Q1 2022 Altus Power Inc Earnings Call
[music].
Good morning, and welcome to the Altice power first quarter 2022 conference call.
As a reminder, today's call is being recorded and participants are in a listen only mode. A question and answer session will follow the formal presentation. At this time for opening remarks, and introductions I would like to turn the call over to Chris Shelton head of Investor Relations. Thank you. Sir you may begin your presentation.
Good morning, and welcome to all of those powers first quarter 2022 earnings call.
Speaking on today's call are Gregg Felton co Chief Executive officer of oldest power and Dustin Weber Chief Financial Officer.
In addition, co Chief Executive Officer, Lars morale will be joining us for Q&A.
This morning, we issued a press release and a slide presentation, both of which can be found on our website www dot ultra's power Dot com.
In the investors section. It's also available on the SEC's website.
As a reminder, our comments on this call may contain forward looking statements.
Statements refer to future events, including Altice Power's future operations and financial performance.
When used in this call. The words anticipate enable expect believe potential will should and similar expressions as they relate to altice power are as such a forward looking statement.
These statements are subject to various risks and uncertainties actual results could differ materially from those predicted in the forward looking statements.
All of this power assumes no obligation to update these statements in the future or as circumstances change.
For more information and we encourage you to review the risks uncertainties and other factors discussed in our SEC filings that could cause our actual results.
Differ materially from our current expectations.
Additional information concerning factors that could cause actual results to differ materially from those discussed during our conference call or in today's press release and slide deck.
Can be found in the company's Form 10-K filed on March 24th 2022, with the SEC and other documents filed by the company from time to time, including the company's quarterly report on Form 10-Q filed today.
During this call. We will also refer to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures.
Our management team uses these non-GAAP financial measures to plan monitor and evaluate our financial performance and we believe this information may be useful to our investors.
These non-GAAP financial measures exclude certain items and should not be considered a substitute for comparable GAAP financial measures.
Altice powers methods of compute of computing. These non-GAAP financial measures may differ from similar non-GAAP financial measures used by other companies.
More detailed information about these measures and a reconciliation from GAAP net income to adjusted EBITDA is contained in the press release issued today, which is available in the investors section of our web site and was furnished on form 8-K with the SEC.
Finally for clarity, while our slide deck is meant to provide a helpful illustration for our prepared remarks, neither Greg nor duston will referenced them directly.
And with that I'm pleased to turn the call over to Gregg Felton Co Chief Executive Officer of Altice Tower.
Thanks, Chris and a warm welcome to everyone joining our call.
I want to begin by thanking the entire altice team for their tireless hard work there.
And their continued dedication positions altice for success, each and every day and we believe is ultimately responsible for driving our long term growth.
Today I am pleased to report that our first quarter results position us well to meet our 2022, adjusted EBITDA guidance of $57 million to $63 million and achieve our adjusted EBITDA margin in the mid 50% range.
We also continue to progress on our over one gigawatt pipeline and I look forward to offering further detail on our customer engagement and pipeline segmentation in a few minutes.
First let me offer some commentary on first quarter results.
Our adjusted EBITDA guidance was designed with quarterly fluctuations in mind, driven by the seasonality of our business.
We anticipated first quarter would be our lightest for revenue and EBITDA margin.
And that the remaining quarters in 2022 will be characterized by higher revenue and expanded EBITDA margin, which we expect will allow us to achieve our adjusted EBITDA range for the year.
Seasonality of our portfolio is attributable to the fact that 51% of our existing megawatts are located in Massachusetts, and New Jersey, where winter months have much shorter daylight hours and therefore, the economics for these projects are weighted towards the second and third quarters.
There is also seasonality present in our construction program, where our team shows the highest efficiency during the second and third quarters, resulting in new projects being completed in third and fourth quarters.
Finally, as forecasted our 2022 adjusted EBITDA guidance contemplated a step up in general and administrative overhead expense in anticipation of growth opportunities and we saw the effect of those increased costs during the first quarter.
Today I'm looking forward to addressing topics, which are critical to all of this and the strong demand we see for many of our projects.
These topics include an update on client engagements.
Evolving economic argument for solar <unk>.
A description of community solar, which we believe is quickly expanding the reach of our projects into the residential segment and.
And finally, an update on our project pipeline and construction progress.
After that Duston will take you through our financial highlights followed of course by your questions.
Starting on client engagement.
In just seven weeks since our fourth quarter call. Our origination team has been and continuing discussion with new potential customers.
In many cases these are bilateral introductions fostered by CBRE with Counterparties, who want to take advantage of solar without the distraction of their time or commitment of their capital away from their primary business.
We believe this is the opportunity that altice offers and with Blackstone in Cbre's collaboration we're now offering solutions to more and larger prospective customers than we have in the past.
We look forward to updating you in future quarters as we begin to convert these potential customers.
An additional aspect of client engagement I'm pleased to share is that we're seeing signs of altice is growing brand recognition among commercial customers.
In several cases prospective customers have seen the announcements like our partnership with Trammell Crow and have contacted us directly to inquire whether all of this can offer a similar solution for their portfolios of either existing buildings or development sites now.
Now I wanted to address the current economic argument for solar and.
And why the demand we're seeing for our projects is currently the strongest in our company's history.
Our commercial customers are proactively trying to reduce their carbon footprint to achieve their sustainability goals and their drive to Decarbonize is now accelerating thanks to rising electricity prices.
The U S government's 2022 annual energy outlook revised its forecast for electric transmission and distribution rates upward by over 4% versus the 2021 report and we expect the current inflationary pressures impacting material and labor to exacerbate these projected.
Increases.
A more immediate upward pressure on utility rates.
Is the rapid rise of natural gas prices, we are witnessing across the U S and globally.
Natural gas has become a prominent feedstock for electricity generation over the past five to 10 years as coal and nuclear plants have been decommissioned.
Over the past few months natural gas prices in the U S have exploded higher to levels not seen since 2008.
Unless prices fully revert utilities across the United States will be required to purchase natural gas at elevated levels, which should ultimately get reflected in their customers' electricity bills.
We believe the pressure on utility rates will expand the economic advantage of solar.
Altice benefits from unique tailwind associated with these rate pressures due to our variable rate power purchase agreements or ppas, which have rates that increase and decrease at a discount to the prevailing utility rate.
Our variable rate contracts make up approximately 60% of our current installed portfolio.
We're happy to sign either fixed or variable rate contracts, but the long term expected increases in utility rates is precisely why we prefer these variable rate contracts.
We believe the increased revenues of the recent rate increases will take a few quarters to filter into our revenues as utilities gradually pass those costs through on a deferred basis.
Turning now to a discussion on our expanding customer base my remarks to this point have focused on our commercial and industrial customers.
Another source of customers is our growing portfolio of community solar.
Which includes residential customers, who sign up as off takers for our commercial scale projects.
Currently about 11% of our installed portfolio or almost 40 megawatts is powering over 5000 <unk>.
Community solar customers and we expect to see significant growth in this customer segment over the next few years.
Some of our most recent contract wins have been portfolios of community solar projects, many of which are in our construction pipeline.
Given the growth we're anticipating from this segment over the next few years I'd like to provide further detail on these relationships.
Community solar is available and utility territories, where the utility Commission has approved a net metering tariff.
Eight of the 18 states in our footprint currently have such tariffs in place with our largest markets, including Massachusetts, New Jersey and Minnesota.
Community solar customers received the economic benefits of solar power at essentially a bulk discount since our projects enjoy economies of scale when compared to residential solar rooftop projects.
In addition, there is a social benefit by allowing all of us to reach customers, who either live in apartment buildings or can't otherwise qualify for a residential rooftop project.
Community solar programs socialize the benefits of discounted clean electricity by allowing all of this to service a broad segment of the community.
For these reasons, we look forward to more opportunities to serve community solar customers across our footprint as well as the potential to expand into additional states that enable net metering tariffs.
We hope these additional details on our contract types sensitivity to utility rates as well as community solar opportunities all provide better understanding of our business.
I'd like to give additional details regarding our pipeline and why we remain positive about both the development additions stemming from the strong customer engagement I previously mentioned as well as a strong flow of both small and large portfolios of operating assets for us to acquire.
Here are some additional segmentation of our over one gigawatt pipeline to help investors and analysts track our progress.
First our pipeline is composed of approximately half potential operating acquisitions and have projects under development.
With respect to the half of our pipeline, which are operating acquisitions, a quarter is made up of single assets or batches of assets, which we view as ordinary course, and the remaining three quarters is made up of larger operating portfolios where execution certainty is generally less predictable.
That said these opportunities have the potential to provide tremendous synergies and scale to our portfolio.
Our origination team continues to devote time to both sets of opportunities because of our track record of successfully identifying commercial and industrial projects and portfolios, where our specific expertise structuring creativity and efficient cost of capital can produce solid returns with the added <unk>.
Benefits of a shorter runway to generating cash flow.
And while we remain highly selective with respect to these opportunities we expect to close on a number of operating acquisitions, each year, which would result in adjusted EBITDA and cash flow generation, which we covet.
I do want to take a moment to comment on the recent rapid rise in interest rates.
Rising rates are clearly pressuring asset values in the public markets and we believe higher borrowing costs will impact asset values in the private market as well.
While this type of repricing can slow the pace of activity in the short term as sellers are forced to reset price expectations. We believe all of this is relatively well positioned for the current environment.
We believe we'll continue to have ample access to debt at attractive spreads and also a significant cash position available to deploy into attractive opportunities.
Turning now to the half of our pipeline made up of development projects, we're providing some buckets to help investors understand the cadence of when our projects will reach commercial operation.
Approximately 20% of these projects are currently in construction where preconstruction.
Another 20% are in contract or under negotiation and the final 60% represent projects from our customer engagements, which are progressing towards an agreement in principle.
Two points to emphasize on our development pipeline first much of our new customer engagement outlined earlier is not yet included in these numbers.
As we emphasized with our Trammell Crow announcement last quarter megawatts are only included in our development pipeline. Once we've reached basic agreement on specific projects.
Our origination team continues to advance a large pool of new clients and remains focused on advancing all of them into our pipeline in the coming quarters.
The other factor reflected in our pipeline is our shift to larger customers with multiple potential projects in other words, the more programmatic origination opportunities, which we previously outlined.
While these larger development portfolios, maybe longer development cycle.
We believe that focusing on these larger relationships will ultimately allow us to scale our portfolio more rapidly and profitably.
One consequence of this approach is that we're consciously spending less time engaging customers with individual projects and we've therefore removes some of these individual projects from our pipeline in favor of newer multi project opportunities as we've described.
We hope these details on our pipeline helped to provide better insight into our business.
Let me now also offer our historic view on the time required to bring projects into operation.
Projects originated by our channel partners, which we then develop engineer and construct benefit from a shorter time from agreed terms to revenues typically six to nine months based on our historical experience.
Projects were originating ourselves and self developing such as those with a lead from CBRE or Blackstone with historically take 12 to 15 months from agreed terms to bring to commercial operation.
Youll recall, we highlighted delays to interconnection and permitting on our fourth quarter call.
We forecast that these delays have added three to six months to complete our projects currently under construction.
While these projects have a longer path to revenues. They also come with higher returns driven by the minimal sales and marketing costs as well as potential for scale benefits as we originate customers with portfolios of projects.
Moving to an update on construction.
Permitting interconnection and supply chain issues remain a challenge for our sector the.
The recent department of Commerce decision to take up the anti circumvention case against modules traveling from Southeast Asia is further challenging the supply chain. It is injecting significant uncertainty into our industry. Both in terms of cost and availability of solar modules.
This unfortunate risk is precisely why we struck an agreement with a north American supplier named Helene.
We have modules in our inventory as well as purchase agreements in place that give us confidence on both our supply and pricing of modules for the remainder of 2022 and into early 2023.
Regarding our projects under construction, while some of our projects continue to be stifled by the pace of permitting utility impact studies and upgrades for interconnection as well as the availability of medium voltage equipment. We're pleased to see physical construction has commenced on some of our delayed projects.
We look forward to updating you on further progress of our construction program.
In closing I hope my comments have helped provide greater visibility into our opportunity set.
First our client engagement is growing due to the flow of our partners and an increasing recognition of the <unk> brand.
An increased demand for solar driven by our customers' need to decarbonize and the immense pressure building on the utility rates is adding to our opportunities for client engagement.
Third the growing appetite for community solar is offering a broader opportunity to expand further into the residential segment.
And finally, we're pleased to present, our pipeline segmentation, which reflects our confidence that our programmatic shift to multi project opportunities will bear fruit.
Now I'll turn it over to Duston, who will detail our first quarter results duston.
Thanks, Greg and welcome to everyone on the call.
During the first quarter, we generated total operating revenues of $19 2 million, an increase of 54% over first quarter 2021.
Collecting the growth of our portfolio over the last 12 months.
As Greg discussed in his remarks, our portfolio experiences seasonality driven by our positioning in northeastern states.
Adding some color to this solar production for the first quarter typically amounts to slightly under 20% of total expectation for the year.
This coupled with our new projects, which are expected to be added during the back half of the year. It means that our first quarter is expected to show our weakest revenues as compared to the remaining quarters.
Turning to adjusted EBITDA, We reported $8 8 million compared to $6 3 million in first quarter 2021, an increase of 38%.
Our adjusted EBITDA margin for the quarter was 46%, which again is a result of our seasonally weakest quarter for revenues, coupled with our anticipated ramp of general and administrative expenses as we invest in our people and our platform.
Just as we experienced last year, we expect adjusted EBITDA margins to be lumpy lowest in Q1 and rising through the remaining quarters to end in the mid 50% range for the year.
Our net income for the first quarter totaled $60 1 million, which was primarily the result of a noncash gain of $64 8 million from the remeasurement of our redeemable warrants and alignment shares.
Each quarter, we re measure the fair value of these derivative liabilities, which can be volatile from quarter to quarter because of the change in fair value is largely dependent on the change in our stock price.
During the first quarter, the stock price decline, which resulted in reporting a large gain share.
Should the stock price increase in future quarters, we would expect a loss on the fair value Remeasurement.
As it relates to the underlying business net income in first quarter was impacted by planned increases in cost of operations and depreciation expense directly related to new projects that went live after Q1 2021.
In addition, we experienced increases in various expenses aimed at preparing <unk> for the future.
Most notably increases in general and administrative and stock based compensation expense.
About expanding our business and recognizing the leadership that will drive the results and support the growth throughout 2022.
Moving to our balance sheet total debt at the end of the first quarter was $543 million or.
Our balance sheet remains well capitalized with $318 million of cash on hand, making our net debt figure $225 million.
The primary use of our cash balance in Q1 was to procure equipment for our projects under construction, which we expect will ramp further in the next couple of quarters as we enter the summer construction cycle.
One key advantage, we maintain as our unique financing architecture during a period of dramatically rising interest rates.
We've locked in our interest expense at an attractive 351% fixed rate on existing debt.
Drawn under the investment grade rated term loan facility.
While we anticipate raising rates will increase the cost of additional borrowings under this facility.
We believe some of that increase will be mitigated by tighter credit spreads.
We believe our balance sheet is well positioned to execute on our development pipeline and targeted operating acquisitions as we work to profitably scale our portfolio.
While in this calendar quarter, we do not conclude any of our operating asset onboarding processes, nor put any late stage construction assets into operation.
We remain focused on adding projects with long term contracted revenues, which we expect to provide attractive returns.
To summarize we remain on track to meet our 2022 adjusted EBITDA guidance and we believe we will continue to maintain significant liquidity to execute on our plan with that I'd like to turn the call back to Gregg for closing remarks.
Thanks Dustin.
Want to end by reiterating the four reasons, we believe we are well positioned.
We are the largest and only pure play company in our lucrative and fast growing sector.
We are EBITDA positive focused on growing profitably and equipped with the capital necessary to carry out our growth plan.
We have valuable strategic partnerships that streamline our customer engagement.
And finally, we offer a vertically integrated solution, making altice, the one stop solution for delivering savings and de carbonization benefits to our customers.
We look forward to meeting many of you in person during the upcoming conference season.
We're now happy to take your questions.
At this time well be conducting a question and answer session.
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While we poll for question.
Our first question comes from the line of Justin Clare with Roth Capital Partners. You May proceed with your question.
Hey, guys. Thanks for taking our questions.
Absolutely welcome.
So I guess first off I was just wondering could you share how much of your 2022 EBITDA guidance is expected to be generated from assets that are currently operating versus how much might be dependent on the addition of new assets that are.
Other than construction preconstruction or.
Potentially new acquisitions and then also.
The projects that you plan to bring on this year.
Could you give us a sense for how much of those.
Already have modules on site versus how many may.
Need modules to be delivered still.
Sure Hey, Justin this is Dustin and I will.
Take the first part of your question and then maybe I'll turn it over to Lars to touch on that.
Kind of a breakout of the.
Our pipeline.
So.
As it relates to the portion of our EBITDA assumptions for 2022 that relate to.
Projects that are already in operation versus those that are coming out of late we haven't put any detail out there as it relates to what the exact split is I think we.
We talked in our opening remarks about some of the drivers there.
<unk> of the existing portfolio being one and then the other main driver is when.
When those new projects ultimately do get placed in service.
Become revenue generating so those are really the two main components that go into that analysis, but we haven't really.
Put any firm numbers on it because it is largely it is a lot of different drivers to it so.
Sure.
Well.
We'll be we'll be updating the market as and when those systems do get placed in service each quarter.
Thanks, Dustin and Hey, Justin this is Lars.
<unk>.
The additional projects that as from the script Duston explained are either operating assets that are in the process of being on boarded and so basically due diligence and purchased by altice.
And the preponderance of the new construction projects that are in late stage construction and that we expect will contribute.
To revenue this year have modules identified they are not always on site they might be in storage, but they exist in our possession.
That's something that we're waiting to receive based on some purchase order.
Some element of deals that are in mid stage construction right now that we'd still suspect may come online this year.
But that will not meaningfully contribute to revenue this year because they might be turned on in November and December have modules purchased where they have not yet been delivered into our possession in a warehouse or in some construction.
Our storage container or something like that we still feel good about those purchase orders. They are not module vendors that would be subject.
To the areas.
Anti circumvention cases going on right now and.
And of course, once you've placed the purchase order and made a downpayment, there's still some risk that the counterparty won't deliver.
But we feel relatively comfortable but that's a very small portion of the deals that we expect will come online this year.
Okay great.
That's really helpful.
And then you mentioned that 60% of your contracts are variable rate here, just wondering could you give us any sense for for how much those variable rates have moved up so far this year.
How often do those re say rates reset and then.
Any sense for how much those higher rates might contribute to adjusted EBITDA. This year has that been factored into your guidance at all.
So hi, Justin.
It has not been factored into our guidance, but I will say that.
We haven't really seen the recent broad increases in rates show up yet and I think that's largely driven by the fact that many of our floating rate ppas that encompass at 60%.
<unk>.
Are either tied to a utility tariff, which depending on the utility will reset.
<unk> annually or.
On some other kind of lag.
So we wouldn't.
Expect to see that show through just yet.
Another subset of our floating rate ppas would be those that are.
Right to a specific customer's avoided cost. So that's also on a look back where we're assessing what they would otherwise pay.
The utility.
On a look back basis.
And maybe the six to 12 month range and then we do have a smaller subset of our portfolio that is.
Selling power real time, so there will.
We are.
<unk>.
The rate increases have come through a little bit, but again, it's a minor portion of our portfolio. So I would just summarize it all by saying, we haven't really seen it flow through yet.
And these Q1 results.
Okay got it.
And then I wanted to ask about the Trammell Crow partnership.
You talked about 300 megawatts over three to four years, but just wanted to see when do you think you could bring the ore commenced construction on the first of the assets within that 300 megawatts is still probably some time from now but just if you could give us a sense of that and then.
Is there opportunity.
To expand that relationship beyond the 300 megawatts any sense for that would be helpful.
Sure. This is Lars again, so let me give you a direct answer on your first.
When part of your question and then try to put it into a broader context.
We expect based on current process and progress that the first trammell crow assets might be possible to be put into construction in the next six months.
So they're currently in.
Stages of interconnecting utility.
Work.
Applications et cetera.
And one of the reasons that we're so happy to have now been able to begin the process of delivering insights into our process into our pipeline into the stages of deals in that pipeline to you guys and then also prepare.
It's around the currency.
Timing of the project.
So that we can let you have an opinion and form an opinion on when these engagements with people like <unk> CRO Blackstone CBRE.
<unk> investment management and all the other large customers that we begun engagement with when that will filter through our pipeline come into Preconstruction construction and then ultimately be added to our client service desk in our books.
The trammel Crow engagement.
It represents a typical large program engagement, where theres a.
Large number of assets that are all.
Clickable, both solar storage and EV charging that together with Trammell Crow Altice is identified.
In a subset of those assets is the first 300 megawatts that.
We've begun to work on.
Once we identify a subset we will them together with the client and the clients' clients in the case of terminal Carla They of course have insurance companies and other capital providers that they've developed real estate for and then they have tenants who want to live in enacting those buildings and in those parcels once the buildings are complete.
Together with Trammell Crow.
And with a view to the clients. We then prioritize among the 300 megawatts, which assets are likely to be put into construction or to be finished through construction first in which particular states is it easier for all of us to obtain quick interconnections and the ability to start selling power to the tenants and based on that prioritization.
We then start moving assets through the process.
So the 300 megawatt engagement, we've moved 100 megawatts of that into our current pipeline.
That 100 megawatts represents basically the deals that we are able to act on the most quickly and both we and Trammell Crow are very happy with the.
Collaboration between the two parties and the work that's been done.
We feel like we've received a lot of benefits.
From the engagement with tremor other large entities are calling is based on it's asking if we can do the same thing for them and it feels to us that trammell Crow is getting the same positive benefits on their side. They are investor clients and capital providers have responded very favorably to the commitment that they are now acting altogether adults.
Okay, Great and then maybe just one more for me you mentioned the 100 megawatt for this moved into your current pipeline is that the amount that could potentially start construction in six months and then if that is the case.
With that.
When would those assets be completed could that be sometime in 2023 that that 100 megawatts could be brought online.
Yeah. So so one of the things that we knew we were going to have to focus on at Altice one.
Once we sort of consummated the transaction together with CBRE is to first do a very good job in the client engagement process, the origination of customer engagements like Trammell Crow.
Builds resources and staffing frankly on the development and pre construction and construction side, where desks inside of <unk>.
We're very focused on bringing the construction effort up to the level of throughput that we can come to those desks with the first 100 megawatts and quickly have it go into design permitting interconnection application et cetera, et cetera et cetera. There is no lack of will on the part of Trammell Crow Theres no.
Lack of number crunching on the part of all this and what we're working on is to make sure that that so the horsepower and velocity can be kept through the construction development and ultimately.
Turning on process as well.
We are currently.
Dividing our new development pipeline and construction pipeline into <unk>.
<unk> developed and constructed deals, which tend to take 12 to 15 months historically and those deals that come to us from channel partners that usually take much less they could be as little as six to nine months.
Before they get turned on the Trammell Crow pipeline fits squarely in the self developed bucket. These are deals where we come to real estate.
That is either just newly constructed or about to be constructed and we begin the process of designing the solar system interconnecting, it et cetera, et cetera et cetera. So we will definitely move some of the 100 megawatts and I hope more of that into the development and preconstruction stages and once it's in there some of the deals will probably be on.
The shorter end of the timeline some will be in the middle and some will be in the longer end of the timeline, we're still seeing delays.
On the interconnection and permitting it's still somewhat.
Sticky to get exactly all the materials that you won't like Transformers and other things. So we're continuing to fight that.
And trying to bring as much of those.
And those supply chain difficulties under our control as possible.
Okay. Thanks very much.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from the line Ryan Levine with Citi. You May proceed with your question.
And thank you for taking my question.
One portion of <unk> and 'twenty three solar projects are dependent on the outbound the department of Commerce investigation.
The North American supplier relationship that was.
Well, it's highlighted in the prepared remarks impactful.
Yes. Thanks, Thanks, Ryan this is Greg.
So I mentioned in the prepared remarks that we have.
Panels are modules in an inventory.
As well as on order.
That are designed to not only.
Fulfill our 2022 needs but into early 2023.
As you know the department of Commerce investigation has created tremendous uncertainty within the sector because the predominance of modules do come from the targeted countries and we are.
Just looking for a decision one way or the other relatively quickly we've worked hard to create a diversified supply chain the helene multi.
Multi year supply agreement is an example of that.
And what we're looking to do with the lean in particular is to make sure we have access to north American modules from a tier one supplier.
Mitigates that risk Helene is not the only supplier it's the one that we've named.
There are other suppliers that are also outside of the target area of the dose.
But what we would say is that from our perspective.
Positioned ourselves to mitigate the supply chain issues as it relates to modules in particular.
As you know there is an expectation.
Resolution sometime in early 2023, what we're focused on and I, probably ought to highlight for this call as well as our ability to pass through elevated pricing.
The uncertainty that exists with respect to pricing right now of modules is not helpful of course for anybody in the industry, but for C&I. In particular, we do have clients that are very focused on de carbonization objectives, and the economic benefits to some extent could be secondary.
In modules makeup approximately a quarter of the total project cost. So we do expect that we'll be positioned to pass along incremental costs.
To our customers in the PPA.
I'm trying to get.
Earlier in 2003 development opportunities what percentage.
Do you happen to rock.
Thanks.
North American supplier relationships.
Good morning.
<unk> supplier in government.
Sure. So we haven't broken that out but what we have said is that we have a.
250 megawatt.
The multi year supply agreement with Helene, we said that publicly and of.
Of course, we have therefore significant access.
<unk> in particular, there are other suppliers that we have relationships with that are not subject to the Doj investigation and so we do believe that we'll be positioned not just with north American supply, which of course is only a very small portion of global supply, but with our other suppliers to be able to procure the panels necessary to fulfill.
Our 2023.
Our development pipeline.
Okay, and then the extent and in development projects were to beat the way cost.
And all he is embedded in your contract.
Anything to highlight.
Yeah.
Yes, you cut out right.
Right.
Yes.
This is Lars I think you I think you asked.
Do our contracts with our clients make any.
Make any sort of reservations relating to the module availability, while we're constructing is not the point.
I'm trying to understand if there's any penalties if there is any delays in your timeline.
Usually not.
Usually we have time.
We have targets in our contract, let's say, we need to start construction of such and such a date, we shouldn't be materially done with development on this site et cetera.
But these contracts from the client's perspective are likely to be very long. They are like 20% to 25 year engagement, where theyre going to buy clean electricity at a discount.
If it takes four months versus eight months versus 10 months to secure the exact allocation of modules or transformers or to get the right required permits or to go through some planning and zoning.
Permitted permitting agency.
That's usually a bit of a blip on the overall timing of that contract.
And so we have history of having projects get delayed because of utility interconnection issues and we've never had a client.
Reevaluate their commitment to all does order engagement unusually the contracts are relatively firm.
As long as we're making progress towards constructing.
And they're not just sitting on our hands, there really isn't any room for decline to back out.
Okay.
Are there technologies associated with cost overruns or delays that.
Got it there.
No, it's usually not like the utility scale deals where there are these sort of make whole payments and day count issues around look the system has to be operational October otherwise youre going to pay us penalties.
That's not a feature in most Eni contract in fact, I don't think we have a single contract like that outstanding right now.
Thank you I appreciate the color.
Sure.
Ladies and gentlemen, we have reached the end of today's question and answer session. This does concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and enjoy the rest of your day.
Yeah.
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