Q3 2023 Heliogen Inc Earnings Call
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Good morning, and welcome to the Helix, Inc. Third quarter 2023 conference call.
As a reminder, today's call is being recorded.
At this time, all participants are in listen only mode.
A question and answer session will follow the prepared remarks.
I would now like to turn the call over to Louis Baltimore diligence, Vice President of strategic Finance and Investor Relations for opening remarks and introductions.
Please go ahead.
Thank you operator, and good morning, everyone. We're glad you could join US today for our third quarter 2023 conference call.
With us on today's call are kristie Obelia Chilean.
<unk>, Chief Executive Officer, and soccer, Corrado, our Chief Financial Officer, and head of strategy.
Hey, Leo June issued its results yesterday afternoon in a press release that can be found on the investors section of our website at <unk> Dot com is.
As a reminder, our comments on this call include forward looking statements, which are subject to various risks and uncertainties.
These statements include expectations and assumptions regarding the company's future operations and financial performance, including implementation of the Companys strategic plan and growth initiatives planned.
Plans to advance the company's P V hybrid product and prioritize installation of commercial scale projects do you expect it capabilities and usages of our Helio stop regeneration three through five.
Expectations for scaling the Companys concentrated solar thermal technology discussions with potential customers and commercial contract progress.
Actual results could differ materially from those contemplated in the forward looking statements any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.
Factors that could cause actual results to differ materially can be found in yesterday's press release and other documents filed with the SEC by the company from time to time.
During this call. We may also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results more detailed information about these measures and a reconciliation to the most comparable U S. GAAP measures is contained in the press release issued yesterday, which is available.
On the investors section of our website was furnished on form 8-K with the SEC.
A replay of this call will also be available on the investors section of our company website. This afternoon and with that I'd like to turn the call over to Christie.
Thank you Louis good morning, everyone, great to be with you.
As you May remember from prior call upon stepping in to lead the company earlier. This year I had outlined here are your top three priorities for 2023.
Number one our closed sales number to install our first project and number three extend our runway and growth capital.
Those goals have not changed I want to open my remarks by sharing some headlines which demonstrates the strong progress we've made during the third quarter.
We have significantly increased our sales pipeline, having grown prospects in the stage of qualified leads to one eight gigawatt and P. F. I D activities stage 265 megawatt.
These steps are necessary precursor to growing the book revenue backlog.
We've initiated our demonstration scale facility as an operating plans rather than a historic used as a platform for future R&D and that will strengthen our basis for future performance guarantees.
These broken ground on a small commercial scale steam units in West, Texas, which will likely become our first operating commercial scale facility.
We designed a hybrid power offering that combines concentrated solar thermal energy storage and TV together in a single compelling offering for the special renewable energy with long duration energy storage.
We completed design verification on a critical component of our integrated generation three concentrated solar power plant, which we were proud to announce and partnership with our customer with that energy earlier this quarter.
We developed and executed a cost reduction plan that allows us to fully fund our business plans or 'twenty 'twenty four.
We recognized revenue of $2.3 million in the quarter, bringing year to date earned revenue to $5 $6 million.
These headlines show that our strategy is gaining steam and building operational momentum.
Now moving onto our agenda for the call. This morning on slide four.
We'll spend a little bit of time, reflecting on how this company is going to create long term shareholder value and will provide an update on key elements of the business before transitioning to our financial update using the same format that we had last time.
And then we'll come back to clothing remarks in 'twenty 'twenty four priorities.
Let's dive in on slide five where I will spend a few minutes talking through how we're creating long term shareholder value.
Shareholder value is across four elements that are depicted in orange or across the page.
Our I T.
The technology that comes out of that core IP.
The partnerships that help us promote and deploy that technology and finally, the applications that we were able to use that technology in.
If we first take a look at the core IP, we can break it down into four key buckets.
Our proprietary heliostat designs that can be produced at high volume and low costs.
Our closed loop and enhanced software that enables appointing accuracy second to none.
Our planned integration and modular design, which brings significant flexibility across a wide range of applications.
And our next generation technology, which is leading the way in generation three concentrated solar power innovation.
Within each of these buckets, we have established and are continuing to advance technologies what are I teach the work as shown by the technology.
And we are leveraging the strength of a few key third party in many cases their contractual relationships to perform scopes of work on specific projects and applications.
Over the next few slides I'm going to drill down into two of the Sun rays on this page.
Moving to slide six first to expand on our proprietary heliostat design and manufacturing excellence.
Ultimately our goal is to have peak performance at the lowest cost manufacturer buses installed.
Performance is a combination of beam quality coming from the mirrors class reliability.
Our third generation Heliostat was first deployed in 2019 at our demonstration scale facility in Lancaster, California.
Those mirrors had a reflective area of 1.5 meter square and were helpful source of iteration on learning.
Today based on our lessons learned we've been able to design and manufacture our generation four he was that.
Our generation four heliostat has further improved upon the beam quality was 119 meter squared up perspective area and it is the best in class in terms of when resilience and has a lifespan required for our first commercial scale projects underway for 'twenty 'twenty four and the first half of 2025.
This really is that is produced in our long beach manufacturing design a high degree of automation.
With the beam quality performance optimized and this generation for you is that we've now turned our focus to the cost side with generation and we expect to achieve the next leg of cost reductions by reducing manufacturing costs and bringing automation installation process.
Design is looking very promising it is more or less at a point, where we can say that we are a majority of the way there.
We will selectively identify the right time to implement our transition from the Gen. Four production facilities to the Gen five.
Now, let me shift gears and move to the third sunray focused on planning design and integration, let's move to slide seven we summarize our roadmap to accomplishing our goals for planned integration.
You can see the summary of our definition of success outlined in the sidebar on the right hand side to that end in 2023, we have begun operating our current solar field and Lancaster, California in a way that allows us to deliver operating metrics that through repeatability, what does that skew. It helps us develop a very strong proof point on run.
Time efficiency further validate our suffering plant controls deliver constant energy to the receiver and enable continued focus on measurement and improvement that will then feed into 'twenty 'twenty four as we build out the balance of plant on our steam plant in West, Texas, which will be installed it'll be a showcase of the first commercial scale application.
Finally on our generation three CSP product price, we expect the first appointment to be mechanically complete by the end of 2025, allowing us to showcase the first integrated next generation solar thermal energy products using our novel particle technology for heat storage.
We have an exceptional team leading our approach to integration and design that allows us to create scalable flexible concentrated solar thermal modules and gives us an opportunity to further expand margins of licensing and O&M.
We also have strong partnerships with companies like scenario poorly and Hanwha, who have deep relevant experience on existing DSP technology that we're deploying for the first time, along with Woodside energy.
In sum this plan for our planned integration line.
Value creation.
Puts us well underway to accumulate operating experience sets us up for supporting our performance guarantee that will help us continue to drive commercial engagement and bolster our industry leading intellectual property.
All of that will reinforce the momentum around our commercial pipeline, which you'll see on slide eight is now one eight gigawatts.
The last time, we presented a similar page to you and thought it would be important this time to update you on the anatomy of our growing pipeline.
We've increased our lead generation from 825 megawatts to one gigawatt, which is more than double weave.
We've also seen an improvement in megawatts across the first three bucket, although not a similar increase in number of customers, which means that we're seeing traction on larger scale projects relative to last quarter.
Increased our submitted proposals by 20 megawatts and a few of our submitted proposals to transition to our pre F. I D activities going from 20 to 65 megawatts.
Although our booked orders remain the same like we talked about last time. It can be an 18 month process for items and lead generation to transition to booked orders and we're taking all the right steps to get there.
We do expect some of these pre of idea activities to manifest in the form of feed studies and joint development agreements towards the contractual activity, we expect to round out our 2000 Twenty's Regal in closing sales.
Moving to slide nine our pipeline spans across many of the industries that we've talked to you about which is beneficial as we're not significantly exposed to any one major macroeconomic factor.
For example, metals and mining customers are critical in the energy transition and they are aggressively seeking to decarbonize given the focus on upstream environmental impact.
Oil and gas are also experiencing record high profit given the recent increase in energy prices and they too are looking to put some of those profits to work I'm meeting decarbonization goals.
Our pipeline is also global in nature, particularly where solar resource is strong and we're C. S. P is a well understood technology.
And as you might expect because we started a real commercial progress only earlier this year many of the C. O D is your commercial operating days for our projects that we're currently evaluating are in 2026 and beyond which is what you would expect to see for a company that is where we are in our commercial journey.
Moving to slide 10, I want to highlight the interest in our new hybrid power product and explain why it is so exciting for our mission.
One compelling aspect of our power product is that it can be the special over long duration, including during the times when traditional solar in Sweden, while power demand is spiking.
And the second compelling aspect is that our modularity can help minimize resilient reliance on the existing transmission system, because we can generate power on or adjacent to our customers' premises are major industrial demand centers.
Despite our commercializing this product only earlier this year. It now represents the vast majority of our pipeline about 80% of our projects.
On Slide 11, you can see the trend in power prices as shown by this example for Cal ISO which is the independent system operator that oversees the operation of California's bolt electric power system transmission lines and electricity market generated and transmitted by its member utilities. What you see on this graph is the price of <unk>.
G for a particular year over a 24 hour period, but the bottom trend line showing 2020 pricing.
As you go up in order of time on these graphs. It shows how pricing increase from 2020 to 2023 and the predicted pricing gains for 2030.
These prices are continuing to rise due enlarge part to increasing natural gas prices, which have even more important is affirming source of power tobacco instrument in renewable energy as well as due to the level of infrastructure investments required to modernize the grid and ensure reliable power delivery.
These trends underscore the importance of the special clean energy and why do we believe artist basketball power product is seeing traction.
Building on this further slide 12 shows what is happening for fossil fuel power plants across the U S.
Example, on this slide is if all the natural gas plants that have been built over the last 30 years and the forecasted natural gas plant retirement that are expected over the next 30 years from where we sit today enjoys me three.
The ones that are retiring far outweigh what is being built.
We're seeing the emergence of some temporary gas generators at existing power plant sites in order to avoid blackouts in goose grid stability and these are taking us backwards on the decarbonization trajectory therein lies our opportunity to come in with cost effectiveness basketball clean power using our concentrated solar energy technology and hybrid offering.
Now, let me move to slide 13.
You'll see us build onto this slide further and so I'm going to take you through it step by step.
This slide introduces the empirical relationship between three different solar energy configurations.
Using solar PV only using P V plus battery energy storage systems are best and using a combination of concentrated solar plus P D plus thermal energy storage Archie yes.
The slide is divided into three verticals section to highlight what happens if your objective is to operate with no shortage as shown by the Gray section, where you can get up to 10 hours of energy by running a typical solar plants when the Sun is shining.
Four one to four hours of storage shown by the Blue section or four to 14 hours of long duration storage shown by the Orange section.
The path of the Sun dictates the productivity of P C.
Without using battery energy storage, we see diminishing marginal returns and trying to extend the number of hours of electricity in a P. D can produce into that vertical section.
This is all despite very low level of cost of energy for daytime solar P V. When the Sun is shining brightly indirectly on the panels.
This dynamic is because in order to squeeze out more performance out of P. D. You're ultimately oversizing of T V feel to get production during the hours when the Sun stopped shining on the optimal point of channels.
Even when using trackers since the Sun is not very powerful in the early and late portions of the day you need to install more panels to get the same amount of energy as you would during the more productive times.
Without battery storage all of that excess peak solar power generated by P. V increases the overall cost of the power that you're generating.
The most common way that People's Jamie to mitigate this is to use batteries to store that excess energy when the Sun is shining the bright eyes. The problem with this is that battery energy storage is still prohibitively expensive.
Although you can get closer to near 24, 7% basketball renewable power, which brings you to that four to 14 hours of storage ROM in the Orange section, there's an associated increase in the level of <unk> cost of energy that would make this an undesirable option for most industrial processes or owner operators of utilities that serve industry.
Now, let's talk about where C. S piece of it then.
S. P does not compete on cost with lead times or P. B, but it doesn't have to because we're C. S. P. Excels is where when it is paired with thermal energy storage, that's because the incremental cost of thermal energy storage is much lower than the incremental cost of batteries. So the total cost of CSP plus thermal energy storage.
It is attractive went around the clock dispatch well energy is the objective and that cost gets even lower by integrated integrating daytime T V into this combination.
This is the crux of what we referred to a huge and as our hybrid power offering. It is really targeting the orange section of four to 14 hours of long duration energy storage the.
The P V that we integrate it can be any off the shelf commercially available PV equipment, whereas the CSP use of tea leaves Joe's core IP enhanced concentrated solar thermal technology that already exists.
Slide 14 layers on the revenue side of this equation and by that we mean, it's revenue if you're selling the power or you're consuming the power it equates to be avoided cost of purchase power from Cal ISO as an example.
Slide 15, and then as the profit curves for each power generation setup.
Our focus is unprofitable long duration power solutions for customers that need bode following our baseload power at some point. Despite the low initial costs more P V becomes a money loser when you're trying to achieve long duration and the special energy.
There's a short period of time or a P V with battery energy storage can be profitable, but really only in the shoulder times in power prices are the highest.
C. S P less T V for thermal energy storage can be the most profitable and to earn the most profits per day.
On slide 16, this shows that profitability improves as grid power costs rise. This is a trend we've been seeing everywhere power costs keep going higher as more generation is built out and all of that new generation requires transmission related equipment upgrades.
The profit line extends all the way up to 22 hours and beyond giving you the maximum opportunity to maximize on a location with the right framework for both E. S. P. N P V along with thermal energy storage.
So in summary, although TSB has a larger capital outlay.
The total all in delivered cost of energy to be more competitive than PV with battery when we combine our CSP with thermal energy storage and solar PV.
On slide 17, I'll spend a moment on our generation three CSP progress.
To ground people unfamiliar to the industry on what we mean by generation three.
Start by describing generation choose DSP technology, which is how the industry, including the department of energy described the currently available forms of C. S. P with energy storage steam in molten salts are examples of generation choose D. S. P storage technology and these are already proven and in commercial operation today and exit.
Facilities <unk>.
Generation three CSP technologies to find in the industry is having thermal energy storage. It has potential to support higher systems, George capacity efficiency, and reliability, which ultimately drives down energy costs.
For Helio Jan our generation three C. S. P technology includes the items outlined on the right half of this page and improves power conversion cycle improved thermal energy storage and our next generation heliostat.
The benefit of our generation three technologies that we expect to unlock gains and efficiencies that lead to an overall lower cost of delivered energy with long duration energy storage. So it has the potential to be a game changer.
I'm proud to share that during the third quarter of 2023 we were able to validate the design for our particle receiver which is our generation three thermal energy storage we.
We were pleased to share this milestone update during October and to discuss this at the solar pieces conference alongside our customer Woodside for whom we're building our first commercial scale units and we look forward to continuing to share our progress with you all.
Now moving to slide 18, where I will highlight our Brenda development projects located in Arizona.
This project site is incredibly attractive based on the strength of solar and water resource geographic characteristics and its proximity to key infrastructure.
On top of that it's based in a federal solar energy Zama streamlines the permitting process.
Our plan for putting this site to use is to leverage it as part of our Green hydrogen project powered by heavy agenda hybrid power offering.
We've had strong interest from equity investors on this and we've been making great progress in the development stage as you can see by the completed and ongoing activities listed on the right hand side.
In contrast to the Capella project, which is not a moneymaker in itself, but instead are opened up future value. The brand the product itself as a source of economic value to he's neogen its shareholders and we look forward to continuing to update you on our progress.
Now, let me hand, it to our CFO saga Corona to go over our financial results.
Thanks Christy.
Good morning, everyone here on page 19 first on the backlog at the end of the third quarter, we have seven megawatts and three projects in our backlog representing $73 million in contracted revenue.
<unk> 1 million of this contracted revenue remaining is attributable to our ongoing project to develop a turnkey green energy production facility sponsored by Woodside energy and partially funded by the Doe.
Chrissie had discussed the scope of this project on page 17.
Second on what's not included in this backlog is an estimated $10 million to design build and operate a high capacity factor steam product in West Texas disc.
As discussed on page seven moves.
Moving on to page 20, as it relates to our third quarter financials.
We earned $2 3 million in revenue in the third quarter, primarily driven from progress on project Capella.
Year to date, our earned revenue is $5 6 million as a frame of reference.
Over the lifetime of the Capella contract.
We will earn $80 6 million, we have recognized $19 2 million lifetime to date.
And routine 61 million in our contracted backlog.
Moving to SG&A on an adjusted SG&A basis.
We have revised our operating structure to gain 11% cost productivity quarter over quarter.
Year to date, our adjusted SG&A.
Is down 24%.
Versus Q4 of 2022.
On the same basis, we forecast an additional $2 million in cost savings per quarter.
In 2024, as a result of executed cost actions.
On page 21, we.
We ended the third quarter with 91 6 million in liquidity.
Year to date, we have received $12 4 million in cash for projects underway and we have expended project development expenses in line with cash receipts.
We spent $32 9 million in SG&A year to date after adjusting for project costs nonrecurring costs and noncash items.
Expected project funding for project Capella from one side and the D. O E is not included in our liquidity on hand.
Our current liquidity position as forecasted.
Fully fund, our investment and operating needs through 2024, allowing for us to focus on planned execution.
Let me hand, it back to Kristy on page 22 to wrap up the presentation.
Yes.
So in closing on slide 22, I hope, we've given you a sense of our strong progress during the quarter and where we're headed with the big picture we've.
We've had significant accomplishments in 2023 so far and we are on track to hitting our key targets.
As we move into 2020 four our priorities are to advance our hybrid power of products to operate our Lancaster site at the plants.
To complete installation of our first project to begin the next phase of Capella products, demonstrating our generation three D. S P offering.
To advance at least one of our 2023 contracts to a positive final investment decision and to operate with a fully funded 2024 and business plan.
But those plans for 'twenty 'twenty four we are confident that we will continue to grow the shareholder value that I outlined at the beginning of this call.
As always thank you all for your support.
Yeah.
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Okay.
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I'll reminder, if you wish to ask a question Please press star and one.
Yes. This is Louis Baltimore from Hilli agenda, we have a couple of questions from the audience and for folks who couldn't be on the call today.
Our first question comes from the audience. How does your recent movement off the New York Stock Exchange impact your plans.
Thanks for that question and we are continuing to be highly confident in our plan. There is no impact of having moved off the New York stock exchange at the end of the day, our cash position remains strong we have the funding needed to execute through our near term.
Plans, including through the end of 'twenty 'twenty four.
And we're looking forward to demonstrating the successful execution of the strategy that we outlined and so our strategic and operational plans remain the same and we will also continue all of the governance and SEC filings that.
That we did as we were on the New York stock exchange as well.
Thanks Christie and this next one comes from Rob Wertheimer at Melius research.
Can you talk about the potential timeline from pre F. I E. Two booked order.
I know this can be variable and it's not yours to predict but any insight itself.
Sure. That's a common question that we've been getting and I think part of this is just part of the education of the energy capital markets space and it is common for large scale energy capital projects to go through different phases and in the pre F. I D phase, which is what we've defined our ourselves.
Pipeline slide it's very typical for that pre F. I D phase to take something in the realm of between say four to 12 months as projects go through front end engineering design for us, especially for our hybrid C. S. P. P V thermal energy storage offering.
These will be the first couple of projects that we're going to be building with that and so we do expect that to be that front end work that takes a little bit longer on the front end and we're pleased to be in discussions with customers on having that phase be funded as much as possible and so we are driving for having signposts in these.
Next couple of months that will be a mix of paid design studies to advance that work on a large scale project in advance of a final investment decision, which is where a project would get added to our full revenue backlog and so you'll see you can expect to see that in the coming months, we'll be delivering.
The the outcomes of our front end engineering design, which is an important part of the the pre feed phase, but at all of that work is progressing very well and as I talked about the the power offering that we have there's a lot of interest and traction in the market and so we're looking forward to continuing to share our progress on that.
And this is just part of the typical large scale energy project and process.
As there are no further questions I would now have the conference over to Kristy O'brien for any closing comments.
Christy Thank you operator.
Yes, so we remain super confident in the global market opportunity if anything the demand for dispatch of bold clean energy is just getting stronger and we're confident that we have a really compelling offering in our dispatch of all power product, especially and that represents the majority of our.
Pipeline, we're looking forward to continuing to build on the momentum that we demonstrated during the third quarter and continuing to knock off the targets that we set for ourselves and so a lot of exciting time ahead for Helio journey, and we look forward to talking with you again soon thank you everyone for your support.
Thank you the conference.
It has now concluded. Thank you for your participation you may now disconnect your lines.
Okay.
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