Q2 2020 FuelCell Energy Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to school Energy's second quarter 2020 earnings call.
This time participant lines.
On mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session. If he would like to ask a question. During this time simply press Star then number one on your telephone keypad. If you require any assistance at any time. Please press star Zero entered operator, we'll come back online, which is true I would now like turn the call up Richard Tom Gallagher.
<unk> Senior Vice President Finance and Investor Relations. Please go ahead.
Thank you Michelle good morning, everyone and thank you for joining us on the call today.
A reminder, this call is being recorded.
This morning, Fuelcell energy released our financial results for the second quarter of fiscal year 2020, and the earnings release is available on the Investor Relations section of our website that Fuelcell energy dotcom.
Consistent with our practice in addition to this call and our press release, we have posted a slide presentation on our website.
This webcast is being recorded it will be available for replay on the Companys website approximately two hours after the conclusion optical.
Before we begin our prepared comments please direct your attention to the disclosure statement on slide two of the presentation and the disclaimers, including in the press release related to forward looking statements.
Gosh them today will contain forward looking statements, including without limitation statements with respect to the company's anticipated financial result statements regarding the company's plans and expectations regarding a continued development commercialization and financing of its fuel cell technology and its business plan.
These forward looking statements are intended to qualify for the safe Harbor from liability established by the private Securities Litigation Reform Act of 1995.
All statements made on this call today other than statements of historical facts are forward looking statements and include statements regarding our anticipated financial and operational performance.
Forward looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made.
Forward looking statements involve numerous known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from any results predicted assumed or implied by the forward looking statements.
We strongly encourage you to review the information in the reports we filed with the FCC regarding these risks and uncertainties in particularly those that are described in the risk factor section of our annual report on form 10-K, and cautionary statements concerning forward looking statements disclosure in our quarterly report on form 10-Q.
You should also review the section entitled Quarterly statements concerning forward looking statements in this morning's earnings press release during this quarter I'll call. We will use non-GAAP financial measures when talking about the company's performance and financial condition in accordance with S.C. SBC regulations, you can find a reconciliation of these non-GAAP measures.
To the comparable GAAP measures in this morning's earnings press release, and the reconciliation document posted on our Investor relations portion of our website.
For our call today I'm joined by Jason If you Fuelcell, Energys, President and Chief Executive Officer, and Mike Bishop Executive Vice President Chief Financial Officer and Treasurer.
Following our prepared remarks, we will be available to take your questions and be joined by other team members of the leadership team.
I'll now hand, the call over to Jason for opening remarks, Jason.
Thank you Tom Good morning, everyone and thank you for joining us on the call today.
These are unprecedented times before we get started on behalf of the Fuelcell energy team I want to say that our thoughts and prayers are with those directly impacted by the ongoing global Pandemics and I want to thank the medical professionals first responders and others central workers for bravely performing their jobs under improving but.
That's very difficult circumstances.
I will give an update on the impact of code at 19 on our company later in my prepared remarks.
In light of the recent public events I want to reaffirm fuelcell energys commitment to diversity and inclusion in every aspect of our business our commitment to an able to world to live a life and Powerpoint clean energy requires a diverse and talented team.
I also want to thank the entire Fuelcell energy team.
During this time of global challenge and uncertainty, we remain focused and committed to continued execution of our powerhouse strategy and I'm proud of the team's dedication and the results weve been able to achieve this quarter.
Yes, I want to think the board of directors for in support of our global team and enabling us to retain our team members on payroll with benefits. Despite our manufacturing facility shutdown bus and enabling us to hit the ground running upon our reopening.
Coming out of our difficult fiscal 2019, we were poised to execute on our new powerhouse business strategy.
The unexpected onset of Kobin 19 has slowed some of the progress we had hoped to make.
By delaying bids and proxy solicitations and challenging ourselves efforts as our customers around the world struggle to address the business challenges brought on by this virus.
As businesses slowly reopened in markets rebound, we anticipate a return to our pre fire sales efforts and initiatives.
As in previous quarters. We have included an overview of the couple of the company for those of you who may be less familiar with our business.
On slide three we have a snapshot of our revenue breakdown for her most recent full fiscal year. The fiscal year ended October 31st 2019.
During fiscal year 2019, we recorded approximately 61 million of total revenue.
With the three largest categories servicing licenses advanced technologies in generation, providing diversified sources of recurring revenue.
I will also highlight some of the will recognize customer shown near the top of the slight with whom we have multiyear contracts.
We anticipate that these existing customers as well as our future customers will benefit from Doug ongoing product enhancements, we made to our technology platform, including our extended stack like which is now up to seven years combined heat and power systems, enabling micro grids onsite hydro.
Generation and future commercialization of our solid oxide platform capabilities to deliver electrolysis long duration hydrogen based energy storage and zero carbon hydrogen power generation.
Moving to slide four.
Our purpose, which is to an April the world to level like some powered by clean energy guides our strategy.
Our people and the work we do.
It also guides, our strategic focus and the innovations we are commercializing.
Since simply it's who we are.
Now turning to the key takeaways for the quarter on slide five.
First.
Overall, we delivered a good second quarter results, but I'm, particularly proud of the team's execution. During this period in which we were faced with unique challenges of the pandemic.
Second we continued to deliver disciplined management of our operating expenses and improve both our gross margins and operating loss driven by an increase in our differentiated work on our carbon capture under our JD with Exxon Mobil research and engineering.
Third.
We continue to execute on our powerhouse business strategy across our global operating model, resulting in some significant achievements during the quarter.
In April.
We began commercial operation of the Triangle Street project in the hometown of our headquarters Danbury, Connecticut after completion of testing and design optimization.
This represents our first deployment of the shore source 4000, hi, electrical efficiency platform and as a another demonstration of the power of our platform.
Deliver distributed generation and an urban setting.
Also in April we begin site construction of a 1.4 megawatt sure source 1500 bio fuel project with the city of San Bernardino Municipal water Department in California.
Which we expect to be commercially operational near the end of calendar 2020.
This project provides yet another operating an example of the power of our multi fuel platform, our proprietary gas cleanup system and the unique position our short source platform occupied as the only harp DG certified distributed generation solution operating on anaerobic.
Digester gas.
In may.
We announced a significant energy output milestone by delivering more than 10 million megawatt hours of clean energy across three continents from our shores source fuel cell power platforms since our first commercial installation in 2003.
On June seven.
You also energy celebrated its twentyth year as a NASDAQ listed company I want to thank our board of directors team members customers and our stockholders for your continued support of fuel cell energy.
For.
To be able to continue executing our business strategy. Despite the business effects of cobot 19, we've taken action to ensure liquidity to the next 12 months by securing a secondary loan commitment from Orion energy partners of up to $35 million for working capital and general corporate purposes, Mike will provide.
Additional details during his prepared remarks.
Said consistent with our purpose, we continue to strive to be a leader in sustainability and environmental stewardship. Looking ahead Fuelcell energy remains focused on four of the largest global energy opportunities one distributed baseload generation.
Two distributed hydrogen generation.
Three carbon capture and for our solid oxide platform, which provides electrolysis hydrogen generation long duration hydrogen energy storage and zero carbon hydrogen power generation.
We continue to believe that carbon capture is key to meeting global goals for reducing the world's carbon footprint without requiring most of the world to forgo technological advancements enabled by abundant energy.
We believe that Fuelcell energys carbon capture technology is currently the only known method that captures carbon while simultaneously producing more power.
Together with Exxon Mobil research and engineering, we continue to develop our fuel cell technology that has the ability to concentrate seo to across industrial applications coal and gas fired power plants, while also producing power from the fuel cell stack.
And finally.
I will give a brief update on how we're managing our business in light of Koby 19.
First we continue to pray for their health and safety of our global team our customers friends neighbors and communities. We took actions in the early days of this crisis prior to the government mandated restrictions to an ex safety precautions, including work from home mandates where possible and the closure of our manufacturing operate.
And then Torrington, Connecticut.
We have remained in contact with global team members suppliers and customers to share information and minimize interruptions to our business plan as much as possible.
Now that efforts are underway to reopen society under controlled plan, we're planning to begin reopening our Torrington, Connecticut manufacturing facility on June 22nd.
While the shutdown of our manufacturing facility was in fact, we continued the construction of our 7.4 megawatt project at the Navy submarine breaks in Groton, Connecticut.
And commence construction at the San Bernardino Biofuel project.
We will utilize a staggered approach to reopen our offices and we will continue to remain in compliance with all rules and regulations, including continued use of social distancing protocols and work from home where possible.
We have secured the necessary PPG for all of our team members and we have modified workspace is to promotion promote social doesn't seem.
Of course, we will continue to monitor the situation and adjust our operations as necessary.
And now I will turn the call over to Mike to discuss our financial results in more detail Mike.
Thank you, Jason let's begin by reviewing the financial metrics for the quarter shown on slide seven second quarter revenue increased by 105% compared to the second quarter fiscal 2000 $19 million to $18.9 million. The biggest contributor was revenue from service in license agreements, which increased by 4.4 million versus.
The prior year quarter to $7 million. The increase was driven by revenue recorded on mitral replacement under customer service agreements.
Revenues from generation increased by $3 million to 4.6 million in the second quarter fiscal 2020, primarily benefiting from additional revenue associated with the Bridgeport fuel cell Park project that we acquired in May of 2019, and the addition of the to Laurie I on that project, which began commercial operation in December of two.
Many 19.
We had 32.6 megawatts of operating power plants in our portfolio as of April Thirtyth 2020, compared to 11.2 megawatts at the end of the second quarter of fiscal year 2019, increasing the scale of our generation portfolio in order to drive long term recurring cash flows is a strategic.
Because of the company.
Advanced revenue from advanced technology contracts increased by 2.3 million to 7.3 million in the quarter due to the addition of revenues from the company's joint development agreement with Exxon Mobil Research and Engineering company, which was executed during the first quarter fiscal 2020, and the timing of activity under other existing contracts.
Gross profit was approximately $200000 for the quarter compared to a gross loss of 3.6 million in the second quarter fiscal 2019 results benefited from increased advanced technology work under our joint development agreement with Exxon Mobil Research and engineering company as well as lower manufacturing costs, resulting.
Yeah.
From a reduction in workforce in fiscal 2019, partially offset by approximately $1 million of manufacturing variances due to the shutdown of our Torrington manufacturing facility due to covert 19 pandemic and a loss from our generation portfolio.
Due to maintenance repairs at several plants during the quarter. We're disappointed by the results of the generation portfolio in the quarter, which now is eight operating plans, we're striving for operational excellence across the platform and have identified improvement opportunities, which have and will be implemented in future periods.
Operating expenses for the quarter decreased by $5.7 million were 41% to 8.3 million compared to 14 million in the same quarter of fiscal 2019.
R&D expenses of 1.1 million 10, administrative and selling expenses of 7.2 million reflect the decreased allocation of resources to internal R&D development, lower headcount and lower legal and consulting costs.
Please turn to slide eight for additional detail and financial performance for the quarter.
Our net loss attributable to common stockholders was $15.6 million or negative seven cents per basic and diluted share in the second quarter 2020, compared to a net loss attributable to common stockholders of 22.9 million or negative $2.06 per basic and diluted share in the second quarter 2019.
No the lower net loss per common share is primarily due to an increase in the weighted average shares outstanding due to the issuances.
In April Thirtyth 2019.
Results for the quarter also include a noncash mark to market accounting expense of 3.4 million for approximately two cents per share related to the fair value liability associated with the warrants issued under our credit agreement with Orion Energy partners.
Net loss totaled 14.8 million compared to a net loss of 19.5 million in the second quarter of last year.
In the second quarter loss from operations improved to 8.1 million compared to a loss from operations of 17.6 million in the second quarter fiscal 2019, adjusted EBITDA improved to negative 3.3 million compared to adjusted EBITDA negative 14.5 million in the second quarter fiscal 2019.
Primarily reflecting the lower expenses and improved gross profit I previously discussed.
Moving to the chart in the center as of April Thirtyth, 2020, cash restricted cash and cash equivalents totaled 73.4 million of which 44.3 million was restricted cash and cash equivalents.
Unrestricted cash and cash equivalents as presented on our consolidated balance sheet includes project cash and cash equivalents borrowed under our credit agreement with Orion Energy partners, which can only be used by our project subsidiaries for project construction purchase of equipment and working capital for projects approved under the credit agreement.
This totaled 18.6 million as of April Thirtyth, 2020, and as highlighted by the Green bar in the chart.
We also have unrestricted cash and cash equivalents, which can be used by the company for general corporate purposes, including working capital at the corporate level. This balance totaled 10.5 million as of April Thirtyth 2020, and as highlighted by the dark Blue bar at the bottom of the chart.
This includes proceeds of the PPP no received during the quarter.
In total as of April Thirtyth, 2020, unrestricted cash and cash equivalents equaled approximately 29.1 million compared to 9.4 million as of April 30, Onest 2019.
During the quarter, we completed the $14.4 million sale leaseback transaction with Krestmark equipment finance for the 2.8 megawatt biogas fueled fuel cell power plant located at the wastewater treatment plant into our California.
Additionally, under the cares Act created in response to the Cobot 19 pandemic in April we entered into a paycheck protection program loan or PPP note and received total proceeds of approximately 6.5 million in accordance with the requirements of the cares Act. The company is using the proceeds primarily for pay.
Overall costs as we previously disclosed we've taken steps to prioritize the health and safety our team members by temporarily suspending operations at our Torrington manufacturing facility.
We have not implemented any furlough lay off or shared work programs.
Excluding project cash and cash equivalents and the remaining balance of approximately $6 million under the PPP know unrestricted cash and cash equivalents totaled 4.5 million as of April Thirtyth 2020, compared to 9.4 million as of October 31st 2019.
Finally, turning to the backlog chart on the right side of the slide we finished the quarter with backlog of $1.34 billion.
This is an $80.8 million increase over the end of the second quarter fiscal 2019.
The backlog is comprised of 1.1 billion for generation 183 million for service and license and 57 million under advanced technology contracts.
Turning to slide nine I would like to highlight some of the recent steps. We've taken its provides additional liquidity to execute on our business plan, which includes building out our backlog of generation projects.
Under our business model as projects become operational we expect to close on long term financing at an efficient cost of capital, which recycles cash back to the company to be used to pay down the Orion credit facility or to reap be redeployed into other projects with the consent of the agent and the lender under the Ryan facility.
An example of this occurred in the quarter whereby in February we closed on the 10 year sale leaseback financing transaction with Krestmark equipment Finance. This transaction has allowed us to retain the to Larry Biomet project in our generation portfolio.
Which in turn provides long term return recurring cash flows 6.5 million of the net proceeds from this transaction where deposited into the Orion project proceeds account, which is a restricted cash account on the company's balance sheet. These proceeds are for future distribution at the discretion of the agent and the lenders under the you're right.
Facility.
To construct our projects for working capital support or for repayment of principal due to Orion.
Later in the quarter on April Thirtyth, we entered into the fourth amendment.
Ryan credit agreement, which permitted the release up to 3.5 million of restricted cash from the project proceeds account to be used to fund the construction of the company's 1.4 megawatt bio gas field project at the waste water treatment plant in San Bernardino, California.
Which began construction this quarter 2.3 million of the proceeds were released subsequent to quarter ends and the balance maybe release bio Ryan when the company achieves certain project milestones. Once this project achieves commercial operation, we expect to source long term financing for the asset which would again recycle.
No capital back to the business to Paydown on Ryan or be redeployed into other projects with the consent of the agent and the lender under there Ryan facility.
Finally on this slide subsequent to quarter end in order to alleviate substantial doubt about the company's ability to continuously going concern today. We are announcing that we have entered into a $35 million secondary financing facility to a fit the amendment to our existing $200 million credit agreement with Orion Energy partners.
Pursuant to the fit the amendment the lenders have committed to make a secondary facility loans up to an aggregate amount of $35 million available to the company for general corporate purposes. These loans may be drawn down between now and separate September 14th 2020, any drawn amounts maybe full.
We repaid on or before September Onest 2021 in exchange for this new loan commitments the company will pay to the lenders and option premium of $1 billion on the earlier of September 14th 2020, and the date of full repayment of all amounts drawn under the facility. Additionally for each draw.
Eight on this on the secondary facility loans the company shall pay the lenders and initial draw discount of 5% of the amount drawn.
In the event that full repayment of all amounts drawn under the secondary facility loans has not occurred within six months of the initial draw the company must pay the lenders and additional draw discount in the amount of 10% of any amount outstanding as of Sept state in the event. The full repayment has not occurred within nine months of the date of the initial draw the company must pay the.
Lenders and additional draw discount in the amount of 20% of any amount outstanding et cetera.
In connection with Orion, making this new commitment the company is providing additional collateral to the lenders by a pledge of the company's intellectual property assets.
All liens on the on the Companys intellectual property will be released upon full payment of all amounts drawn on the secondary facility loans or upon termination of the commitment if no amounts or drop.
The company is required to prepay any draws on the secondary facility in event that the company issues or incurs any new indebtedness other than permitted indebtedness as defined in the Ryan credit agreement or issues or cells equity, which includes any capital stock or any instruments security or rate that is convertible into or exercise.
A couple or exchangeable for capital stock.
Under these two scenarios, 100% of the net proceeds of any new debt issuance and 50% of that of net proceeds of any equity issuance must be applied to pay down the outstanding amounts under the secondary facility loans.
Complete description of the fifth Amendment is included in our second quarter 10-Q, which was filed this morning. In addition to this new financing with Orion The company continues to Alex.
I'm sorry in addition to this new.
Only with Orion the company continues to evaluate new debt and equity financing options as we execute on our powerhouse business strategy across all of our product and technology platforms.
To wrap up my comments on balance we are pleased with the overall progress that we made in the quarter in a challenging business environment, we look forward to continuing to execute against our backlog as well as other future growth opportunities as we emerge from the pandemic I will now turn the call back over to Jason.
Thank you Mike next on Slide 10, I want to provide an update on the powerhouse business strategy that we announced earlier this year.
The first phase were plan was to transform in order to build a solid financial foundation, which to grow the business.
Over the past several months beginning just prior to when I assumed the role of CEO in August of 2019, we undertook a number of restructuring initiatives to strengthen our financial footing in order to support future phases of our strategy.
Prior to covert 19, we were focused on strengthening our business by optimizing capital deployment and developing new business.
In the example shared earlier by Mike you can see that despite cobot 19 challenges. This remains an ongoing evolving process with goals of the improving our cost of capital overtime and working hard to ultimately achieving profitability.
We will continue to focus on disciplined capital deployment, and securing lower cost long term financing and tax equity financing for completed generation projects.
Pursuing commercial excellence is a never seen focus as we seek to strengthen our customer relationships established new customer relationships and build a world class customer centric reputation by keeping close to the markets. We serve in responding to the needs of our customers.
Our priority is to develop a deep strategic partnership with our existing customers as we also develop such relationships with future customers.
Operational excellence is that the hurt or success.
As we strive to execute on projects manufacturing and customer service.
We have implemented cost reductions over the past year there were evident in the results reported today as we continue to make strides toward profitability.
Reducing costs were on hearing to safety and product quality standards goes hand in hand, with our pursuit of operational excellence.
As we look to continue our group.
As we emerged from the pandemic, we have an opportunity to increase product sales in local in global markets, where we have been absent.
Innovation is our DNA.
It's what Fuelcell energy has done over its 50 year history.
We are constantly working toward increasing product life and reliability and exploiting our competitive advantage with multi use applications.
Multi fuel applications are scalable platform and multi feature capabilities, we have commercial products to meet distributed generation and distributed hydrogen applications. We also intend to develop and commercialize our advanced technology platforms across carbon capture long duration hydrogen based energy storage.
And zero carbon hydrogen power generation.
To expand upon or segment leadership, we will seek to capitalize upon our core strengths of delivering combined heat and power utilizing available biofuels for power production, enabling micro grids large megawatt platforms generating distributed hydrogen for industry transportation and.
Ultimately energy storage and power generation.
Underpinning our efforts is the education of commercial and industrial power consumers.
Covenants utilities as well as the general population on how clean energy can advance societal progress while addressing global sustainability goals.
We're working to ensure that policymakers environmental advocate and consumers understand the environmental security resiliency and reliability benefits that are possible with fuelcell energys platforms.
To expand our geographic markets, we're collaborating with channel partners on Pan European opportunities, including sub megawatt applications. We also remain committed to regaining access to markets across Asia.
There is a growing global appreciation for our technology platforms.
Our multi feature capabilities ranging from use of on site Biofuels microgrid applications carbon capture and hydrogen.
We intend that international growth will be part of our go forward strategy.
Turning to slide 11.
As I have outlined executing on our project backlog is foundational to our long term success.
As mentioned earlier on site construction has commenced on our 1.4 megawatt biofuel project with the San Bernardino Municipal water Department in California.
Seen here is the trenching and pipe work, which is well underway now.
Next up for onsite project mobilization does our 7.4 megawatt project in yet Bank Long Island, New York.
We have included a rendering of what this site is expected to look like upon completion.
And we look forward to bringing clean reliable base load power to reality on long Island.
We also continue to focus on commercializing advanced technologies, including carbon capture under our joint development agreement with Exxonmobil and Engineering company. We continue to advance the commercial development of our solid oxide technology through research and development cooperatives agreements with US Department of energy we are.
We're excited about our potential to revolutionize long duration energy storage and better integrate intermittent sources of power into a complex grid of tomorrow.
Our trajectories your source platform delivers three value streams first our platform delivers clean energy second the thermal energy and naturally produce water on our platform can be used as a source of hot water skiing, and or heating and cooling applications and third our Trojan platform generates high.
Good for use in transportation and other industrial applications.
Next on slide 12, we want to give an update on our long term targets and goals in light of how the cobot 19 pandemic has created some disruption and macroeconomic uncertainty.
These targets and goals are intended to add context to our long term strategy and therefore, we are looking past the current economic uncertainty with a time horizon stretching to fiscal year 2022.
Given our current revenue backlog and our expectation for increasing demand as the world emerges from restrictions imposed by the end demand and the performance in economics of our technology continued to improve we have no changes at this time to our long term growth expectations.
Key to achieving the plan is the continued execution of our project backlog and achieving commercial operation for each of those projects, which is then expected to deliver recurring revenue for the company to power generation and long term service agreement revenues.
On slide 13, I would like to review our key investment highlights for Fuelcell energy.
As discussed in previous quarters, we're range for access to construction financing for projects that were $200 million credit facility with a wind energy partners.
Which we expect to assist us in bringing our projects to commercial operation that are expected to generate long term recurring.
Generation and service revenue.
We continue to look for opportunities to enhance our liquidity and reduce our cost of capital.
We have an outstanding organization that is focused on executing on our projects achieving financial milestones, increasing operational efficiencies, while living or core purpose.
And we are working to implement our powerhouse business strategy to transform strengthening grow our company for the long term.
I will conclude my prepared remarks today by noting that it has been over a year and a half since I joined the board of directors at about nine months since I assumed the role as President Chief Executive Officer, and Chief Commercial Officer.
During this time the Fuelcell energy team has embarked on an ambitious plan to restructure and Reimagine the company to improve our perception in the eyes of our customers and partners and restore pride in this great American manufacturing company to reposition it for the future.
While we set an aggressive agenda over the past 12 months to lay the foundation for Fuelcell Energys turnaround.
I'm pleased that we have renewed energy inside our organization. Despite the challenges presented by the global pandemic and the cross functional collaboration by which we are advancing our purpose.
This concludes our formal remarks before we begin in the Q1 day I want to introduce a few more team members who are on the call with Tom Mike and me.
We're joined by Mike was out ski EVP and COO, Tony Leo EVP, and CTO, Joe Crossman, SVP finance and been Toby SVP direct sales I will now turn it over to Michelle to begin couponing.
Okay. So at this time, if anybody would like to ask the question. Please press star one on your telephone keypad.
Again that start one on your telephone.
Your first question will come from Jeff Osborne from Cowen and company. Your line is open.
Hey, good morning, a season and Mike I was wondering if you could touch on the Ryan facility how much of the 200 is withdrawn and have you started the six month clock in the 35.
Good morning, Jeff, It's Mike I'll take that one.
So we drew down 80 million under the Orion facility in.
On October 30, Onest and then in November of 2019.
Those proceeds were primarily used for construction of our projects in process, including the Groton project.
Today, we announced that we entered into a secondary loan facility with Orion for $35 million that can be used for general corporate purposes, and we have not drawn down anything under that facility at this point.
Okay.
And then on the generation side, you talked about some challenges there.
Can you just touch on the nature of those and what you're doing to mitigate.
Sure. So so dirt during the quarter. So just to kind of reset here currently we have.
Eight plants operating in our generation portfolio, we brought on the two already plant.
At the beginning or the end of October of I'm, sorry. The ended December of last year during the quarter, we had several plants, which had maintenance items that we addressed and.
Doing an overall review of of the.
Of the portfolio and continued to make improvements in the portfolio and expect improving operations going forward.
Okay.
Two other quick ones if I could one is on the you mentioned a mirror manufacturing costs because of Kobin I think a million dollars impact you in April quarter should we assume a similar amount.
For the current quarter.
So there was a million dollar.
Additional expense in the quarter related to covert 19 related to the manufacturing shutdown of the Torrington facility, that's really a function of unabsorbed overhead given that we weren't.
Producing anything as as chief incentives prepared remarks, we intend to bring the factory backup.
Starting in June at the end of June June 22nd that we'll be at a slow ramp so I would expect to see some impact in the quarter and the exact amount.
TBD.
Okay, and then it might have missed it but in the queue or the presentation you didnt have the.
Dates for some of the projects is that people used to provide the past can you just talk about the near term ones between Groton, Yap, Hank and the timing of those.
If kovats push those out by months weeks quarters, who is unclear.
What's the timing is.
Sure. So we did not want to given the uncertainty that's out there we did not want to be overly specific about exact dates of when projects will come online.
But as we said we have 40.6 megawatts of projects that are currently in the to be constructed backlog.
The ones that are currently in in construction right now on the Groton project, that's very far along with include could be included photos of that in the presentation on the San Bernardino project as we announced this quarter is now under construction as well as.
The light, but yacht pen project 7.4 megawatt project.
Which is active in in long island.
Got it thank you.
Your next question will come from Eric Stine from Craig Hallum. Your line is open.
Good morning, everyone.
Good morning here. So let me just curious on the on the generation portfolio, obviously, you're making progress there.
But any thoughts on.
Potentially selling any of those projects, obviously that would set back your.
Your plans there in terms of EBITDA, but would also help the balance sheet in light of.
Some of the challenges you you've got at the present time.
Sure. Good morning, Erik This is Mike. So the company has has had a long term strategic focus in building out our generation portfolio. So that we can benefit from the long term recurring cash flows of that portfolio. We've made significant progress in having over 30 megawatts.
Now on the balance sheet.
With higher revenue from last year on higher higher EBITDA from last year in and expect to continue to grow that portfolio.
So that that portfolio can provide the sustainable cash flows to ultimately get the company that EBITDA positive.
That said the company is always evaluating.
Capital priorities, we are continuing down our current path of building out projects and keeping them on balance sheet.
But as as we evaluate projects.
There could be opportunities in the future to sell.
What we're currently building out or potentially what's what's on the balance sheet, but no plans as we sit here today to do that.
We're fortunate to have a $200 million credit facility in place with Orion and we're strategically aligned with them to build out this portfolio and then we've also demonstrated that we can once projects hit commercial operation, we can bring in efficient capital to recycle.
The construction financing and reinvested back into the business.
And Eric I would just add to that but as you look at what we are doing as part of our overall transformation plan and the opportunities that we're pursuing for example in Europe. I think you will see we're part of our approach to that market will be fairly balanced between on balance sheet opportunities.
In selling.
Projects and as we develop new projects in our pipeline begins to convert that same evaluation for each project will be part of that process.
Got it okay. That's helpful.
Maybe just turning to carbon capture.
I know originally way back when when that when the first agreement was into their you'd targeted a pilot project with Alabama power and I know that that sense kind of been table. Just curious what I mean, obviously there are next steps plan, maybe any details you can share as to what those next steps maybe with X.
John.
Yes, so we continue to move forward with the J.D.A. today with Exxon.
And the goal of that is too.
Prove out the technical milestones that we've outlined in that program and then to move from that Sage two demonstration project.
Which exxon has publicly talked about as potentially being at one of their facilities in Rotterdam.
Okay, and I am seeing.
I've seen that but not I mean, any any thoughts on timing or is that something still to be determined.
I'm not prepared to talk about timing right now.
Okay, because obviously that's in cooperation with Exxon and aligning both of our plans around that.
Okay that was worth a try.
Maybe maybe last month.
Maybe last one for me just add loving update that when you're talking about.
Yes look into international markets, I'd Love and an update anything you can share on posco, and and where things stand in kind of the negotiations with the with the agreement breach that they have that they have made.
So Eric you know we've obviously.
Made public through filings some of the things that are going on with Posco. At this time, we're not prepared to make an additional statement I will tell you, though when we are we will certainly you know issue, an 8-K and and informed the market of where where we are with positive.
Okay. Thank you.
Thank you.
Next question comes from Colin Rusch from Oppenheimer. Your line is open.
Thanks, So much fans love.
Look to get a little bit more detail on the sales pipeline.
Obviously, you guys have let's not forget that I would love to see what the early returns are in terms of venture in some of the new geography use some of the traction.
The incremental product offerings. So you guys are.
I can bring out and then also just the order of magnitude on number of clients and how those clients are progressing through the sales.
Colin and good morning, how are you. This is Jason I'll make a few comments and then I'll turn it over to been Toby to give you more of a sense of.
Customers and what are you seeing in the in the market.
As a.
What we've done in terms of our go to Max market strategy is really think about.
How do we think about partnerships as we look at international markets and how we structure channel indoor distribution relationships thats been a big effort and focus for US Secondly, we really thought about how we position our product to give a set of applications, where we think we have really strong competitive different.
Great.
Thats, obviously around applications ranging from.
The use of Biofuels distributed generation.
Distributed hydrogen how we address opportunities where thermal energy is an important part of the customer solution.
And then also is we think about if you think about the European market, where we have sub megawatt products. Then how do you know our platforms become part of the overall fabric of the customers operation like we've demonstrated with the Radisson blew the snow were were integrated into the facility we provide all of the electricity.
All of the thermal energy needed for hot water.
And heating for the hotel, but I'll ask them to maybe give you a sense of how customers are responding to us now versus maybe how customers are responding to us.
12 months ago, certainly have too good morning call event Toby speaking.
I think that the customer response.
Is increasingly enthusiastic to our to our products.
We are known as the solutions provider that delivers.
Hi, as possible efficiency when it comes to converting fuel into useful electricity and heat well known as a provider of renewable energy via biogas.
And we're also known as.
Somebody who has been in the market delivering solutions through to these traditional applications for long time, what is increasing now is an awareness of the uniqueness of our applications around renewable electricity delivery as particularly around hydrogen and carbon capture we're getting a lot more awareness and I would say traction in.
Todays where we're speaking to folks around how to convert sort of advanced applications into today's opportunities and so I think it's it's each each market segment. Each geography has unique attributes that our strengths that we can go for.
And those are the ones that we're trying to uncover but.
Very optimistic about the sales pipeline, that's continuing to unfold and we'll see good results going forward.
Yes, I'll have some follow ups afterwards.
Turning to some of the refining assets.
So would love to understand kind of how the finance market is trending for you guys.
Obviously, there is a long history with the assets but.
Your ability to recycle capital would love to understand how relationships are developing with lenders in terms of repeatability of some of these deals and comfort level with the assets to the just.
Five some with Vicki.
Huh.
For.
Sure Collin, it's Mike I'll take that wanting and good morning. So.
I start off by saying, we continue to have very strong relationship with Orion you can see in the quarter that we.
That we recycle the capital from the Krestmark financing into the.
Into the San Bernardino project and were able to pull down financing for that and entered into an additional.
35 million dollar financing facility with them at the project level continue to have strong dialogue with existing and potential new lenders.
And obviously the next project up is the Groton sub base project in dialogue with with folks on on that activity level.
Is quite high and we continue to anticipate that as projects hit Cod, we'll be able to bring in efficient cost of capital using a combination of of tax equity and long term debt.
I think Collins is going to add to that I mean, one of the important things as I think if you look at the customers for which were executing these projects with very strong customers, where there's a lot of comfort from long term lenders with the credit quality of the customers that were doing business with.
Perfect.
Your final question for today will come from Pavel Molchanov from Raymond James Your line is open.
Think about taking the question when you talk about more than a billion dollars of backlog in the in the generation portfolio can you split that apart between.
Natural gas or other a conventional project versus bio gas and landfill gas on the other side.
Yeah I think.
Mike I don't if you've got we can certainly talked about which products are biofuel projects in wood products or natural gas projects and then try to give you some way to think about it yes. Good morning, Cobalts, It's Mike and thanks for joining so if you if you look at our generation backlog, we about 1.1 billion of generation backlog.
Predominantly.
Natural gas given that these are utility scale projects. If you look at the projects.
Bridgeport project 15 megawatt project, that's that's a long term PPA with Eversource that some natural gas the Rotten sub base project 7.4 megawatts natural gas and the and of course, the life of project, but when you to follow on some events projects. When you look at our behind the meter projects.
So the TLR biomass project as it is a great example.
That's using using renewable biofuels from the waste water treatment facility and then of course, our Toyota hydrogen project, that's the buy on that project as well so.
So I'd say from a dollar perspective, more weighted towards and GE, but certainly a.
A significant piece here also on on the biogas side as well.
Thanks, that's helpful.
In that context, let me ask about how did the European dimension of the story historically Europe.
Has been a pretty small part of your revenue mix, but now we're seeing more and more headlines about the European Green deal Neo net zero target by 2015 kind of an all of the above story I'm curious if you with that at the backdrop, if you're seeing more potential traction.
From European customers.
In any of the facets of the business.
Yes. This Jason yes, yes, we are and I think if you look across pennant a pan European market.
There are certainly certain markets, where there is strong interest.
In terms of our biofuel capability and particularly the pride proprietary gas cleanup capability that we have given the fact that we don't need to get biofuels to a pipeline quality gas to be able to use that in our platform. Some very strong interest there secondly, as as you.
You know or are likely alluding to is the interest around hydrogen in European markets. So theres a lot of interest in terms of our capabilities on our Trojan platform do you know just for distributed hydrogen to be part of our they're thinking about hydrogen infrastructure and then certainly.
As we continue to work on the commercialization of our solid oxide technology around electrolysis and hydrogen energy storage, that's certainly a big part of how they're thinking about planning for their energy grid of the future. So I would say today and it all has been the comment as well that.
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The understanding that customers are starting to get about you know I talked about the for global energy opportunities that we're focused on distributed generation distributed hydrogen carbon capture and electrolysis as long duration energy storage FIA hydrogen and then hydrogen power generation.
The greater awareness that we built around the fact that we've got technology today, that's commercial across two of those were well advanced and what we're doing around carbon capture and then we've demonstrated the ability that we haven't are solid oxide platform that realization is wrong driving strong interest from.
Customers.
On.
About our company in Europe, and I think been is seeing that in the conversations we're having with customers absolutely follow up until we speaking I would say not only do we continue to deploy our direct mail mall to originate new business in Europe ourselves and turning up really good opportunities in Europe, but we're also cultivating increasingly.
A very active channel channel strategy, there, having really good conversations with with smart folks who are well positioned to take advantage of some of the applications that that Jason was talking about I was just make one additional point to one of the themes that we're doing is there's a lot of ambitious goals out there on the table.
In the immediate near term you've got you've got a 100 with people and so we're delivering projects that are cash flow positive from day, one that going that remove carbon because were lower than the slow to footprint on the grades now but as you go forward you can retrofit and adapt with that same capital asset to increase your carbon footprint footprint going.
Forward. So so that's also attracted to the folks that were talk through over here you can grow pointing means.
In Europe, and the leadership position that May hadn't previously at least in my view had occupied but there definitely are increasingly doing so.
Appreciate the color guys. Thank you.
Thank you.
Ill now turn the call back over to Jason few for his remarks.
Thank you.
I would like to close today by again, extending a heartfelt thanks to all of us at Fuelcell energy to the healthcare professionals and other essential workers around the world who have been on the front lines during the pandemic.
I also want to say that I am proud of all of the Fuelcell energy team has been able to accomplish especially over the past quarter. Despite the koby challenges we faced.
I'm very excited about the future and our work to deliver on our purpose to an able to world deliver lights and powered by clean energy.
Thank you everyone for participating on our earning call today and for your interest in Fuelcell energy. If you had any follow up questions. Please don't hesitate to contact us. Thank you.
Thank you everyone. This will conclude today's conference call you may now disconnect.
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