Q2 2021 Fuelcell Energy Inc Earnings Call
Good day, and thank you for standing by.
Welcome to the fuel cell energy second quarter of 2021 financial results and business update conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
I'll ask a question during the session.
You will need to press star 1 on your telephone.
Please be advised the today's conference is being recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your Speaker today, Tom Gelston Senior Vice President of Finance and Investor Relations. Please go ahead.
Thank you Jason and good morning, everyone. Thank you for joining us on the call today as a reminder of this call is being recorded.
Morning fuel cell energy released our financial results for the second quarter of fiscal year 2021, and the earnings press release is available on the Investor Relations section of our website at fuel cell energy Dot com.
With our practice.
In addition to this call on our press release, we will post a slide presentation on our website.
This webcast is being recorded and will be available for replay on the company's website approximately 2 hours. After we conclude the call.
Before we begin on prepared comments. Please direct your attention to the disclosure statement on slide 2 of the presentation of the disclaimers included in the.
A press release related to forward looking statements the.
The discussion today will contain forward looking statements, including without limitation statements with respect to the company's anticipated financial results and statements regarding the company's plans and expectations regarding the continuing development commercialization and financing of its fuel cell technology and its business plans.
These forward looking statements are.
Intended to qualify for the safe Harbor from liability established by the private Securities Litigation Reform Act of 1095, all statements made on this call today other than statements of historical facts are forward looking statements and include statements regarding our anticipated financial and operational performance.
Forward looking statements made on this call represent management's current expectations.
Based on information available at the time such statements are my forward looking statements involve numerous known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from the results predicted assumed or implied by the forward looking statements.
I encourage you to review of the information on the reports we file with the SEC regarding these risks and uncertainties in particular of those.
That are described in the risk factors sections of our annual report on form 10-K, and the cautionary statement concerning forward looking statements disclosure in the quarterly reports on form 10-Q.
You should also review the section entitled Cautionary statement concerning forward looking statements in this morning's earnings press release.
During the call, we will use non-GAAP financial measures when talking.
Patients from the company's performance and financial condition in accordance with the SEC regulations, you can find a reconciliation of these non-GAAP measures to the comparable GAAP measurements in this morning's earnings press release and the reconciliation document posted on the Investor Relations portion of our website for.
For our call today I'm joined by Jason few fuel cell energy as president.
Talking about executive Officer, and Mike Bishop Executive Vice President and Chief Financial Officer, and Treasurer. Following our prepared remarks, we will be available to take your questions and be joined by other members of the leadership team I would now like to hand, the call over to Jason for opening remarks, Jason.
Thank you Tom and good morning, everyone. Thanks for joining us on our call today.
We remain optimistic about the continuing momentum behind the global energy transition and expect to play an important role with our primary technologies that include distributed generation distributed hydrogen long duration of hydrogen energy storage and carbon capture.
We are firmly committed.
It to working hard to achieve revenue growth over time by continuing to focus on our turnaround and delivering proprietary technology solutions that we believe solve customer energy needs and aid in the carbonization.
For anyone who may be new to the story, we have included a company overview.
As shown on slide 3.
Taking a look at full year fiscal 2020 ended on October 31, we achieved revenue of $71 million.
A double digit increase over the prior year.
Our 3 largest revenue categories, our service and licenses advanced technology.
Acknowledges and generation.
All of which represent diversified sources of recurring revenue under multiyear contracts with investment grade customers.
Looking ahead, we are focusing on opportunities to generate meaningful revenues from product sales, we see opportunities in markets, including the U S.
And select countries across Europe, and even domestically with certain customers, who prefer to own the fuel cell platform under our powerhouse business strategy. We have made it a priority to target product sales.
We have been taking steps to rebuild our business development and go to market capabilities as in the central.
Asia and the strength in pillar of our powerhouse business strategy to ultimately support growth.
Recruit and onboard on strategic talent.
Focus on market segments, which deliver long term growth opportunities with repeatable business and carbon capture and separation and hydrogen applications.
<unk> re enter targeted global markets and build client relationships.
We had many customers highlighted here on the slide who are utilizing our multi featured fuel cell platforms. Many of these platforms integrate combined heat and power capabilities, creating extremely high energy.
<unk> efficiency levels, while other installations enable micro grids keeping of central resources powered and enhance grid resiliency and reliability.
Some applications utilize onsite biofuels, resulting in carbon neutral to carbon negative power.
Prior to moving on to discuss.
The purpose I want to spend a minute addressing our quarterly results certainly we are not satisfied with the financial results that the company produced this quarter. If this is not your first earnings call. You've heard me discuss safety ratio, we continue to concentrate on improving the saving ratio across our organization.
Our Corp, and while our strategy implementation and pivoting to the growth phase was expected to be a process. We are not pleased with our saving ratio this quarter and the results that we're reporting this morning.
However.
I want to stress that the financial results are a snapshot.
And not a complete.
<unk> reflection of the hard work and progress, we're making in executing our powerhouse business strategy. We will cover some of these actions and investments in the coming slides now turning to slide 4.
As a company we are committed to our purpose of enabling the world deliver life empowered by clean energy.
Complete the world will always need reliable always on power that is created in an environmentally responsible manner.
As we are periodically reminded by extreme weather and other events grid reliability remains a critical issue.
Fuel cell energy is uniquely positioned to assist customers.
On the de Carbonization journey and meet the grid reliability challenge with our broad product portfolio.
It is important to highlight that we do not subscribe to the philosophy that the goal of de carbonization requires the industrialization or the developing countries around the world cannot participate in.
Industrial in industrialized societies through their own economic development instead.
Instead, we look to deploy our unique and differentiated energy solutions to deliver decarbonize based on power as the.
A necessary complement to intermittent renewables and of manner, which sustained high standards of living and.
The growth, while protecting the environment and adapting to new resource challenges.
This purpose drives our strategic focus and the work we do.
Next I would like to turn your attention from some key messages for the quarter shown on slide 5.
The first is that we continue to make steady.
The desktop aggress against our $1.3 billion of backlog as we execute our powerhouse business strategy in terms of rate of capacity completion of these projects will add $43.5 megawatts more than doubling our current generation portfolio of $32.6 megawatts.
As previously.
<unk> our backlog now includes a power purchase agreement for a newly awarded 2.8 megawatt share clean energy facility project in Derby, Connecticut.
I am pleased to announce that we are close to resolution of the interconnection issues on the 7.4 megawatt project at the U S Navy.
Naval submarine base in Groton, Connecticut, with 2 parties prepared to execute the current form of interconnect agreement 1 of which is fuel cell energy.
The project is entering the final stages of construction and nearing completion with commercial operation currently expected in late summer assuming final signature.
Nature of the interconnection agreement is achieved.
Just last even.
The <unk> the Connecticut Senate approved the passage of house Bill of $65.24 by a 26% to 10 margin.
This bill includes several key provisions and amendments important to the state of Connecticut, maintaining its fuel cell manufacturing leadership position the.
Energy transition in the forecast.
Cost of the importance of distributed hydrogen positions, Connecticut as a global leader in clean technology, the central and achieving global sustainability objectives.
The Bill requires the Connecticut utilities to solicit proposals to require new fuel cell electricity generation projects.
<unk> forecast begin on or after July 1.2021.
Projects submitted under this mandate will be approved by January 1.2022 importantly.
Importantly house Bill $65.24 provides preferences for projects that are cited on brownfields as Connecticut demonstrates it.
Commitment to energy equity and for fuel cells that are manufactured in Connecticut.
The Bill now goes to the Governor Lamont desk for signing and per law.
At our 1.4 megawatt biogas project at the San Bernardino, California wastewater treatment facility construction.
<unk> is completed we have received the necessary authorizations from the local utility on the interconnection process for this platform and we have entered the.
The commissioning stage of this project, we expect COPD in our fiscal third quarter and once we achieve COPD fuel cell energy will help.
Yet another wastewater treatment plant turn off its fleur. Another example of fuel cell energy, helping the customer to move its de carbonization goes forward and eliminate methane flaring.
The equipment manufacturing fabrication and early stage construction is underway on the 2.3 megawatt.
The hydrogen platform at the Port of long beach that will deliver carbon neutral electricity.
Green hydrogen and produced water, helping Toyota avoid consuming water as a natural resource at the port.
The picture on the right side of the slide is of rendering of the first.
Of its kind project.
I want to unpack the value of generated water are trialing hydrogen platform will provide Toyota.
Based on the National drought mitigation center at the University of Nebraska, Lincoln today, 100% of the state of California isn't at least moderate.
On track conditions and the areas surrounding long Beach, California are classified in between the severe and extreme making the <unk> water production, even more valuable to Toyota is water use at the port.
This project is expected to further demonstrate the ability of fuel cell energy platforms.
Drought to assist our customers and achieving a broad range of sustainable goals.
In addition, we are advancing work on our utility scale deployments in the Op, Inc. Long Island, New York in Derby, Connecticut, together. These 3 projects totaled $24.5 megawatts.
After resuming production last year at our Torrington, Connecticut manufacturing facility with necessary Covid related safety enhancements, we have increased our annualized production rate from 17 megawatts at the end of fiscal 2020 to more than 30 megawatts as of April 30th with the objective of reaching the.
The annualized production rate of 45 megawatts by the end of this fiscal year.
This increased production rate has been facilitated in part by our efforts on increasing hiring reducing production tack time and continued implementation of lean manufacturing principles of.
Operational excellence.
Always been extremely important to fuel cell energy and a validation of our efforts I am proud that we have recently added ISO 45001, 2018 to our list of certifications.
This recognition represents the worlds international standard for occupational.
Health and safety and is important to our company as it formally incorporate safety into our everyday practices.
My second key message is the highlight of our investment in research and development towards the commercialization of our solid oxide power generation storage and hydrogen electrolysis platform.
As well as growing our commercial capabilities.
Our support of programs continued to advance the design of our solid oxide stacks.
<unk> modules and balance of plant systems.
The prototype electrolysis system that we are currently operating is exhibiting our target of electrical efficiencies of about.
90% with the capability to increase the electrical efficiency to 100% with an external source of <unk>. We are also executing on programs to develop reversible solid oxide systems from energy storage and very high efficiency solid oxide power generation systems.
And the third key message.
Today is our focus on strengthening our leadership in sustainability the <unk>.
Transition of clean energy continues to gain momentum as society looks for de Carbonization solutions to address climate challenges, while grid reliability deteriorates admits challenges posed by climate change on.
The investment in infrastructure.
Cyber attacks to meet this growing need the also energy remains focused on developing and deploying our distributed decarbonize product portfolio of solutions for some of the largest global energy opportunities.
And now I will turn the call over to Mike to discuss our financial results in more detail Mike.
Jason.
Let's begin by reviewing financial highlights for the quarter shown on slide 7.
In the second quarter of fiscal year 2021, we delivered revenues of $14 million compared to $18.9 million in the second quarter of fiscal year 2020.
Looking at revenue drivers by category service agreements and license.
Jason is decreased to $700000 from $7 million reporting of the reported in the comparable quarter of 2020.
The decline in revenue is primarily due to the fact, there were no new module exchanges during the quarter, while new module exchanges generated approximately $5.5 million of revenue in the prior year quarter.
The second.
<unk> revenue of fiscal year 2021 also included cost estimate adjustments related to changes in the expected timing of future module exchanges, which reduced revenue recognition in the quarter by approximately $800000.
Generation revenues increased to $6.2 million from $4.6 million primarily due to.
Quarter operating output of the generation fleet, which resulted in an increase in generation revenues of approximately $800000 and sales of renewable energy credits, which also resulted in an increase in generation revenues of approximately $800000.
Advanced technology contract revenues decreased to $7.1 million from 7.
7.3 million compared to the second fiscal quarter of 2020 advanced technology contract revenues recognized under the joint development agreement or <unk> with Exxonmobil.
Non mobile research and engineering company, where Emory.
Approximately $400000 higher during the second fiscal of.
Quarter of 2021, reflecting the continued performance under the JV EBITDA with Emory on fuel cell carbon capture solutions during the quarter. The increase revenues under the GTA were offset by $600000 less revenue recognized under government contracts during the second fiscal quarter of 2021.
Compared to the prior year quarter.
The loss from operations totaled $17.4 million of compared to $8.1 million in the comparable prior year period as a result of higher gross loss and higher operating expenses.
Gross loss for the second quarter of fiscal year, 2021 totaled $4.8 million compared to a gross profit.
Of $200000 in the comparable prior year quarter impacting the gross loss for the quarter were lower.
Lower service gross margin due to the fact, there were no new module exchanges during the quarter and due to adjustments of loss accrual reserves to account for changes in the expected timing of future module exchanges.
We also saw lower generation gross margin primarily related to higher cost per plant maintenance as we continued to invest in efforts to improve fleet performance.
And lower advanced technology gross margin given the mix of activities in the quarter. These impacts were partially offset by lower manufacturing variances as.
Of the increase in the annualized factory production range.
Operating expenses for the second fiscal quarter of 2021 increased to $12.6 million from $8.3 million in the second fiscal quarter of 2020 administrative and selling expenses in Q2.2021 included additional share based compensation.
Asian of $800000 due to the non cash grants made in August and November 2020, under our long term incentive plans.
An increase in compensation expense and proxy mailing and expenses associated with the Companys annual stockholder meeting also contributed to higher administrative and selling expenses in.
As a result of fiscal quarter of 2021.
Research and development expenses of $3 million during the second fiscal quarter of 2021 reflects increased spending on the companys hydrogen commercialization initiatives.
Net loss was $18.9 million in the second fiscal quarter of 2021 compared to <unk>.
In the <unk> of $14.8 million in the second fiscal quarter of 2020, the net loss per share attributable to common stockholders for the second quarter of fiscal 2021 was <unk> <unk> compared to 7 in the second fiscal quarter of 2020, the lower net loss per common share despite a higher net loss.
<unk> attributable to common stockholders is due to the higher weighted average shares outstanding due to share issuances since April 32020.
Adjusted EBITDA totaled negative $11.3 million in the second fiscal quarter of 2021 compared to adjusted EBITDA of negative $3.3 million in the second fiscal quarter.
2020.
Please see the discussion of non-GAAP financial measures, including adjusted EBITDA in the appendix of the Companys earnings release.
Next please turn to slide 8 for additional detail on financial performance and our backlog.
The charts on the left hand side of the slide graphically.
Numbers, we just reviewed for the second quarters of fiscal year, 2020.1.
Looking at the right hand side of the slide we finished the quarter with backlog of approximately $1.3 billion a decrease of 1.5%. The backlog decrease was partially offset by the inclusion of $59.4 million.
Show them of generation backlog added during the quarter for the power purchase agreement for the 2.8 megawatt project in Derby, Connecticut.
This 20 year power purchase agreement was awarded as part of the competitively bid state sponsored shared clean energy facility program.
Now turning to slide 9.
As of April 32021, cash restricted cash cash equivalents totaled $171.2 million of which $32.1 million was restricted cash and cash equivalents represented by the Green bar.
On the right hand side of the slide we have included a chart illustrating our total prop.
Assets, which make up our company owned generation portfolio, which we continue to invest in investments to date include capital spent towards completed projects as well as projects in development and construction at.
At the end of the second quarter of fiscal year 2021, our gross project assets totaled.
<unk> $223.4 million.
As the itemized on slide 19 in the appendix of this presentation our generation portfolio totaled 70.176, 1 megawatts.
Of assets as of October 31, 2021. This includes $32.6 megawatts of operating.
<unk> assets and $43.5 megawatts of projects in process as projects in process come on line. They are expected to contribute higher revenue and adjusted EBITDA.
As noted in our release today, we are now targeting commercial operations of our San Bernardino platform in the third quarter of fiscal 2021 and.
And commercial operations of the Groton Navy sub based project is targeted for late summer of 2021.
As projects come online, we expect to seek long term project financing and recycle cash back to the company to redeploy into other projects or growth development activities.
I will now.
Now I'll turn the call back over to Jason.
Thanks, Mike.
Next on Slide 10 is a summary of the 4 major technologies that fuel cell energy is pursuing.
Each with its own significant total addressable market opportunity that creates optionality for the company and has supported.
Courted by our broad fuel cell platform portfolio.
In distributed generation. We currently have 32.6 megawatts of installed and operating with another 43, 5 megawatts and our project backlog.
Our distributed hydrogen and carbon separation solutions are commercially available and as previously.
Stated our carbonate distributed hydrogen solution will be implemented at the port of long Beach, California.
As of the only platform, we know that can produce.
The hydrogen and water.
This capability has the potential to be particularly significant in areas with constrained water supply as I previously.
Previously highlighted.
Hydrogen and long duration energy storage using our solid oxide technology is in advanced development and our unique carbon capture technology is currently being developed under a joint development agreement with Exxonmobil Research and Engineering company, we continue to advance our carbonate fuel.
So platforms efficiency, capturing carbon from an external source, while also producing power as.
As with our distributed hydrogen platform, we believe our carbonate fuel cell platform is the only system in the world that can capture carbon from an external source and produce more power at the same time, we can all.
Also directly capture our own carbon emissions from our platform.
For carbon utilization <unk> sequestration.
Next on slide 11.
Illustrates our position across the hydrogen value chain.
On the left you will see a visual illustration of how fuel cell energy has the potential to deliver hydrogen.
<unk> been using 3 of our platforms the opinion on our customer application.
Carbon at Tri Gen delivers power water and hydrogen and depending upon the configuration can deliver great hydrogen blue hydrogen when combined with our proprietary carbon capture technology, our greenhouse origin when deployed utilizing.
Biogas with or without carbon capture.
And as a reminder, fuel so energy is spent 2 decades developing and refining in real commercial applications of the technology to clean the impurities from our onsite biogas.
So that we can generate renewable energy and greenhouse origin directly at the biogas.
Sort of without expensive purification to pipeline quality.
The platform. We are currently building for Toyota at the Port of Long Beach is an example of <unk> delivering green hydrogen.
Carbonate RFP, which stands for reformer electrolyzed water purification can be utilized when co production of power is not required.
Third and it can deliver green hydrogen blue or gray.
In essence this is ronnie our carbonate fuel cell in electrolysis.
Reverse mode to singularly produce hydrogen.
And third we are advancing our solid oxide technology, which produces hydrogen through highly efficient.
High temperature electrolysis it.
It can also operate in reverse mode using stored hydrogen to produce zero carbon power.
Slide 12 provides a more detailed overview of our solid oxide platform.
A prototype unit is currently running in our Danbury, Connecticut headquarters for testing of various.
Current design elements.
It will be modified the run and reversible mode.
Turning between hydrogen generation and power production, demonstrating our hydrogen based energy storage platform.
As previously announced we have been selected for cooperative agreement from the U S Department of energy.
<unk> to fund the design manufacture and testing of a large system at the also energy Danbury, Connecticut facility to be delivered to Idaho National laboratories.
There it will undergo rigorous testing to confirm the electrical efficiency as well as the ability to utilize nuclear power plant waste heat.
To obtain even higher efficiencies of up to 100%.
This project represents a key step in fuel cell energy path to commercialize our high temperature high efficiency solid oxide electrolysis technology the.
Multi stack module that forms the core of the system is a modular building.
The block easily scalable for larger systems of 2 gigawatt scale.
Just last week Senator Chris Murphy, and Congresswoman Johanna Hayes visited us here in Danbury to witness firsthand electricity being converted to hydrogen by our prototype solid oxide unit.
It is safe to.
To say that both the senator and Congresswoman are excited about the development of our differentiated technology, taking place in Connecticut. The role of Connecticut can play in the energy transition and the opportunity to create clean tech jobs in the state they represent in Congress we.
We are thankful for their time.
2 of them for their support for federal programs that encourage the continued and expanded deployment of fuel cells and encouraged by their leadership in important matters like de carbonization grid reliability, the clean energy transition and their recognition that fuel cells are needed to realize global climate ambition.
A price.
Next on Slide 13 is our powerhouse business strategy, which is based on 3 core pillars of transform strengthen and growth.
We introduced the powerhouse business strategy in January of 2020 to serve as a guidepost for our turnaround as we reposition fuel cell energy to capital.
Capitalize on the energy transition.
The first phase of our plan was to transform the company by building a durable financial foundation and enhancing financial results. We have taken a number of important steps to strengthen the balance sheet allowed us to finance new projects push forward with commercialization of breakthrough products and.
And lower our cost of capital <unk>.
Currently we are focused on strengthening and stage of our strategy to drive operational excellence throughout the business and make capital investment decisions that further enhance our performance and advanced product commercialization, while adding top quality talent to our team.
The fully deliver on the powerhouse business strategy, our third pillar for long term growth is to penetrate markets and customer segments, where our technology platforms. It can be the preferred solution.
We're increasing our annualized production rate as previously mentioned and will generate operating leverage.
Increase our production rate for future business growth.
Turning to slide 14.
We will continue to work toward our 3 year long term targets and goals that we established with the launch of our powerhouse business strategy looking ahead to fiscal year 2022.
Reaching these targets will require of successfully exit.
<unk> against our $43.5 megawatt project backlog and achieving commercial operation from each of those projects.
As I have explained in today's presentation, we are pursuing commercial commercializing our advanced technology around our around RMP and solid oxide hydrogen and focusing on advancing the development.
<unk> of our carbonate carbon capture platforms for capturing carbon from external sources, each of which offers potential growth opportunities for our company.
To conclude my remarks, I will review the key investment highlights for fuel cell energy on slide 15.
We have executed several strategic actions.
To strengthen our balance sheet by repaying debt enhancing liquidity and reducing our cost of borrowing we believe these steps have positioned the company to execute on our 3 year growth strategy we.
We have an exceptional leadership team and continue to add talent across the company. We are focused on taking care of our customers.
<unk> hitting our financial milestones and continually building upon our operational excellence, while adhering to our core purpose.
Our portfolio of innovative technologies has a.
The potential key role to play in the global goals of Decarbonize, the grid developing the hydrogen economy and supporting existing.
<unk> and industrial infrastructure investments with differentiated carbon capture solutions.
We are working to implement our powerhouse strategy to strengthen our business maximize operational efficiencies and position us for long term growth.
Finally, we intend to be a leader in sustainability and environmental stewardship.
Entered by delivering on sustainability through our technology and the full circular life of our platforms.
I will now turn it over to Jason Stevenson to begin Q&A.
At this time, if you would like to ask a question. Please press Star then the number 1 on your telephone.
Telephone keypad, we will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Colin Rusch from Oppenheimer. Your line is open. Thanks, so much that's kind of get an update on the the pipeline of projects that youre looking at and how they're progressing outside of kind of get it.
Great to see you made some progress, but we love to see.
How youre competing in some of the other geographies.
Yeah, Hello, how are you this morning.
Good good degree of voice.
Thank you for joining the call just to give you a sense of that are you know as we work to.
You don't really see the work that we're doing around the.
The transformation part of our pillar of big of another big part of that has been trying to really build our pipeline and build opportunities not only outside of the state of Connecticut, but but around other parts of the pool.
So if I were giving you the sense of the pipeline you know as.
As we see.
The opportunities today kind of across the U S. They represent.
Approximately about 40% of the opportunities that we see the.
Europe and maybe the lease right now is about 34% of of the opportunities that we're looking at in Asia today, as we've reentered that market now.
<unk> reflects early go away in about 13% and then.
Across Latin America, and other markets were roughly about 12%. So we're starting to see really good momentum in the markets that we're that we're really focusing on and leveraging the <unk>.
Our product really as a platform.
So if you think about the way I talked about the Toyota solution.
That's the scenario, where we're offering more benefit than just traditional.
Power of our combined heat and power with that type of solution and so as we approach customers around the world.
That's really a big focus of ours is to make sure that we.
Can leverage the multi capabilities of our platform.
To attract more customer of demand for our products.
That's super helpful. Okay, 2 more quick ones first on the.
The.
To put aside from manufacturing.
The scale of raw materials.
The bigger.
Consideration.
From a purchasing perspective, more obviously seen a ton of inflation around some basic materials, but just want to get a sense of how you guys are positioned on that in terms of exposure on on raw.
Cereals, and any sort of patches of U.
They have in place at this point.
The call it what I'm going to do I'm going to I'm going to let Michael is out of here, our chief operating officer address that from on our.
The supply chain perspective, Colin Thank you very good morning, and thank you very much for your question. Great question. So we have a very well established and solid compounded global supply chain. These relationships stand.
The periods of time.
We have pursued with our supply partners.
In many cases firm fixed.
Price pricing agreements for to ensure continuity of supply as well as protecting against unfavorable market dynamics. So we feel good and confident about the position that we have 4 of our supply line and look ahead to executing on the projects as articulated.
Okay, Perfect and then 1 last 1 on.
On financing piece, obviously interest rates are a tremendously low here.
So it's really supplement to the balance sheet never the comprehensive way can you talk a little bit of about the potential of refi the existing portfolio of what sort of savings we might see on that.
That in a general sense of timing.
If you are per se.
Of those sorts of opportunities.
Yeah. Good morning, Good morning, Colin This is Mike the shifts. Thank you for joining the call. So as I mentioned in my remarks, the company as we bring projects to the commercial.
<unk> operations, we expect to bring in permanent financing for those.
The projects both in terms of of tax equity and back leverage.
As we've done for the projects that are that are currently operating in our portfolio. We have over 40 megawatts of projects.
Coming on line so thats.
That's an opportunity to recycle.
Capital back into the company as those projects come on line.
As we mentioned in our remarks.
San Bernardino project.
Specced at the commercial operations.
In fiscal Q3, and then the the ground of the sub based project expected late summer of <unk>.
This year.
Perfect. Thanks, guys.
Yes.
You're.
Question comes from the line of printing so tissue from Wells Fargo. Your line is open.
Thanks. Good morning, I was wondering if you could comment on the support you're seeing generally from the Biden administration for hydrogen adoption I think there was a proposal by the D O to try to earlier this week to try to get the cost of green hydrogen down too.
That's a dollar per kilogram in a decade. So just curious for your thoughts on this and maybe the likelihood of at some point of of greater subsidies and the like from from the federal government.
Good morning, Thank you and thank you for that question.
We remain pretty optimistic about what the by the administration is trying.
<unk>.
With respect to the energy transition and even the focus that they're around the strengthening of the reliability of the energy grid itself and we think our technologies will.
Have an opportunity to participate with opportunities are on micro grid as well as certainly across the 3.
On to do arms as we discussed 4 for hydrogen.
You look at the U S. We certainly see the U S trying to figure out how to move the hydrogen economy forward in playing a bit of a catch up with markets like Europe and Asia in terms of the plans that have been announced across different.
The countries across those regions, but we think that the by the administration from everything that we're hearing in conversations that we have with the day. We as you know we do a lot of work with the debt.
That theres going to be tremendous support for the hydrogen and we look forward to that in <unk>.
As we indicated we've got a day.
The <unk> supported.
Project that we're working on that will do with Idaho National Labs.
Which is really gets to again.
Really thinking about how we leverage the multi capabilities of our platform. So as we as we talked about we have the ability with our solid oxide platform to produce.
Hydrogen.
Very highly efficient manager manner, as we talked about 90%, we're demonstrating in the prototype that we're running here, but to be able to leverage that platform and then integrate and extend the value of nuclear by utilizing <unk> to even make the conversion of that electricity even more efficient.
It's just another example of how 1 the the Baidu administration of <unk> supporting our work and leveraging the the multiple capabilities of our of our platform.
Great. Thanks, and just 1 more question I was just wondering if you could give us an update on your carbon capture progress so far.
And maybe the roadmap there to commercializing it.
Sure Great question, and what I'll do the zone, maybe asked Tony Leo of our Chief Technology Officer to give you a sense of the work that we're doing there and the progress that we're making sure.
So we're.
We're making a lot of progress.
Per our joint development agreement with Exxon and over the background on the objective of that our carbonate platform has been optimized over the years for power generation. The Exxon program is developing modifications of designed to optimize it for carbon capture so what we've been able to do all of the work we've done with them. So far is really.
With each of the capabilities of the amount of power, we can make while we capture carbon we continue to do that work and we continue to think about where the project will be demonstrated the Exxon has publicly talked about doing a demonstration of 1 of their facilities in the Netherlands in Rotterdam. So.
We are continuing to develop the plans for that demonstration as well as the evolve.
All of the technology.
On that project as well as project beyond the timing.
Exxon is still finalizing with us so we can't be very specific about the timing, but we're happy with the progress we're making.
And just to add onto that I mean, as you think about our platforms and.
The carbon capture we really we think about it is both how do we leverage our platform around carbon capture related to sequestration and apply that technology towards large scale applications, whether that'd be.
The gas power generation or industrial.
Type application.
Applications, but also we think about carbon from a utilization standpoint, and all of the innovation that's going around how carbon is utilized in different ways whether that's.
Making concrete indoor plastics as an example, or traditional uses for carbon like dry ice or ph balancing and water.
Water supply, but just to give you. An example, again of of our platform with respect to led.
Leveraging carbon.
<unk>.
We have the ability to capture carbon from our own platform.
We can actually purify that <unk>, the beverage or food grade and deliver that cotwo of food company.
Company of our beverage company for utilization of whether it be in processing or carbonated beverages, while at the same time with that on site generation delivering reliable electricity and as I'm sure you appreciate.
On the thermal use of most of those locations is another area of that our platform can deliver value but increase.
<unk> deliver energy security to those production facilities. In addition to certainty around pricing on on carbon for as an ingredient in their products, which is going to become an even bigger issue as we continue to see.
Price is put on carbon reduction and.
Traditional sources of carbon from the supply standpoint.
Got it thanks.
Your next question comes from the line of Jed door Shimer from Canaccord Genuity. Your line is open.
Once again your next question comes from the line of Jed <unk> from Canaccord Genuity. Your line is open.
Hey, sorry, I had it on mute thanks for taking the the question.
The question guys.
I guess just on the generation side.
What changed in pricing quarter to quarter.
Is it.
It ticked up but on the same base.
How should we.
Think through that.
Short term dynamics there.
Hey, Jim how are you this morning.
I would have been if all I can tell you that you're on mute or something but.
<unk>.
Side of the dock.
Yeah.
Great question and I'll actually have Mike was asking you to talk about this a little of it but in general right. The way you should think about it just increased output with the things that we've been doing in terms of enhancing the operations of our.
Current generation portfolio, but Mike I'll, let you speak to that a bit.
Jed Thanks for the question and Jason you hit it right on the Mark Jed really the debt.
The improvement there is based on the overall alpha generation of the of the fleet. This is this is bill of it centered around the improvements that we've made with respect to replacement of modules at the end of life and other performance.
The improvements that we've made across the fleet and that those of the drivers for that improvement.
Got it thanks.
And then I guess.
Yes, just to add.
The percentage of the base, that's gravy versus Blue I know the tried Jan.
Yes sort of the capture is relatively.
Small portion, but I'm just curious what.
What is that that percentage.
When you say the percentage of the base. So the percentage of the fleet they can do.
In terms of your base that's able.
To do.
The gray hydrogen generation that isn't doesn't have any of the.
Capture.
Technology versus what is.
Sort of the non R&D debt.
Actually capturing the carbon debt consider blue.
Yes.
So so Jed if you think about our existing operating portfolio today.
None of those platforms that are that are currently deployed of grid connected or behind the meter of the customer are doing.
Electrolysis for hydrogen production.
So if you think about our platforms.
On a go forward basis right.
Our carbonate platform the way I would.
Try to get you to think about it is if you think of our carbon of platform. We have 2 ways of delivering hydrogen with our carbonate platform.
And across the carbon of platform, we can deliver great hydrogen.
Blue hydrogen.
Or green hydrogen depending on the configuration for where that platform is deployed so.
The way that we do that is either with our Tri Gen platform. So if you just take the Toyota project as an example, where we're using directed biogas debt is going to deliver.
<unk> Green hydrogen car.
Carbon neutral power and water of that Tri Gen platform, So 3 value streams get delivered to Toyota.
Also with that carbon of platform, we are working to commercialize the ability to take that same carbon at platform.
We brought it in reverse mode for.
For electrolysis and again with that platform depending on the.
The configuration, so, let's just take of configuration, where we're using natural gas in this case to produce hydrogen we would be using natural gas as an input fuel and electricity.
And converting that through electrolysis to hydrogen and in that case, great hydrogen.
And then but also we were using biofuels right that could be green hydrogen and if we were doing carbon capture with natural gas and electricity that can be blue hydrogen.
And then if you take thirdly, our solid oxide.
Form.
Again, depending on the configuration. So let's say we were doing electrolysis and we were using the input was renewable energy sources wind or solar as an example, and we were using that electricity to convert the hydrogen that would be green hydrogen, but if we were using grid.
Plasticity.
The kind of the blending of.
Nuclear and renewable and gas and coal, we would be making great hydrogen in that configuration. So it really depends on the configuration, but across both the carbonate and solid oxide platform, we have the ability to deliver of hydrogen.
And depending on the input sources, we can deliver the various colors of hydrogen if you will.
Yes.
Thanks, that's helpful. So I guess it begs the question I guess why focus on the U S. Why not focus your efforts on Qatar for example, which has its entire.
Entire economy.
<unk>.
Sure.
Based in shipping LNG.
You would have the most fruitful market and.
In terms of is it the infrastructure of the demand for hydrogen is just not there.
Or.
Is there some other reason instead of focusing on sort of these small smaller projects.
Yes, so we're not just focused on the U S. As I as we talked about part of our powerhouse business strategy has been to.
To move our activity into our strengthening growth as part of that.
Adding resources, which equates to market coverage, so that we can pursue broader opportunities across the globe.
And as we indicated we're making progress on in terms of our hiring there on deploying resources as well as relationships in various markets to help with those efforts.
And we're recruiting some salespeople Jed so if you're if you look at you can.
We need a great sales person in that part of the world. So.
Sure.
Listen I appreciate it I'll jump back in queue.
Thanks.
Your next question comes from the line of Noel Parks.
It is.
Tuohy Brothers your line is open.
Hey, good morning.
Good morning.
Just a couple of things could you just talk a little bit more about the new project in Derby, just curious about what the lead time was from inception to signing.
What are the pricing out of the deal is more or less typical.
Sure so moving to make sure I'm answering the question you're asking are you asking about the the 2.8 megawatt award that we discussed or.
I just.
<unk>.
Yeah, Okay. Yeah. So that that project was part of a program code share clean energy facilities, which was an open competitive bid process that we participated in the state of Connecticut.
And the 1 that project.
As.
All of that open bid process, where we competed against.
Other generation resources like wind and solar the project.
Ward.
I'm going to say the bid process in the award process lasted over <unk>.
Several months was the process then.
Upon being awarded that project.
As part of it now have an assigned PPA, it's part of our backlog now and we will intend to move forward with development and construction of that project.
Great.
And for the San Bernardino and and Navy are both both coming on line sort of.
<unk> later in the in the summer.
Just for some perspective could you talk about I guess, the usefulness of having new fully of life projects.
Sort of yes.
In demonstration.
As far as the trying to get new contracts.
And if you were replicating.
Magic like San Bernardino today, just curious where do you think the.
Cost would be this time around.
Either efficiencies or lessons learned.
Versus.
The I guess maybe labor.
The material service environment.
No I think I might've missed the first part of your question, but.
And in terms of San Bernardino.
I'll speak to that 1 here just a little bit net.
I'll ask maybe Mike to the jump in.
The.
You can think about a project like the San Bernardino is that it's more representative.
The other projects that we've done that are leveraging on site bio fuels for the production of carbon neutral power.
If you think about that project just as we did in 2019 if of my year right.
On the tillery.
As an example, where that was another example of the wastewater treatment facility that was using anaerobic digestion of produce biofuels and was actually flaring. The gas we were able to leverage our technology to utilize that fuel to produce clean.
Power.
<unk> and debt flurry of the state of California, We're doing the same thing with San Bernardino, which is another example of.
Of leveraging onside Biofuels, which we think of the differentiated capability for the company.
And we think that there's opportunities to do that across other areas where wastewater.
In the plants or other areas where.
Biofuels are being produced.
Just staying with California for a second if you look at.
Legislation there now that requires the food waste not go to recycling, but then to use the tenor of the digesting that is going to be another source of fuel as an example that we'll look to leverage.
The treatment in terms of creating opportunities for the company with debt without platform.
And that enhanced enhances grid reliability.
Grid reliability and resiliency as well.
So we're very excited about those kind of opportunities.
The other example is if you.
And think about the project you mentioned on the Navy base in Groton, Connecticut. That's an example, where we are.
Excited about the fact that we're participate participating in a project where the U S government and the military is committed to enhancing reliability on installations there.
With our platform, we will be able to provide microgrid services to the Navy in addition to grid.
Power to the Groton area enhancing the reliability of the not only the grid, but enhancing the reliability of the naval base operations as well.
Great and I was the sort of getting at.
As of yet.
Oh, sorry.
With somebody else kind of jumping.
Okay.
Well just thinking if the.
The next time around if you had of a similar of what.
The project.
Do you think the cost.
Turnaround.
The years later after of your prior ones.
Would be similar or do you think there is a cost curve you can you can scale.
Yes, I'm just trying to think about.
How the economics might might change as you.
Treatment replicate more on more projects like this over time.
Yes, so so I think of them understanding your question correctly. Obviously every project. We do there are opportunities that we take away from of learning perspective that we learn how to maybe think about doing on site construction differently, how we think about ours.
As youll sourcing of EPC contractors, as we as we build scale and energy.
And our manufacturing capabilities all of those things will contribute to us being able to lower actual cost of.
Our <unk> platform right and so.
We look to continuously through continuous improvement and lean manufacturing and the way in which we approach each and every project to find ways to bring down overall cost of every time and to your point in terms of the.
The next project we keep in.
Mine at right the technology that we're deploying is.
Replicative of which the same technology, it's our St proprietary gas cleanup scared of it.
Our same carbonate fuel cell platform so.
We're not we're not doing something new every time and that adds to obviously the efficiency in.
The next.
Opportunities to drive down the hall.
Great. Thanks, a lot.
Thank you.
Due to time constraints, we're going to have.
Each of the limited to 1 question. Your next question is from the line of Jeff Osborne.
Born from Cowen and company your line is open.
Hey, guys, just a couple or actually 1 sorry, the Connecticut $65.24 program as the Beacon falls eligible for that.
Yes.
First of all I should say Hello, Jeff how are you of this morning.
The answer is yes the projects like.
That would fall into.
That legislation.
I mean signature by the by the government.
All right perfect. Thank you.
Your next question comes from the line of Chris <unk> from B Riley Your line is open.
Hey, guys just a quick 1 then on.
Module exchange.
Timing for the rest of the year are there any other key.
Key module exchanges that you are expecting throughout the year or how should we think about the <unk>.
<unk> of some of that.
Chris. Thank you very much great question. This is Mike Lisowski. So as you know of modular placements there on the ordinary part of our business.
<unk> and we do them when we need to do them and the overall our field replacement plan remains unchanged.
Really focused around the 4 specific projects going forward in the future of that we're going to be making module exchanges and thats really a mixture of line between projects that are in our generation portfolio.
As well as under service agreement and our manufacturing plant is in alignment with supporting those module replacements. So we're well positioned.
To support that.
Understood and just on.
Another 1 if I could hear sorry.
The kind of thought of doing things, but I.
I wanted to get a sense of the pipeline.
On a break it down between people looking at where you guys are going to be doing with Toyota and.
Seeing potential with with some of these additional value streams versus the distributed generation and then some of the longer term opportunities.
If you could kind of break down the pipeline to kind of piggyback.
Good question before.
Yes. Thank you.
Just to give you maybe a broad brush sense right.
In terms of how we think about that and the opportunities. We're pursuing we see a lot of opportunities around the leveraging of biogas like we just talked about.
We also see opportunity for our platform as you think about edge data centers when you think about the.
What an edge data center needs the needs reliable power. It also needs a lot of Chile, and the fact that we can we can integrate with absorption chilling creates an opportunity for us we're seeing opportunity.
It is across both the education of healthcare sectors food and beverage as I as I described we see opportunities around government sector.
The military is the fortification of.
Our installations across the U S continues to be an important priority for.
<unk> administration and across the industrial.
And process type of manufacturing, we're seeing growing.
Demand for not only reliability, but frankly as a way to try to find authentic ways to try to really contribute to de carbonization.
The as opposed to what's typically done in terms of leveraging like virtual ppas around renewable energy.
And then we certainly anticipate when it comes to micro grids, both for commercial and industrial customers, but also for utilities.
And increasing.
Desired.
<unk> and implement micro grids, so that they can ensure that the central resources remain online.
And with micro grid, having the opportunity to eliminate or significantly reduce a lot of the above ground risk. We're seeing a lot more interest in those kind of opportunities and then certainly across growing.
<unk>.
Pharma and biotech as well, where we're seeing opportunity for reliable power generation as you can imagine.
Those facilities require reliable power a lot of money is spent in R&D instead of having.
Power available is critical and then being able to leverage aspects of our platform like <unk>.
The round in their manufacturing process, so again really focusing on.
Customer segments and opportunities, where we can deliver.
Enhanced side of the customer by really leveraging the full capabilities of our of our platform. So hopefully that gives you a sense of how.
We're seeing the opportunity across customers.
Okay No that's very helpful. Thanks, guys.
Thank you. Thank you.
Your final question comes from the line of Eric Stine from Craig Hallum. Your line is open good.
Good morning, everyone.
Good morning, Eric Good morning, Hey, I, just wanted to touch on.
On the on the product side of the business I know, that's clearly a focus.
<unk>.
You talked about re engaging there so maybe what have been some of the gating factors what are some of the steps you're taking maybe a timeframe to when you think that you start to see some traction there.
So.
In terms of the product or are you talking about the sales pipeline.
The second so I'm talking about.
Just product sales I mean, obviously, you're making great strides growing generation, but I know products selling product along with that as part of the mix is 1 of your objectives. So just thoughts there.
Yes so.
As we've been working through.
Our business strategy.
1 of the things that we focus the first several months obviously on fixed.
Fixing our balance sheet and creating some liquidity for the company.
Sales cycle generally for our utility scale projects range anywhere between you know.
<unk>.
I must say 18 months since of you think about where we are on that timeline.
We fully.
Dissipate that will start to convert projects that we have on our pipeline.
Sales and many of those opportunities.
The kind of kind of.
Round the world our opportunity.
<unk> actually be product sales, but obviously with each 1 of those we bundle the service agreement that runs coterminous with the life of the assets that generally is the 20 year kind of.
Service agreement as well.
So we fully expect to start to see some of those convert the sales opportunities and youll see it.
The mix of product sales in addition to what you've traditionally seen for us for a while now ppas as well.
Got it thank you.
There are no further questions I'll now turn the call back over to Jason for closing remarks.
Jason Thank you.
And thank you all again for joining us today.
We will continue to execute on our powerhouse business strategy working to deliver profitable growth and optimize returns the fuel cell energy team is excited about our work to deliver on our purpose to enable the world of live a life empowered by clean energy and we are committed.
Delivering long term shareholder value.
Thank you for joining our call today.
Everyone has a great day. Thank you.
That concludes today's conference call. Thank you everybody for joining you may now disconnect.
[music].
<unk>.
Sure.
Sure.
Yes.
[music].
Yes.
[music].