Q3 2020 New Fortress Energy Inc Earnings Call

Ladies and gentlemen, thank you for dialing in and please stay on the line your conference call will be beginning momentarily.

[music].

Hi, and welcome to the end of the third quarter 2020 earnings Conference call. At this time, all participants I went on listen only mode.

[laughter] hastened to we'll get much and answer session to ask a question just touching you'll need about star then one on your telephone your.

You're acquiring any further assistance. Please press star then zero. Please be advised that they felt that may be recorded.

I like to hand, the conference over to you. If you could today Mr., Josh came vice president of Investor Relations.

Thank you. Please go ahead.

[laughter]. Thank you I would like to welcome you to the new fortress Energy third quarter 2020 earnings call. Joining me here today are Wes Edens, our CEO and chairman of the Board, Chris Jones, Our Chief Financial Officer, and Sam Adult Vice President of project development.

Throughout the call we're going to reference the earnings supplement that was posted to the new fortress energy website, if you've not already done so I would suggest that you download it now.

In addition, we'll be discussing some non-GAAP financial measures during the call today, the reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement before I turn the call over to Wes I would like to point out that certain statements made today will be forward looking statements, including regarding future earnings. These statements by their nature are uncertain and may differ materially.

From actual results. We encourage you to review the disclaimers in our press release and Investor presentation regarding non-GAAP financial measures and forward looking statements and to review the risk factors contained in our quarterly report filed with the SEC now I'd like to turn the call over west great. Thanks, Josh Thanks, everyone for calling in early on.

On the 29th there.

As Josh said, if you have had a chance to either pull up on your screen or download the the management presentation that will be what we referred to as we go through this would be helpful to have you have in front of you. So.

With that let's let's turn to the beginning and start with page number four.

We had a very very productive quarter. So first full quarter as a in our covered world. We had a number of initiatives, we started the quarter and I'm happy to say that we actually.

Achieved most of what we set out to do starting in first and foremost with production. So as we mentioned in our last earnings call on the July 10th was a big need for it that was the date when both of the turbines turned on down in Puerto Rico.

Basically it was the moment that we've kind of switched from being a development company to an operating company and I'll go through it and just a second but the bottom line is that we achieved record volumes 1.8 million gallons per day for the quarter actually hit a peak in the month of September to about 2 million gallons, we're well on the way to being the cash for enterprise that we had that we set out to be.

Second of all you know the development for.

For us above both our large scale developments in our terminals and then the smaller developments for our customers.

Also had a very productive quarter challenges for sure from the coveted environment and there was some delays, but they are modest and the I'll have Sam go through them here in just a few minutes, but the the the tagline is that basically on time and on budget for the most part I'm very very good.

News to report there new business the cycle.

We have a lot to talk about and all what well spend some detail on when we get there, but basically we've become very focused on kind of organizing our business into the organic growth of our existing terminals the new terminals as well as then the new markets that were targeting.

We've hired a lot of people, we've actually put a significant amount of focus on the infrastructure build out there and I think the results are going to organise shouldn't speak for themselves or shortly.

Hydrogen all talk a fair bit about it I mean that path becomes clear every day as to what what we intend to do our first two projects. We announced this just recent days first investment that we made in that electrolysis company Israeli company, we made a small investment in here a few days ago.

Also us establish a joint venture to run hydrogen creates basically the first hydrogen burning power plant here in United States to give deal data for us. So that's great. But there is a lot to talk about there and then Chris can go through the finance and operations of which there's a lot to a again watch report on so with that if you flip to the next page.

On page number five no.

July 10th was the date when both would be the turbans turned on and for the most part they had been running very reliably ever. Since this is a photo that you see there were 1.4 million gallons per day in July.

August we then added one significant customer piece of business, which Jim Alco.

Company in Jamaica. This of bauxite company, they switched over their boiler operation from HFO to gas so dirty fuel to clean fuel. That's a that's a big win for the environment also was an incremental piece of business for us and by September 1.8 million gallons per day kind of running.

As we expected if you look at page number six.

It's a busy page and it's not uncommon not intended to be the the cleanest presentation of this but you can see on a daily basis that.

Modest amounts of variability as our customers' needs go up and down but this story overall is one of growing and also growing and diversity and what's very important for our business or both of those things. We obviously want higher volumes, but we want we want more and more customers on our on our our business that will create the cash flow profile and the reliability that we want as an enterprise.

And the quarter was very good in that regard so.

So for the next section will talk about the developments I'll turn over to Sam Sam.

Thank you and good morning, everyone.

Our business is about terminals and customers that we supply from those terminals.

Currently we have three terminals in operation.

And two terminals under construction.

The two under construction and moving to slide number nine.

Largely on track and we achieved significant milestones.

Talking about the loss on the Mexico terminal, we encountered a couple of months of delay because the up some of the government offices with close between March and July.

You get to Cove. It the project is on track right now we have 110 people on site. Currently by next month, we will have 150 people on site.

And the completion of the terminal will be by mid December of this year and the power plant completion will be by end of Q1.

Next year.

We also realized that is an increasing demand on power and love pause on in Bohai in general So we filed for a new generation license.

And we achieved and we got the preliminary approval from a from the authority. So we went ahead and bought new land.

And we filed for the tournament and we actually see the construction permit from the new land by next last week.

So we will keep you posted we don't we have not shown what will happen with it but it looks very promising.

Moving to any color I go up.

The project is on track for completion by Q1 of next year end of Q1 next year or early Q2.

We signed the ports confession and Nicaragua, we bought the land for that power plant and we finalized the engineering and file for the permit this.

This week, we finalized the contract with the <unk> the APC contract with the power plant contractor and the mobilizing to the site next.

Next month.

So moving to slide number 10.

Our customers large or small the need gas and power, but the gas we supply them from the existing terminals and for the power we fully finance this solution.

We currently for the small scale or what we call them to organic growth, we have 24 customers and operation and nine under construction.

But you will see in the picture here on slide number 10. This is the same any projects nine megawatts installed but average of 11000 gallons per day and.

And we turned on this project few weeks ago. We are proud of this project because it's a it's a small island luxury resort and that a lot of island in the world. So this is a great proof of concept for what was coming in especially in the Bahamas.

We also this last quarter, we turned on the first two small scale customers in Puerto Rico that Coca Cola facility and the data center for Banco popular the largest bank in Puerto Rico.

[noise] once we also would like to highlight the out of the nine customers under construction right. Now is our first client our first small scale client and and Baja.

Which is the four seasons resort and Los Cabos.

Once all these nine customers out online, which we expect by end of the year or early next year. We will have four total small scale about hundred and 90000 gallons per day of production.

Now moving to slide number 11.

And this is about the ISO flex as a quick update.

On the logistics for the ISO flex we hired the former COO of publicly traded offshore supply vessels company and he brought a very talented team with him be opened the office in Louisiana.

It wouldn't be our office to manage this part of the business the team purchase the LSV, our first small ship, which we call. It NFI is zero and I didn't fight two barges that we will purchase within a couple of weeks the manifold. Our proprietary manifold is also under construction with completion by December of this year.

Great because it's a under Tom following pages, the cartoon that showed before which demonstrates kind of how this all works and bottom lines that we think that this is a real game changer basically by using ISO containers and filling them up from the big ship, and then bring them to shore and off loading them with just a cranes and and typical kinds of equipment.

You'd find in ports already we've basically skip a step up from that.

That reduces our capex by about 50% or reduces our opex by about 50%. It takes the time to deliver from 24 to 36 months down to three to six months. So it's a it's a huge change across that the first two places we'll deploy this will be in Nicaragua and in Mexico.

And you'll see this this will transform from a cartoon showing this process to actual performance here in just a few months. So it's a big deal for us slipping.

Flipping the real world briefly to the new business side on page 14, as I mentioned earlier, we reorganized our sales into two.

Thanks functions the organic sales groups with our existing terminals and then new terminals and targeting around the world. We've added more than a dozen new people get the build out of the origination network cross across the World. We think there is a significant step for us forward as an organization and I think I'm very happy with the people that we have brought in your organization that we've created anchor results will speak for themselves.

Shortly you look on page number 15, just to take a quick look at the what organic growth really means here. The five terminals that are under construction are up and running right. Now you can see the utilization rate. If you circle that at the bottom of the page, 29% that means that that 71% of the terminals are still available for new customers that translates.

Two total capacity of another 8.2 million gallons per day, if you sold all that at our average margins right now generating over $1 billion in PNM before so huge opportunity for us and you're at a huge competitive advantage. We already have the infrastructure built we already have logistics in place where you have the personnel. All we really have to do is just go to our customers execute.

With them and get them online. So this is a big focus for US is the best business that we can do there is lots of things.

Things that we think are likely to turn up here in the next.

Months and quarters, but organic growth is clearly one that can be one of the real engines of growth for us cash flow wise next year pay 16 that the new.

Near term pipeline for our business is actually significant but what we what we have done in our reorganization of our of our origination folks has become very focused on key markets. There are six countries in particular around the world that we think have got the characteristics that are the most ideal for our business of course, there is of the you know the several hundred companies in the World we are.

Think that two thirds of them need our services in one form or the other but theres a handful of relative handful that actually we have got we think that the characteristics. We will have the biggest impact for us those three characteristics or a large populations the significant existing power infrastructure and present in particular existing thermal power that can be converted in three significant opportunity.

For economic growth, especially once the cobot time has passed so these for US circles I show you Theres eight different transactions that we are in the middle of right now.

As you can see there is a real push to the right hand side. When you look at LNG flows around the world about 75 or 80% of all LNG goes into Asia. So it's no surprise that when we look at areas that we think we've got the most promise thats, where we are but Central America, South America Africa Asia, Theres, a tremendous amount of opportunities there our goal is to be F.I.D. on too.

New projects between now and the ended the year when a couple of months left in the year, but we're down the path on a number of things and I think we've got a good good opportunity to bring two of them over the finish line and then the goal for next year as five to 10, where the real target as a company to be 20 to 30 terminals over the next five years.

Turning to our to hydrogen a little bit.

Put a number of slides in here I'll go through this briefly but this is a this is my.

Kind of reset in terms of how we think about the business page 18 on the left hand side to the first thing is to give a little bit of context is how big is the market for hydrogen today, we all talk about how big we think it can be and what a transition fuel can be in terms of helping us get our fossil fuels as a world, but how big is it today 100 billion.

HEALOS of hydrogen are sold every year right now so at an average price of about a $1.25 kilo that translates into a hydrogen market today, it's $125 billion just to give a little contrast, the LNG market today, which is about 360 million tons at about $5 and then maybe to you is it.

$90 billion. So this will come as a sort of surprised many people, but the actual hydrogen market today is actually 30% bigger than the LNG market is today, so huge huge market that exists right now, whereas it all come from it comes from a couple of different methods steam methane reforming and coal gasification in particular, you can see the.

Electrolysis is a very small part of it all you really need to know about steam methane reforming SM are in coal gasification is it produces hydrogen but it does so in a very very dirty fashion basically a 11 kilos of C. O. Two created for every kilo of hydrogen with SM R. 22 kilos of Seo to created for every one kilo.

So of hydrogen created by coal gasification.

That what does that mean in the world and means that to produce hydrogen which is the cleanest of all fuels.

Generates 2.5% of all global emissions, so it's a bit of a disaster from an environmental standpoint, that's the bad news. The good news is there's lots you can do about that if you look at page number 19.

Just again to give a little bit of context, the hydrogen that we're looking at in our in our projects can come from three basic feedstocks, one water, obviously largely free it's not exactly free but we put it is free because that's essentially what lives. It can come from gas we can come from coal those both have chemical compositions that are actually able to.

Create a lot of hydrogen if there if they are broken up properly the production technologies. We've looked at over 150 companies. So we've seen a lot of different production technologies.

Our really three different types here electrolysis, which is the process to take water and splenda into the oxygen and hydrogen met.

Methane prep process and coal process. All you really need to know is that these are processes that use significant amounts of heat and although they are similar to the technology to use right now the significant differences that can be made entirely clean we believe and I'll talk about that in a second so the best price at the bottom here I draw lines under just and just for reference and what this.

It really represents is our view of if everything worked perfectly in the world which of course it doesn't what is the theoretical price at which you could create hydrogen water 80 cents a kilogram. That's a that's basically two cents continual power, 100% efficiency of your of your Electrolyzer gas.

Through methane paralysis 60 cents per kilogram coal 20 cents per kilogram, that's the one to actually draw a line under because theres, a theres a little bit to talk about there look at page number 20.

When we we tried to dimension.

You mentioned the problems and what we're trying to address what's our focus will all three sectors power industrial and transportation.

Combined to about 80% of all emissions. So in very simple terms it wouldn't be perfect, but if you could actually turn those three sectors from burning dirty fossil fuels to bring clean hydrogen you go a long ways towards cleaning up the this year two in the atmosphere for us so on the right hand side I put a box together that just shows you and dimensions, what the relative competition is.

Fossil fuels versus hydrogen today. So I said, if we are able to generate hydrogen at a dollar a kilogram.

Right to convert that into an M vehicle than just multiply by seven and a half well power today look at power in the United States, Henry hub, which is with index.

Which the natural gas is sold is about $3 say cost them 75 cents and transport cost to get that natural gas into their power plant $3.75. So what that means to me when I look at this is that even in our kind of clinical best case scenario using kind of conventional electrolyzers, we're still about 50% higher in price.

With hydrogen than we are with natural gas industrial as I said that earlier page. The average price that is paid for the industrial hydrogen screen is about $1.25 $1.25 times, seven and a half is about nine and a half so the dollar versus the 754 hydrogen versus 950 could be competitive again in the back.

Sks transportation there is a big gap there I put an asterisk next to it because that is before the cost of logistics, which is a big deal right. So in order to get basically hydrogen to people in service stations or in gas stations are in trucking stations or whatever around there's a significant cost to that and so while you look at these two say on paper they won the ELD.

Naturalizer could have the biggest impact potentially on transportation. The other two is actually simply not good enough.

The the goal then is actually very simple either you have to find a way to make hydrogen at roughly 50% lower than what we think is the best case or the governments have to step in and do one or two things they have to either subsidize that the other production costs of of of hydrogen bringing it down. So it's more in line competitively or they have to put attacks and play some people that are burning dirty fuels.

When they say carbon tax what I really mean is make it more expensive for people to burn those dirty fuels. So that our fuel is more cost competitive and those are those are both things I think the government could and should consider but without that if you want to just take care of yourself, then you need to actually produce a cheaper. So page 21. The goal is actually very simple it's zero emissions.

And something has become very clear to me as I think the way that we characterize hydrogen and its production in my opinion is not really correct.

We say that electrolysis is clean quote unquote, if the power comes from renewable source in other words, it's the as I say, it's the Hippocratic oath of hydrogen first do no harm is that if you're not creating emissions and therefore, it's clean and so we call that green, but the characterizations are little confusing at least to me, there's green and Theres Blue and there's gray and there's even turquoise.

Yes, and I think that has less let is less important to categorize it that way than that and then the much more simple way, which is no no emissions and when we look back at that earlier chart and you see that you guys water and gas and coal and coal and this paralysis. This method is this whole process could be too.

Generate hydrogen as cheap as 20 cents, a kilogram, which again would be less than the 50% threshold you'd need to really go turn on the power.

If you can sequester the Seo to that comes out of that not like spread into the atmosphere. It then becomes very very clean power. There is a number of articles have been written around this if you actually go in there is a Forbes article that I actually read just last night about coal paralysis and things that are being done around the world I think you're going to hear an awful lot about this and as as odd as it may seem that the dirtiest to the fossil fuels.

This may be real gateway to creating really really clean hydrogen for us I think it's got a lot of promise simply because if the government's don't intervene and make it more expensive to earn fossil fuels and the market has to go produce that this is the place where it's going to end up going.

So last thing page 22, what do we do this quarter, we did two things long ridge, which is the photo there. This is a I was an abandoned smelter site aluminum smelter site that.

The infrastructure fund another kind of a sister company had taken over really an interesting asset. They are building a 485 nine megawatt power plant there, we're partnering with them to bring in and burn at least part of the feedstock to be hydrogen the goal for it to all be hydrogen at the end of the day.

Really in my goal and this is presuming success in other words presuming that we can find a clean way and a cheap way to to create hydrogen what does the field data actually support. So we know what GE tells us they think it will do and we trust them of course, but we wanted to see and verify that ourselves. This will be a real opportunity as this gets up and running next year to run hydrogen through.

See the field data and see how it actually performs in practice. So that's a that's what this can be a big experiment for us and something that will be very productive to the right hand side of the page us as a company that we invested in called Hctwo Pro two pro Israeli based Electrolyzer. It basically is a much more efficient way of electrolysis.

Simple terms, it's got two different cycles that it runs through and it uses the heat that has created from the first cycle to make the second cycle more efficient. So it's kind of a combined cycle as I like to think of it in lay terms of Electrolyzer. The bottom line is that its use is 30% less electricity less than 50% of the capex, we've tracked to traditional electrolysis.

Yes, and it achieves efficiencies close to 100% so on paper in the laboratory this actually looks like a very promising technology.

Technology, we made a small investment that we're going to partner with these guys to basically build a prototype. So we can get actually the field data for it but again. This is something you think is an exciting next step for us.

Just flipping to the next section on coated I turn it over to Chris to talk about this in second but we posted it on our web page. This is page 24 post thus our webpage and I just wanted to give a little bit an update in terms of what we have done as a company because essentially at least from my perspective Ive been sheltering from work since the the 11th of March. So we've been here every day and we actually are.

Company has been coming to work since the first of June.

Once covered happened.

Again, my point departure was win.

Adam Silver like suspended the MBK season on the Marshall 11th a few folks came on the 12, there was a handful that run on the 13th and it was a new world.

The other day, our office here in New York.

The following Monday, there were 12 people in my dog. So that's we were socially distance because there's a large office there is very few people here.

As the months past, we've had more and more people that wanted to come to work and so basically we set out to create environment for them that number one was the safest possible environment. They can be and they can feel comfortable coming to work and number two allow us to put in place the testing biometrics and other protocols to ensure that we are giving our employees the best chance of being here.

And safe and then also we did a number of things with our with our folks in the field because as I said at the beginning we're in essential enterprise our customers rely on us to for the for the power and the gas to run their businesses and.

And so the of all the things that we did here and I'll have Chris talk about the one that I am I am most proud of is that in the months of May and June which were kind of the peak months in terms of the uncertainty of not knowing what's going to go on what's going to happen with this we reached out into all of our field personnel, we paid them basically a bonus of 150% of their salary for those two months to just as that or not.

College month of what they were doing was important to us important to their customers. We want to do the right thing. So all these actions at the end of the day total up to about $1 million in costs was not free to do this but the the results on has been really terrific. So far Chris yeah. Thanks, Wes Good morning, everybody I appreciate the time to update you on the results for Q3, but first to talk about Cobot Wes said, we made.

A carefully considered decision to return to work and I'm happy to share a few details as an essential industry our responsibility to keep the lights on for our customers drove us to find a comprehensive safety plan to return to the office and as Wes said, we're so proud of our team for their response to support our customers in the wake of the pandemic as Wes said the company provided bonuses for the central workers staying onsite at our power.

Our plants and our gasification terminals.

Additionally, we created our own version of the NB a bubble at the corporate offices, we instituted daily questionnaires and no touch thermal temperature checks, we increased the frequency of cleaning the office, including cobot deep Queens on a biweekly schedule and we've taken on a new floor to double our office space and maintain social distancing. Most importantly, weve required mandatory weekly test.

I think for the whole company and we administered over 3200 tests in the last six months. This has resulted in a safe and productive work environment would knock on wood no in office transmission.

Excited to announce we've just hired over 60 people. We've completed a construction projects signed eight new contracts were ammo use representing over two and a half million gallons per day, all well selling record volumes for the quarter. Our successes during the pandemic are owed to great customers dependable vendors and dedicated employees, who had been extraordinarily good.

Emitted during these challenging times.

If you turn to slide number 26, how quickly walk you through the summary financial information for the quarter.

The biggest driver of our results as you know and as important you've already heard our volumes, we averaged over one and a half million gallons per day for the quarter and as Wes said, we sold an average of 1.8 million gallons for the month of September.

The increase in volumes is almost entirely driven by increases in Puerto Rico and gas sales to the gym Alco report refinery boilers red.

Revenue for the quarter increased $42 million, which is a 45% increase over Q2 and despite the large increase in volumes. The cost of sales was mostly unchanged due to the decrease in the cost of LNG to a little more than $4 for the quarter.

We are pleased to report that are non development cash as DNA expense for the quarter was 19 million Bucks, which is just underneath the 20 million, we are forecasting and on track for $80 million for the year.

One thing to call out as we had $24 million loss, resulting from the write off of debt debt issuance costs associated with the early termination of the size of the credit facility.

And lastly, well I'll touch on the balance sheet in greater detail. Shortly we have over $150 million in cash on hand, which when combined from cash from operations will fully fund the remaining cost to build out Mexico Nicaragua.

If you flip to slide 27, you can see the volume ramp in cash flow estimates for the remainder of 2020 and 2021. This familiar graph shows the committed volumes only through the growth excuse me shows committed volumes only and given the growth opportunities both organic through new.

Customers through existing infrastructure in inorganic through new terminals, there is significant upside.

In Q3, we averaged one and a half million gallons per day for the quarter and are expecting around 1.8 for Q4 on our way to 3.5, once Mexico, Nicaragua terminals commence.

When you look at the consumption for the quarter and break down large feared scale terminals versus the direct sales to customers volumes were right, where we forecasted to our base load consumers.

Finally, moving on to page 28 on our Q2 earnings call, we laid out a roadmap for our capital plan, we've executed on those key priorities.

August we priced an upsized $1 billion of secured notes offering due 2025 at 6.75% and refinanced our existing corporate facility and the Jamaican subsidiary bonds. This.

This transaction pushed out our debt maturity, two and a half years and will lead to $23 million of interest reduction for 2021.

The line is now open.

So.

One thing I've been wondering about with OPEC kind of looking at easy production and Libya, possibly coming back online.

There's a question that maybe they're maybe some some easing in the price of crude and I think that kind of might have an impact on sort of the diesel competitive cost in the high school for people all kind of moving lower.

Is there any risk that if that spread compresses that some of your your existing customers in Puerto Rico in Jamaica.

Can do they have the ability to switch power sources and essentially you use diesel instead of natural gas from that they're required from you or are they pretty pretty much fixed into to what power source, they're kind of generating from.

Well generally the answers that they are committed I mean, we have a range of contracts they arrangement mershon contracts too long term committed contracts.

The bulk of our contracts are a longterm take or pay the average terms of our contracts is roughly 12 years. So.

Most part they are but there there are some that have the option to switch back and forth when they all say as we had done this study for one of our investors.

This summer we look back at the previous 10 years of data.

King at the delivered price of diesel versus versus the delivered price of gas in their country as an island country and over that 10 years. There were 24 days that diesel is cheaper so at a 3600 50 days roughly.

There were 24 us in less than 1% of the days was it actually cheaper.

Of course, if you had long term very very low prices as you had.

A little bit of a dip. This this spring that could that could definitely an impact that but I think that from a cost competitive standpoint.

The last 10 years are any guide.

Over 99% of the time, we're cost competitive in addition to that as long as you are around that there's a lot of other hidden costs of running liquid fuels on the maintenance side and the operational side in particular.

Turbines don't like running on diesel.

And so the marginal cost of maintenance in marginal costs of taking care of the equipment. The O&M costs are a little bit higher and people definitely care about the environment I think one of the real misconceptions people have is that somehow if you're in developing country and you're trying to get your energy situation that under under control you don't care as much about the environment as people in developed countries.

Trees and from my perspective, that's just flat out not not the way that it is so I think if you're if there's anything close to parity.

Course would switch but.

But again historically, it's been it's been much to the favor of gas over that period of time.

Okay.

And then just another.

John I think we lost Ya.

I'm curious if you have a lot of any clarity that you can disclose in terms of what you've re contracted and and what your kind of gas prices starting note to shape up for 2020 wanted how much of that is hedged and how much that's kind of spot exposure.

We haven't we haven't done anything material.

Reportable on the on the hedging side, yet there's a lot that is.

That is in the works right now we still have significant.

Significant open position next year I'd say.

Commentary over the quarter is that.

The impact of the all the hurricanes that hit the Gulf Coast shutdowns, there there was a fire.

One of the.

Reduces in Norway, there's just a handful of events that happened and so you took out a fair amount of supply and with that prices rose a bit over the course of the of the quarter, but.

Our position is still a long term very very much and the money there's been very very little impact when you look at it quarter over quarter of the value of the longterm position and there is some short term volatility and you'd expect to get that I think most people in.

In the market would believe that there's.

There's gonna be some volatility over the next couple of years as you get the short term swings and supply and demand, but you have a significant amount of production.

Action, which is expected to come on in 2024 and 2025, the lead to a very oversupplied market and that that allows us to have a lot of flexibility in terms of the kinds of <unk>.

Contracts that we could get so we don't have anything specifically to disclose we feel really good about this right now I mean in Q3, we bought gas sub $3 Q4 will probably be you know.

Context was around $4, even though the market is five plus dollars today. So we're in a good position here for the fourth quarter and feel very good about the aggregate position going forward, but as I mentioned before this is something that is a focus point for me personally and for the firm and I think we'll have some good good developments to talk about here and there not so distant future. So.

Okay. Thanks West.

Thank you and our next question comes from Devin Mcdermott with Morgan Stanley. Your line is now open.

Good morning, Thanks for taking my question.

So the first one order to ask on his hydrogen and I. Appreciate the additional time in detail you provided on on this call and also congrats on the significant steps you've taken just over the past few months in advancing the zero ambition that you all have I wanted to talk about the specific next steps here do you think about really the next few years and executing on this.

Strategy and I think you all have talked about doing some pilot projects that the Ht Pro investment I was wondering could comment on what you're seeing there in front of what those projects might look like any comment when customer demand for green hydrogen as well and then should we think about additional tech investments account. For example, you talked about the gas and coal Thralls is is that some.

Thing, where where you could make some seed investments as well I really just trying to frame me up. The next few years interior the opportunity sat in capital allocation Herronimo's opportunity yeah.

Well the two two answers to that one is with respect to the prototypes.

Really we're trying to identify technologies you think have promise.

Make an investment in the company then become a partner to build a prototype get field data to support what the theoretical data is in the lab. So that's the that's the general thesis that we have H. Two pro we think is very capable group, we like their technology. So we want to see that out in the field build a prototype with them and get that deployed.

And so that's that's the one specific thing.

When I laid out.

The the numbers on water.

Gas and call I did so because my.

My view about this my attention of this is to try to find a technology try and find a process trying to find a way to really deal with the climate change issues in a very very broad way and you need to have scaled to do so and the one page and I laid out during our show kind of theoretical best price of 80 60.

20th those are very theoretical best prices today and of course things could change.

But that's if everything works out perfectly I'd lay that out because simply if you then add on a capital cost and you ended up at a dollar for example, electrolysis that's still roughly twice as expensive as what people can burn natural gas in there have been a power plants here in the US today, so that is not going to actually solve the problem unless the government makes it more expensive for people to burn fossil fuel.

<unk> or they they give you some production credit. So then when you go to the right hand side of the page and you look at the other other things that are possible. The call really does leap off the page and so very counter intuitive things.

For the the ESG folks that are trying to invest sustainably. They here call I'm sure. It makes her eyes roll a little bit but.

That's why I say, it's not about in my view, it's not about the characterization of kind of green green or blue or a turquoise or gray. It's really can you produce hydrogen and do so in a way to create zero net emissions you can that's very clean and what we have seen has been some pretty promising technologies that would indicate that.

It is possible to basically create a.

Hydrogen very very inexpensively. This way and then the stream a C or two is very pier and see her to itself. Then it becomes a question of what can use the C. O. Two it's got an industrial years. It can also be used for power generation. It can be used to sequestered underground, there's a whole bunch of different see frustration technologies and so to me the the the.

Key to this thing is if you can figure out a way to sequester economically that unlocks a huge new store of value I mean, a joke about that guy's here migrate state of Montana has massive coal reserves, you could end up with Montana, and Wyoming, the many Saudi arabia's of hydrogen production and I and I know that sounds fanciful, but go onto the internet start looking at these that these <unk>.

Articles and things that are out there and you'll see this is a very serious enterprise what people are looking hard at and it may not be the ultimately the best like long term solution, but it may be a great immediate solution. So.

I believe there will be.

Trillions of dollars made literally in the in this transfer of.

From a fossil based system to a hydrogen system and I think that the people that can identify the right technologies in the right feedstock and then industrialize that are going to do very well and doing well by doing good and something that I'm very very focused on we're very focused on we've got a great team of people that are working on and stuff and.

So I think we will make a follow on investment my guess is that some of these other sectors much sooner than later and I'm very impatient about it but I think that you have to get the cost of it down kind of 50 or less than 50 cents or less everything changes right 50 cents or last thing you can do it with with clean emission free production.

You will see a massive transfer in silver and so it's very clear to me now what the path is and I think the electrolysis has got a lot of like a lot of promise in particular and transportation, where you can imagine.

Distributing electrolyze resolve the place and maybe you're making your own fuel effectively we're using it and that's how you cut down on a lot of your your logistics and transportation costs and what not there's there's a number of different passed but the big one that would be a game changer is figure out a way to really create a long term emission free hydrogen at 50 cents or less that then puts you right into the strikes of all these different.

Technology as I said the three it is transportation that is power and it's industrial use solve that and you've done a really good job is kind of clean things up so.

Sharp and long answer to a short question no.

That's great and really helpful context, and my second question is switch your a bit to the growth opportunity you have within the existing portfolio any of the additional detailing disclosure on the small scale opportunity and the execution you've had there is really good to see.

You highlighted the $1.2 billion.

Opportunity from increase in utilization on existing terminals and I guess the question I have it is one any logistics constraint that would prevent you from going to theoretical 100% utilization is you highlighted in that slide that we should be thinking about and then secondly, I think I'm a slight it talks about 50000 gallons per day off from the nine customers you back to get it on so far.

And the remarks, you also talk about 190000, a small scale within the portfolio. So just kind of bridging those two numbers and you've been thinking about what what's.

Luckily to come here within the next 12 to 18 months.

Yeah, I mean, the answer the first question there is no constraints with all of that.

I've, often said and the and the infrastructure business. If you it's actually very simple if you create infrastructure for one purpose and you don't use it you lose all your money. If you. If you created for one purpose new use that you get a decent return if you created for one purpose and use it for two or three or four that's how you make outsized returns in the business and so this is.

Just simply like an attempt to do the the latter which is basically take the it infrastructure logistics. The people personnel that we have in place and go aggressively end of those markets because we have an asset competitive advantage and so are our renewed focus on that Sam touched on a little bit we've got.

Milestones, we've got our first couple of customers turned on in Puerto Rico, We've got our first contract signed in.

<unk>.

In Mexico, we think that there are many many of those to follow and that is really low hanging fruit and so it's got a real focus for us in those markets. We think there's significant incremental demand as you can tell from that table, we've got significant operational flexibility to to to service them. So that's.

That's a really big focus for us again, and again and then the beauty of it is obviously because there's no lag time in the logistics and the infrastructure. Those are the kinds of things that could translate into earnings and sales for us in the very near term. That's that's really a focus.

[noise]. Thank you. Our next question comes from.

Joseph Osha with them hate to hear any.

Often.

I wanted to return to this issue of hydrogen and the the transportation market <unk>.

The price points, there that that market will bear or <unk> or potential we hire particular, if you look at running hydrogen fuel cell some.

I'm wondering if you if you look at what might be economically viable there doing electrolysis on on site as you talked about.

Whether that might work I'd say $1.50 killed room or something yeah.

Yeah.

Is this really interesting because the the process that we've been going through this is basically twofold. One is how do you create hydrogen at the lowest possible price, which is a big focus and then too is if you had inexpensive hydrogen what would you do with it and it's very very similar to what we'd looked at we built this business is our core business because we knew that once we salford logistics and the infrastructure to bring LNG.

The question is like what were the customers that would be that would be most.

Most obviously you would go to.

Our answer for that obviously was to go to power because power generation is in a single place. So it's kind of a simpler logistics and the the needs that they have our daily and their significance. So that's that became the answer we also have some transportation customers right. So at one point we owned.

In a different company here, we owned the biggest LNG trucking fleet in America we.

Have supplied the bus system in in.

In Jamaica with.

Natural gas so there's number and if you look at the development of natural gas as a transportation fuel what you see is that a developed around places with logistics became actually fairly straightforward. So that the kind of return to base users. So garbage trucks municipal bus systems EPS trucks Fedex trucks. They all can.

Come back to the same thing to refuel because that's why when I show that the fuel price there you're 100 per cent right you look at it and say gosh $15. An interview to you we can make it a lot cheaper than that that's great. There's an astro negative because you have to get it there and so hydrogen trucks or.

Hydrogen cars all those kinds of things are big theoretical customers, but there is a significant infrastructure built up it has to go along with it I think one of the one of the geniuses effectively of electric vehicles is that you don't need to have all that infrastructure in the same way because everyone's got.

An outlet in the garage that they can plug their car into and so in effect a lot of the infrastructure already exist because you have electricity in your house.

But you can see that there even though it's electric vehicles, there's been a pretty slow buildup for the infrastructure then and support these like charging stations around and there's a lot of analog. So you can draw between the two of those now when they guidance I'd say about this and I think it's a miracle that more people and talking about people have electric cars, and it's really clean emission free and that's great, but whereas the electricity come from is a fair.

Question, and so if you're going to state where 50% of your if your energy comes from coal you're basically running your car on coal and that may be a very popular thing for the electric vehicle guys to think about but it's the truth and so really I think that the transportation stuff. My view again, if you look at the places have got the simplest logistics <unk>.

Long term to sort out that'd be shifts because they come to the same places and they use a lot of fuel airplanes, because they come to the same places I think actually one of the big opportunities honestly, you'll be railroads we.

He worked with the Siemens guys, they think that they're going to have a.

A very very effective form of prototypes for hydrogen powered locomotive like a booster on this thing again logistics for for our railroads, they're a lot easier because they are on the tracks. So we know where they go so it's a much easier thing to solve for it. So I'd say in terms of degree of difficulty cars trucks long haul trucking. That's the most complicated because of all the infrastructure buildup.

But things like municipal buses things like garbage trucks things the return to base users as well as things like railroads will probably on that list and you'll probably see a fair amount of development around that and I think that electrolysis, even if it is not as cheap as maybe some of these other things where they were talking about it is cheap enough to be really effective on that and if you distribute deals Electrolyze was around then you don't have to go.

The infrastructure to then transport this stuff, which is another incremental costs and you kind of escape so.

Sure can I ask a follow up actually chunk follow up completely different question I'm wondering if you're starting to see from some of your new markets any demand related to using gas.

<unk> resource alongside renewables.

Well, you know I think that the.

The energy plans that I see over and over these countries or some combination gas fired power in renewables renewables are awesome right, they're clean they're gotten much much cheaper much more cost competitive.

Negative obviously, they're not dispatcher will so here in New York City I'm looking at the end of the day, and it's pretty rainy and Misty solar resources wouldn't be working very well right. Now so you need something else to kind of go along side of it and this is what really kind of got me very focused on the whole hydrogen thing is that if you have hydrogen that is effectively the battery that you need.

Like support you on days like today, and so and allow for a much much higher percentage of renewables in your system. Because you know then you've got a very active battery to do it in your choices hydrogen as a battery or batteries as batteries and right now the differences are not even close and I think and also you also have to think about it like I'm trying to be very very intellectually.

Honest about looking at the process of creating a hydrogen I'm looking at how we create how clean it is et cetera, we should apply that same rigour to creating batteries right. So if you can actually make a battery there's a whole bunch of stuff that goes into it and we should just think about that production process and lineup side by side and see which one is really cleaner as well as cheaper and I think our analysis or conclusion, obviously is.

Hydrogen actually if you can do it properly is very very competitive and very very clean, but there's no doubt that gas I think is going to play a big role.

We see not only not only gas in terms of the new power plants, but then again, replacing existing thermal power and my first big discussion two nights ago with one of the Asian customers that is deadly serious about converting out of a.

Big coal fired.

Business operation into natural gas, so and at these prices, it's pretty competitive with environmentally on top of that it's a big big plus so there's no doubt the gas is a big part of the energy infrastructure of the developing world. So.

Thank you.

Thank you. Our next question comes from Christine Charles Barkley. Your line is now open.

You guys have like high can't kitchen or condition of being free cashflow positive.

Uhm.

Maybe 50 mixture sauce, all day from from other clean Tec Tech company and energy.

This might be a bit of a longer data question, which is K. How you think about maintaining a copy of <unk> castle technician, given the magnitude of opportunity.

That you've alluded to and maybe it's a follow on a couple of quarters ago, you got to install a potential equity issue and it sounds like most convenient Madison five so probably not applicable.

But depending on the download and that could be these I'd come to market in conjunction with one Ethan <unk> and that's how you can increase the Florida.

Yeah.

It's a really really good question Christina I think that.

Look we're very very focused on free cash flow and while it's great to talk about all the upside and the potential and the hydrogen stuff and that's obviously a real passion around here. The business is made every day with free cash flow that's generated from operations and they are a significant they're consistent as you can see from our presentation of them and most importantly, there growing so.

I really believe that when the two terminals are completed and we bring another couple of projects.

By the second half of next year, we could double our free cash flow estimates, where we are right now that's the the dimensions of the transactions and I would say that I'm very focused on a handful of countries is countries that we think not necessarily going to have a thousand megawatts of 2003 thousand megawatt projects the ones, where we can do incrementally the same kind of things.

We've done before a three or four or 500 megawatts and projects and then do that over and over because the economy's are big and growing and I'm deadly serious about being a company that generates billions of dollars in free cash flow in a very.

Consistent and straightforward manner and doing so faster than not that's where the whole focus on logistics chain. The ISO flexibility to get these market as quickly as something that we are laser laser focused on that policy organic growth. So the cashflow generation is something that we're very focused on and you're right. Most of the investments we have looked at in terms of incremental things have.

Been modest in size.

The.

Capital required for a situation like Nicaragua is roughly $250 million to $300 million for a 300 megawatt plant plus all the related infrastructure. That's a good place holder for the size of investments, which I think you will see and so obviously, if we do two or three or four or five of those you can do the arithmetic and look.

At what our capital needs to be we have not issued any equity since the IPO and we haven't had they need to do so Chris has been very clear and we have a clear policy in terms of growing the company, but doing so with really debt and equity hand in hand, because we want to maintain.

The credit profile that we have and improve on it as we get more diversification and we get more cash flow, but I I think that more.

More capital events Arca come.

Assuming that we are successful in our pursuit of new business and relentless is the word he was a member I am so focused on the next customers and there's so much to do in these different markets and we just have to put the people on the field that I have the capability of doing so and we have done that like I said, a dozen new people and this at the end of the year. Our forecast is we'll have.

Roughly 50 people in the origination business around the world and these different markets and see add that all up that's the infrastructure that can generate the flow of new opportunities and then we've got the development teams in the operation seemed to then execute on off that's what the bus the core business in your profile. So there's.

There's a lot more to come but I feel.

Even in a time of Covid, where it's a challenge frankly to get in front of people and you're meeting people on zune calls rather than in person.

This too shall pass and.

We've made a lot of progress over then knock wood I think we'll have some some exciting things to announce hopefully soon because I feel good about the number of the things that are out there, but I can't forecast out until they actually get down but our goal as I said to new material projects done by the end of the year and five to 10 next year those are lofty ambitions, but I think that there there are.

The foundation for them is actually set with the the infrastructure, we're putting in place so.

Boswell helpful phone.

<unk> I'll stop currently is there any <unk>.

<unk> you can provide us with the sharp proceedings on all public terminal.

There's no update we we set the response letter it's all public everything was out there. So you can see there letter you can feedback our response.

We feel 100% good about our position.

And but we haven't haven't heard back from them. So we asked for them to respond expeditiously.

They didn't [laughter] so.

I don't control that but but now we feel very good about a condition. So.

Okay. Thank you.

Thank you and last question for today.

One moment.

Okay.

Our next question for today and our last question for today.

From Brian Levine with city your line is now.

Open.

Again, what do you anticipate the most efficient way to transport hydrogen to send a a new purchases current and market.

And would you have any intention in pursuing the infrastructure to help facilitate that.

It's a it is a great question Ryan.

Hydrogen can be frozen smaller lighter atoms. So it takes a little bit more energy I could freezes about 100 degrees colder than does LNG. So that part of the infrastructure work there seems to be some challenges and putting it into pipelines spreads. So we've talked to the technical people I guess, the Ottoman so small division permeability issues and whatnot.

So it's a real issue one of the things I think is really interesting about the production of it though potentially is.

Electrolysis, if that was your feedstock for hydrogen you could perform that on site potentially so actually obviate the need for transportation buffer. That's one one significant benefit oven something to really think about.

Also again, depending on the feedstock that's why I lay out that feedstock page you can use the feedstock transport that and then have you're you're having an introduction onsite. So I think what's likely is you'll see district.

Distributed production is kind of the way, we think about it like so hydrogen in a box effectively where you've got differ.

Different production.

Technologies that then travel to where they are used that's why I'm. So focused on price because when you look at the big users for it the ones that leap off the page and the industrial users and the.

And the the power plants and you could potentially actually create your own hydrogen almost site that has an effect what's being done today, it's been done in a super duper like Dirty way.

And I think it's amazing I put those numbers or maybe maybe even surprised with a surprise me I was I was shocked to see that actually hydrogen as a bigger market. Then then is LNG today the users for our basically the refineries writing firings use a lot of it for industrial purposes, and then of course is used a lot in the production of fertilizer so for things like.

<unk> and for your area and.

And ammonia in particular, one of the other things people will talk about is it's fairly easy to turn hydrogen into ammonia and then ship ammonia.

Done commonly it's actually shipped all over the place and then you can either use as ammonia when he gets there in some way shape or form or have a fairly simple cracker in place and actually split it back out so but your question is like spot on a great question there'll be first find a cheap way to to to make it second find a use for it and third trying to figure out how you're going to.

Get it from eight point B, that's actually that that is the.

The logic chain to get from one place to the other and we're still on one.

Progress on one once we get the one two is in the gun sights 333 O V. A big part of the solution for it though so I think there's some good options.

Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to the speakers for any closing remarks.

Great well, thanks, everyone for for calling in obviously, we're happy to follow up on any follow up questions through Josh or anybody else, an investor Relations group and we look forward to talking to after our next quarter and the new year. Thank you.

Lady who go and thank you for your participation confidence that concludes your program and you may now disconnect.

[music].

Uhm.

[music].

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the <unk> third quarter 2020, or any thoughts on that.

<unk>, but when I looked and only mode.

It's taken there will be a question and that's a session to ask a question during the session you'll need about Star then one on your telephone your.

You're acquiring any further.

I thought in zero.

Oh, but may be recorded.

I'd now like to hand, the topics opportunity today Mr., Josh came back well that's really.

Thank you. Please go ahead.

Thank you I would like to welcome you to the new fortress Energy third quarter 2020 earnings call. Joining me here today are Wes Edens <unk>, our CEO and chairman of the Board Christian Thomas Our Chief Financial Officer, and Sam Adult Vice President of project development.

<unk>, we're going to reference the earnings supplement that was posted to the new fortress energy website. If you have not already done. So I'd suggest that you download. It now in addition, we'll be discussing some non-GAAP financial measures during the call today. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement before I turn the call over to Wes I would like to play.

It out that certain statements made today will be forward looking statements, including regarding future earnings. These statements by their nature are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and Investor presentation regarding non-GAAP financial measures and forward looking statements and review the risk factors contained in our quarterly report.

But do you actually see now I'd like to turn the call over well great. Thanks, Josh Thanks, everyone for calling in or are we on a on the 29th here as Josh said, if you have had a chance to either pull up on your screen or download the.

The management presentation that will be what we refer to as we go through this would be helpful to have you have in front of it so.

With that let's let's turn to the beginning and start with page number four.

We had a very productive quarter, so first full quarter as a in our covered world.

We had a number of initiatives, we started the quarter and I'm happy to say that we actually achieved.

Achieved most of what we set out to do starting in first and foremost with production. So as we mentioned in our last earnings call on the July 10th was the Big date for it that was the date when both of the turbines turned on down in Puerto Rico.

That that's basically it was the moment that we've kind of switched from being a development company to an operating company and I'll go through it and just a second but the bottom line is that we achieved record volumes 1.8 million gallons per day for the quarter actually had a peak in the month of September to about two nine gallons, we're well on the way to being the cash for enterprise that we had that we set out to be.

Second of all you know the development for.

For us above both our large scale developments in our terminals and then the smaller developments for our customers.

Also had a very productive quarter challenges for sure from the covered environment and there was some delays, but they're modest Andy I'll have Sam go through them here in just a few minutes, but the the the tagline is that basically on time and on budget for the most part I'm very very good.

News to report there new business a cycle.

We have a lot to talk about Norwalk mall spend some detail on when we get there, but basically we have become very focused on kind of organizing our business into the organic growth of our existing terminals and new terminals as well as then the new markets that were targeting.

We've hired a lot of people, we've actually put a significant amount of focus on the infrastructure build out there and I think the results are an artist shows speak for themselves or shortly.

Hydrogen all talk a fair bit about it I mean, the path becomes clear everyday as to what what we intend to do our first two projects. We announced this just recent days first investment that we made in that electrolysis company Israeli company, we made a small investment in here a few days ago.

Also establish a joint venture to run hydrogen creates basically the first hydrogen burning power plant here in the United States to give deal data for us. So that's great. But there is a lot to talk about there and then Chris can go through the finance and operations of which there's a lot to a again watch report on so with that if you flip to the next page.

On page number five you know a July 10th was the date when both would be the turbans turned on and for the most part they've been running very reliably ever. Since this is a photo you see there were 1.4 million gallons per day in July.

August we then added a one significant customer piece of business, which Jim Alco.

Our company in Jamaica, this or bauxite company they switched over their boiler operation from HFO to gas so dirty fuel the clean fuel that's a that's a big win for the environment also as an incremental piece of business for us and by September 1.8 million gallons per day kind of running as.

As we expected when you look at page number six.

It's a busy page and it's not uncommon not intended to be the the cleanest presentation of this but you can see on a daily basis that.

Modest amounts of variability as our customers' needs go up and down but the story overall as one of growing and also growing and diversity and what's very important for our business. Our both those things, we obviously want higher volumes, but we are we want more and more customers on our on our our business that will create the cash flow profile and the reliability that we want as an enterprise.

And the quarter was very good in that regard so.

So for the next section I will talk about the developments I'll turn over to Sam Sam.

Thank you and good morning, everyone.

Our business is about terminals and customers that we supply from those terminals.

Currently we have three terminals in operation.

And two terminals and that construction.

That two under construction and moving to slide number nine.

Largely on track and we achieved significant milestones.

Talking about the loss on the Mexico timing, all we encountered a couple of months of delay because the up some of the government offices with close between March and July.

You get to Covance. The project is on track right now we have 100 and people onsite currently by next month, we will have 150 people on site.

And the completion of the terminal will be by mid December of this year and the power plant completion will be by end of Q1.

Next year.

We also realized that is an increasing demand on power and love pause on in Bohai in general So we filed for a new generation license.

And we achieved when we got the preliminary approval from from the authority. So we went ahead and bought new land.

And we filed for departments and we actually received the construction permit from the new land by next last week.

So we will keep you posted we don't we have not shown what will happen with it but it looks very promising.

Moving to any current well.

The project is on track for completion by Q1 of next year end of Q1 next year or early Q2.

We signed the Port confession, and Nicaragua, we bought the land for that power plant and we finalized the engineering and file for the permit this.

This week, we finalized the contract with the APC contract with the power plant contractor and the mobilizing to the site next.

Next month.

So moving to slide number 10.

Our customers large or small negating the need gas and power.

Gas, we supply them from the existing terminals and for the power we fully finance this solution.

We currently for small scale or what we call them the organic growth, we have 24 customers and operation and nine under construction.

But you will see in the picture here on slide number 10. This is the same any project nine megawatts installed but average of 11000 gallons per day and.

When we turned on this project few weeks ago. We are proud of this project because it's a small island luxury resort and that a lot of island in the world. So this is a great proof of concept for what was coming in especially in the Bahamas.

We also this last quarter, we turned on the first two small scale customers in Puerto Rico that Coca Cola facility and the data center for Banco popular the largest bank in Puerto Rico.

Once we also would like to highlight the out of the nine customers under construction right. Now is our first client our first small scale clients and and Baja.

Each of the four seasons resort and Los Cabos.

Once all these nine customers out online, which we expect by end of the year or early next year. We will have four total small scale about 190000 gallons per day of production.

Now moving to slide number 11.

And this is about the ISO flex as a quick update.

On the logistics for the ISO flex we hired the former COO of publicly traded offshore supply vessels company and he brought a very talented team with him the open the.

Office in Louisiana.

That will be our office to manage this part of the business the team purchase the LSV, our first small ship, which we call. It NFI is zero and identify two barges that we will purchase within a couple of weeks the manifold. Our proprietary manifold is also under construction with completion by December of this year.

Great.

On the town falling changes the cartoon that showed more which demonstrates kind of how this all works and bottom lines that we think that this is a real game changer basically by using ISO containers and fill them up from the big ship, and then bring them to shore and off loading them with just a.

Cranes, and and typical kinds of equipment you'd find in ports already we've basically skip a step of having intermediate ship that that reduces our capex by about 50% or reduces our opex by about 50%. It takes the time to deliver from 24 to 36 months down to three to six months. So it's a it's a huge change across at the first two places we'll deploy that.

We'll be in Nicaragua and in Mexico.

And you'll see this this will transform from a cartoon showing this process to actual performance here in just a few months, that's a big deal for us slipping.

Flipping a real youre, referring to the new business side on page 14, as I mentioned earlier, we reorganized our sales into two.

Thanks functions the organic sales groups with our existing terminals and then new terminals and targeting around the world. We've added more than a dozen new people get the build out of the origination that are cross across the world. We think there is a significant step for us forward as an organization and I think I'm very happy with the people that we have brought in the organization that was created banking results will speak for themselves.

Shortly you look on page number 15, just take a quick look at the what organic growth really means here. The five terminals, but that are under construction are up and running right. Now you can see the utilization rate. If you circle that at the bottom of page, 29% that means that the 71% of the terminals are still available for new customers that translates.

Two total capacity of another 8.2 million gallons per day, if you sold all that at our average margins right now would generate another $1 billion in PNM before so huge opportunity for us and you're at a huge competitive advantage. We already have the infrastructure built we already have logistics in place already have the personnel. All we really have to do is just go to our customers execute.

With them and get them online. So this is a big focus for US is the best business that we can do there is lots of.

Things that we think are likely to turn up here in the next.

Months and quarters, but organic growth is clearly when we're going to be one of the real engines of growth for us cash flow wise next year pay 16 that the new.

Near term pipeline for our business is actually significant but what we have what we have done in our reorganization of our of our origination folks has become very focused on key markets. There are six countries in particular around the world that we think have got the characteristics that are the most ideal for our business of course because of the the several hundred companies in the world with.

Thank the two thirds of them need our services in one form or the other but there is a handful relative handful that actually we have got we think that the characteristics will have the biggest impact for us.

Those three characteristics or a large populations the significant existing power infrastructure and present in particular existing thermal power that can be converted and three significant opportunities for economic growth, especially wants to cope with that time has passed so these for US circles I show. There is eight different transactions that we are in the middle of.

Now.

As you can see there's a real push to the right hand side. When you look at LNG flows around the world about 75 or 80% of all LNG goes into Asia. So it's no surprise that when we look at areas that we think we've got the most promise thats, where we are but Central America, South America Africa Asia, Theres, a tremendous amount of opportunities there our goal is to be F.I.D. on too.

New projects between now and the end of the year like couple of months left in the year, but we're down the path on a number of things and I think we've got a good good opportunity to bring two of them over the finish line and then the goal for next year as five to 10, where the real target as a company to be 20 to 30 terminals over the next five years.

Turning to our to hydrogen a little bit.

Put a number of the slides in here I'll focus this briefly but this is a this is my.

Kind of reset in terms of how we think about the business page 18 on the left hand side to the first thing to give a little bit of context is how big is the market for hydrogen today, we all talk about how big we think it can be and what a transition fuel can be in terms of helping us get off fossil fuels as a world, but how big is it today 100 billion.

HEALOS of hydrogen are sold every year right now so at an average price of about a $1.25 kilo that translates into hydrogen market today, it's $125 billion just to give a little contrast, the LNG market today, which is about 360 million tons at about $5 maybe to you is it.

$90 billion. So this will come as a sort of surprised many people to the actual hydrogen market today is actually 30% bigger than the LNG market is today, so huge huge market that exists right now, whereas it all come from it comes from a couple of different methods steam methane reforming and coal gasification in particular, you can see the.

Electrolysis is a very small part of it all you really need to know about steam methane reforming SM are in coal gasification is it produces hydrogen but it does so in a very very dirty fashion basically 11 kilos of Seo to created for every kilo of hydrogen with SM R. 22 kilos of Seo to created for every one kilo.

So of hydrogen created by coal gasification.

That what does that mean in the world and means that to produce hydrogen which is the cleanest of all fuels.

Generates 2.5% of all global emissions, so it's a bit of a disaster from an environmental standpoint, that's the bad news. The good news is there's lots you can do about that you look at page number 19.

Just again to give a little bit of context, the hydrogen that we're looking at an ARPU in our projects can come from three basic.

You'd stocks one water, obviously largely free it's not exactly free but we put it is free because that's essentially what it does it can come from gas or can come from coal those both have chemical compositions that are actually able to create a lot of hydrogen if there if they are broken up properly. The production technologies. We've looked at over 150 companies. So we've seen a lot of different.

Production technologies.

Our really three different types, there electrolysis, which is the process to take water and splenda into the oxygen and hydrogen.

Thanks process and coal process. All you really need to know is that these are processes that use significant amounts of heat and although they are similar to the technology. They use right now the significant differences that can be made entirely clean we believe and I'll talk about that in a second so the best price at the bottom here I draw lines under just and just for reference and what this.

Only represents is our view of if everything works perfectly in the world, which course it doesn't what is the theoretical price at which you could create hydrogen water 80 cents a kilogram. That's a that's basically two cents continual power, 100% efficiency of your of your Electrolyzer gas.

Through methane process 60 cents, a kilogram coal 20 cents a kilogram that's the one to actually draw a line under because Theres a business is little bit talk about there look at page number 20.

When we we tried to do.

You mentioned that the problems and what we're trying to address what's our focus will all three sectors power industrial and transportation.

Combined to about 80% of all emissions. So in very simple terms it wouldn't be perfect, but if you could actually turn those three sectors from burning dirty fossil fuels diverting clean hydrogen you go a long ways towards cleaning up the this year two in the atmosphere for us so on the right hand side I put a box together that just shows you and dimensions, what the relative competition is.

Fossil fuels versus hydrogen today. So I said, if we are able to generate hydrogen at a dollar a kilogram.

Right to convert that into an MLP here, Colin just multiply by seven and a half well power today look at power in the United States Henry Hub, which is an index.

Which the natural gas is sold is about $3 say cost and 75 cents and transport cost to get that natural gas into the power plant $3.75. So what that means to me when I look at this is that even in our kind of quote unquote best case scenario using kind of conventional electrolyzers, we're still about 50% higher in price.

With hydrogen than we are with natural gas industrial as I said that earlier page the average price for those paid for the industrial hydrogen screen is about $1.25 $1.25 times, seven and a half is about nine and a half so the dollar versus the 754 hydrogen versus 950 could be competitive again in the back.

Sks transportation there is a big gap there I put an asterisk next to it because that is before the cost of logistics, which is a big deal rights in order to get basically hydrogen to people in service stations or in gas stations are in trucking stations or whatever around there's a significant cost of that and so while you look at these two say on paper day one bill.

Naturalizer could have the biggest impact potentially on transportation. The other two is actually something not good enough.

The the goal that is actually very simple either you have to find a way to make hydrogen at roughly 50% lower than what we think is the best case or the government had to step in and do one or two things that have either subsidize that the other production cost of of hydrogen bringing it down so it's more in line competitively or they ask for the tax in place on people that are very very fuels.

When they say carbon tax what I really mean is make it more expensive for people to burn those dirty fuels, so that our fuel as more cost competitive and those are those are both things I think the government could and should consider but without that if you want to just take care of yourself, then you need to actually produce a cheaper. So page 21. The goal is actually very simple it's zero emissions.

And something has become very clear to me as I think the way that we characterize hydrogen and its production in my opinion is not really correct.

We say that electrolysis is clean quote unquote, if the power comes from renewable sources in other words, it's the as I say, it's the Hippocratic oath of of hydrogen first do no harm is that if you're not creating emissions and therefore, it's clean and so we call that green, but the characterizations are a little confusing at least to me, there's green and the blue and as Gray and there is even turquoise.

Yes, and I think that has less.

It is less important to categorize it that way than that and then the much more simple way, which is no no emissions and when we look back at that earlier chart and you see that you guys water and gas and coal and coal and this paralysis. This method is this whole process could be to generate hydrogen as cheap as 20 cents.

Telegram, which again would be less than the 50% threshold you need to really go turn on the power. If you can see cluster the Seo to that comes out of that not to extend into the atmosphere. It then becomes very very clean power. There's a number of articles have been written around this if you actually go in there is a Forbes article that I actually read just last night about coal paralysis and things that are being done around the world I think youre going to.

Here, an awful lot about this and as as odd as it may seem that the dirtiest in the fossil fuels may be real gateway to creating really really clean hydrogen for us I think it's got a lot of promise simply because if the government's don't intervene and make it more expensive to earn fossil fuels and the market has to go produce that this is the place where it's going to have gone.

So last thing page 22, what do we do this quarter, we did two things long ridge, which is the photo there. This is a I was.

As an abandoned smelter site aluminum smelter site that.

The infrastructure fund another kind of a sister company had taken over really an interesting asset. They are building a 485 million megawatt power plant there, we're partnering with them to bring in and burn at least part of the feedstock to be hydrogen to the goal for it to all be hydrogen at the end of the day.

Really in my goal and this is presuming success in other words presuming that we can find a cleanly and a cheap way to to create hydrogen what does the field data actually support. So we know what GE tells us they think it will do and we trust them of course, but we want to go see and verify that ourselves. This will be a real opportunity as this gets up and running next year to run hydrogen through.

See the field data and see how it actually performs in practice. So that's a that's what that's going to have big experiment for us and something that will be very productive the right hand side of the page as a company that we invested in called Hctwo Pro two pro Israeli based Electrolyzer. It basically is a much more efficient way of electrolysis and.

Simple terms, it's got two different cycles that runs through and it uses the heat that has created from the first cycle that make the second cycle more efficient. So it's kind of a combined cycle as I'd like to think of it in terms of Electrolyzer. The bottom line is that its use is 30% less electricity less than 50% of the capex and attract a traditional electrolysis.

Yes, and it achieves efficiencies close to 100% so on paper in the laboratory this actually looks like a very promising technology.

The uncertainty of not knowing what's gonna go on what's going to happen with this we reached out into all of our field personnel, we paid them basically a bonus of 150% of their salary for those two months to just as an acknowledgement that what they were doing was important to us important to their customers and you wanted to do the right thing. So all these the actions at the end of the day total up to about 1 million.

And costs was not free to do this but the the results of an event really terrific. So far Chris Yeah. Thanks. Good morning, everybody. Appreciate your time to update you on the results for Q3, but first to talk about Covid West said, we made a carefully considered decision to return to work and I'm happy to share a few details as an essential industry our responsibility to keep the lights on for our customers drove us to find a cough.

<unk> of safety plan to return to the office and is West said, we are so proud of our team for the response to support our customers in the week of the pandemic as I said the company provided bonuses for the central worker staying onsite at our power plants in our gasification terminals. Additionally, we created our own version of the NBA bubble at the corporate offices, we instituted daily questionnaires and.

No touch thermal temperature checks, we increase the frequency of cleaning the office, including Covid deep cleans on a biweekly schedule and we've taken on a new floor to double our office space and maintain social distancing. Most importantly, we've required mandatory weekly testing for the whole company and administered over 3200 tests in the last six months. This as a result.

And a safe and productive work environment with knock on wood no in office transmission.

Excited to announce we've been hired over 60 people. We've completed eight construction projects signed a new contract or mou's, representing over to 5 million gallons per day, all selling record volumes for the quarter.

Our successes during the pandemic are owed a great customers dependable vendors and dedicated employees, who have been extraordinarily committed during these challenging times.

If you turn to slide number 26, how quickly walk you through the summary financial information for the quarter.

The biggest driver of our results as you know and is it you've already heard our volumes we averaged over one 5 million gallons per day for the quarter and is West said, we sold an average of 1.8 million gallons for the month of September the.

The increase in volumes is almost entirely driven by increases in Puerto Rico and gas sales to the <unk> refinery boilers.

Revenue for the quarter increased $42 million, which is a 45% increase over Q2 and despite the large increase in volumes. The cost of sales is mostly unchanged due to the decrease in the cost of LNG to a little more than $4 for the quarter.

We are pleased to report that are non development cash SG&A expense for the quarter was 19 million Bucks, which is just underneath the $20 million, we're forecasting and on track for $80 million for the year, one thing to call out as we had $24 million loss, resulting from the right off of desk debt issuance costs associated with the early termination of the of the credit facility.

And lastly, while I'll touch on the balance sheet in greater detail. Shortly we have over $150 million in cash on hand, which when combined some cash from operations will fully fund the remaining cost to build out Mexico in Nicaragua.

If you flip to slide 2070 can see the volume ramp and cash flow estimates for the remainder of 2020 in 2021. This familiar graph shows that were committed volumes only through the growth excuse me shows committed volumes only and given the growth opportunities both organic through new.

Customers through existing infrastructure and inorganic through new terminals their significant upside.

Q3, we averaged one 5 million gallons per day for the quarter and are expecting around one eight for Q4 on our way to three five wants Mexico in Nicaragua terminals comments.

When you look at the consumption for the quarter and breakdown large Garrett scale terminals versus the direct sales to customers volumes, where right, where we forecast it to our baseload consumers.

Finally, moving on to page 28 on our queue two earnings call, we laid out a roadmap for a capital plan. We've executed on those key priorities in August we priced and Upsized $1 billion of secured notes offering do 2025 at 675% and refinanced our existing corporate facility in the Jamaican subsidiary bonds. This trans.

Action pushed out our debt maturity, two and a half years and it will lead to $23 million of interest reduction for 2021.

The notes are traded exceptionally well exceptionally well post the offering currently at 160 yield about 5%.

The bond offering deepens Nfu's capital market access to fund growth and is a critical step and then if these transition into a well capitalized and mature company.

Following a refinancing we instituted a quarterly 10 cents per share dividend, which represents 20% to 25% of the next 12 months a free cash flow.

The robust cash flow generation of our business allows us to return capital to our shareholders and we intend to stick to the 20% to 25% of free cash flow target range on an ongoing basis.

Three we remain fully funded on a committed projects and are committed to maintaining modest leverage strong liquidity. Our goal is to become an investment grade company and we will fund new terminals via prudent mix of debt equity in cashflow generation with that I'll turn the call back over the west.

Alright, two questions.

Great operator will open up the questions.

Thank you as a reminder, if you'd like to ask a question. Please Saddam one on your thoughts on telephone installing questions.

Policies.

By what we compiled Ross.

Our first question comes installed.

Margaret with ever call ISI My line is now open.

So.

So.

One thing I've been wondering about with OPEC kind of looking at easing production and Libya, possibly coming back online.

There's a question that maybe there may be some some easing in the price of crude and I think that kind of might have an impact on sort of the diesel competitive costs and the high school for Boo all kind of moving lower.

Is there any risk if that spread compresses that some of your existing customers in Puerto Rico in Jamaica.

Do they have the ability to switch.

Our sources and essentially use diesel instead of natural gas from that they're required from you or are they pretty pretty much fixed into to what power source, they're kind of generating from.

While generally.

The answer is that they are committed I mean, we have a range of contracts. They arrangement mershon contracts too long term committed contracts the.

The bulk of our contracts are a longterm take or pay the average terms of our contracts is roughly 12 years. So for the most part they are but there are some that have the option to switch back and forth. One thing I'll say is we had done this.

Study for one of our investors.

This summer we look back at the previous 10 years of data looking at the delivered price of diesel versus versus the delivered price of gas in their country was an island country and over that 10 years. There were 24 days that diesel is cheaper so at a 3600 50 days roughly.

24 us in less than 1% of the days was it actually cheaper.

Course, if you had long term very very low prices as you had.

A little bit of a get this this spring that could that could definitely an impact that but I think that from a cost competitive standpoint.

The last 10 years are any guide.

Over 99% of the time, we are cost competitive in addition to that as long as you are around that there's a lot of other hidden costs of running liquid fuels on the maintenance side and the operational side in particular.

Evans don't like running on diesel.

So the marginal cost of maintenance of marginal costs of taking care of the equipment. The O&M costs are a little bit higher and people definitely care about the environment I think one of the realm misconceptions people have is that somehow if you are in developing country and you're trying to get your energy situation that under under control you don't care as much about the environment as people in developed countries.

And from my perspective, that's just flat out not not the way that it is so I think if you're if there's anything close to parody you of course would switch but.

But again historically, it's been it's been much to the favor of gas over that period of time.

Okay.

And then just another.

Alright, Jonathan.

John I think we lost Ya in the gap.

With us I'm curious if you have a lot of any clarity that you can disclose in terms of what you've re contracted and and what your kind of gas prices starting to shape up for 2021, and how much of that is hedged how much that's.

Spot exposure.

We haven't we haven't done anything material that's reportable on the on the hedging side, yeah. There's a lot that is.

That is in the works right now we still have significant open position next year I'd say.

Commentary over the quarter is that.

The impact of the all the hurricanes that hit the Gulf Coast shutdowns there.

There was a fire of.

One of the producers in Norway, There's just a handful of events that happened and so you took out a fair amount of supply and with that prices rose a bit over the course of the of the quarter, but.

Our position is still a long term very very much and the money that has been very very little impact when you look at it quarter over quarter of the value of the long term position and there's some short term volatility and you'd expect to get that I think most people.

In the market would believe that there's.

There's going to be some volatility over the next couple of years as you get the short term swings and supply and demand, but you have a significant amount of.

A production, which is expected to come on in 2024 of 2025 that will lead to a very oversupplied market and that that allows us to have a lot of flexibility in terms of the kinds of <unk>.

Contracts that we could get so we don't have anything specifically to disclose where we feel really good about this right now I mean in Q3, we bought gas sub $3 Q4 will probably be.

Context wise around $4, even though the market is five plus dollars today. So we're in a good position here for the fourth quarter and feel very good about the aggregate physician going forward, but as I mentioned before this is something that is a focus point for me personally and for the firm and I think we'll have some good good developments to talk about here and there not so distant future. So.

Okay. Thanks West.

Thank you and our next question comes from Devin Mcdermott with Morgan Stanley. Your line is now open.

Good morning, Thanks for taking my question.

So the first one order to ask on his hydrogen and I. Appreciate the additional time in detail you provide on this call and also congrats on the significant steps you've taken just over the past few months and dancing zero ambition that you all have I wanted to talk about the specific next steps here. If you think about really the next few years and executing on this.

Strategy and I think you all talked about doing some pilot projects that the Ht Pro investment I was wondering could comment on what you're seeing there in terms of what those projects might look like any comment when custer demand for green hydrogen as well and then should we think about additional tech investments accounted for example, you talked about the gas and coal Thralls is is that.

Thing, where you could make some seed investments as well I really just trying to frame me up the next few years enjoy the opportunity sat in capital allocation of animals opportunity yeah.

Well the two two answers to that one is with respect to the prototypes.

Really we're trying to identify technologies, who think have promise.

Make an investment in the company then become a partner to build a prototype to get field data to support what the theoretical data is in the lab. So that's the that's the general thesis that we have.

H two pro.

Is very capable group, we liked their technology. So we want to see that out in the field build a prototype with them and get that deployed.

And so that's that's the one specific thing.

When I laid out.

The the numbers on water.

Gas and call I did so because my.

My view about this my intention of this is to try to find a technology try and find a process trying to find a way to really deal with the climate change issues in a very very broad way and you need to have scaled to do so.

And that one page I laid out dermal ratio kind of theoretical best price of 80.

60, 20, those are very theoretical best prices today and of course things could change.

But that's if everything works out perfectly I'd lay that out because simply if you then add on a capital cost and you ended up at a dollar for example, electrolysis that's still roughly twice as expensive as what people can burn natural gas in there have been a power plants here in the US today, so that is not going to actually solve the problem unless the government makes it more expensive people to burn fossil fuels.

Or they they give you some production credit. So then when you go to the right hand side of the page and you look at the other other things that are possible. The call really does leap off the page and it's a very counter intuitive things for.

The the ESG folks that are trying to invest sustainably. They here call I'm sure. It makes their eyes roll a little bit but.

What I would say, it's not about in my view, it's not about the characterization of kind of green green or blue or turquoise or gray. It's really can you produce hydrogen and do so in a way to create zero net emissions and you can that's very clean and while we have seen has been some pretty promising technologies that would indicate that.

It is possible to basically create a.

<unk> very very inexpensively. This way and then the stream of <unk> is very pier and <unk> itself and it becomes a question of what can use the C. O. Two it's got an industrial years. It can also be used for power generation. It can be used to sequestered underground, there's like a whole bunch of different see frustration technologies and so to me the the.

This thing is if you can figure out a way to sequester economically that unlocks a huge new store of value I mean, a joke about that guy's here migrate state of Montana has massive coal reserves, you kind of a Montana, Wyoming, the many Saudi arabia's, a hydrogen production and I and I know that sounds fanciful, but go onto the internet start looking at these that these different.

Articles and things that are out there and you'll see this is a very serious enterprise and people are looking hard out and it may not be the ultimately the best like long term solution, but it may be a great intermediate solution. So.

I believe there will be.

Trillions of dollars made literally in the in this transfer of.

From a fossil based system to a hydrogen system and I think that the people that can identify the right technologies and Ah right feedstock and then industrialized that are going to do very well and doing well by doing good and something that I'm very very focused on we're very focused on we've got a great team of people that are working on that stuff and.

So I think we will make a follow on investment my guess is that some of these other sectors much sooner than later and I'm very impatient about it but I think that you have to get the cost of the down kind of 50 or laugh at 50 cents or less everything changes 50 cents. Our last thing you can do it.

With clean emission free production, you'll see a massive transfer in silver and so it's very clear to me now what the path is and I think the electrolysis has got a lot of like a lot of promise in particular and transportation, where you can imagine.

Distributing electrolyze resolve the place so maybe you're making your own fuel effectively we're using it and that's how you cut down on a lot of your.

Logistics and transportation costs and whatnot, there's there's a number of different passed but the big one that would be a game changer is figure out a way to really create a long term emission free hydrogen at 50 cents or less that then puts you right into the strikes out of all these different technologies I said the three it is transportation that is power and it's industrial use solve that and you've done a.

Done a really good job is kind of clean things up so.

Sorry for the long answer to a short question no.

That's great and really helpful context and.

My second question is switch you are a bit to the growth opportunities you have within the existing portfolio any of the additional detail and disclosure on a small scale opportunity and the execution you've had there is really good to see.

You highlighted the $1.2 billion.

Opportunity from increase in utilization on existing terminals and I guess the question I had is one any logistics constraint that would prevent you from going to theoretical 100% utilization is you highlighted in that slide that we should be thinking about and then secondly, I think on the slide it talks about 50000 gallons per day from the nine customers effected on so far.

And in the remarks, you also talk about 190000, a small scale within the portfolio. So just kind of bridging those two numbers and been thinking about what what's.

Luckily to come here over the next 12 to 18 months.

Yeah, I mean, the answer the first question, there's no constraints with all of that.

I've, often said and the and the infrastructure business. If you it's actually very simple if you create infrastructure for one purpose and you don't use it you lose all your money. If you. If you created for one purpose new use that you get a decent return if you created for one purpose needs of or two or three or four that's how you make outsized returns in the business and so this is.

Just simply like an attempt to do the the latter which is basically take the it infrastructure logistics. The people personnel that we have in place and go aggressively into those markets because we have an asset competitive advantage and so our renewed focus on that and Sam touched down a little bit we've got.

Milestones, we've got our first couple of customers turned on in Puerto Rico, We've got our first contract signed in.

In.

In Mexico, we think that there are many many of those to follow and that is really low hanging fruit and so it's got a real focus for us in those markets. We think there are significant incremental demand as you can tell from that table, we've got significant operational flexibility to.

To service them. So that's a that's a really big focus for us again, and again and then.

City of it is obviously because there's no lag time in the logistics and the infrastructure those are the kinds of things that could translate into earnings and sales for us in the very near term, that's that's really a hopeless.

Thank you our next question comes from.

Joseph Osha with them hate to hear any.

Elephant.

I wanted to return to this issue of hydrogen in the transportation market <unk>.

The price points, there that that market will bear.

Potential we hire a particular, if you look at running hydrogen fuel cell some.

I'm wondering if you if you will.

It might be economically viable there doing electrolysis on on site as you talked about.

Whether that might work I'd say $1.50 kilograms or something yeah.

Yes.

Is this really interesting because the the process that we've been going through this is basically twofold. One is how do you create hydrogen at the lowest possible price, which is a big focus and then too is if you had inexpensive hydrogen what would you do with it and it's very very similar to what we'd looked at we built this business as our core business because we knew that once we Salford logistics and the infrastructure to bring LNG.

The question is like what were the customers that would be that would be most.

Most obviously you would go to.

Our answer for that obviously was to go to power because power generation is in a single place. So it's kind of a simpler logistics and the the needs that they have our daily and their significance. So that's that became the answer we also have some transportation customers right. So at one point we owned.

In a different company here, we owned the biggest LNG trucking fleet in America we.

Have supplied the bus system and.

In Jamaica with.

Natural gas so there's number and if you look at the development of natural gas as a transportation fuel.

You see is that a developed around places with logistics became actually fairly straightforward. So that kind of return to base users. So garbage trucks municipal bus systems EPS trucks Fedex trucks. They all come back to the same thing to refuel because that's why when I show that the fuel price. There you are a 100% right and look at it and say gosh $15 an interview to you.

We can make it a lot cheaper than that that's great. There's an astro <unk> because you have to get it there and so hydrogen trucks or.

Hydrogen cars all those kinds of things are big theoretical customers, but there is a significant infrastructure built up it has to go along with it I think one of the one of the geniuses effectively of electric vehicles is that you don't need to have all that infrastructure in the same way because everyone's got.

An outlet in the garage so they can plug their car until and so in effect a lot of the infrastructure already exist because you have electricity in your house and.

But you can see that they are even though it's electric vehicles, there's been a pretty slow build that for the infrastructure than a support these like charging stations around and there's a lot of analog. So you can draw between the two of those now when they guidance I'd say about this and I think it's a miracle that more people and talking about bills have electric cars, and it's really clean emission free and that's great, but whereas the electricity come from is a fair.

Question, and so if you're in a state where 50% of your if your energy comes from coal you're basically running your car on coal and that may be a very popular thing for the electric vehicle guys to think about but it's the truth and so really I think that the transportation staff. My view again, if you look at the places that have got the simplest logistics <unk>.

Long term to sort out that'd be shifts because they come to the same places and they use a lot of fuel airplanes, because they come to the same places I think actually one of the big opportunities honestly, you'll be railroads, we worked with the Siemens guys. They think that they're going to have a.

A very very effective form of prototypes for hydrogen powered locomotive like a boot stronger thing again logistics for for our railroads or a lot easier because they are on the tracks. So we know where they go so it's a much easier thing to solve for it. So I'd say in terms of degree of difficulty cars trucks long haul trucking, that's almost complicated because of all the infrastructure buildup.

But things like municipal buses things like garbage trucks things the return to base users as well as things like railroads are probably on that list and you'll probably see a fair amount of development around that and I think that electrolysis, even if it's not as cheap as maybe some of these other things where they were talking about it is cheap enough to be really effective on that and if you distribute this electrolyze was around then you don't have to build.

And the infrastructure to then transport the stuff, which is another incremental costs and you kind of skip so.

Sure can I ask a follow up actually chunk follow up with a completely different direction I'm wondering if you're starting to see from some of your new markets any demand related to using gas.

Firming resource alongside renewables.

Well, you know I think that the.

The energy plans that I see over and over these countries or some combination gas firepower and renewables renewables are awesome right, they're clean they're gotten much much cheaper much more cost competitive.

The negative obviously, they're not dispatcher will so here in New York City I'm looking at the end of the day, and it's pretty rainy and Misty solar resources wouldn't be working very well right. Now so you need something else to kind of go along side of it and this is what really kind of got me very focused on the whole hydrogen thing is that if you have hydrogen that is effectively the battery that you need.

Like support you on days like today, and so and allow for a much much higher percentage of renewables in your system. Because you know then you've got a very active battery to do it in your choices hydrogen as a battery or batteries as batteries and right now the differences are not even close and I think and also you also have to think about it like I am trying to be very very intellectually.

Honest about looking at the process of creating a hydrogen and looking at how we create how clean it is et cetera, we should apply that same rigour to creating batteries right. So if you can actually make a battery there's a whole bunch of stuff that goes into it and we should just think about that production process and lineup side by side and see which one is really cleaner as well as cheaper and I think our analysis or conclusion, obviously is.

Hydrogen actually if you can do it properly is very very competitive and very very clean, but there's no doubt that gas I think is going to play a big role we we.

See not only not only gas in terms of the new power plants, but then again, replacing existing thermal power and my first big discussion two nights ago with at one of the Asian customers that is deadly serious about converting out of a.

Big coal fired.

Business operation into natural gas, so and at these prices, it's pretty competitive with environmentally on top of that it's a big big plus so there's no doubt the gas is a big part of the energy infrastructure of the developing world. So.

Thank you.

Thank you. Our next question comes from Christine Charles Barkley. Your line is now open.

Uhm.

You guys have like high can't get your heart condition.

And the cash flow positive.

Maybe to indicate your sauce, all day from from other Cleantech head company and energy.

Did this might be a bit of a longer data question, which is K. How you think about luchini upon Nancy cashflow potential given the magnitude of opportunity. Thank.

That you've alluded to and maybe it's a follow line a couple of recordings of all you've got to install a potential equity issue and it sounds like more convenient Madison and five.

Oh, probably not applicable in caring, but depending on the download and backman B C that come to market in conjunction with wanted Ethan and that's how you can increase the Florida.

Yeah.

It's.

A really really good question, Christine I think that.

Look we're very very focused on free cash flow and while it's great to talk about all the upside and the potential and the hydrogen stuff and that's obviously a real passion around here. The business is made every day with free cash flow that's generated from operations and they are a significant they're consistent as you can see from our presentation of them and most importantly, there growing so.

I really believe that when the two terminals are completed and we bring another couple of projects.

By the second half of next year, we could double our free cash flow estimates, where we are right now that's the the dimensions of the transactions and I would say that I'm very focused on a handful of countries is countries that we think not necessarily are going to have a thousand megawatts of 2003 thousand megawatt projects, but ones, where we can do incrementally the same kind of things.

We've done before three or four or 500 megawatts and projects and then do that over and over because the economy's are big and growing and.

I'm deadly serious about being a company that generates billions of dollars in free cash flow in a very.

Consistent and straightforward manner and doing so faster than not that's where the whole focus on logistics chain. The Eiffel flexibility to get these markets quickly is something that we are laser laser focused on that policy organic growth. So the cash flow generation is something that we're very focused on and you're right. Most of the investments we have looked at in terms of incremental things have.

Been modest in size.

But the.

The capital required for situations like Nicaragua is roughly $250 million to $300 million for a 300 megawatt plant plus all the related infrastructure. That's a good place holder for the size of investments, which I think you will see and so obviously, if we do two or three or four or five of those you can do the arithmetic and.

With our capital needs to be we have not issued any equity since the IPO and we haven't had the need to do so Chris has been very clear and we have a clear policy on in terms of growing the company, but doing so with really debt and equity hand in hand, because we want to maintain.

Credit profile that we have and improve on it as we get more diversification and we get more cash flow, but I I think that.

More capital events are to come.

Swimming that we are successful in our pursuit of new business and relentless is the word how he was a member I am so focused on the next customers and there's so much to do in these different markets and we just have to put the people on the field that I have the capability of doing so and we have done that like I saw that it doesn't new people and this at the end of the year. Our forecast is we'll have roughly 50.

People in the origination business around the world and these different markets and add that all up that's the infrastructure that can generate the flow of new opportunities and then we've got the development teams in the operation seem to then execute on that that's what the bus at the core business in your profile is so.

There's a lot more to come but I feel even in a time of Covid, where it's a challenge frankly to get in front of people and you're meeting people on zune calls rather than in person but.

This too shall pass and we.

We've made a lot of progress over then knock wood I think we'll have some some exciting things to announce hopefully soon because I feel good about the number of the things that are out there, but I can't forecast that until they actually get down but our goal as I said to new material projects done by the end of the year and 510 next year those are lofty ambitions, but I think that there there are.

The foundation for them is actually set with the the infrastructure, we're putting in place so.

Boswell helpful.

And then just Ah separately.

Mhm.

Provided us with a sharp proceedings on all public terminal.

There's no update we we set the response letter it's all public everything was out there. So you can see there letter you can feedback our response.

We feel 100% good about our position.

And but we haven't haven't heard back from them. So we asked for them to respond expeditiously.

They didn't so I don't control that but but now we feel very good about our position so.

Thank you.

Thank you and.

Last question for today.

For a moment.

Our next question for today and our last question for today.

From Brian Levine with Sydney. Your line is now open.

Again.

What do you anticipate the most efficient way to transport hydrogen to some new purchases current and market.

And would you have any intention in pursuing the infrastructure to help facilitate that.

It's a it is a great question Ryan.

Hydrogen can be frozen smaller lighter atoms that takes a little bit more energy I could freezes about 100 degrees colder than does LNG. So that part of the infrastructure work there seems to be some challenges and putting it into pipelines right. So we've talked to the technical people I guess, the Ottoman so small division permeability issues and whatnot.

So it's a real issue one of the things I think is really interesting about the production of it though potentially is.

Electrolysis, if that was your feedstock for hydrogen you could perform that on site potentially so actually obviate the need for transportation Buffalo. That's one one significant benefit of it and something to really think about.

Also again, depending on the feedstock that's why I lay out that feedstock page you can use the feedstock transport that and then have.

You are having introduction onsite so I think what's likely is you'll see.

Distributed production is kind of the way, we think about it like so hydrogen in a box effective already got different production.

Technologies that then travel to where they are used that's why I'm. So focused on price because when you look at the big users for it the ones that leap off the page with the industrial users and the.

And the the power plants and you could potentially actually create your own hydrogen almost site that has an effect of what's being done today, it's been done in a super duper like Dirty way and.

And I think it's amazing I put those numbers or maybe maybe even surprised that they surprise me I was I was shocked to see that actually hydrogen as a bigger market then within his LNG today. The users for it are basically the refineries writing firings use a lot of it for industrial purposes and of course is used a lot in the production of fertilizer so for things like that.

<unk> and for.

And and.

And ammonia in in particular, one of the other things people will talk about is it's fairly easy to turn hydrogen into ammonia and then ship ammonia.

It's done commonly it's actually shipped all over the place and then you can either use as ammonia when he gets there in some way shape or form or you have a fairly simple cracker in place and actually split it back out so but your question is like spot on a great question, you'll be first find a cheap way to to to make it second find a use for it and third trying to figure out how you're going to.

Get it from eight a point b, that's actually that that is the.

The logic chain to get from one place to the other and we're still on one.

Progress on one once we get the one two is in the gun size 333 O V. A big part of the solution for it though so I think.

There's some good options.

Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back with the sneakers for any closing remarks.

Great well, thanks, everyone for for calling in obviously, we're happy to follow up on any follow up questions through Josh or anybody else, an investor Relations group and we look forward to talking to you after our next quarter and the new year. Thank you.

Lady who go and thank you for your participation confidence that concludes your program and you may now disconnect.