Pipes – Fred Beans: Yes. That’s what I meant like mercury for instance.

Well certainly, the mercury rules have also been influx and we think that that is going to be a market for the company. As you know, we don’t presently offer a target solution for mercury. But we’re actively working in the development side of our business to look for that which we think would be one of the better solutions. We both look in terms of external acquisition opportunities, further R&D development programs with potential partners as well as patented technologies that could be acquired. And I think that that market is still a little way off compared to our present market. But we do believe that’s an example of one that we could participate fully in. I think there are some significant investments that have been made by certain companies looking at mercury reduction and may not be the sustainable solution. So we’re being a little cautious about really acquire our resources rather on certain but important regulated market.

Your next question comes from the line of Graham Madison with Lazard Capital Markets. Please proceed sir. Graham Madison – Lazard Capital Markets: I was wondering if you could talk a little bit more about the alliance agreement. Is there a potential to expand this alliance agreement that you have right now or you’re in active discussions with anybody else to try and enter into something similar?

As you know, this isn’t the first alliance agreement the company has had. I think our opportunities will be fully exploited with the present customer and we expect additional orders to be announced with that customer because of that agreement. I think it’s a very good way to do business. And I think our success with customers that have been in alliance with Fuel Tech in the past could prove advantageous particularly as utilities enter into what I’ll call a little bit more of a scrambling period to comply with regulations and client deadlines that will put them in a fairly suppressed timetable. We are good to work with them that we could implement quickly compared to very large costly capital projects. And the ability to work with us in a planned manner or customers that have multiple units at many sites and many states is a nice orderly way to do business. Margins are good for us. Costs are good for them. And so, I would expect that we would continue to advocate that. We’re always in discussion to look for those kinds of opportunities. Graham Madison – Lazard Capital Markets: And then, looking at the APC side on the margin front, I mean looking at the backlog you have another. There has been some movement in terms of the margins that you see going from the mid-40s to the mid-30s. What’s the right margin level going forward given the backlog mix on what you’re seeing?

We typically plan between 35% and 40% depending on the mix of products. Our core projects typically tend to the higher end of that range, around the 40%. If we’re doing a larger installation projects, that’s trending toward the lower end of that range. But we typically plan between 35% and 40%. Graham Madison – Lazard Capital Markets: Got you.

We completed one large project this year that does have a mix of installation works that, for quotation and strategic reasons, we are wanting to do this job. We accepted lower margin on that work, but that’s not our core business area. But it did give us excellent opportunity to demonstrate what we can do in very large complex low NOx burners, and that project is going well. I think it will serve as a very useful demonstration of our capabilities to do projects of greater revenues, scope, and size, not only for low NOx burners, but also for the revenue level of a complex project such as an advanced SCR. So, sometimes you accept pricing decisions in order to position yourself for further opportunities along with completing this year is suppressing margins that generally, in that 40% to 50% range has been our typical APC margins. And with the quotation activity that we had today, we don’t really see competitive environment requiring us to quote at a suppressed level. Graham Madison – Lazard Capital Markets: All right, great, very helpful. Thank you very much.

Your next question comes from the line of Rick Hoss with Roth Capital Partners. Please proceed, sir. Rick Hoss – Roth Capital Partners: Hi, good morning.

Hi Rick. Rick Hoss – Roth Capital Partners: Doug, I think last quarter we had talked about the utilization of FUEL CHEM units and I know some of that were removed completely. But can you give us an appreciation for just, I guess, a ball park utilization of these units and with the expectation that as electricity production ramps up and continues to recover, that some of these will start flowing again, some of these will start firing again, and really recover a lot quicker – FUEL CHEM can recover a lot quicker than, say, new orders would foreshadow?

Sure. And if you combine that statement of increased electricity demand with the choice of fuel, certainly, at higher load levels of coals that slag and foul do soar at a greater level when they’re run at full loads. As loads are reduced, some of those fouling and slagging problems are shed on their own, and therefore the benefit of FEUL CHEM program is lesser to the customer. So, when you combine higher load levels and the shift as we’re seeing to Illinois basin, Powder River basin coals that have those fouling characteristics, we think that some existing customers we have that are not pumping will return. We’re actively working with those customers to look for opportunities to begin to utilize the systems that are already in place. Some units are just shut down and that reflects the system requirements of certain customers as the country has been in a unique situation of seeing one of the first periods in time when electricity demand dropped. So, we’re encouraged by seeing nice moderate increases in demand. I think you’re still in an environment where natural gas prices are going to, in some way, limit how much coal is burnt. I think you’re also seeing a lot of challenge produced – put on utilities as to whether or not we’re going to continue to operate certain coal-fired power plants, particularly smaller ones. But I believe that coal is a mainstay of electricity production in this country, I believe it’s going to stay within the percentage range of total demand, roughly speaking. There’ll be variations obviously, customer-to-customer, but it’s still the lowest cost for BTU of heat value. And I think this country is in a great position to benefit from the resources it has. And then the reason I say that is that when I look abroad and I see the levels of energy demands coming from other parts of the world, particularly China, the exports of our coal are only going to increase. I think that will be good for the domestic utility industry to look to further switch to PRB type coals. And I think we’ll see an environment in which our FEUL CHEM technology will be a mainstay of the utility industry for some time to come. But we certainly have been in a period of unusual electricity demands over the last two years. We’ve noted and we’ve seen a significant effect on our business, so much so, when you look at our year-over-year revenues, a lot of what we’ve sold has been certainly partially offset by units that have gone on standby. But we think that’s going to begin to slowly change. Rick Hoss – Roth Capital Partners: Right. And especially amplified in a business model that’s predicated on power of the margin, right, which makes increasing sense as rates close in on maximum.

Right. Rick Hoss – Roth Capital Partners: Right.

With the fundamental benefits of the technology remain unchanged, under the same load condition, the economic benefits remain unchanged. I think you see that in our ability to maintain pretty good margins, so it’s not so much as the pricing issue, it’s whether it’s a solution that the customer can benefit based upon his load level and his choice of fuel. Rick Hoss – Roth Capital Partners: Okay. And then, Doug, this is, I guess, more of an opinion. What’s your take on the changing composition of Congress? We’ve been chasing CAIR for a while and now we’re chasing transport rule, and it’s just continually pushed off and pushed off. With this change that we’ve seen in the House and maybe this momentum continues, how does this affect the transport rule, the timing of it? Does it help it, does it hurt it? What’s your take on that?

Well, I wish I was a better political pundit than I am. Generally speaking, I think it will call into debate the cap and trade policies. I think that Congress has to squarely deal with the overall spending issues of the nation in order to direct resources to needed environmental activities. I do believe that after a period of uncertainty, that clarity will be mandated in 2011. How much Congress will spend time debating on what that is? It’s hard for me to guess. But I think at least in our suite of products, we are generally well positioned. We diversified a little bit more than we would’ve been in the past regardless of what those policies are. And I particularly think that utilities are going to be more prudent with their capital, and so strategically offering lower capital cost approaches to emission controls is the right thing for the company to be doing. The APC market is regulatory-driven. Unless the regulations mandate it, generally speaking, those expenditures are not going to be made, but we believe it’s only going in one direction. It is problematic when the rules get thrown out and then litigated or reset. Our customers are looking for clear guidelines and all we know is it’s going in one direction and we’re prepared to give them the solutions they need. I would say that trying to offer you my early, at this point, perception of what our beloved Congress will bring over the next six months might be guessing at best. Rick Hoss – Roth Capital Partners: Okay. Well, I appreciate the attempt. Thanks, Doug.

Okay.

Your next question comes from the line of Jeff Osborne with Stifel Nicolaus. Please proceed. Jeff Osborne – Stifel Nicolaus: Yes, good morning. I was just wondering a couple questions here on the tax rate for 2011. Do you have a sense of what we should be thinking about for that given the elevated bubbles here in 2010?

Yes, I would expect the rate to go down next year. There’s a couple of reasons; we’re carrying some FIN 48 reserves for some items which will roll out in 2011, and so you’ll likely see that come through the rate, so I would expect it to turn down. Now, all of that depends on pretax operating income levels as well. Jeff Osborne – Stifel Nicolaus: Okay. I think a kind of a base case would kind of be in the low 40s, would that be reasonable?

Yes, pretty good. Jeff Osborne – Stifel Nicolaus: Okay. And then just quickly, any sense of what depreciation was here in the third quarter?

Year-to-date, $3.1 million for depreciation. Jeff Osborne – Stifel Nicolaus: Okay. And then, given all the moving parts here on OpEx, is this a fair run rate to assume over the next six to nine months, or do you have any kind of hiring initiatives just as the China market might heat up? How do we think about that?

There’s some puts and takes to it. I think it’s a fair run rate right now. We could go and identify those things that will roll up our list, but they will add some things to it. So I think it’s a fair run rate. Jeff Osborne – Stifel Nicolaus: Very good. And just a last quick one here on the Chinese market with the five-year energy plan and some of the documents that have been released thus far, I mean what’s your sense there on timing of compliance outside of the Guangdong region there? Would that be orders kind of similar timeframe as the US market for you in late 2011-2012 or would you expect more activity in the first half?

Let me give you what I think we see our take is. The – in the five-year plan, they set plan over that period of time. So by 2015, every operating unit and what they call key point regions must comply with a certain level of NOx emission standards. And the key point regions used to be three particular broad areas of countries they’ve now included six other regions. So the expanded key point regions have significant incentives now to order NOx control equipment and expand the business for us as well as other participants over a five-year period. But we – if we were to try to chart that out in a business plan, I would say that we would see a noticeable acceleration in the 2011-2012 timeframe, and then fairly, maybe, level to growing activity to meet the 2015 deadline. So there’s enough work to be done, but it’s going to fill heavily of four and a half to five-year program. And another way to kind of gauge what that level of activity would be is we were just recently at a US-China Environment Industry’s Forum where a number of China and US companies participated. And I found a very interesting some statistics were presented by the US Department Commerce, noting that how do you size the world of environmental markets? So I offer you this as an macro level perspective. Last year in 2009, the US market for environmental solutions of all kinds was estimated at about 284 billion. Western Europe, by comparison, another highly developed area was 211 billion. China was 31 billion. So I think if you take a conjecture at comparing size and gross domestic products of the economies, those three areas, and look at the tremendous resources, in terms of financial resources that China now has, and the commitment of come true in this five-year plan, I cannot believe that we’re going to see anything other than substantial growth covering in pollutants of all harms, therefore benefiting many, many companies. So Fuel Tech is positioned to participate in that. So I would say that we’re looking at a measured growth next year that is a significant percent gain over 2010, and I would venture to say that the China market could grow to a size equal to what Fuel Tech is today inside that five-year plan. So that’s just a rough scaling of what I think the opportunity is for the company. Jeff Osborne – Stifel Nicolaus: Thank you. I appreciate the detail. Thank you.

All that’s been some good execution, obviously. And we are committed to putting in place the finest organization that we can, because it requires good management skills, good selling skills backed up by highly competent technical resources to serve that market.

Your next question comes from the line of Dan Mannes with Avondale Partners. Please proceed, sir. Dan Mannes – Avondale Partners: Good morning. A couple of follow-up questions. First, on FUEL CHEM, and this is in response to a previous question and answer. You said pricing on the product isn’t really an issue, but I know over the last couple of quarters, it seemed like you’ve had some margin degradation as maybe some of the units were operating below the capacity. And maybe if not a price increase, but I’m wondering is there a pricing structure maybe that you could offer that would better cover your fixed costs in light of the fact that some units may not run as much as you had originally modeled?

Yes, we do offer different products on the FUEL CHEM side, and those products do carry different margins, and so depending on the mix of those, you can’t see some changes from period-to-period. And then also, just in terms of customers, that pricing is done independently as well. And so if you had a well-priced customer that is generating more business, then you’ll see your margins change there as well. The other component that gets added in all the demonstration costs, and so when you have a demonstration running in period that’s going to impact margin as well. Dan Mannes – Avondale Partners: Right. I understood. I’m just wondering forward given some of the – some things you run into and given where natural gas is and that some of these units are probably going to run (inaudible) for a while. I was wondering if there was any maybe mix shift in contract type or maybe some direction you guys were pushing towards.

Yes. I think we’re going to model it around 50%, that’s what we’ve said in the path, I think that’s what we’re going to continue to plan for. Dan Mannes – Avondale Partners: Got it.

That should take into account the different variations that we talked about. Dan Mannes – Avondale Partners: Okay. And following up on other question as it relates to the SG&A line, I think in your prepared commentary, you had a couple of items that we’re kind of man occurring in nature, it sounded like, or looked like they might tick down with the noncash comp. Some of like some consultants, I don’t know if you mentioned what that was for? And then third, it sounded like the executive surge costs. I mean do we assume the consulting cost stays? Do we assume the executive surge costs go away, but it’ll replace by new executive costs? If you can just sort of walk us through that. I was just wondering – I know you said this is a reasonable run rate, I’m just trying to make sure I understand why.

Yes, yes. There’s always things that come up. We’d like to think that’s not going to ever reoccur again, but we incur those costs. We’re going through our planning cycle right now. We may look to add some costs for SG&A line to support growth expectations. And so if you talk about it just a grow dollar amount, I’m comfortable saying that our run rates is reasonable right now. Dan Mannes – Avondale Partners: Okay. Because I guess in some prior conversations, the indication was that maybe staffing levels were – or staffer company that had the capacity handle a lot more revenue than the company was currently doing. So I guess I’m kind of surprised that you are adding. Is that more of just – is that more geography, is that more China? Because I guess that’s a little bit at odds with what we’ve heard previously.

No, we’ve not been adding. In fact, whereas we’ve established an organizational design in September to take advantage of growth opportunities, we actually did so with a slight reduction in role personnel. I think we brought in exceptionally highly qualified people in the positions that is vacated by those did not stay with the company or we chose to eliminate that position. And we announced, for example, Vince Arnone returning to the company as Executive Vice President of Worldwide Operations. Reporting to him is our China Pacific Rim, Beijing Fuel Tech Group, our European operation, and our entire project execution team. That’s being done in a manner to provide a much higher level of coordination worldwide with all those activities. And Vince was a consultant to the company, so his salary does replaces some consulting fees that we have been incurring. And we actually are now positioned I believe to steadily trend to more historical levels of SG&A as a percent of sales that you might have seen a couple of years as we position the company for obviously higher revenues with the organization that we have. So we don’t envision significant additions of people in the US. We do have some open positions in China. And that’s necessitated by being able to sort of the rate of route that market will have as well as the change over from the talent levels that we utilized and for startup mode to the talent level that we are requiring going forward.

And just to clarify one other thing, off the items that we’re identified, most of those are reductions. The one increase was the incentive plan expense and executive officer recruitment fees for executive officers (inaudible). The lion share of that is the incentive plan related expense. And so what you’ re talking about is really a fairly marginal number for the recruitment fees. Dan Mannes – Avondale Partners: Got it. And then just one last question on the APC side. When you talk about quotation activity increasing, can you talk a little bit of that in the context of the sales like i.e., are these just kicking the tires laying everything out, so they can make a decision in nine months when they have visibility on transport? Is there an ordinary level of quotation activity just generally driven by states and consent decree? I’m just trying to understand what the implications are just as it relates to timing, and I realize it’s very specific by utility, but if you can just walk through the cycle in where this fits in that would be helpful.

After orders are announced, we typically have six to nine months lead times to get those orders in. Sometimes there is a three- to six-month time period just to inspect the job and the do the scoping at it. But once we announce that we do come out with our press releases and to see those revenues come through our income statement and realize the benefits on that, you do have a fair amount of a sale there. If we – if we’re – if we make the announcement this quarter, then look to see those put through the P&L next year. Dan Mannes – Avondale Partners: No, I’m talking about on the front end. You’re talking about quotation activity picking up as a potential indicator of order and backlog. I’m trying to walk from the quotation activity to the actual order.

The sale cycle itself? Dan Mannes – Avondale Partners: Yes, that’s what I’m more focus on. And we’ve been through this before. I mean, you saw it with care. I guess, I was hoping you could draw some analogies from a timing perspective and where utilities are in their thinking.

Know that we had a long list of things we’ve been discussing for some period of time, so it’s not we’re starting that activity. We typically don’t share what that list is, but is robust so. Dan Mannes – Avondale Partners: Okay. Maybe will –

I would say that if you look at the contracts that were awarded through the first half of the year, they certainly were in discussion in the early part of the year to achieve those or even late last year. So being a six-month sales cycle is not uncommon at all in China. Dan Mannes – Avondale Partners: Okay. I was – that’s fine. I was more focused – you ask – but maybe we’ll take this discussion offline.

I’m sorry, I thought you were asking about China. Dan Mannes – Avondale Partners: No, I wasn’t asking much on it.

At US, I would say generally you saw it this year in terms of our announced contract awards, I think we went through a little hiatus periods. There are cycles that got longer because of delays in rules. If I look at the market today, certainly the quotation activity in terms of number of potential projects has dramatically increased on APC side. APC will still have a pretty dug on for the year in terms of the completion of bookings that we came into the year with. We are anticipating a reasonably good fourth quarter relative to new bookings, but it’s very hard to give guidance on APC. The dollar value of projects vary in size, their timing is often uncertain, and so trying to call our revenues within a few million dollars is very difficult thing to do. But I think APC is going to finish the year with a very respectable, both revenue – and if I see some of the activity that we’re closing come to fruition before this year is over, I think we’ll still enter the year with a good backlog. Dan Mannes – Avondale Partners: Okay, thanks.

Okay.

(Operator Instructions). Your next question comes from the line of Carter Shoop with Deutsche Bank. Please proceed. Carter Shoop – Deutsche Bank: My questions have been answered. Thank you.

Your next question comes from the line of Steven Charest with Divine Capital Market. Please proceed, sir. Steven Charest – Divine Capital Market: Hi, good morning, gentlemen. Thanks for taking my call. Regarding the FUEL CHEM segment and the depress demand, I was wondering if you had or you can find some clarity on the linkage between electrical generation activity which is up about 3% and where the demand – where do you think the inflection point starts to come in here. If I look back to what we had in the summer, we had a near historic heat wave in the summer, we had a peak curtailment activity, get very strong in some of the demand response companies, but very little impact on the FUEL CHEM segment. So do you have a sense of what kind of a net electrical output in the United States has to be reached in order for FUEL CHEM to start picking up?

It’s a good question and a fair question. I don’t think you can specifically answer that as a percent growth rate of electricity demand. Obviously, as it grows, it creates a positive window on back. But I would say it much more depends on the fuel policy that a customer has. Certain coal is slag, certain coal is dump. And they certainly if they slag, they slag more at higher loads. When we look at our business, there are certain accounts that because of their low levels and fuel policies, they are already generating significant economic benefits from something in using the FUEL CHEM program. There are certainly certain customers that are operating at levels where those economics are questioned. Now, as demand increases specific site – in a site specific way that only improves the economics, and everything is in place to turn it on again. I’d say we’ve been relatively challenged this year by trying to get our previous customers to begin pumping again with some success. And we’ve got an active selling effort to assist those companies in identifying how FUEL CHEM can benefit them. But until load levels are higher that may not be won. But the thing it does change the characteristics is choice of fuel. Steven Charest – Divine Capital Market: Right. So in this case, it’s the one-two punch of both load levels being reduced and the cheaper Eastern coal mix?

Or cheaper Midwestern and Western coal mix. Steven Charest – Divine Capital Market: Right.

Eastern coals typically are higher costs and higher DTE values. Steven Charest – Divine Capital Market: Right. Now, you had mentioned in your notes earlier about the differential between the fuel pricing. Similar question, different topic there; do you see that there is an inflection point that, where you see a lot of more of these customers you’ve been chatting with, reach their tipping point?

Tipping point in terms of realizing that they can enjoy the benefits of FUEL CHEM? Steven Charest – Divine Capital Market: Yes, just in aggregate sense if the differential between the coal pricing is enough and their load is for all other things being equal back to where it was in 2007, do you see that the market is nearing that point for a lot more of these customers?

Yes, I think we’re beginning to see a favorable direction. As I said earlier, three of the four awards that we just recently announced for TIFI FUEL CHEM programs were as a result switching to PRB and Illinois basin coals. Certainly, the market conditions are changing, the pricing of those coals, and I think that we will continue to see that trend for a while. Now, there is the challenge coming from low cost of natural gas and that cannot be ignored as certain utilities choose to hit their peaking requirements, for example, with natural gas. Steven Charest – Divine Capital Market: Right, right.

I think that probably remains a bit of an overhang on the markets. Steven Charest – Divine Capital Market: All right, that’s very helpful. Thank you.

Okay.

With no further questions in the queue, I would now turn the call back over to Doug Bailey for closing remarks. You may proceed, sir.

Thank you, operator. And thank you for all your questions, they are all good questions. We always look forward to reporting on the activities of the company. I think in my involvement with the company over this past eight months, I’m very energized by the organization and the efforts that people are undertaking to prepare what I believe will be a nice exit to 2010 and a very strong year for us for 2011. Obviously, we have a lot of complex planning issues in the business, because our customers do. But we are certainly making great headway in creating the organizational staffing, account levels to meet those needs of those customers, and we look forward to meeting with any of you on one-on-one basis to answer your questions and give you further insight into how we see our business. So we thank you for the call today and we appreciate your attendance. Thank you to my colleagues around the table and we look forward to chatting with you more in the future. Good-bye everybody.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.