Q3 2020 Ameresco Inc Earnings Call
Plant city.
Ladies and gentlemen, thank you for standing by and welcome to the Ameresco Inc. third quarter earnings call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that point.
I remind you. This conference call is being recorded I would like to turn the conference over to your host Mrs. well you had noted vice President marketing and communications Mr. Lynn you may begin.
Thank you Nicole and good afternoon, everyone. We appreciate you joining us for today's call. Joining me here are George Sakellaris Amorous goes chairman, President and Chief Executive Officer, Doron whole senior Vice President and Chief Financial Officer, and Mark Chip block.
Vice President and Chief Accounting Officer before.
Before I turn the call over to George I would like to make a brief statement regarding forward looking remarks. This.
This call contains forward looking information regarding future events and the future financial performance of the company. We caution you that such statements are predictions based on management's current expectations or beliefs.
Actual results may differ materially as a result of risks and uncertainties that pertain to our business.
We refer you to the company's press release issued this afternoon and to our FCC filing.
These documents discuss important factors that could cause actual results to differ materially from those contained in the company's projections or forward looking statements.
We assume no obligation to revise any forward looking statements made on today's call.
In addition, we will be referring to non-GAAP financial measures. During this call. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.
A GAAP to non-GAAP reconciliation as well as an explanation behind the use of non-GAAP financial measures is available in our press release and in the appendix to the slides, which can be downloaded from our website.
I will now turn the call over to George George Thank you Linda and good afternoon, I hope everyone is staying healthy and safe.
First I would like to thank our employees.
Customers and partners, who continue to effectively manage through the ongoing challenges facing all of us in this difficult over 90 any environment.
Oh performance would not have been possible without them.
In the performance this quarter was indeed excellent.
A robust 83% revenue growth with tight expense controls helped us drive outstanding earnings and record levels of EBITDA.
We see good demand for our services accelerating given our customers increasing need.
Solutions that combine cost savings with advanced technologies.
He is really more.
Energy regime into infrastructure upgrades.
Transitioning to low carbon energy sources, and healthy and safe environments, especially in light of the covert night in crisis.
Our core businesses continued to execute well during the third quarter led by exceptional results from our federal solutions group.
Which benefited from strong contract execution and improved access to Worksite.
They work hard to pull in and execute them contracted backlog given uncertainties around COVID-19 and future job sites took excess.
Oh renewable assets in operation and maintenance businesses continued to provide them more ethical with highly predictable long term recurring revenue, which is especially important during these economically I'm sure. It 10 times.
These two businesses support our visibility with a combined $2 billion backlog of contracted revenue and incentives, which will be generated over the next 15 years on average.
Our industry reputation is strong financial profile.
Oh in excellent position to identify and pursue additional high return renewable asset opportunities.
During the quarter.
We added 15 megawatts or megawatts or assets, including a new Orange you plan and a standalone battery storage system.
Our renewable assets in development currently stands at a healthy 322 megawatts.
Well, we remained focus on project execution in the third quarter.
We were particularly pleased to see a sequential increase in our total project backlog for the second consecutive quarter.
Our ability.
To backfill our strong revenue execution with New awards gives us excellent visibility as our total project backlog grew to $2.25 billion.
We are now seeing an uptick in proposal activity as we leverage our broad geographic footprint and deep long term customer relationships.
Drive additional project opportunities and we look forward to sharing more over this with you in the future.
Highlights in this effort is our recent project win with the city of Chicago Heights involving the retrofit over 2000 Streetlights with L.C.D.'s.
The contract is what worthy as our Myrisk and made a proposal to the city, which was accepted in less than 90 days.
Interestingly the installation will definitely include and intelligent lighting control system.
Showing how municipalities across the country are embracing smart security technologies.
We anticipate global growth in similar contracts as serious upgrade their aging infrastructure with smart cost saving solutions.
We see numerous opportunities for repeat customer business without a satisfied customer base.
Another example, well a quick tour opportunistic when is our recent contract was cannot talk down to you know high.
Cameron <unk> is a very good long term customer that we had that kids receive stimulus funds under the current Soc, which needed to be used by year end.
Am I ask the team worked to identify quick tour safety and efficiency projects that include that.
It's less well I mean fixtures in the public restrooms over the counter built in this that will help protect the stuff and public as they reopen their facilities.
Al So many areas around the world, including large regions of the United States are facing water scarcity issues.
Water can no longer be viewed as a commodity available at the turn of the Fosun.
We have been seeing increased interest from municipalities across the country to deployed or a magic mirror infrastructure or A.M.I. advanced technologies.
Hey, M.I. promotes and more efficient and effective water distribution system, well enhancing transparency for customers into water consumption and of course.
The systems, not only save significant amounts of money there.
Versus manually region Myris. They also allow municipalities to capture lost water and sewer revenue.
Oh arisen A.M.I. projects in Texas with a serial Gatesville in woodlands, Florida are two great. Examples of projects. We are managing in this increasingly important area.
[noise], Myrisk, which addressable market is rapidly expanding driven by customer demand demand for comprehensive solutions, including advanced technologies, such as cyber security solar battery storage advanced lighting controls and more equity.
A good example of this type of project is our recent $36 million at utility energy services contracts at Fort Bragg in partnership with Duke Energy.
Here, we will be deploying and number of in number of advanced technologies, including a 1.1 megawatt to float in PV system and a two megawatt battery energy storage system.
And why our school lands to implement a horse traditional energy conservation measures.
Energy efficiency and renewable distribution generation continue to benefit from their resilience it.
Got it and low carbon qualities, but it's.
It is there ever improving economics, that's creates the large and rapidly growing long term market opportunity.
In the end our solutions provide substantial cost savings and have healthy returns for our customers often with no upfront cost.
COVID-19, and the ongoing economic pressure. She has created just stress the financial health of companies institutions and governments around the world.
This impact will most certainly be felt for years to come.
Again against this backdrop and Myrisk what are you seeing increased interest in providing our solutions under a new innovative energy as a service financial structure.
This structure Ameresco will delever energy related infrastructure improvements energy conservation measures and related technologies directly to a customer under a long term service agreement with no upfront capital.
Customers benefits by maximizing their financial resources, well it might ESCO games and other highly visible long term recurring revenue stream.
We look forward to announcing upcoming energy and the service contracts in the near future.
In summary im.
Myrisk was continues to overcome challenges geologists and just difficult covered 90 environment.
We are expanding our expertise and offerings to create comprehensive and flexible solutions for our valued customers and.
At the same time.
We maintain our entrepreneurialism spirit and approach, allowing us to creatively serve our customers and opportunistically seek out additional revenue opportunities I will now turn the call over to door to provide some comments on our great financial performance Doron.
[noise], Thank you George and good afternoon, everyone.
I'm pleased to review the company's third quarter financial performance.
Please refer to our press release and supplemental slides posted on our web site for additional financial information.
In the third quarter, we achieved strong double digit revenue growth and increased operating leverage leading to record EBITDA levels and accelerating earnings growth.
Revenue grew 33% year on year with growth across our core businesses led by the exceptional performance of our federal solutions group as we executed on a number of new projects and pulled forward some existing contracts. Thanks to improved site access in many locations.
Gross margin of 18.2% remain consistent with our year to date performance as revenue and mix of projects remain similar.
We anticipate our gross margins to remain at these levels for the rest of the year.
Ameresco continued to benefit from our past investments in the highly scalable nature of our business model.
Revenue growth higher utilization and reduced spending levels, including travel related expenses were key drivers of our strong net income and EBITDA performance.
And while EPS Gionee expenses will increase in a post pandemic environment. We believe a portion of the savings are permanent and will benefit our operating leverage in the future.
Net income attributable to common shareholders was $20 million non.
Non-GAAP net income was $18.5 million an increase of 117%.
Adjusted EBITDA also a non-GAAP financial measure was the highest we have achieved in the company's history and.
An earnings per share more than doubled year on year.
Even with our strong project revenue, we continue to replenish and grow our contracted backlog.
We ended the quarter at over $1 billion in contracted backlog, representing 1% sequential and 31% year over year growth.
Our total project backlog now stands at $2.25 billion at quarter end, despite the pandemic related slowdown in new business development activity.
Our high margin recurring revenue businesses, which accounted for 70% of our year to date EBITDA have approximately $2 billion in long term contracted revenue in incentives between OEM and renewable assets. These.
These businesses will provide us with annuity quality revenue streams for years to come.
Amerescos cash flows and liquidity remains strong with ample cash and available credit to execute on our asset development pipeline.
We ended the quarter with cash on hand to $45 million after paying down $10 million on our line of credit.
Despite the pandemic challenges our continued focus on cash collections during the quarter further reduced our DSO to 88 days from 97 at the end of Q2.
In addition to strong working capital we have broad access to project financing and tax equity and we also have the ability to monetize development assets.
As noted in our release.
We received a request for information from the FCC concerning the timing of revenue recognition in our SaaS businesses.
While these businesses contribute a relatively small amount of revenue to our business as a whole.
For the sake of transparency to our stakeholders, we want to emphasize that we are taking this matter very seriously.
In the short time since we received this year does he see request.
We have spent considerable time and effort investigating and assessing these matters using outside counsel and an external forensic accountant.
All under the supervision of our audit Committee.
To date, we have found no material revenue recognition errors.
Now turning to our outlook, we're very pleased to be increasing our 2020 full year guidance as detailed in our press release.
We now estimate revenues in the range of $960 million to $1 billion, adjusted EBITDA of $107 million to $115 million and non-GAAP EPS of 94 cents to one dollar.
The midpoint of our revised guidance now represents a very robust 13% growth in revenue, 22% growth in adjusted EBITDA and 17% growth in non-GAAP EPS.
This assumes we will have the same level of access to our work sites and does not account for discrete items.
We will be providing a more detailed 2021 outlook during our Q4 earnings report.
When evaluating our year over year comparisons in Q4.
Keep in mind that our results are variable from quarter to quarter and last year, our fourth quarter results were exceptionally strong due to contract timing.
Now I would like to turn the call back over to George for closing comments. Thank you Doron.
Our unique business model and value proposition to our customers will allow him our ESCO to continue to thrive for years to come.
Our project backlog and recurring revenue stream give us excellent visibility into what should be another record year of growth and profitability for myrisk will enter into 21.
The entire I might ask a team hopes you and your family stays shave operator.
I would now like to open the call to questions. Thank you.
As a reminder to ask a question you will need depressed star one on your telephone Billy Joel Your question breast abound.
Your first question comes from the line of Noah Kaye from Oppenheimer. Your line is now open.
Good afternoon, everyone and that you know you mentioned the poor Q a year over year comps to be aware of but certainly I think it's good to be going into core Q.
With the strong results you've had already in hand, and not not dependent so much on contract revenue timing so.
With that and the first question is on capital structure I think year on an adjusted basis, you produce really strong free cash flow year to date, you've been able to finance.
Most of the energy project Capex with operating cash flow.
You look at the energy projects in development.
What that will mean for your recurring EBITDA and cash flow profile over time, how should we be thinking about.
Your you have an optimal capital capital structure target leverage and how you want to be financing the growth going forward.
Good good good good question.
I will let doron follow up on that.
Yeah no. Thanks, So I think while we're not making any particular statements about our leverage levels or any you know any specific plans. The truth is as a public company and with the track record. We have we have a lot of tools at our disposal, we continue to pursue creep.
Live project financing.
As you mentioned strong cash flow has allowed us to continue to fund that expansion and you know we'll continue to monitor the project finance markets the tax equity markets M&A capital markets for for ideas and and opportunities.
Okay. That's very helpful I'm thinking about the development, particularly on the R&D side, certainly lynn's coming back here nicely over the course of 2020 I'm sure help with with your view of the future project economics.
Just how are you taking advantage of the current IND.
Increase in RIN prices and in general can you talk about the Bankability of our LNG projects at this time.
Yeah, and as you probably know Youre aware.
Our NGL prices they've been relatively constant around the 150 to 265.
Dollars.
And as you might recall, we have hedged 70% of our outlook for the year and for the balance of the year, we had about 60%.
Hedge the other thing that.
We have done.
For the new plan those with the Mci rose is going to be an operation.
The.
Early next year, the first quarter of next year.
We have subsequently we have a long term contracts for about 50% of the output of that plan and I would say.
50% of the outputs of Oh are we doing plan and a little bit more of the San Antonio plant.
So we are hedged.
Oh, 2020, I want to say close to 50% of our output.
And as far as going beyond that we look we are working with various good creditworthy.
Offtakers to execute long term contracts so for.
The two plans as it will probably come into service and we have indicated so.
Next year, we are looking to execute some kind of a long term contracts.
Hopefully longer than the ones that we have right now with the two plants as a contract and then for 2000.
22, and beyond when we plan to bring three plants into operation again, where does the market is evolving.
In two long term contracts I think we might have to sacrifice a little bit on the return in order to execute those went on non long term contracts, but the bottom line is that this projects even under those conditions, they're very profitable much better return on equity and.
Lever return than anybody else.
So that's it.
Sorry go ahead go ahead.
And so far you know we were able to finance a when a project finance basis. All the plans that we have developed and executed that the leverage of course is probably not as good as we would like it unless we get a seven to 10 year contracts because the ones. We have right now there are three year contracts right.
Right, you think that some of those future contract so whether it's from the projects next year are there.
Ones in 2022, you think you'll be able to bundle you know the incentive streams. Among the other revenue streams is that how you're thinking about the contracts, where they still will be decided yet.
No. We do we're looking that we will once a month and we will be able to get some pretty good terms in financing as long and I feel very comfort.
Very comfortable with that we will be able to execute the longer term contracts, because so far even colleges and universities that are approaching us because many of them as you know they have combined heat and power plants right and they want to be 100% covered neutral the only way. They can do it is by replacing the natural gas was this grid guests and we are talking to us.
Some of them, but quite a few of them they have not step up to the prices that we would like them to do and some of the gas utilities you know, it's coming down the pipe that are the next evolution.
Originally started with the electric utility business now that you're going to do with the gas utilities to reduce their carbon footprint and again, we are talking to some of them but.
We are not in a position that we didn't announce any specific contracts yet.
Alright, well, thanks, very much for taking the questions nice quarter.
Thank you very much.
Your next question comes from the line of Eric Stine from Craig Hallum. Your line is now open.
Hi, everyone. Thanks for taking the question.
Yes.
Yeah.
Maybe I'll I'll, just stick with our Angie I'm just curious when you think about your pipeline longer.
Longer term and.
I guess some of the projects that maybe in California, I mean, any any thoughts on the break down there between Gary.
Versus landfill.
And obviously I'm getting that to the much better CDAI score and the LCFS revenues, which are quite a bit higher.
Would be.
Pretty nice component.
Yeah, you know, depending what that looks like in your pipeline.
Well, that's very good question and right now I think if.
If you thought on all the plans as we have in development. Our energy plans is that 12 of them and they represent a very a good chunk of our developer.
Then pipeline the megawatts.
But you you hit the nail on the head we are looking at besides landfill other sites, but it's just a couple of them, but I cannot talk about we we don't have the agreements in place yet in order to be able to discuss them, but I agree with you as we have higher value and the other thing don't be surprised that down the road.
Load some of this means that even the linfield blends as we have developed and right now we might go to hydrogen and have a higher value.
Mhm.
Got it Okay. I guess, we'll stay tuned on that you know, maybe just thinking about fourth quarter and I know you took up the guide I mean, it was a very good third quarter, but.
No with Kohl's bid and concerns about.
Another wave and conditions worsening in some areas.
Are you seeing any change to working conditions now.
I know your guidance is predicated on that and then at roughly stays the same but just curious what you're seeing early in the quarter.
Yeah, and I would add some.
You provided some color than dollar might want to add something to it look we're in a very good position as to where we are just as far as the total backlog and we are executing that seems very very well and unless they shut those down on a good number of sites for prolonged periods of time.
And then I will say there will be some disruption, but I do not anticipate that based on what we have seen in the past.
No even going back in March if you remember when they did shut down and we did have some shutdowns on some lower sites, but it was a weak what may be a few more days than that we clean up the site than we started up again.
So I I don't envision any problems and undermine when it's time to do that because that's a that's a great question and we think a lot about it and.
And tried to be prepared to as much as possible and that's why we say decides would've been available for this last third quarter. So we push to accelerate as much revenue as we possibly and Thats why we put some revenue from the fourth quarter to this quarter, because we have the access to the.
Various sites, especially in the military basis and actually some schools as well. So we took advantage of the opportunity. We will continue to the us and now I'm I will say, we're one month into the fourth quarter and what I haven't seen any interruptions.
During the Missy.
Yeah, I think it's all about monitoring the you know the infection rates and how things are going in the various states where were operating and where our projects are located which as you can imagine are all over the country and.
Being able to react to that I think our experience from earlier in the year will allow us to react to to any situations that arise, but as George said, we haven't seen anything thus far.
Yes, okay.
Thanks for that and then last one for me just George you mentioned, the military opportunity and clearly a number of award this year announced over the last couple of months and that was a big driver third quarter. I mean, how do you think about that opportunity or I mean is there any what size that opportunity.
You know I mean, it would seem like what you're seeing right now is a very sustainable trend for you.
No question about it isn't it and this is that's why I made the remark our market is expanding the opportunities are expanding because each and every based as we go into now they are more concerned about there is not only infrastructure upgrade but the resiliency and then not only about resiliency about some kind of renewables.
Reduction or their carbon footprint. So that's why we think it's it's it's very sustainable.
And that's why you see we Didnt talk a couple of projects as we have announced and they combined solar microgrids distributed generation and so on.
And the other thing Thats happened in June.
Regardless of what administration, we having that in place the economics of driving more and more of this business because the distributed generation solar insulin and micro grids, they pencil out otherwise they make good economic sense for the client and to me that's the best driver that you're going to.
Heavy this business.
And.
I've been in it for 40 years, or so and my biggest amazement is yeah, the cost reduction and the technological improvements that we have seen.
Yep, Okay. Thanks, a lot.
Well thank you.
Your next question comes from the line of Jed Dorsheimer from Canaccord Genuity. Your line is now open.
Hi, Thanks, congratulations on the quarter and the strength.
Thank you couple of questions.
You're welcome my first I.
I guess first question on the it seems that your you know continue to execute really well and the municipalities.
The military and universities.
I Didnt see anything noted on the commercial side, which I know is under pressure right now from an end market dynamic and also a relatively small portion.
Portion of your revenues, but I'm just curious in terms of any activity that you'd call out in that.
Business.
It's yeah.
Start there.
No no very good question actually.
We didnt call it out with I want it to get approval from some couple of three.
123, large Si I my customer that I wanted to talk about it but they did not get the approval in a time when official but.
And that's what makes me feel very very good about this business not markets finally is beginning.
And it's beginning to move because I think it's economic driven in addition to that the carbon is sustainability reduction.
And many of them as you probably know there has yes that adjuvant programs and finally, they are beginning to talk to us and we see some very good projects with implementation it's.
You know I had been in a long time and I said you know the next major catalyst that's going to happen to this business is get a this year nice to move on the other hand, though you know that many of them. They want us to develop the project design of the project and then we've built them for them. So they squeeze us emerges.
But the man, but they're quick turnaround and they move much faster than the federal or state on them wasn't much markets as we've been so successful and it's encouraging that's all I can say right now and the other thing that's why you see us develop the energy as a service agreement because many many of them. They will have some financial concerns.
And though as they have approached us.
For some kind of a different type of financing that the performance contract and we said sure and that's why you see us talk in the near future, we'll be able to announce some of those deals.
Got it well you hit the second question I was going to ask in terms of the energy as a service. So should we be thinking of that as a separate line item breakout I recognize it's relatively small at this stage but.
I'm just thinking of that is it's kind of a separate business and it seems like that may be may starting kind of focus on the scene I side of your of your business is that the right way to think about that.
Well I'll jump in here, so I'm not sure that it's exclusive to the C. and I for sure certainly the desire for energy as a service financial structure is coming from all of our customer bases.
I would also probably think about it a little bit more like another category of the energy assets.
In development, you know, we're going to we're going to be.
You know exploring those situations with our customers those will become assets that are on our balance sheet that will generate the long term recurring revenue streams.
Got it so I think that's probably the best way to think about those.
Okay, and then I guess, George if you.
Do you feel as if there are any constraints in the business and what I mean by that is it seems as if.
You know there's a.
The work from home dynamic is well is the pressure on tax revenues is kinda created this perfect storm for your business as well as a focus on reducing carbon footprint and I'm just wondering.
As you know as it relates to head count in your ability to expand the business.
Do you feel like there's any odd.
Limitations that you.
You now have.
With respect or or do you feel like you're well balance.
Well right now I would say that we are well balanced but.
As the business accelerates, especially on the distributed generation side and the Green gas plans as one of its hydrogen downs that roll into things like that.
You know, we're looking for additional help there, but the rest of the rest of the business was from the administrative side legal site account in financing and so on and then generally engineering on the energy services sites I think we have very good and actually we have a little bit.
A little.
A little bit extra room, I will say.
Actually just a little bit more business than we've been doing in the past and that's why we're getting good leverage from the operations.
And that.
You know I I said this before we've been lucky.
And the fact that we technology independent and non affiliated with a large utility or a large manufacturer and we approach of the solution from the agnostic technology agnostic and what makes a good sense for the customer we have people that have the passion for this business.
And we've been able to attract the talent and the fact that the lira independent and it gets helped us a lot.
Great I'll jump back in queue. Thank you.
Thanks, Jeff.
Your next question comes from the line of Craig Irwin from Roth Capital. Your line is now open.
Hi, good evening, congratulations on the really strong performance this quarter I'm really talking it out of the park.
We're trying.
[laughter] and succeeding.
George can you remind us the timing of your next couple cellulose at plants. When you expect those to come on online.
How firm are those approximate start dates.
Do we.
Do we maybe have some ribbon cutting is coming up.
Yeah. That's a good question the car they want the one down in Texas, We had that was getting basically commission and the plan this quarter.
And because of the various storms down there.
And little bit of covenant, I didn't but not as much on some delivery of equipment, but primarily from the storms that will flip delayed by a couple of months. So that's when we started the first quarter of next year.
Then in addition to that we have a dual plans the supposed to start by the end of next year one of them definitely was sub but in the end of next year. The other one might slip to the first quarter of 2000.
You.
Tony too.
And then in that particular year, we have three more.
That's correct. So you understand the primary bottleneck in developing this plans, especially new especially in California. They are more valuable there of course, but.
Permitting them.
And especially with what's going on fun to getting to the right of ways for the gas pipelines and getting that utilities attention because of what's going on with the fires and everything else is and then COVID-19. It is borrow up.
The permitting process.
And I'm going to let it.
[music].
That we're doing as much as we can and we have our local people, who and where we hired more and more local talent in order to help us in California to expedite that those those plant because we want to build this to be able to do at least three plants are you.
Yeah, and I would weigh in a little waiting until we seem to the light at the end of the tunnel to be able to exit good long term contracts and it's going to happen. It's really a matter of time that that would happen and therefore, we would we.
We are building up.
So then as we look at the project EBITDA in the third quarter. It was up almost 80% sequentially increased by 5.6 million on an EBITDA basis you.
You know that's well above any peak prior performance for your project business.
Can you talk about any specific items in there you know is this really the.
The debugging of some of your plants and maybe some summer rains in there you know what were the contributing items to the strength that we saw both sequential and year over year there.
Yeah.
Yeah, I mean, Craig I'll start Mark my jumped [laughter], but I think you know as as we talked about the performance of the Federal group was a it was quite strong in the quarter and you know when we look at operating leverage I think that's a business that actually operates extraordinarily efficiently. So the EBITDA contribution is.
It is a bit stronger even even versus some of our other businesses. So.
I don't I don't know that I could actually isolate any particular items there marketing.
I don't think there's much more to add there were there were no real unusual it was really just comes down to the mix of those federal projects and the overall project revenue across the company. So it was just a stronger mix and continued execution that whether the contributions so.
Yeah. That's that's excellent that's excellent so the other business that was particularly strong in the quarter, which OEM. You know 5.8, now EBITDA up 4 million sequentially. That's that's again, a big chunky number where there any maybe on project closeouts in the quarter or any other items that that lifted that.
And keep that strength.
No or is it really just a steady state number based on the number of projects that that Amrisc was built into its books that runs off over many many years.
Yes, no that's why we love the business you know that's why we when we say we want to improve or increase our recurring revenue base and the why now is the one that basically.
It doesn't require any capital, but its comes after the large energy savings reform as contracts that that we implement and then it's lumpy, but once we get one of them they they add to quite a bit.
It's a it's a great great little business line and.
That's the one that we focus a lot.
Maybe we will fine so.
Some niche player that will fit in our.
In our gearbox and maybe you acquired a small company and grow that business more it's it's a great opportunity for us and it's sticky I'm in a.
Many of the federal conferences, we have there 18 to 22, you have contracts or in some agreements so.
Yeah.
A great business to be it.
So my last question.
It's about the environment for somebody looks at plants I understand there are actually a couple of plants that are being offered for sale right now.
You know they are definitely not cheap given the the value in these properties.
But should we be surprised if ameren still maybe chooses to to acquire one of these one of these plants and the market, particularly given that you know your equity has a much more fair valuation than it has for the last several years and.
And investors seem to understand this business and a long term profit potential pretty well right now.
Yeah.
Look we're looking at all kinds of opportunities as [laughter].
If they make sense to us.
What is the price is right and ER.
We will do it but on the other hand, we were very very cautious.
And I know the expectations out there on the street, they're very very high.
Uh huh.
I think you know me little bit better than that correct.
I'd like deals that can make money.
And and I liked you cautious as as do most of your investors. So congratulations on another question, but on the other hand, there are some opportunities as you might not be aware that we are looking that is they are not as.
As expensive as in my other things might be so I wouldn't be surprised that we might acquire something but it's going to meet our criteria make great economic sense for the company and strategic fit.
Would you consider buying maybe one of the portfolios. You know there was a portfolio that was up for sale that a bulge bracket banks butcher the transaction didn't know really go to one.
Would you consider any.
Portfolio with multiple plans.
That's that's little bit beyond our reach I will look at it but like I said that we were extremely careful.
Some people there they want some crazy prices out there and.
And im not I look we're a developer.
You know, we develop our own assets, we've known lower on as is and.
Rebuilt the you know last time, you brought it up that we operate in a little bit that some local presence. We have built this plans to us and it has helped US strategy. So far we continued.
On the other hand, I I did say somewhat opportunistically, we will be opportunistic well that will continue and and no. We don't plan.
As we want to develop exit good for them and then we have a couple that are they.
There will be different in the landfill gas so.
There is no shortage.
That's good to hear me congratulations on the progress.
Very much Greg Thanks, Greg.
Your next question comes from the line of China from Raymond James Your line is now open.
Thanks for taking the question in your.
Portfolio, that's in operation solar right exactly 50% of the megawatt.
And in the development portfolio.
Solar I believe is 65 person that is.
Is there a mix that you're aiming for or does it not matter either way as long as the economics makes sense.
Yeah, Phil Thanks for the question you know I think it's more the latter really.
You will see as we talked about energy as a service asset opportunities started appearing and developing those in the proposal stage.
It's all going to be down to risk reward and what makes sense economically and what the returns look like.
Solar in the last 12 to 18 months for the company I think grew pretty substantially.
Because the opportunities were available and were finding good deals.
At the same time.
So that that doesn't necessarily mean that that's what's going to continue to happen.
Yeah.
One yep Yep. Please.
What am I, what I might add there one of the advantages of the solar is the fact that across.
Across the country all of our offices now they can develop the solar plants and of course many of them. They are behind some customer accounts like schools colleges universities and so on so you will see has developed and what I will say the smaller scale sides for solos is five kilowatts to.
Five megawatts.
It happened in a lot where the.
Green gas plants, there's much more specialized item and we have one group basically that does that for across the country. All the plants. So we have little bit limitations as to how many green gas plants. We we can do we're there and that's why we're building the capabilities up on that side whether the.
The solar plants, they're easier to develop and hopefully everybody out.
Around the company would be able to do that and that will help us but.
But accelerate that as much as possible.
Yeah, I mean, I guess I would I would also sorry for those just add the solar plus storage is certainly something that starting to emerge a lot in our in our in our development pipeline here you know you're not seeing that actually in this metric I think as we've talked about before were relatively conservative in terms of putting things in this metric in terms of milestones.
Third our projects have to reach before they actually get recorded here, but there's certainly plenty of activity there as well.
[noise] Im not contact since we're a day away from from the election.
Lets suppose that the ITC for solar.
Expires or drops too though.
That story, 10%.
At the end up 21 is.
Is it fair to assume that for your development efforts. If that's the scenario you're gonna pull in as many projects as possible for solar into next year.
And then perhaps take your foot off the accelerator in.
In 22 and beyond.
[noise] foot off the accelerator is a little bit of an extreme a reaction I think that like any other developer we will be reasonable in terms of our desire to the safe Harbor a.
Equipment in order to preserve 26 and 22.
Costs, you know as we all know costs should come down they'll continue to come down we have to continue to strive to increase efficiencies and bring down balances systems and then keep in mind that a lot of the work that we do in solar and battery storage is in our project business.
So.
I don't think were necessarily going to slow down as a a a as a contractor in the sector.
What I might add.
Solar it's here to stay and even with all the incentives go away, let's say three years from now.
At that time I think the yeah.
The drive whether it's from the mass market or they see a nice.
And.
Yeah, there will be happening <unk> and <unk>.
Just just think about where solar module pricing is today versus the wattage of modules that standard module you can get in the increases in efficiency that you're seeing you know if that's going to keep going that direction.
They're going to be ways to to make these deals pencil.
Thank you guys.
Thanks for you. Thank you.
Your last question comes from the line of Christopher in Southern from B. Riley. Your line is now open.
Hey, guys. Thanks for taking my question and congrats on the quarter.
To piggyback on that last.
Point, when you're talking about solar and additional the addition of storage, which seems to be continuing to be.
I see an opportunity there could you just talk about within that mix.
You have a sense of what the percent that include storage or and then I think you also mentioned the Standalone battery system in the prepared remarks could you talk could you provide a bit more color on that project maybe.
Right now as a percentage of the test storage on that basis, the military basis.
The ones that we have done recently I want to say just about every one of them is sometime in the form of a storage.
But.
As far as the other applications.
The sites I would say very small percentage <unk>, then maybe 10% if that but.
The storage is evolving right now we are a little I would say in the first inning if at that.
And as far as the cause concern and as far as the acceptability of various customers out there, but I like to say, it's a much more choices. Many managed schools right now they would that we did the solar installations couple of years back they want us to go back and put some battery storage and we have.
A couple examples of that so we are at the early stages of store the store to store. It doesn't represent a large portion of our portfolio and then Durham I have it.
No I think as those as those projects start going into the us and development metric will talk more about it and talk about how how the.
The volumes are looking versus the rest of the categories of assets and the Standalone storage. So actually a small utility contract I don't think we're in a position to disclose anything further about that.
Okay understood appreciate the color and then just on this past quarter, you discussed having improved access to work sites, which probably allowed some pull forward demand.
New projects popping up during the quarter, which seem to be kind of the delta with the full year guidance.
I just wanted to get a sense of how many of these projects are corporate related upgrades like the UBI disinfectant. Each backup grades you talk you mentioned being strength last quarter.
Were these what kinds of projects, where the incremental tons of projects you're saying.
Uh huh.
It wasn't that many broad jets, but.
I would say.
We hit the one.
About five projects that they know the catalyst was the fact that they had to do something because of covered maintain.
But the other thing that's happening, though we incorporate covered 90 in many years. So we get the customer to talk to us and get moving.
So it's a.
But I know for projects at least that the catalyst was covance et cetera customer ended up moving ahead and one of them as I mentioned that Columbus.
They can cut and some money out of the cures Act and they need to do something.
Got it and then just.
Maybe an update on kind of what some of the hospital business, which seem like had had seemed to slow down earlier in the virus pandemics outbreak.
That business starting to come back or are there any other.
Beyond the federal strength that we should kind of be.
I'm doing here.
No actually that no recently we.
We haven't seen any slowdown in the hospital business at all.
And.
We are moving.
Full speed ahead of them I say and we're doing a couple of large was phyllis institutions and we did experience some delay certainly won but not lately.
The other thing that gets cap and you know the.
The COVID-19 cases in the cost of those he has dropped.
Substantially even with the uptick.
And we haven't seen any slowdowns.
That's good to hear.
I'll hop in the queue. Thanks.
Thank you Joe.
At this point I don't see any further questions ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Thank you.
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