Q4 2022 Nuscale Power Corporation Earnings Call
Good afternoon, and welcome to new skills fourth quarter and full year 2022 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. If you would like to ask a question at this time. Please press star one on your telephone.
Keypad, a replay of today's conference will be available and accessible on new skills website at IR dot new skill power 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 a registration link also accessible on new skills website.
At this time for opening remarks, I would like to turn the call over to Scott Kozak Director of Investor Relations. Please go ahead Mr. Kozak.
Scott Kozak: Thanks, operator. Welcome to NuScale's Q4 and full year 2022 earnings results conference call. With us today are John Hopkins, President and Chief Executive Officer, and Chris Colbert, Chief Financial Officer. On today's call, NuScale will provide an update on its business and discuss financial results. We will open up the phone lines for questions. This afternoon, we 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 discussed during the course of our remarks in the subsequent Q&A session includes forward-looking statements, which reflect our current views of existing trends and are subject 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 S-1 and Form 10-K.
Thank you operator, welcome to <unk> fourth quarter and full year 2020 earnings results conference call with US today are John Hopkins, President and Chief Executive Officer, and Chris Colbert Chief Financial Officer on today's call New scale will provide an update on its business and discuss financial results. He will then.
Open up the phone lines for questions. This afternoon, we posted a set of supplemental slides on our Investor Relations website.
As reflected in the safe harboring slide two the information set forth in the presentation 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 are subject to a variety of risks and uncertainties. You can find a discussion of our risk factors, which could potentially contribute to such differences.
And in our SEC filings on form S. One and Form 10-K.
Scott Kozak: I'll now turn the call over to John Hopkins, NuScale's President and Chief Executive Officer. John?
Now I'll turn the call over to John Hopkins, New scales, President and Chief Executive Officer, John Thank you Scott and good afternoon, everyone.
John Hopkins: Thank you, Scott. Good afternoon, everyone. 2022 was a year of increasing momentum at NuScale as we made important progress toward our mission of helping power the clean energy transition through the development of our safe, innovative, and cost-competitive VOYGR SMR power plants. This momentum was evident in the Q4 as we delivered on our remaining three goals for the year, enabling us to accomplish all five of our 2022 milestones, which you can see on slide four of our presentation. With this progress, we have the ability to deliver NuScale power modules in 2028 due to customer ordering. Let me walk you through these important development points. First, turning to slide five. In December, we secured our second committed customer, Romania's RoPower, with the signing of a contract for phase I of front-end engineering design or FEED work.
2022 was a year of increasing momentum.
We made important progress toward our initiatives, helping power the clean energy transition is the development of our innovative and cost competitive Voyager <unk> power plants.
This momentum was evident in the fourth quarter as we delivered on our remaining three goals.
And maybe lastly, accomplish all by 2022 milestones.
Can see on slide four of our presentation.
With this progress we have the ability to deliver new scale power modules in 2028 at a customer.
Let me walk you through these important development porch.
Turning to slide five.
December we secured our second committed passionate Romania's road power.
With the signing of a contract for phase one of front end engineering design or feed work.
John Hopkins: Activities completed during the first phase of the FEED work will define the major site and specific inputs for our VOYGR-6 SMR power plant, which will be deployed at the Doicesti Power Station in Romania, formerly the site of a coal-fired power plant. As you may recall, President Biden touted our relationship with RoPower in his remarks at the G7's launch of the Partnership for Global Infrastructure and Investment, where the President committed to help raise $600 billion by 2027 for strategic investments critical to sustainable development and our shared global stability. President Biden noted that NuScale's first of its kind SMR plant will help bring online zero-emission nuclear energy to Europe faster, more cheaply, and more efficiently. We couldn't agree more.
Activities completed during the first phase of the feed work, we will define the major site.
Specific inputs for Voyager successful more pilot plant.
Would you be deployed at the door just power station in Romania.
Normally the site of a coal fired power plants.
As you may recall rapidly by indicated our relationship with low power in his remarks that the G. Seven as large of the partnership for global infrastructure and investment.
Where the president is committed to help raise $600 billion by 2027 were strategic investments critical to sustainable development and our shared global stability.
President Biden noted that new scales first of its kind <unk> plant will help bring online <unk> faster.
More cheaply and more efficiently.
We couldn't agree more.
John Hopkins: At NuScale, we believe that our agreement with RoPower illustrates how our VOYGR technology presents a safe, economic, and scalable solution, not just for Romania, but as the president mentioned, the broader European region and beyond, as countries seek to diversify their energy portfolios and meet climate goals. Second, moving to slide six. We are also pleased to have completed the standard plant design, which I will refer to as the SPD, ahead of schedule. This important step will help our customers save time, engineering resources, and support licensing efforts, providing them with a template VOYGR power plant design that will serve as a starting point for an EPC contractor site-specific designs. The completed SPD also advances our overall commercial readiness, preparing us for facility construction, equipment procurement, and manufacturing of long-lead major engineered plant equipment for the NuScale balance of plant.
Our new scale, we believe that our agreement with ROE power illustrates our Voyager technology presents a safe.
Economic and scalable solution.
Just the Romania, but as our president mentioned, the broader European region and beyond.
As countries seek to diversify their energy portfolios can meet climate goals.
Moving to slide six we're also pleased to have completed the standard plan design, which I'll refer to as the SPD ahead of schedule.
This important step will help our customers save time engineering resources and support licensing efforts, providing them with a template Voyager power plant design.
Third as a starting point for an EPC contract and site specific designs.
The completed SPD also advances our overall commercial readiness.
Preparing us for facility construction.
Equipment procurement.
Manufacturing of Huawei major engineered plant equipment.
New scale balance of plant.
John Hopkins: No other Western SMR developer has advanced its design work this far. Third, we submitted our second standard design approval application to the U.S. Nuclear Regulatory Commission, or NRC, for our VOYGR-6 SMR power plant. This is another indicator of our unparalleled design readiness. No one else in the industry has made the licensing progress that NuScale has achieved to date. The design of this new application features the same fundamental safety case and features approved by the NRC back in 2020, now with a power upgrade to a 77-megawatt module that will support the capacity needs for a wider range of customers, as well as improved economics. The next step is for the NRC to accept the application for review, which I'll discuss in a moment as part of our plan for 2023.
No.
As soon as the more developed.
This design.
Sure.
And third we submitted our second standard design approval application to the U S nuclear regulatory commission or intercity for Voyager six <unk> power plant.
This is another indicator of our unparalleled design readiness.
No one else in the industry has made the licensing progress the new scale is achieved to date.
The design of this new application features the same fundamental safety case of features approved by the inner city back in 2020.
Now with a power up rate to a 77 megawatt module that will support the capacity needs for a wider range of customers as well as improved economics.
The next step is for the NRC to accept the application for review, which I'll discuss in a moment as part of our plan for 2023.
John Hopkins: In addition to closing out our five goals for 2022 in the quarter, we made other steps in readying the NuScale Power Module for deployment. As you'll see on slide seven, we announced an agreement with Framatome, an international leader in nuclear energy, to design fuel handling equipment and fuel storage racks for our VOYGR SMR power plants. These are two important design components for the continued development of our plants. This agreement also speaks to one of the many benefits of the NuScale design. Our technology uses existing and readily available fuel suppliers and supply chain infrastructure. We believe that many of our competitors who are not using light water reactor fuel and technology will have a longer and more challenging path ahead of them. NuScale also took actions this quarter in line with our ongoing efforts to power the global energy transition.
In addition to closing out our five goals for 2022 in the quarter. We made other steps already introduced our module for deployment.
See on slide seven we announced an agreement with Framatome, an international leader in nuclear energy. He designed fuel handling equipment and fuel storage racks for a voyage rest of our power plants. These are two important design components for the continued development of our plants.
This agreement also speaks to one of the many benefits of the new skills.
Our technology uses existing and readily available fuel suppliers and supply chain infrastructure.
We believe that many of our competitors who are not used in light water reactor, Hugh and technology will have a longer and more challenging path ahead.
New scale also took actions in the quarter in line with our ongoing efforts to power the global energy transition.
John Hopkins: We were proud to join the Ukraine Clean Fuels for SMRs pilot, a project we became part of alongside Special Presidential Envoy for Climate, John Kerry, and Ukraine Energy Minister, Herman Halushchenko. This multinational consortium will carry out a first of a kind pilot plant study to assess the production of ammonia and hydrogen from the SMRs using solid oxide electrolysis. Among other aims, the project seeks to support food and energy security goals in Ukraine. We also joined a research collaboration with Shell Global Solutions and others to develop and assess the use of a NuScale VOYGR SMR power plant in supporting clean hydrogen production. Our off-grid capability and site boundary emergency planning zone, or EPZ, which I'll discuss further improves the ability to site our technology in close proximity to an industrial facility that is an end user of hydrogen, therefore eliminating transportation costs.
We were proud to Joanna Ukraine clean fuels for <unk> pilot.
Project, we became part of alongside special presidential envoy for climate, John Kerry in Ukraine Energy Minister turmoil at Genco.
This multi national consortium will carry out a first of a kind pilot plant study to assess the production of ammonia and hydrogen from NASA Mars used in solid oxide electrolysis.
Among other range the project seeks to support food and energy security goals in Ukraine.
He also joined our research collaboration with shell Global services, and others to develop and assess the use of our new scale, Voyager and smart power plant and supporting clean hydrogen production.
Our off grid capability say bad REIT emergency planning zone, or EPC, which I'll discuss further improves the ability to fight our technology in close proximity to an industrial facility that has an end user of hydrogen therefore eliminated transportation costs.
John Hopkins: These two initiatives and features speak to the many potential industrial use cases of our SMR technology. Finally, we also have become a signatory of the United Nations' 24/7 Carbon-Free Energy Compact at COP27. We urge all of you to consider joining the compact in advance of COP28 in Abu Dhabi. Indeed, our commitment to sustainability is fundamental at NuScale. We leveraged S&P Global Sustainable1's carbon footprint service to calculate our 2022 emissions relating to the climate change impact of Scope 1, direct natural gas emissions, and Scope 2, indirect purchased electric emissions. A report is posted on our website and describes our nominal emission footprint, which is consistent with NuScale being a problem-solving technology company working for a cleaner, brighter future.
Two initiatives and features speak to the many potential industrial use cases of our rest of our technology.
Finally, we also have become a signatory of the United Nations 24, seven carbon free energy compact at top 27, and we urge all of you that you consider joining the compact in advance of Cop 20 AIDS in Abu Dhabi.
Indeed, our commitment to sustainability is fundamental at new scale.
We leveraged S&P global sustainability once carbon footprint service to calculate our 2022 emissions relating to the climate change impact of scope, one direct natural gas emissions and scope to indirect purchase electric emissions.
Our report is posted on our website and describes our nominal emission footprint, which is consistent with <unk> being a problem solve and technology company working for a cleaner brighter future.
John Hopkins: Now before I hand the call over to Chris to walk through our financials, I wanted to speak about 2023 and lay out five new objectives for this year, which are on slide eight. Similar to last year's milestones, these initiatives reflect our laser focus on both growing our business and ensuring readiness to deliver on our customer commitments. First, we are focused on securing our next three committed customers, further diversifying our customer base and building on momentum with the signing of RoPower Nuclear and an ongoing work with the Carbon Free Power Project or CFPP. In fact, already this year, we have made important strides with the project as participants recently reaffirmed their continued support for the project in the project's recent Class 3 cost estimate.
Now before I hand, the call over to Chris to walk through our financials I wanted to speak about 2023 and lay out five new objectives for this year, which are on slide eight.
Similar to last year's milestones these initiatives reflect our laser focus on both growing our business and ensuring readiness to deliver on our customer commitments.
First we are focused on securing our next three committed customers.
Diversifying our customer base and building on momentum with the signing of <unk> power and an ongoing work with the carbon free power project or CFPB.
Fact already this year, we have made important strides with a project as participants recently reaffirmed their continued support for the project and the projects recent class III cost estimate.
John Hopkins: As we advance on the path toward planned deployment in 2029, we begin the detailed work necessary to develop a Class II cost estimate for the project to be completed later this year. The Department of Energy, or DOE, has been an important consistent supporter of NuScale in the CFPP. Going forward, sufficient funding for the CFPP DOE award in fiscal year 2024 will be critical to maintain proposed schedules, as Chris also will discuss. Looking ahead at business development opportunities on slide nine, there is a growing demand across the globe for solutions that address climate change as well as support enhanced energy security and independence. Nuclear and NuScale’s innovative SMR technology fits at the intersection of these two issues. These dynamics are driving our expanding customer pipeline, which is robust, diverse, and includes domestic and international partners across both the public and private sectors.
As we advanced on the password planned deployment in 2029, we begin the detailed work necessary to develop a class II cost estimate.
The project to be completed later this year, the department of energy or <unk>.
It's been an important consistent supporter of new scale and the CFPB going forward sufficient funding for the CFPB Doj Award.
Fiscal year 2024 will be critical to maintain proposed schedules as Chris also will discuss.
Looking ahead, our business development opportunities on slide nine.
Growing demand across the globe solutions that address climate change as well as support enhanced energy security and independence.
Nuclear new skills innovative <unk> technology fits at the intersection of these two issues. These dynamics are driving our outstanding customer pipeline, which is robust diverse and includes domestic and international partners across both the public and private sectors.
John Hopkins: We expect the Inflation Reduction Act, or IRA, to accelerate these trends in the US as utilities, local governments, and industrial companies better understand the benefits the act provides and the timelines they need to meet to fully take advantage of the tax credits available. We believe the potential expiration of some IRA benefits as early as 2032 will increase demand for NuScale SMRs throughout 2023, whose projects likely need to begin moving forward in earnest by 2024 to ensure they can maximize their benefits under the IRA. NuScale's competitive positioning for new business drivers by IRA tax credits was bolstered in the Q4 when we received NRC approval of our emergency planning zone methodology, enabling a significantly smaller site boundary zone in most locations.
We expect the equation exactly law or irate to accelerate these trends in the U S as utilities local governments and industrial companies better understand the benefits the acura revised timelines they need to be to fully take advantage of it.
Credits available.
We believe the potential exploration of semi array benefits as early as 2032 will increase demand for new scale as tomorrow's throughout 2023, those projects likely need to begin moving forward in earnest by 2024 to ensure they can maximize their benefits under the Iraq.
<unk> competitive positioning for new business drivers by higher rate tax credits was bolstered in the fourth quarter. When we received NRC approval of our emergency planning so and methodology.
Enabling a significantly smaller side boundaries, though in most locations Vista.
John Hopkins: This approval not only underscores the unparalleled safety of our design, but also significantly reduces plant ownership costs and enhances plant siting options for where power is needed the most. For example, our VOYGR SMR power plants can be installed at retired coal facilities near high population zones, while other technologies may not. As I mentioned earlier, we're already seeing this benefit confirmed by RoPower, who will site their first plant at a retired coal plant site. We're looking forward to sharing our progress on this front in the coming quarters. For our second milestone in 2023, we'll continue to make progress on advancing the design for key components of our SMR technology. NuScale is maturing the design for approximately 90 equipment packages in a scope of supply.
This approval not only underscores the unparalleled safety ever design, but also significantly reduces plant ownership costs and enhances plant siting options for more power is needed the most.
For example, our Voyager as tomorrow power plants can be installed that retired coal facilities near high population zones.
Technologies may not.
As I mentioned earlier, we're already seeing this benefit confirmed by Roadhouse, who will cite their first plant at a retired coal plant site.
We're looking forward to sharing our progress on this front in the coming quarters.
For our second milestone in 2023, we'll continue to make progress on advancing the design the key components of the rest of our technology.
New scale its maturity design for.
Approximately 90 equipment packages.
John Hopkins: Significant focus areas for this year include the reactor building crane mechanical design, reactor vessel internals, plant protection system, and bolting equipment integrated design. The completion of these key component designs is critical to our timely transition to the manufacturing and procurement activities that will ensure the delivery of our product on schedule. We are indisputably ahead of peers in this critical respect. Our third goal for the year, as I mentioned earlier, builds off the submittal of our application for standard design approval for SDA to the NRC last year. In 2023, we expect to see the SDA application accepted for review by the NRC. This review is a process by which we can obtain NRC approval for our uprated 77-megawatt design.
Hope with supply significant focus areas. This year include the reactor build and create and mechanical design reactor vessel internals plant protection system and bolting equipment integrated design. The completion of these key component design is critical to our timely transition to the manufacturing and procurement activities that will ensure the deal.
Every all of our product on schedule we are.
Indisputably ahead of peers munis critical respects.
Our third goal for the year as I mentioned earlier those office to the middle of the application for standard design approval for F. D. A to the NRC last year.
In 2023, we expect to see the SD application accepted for review by the NRC. This review as a process by which we can obtain NRC approval for our operated 77 megawatt design.
John Hopkins: We are undertaking this effort because NRC approval represents, in our view, a thorough validation of our design and commercial readiness, and will therefore enhance the commercial prospects of the NuScale VOYGR SMR. Fourth, we plan to start manufacturing the reactor pressure vessels for our NuScale Power modules. As recently announced, we placed our first long-lead material order with our partner, Doosan Enerbility, to produce forgings and materials essential in the manufacturing of the first NuScale Power modules. Commencing the manufacturing of key component marks a significant transition from planning to the execution of our product delivery, further differentiating NuScale from the competition, as we are one of a few select SMR providers to have advanced to the manufacturing phase. This is one of the more complex pieces of the NPM design, the manufactured materials will mark important progress in fabricating this key element of our modules.
We are undertaking this effort because NRC approval represents in our view a thorough validation overdue side and commercial readiness readiness and will therefore enhance the commercial prospects of a new scaled Voyager S tomorrow.
Fourth we plan to start manufacturing the reactor professional vessels for a new CEO power modules.
As recently announced we placed our first long lead material order with our partner Nissan and their ability to produce four genes and materials essential and the manufacturing the first nuclear power modules.
Commencing in the manufacturing of key component marks a significant transition from planning to the execution of our product delivery further differentiated new scale from the competition as we are one of a few select SMO varieties to have advanced the manufacturing space.
This is one of the more complex pieces of the N. P. M design and the manufacturing materials will mark important progress in fabricating this key element of our modules.
John Hopkins: Finally, our fifth 2023 goal is to secure long-lead material orders for 10 additional NuScale Power modules. We're aiming to have 16 NuScale Power modules in operation by 2029 and have already made progress towards six of them with our order for the Carbon Free Power Project. Our work to advance our design, as well as expand our customer ecosystem, will be critical to ensuring we can meet these objectives. Taking a step back, these five goals for 2023, and the progress we are committed to making against them, will demonstrate our continued advancement towards commercialization and meeting the needs of our customers. We are excited about the year ahead and the tremendous opportunity in front of us, and confident that NuScale will continue to build off the progress we made in 2022.
And finally, our fifth 2023 goals is to secure long lead material orders for 10 additional new scale power modules.
And you have 16, new steel power modules in operation by 2029.
We've already made progress towards six of them with their order for the carbon free power project, our work to advance our design as well as expand our customer ecosystem will be critical to ensuring we can meet this objectives.
Taking a step back these five goals for 2023 and the progress we are committed to making against them. We will demonstrate our continued advancement towards commercialization and meeting the needs of our customers.
We are excited about the year ahead, and a tremendous opportunity in front of us and confident the new scale will continue to build off the progress we made in 2022.
John Hopkins: Now I'll hand it over to Chris to provide our financial update for the quarter, and the year, as well as share some guidance for 2023.
Now I'll hand, it over to Chris to provide our financial update for the quarter and the year as well as share some guidance for 2023.
Chris Colbert: Thank you, John, and hello everyone. Our financial results are available in our press release and filings, so my focus will be on performance drivers. I'll start by discussing our Q4 results found on slide 11, then touch on 2022 full year. All figures following are Q4 2022, unless I state otherwise. NuScale ended the year with a cash balance of approximately $268 million. As you would expect, most cash usage is related to operating expenses as we pivot into production and commercialization. R&D increased due to higher professional fees associated with standard plant design completion, as well as the increased headcount to support ongoing licensing efforts. CapEx was minimal, and again, mostly comprised of software and computer hardware to support R&D, which is consistent with our asset-light model. Offsetting expenses in CapEx was Department of Energy cost-sharing and revenue.
Thank you John and Hello, everyone.
Our financial results are available in our press release and filings. So my focus will be outperformance drivers.
Start by discussing our fourth quarter results found on slide 11, and touch on 2022 full year.
All figures following our fourth quarter 2022, unless I state otherwise.
<unk> ended the year with a cash balance of approximately $268 million.
As you would expect most cash usage related to operating expenses as we put it into production and commercialization.
R&D increased due to higher professional fees associated with standard plant design completion as well as the increased head count to support ongoing licensing efforts.
Capex was minimal and again, mostly comprised of software and computer hardware to support R&D, which is consistent with our asset light model.
Offsetting expenses in Capex was department of energy cost sharing and Robert <unk>.
Chris Colbert: Our revenue is limited but growing as you would expect at the company's current phase of development. As a reminder, at this stage in the life of our partnerships, we mainly generate revenue by providing consulting services to customers. Stepping back and looking at the full year, NuScale's proud of the strong foundation built to transition our business into commercialization phase. When we went public last year, the company raised an additional $342 million. During the year, our cash position was augmented by the exercise of warrants and options that raised a further $29 million. Together, these actions strengthened NuScale's balance sheet and provided the business with considerable financial flexibility to support the advancement of our strategic and operational objectives in 2023 and beyond. On slide 12, looking ahead, we provide insight on drivers for higher than previously anticipated cash use in 2023.
Our revenue was limited, but growing as you would expect that the company's current phase of development as.
As a reminder, at this stage the lifeboat partnerships remain will generate revenue by providing consulting services to customers.
Stepping back and looking at the full year, New scale is probably strong foundation built with transitional business include commercialization phase.
When we went public last year the company raised an additional $342 million.
During the year, our cash position was augmented by the exercise of warrants and auctions, but raised a further $49 million.
Together these actions strengthen new skills balance sheet and provided the business with considerable financial flexibility to support the advancement of our strategic and operational objectives in 2023 and beyond.
On slide 12, looking ahead, we provided insight on drivers for higher than previously anticipated cash use in 2023.
Chris Colbert: Please keep in mind that a company with an asset-light model in the early stages of commercialization, like where NuScale is today, invest in growth mainly through costs and expenses. We are building our business by investing in R&D, marketing, and corporate infrastructure, even though it is not reflected as an asset on our balance sheet. What we are talking about is investment. Next, I will briefly describe the key factors driving our expectations for 2023. First, the DOE cost share program. The fiscal year 2023 appropriations available to NuScale were lower than anticipated. Consistent with our DOE award agreement, we have requested an amount in the fiscal year 2024 appropriation to make up for the shortfall in fiscal year 2023 and support our continued participation in the CFPP.
Please keep in mind that a company with an asset light model in the early stages of commercialization wake word new scale is today.
Investment growth, mainly through cost and expenses.
We are building our business by investing for R&D marketing and corporate infrastructure, even though it is not reflected as an asset on our balance sheet.
So what we're talking about is investment.
Next I will briefly describe the key factors driving our expectations for 2023.
First the Doe cost share program.
For fiscal year 2023 appropriation of available to new scale were lower than anticipated.
Consistent with the <unk> Award agreement, we have requested an amount in the fiscal year 2024 appropriation to make up for the shortfall in fiscal year 2023, and support our continued participation in the CFPB.
Chris Colbert: As John mentioned, our funding plan relies on cost-shared funding provided through a cooperative agreement with the DOE, with funding at the levels that we have requested. The second factor is a shifting out of payments to suppliers to fulfill our first customer order. Refining the scope and payment terms with our suppliers is shifting out projected spending without impacting our first customer delivery schedule. We receive payments from customers for equipment in advance of incurring costs to procure that equipment, we now anticipate a shift out in revenue, costs, and associated margin to us on the CFPP. Essentially, we ended up with more favorable payment terms and schedules, which gets passed through to CFPP. We continue to believe that the typical plant economic model, including revenue and margins, is valid. This update simply shifts out the CFPP spending profile.
As John mentioned, our funding plan relies on Kashered funding provided through a cooperative agreement with the Doe.
With funding from levels that we have requested.
The second factor is a shifting out of payments to suppliers since before our first customer order.
Refining the scope and payment terms with our suppliers and shifting our projected spending without impacting our first customer delivery schedule.
Because we received payments from customers for equipment, then to answer the incurred cost to procure that equipment. We now anticipate a shift out of revenue costs and associated margin to us on the CFPB.
Essentially we ended up with more favorable payment terms and schedules, which gets passed through to CFPB.
We continue to believe that the typical plant economic model, including revenue and margins as well.
This update simply shifts the CFPB spending profile.
Chris Colbert: The third factor is an increase in R&D spending to catch up on work deferred from 2022 to 2023, an increase in the cost of planned work, and an increase for work added to mitigate future execution risk. For 2023, this equates to an anticipated cash flow from operations range of -$102 to 142 million. Before I conclude, I also want to touch on the financial impact of higher inflation in the US and around the world. For NuScale, the most immediate effect is upward pressure on our operating expenses. While unwelcome, we are managing this pressure and have adjusted our projections accordingly. The other challenge is the impact of inflation on the estimated cost of our VOYGR SMR power plants.
The third factor is an increase in R&D spending to catch up on work deferred from 2022 to 2023.
An increase in the cost of planned work and the increase will work added to mitigate future execution risk.
For 2023, this equates to an anticipated negative cash flow from operations range of $102 million to $142 million.
Before I conclude I also wanted to touch on the financial impact with higher inflation in the U S and around the world.
For new scale. The most immediate effect is upward pressure on our operating expenses, while unwelcome. We are managing this pressure and have adjusted our projections accordingly.
The other challenge is the impact of inflation on the estimated cost of our Voyager as some of our power plants.
Chris Colbert: As referenced earlier in regard to UAMPS, from a financial perspective, we are staying on top of cost estimate changes, communicating these to existing customers, and incorporating them into discussions with prospects. Higher projected levelized costs of electricity may impact the decision-making for some customers. It's important to bear in mind that this is not happening in a vacuum, nor is it a phenomenon unique to NuScale or the nuclear industry. Energy providers and customers in the US and around the world are all experiencing the same pressure. NuScale is confident that our value equation will not be materially disrupted by inflationary forces, and that we will continue to see considerable demand for our modules.
As referenced earlier in regard to <unk> from a financial perspective, we are staying on top of cost estimate changes communicating these to existing customers and incorporating them into discussions with prospects.
Our projected mobilized possible electricity may impact on decision, making for some customers, but it's important to bear in mind that this is not happening in a vacuum nor is it a phenomenon unique to use scale or the nuclear industry.
Energy providers and customers in the U S neurology the world, they're all experiencing the same pressure.
<unk> confident that our value equation will not be materially disrupted by inflationary forces and that we will continue to see considerable demand for our modules.
Chris Colbert: Overall, because of the capital we have raised and diligent stewardship of our financial position, we continue to be well-positioned to navigate this dynamic environment, meet our near and longer-term milestones, and create value over time. Operator?
Overall because of the capital we have raised diligent stewardship of our financial position, we continue to be well positioned to navigate this dynamic environment.
Meet our near and longer term milestones and create value over time.
Operator.
Operator 3: Everyone, if you would like to ask a question, please press star one on your telephone keypad. We'll take our first question today from Marc Bianchi, TD Cowen.
Everyone else, who would like to ask a question. Please press star one on your telephone keypad will take our first question today from Marc Bianchi with Cowen.
Marc Bianchi: Hey, thank you. I want to first ask about the cash update here, and just try to understand the moving pieces. What were you expecting and what are you getting? What gives you confidence that you're going to be able to recover that in 2024?
Okay. Thank you.
I wanted to first ask about the.
The cash update here and just trying to understand the moving pieces.
Like how much of a Boe.
What were you expecting and what are you getting.
And kind of what gives you confidence.
Youre going to be able to recover that 24.
Chris Colbert: Thank you, Marc. This is Chris Colbert, CFO. We presented a range for cash flow from operations of $102 to 142 million to bracket the range that we would expect from the DOE, getting what we request or not getting what we request from them. That's what brackets the range that we're seeing for them. In terms of the level of confidence, every year we go through the same drill where there's a request put in, and then we work with our folks explaining what we used the money for in the past, what we would use it for in the future, and then we receive, at the end of the year, a budget request or an enacted budget. For example, last year, the budget request was for $30 million, and the final enacted budget was for $165 million.
Thank you Mark this is Chris Colbert CFO .
So.
<unk> presented a range for cash flow from operations of $102 million to $142 million to bracket the range that we would expect.
From the D are we getting what we request or not getting what we request from them, that's what brackets the rash.
Range that we're seeing for them.
Terms of the level of confidence every.
Every year, we go through the same drill where there is a request put in and then we work with our folks explaining what we use the money for in the past.
We would use it for in the future and then we received at the end of the year.
Budget request.
<unk> budget.
For example, last year partisan its budget request was for $30 million and the final enacted budget was for $165 million.
Chris Colbert: That's been a very typical sort of evolution through the last several years where there isn't very much correlation between the President's Budget Request and what gets enacted. We'll continue to monitor this and work through it, and if we have a sense of confidence of how things are moving forward, we'd be certain to update folks. Right now, we're just working with what is the very first step in the process, which is the President's Budget Request.
And Thats, a very typical sort of evolution through the last several years, where there isn't very much correlation between the president's budget request and what gets enacted.
But we'll continue to monitor this and work through it and if we have a sense of the confidence of how things are moving forward, we'll be certain to update folks, but right. Now we're just working with what is the very first step in the process, which is the president's budget request.
Marc Bianchi: Okay, great. The prior outlook was to be free cash flow positive in 2024, I believe. Is that still the expectation? There's some other stuff going on here, right? The progress payment shifting around, inflation. I'm just wondering, in light of those, are you still anticipating free cash flow in 2024?
Okay great.
And the prior outlook was to be free cash flow positive in 'twenty four I believe.
Is that still the expectation.
Because theres some other stuff going on here right the progress payment shifting around inflation.
I'm just wondering in light of those are you still anticipating free cash flow of 24.
Chris Colbert: Yeah. We haven't really forecasted out to 2024 at this point in time, but there's nothing for us to believe if we continue on the process we're on in terms of both the customers we have in-hand and the customers we want to get in hand this year, that that objective could not be met. That's something that will play out through the year, and we'll update it as we have better understanding as to both how our markets are developing and our first customers are moving forward through their process of engaging us on work to move forward with their plans.
Yeah, we haven't really forecasted out to 2024 at this point in time, but there is nothing for us to believe if we continue on a process were on in terms of both the customers. We haven't had in the customers we want to get in and this year that that objective could not be met.
That's something that will play out through the year and we'll update it as we have better understanding as to both how our markets are developing and our first customers are moving forward through their process of.
Engaging us and work to move forward with their plans.
Marc Bianchi: Yep. Okay. One thing that hasn't been discussed that kind of came up with the UAMPS' latest cost estimate and competitive test was that there was an 80% subscription requirement, I believe, put into the agreement there. My read on that is basically the project needs to go from, say, 25% subscribed today to 80% by February of 2024, or you could be responsible for reimbursing UAMPS for the cost. Can you maybe talk about the update to the agreement there and what level of confidence you have in being able to see the subscription levels up to that level?
Yes, okay.
One thing that.
Hasnt been discussed that kind of came up with the.
<unk> apps.
Latest cost estimate.
Competitive test was that there was a.
80% subscription requirement I believe put into.
The agreement there. So my my read on that is basically.
Project needs to go from say, 25% subscribed today to 80% by February of 2024.
Or you could be responsible.
Responsible for reimbursing, new apps for the cost can.
Can you maybe talk about the update to the agreement there and.
What level of confidence you have in being able to see the subscription levels up to that level.
Chris Colbert: I think you got it very well, Marc, good on reading the report and following through that. What you stated is actually correct, that it would go from 25% to 80%, and that we'd be liable for potential reimbursement if they chose to terminate for failure to reach that point. In terms of our confidence of getting to that point, we are working with UAMPS and the Carbon Free Power Project to bring in that additional subscription, and we'll be monitoring that throughout the year as we move forward with them. The news is that as you saw with them coming forward with 26 of 27 members voting to move forward with the project earlier this year at the $89 per megawatt hour price, that's very much indicative of a market that's changing and tightening in that area.
So I think you've got it very well mark so good on reading the report and following through that but what do you say that as <unk> correct that would go from 25% to 80% and then we'd be liable for potentially reimbursement if they chose to terminate for failure to reach that point.
In terms of our confidence of getting to that point.
We are working with new apps and the carbon free power project to bring in that additional subscription and we'll be monitoring that throughout the year as we move forward with them.
Is is that as you saw with him coming forward with 26 to 27 members of voting to move forward with the project earlier this year.
At the $89 per megawatt hour price, that's very much indicative of a market thats changing and tightening in that area and depending upon those factors going forward. We think that will continue in the western region, particularly as coal plants continue to retire at a faster pace than expected.
Operator 2: Depending upon those factors going forward, we think that will continue in the Western region, particularly as coal plants continue to retire at a faster pace than expected.
John Hopkins: As we see people looking to get benefit from the Inflation Reduction Act, we're making investments now as opposed to later on.
We see people looking to get benefit from the inflation reduction Act, we're making investments now as opposed to later on.
Marc Bianchi: Is it more likely that the increased subscription comes from the existing members increasing their level, or are there other parties that are more likely? I don't know if it's a power producer that would be looking to take a piece of the project, or what are the likely candidates there?
Is it more likely that the increased subscription comes from the existing members increasing their level or are there other parties.
That are more likely I don't know if its power producer that would be looking to take a piece of the project or what are the likely candidates there.
John Hopkins: All of the above. To give you a data point, at one point, the U.S. members had signed on to 250 MW of electricity from the project, which could be a proxy of what they need. They could do that at some point. We're also seeing interest from investor-owned utilities and increasingly, folks that have large energy needs and they need reliability are also interested in it, particularly data centers and the like moving forward. Those are all opportunities that we see that aperture opening, not narrowing, and more people becoming interested in it.
All of the above but to give you a data point at one point you asked members had signed onto 250 megawatts of electricity from the project, which could be up.
A proxy of what they they need so they could do that at some point.
Also seeing interest from investor owned utilities and increasingly.
Does that have large.
Energy needs and they need reliability are also interested in it particularly data centers and the like moving forward. So those are all opportunities that we see that aperture opening not narrowing and more people are becoming interested in it.
Marc Bianchi: Okay. Thanks so much. I'll jump back in the queue.
Okay. Thanks, so much I'll jump back in the queue.
Operator 3: At this time, everyone, there are no further questions. I'll hand the call back to NuScale CEO, John Hopkins, for any additional or closing remarks.
At this time, everyone. There are no further questions I'll hand, the call back when you scale CEO , John Hopkins for any additional or closing Iraq.
John Hopkins: Thank you, operator. We're the only SMR design certified by the U.S. Nuclear Regulatory Commission. NuScale is well-positioned to commercialize and deliver clean energy at scale. NuScale technology is essential to powering the global energy transition, and we are at the forefront of that effort with our work to deliver safe, scalable, and reliable carbon-free nuclear power. I could not be prouder of our team for delivering on each and every one of our important goals over the past year. We appreciate the support of our investors and partners around the world who are enabling us to deliver on the opportunities ahead. I look forward to what we will accomplish together in 2023, and I'd like to thank all of you for your interest in NuScale and for participating in our call today. Operator?
Thank you operator, but the only ask some are designed and certified by the U S nuclear nuclear regulatory Commission.
This scale is well positioned to commercialize and deliver clean energy at scale.
<unk> technology is essential to power in the global energy transition we are at the forefront of that effort with our work to deliver safe scalable and reliable carbon free nuclear power.
I could not be prouder of our team for delivering on each and every one of our important goals over the past year.
And we appreciate the support of our investors and partners around the world.
Who are enabling us to deliver on the opportunities ahead.
Look forward to what we will accomplish together in 2023 and like to thank all of you for your interest in new scale and for participating in our call today.
Operator.
Operator 3: Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.
And once again, everyone that does conclude today's conference. Please I'd like to thank you all for your participation you may now disconnect.
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