Q3 2022 Nuscale Power Corp Earnings Call
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Good morning, and welcome to your New scale 2022 third quarter earnings results Conference call. Today's call is being recorded all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session.
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Task a question please press star one.
A replay of today's conference call would be available and accessible on new skills website at IR Dot and U S. P. A L E. P O W. E. R. Dot com the web replay will be available for 30 days following the earnings call. A telephone replay will also be available for seven days through registration.
Linked also accessible on <unk> website at this time for opening remarks, I would like to turn the call over to.
Diane <unk>, Vice President marketing and Communications. Please go ahead Ms shoes, Mr shoes.
Yeah.
Thank you welcome to <unk> 2022 third quarter earnings results Conference call.
I appreciate your interest in new scale and thank you for joining with US today, we have John Hopkins, President and Chief Executive Officer, and Kris <unk> Chief Financial Officer.
Today's call, John and Chris will provide an update on our business and discuss our results. We will then open up the phone lines for questions.
We have posted a set of supplemental slides on our Investor Relations website as reflected in the safe Harbor on slide two the information set forth in the presentation and discussed during the course of our remarks and the subsequent Q&A session includes forward looking statements, which reflect our current views of existing trends and our <unk>.
I'd like to a variety of risks and uncertainties you can find a discussion of our risk factors, which could potentially contribute to such differences in our SEC filings on form F. One and Form 10-Q, I'll now turn the call over to John Hopkins, New skills, President and Chief Executive Officer John.
Thank you Diane and good morning, everyone I'm pleased to be speaking to you from Sharm El Sheikh EGF, Jack Cop 27, we have been participating in medians of panels about the essential role that nuclear will play and Decarbonize, our global energy ecosystem to help meet our carbon reduction targets by 2050.
We discussed the use of <unk> technology to provide critical carbon free power to Ukraine.
The discussion included announcement by the unit Capex commenced a pilot project in Ukraine that will demonstrate to production of clean hydrogen pneumonia using new scale ask Lamar technology carried out by a public private consortium in the U S, Ukraine, Japan, and the Republic of Korea.
This is another example.
Similar technology could not only provide energy security, but also offers a diverse energy platform from which to decarbonize multiple sectors and enable countries to address issues like long term food security and energy scarcity.
This also underscores is that the level of excitement around nuclear has never been greater.
Recent geopolitical developments youre, putting a spotlight on the need for additional sources of clean and reliable energy.
As a result.
Utilities and businesses across the globe when I look at the nuclear as a viable way to power the future.
As an example at the recent international Atomic Energy Agency IEA nuclear powered ministerial conference in Washington D. C leaders from the government of Japan Ghana.
<unk> announced a strategic collaboration to support the deployment of <unk> technology and data.
As part of this agreement the government of Japan is funded a feasibility study.
<unk> changed the survey for the potential deployment of a new scaled boy if you ask the more power plant and Ghana.
This collaboration the first of a tie on the African continent, a market, we believe could be well served by our technology.
Administrations, and the U K, France, and South Korea are also discussing and extending the lives of existing plants into our building more nuclear power plants as part of a longer term framework to be net zero emission targets.
And it has been encourage you to see countries, such as Germany reevaluate their stance on nuclear.
Similarly in the U S states are calling for extending the lifetime of the current fleet.
Expanding the use of nuclear power.
In California for example, Governor Newsome signed a larger keep the Diablo Canyon power plant running for five years past its previous plan closure date.
Virginia has recently released 2022 energy plan.
Typically call it without the need for reliable base load clean energy from NASA Mars and calls for the first commercial aftermarket facility in the country to be placed in southwest Virginia within 10 years.
On the federal level. The recently passed inflation reduction act represents the most consequential piece of legislation and supportive nucleolar since the atomic Energy Act of $19 54.
We're also seeing the coal to nuclear concept be it further embrace as a key strategy to build a new path for our energy communities crystals expand on both in his remarks.
It is clear that this is an exciting time and new skill Voyager small modular reactor power plants offer a cleaner safer and cost competitive with path forward.
New scale technology smarter using proven pressure water reactor technology as a basis to create a simpler and modular design that can be fully factory fabricated.
By shifting to a full factory fabrication and assembly oversight construction, we have the potential to reduce and stabilize cost while lowering schedule risk by moving more costly construction indirection activities to a factory environment.
New scale is a carbon free energy source that is not only capable of producing reliable baseload electricity, but also a desire for flexible operations complement intermittent renewable energy generation sources and to provide processes for applications such as desalinization hydrogen production.
In order to refine aimed to further decarbonize the industrial sector.
Well as to provide heat to communities via district heating circuits.
The safety of new scale design is on payroll that will do to our power modules ability to safely shutdown and self cool indefinitely without the need for AC or DC power.
Operator, or computer action or any additional water.
This provides what is called an unlimited coping period.
A first for Lightwater reactor technology compared to days or weeks or other designs.
And finally in terms of being cost competitive new scales. <unk> design is the only technology that is scalable.
And Thats a facility to be operated from as few as one new scale module power modules to as many modules as the reactor build and is capable of housing.
This scalable feature allows customers to expand the facilities installed capacity over time, Jimmy load growth or other economic considerations and the facility does not need to have all modules installed to operate.
As we shared last quarter, our technology is not hypothetical we're putting the building blocks in place for commercialization.
We are the first and only SCR technology provider in the world to receive design approval for the U S nuclear regulatory commission or in our C.
This approval is foundational to validated the innovative safety of our design. It has propelled the public acceptance so thats been our technology domestically and abroad.
To our knowledge, none of our competitors have even filed an application with the NRC for design approval.
Which means we are at least three years ahead of the competition for those technologies interested and deploy in the United States.
Furthermore, our technology is backed by an established supply chain, we are aligned with proven and highly confident manufacturing partners and we have developed a robust supply chain management organization to provide oversight and monitoring our suppliers.
Together. These foundational elements are supported by our asset light and diversified business model, then monetize the value of class a 60 year life of our plants.
With that I will move on to provide an operational update.
Yeah.
As we prepare to list our company earlier this year, we established five near term objectives for new scale to complete by year end.
As you can see on slide 15, we are making strong progress on our 2022 priorities.
As a reminder, our five year near term objectives are.
One secure our next committed customer to issue long lead materials specifications for the upper reactor pressure vessel.
Three complete the reactor building design.
For complete our standard plan design, which I'll also refer to as the SPD throughout my remarks, and five submit a standard design approval application to the U S. Nuclear regulatory commission for the Voyager six module power plant that are customer, Utah associated municipal power system plans to deploy.
Now, let's address each of these one by one.
First securing our next committed customer.
Last quarter, I shared details, but exciting opportunities in Romania and Poland.
We have continued to make progress with potential customers in both markets and our osprey mystic that we'll be able to secure a next committed customer by year end.
In Poland, we have made meaningful steps forward with Katie HCM, the large Polish copper and silver producer.
On our last call. We mentioned that we have sent our proposal for a full scope two kg ATM and that the proposal was under review.
Since the new scale and K G. HN has slightly stable commencement to initiate the deployment of the first ask Lamar in that country.
We have issued invoices for further development work at <unk> continues to have fruitful conversations with the regulatory authorities to Poland.
Our initial feedback has been positive.
In Romania, and the U S trade development agency awarded a grant for front end engineering and design work with ROE power nuclear SA.
A subsidiary of Romania State Nuclear Power Corporation SCA nuclear electric.
The eight months scope of work includes task in the production of deliverables that will define the site and the customer specific inputs for avoid your six <unk> power plant at the door chest power station in Romania.
A site with a decommission coal fired plant and natural gas fired units and represents another step towards a signed commitment.
In addition, we're moving forward with deploying in energy exploration center or <unk> to control room stimulator facility at the University of Bucharest.
Which establishes the groundwork for Romania to serve as an SLR educational and training for young and aspiring engineers in eastern Europe .
Finally, we recently participated in a series of supplier day events, Romania in partnership with nuclear electric and Fluor.
I gave you was like this are a critical first step in leveraging Romanians local resources and supply chain and the manufacturing and development of our technology.
Meanwhile, in the U S. We continue to move forward with our anchor customer, Utah associated municipal power systems in their carbon free power projects.
We'll deploy a voyage at six <unk> power plant by the end of the decade.
Earlier this year CFPB completed the geotechnical work at the site to support licensing activities.
Totally more than 47000 hours of work.
The data insight information has been used to complete the project seismic hydrologic and volcanic analysis required for the combined license application or color to the NRC to be submitted in January 2024.
Site work has continued this fall with field surveys being conducted via drones NSA team recently mobilized to conduct groundwater sampling calibrate the meteorological tower instruments and install grounding rods.
Furthermore, key contracts for original equipment manufacturing engineering.
Procurement and construction and maintenance and operation contracts are in process of being developed.
Looking into 2023 and beyond our customer pipeline continues to be strong.
As I mentioned earlier interest in our technology and intensified throughout the quarter as leaders in industry outside of our sector continue to embrace advanced nuclear solutions for the world's clean energy needs.
Our recent new scale symposium in Washington D. C. A few weeks ago is a good example, we had more than 100 senior level leaders joined from a broad spectrum of domestic and international utilities power users administrator level leaders from countries interest and employing some of our technology.
We're also joined by federal and state officials, a diverse cross section of the international supplier community as well as to analysts and investors signaling broad interest and support from the required stakeholders needed to finance manufacturer build and deploy new skills as tomorrow power plants around the world.
Moving onto our second milestone.
As we reported last quarter, we have issued the long lead materials specifications for the upper reactor pressure vessel.
Which is a critical element in the procurement and manufacturing process of the new scale power module.
We are now working with our key suppliers and further pre manufacturing activities to ensure that the supply chain is ready to go in anticipation of placed long lead material items in the near term.
So we are in good shape here and we will continue to advance our manufacturing and supply chain readiness.
We discussed on last quarter's call that our third milestone completing the reactor building aside was completed in July .
The reactor build and is a large robust structure that houses a new scale power modules and is used to ensure maximum safety during normal operations and mitigate the consequences of any potential safety incidents.
Given the importance of this structure completing the design was an important step and supports our efforts and the broader standard plan design process.
This brings us to the fourth milestone on our list our goal of completing our standard plan design or SPD.
Our vendors have submitted over 12000 deliverables, including floor plans procurement specifications pipe stress calculation that need loads.
Is the Liberal deliverables, along with a comprehensive plan <unk> model makeup the new scale standard plant design.
The completion of the SPD will provide a comprehensive plan design for potential customers to be leveraged in deploying new scale, Voyager and smart power plants.
This means significant savings for our customers as they can focus their investment and engineering resources on site specific design changes the.
The designs completion further advances the commercial viability of new skills technology, and we look forward to delivering good news by year end.
Finally, our fifth and last milestone is submitting the standard design approval application for FDA to the U S. NRC for the Voyager success of our power plants.
This is a work stream that focuses that are 77 megawatt technology. This is not to be confused with our 50 megawatt technology, which has already been received standard design approval from the NRC.
As a reminder, we started R&D efforts over a decade ago with a 12 module plan at 50 megawatts for each new scale power module. However through value engineering efforts, we determined that the same new scale module can deliver up to 77 megawatts, which would further enhance the use case for our technology.
This power upgrade requires relatively minor changes to the physical model and some revisions to the analytical models that have since already been approved or are currently under review by the NRC. There is nothing novel and these methods in the RFC has great deal of experience with power up rates.
So progress is being made on this milestone and we're still on track to submit the FDA by year end.
All in all I am pleased with the advancements that are new scale team has made towards our 2022 objectives and our broader work towards commercialization.
Before I hand, it over to Chris I'd like to highlight a few other important achievements, we accomplished in the quarter.
We continue to pursue and formed strategic partnerships with entities that could help us to provide customers with an integrated solution for the financing development and management reservoir projects.
These partnerships are important because they lower the barriers to entry for prospective customers by enabling us to offer a single source solution for financing and building a new scale Voyager power plant.
Also proud to highlight the NRC issued its final safety evaluation report, which approved new skills methodology for determining the emergency planning zelle or EPC for the new scaled Voyager <unk> power plants.
As opposed to the traditional large scale nuclear power plants, which are required to have an EPC or 10 miles in the U S user disapproved methodology, new scale Voyager power plants can achieve an APC limited to the site boundary.
This is significant because it demonstrates the unparalleled safety of new skills <unk> design.
A smaller EPC also significantly reduces plant operating costs and further enables the siting of new skills technology, where it is needed most.
For example, our Voyager and smart power plants can be installed at retiring coal facilities near high population zones, while other technologies may not.
Lastly, and critically the NRC unanimously voted to certify new skills as tomorrow design, noting that it needs the agency's safety requirements.
Completing certification of the 50 megawatt size sets the stage for an efficient and effective review of the FTAA I mentioned earlier, especially since we've established an alignment with the NRC staff unwanted standard design approval application should contain.
The <unk> certified design now has the approval of the NRC staff.
The Advisory Committee on reactor safeguards in the commission itself.
As the first <unk> design approved by the NRC. This achievement as a reminder of the unparalleled progress we've achieved towards commercialization.
No other SBR technology provider has submitted to the NRC and application seeking design approval, let alone been approved and certified.
So a lot of positive developments in the quarter.
Now I'd like to turn the call over to our Chief Financial Officer, Chris Colbert to go over the financial highlights Chris.
Thank you John and Hello, everyone I.
I'd like to begin by touching on our third quarter financial highlights.
With the detailed information available in our filings our focus on the primary drivers performance.
In terms of top line results, we generated $3 $2 million in revenue in the quarter compared to zero point $3 million in the third quarter of 2021.
The increase in performance was driven by activities in support of the engineering.
And construction development agreement for the carbon free power project with additional consulting services around the nuclear technologies.
Although trailing positively revenue remains a smaller part of our story at this stage and our focus is on effectively managing our spend.
Operating.
Expense has and will continue to growth with efforts to ramp our commercialization plan.
Professional fees associated with the standard plant is up.
And an increased head count to support our licensing efforts drove R&D expenses in the quarter, while an increase in G&A, resulting from higher insurance and marketing expenses were partially offset by lower compensation costs.
Investments in advertising and marketing are integral to build their brand recognition across the globe.
Due to timing differences with our federal funding the daily cost share decreased slightly in the quarter.
However for the nine months ended period.
Car share was $13 6 million more compared to the same time period in 2021, as we continued to advance our research.
And our net loss in the quarter was $22 $5 million greater than the comparable loss in the <unk>.
Third quarter of 2021.
Looking at other uses of cash Capex was minimal and mostly comprised of software and computer hardware to support R&D, which is consistent with our asset light model.
We continue to be well positioned to meet our near and longer term milestones.
Our $318 $6 million in cash cash equivalents and short term investments further buoyed by our lack of debt provides us financial flexibility.
New scale considers its total shares outstanding for calculating market cap can be its class a shares plus its class b shares and units owners will convert at some discretion.
We realize that not all sources capture our structure appropriately.
For clarity based on this calculation as of November seven 2022 was $2 6 billion.
Before I turn the call back to John I would like to touch on a couple of other major developments that will impact our business.
Industrial projects across the board are facing an increase in raw material and financing costs driven by supply chain disruptions rising interest rates and other macroeconomic dynamics.
<unk> pressure on key materials, such as steel copper and mineral commodities has intensified both on a year over year basis and versus the pre COVID-19 period.
While this cost inflation is something we will need to manage I want to emphasize that it is not exclusive to new scale or the nuclear industry.
Every category of energy generation.
<unk> solar wind LNG conventional fossil fuel projects are affected.
<unk> is that the nuclear SLR projects remain cost competitive with all other forms of energy generation, which is a core part of our story as we scale.
The passage of the inflation reduction that which John referenced earlier is an incredibly significant development for the nuclear industry.
It will benefit our business model and help lower the localized cost of energy for our technology.
Previously government credits of our cleaning technologies, only applied to wind and solar.
Passage of the IRA and levels. The playing field now include nuclear in the government's clean technology framework.
Selling takeaway here is that advanced nuclear will now enjoy a meaningful reduction in capital costs of 30% to 50%.
While utilities and other stakeholders are still assessing the broader implications of the IRS.
We expect to see a significant increase in interest in our technology as a result of this legislation.
So we're taking this as a clear positive for a new scaled business model and our future trajectory.
With that I would like to turn the call back to John for closing remarks.
Thanks, Chris as a pioneer in the <unk> nuclear industry. We are incredibly proud to have the opportunity to originate build a unique business model that will deliver carbon free baseload energy can help provide clean energy at scale.
We appreciate the strong interest from our investors and we will continue diligently executing on our operational and financial milestones as we work to change the landscape of clean energy.
Now more than ever the world needs more clean energy sources, and we believe new scale is prime to fulfill this need in a meaningful way.
With that I will turn to questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
And your first question comes from the line of Mark.
Marc Bianchi with Cowen Your line is open.
Okay. Thank you.
Yes, Chris just because you were you were mentioning this on an IRR, perhaps you could talk about.
What that's meant in terms of customer inquiry I guess, you mentioned that.
Utilities are taking their time, but curious if there's other customers that have come in and started talking since CRA was announced just curious if you could quantify that to some degree and give us a better handle on when we would hear more about those types of conversations.
Sure and John maybe you want to start off and I'll follow up after you.
So go ahead, Chris I ask you the question I'll follow up.
Alright, so the inflation reduction act provides the opportunity of maybe a 30% 50% reduction in the cost of a new scale plant and.
That's driven quite a bit of interest and inquiries from the.
The U S sector as they get their arms around it.
<unk> for them in their individual circumstances.
The inquiries, we've had come from both the investor owned utilities as well as other public sector.
Municipal power agency similar towards <unk>, and even regional cooperatives, such as Dairyland power.
So we expect it will take a little bit of time for folks to digest how the.
Sorry.
Applies to their particular circumstances.
They start figuring that into their deployment decisions going forward.
Suffice to say, we received a large number of inquiries.
From all of those on the side that are providing power as well as from state policymakers who've asked us to come in and talk about the technology and how higher rate impacts what they could see happening in their states. So with that I would say it's very.
Exciting opportunity that we see accelerating the deployment.
Advanced reactor technology, including new scales in the United States, but it will take a little bit of time for folks to digest.
That applies to them and more importantly, hardly moved forward to implement projects that take advantage of these technologies and the IRB benefit John .
Yes, Mark I, just wanted to follow up and say you know have any IRA come out again as Chris stated significant interest as were seeing numerous potential power plants coming offline here within the next decade.
Major utilities are now looking at <unk> as a sense because it looks to phase out at about 2032. So they are looking to want to take advantage of these savings so it could be up to 30% of cost.
So that plus what else I'm seeing here at cop 27, with discussions about European Tech sodomy et cetera.
We're seeing significant movement in terms of customers up.
Up there Tyler timeline sooner than later.
Thank you.
Great. Thanks for that John .
Yes.
One of the milestones here is the.
The second secured customer can you just remind us what criteria is involved in.
Claiming success on a on a second secured customer.
We see lots of Mou and announcements that are moving the ball down the field, but I don't know what that trigger is for kind of counting the customers are secured customer.
Yeah, Mark what we're looking at is.
In fact, this take a country like Poland or the Patriots.
There we're looking at what's the regulatory framework what is the funding, whereas the funding come from where is the government support.
And most importantly, once money start changing hands, we havent working agreement and Thats in the multiple millions of dollars now to assist AGM.
In a variety of assisting site.
Selection and other front end work.
Once that money starts moving we have a tendency to look at as a more secure.
Customer.
Same thing applies to Romania, and again, there we have working agreements with them. So my name is exchanging hands government supports there at the very senior levels U S. Government supports there as I said, we did a supply chain.
In fact, we get all our suppliers together here the last few weeks. So the momentum is greatly enhanced and moving forward.
Okay, great to hear maybe if I could just slip one more in.
On the department of energy cost share appropriations.
The there is a Senate draft out there that seems to direct some funding away from new scale I'm just curious what that.
Outcome would mean.
And how we should think about that in the context of the free cash flow guidance that you guys have talked to through becoming free cash flow positive in 2024.
Yeah, let me start and I'll turn it over to Chris.
Every year, we go through the Senate Appropriations Bill and.
As Chris stated this year were $13 million more than last year.
Working both sides of the Hill right now on appropriations to against continue to secure and to ensure that just technology in our project at C. A P. P moves forward. So the feedback we're getting on both side of the Hill has been very positive. So we will see what the end result is.
Where can deal with GE on it like we do every year Chris.
That captures it well John .
Our process right. So there is a president's budget request and there is a host Mark a Senate Mark and then Theres a conference and this has been go it goes on every year.
So we need to see what comes out of that process.
But if you looked at it historically.
Is that typically.
It takes some time for it to work through.
<unk> been successful or at least within appropriate at the levels that we expected in the past, but thats not a predictor of the future.
But right now we're working both.
With the department of energy.
And with the various committees to make sure they understand what it is we're looking to achieve and that it's appropriately.
Funded going forward, so I'll leave it at that.
Okay. Thanks, Chris I guess I've had a couple of other questions come in.
On the phone here can you talk to the opportunity from the Ukraine announcement here with.
<unk>.
On hydrogen I guess, what's the timeline for that to potentially convert into.
Project for you and I know I've mentioned is using solid oxide electrolysis, which my understanding is that still more of an emerging technology for for hydrogen electrolysis is there some technology achievement that needs to occur on the electrolysis side that is the gating factored in moving this project forward.
Yes.
I will say I was extremely proud that was on the stage with what was there special President automotive climate John Perry.
Creating energy Minister.
<unk> announced this clean fuels at some of our pilot project.
<unk>.
It's not only just for hydrogen but its also for ammonia and Secretary Carey mentioned, specifically about what is going to take from an infrastructure rebuild and after U S and other countries want to stand behind and particularly on the energy side I thought was really important when they announced.
That particular project for ammonia and hydrogen many of <unk>.
New skills key suppliers from the U S. Japan and Korea are all engaged in this project. So it's in the early stage and we're going to sit down and start having discussions how that's going to how this works but.
On a solid oxide and maybe a little further ahead in your believes in.
I will just going to have to leave it at that.
Okay ill stick stick to the nuclear technology on the website.
As the interest would be on that stage. It was a crowded room and then they also if you remember he announced.
Another project called project Phoenix, and essentially this is to escalate the transition of Europe coal fired plant staffs lawyers and the key for US. This is retaining local jobs note. This is not dissimilar from what we're doing in Romania, and Poland as well as what we're going to be doing in the United States KOL refurbishment is going to be.
Huge opportunity globally for the advanced nuclear community.
Super.
Maybe last one just on the on the warrants.
Is there any any color you can provide on plans around redemption or how youre thinking about updating the market on that is there anything that youre looking for or just general color that you can provide.
I'll turn that one over to Chris Chris.
Please yes. So we are aware of the situation and the triggers that have been that on that and again it really comes down to a conversation within the company and what we think is best.
All the other particulars around our capitalization.
Going forward, but we'll continue to monitor it.
And we will continue to evaluate the opportunity and that presents both in terms of.
Perhaps exercising those redemption rates are letting them stay well I will note is that in the Q3 Youll notice that there was about $27 million with capital raised.
As a result of folks exercise of warrants and options.
Which really was not expected. So there is some benefit in terms of letting those stay there because people at least in the third quarter exercise some of those and provided additional capital to the company.
Quite honestly.
Adds up and projecting that our planet.
It's there it's a positive thing to have.
Okay, great. Thanks, so much for the answers I'll turn it back.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
At this time there are no further questions I'd now like to turn the call back over to John Hopkins for closing remarks.
Thank you operator is greatly appreciated for everybody attending and the questions as well I got a couple more days here at Cop 27, I got two more presentations and I'll say this that was a cop 26, and I I mentioned last quarter I felt we had a.
Seat at the table I can tell you. The interest were new scale has six speaking opportunities here at <unk> 27.
It's been a lot of interest driven heavily by obviously climate disruption, but also energy security.
So a lot of discussion as we stated earlier about hydrogen production.
And how do you get it how do you get it to scale.
Fertilizers like Romania also another key component that has been discussed here is the fact that new scale via the NRC now has emergency site boundary.
Yes.
Essentially as a fence line plant. This is a first for industry and there is no other nuclear power plant. The world. So if you think about what we were talking about on coal refurbishment as these power plants come offline.
Population density has increased and is a significant cost to be able to say that we can do it at say boundary so with that I'd like to say thank you very much. We appreciate it until next time.
This concludes today's conference call you may now disconnect.
Okay.
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