Q3 2019 Earnings Call
Good day, ladies and gentlemen.
Thank you for standing by and welcome to them.
Ameresco incorporated third quarter 2019 earnings call at this time all participants are in listen only mode. Later, we'll conduct a question and answer session and instructions will follow that.
As a reminder, this conference call is being recorded.
Now, let's turn the conference over to your hosts Mrs. Leila doesn't vice President marketing and Communications Mr. Alan you may begin.
Thank you, Chris and good morning, everyone. We appreciate you joining us for today's call joining me here, our George Sakellaris, Amerescos, Chairman, President and Chief Executive Officer, Doron whole senior Vice President and Chief Financial Officer, and Mark Chip Block Vice President corporate.
Controller, and Chief Accounting Officer.
Before I turn the call over to George I would like to make a brief statement regarding forward looking remark.
Call contains forward looking information regarding future events and the future financial performance of the company. We caution you that such statements are predictions based on management's current expectations or beliefs.
Actual results may differ materially as a result of risks and uncertainties that pertain to our business.
We refer you to the company's press release issued this morning and to our FCC filing. These documents discuss important factors that could cause actual results to differ materially from those contained in the company's projection or forward looking statements.
We assume no obligation to revise any forward looking statements made on today's call. In addition, we will be referring to non-GAAP financial measures. During this call. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principle, a GAAP to non-GAAP reconciliation.
Second as well as an explanation behind the use of non-GAAP financial measures is available in our press release and in the appendix on this slide which can be downloaded from our website.
I will now turn the call over to George George.
Thank you Leila and good morning, everyone third quarter results were marked by record smart energy solutions towards resulting in record total project backlog.
We also had significant growth in there might have school essence development pipeline, resulting in a record assets backlog.
Something very unique or the awards two contracts expected in Q3 were delayed.
Shifting approximately $30 million, so revenue Oh, well have corner.
I would point out.
The number of this contracts have already been signed since September 30.
We expect the remainder to close in Q4.
And most importantly, the overall trends in our business to remain very strong.
Oh robust as a development by the pipeline will allow us to more than doubled our mega what's your operation in the coming years.
Inefficiently, increasing our base of recurring revenues and earnings.
At the same time, we have continued to build our technical expertise to address the increasing complexity of all customers Broderick and company owned assets.
As we have indicated during the last year, we have made investments in order to develop significant domains global knowledge in areas such as battery storage micro grids smart controls in other advanced energy technologies across all four regions.
Yeah.
As you can see the success of this strategy is resulting in our record awards.
We are also leveraging our expanded platform to grow our ameresco aesynt business at much higher rates than in the past.
We are at the point, where all regions I gave a little to compete and have begun to contribute to this advanced markets.
Well the company's assets, where traditionally developed out all the northeast offices, we have now expended our local capabilities into all regions.
Our 70, plus offices in North America afford us a unique competitive advantage for traditional smart energy solutions work and asset ownership opportunities.
At the end of Q3, both the lessons can develop and more than doubled year on year, reaching 287 megawatts by quarter sent.
We expect our S isn't development to continue to exceed the number of Mega lunch in operation.
Oh restaurant development opportunities are in increasingly getting larger and more complex.
In fact, we recently announced our largest energy assets project.
At 25 megawatt solar plant into few Illinois.
Structure is expected to begin the summer of 2020.
This installation highlights multiple benefits as it will help the state of Illinois Me, it's renewable energy goals will at the same time provides an income to their local community and of course, a good through town for him or desk.
During the quarter, our Canadian team held ribbon cutting ceremony for our first company owned greed tight battery energy storage system.
16 megawatt hour system is being used in Ontario to store power you did very well.
Excess supply and deliver it back into the agreed when demand is high.
These types of systems are an integral part of the grid stability and given the intermittent natur over renewable energy generation. We it generation. We're confident that this excess of such projects will lead to much wider adoption and greater opportunities for them at ASCO.
As you are aware California's largest utility BG and he has been shut it off power to large portions of its territory to prevent potential wildfires.
It's blackouts has impacted mainly on so whereas in Nashville cost Miss along with numerous municipal institutional and manufacturing facilities.
It's estimated.
To date the block out here of course, the 2.5 billion dollar sit economic losses for the state.
We believe this historic events are creating unprecedented demand for resilient distributed energy resources, which are relevant to our smart energy solutions and ameresco acid business as well as our integrated solar distribution business for me.
Nucor's, which have been sell in fourth grade Standalone solar and energy storage systems into the California, California for applications, such as cellular towers, Florida Fund and supporting local electric utility operations.
[noise] years of utility Unprecedent under investment are growing and growing to weather volatility increases the likelihood that such proactive blackouts will become more frequent and it was spread to other geographic areas.
Fiji itself believes that it will take up to 10 years to address these issues.
California, because all his ban at leisure is real bullish in energy technologist for their environmental benefits.
We now believe that's California will become a leader in advanced technologies for power resiliency.
The stage recently passed SB 13, 39, and the governor appointed synergies are.
We should bring much more certainty and urgency around deployment of technologies such as Michael Please.
This will lead to increased adoption not wandering in California, but of course the country as they use of these technologies become more accepted by customers and begin to make more economic sense.
We believe ameresco is exceptionally well positioned to benefit from these emerging markets.
Yes, we have discussed in the past our customers are require you that resiliency being incorporated into more projects.
Our core client base over the federal government.
Municipalities universities hospitals, and other institutional clients, a leading the charge in investing in the resiliency program, such as Microgrids CHP and battery storage.
A great example of such a project is our recently completed Fort Leonard would project.
It's just the last year that utilizes the latest in advance energy technologies. It's powerplay 2.5 megawatts natural gas fired engine with advance emission controls and a huge recovery system.
Utilizing the micro grids controls the system can operate as far as a function in grid or even an island mode.
That's providing continuous power for mission critical systems.
Our existing customers continued to provide us with additional work.
For example, we signed our third United States, what the service contracts this year.
One of which includes distributed energy generation, we sold the other two were focused in design build built it modernization.
This design build wins are in part due to the expertise brought to hammer ESCO from recently completed acquisition.
We are optimistic for the potential of design built work as an additional complimentary revenue stream from our existing customer base.
We'll continue to pursue.
Similar complimentary acquisitions.
In summary market conditions had very strong.
And we believe our position is positioning is excellent.
Supporting our confidence in a very strong finish to 2019 and solid growth for 2020 and beyond I.
I will now turn the call other Doron to review the financials Doron.
Thank you George and good morning, everyone.
As I review, the company's third quarter financial performance I ask that you. Please refer to our press release and supplemental slides for more complete financial information.
The record gross and project awards, and another solid quarter of adding assets to our pipeline highlights. The early successes of the investments in strategic resources in advanced technology, we decided to make this year.
We achieved record project awards in the third quarter of 343 million up 72% year over year end in large part, reflecting the increasingly complex projects the George spoke about earlier.
Our smart energy solutions project backlog at quarter end was 2.2 billion comprised of 787 million in contracted backlog and 1.4 billion in awarded projects.
Our Emerus go asset development pipeline reached a record 287 megawatts at the end of the third quarter.
This represented 61% year to date growth and was more than twice the size of our pipeline at the end of last year's third quarter.
We added 37 megawatts of assets to this pipeline, including another earlier stage are in G. plant that we have been talking about for a few quarters.
The rest of the awards were solar including the large diffuse, Illinois project the George mentioned.
We placed eight megawatts into service in Q3, bringing our year to date, the total number to 29 megawatts.
The rapid growth of our Emerus go asset business reflects our ability to leverage the company's geographic footprint customer relationships and technical knowledge to win additional asset opportunities.
During the third quarter, we transferred 15 megawatts out of our assets in development metric into project Awards.
These solar projects or for a large national corporate account.
Where during development the customer decided that owning these systems out right versus entering into a power purchase agreement with them or ESCO made more sense, given its tax strategy and cost of capital.
Well, we do have the resources and balance sheet to build and own assets. We want to remind everyone that we are a customer first organization and we have the flexibility to pivot our energy savings offerings based on customer needs.
We're pleased to be developing our see an eye book of business with this new marquee national account and we'll be talking about it more in the future.
Third quarter revenue was 212 million, reflecting modest growth across all of our lines of business.
Well a positive year on year comparison, the push out of several project contract conversions impacted revenue results by approximately 30 million.
As you know these projects have already been awarded Dameris scope.
Let's start dates are a function of client schedules can slip from one quarter to another.
Net income attributable to common shareholders was 8.9 million net income per diluted share was 19 cents.
non-GAAP net income was 8.5 million and non-GAAP EPS came in at 18 cents.
These metrics are below the comparable 2018 figures representing the increased investment in people and technology that we had anticipated for 2019 and in support of what we expect to be very strong 2020.
Adjusted EBITDA was $23.9 million.
Cash flows used in operating activities were 11.5 million in adjusted cash generated from operations and non-GAAP financial measure was 21.3 million during the quarter.
Our liquidity remains strong the company is well positioned to execute on its asset build out through a combination of cash on hand cash generated.
Nonrecourse debt and the ability to monetize existing assets and recycled the proceeds into additional opportunities.
Turning to our outlook.
Based on contracts signed after the end of the third quarter and those expected to be sign shortly we are reaffirming our 2019 full year guidance, namely for revenue to be in the range of 845 million to 885 million.
Adjusted EBITDA of 95 million to 103 million.
Net income per diluted share 77 cents to 85 cents.
We expect our tax rate to be between 12 and 15% for 2019.
And we now expect to place approximately 40 megawatts of assets into operations. This year.
I would like to turn the call back over to George for closing comments.
Good door.
To summarize with your points.
First we expect to have announced stands in fourth quarter.
Second we're already seeing tangible results from the investments that we have made in people and platforms and third we expect to have a strong 2000, Tony thanks to our fast growing in asset development pipeline and substantial constructed.
Backlog.
We look I look forward to seeing many of you at our upcoming investor conferences.
And now Chris we would like us to open the call two questions.
And as a reminder to ask a question we need to press star one on your telephone.
To withdraw your question. Please press the pound key please stand by what we composite culinary roster.
And our first question comes from a line of Chris Van Horn with B. Riley FBR. Your line is now open.
Good morning, everyone. Thanks for taking my call.
Good morning, Chris.
So you mentioned you know right off the bat that.
2019 was going to be an investment year and it's obviously translated to some really robust award activity I'm curious where you are in terms of those investments do you see more coming and do they go into 2020, and what's kind of your.
You are thinking around that.
Yes.
Basically I will say that the.
We pretty much all essentially done within investment that we made for 2019, because that's what's the plan what I would call one shot basically rightsizing all units of the company for the particular markets that we wanted to address otherwise the advanced markets opportunities as we go forward.
I think you will see us be more opportunistic and tried to add.
Additional talent, but it will be.
Mentioned to what we forecast in the past that we want to grow the bottom line at the faster rate them, but we do the top line. So the operating expenditures, we will be more carefully monitor going forward and we pretty much done with investments that we want it to make.
But what I would put one one shut deal for 2019, the better part we are well that's why we started seeing the results you know they impact basically the talent that we brought the board.
He has some early successes and not only in the.
The north three is but it's in the federal group is assumed to southwest as well. These are the central as well as well in Canada. So we feel very good what we are.
Okay got it and then you know in it you mentioned in your outlook accelerated growth entering 2020.
Could you would you be able to elaborate a little bit on that and are you Turk talking in terms of topline growth or EBITDA adjusted EBITDA expansion a anymore detail there would be great.
We will give guidance over the next call and maybe even a little bit before that.
After the fourth year announcement, but I think it's important to note that basically where we are today, we think that by the end of the year.
We will have record constructed backlog otherwise the project contracts, we will be a director level based on where we are.
As of today, so that will that's the way I feel very strong. That's next year is going to be a very strong here. In addition to that we have a great pipeline over the essence in development that we have so a good chunk of us we're going to come into play next year. So that will contribute a lot you operation and maintenance looks pretty good.
So even though we I'm not giving actual guidance I think historical vote Fran otherwise.
Growing the top line at the high single digits. I think is very very doable at the EBITDA line going to close to close to 20%. So historical trend for the last five years again, it's very doable.
So I hope that gives you a little bit more color, but the fact that we will end the year with <unk>.
Record.
Project.
I'd like to backlog.
I've been with shape.
Got it got it and last one for me if you don't mind.
You can you maybe talk about the competitive landscape, obviously, you're you're you're seeing a lot of award activity and I'm just curious what what you're seeing from a competitive standpoint, our competitors, a rising and you're seeing more more small players kind of starting to emerge or are you guys. Just you know benefiting from just taking all the share because of the lack of of players in the space maybe.
Okay.
Uh huh.
I will say, we have pick a little bit share from the largest competitor it sounds like the Johnson controls that I knew what was the segments of the world because we have more of the focus a broader strategy that they do.
First of all these advanced acknowledges the flexibility we wanted to system, we'll let the customer along the system and so one a bridge solar solution from the customer perspective, and the fact that we've made the investments over this last years to be.
Broad and deep technical expertise is helping us a lot and we take a.
Market share from the big guys, but.
One of the performance contracts on the smaller scale the contracts I will say 2 million and below where do you have some mechanical contractors will local engineering firms you will see the new they picking some of the small contracts and some of our unit as they focusing on the smaller contracts and the less complex.
Going to contracts they have some challenges where the units that they focus on the broader technologists and more comprehensive projects. They have some great wins.
Okay, Great you overall market, though that market is evolving.
On this larger projects and the fact that I think we pivot the company over the last three years to take advantage of the emerging markets. We are very very well position. The other thing I want it may be daughter might want to come a little bit this well the competitive landscape when we get going into the asset ownership, especially one of this.
Solar.
What is helping us a lot in the solar businesses effect now that all units of course.
The country otherwise, you're the 140 plus develop as they can develop this projects and in addition to that's in the market. We address let's say 10 megawatts and below which is a local municipality.
Clients and so one would have.
The relationships.
So again it helps us and if you want.
I think the.
Competitive landscape in solar is obviously different than the traditional energy efficient deficiency business and so.
I think as George mentioned before that flexibility to allow clients to own the assets or to allow us to own the assets is really a competitive advantage and then Furthermore.
Just simply the local presence as we talked about in the in the call earlier, just 70 plus offices around the country.
We've got the penetration and then in addition to that.
The technical capabilities in the regions to actually develop the projects just gives us the competitive advantage, it's a very local business.
So it's necessary to have that.
Okay got it. Thank you so much for all that color and thanks for the time.
Thank you and our next question comes on line of Noah Kaye with Oppenheimer. Your line is now open.
Hi, good morning, Thanks for taking my questions I'm wondering what's keeping to start with.
Segment perspective can you help us and where that $30 million revenue per share happened.
Segments.
Yes, basically no I know it is.
A good chunk of money, but basically on all these projects the contract could have very very mature.
And.
This.
Close to 30 minute about $25 million to $3 million is in development expense that we live already invested on those particular projects or when there was just get signed all that hits to the topline income statement.
And and that's why it had to measure impact on the Florida and it gets shifted you might say, but by your quarter that particular revenue going going out.
I am sorry about my question was on which segments.
Role reach it.
Canada where were to happen.
Yes, yes, mostly federal Noah.
That is related to federal awards.
Okay with the federal I know theres been some timing.
Issues potentially related to a large deal.
Projects.
Ideal authorization that expiring can you maybe kind of connect the dots here for us on some of it in quarter timing softness and the large awards that you mentioned.
Help us kinda connected up there a little bit.
So.
Some of those contracts and you can add something too.
We were very good sign and we have very very good visibility and feel very confident that they will be signed prior to.
December 16th which is the idea to these particular one.
Or X spine.
Yeah, I think as we said in the past Noah I think certainly there would be tiny aspect, but but these are really.
Pretty mature in the overall sales in development cycle on both ends so although it's you know we didn't we didn't get the one sign that we had possibly expected in Q3 pretty confident that those will come in before the expiration of the Q.
And as George mentioned, we we've already we've already science on hand.
Yeah, I expect them signed the rest in the coming weeks.
And I'll, just add any quarter on quarter.
Sorry go ahead.
Yeah, I was just going to add to the quarter on quarter slip in the federal business. You also had an impact just from a practical perspective of their September thirtyth fiscal year end.
Right, where where frankly people on the other side of these contracts have a lot on their plate to get done before fiscal year end and and so as a result. These do you think slip.
Yep.
So I guess that'll feed can you talk about your conviction level for the fourth quarter I think.
At this point to hit the midpoint of your revenue guidance you'd have to do 305 billion in fourth quarter sales.
That would be.
3% higher than your previous high watermark for Oh, you mean at the low into your guidance or do something 285 billion in sales.
Again that would be well above your previous high watermark. So you know just talk about it you can't what's driving these expectations for a record quarter get part of it may be.
Recognizing this 30 million maybe come from Threeq to Fourq, you, but just how much visibility you have to it coming through and maybe you know you reaffirmed your guidance, but where is your bias at this point within the range or pretty close to.
We ended the year at this point.
Yeah. This is mark.
I think why we feel so confident that 85% of the.
Of the revenue were expecting Q4 comes from contracted sources, so either our contracted backlog or from our others revenue streams, the recurring revenue streams or integrated PV.
And so again, 85% of that revenue, we feel pretty pretty confident about just given the visibility from contracted sources and then the rest is coming from the award as we mentioned.
You know, we feel highly confident that that the awards that not side in Q3 involved one that we get always expected in Q4 will will sign so we feel like there is.
Very strong visibility to the.
Through our Q4 revenue.
Okay got it so I was just to take that mid 0.3 or five nothing implied for the fourth quarter.
$260 million that essentially is in the back and then the rest is just what comes through that is that correct.
Lastly, you got from the revenue from contracted sources, we feel pretty good about so your math is correct I think we just feel we feel confident because.
Once it's in our contracted backlog, we cannot yields and move to a hot to recognize that and as long as we're executing we feel that we feel very good about that.
The rest is come from.
Okay.
Excellent can you give us any color on the R&D projects that you added to the asset development pipeline this quarter.
Yeah, It's a it's and then another plant in California, and it's very good size of close to the woodland plan and it's an existing sites that we have.
Conversion from landfill gas to electricity and is a large plant, but we have excess gas. So we are not convert in other ways taken down the like electric brand. We have right now I will be an additional implanted will be agreed plan.
And the fact that it's a an existing client on the other side that was the landfill owner and US we feel very very good about it we've been working for its for sometime and the other thing I wanted to add up because we have been talking about the other five six plans that they are in the early stages of development, but we have not puts them.
Now pipeline that have not going away, we still working on them.
And I wouldn't be surprised that we probably had couple of them into our backlog by the end of the year.
And in addition to that.
The plans that we have in construction that we said one will go into operation late next year and the other two.
The second half of 2021 again, it's on schedule.
No any delays we.
On schedule and now we're trying to get for 2032 to have a new ones that we just signed and probably a couple more.
By the end of the year have better visibility as to the 2022.
So you know you're continuing to it took back actually augment that that R&D pipeline, which is terrific to see can you maybe talk a little bit about the demand environment for our energy broadly we've seen some indications that this is starting to brought in from the transportation sector. Its of utility gas market I'm seeing that impacting your.
Or opportunity set or do you think we might it take back to see you know down the pike some projects for utility sector.
No question about it no at this it's it's a great point that this is what is making us a halo.
Feel better Vera about this particular market segment. The fact that now we begin to see the emergence where I would call a potential long term contracts with great creditworthy customers and it's the utilities.
The gas utilities, there is because many state regulators right now they say you got to reduce your carbon footprint and no anyway. They can reduce it that at this time is with a this green gas and actually we are talking to several utilities and.
I would it be surprised that down the road, we will have some lump sum contracts with them in addition to that.
Many colleges universities and other institutional accounts, they might have a cogeneration plans or whatever the case might be and they want to become 100% carbon neutral. They went away that there will be able to accomplish that played mine or green gas and we are talking to couple of colleges where by that.
We will sign long term contracts, we will by some of these.
Output.
And Darren you want to add something that I know you've been looking at it had so yeah no I am I would only say that look the nature of these contracts there long term the typically looking like fixed price contracts.
That clearly allows for better revenue visibility and.
It also included it improves our financing terms, so clearly that that's a that's an improvement for us in terms of what we believe the.
Economic feasibility and economic stability of these projects looks like.
Okay, I'll follow up with that offline, but I think you're actually comments.
Thank you and thank you.
Thank you.
Our next question comes from the line of Chip Moore with Canaccord. Your line is now.
Morning, Hey, thanks.
Why don't you wondering if you go back to the $30 million a push out if you just give us a ballpark on what still needs to get signed there and then.
On Q4, just to follow up any puts and takes so as we think about just typical seasonality in and you're thinking there.
Yeah, I would say answer and then mark might Wanna add sums it primarily those contracts. It's about close there are several contracts about couple of hundred million dollars with a contract and primarily the issues for the delays is administrative and Doron pointed out the fact that.
It was because of the fiscal <unk>.
September 30, the deadline or the federal government. In addition to that that not only us but many other companies they have other contracts that.
People on the other side they are working on it.
And but we feel very good we've we just signed a couple of since that time since the September Thirtyth and we have great visibility ex actually asked the timing of the balance of them.
The government have give us a schedule and we feel very good about that particular schedule.
And it and why is the $30 million, which since you're not in the development expands. The fact that these projects are very complicated and.
We just spend a substantial amount of money on our side in order to develop this projects to bring to bring them to this point. In addition to that you've got to think on the other side. The government. They go spend less time and the desperate they are motivated they do want to get these projects moving so it is all the delay that's why we feel very confident.
The the incentive or the catalyst going the other side is there. This project is a great projects from the government and it's not just or.
Something that was just save them at energy is something that will give them the infrastructure upgrades to the resiliency and they need.
And Mark on someone had something to that I mean think you hit on that I think again and we feel it comes back to our confidence level based on the visibility we feel like we'll get those awards converted but that's going to happen in there.
Certainly with the visibility to the contracted piece, we feel very good about that but we need to execute we feel like.
We're.
We're in a position to control that and.
Well in those numbers so.
Understood. Thanks, and you know we're very early days here I'll post public power shut off out west, but can you talk broader about how you're thinking about positioning there what are the biggest opportunities and any investments you may need to make.
Look we are talking to various commercial and industrial customers as well as colleges and universities, yeah on churn and municipalities and they are concerned.
About what's going on and basically you will see combined heat and power battery storage solar and the micro good controls and.
We have the ability to have an island mode I've been talking for long time, the the old days.
Sensible large plans long submission lines the assets that it's acceptable to measure outrageous and now what has happened.
The economics of the distributor generation after the point that they compete.
With a central power plants as I've Michel lines are they give the customer not only resiliency, but economics I mean, we're talking to some of the wasn't sample with Google They say that 100% of carbon footprint, but the first thing that they invest is sold out why of course. It you compete is competes with lumber liquidators right so that it.
It's a great investment not just makes great sense environmental sensed a great investment now take some of the datacenters or they have they in order to bridge the gap because the solid is not all that all the time up they need some kind of a battery started they need some kind of micro grid. So we see a huge opportunity for us I haven't done on the road.
And we would already have started talking to the utility is all of them in a in California and.
Some of the people that we hired in the battery storage the micro grids. They are located in California, so but.
Look it started with the federal government was the first one we did up it's what's been your have shown a micro grid because they have a base that they cannot afford to the interruption with during the ice storms that we get the new England.
And to build very successful and then we have done four or five of them knowing the federal government.
Enable shipyard in Philadelphia, and so on and now some of the.
Kaiser Permanente, which is one of our clients that we have and we're doing solar installation now they're coming back and they say, okay. I guess now we have to look at this resiliency issue.
So it's beginning to get disruption in the marketplace.
That's why I brought up I think its a.
We made the investment in the past.
The existing customers, but what's going on in the marketplace, but now it broadens the what I would call a market segment.
Let me just touch on a couple of things So [noise] George mentioned, so some of the expertise on the micro grids in the battery storage stuff, though those were investments that we made this year already so we don't necessarily need to expand that further certainly from a you know processing and sales coverage perspective, there [laughter] potentially some opportunities at the demand goes on.
But I would categorize this opportunity into two things one of them is the little bit longer term all of these customers that we have now plus the utilities thinking about microgrid applicability, they're going to be thinking about the economic value proposition differently, because the economy effectively shut down when those shut off SAP.
And the money that they lost by not being able to actually work and even individuals not being able to work not being able to communicate.
Is going to be something they're gonna have to take into account when deciding whether it's worthwhile to spend the money to put a microgrid rather the or the second piece is our integrated solar distribution business, which has already been happening in that that's that's more immediate you know these are off site.
Kits that can be shipped and you've got cell phone service towers that can use those.
Weve, there's irrigation on the farming community, there's there's a variety of applications there and so I think thats, a little bit more near term.
Great. That's a that's helpful. Thanks a lot.
Thank you.
And our last question comes from a line of Craig Irwin with Roth Capital Partners. Your line is now open.
Great. Thank you so George I guess I'm going to be the only one not to talk you about.
About the quarter and maintaining the year I guess.
Obviously this is construction on these things happen.
My questions are about the landfill gas business in particular, and the green gas business in California.
So.
Many of my clients have been looking this at this business is potentially a long term driver of increased appetite amrisc over the next few years.
But when we look at RIN prices.
The last two years, they've come off quite a bit off to peak right. We're now roughly 70 cents for disappearance, you know down around 75% from the peak.
Can you maybe discuss for US your approach to locking in your Rins sharing agreements.
How much do you typically lock away.
What would we be comfortable sort of looking at as far as.
[noise] minimum written prices for projects.
And how much exposure to this kind of volatility do you see translate through into your piano.
Yeah.
I will try to cancel the question and then Doron and Mark May want to add some more color.
Let's do it.
The better part.
First let's talk about.
Going forward.
We look at all the projects, especially let's say the three in California, we have right now and the that they are.
In development and the other one in Texas in construction, each and every one of them even at the numbers that you see today on the RIN prices they make good economic sense better than the other assets that we will.
Own however.
As I pointed out we looking not just the marine market by itself and then if you talk the.
L C.
Yes.
So fast that break that gets going up substantially so the California plans will benefit from that considerably and we going forward or some of the use new plans.
I wouldn't be surprised that you will see us execute some of those non contracts that we've been talking about it. So we are sufficiently has as far as the existing ones.
If you look at though overall asset portfolio only 5% of the thought the output.
His is merger and then as you take it to one step down on the.
RIN prices I will now on.
The green gas, even that we have hedge the bet a portion of that on a long term contracts. So their exposure for us it's up for this particular here, it's minimal and on the new ones, we've coming up with what I would say a strategy where not only this plant will be.
You cannot make on the.
Low.
Market price on the rigs, but also outside the trends transportation and I think in the long term that offers a larger possibility for us and more predictability on the revenues you might take a little bit lower return on the high returns when the ring prices were were way up there but.
On the on the other hand here we have more.
Stability on the return as well as <unk> and the financing like a doron pointed out earlier it would be even better the other thing I want to save a door I mean, Greg.
On the RIN prices, where they are right now as you probably know everybody is waiting to see what does the new our view all will be set at and if that said over 600.
Then you will see the RIN prices go up considerably which.
People working on that for some time, so any transactions right now they're very very very small if any so they do not reflect what the market is a is doing most people are they're holding back the some of the sales you want to its something that Darren.
I think you summarized it well I think that the point is here that is at least in their current current situation.
This RIN pricing, we we don't expect it to have a material impact on guidance that we gave for the year.
I mean, that's at the bottom line, yeah, and I'm going forward, each and every all the projects they pencil out very well.
And just just a point of clarification, how long do you usually lock your rins sharing agreements in poor are they annual agreements that you'd have to.
Resign and reset every year or some of these multiyear agreements no no. There was the ones that we feel it has right now they are multiyear contracts.
And I don't recall the exact date when they expire in but I know that go at least through next year.
Okay. Excellent then you mentioned L. CFS and your three plants in California. So obviously I'll see if this is doing great with I guess carbon price is close to 200 Bucks a ton.
That translates well into supporting the economics of clean fuels and Green gas can you maybe just a concern for us the relative importance of L. CFS versus RIN prices.
You know do you see rins as it Diminimus contribution on these plants, it's really LCF, that's driven and is there an opportunity to maybe a focus more on California, and other LCFS such states.
In the pipeline for development.
Yeah no.
I will say this much base or whether they are right now it's Barry.
I would say even contribution between the RIN prices in the L. CFS and.
It might be little bit more weighted to the.
CFS and the other thing I want to point out Greg the San Antonio plan, we ship that.
Green gas to California, too so we take advantage of the L. CFS as well.
I just want actually and then last last question I make.
Can you.
Can you update us on the the total fleet a flat.
Green gas plants in development, when we expect those two potentially break ground and come online.
Yeah, I gave a little bit color, we have the three right now that that permitted infrastructure than we had given this schedule of those three Juan will become even on the one actually we breaking ground this month.
Yeah, we got all departments in the that's a mccarty project in.
Houston, Texas, I would say Houston.
So that will be coming on the for the third fourth quarter of next year, then we have two more.
I mean, a 2000, Tony you want the second half of 2021.
Then right now we have the plant as we just announced when you do the developing in California that it would become One Q2 000 don't get too and I would say probably the mid of 2022 and are the six five to six that we have talked remained in couple of them I show up in the development by.
They are under this year and I would like to see at least three plans right now it's a goal but.
But by the end of the yeah, we'd be able to give you more color that you will be up.
Sometimes in 2022, so one next year to year after and three of the here after that the plan that we've been trying to work on that.
And that's relations on the progress there.
Thank you thanks quick.
Thank you.
And ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.