Q1 2024 FuelCell Energy Inc Earnings Call
Operator: www.fuelcell.com Hello and welcome to FuelCell Energy's first quarter of fiscal 2024 financial results conference call. At this time, all participants are in listen mode only.
Okay.
Hello, and welcome to fuel cell energy for each quarter of fiscal 'twenty 'twenty four financial results conference call.
This time all participants are in listen mode, only a question and answer session will follow.
Operator: A question and answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. At this time, I'd now like to turn the call over to Tom Gelston. Tom, you may now begin the call. Thank you.
Swallowed the prepared remarks as a reminder, this conference call is being recorded at this time I'd now like to turn the call over to Tom Gelston. Tom You May now begin.
Thomas Gelston: Good morning, everyone, and thank you for joining us on the call today. As a reminder, this call is being recorded. This morning, FuelCell Energy released its financial results for the first quarter of 2024, and our earnings press release and our quarterly report on Form 10-Q are available in the investor section of our website at www.fuelcellenergy.com. Consistent with our practice, in addition to this call and our earnings press release, we have posted a slide presentation on our website. This webcast is being recorded and will be available for replay on our website approximately two hours after we conclude the call.
Thank you good morning, everyone and thank you for joining us on the call today as a reminder, this call is being recorded this morning fuel cell energy released our financial results for the first quarter of 2024 in our earnings press release, and our quarterly report on Form 10-Q are available in the investors section of our website at www dot fee.
Sell energy Dot com.
Consistent with our practice in addition to this call and our earnings press release, we have posted a slide presentation on our website. This webcast is being recorded and will be available for replay on our website approximately two hours. After we conclude the call.
Thomas Gelston: Before we begin, please note that some of the information that you will hear or be provided with today will consist of forward-looking statements within the meaning of the Securities Exchange Act of 1934. Such statements express our expectations, beliefs, and intentions regarding the future and include, without limitation, statements with respect to our anticipated financial results, our plans and expectations regarding the continuing development, commercialization, and financing of our FuelCell technology, and our business plans and strategies. Our actual future results could differ materially from those described in or implied by such forward-looking statements because of a number of risks and uncertainties. More information regarding such risks and uncertainties is available in the safe harbor statement in the slide presentation and in our filings with the Securities and Exchange Commission, particularly the risk factor section of our most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. During the course of this call, we will be discussing certain non-GAAP financial measures, and we refer you to our website and to our earnings press release and the appendix of the slide presentation for the reconciliation of those measures to GAAP financial measures.
Before we begin please note that some of the information that you will hear or be provided with today will consist of forward looking statements within the meaning of the Securities Exchange Act of $19 34.
Such statements express our expectations beliefs and intentions regarding the future and include without limitation statements with respect to our anticipated financial results, our plans and expectations regarding the continuing development commercialization and financing of our fuel cell technology, and our business plans and strategies are.
Our actual future results could differ materially from those described in or implied by such forward looking statements because of a number of risks and uncertainties.
More information regarding such risks and uncertainties is available in the safe Harbor statement in the slide presentation and in our filings with the Securities and Exchange Commission, particularly the risk factors section of our most recently filed annual report on Form 10-K, and any subsequently filed quarterly reports on Form 10-Q.
During the course of this call we will be discussing certain non-GAAP financial measures and we refer you to our website and to our earnings press release and the appendix of the slide presentation for the reconciliation of those measures to GAAP financial measures.
Thomas Gelston: Our earnings press release and a copy of today's webcast presentation are available on our website under Invest. On our call today, I am joined by Jason Few, FuelCell Energy's President and Chief Executive Officer, and Mike Bishop, our Executive Vice President, Chief Financial Officer, and Treasurer. Following our prepared remarks, we will be available to take your questions and be joined by other members of the leadership team. I will now hand the call over to Jason for opening remarks. Jason
Our earnings press release, and a copy of today's webcast presentation are available on our website under investors.
For our call today I am joined by Jason few fuel cell Energy's, President and Chief Executive Officer, and Mike Fisher, Our executive Vice President Chief Financial Officer, and Treasurer. Following our prepared remarks, we will be available to take your questions and be joined by other members of the leadership team.
I'll now hand, the call over to Jason for opening remarks, Jason.
Jason B. Few: Thank you, Tom. And good morning, everyone. Thank you for joining us on our call today. Since we last reported in December, we have continued to make progress toward the accelerated implementation of our powerhouse business strategy. For the first quarter of fiscal 2024, revenues were lower than in the comparable prior year quarter.
Thank you Tom and good morning, everyone. Thank you for joining us on our call today since we last reported in December we have continued to make progress toward the accelerated implementation of our powerhouse business strategy.
For the first quarter of fiscal 2024 revenues were lower than in the comparable prior year quarter.
Jason B. Few: However, this was in line with our expectations due to a one-time revenue benefit from the expiration of a material right related to an extended warranty obligation and higher service revenues from required module replacements during the comparable prior year quarter. Today, we will provide additional detail on our results for the quarter, as well as discuss our outlook. Before diving into the business results, I believe it is important to give an overview of FuelCell Energy for anyone new to our story. As shown on slide 3, we've been in operations for over 50 years, and we are a leader in developing stationary fuel cell platforms. Our purpose as a company is to enable a world empowered by clean energy. Today, the world is in the early stages of a global energy transition to a low-carbon future.
However, this was in line with our expectations due to a onetime revenue benefit from the expiration of a material right related to an extended warranty obligation and higher service revenues from required module replacements during the comparable prior year quarter.
Today, we will provide additional detail on our results for the quarter as well as looking ahead.
Before diving into the business results I believe it is important to give an overview of fuel cell energy for anyone new to our story.
As shown on slide three we have been in operations for over 50 years, and we are a leader in developing stationary fuel cell platforms.
Our purpose as a company is to enable the world empowered by clean energy.
Today the world is in the early stages of a global energy transition to a low carbon future.
Jason B. Few: We believe FuelCell Energy is well-positioned as an energy delivery and emissions management company to be part of the solution by supporting customers on a safe, secure, and practical path to net carbon zero. This important purpose is what drives our passion for this work and guides our strategic focus. We have 188 modules in commercial operations in North America, Asia, and Europe.
We believe fuel cell energy is well positioned as an energy delivery and emissions management company to be part of the solution by supporting customers on a safe secure and practical path to.
Net carbon zero.
This important purpose is what drives our passion for this work and guides our strategic focus.
We have 188 modules in commercial operations in North America, Asia and Europe.
Jason B. Few: And we are focused on entering additional markets around the world. Our proven carbonate technology has met customers' needs for over 20 years and has generated more than 15 million megawatt hours to date. Our recently commercialized solid oxide technology platform extends the solutions we can provide our customers, including electrolysis and power generation using zero-emission hydrogen fuel as the only feature. We believe that our molten carbonate and solid oxide platforms position us to meet evolving customer needs across distributed power generation, distributed hydrogen, electrolysis, and hydrogen energy storage, and direct-flow source carbon capture. FuelCell Energy provides technological solutions for and collaborates with some of the world's largest global companies, including our work with ExxonMobil to jointly develop carbon capital solutions, and Toyota for Distributed Hydrogen with our Trigen Facility at the Port of Long Beach. Pfizer to enhance power reliability by building a microgrid and leveraging its thermal energy to provide steam.
And we are focused on entering additional markets around the world.
Our proven carbonate technology has met customers' needs for over 20 years and has generated more than 15 million megawatt hours to date.
Our recently commercialized solid oxide technology platform extends the solutions, we can provide our customers, including electrolysis and power generation using zero emission hydrogen fuel as the only feedstock.
We believe that our molten carbonate and solid oxide platforms position us to meet evolving customer needs across distributed power generation distributed hydrogen electrolysis and hydrogen energy storage and direct flu source carbon capture.
Fuel cell energy provides technological solutions for and Collaborates with some of the world's largest global companies, including our work with Exxonmobil to jointly develop carbon capture solutions.
<unk> for distributed hydrogen with our Tri Gen facility at the Port of long Beach.
Pfizer to enhance power reliability by building, a micro grid and leveraging our thermal energy to provide steam.
Jason B. Few: Canadian Nuclear Laboratories or CNL in Canada to explore the viability of pairing our electrolyzer with nuclear energy. IBM through a collaboration to use AI to find breakthrough ways to alter chemistry to extend the life of our electrochemical fuel cell. We are proud to be a global leader in electrochemical technology. Simply stated, our proprietary FuelCell technology platforms do two things: decarbonize power and industry and produce hydrogen. Next, let's turn to the key highlights for the quarter, shown on slide four.
Canadian nuclear laboratories, or <unk> in Canada to explore the viability of pairing our electrolyze or with nuclear energy and IBM through a collaboration to use AI to find breakthrough ways to alter chemistry to extend the life of our electro Ken.
Nicole fuel cells.
We are proud to be a global leader in electrochemical technology simply stated our proprietary fuel cell technology platforms do two things decarbonize power in industry and produce hydrogen.
Next let's turn to key highlights for the quarter shown on slide four.
Jason B. Few: First, we continue to make operational progress on key projects. We announced that both of our Derby, Connecticut-based projects were placed in service during our first quarter of fiscal 2024, bringing our on-balance sheet generation operating portfolio to 62.8 megawatts from 43.7 megawatts at the end of fiscal 2023. Our FuelCell Parks in Derby are generating competitively priced renewable energy for thousands of area residents and are helping the state of Connecticut close its power generation gap.
First we continue to make operational progress on key projects, we announced that both our Derby, Connecticut based projects were placed in service during our first quarter of fiscal 2024, bringing our on balance sheet generation operating portfolio to $62 eight megawatts from $43.
Seven megawatts at the end of fiscal 2023.
<unk> fuel cell parks in Derby are generating competitively priced renewable energy for thousands of area residents and are helping the state of Connecticut close its power generation gap.
Jason B. Few: We also continue to make significant progress building out our solid oxide manufacturing capabilities through capacity expansion of our facility in Calgary. We're working to position ourselves as high efficiency solution providers in the hydrogen marketplace. Additionally, we continue to monitor and make adjustments to our production rate at our Torrington facility to reduce cost, and our carbonate inventory position gives us the flexibility to meet current and forecasted demand.
We also continue to make significant progress building out our solid oxide manufacturing capabilities through capacity expansion of our facility in Calgary.
We are working to position ourselves at high efficiency solution providers in the hydrogen marketplace.
Additionally, we continue to monitor and make adjustments to our production rate at our Torrington facility to reduce cost and our carbonate inventory position gives us the flexibility to meet current and forecasted demand.
Jason B. Few: As we look ahead to fiscal 2024 and 2025, we remain focused on advancing new technologies for pilot and commercial applications. We have the technology and flexibility across our product and service offerings to allow us to participate in the global energy transition in a number of different ways. We are pleased to announce that we have entered into an agreement with the U.S. Department of State to participate in a private-public project that will use FuelCell Energy's solid oxide electrolysis technology in Ukraine. This project is focused on demonstrating the benefits of an efficient, carbon-free, decentralized platform that can generate power and support food security through the production of hydrogen and ammonia.
As we look ahead to fiscal 2024 and 2025, we remain focused on advancing new technologies for pilot and commercial applications, we have the technology and flexibility across our product and service offerings to allow us to participate in the global energy transition in a number of <unk>.
Current ways.
We are pleased to announce that we have entered into an agreement with the U S Department of state to participate in a private public project that will use fuel cell energy solid oxide electrolysis technology in Ukraine.
This project is focused on demonstrating the benefits of an efficient carbon free the centralized platform that can generate power and support food security through the production of hydrogen and ammonia.
Jason B. Few: Additionally, we recently entered into a power purchase agreement with the University of Connecticut or UConn to install four 250 kilowatt solid oxide fuel cell units. Power from these solid oxide fuel cell units will be used by UConn's new Innovation Partnership Building. Any unused power will be exported to the Eversource grid under the FuelCell Net Metering Tariff. We believe that this project will be an excellent example of the ability of our solid oxide fuel cell platform to answer the need for onsite resilient distributed power that will assist UConn in achieving its environmental goals and provide heat, reducing their heating costs. Next, we are taking proactive steps to maintain the strength of our balance.
Additionally, we recently entered into a power purchase agreement with the University of Connecticut, or Yukon to install for 250 kilowatt solid oxide fuel cell units.
Power from the solid oxide fuel cell units will be used by <unk>, new innovation partnership building.
Any unused power will be exported to the ever source grid under the fuel cell net metering tariff.
We believe that this project will be an excellent example of the ability of our solid oxide fuel cell platform to answer the need for onsite resilient distributed power that will assist Yukon in achieving its environmental goals and provide heat reducing their heating costs.
Next we are taking proactive steps to maintain the strength of our balance sheet.
Jason B. Few: We follow a disciplined approach to managing our capital investment by establishing investment triggers linked to key milestones. We will continue to work toward increasing revenue and investable cash flow while taking prudent steps to raise capital and preserve the liquidity required to operate our business. Fourth, we are focused on accelerating our global sales closure pace, Contract Execution, and Repowering Service Efforts in Korea.
We follow a disciplined approach to managing our capital investment by establishing investment triggers linked to key milestones. We will continue to work toward increasing revenue and investable cash flow, while taking prudent steps to raise capital and preserve the liquidity required to operate.
Eight our business.
Fourth we are focused on accelerating our global sales closure pace.
Contract execution and Repowering service efforts in Korea.
Jason B. Few: We have made progress expanding our reach in Korea. For example, we completed repowering for our new customer, Noel Green Energy Company Limited, in fiscal year 2023. And we see a significant opportunity to enter into other long-term service agreements in Korea. We believe that our work with no green energy can serve as a model for transitioning similar projects. Additionally...
We have made progress expanding our reach in Korea. For example, we completed Repowering for our new customer No Green Energy Company limited in fiscal year, 2023, and we see a significant opportunity to enter into other long term service agreements in Korea.
We believe that our work with no green energy can serve as a model for transitioning similar projects.
Additionally, applications like electrolysis time to power and <unk> as they delivered product are gaining momentum among a broader set of potential customers and geographies.
Jason B. Few: Applications like electrolysis, time to power, and CO2 as a delivered product are gaining momentum among a broader set of potential customers and geographies. Finally, we're opportunistically evaluating potential options to benefit from global policy talent. We believe that the domestic policies that have been enacted are stable, that the proposed global policies have strong support, and that we are well positioned to capitalize on the evolving energy landscape. Now, I will turn the call over to Mike to discuss the financial results for the first quarter in more detail. Mike.
Finally, we are opportunistically evaluating potential options to benefit from global policy tailwind, we believe that the domestic policies that have been enacted are stable.
That the proposed global policies have strong support.
And that we are well positioned to capitalize on the evolving energy landscape.
And now I'll return the call over to Mike to discuss the financial results for the first quarter in more detail Mike.
Michael S. Bishop: Thank you, Jason, and good morning to everyone on the call. Let's begin by reviewing the financial highlights for the quarter, as shown on slide 6. For the first quarter of fiscal year 2024, we reported total revenues of $16.7 million, in line with our expectations. Revenues in the prior year quarter totaled $37.1 million, which included a one-time benefit related to the expiration of a material right from an extended warranty obligation and higher service revenues from required module replacement. I will provide more details regarding service a bit later in my remarks. In the first quarter of fiscal year 2024, we reported a net loss of $44.4 million compared to a net loss of $21.1 million in the first quarter of fiscal year 2023. The resulting net loss per share attributable to common stockholders in the first quarter of fiscal year 2024 was negative 5 cents, unchanged from the first quarter of fiscal year 2023.
Thank you, Jason and good morning to everyone on the call today, let's begin by reviewing the financial highlights for the quarter as shown on slide six for the first quarter of fiscal year 2024, We reported total revenues of $16 7 million in line with our expectations.
Revenues in the prior year quarter totaled $37 1 million, which included a onetime benefit related to the exploration of a material rate from an extended warranty obligation and higher service revenues from required module replacements.
I will provide more details regarding service a bit later in my remarks in the first quarter of fiscal year 2024, we reported a net loss of $44 4 million compared to a net loss of $21 1 million in the first quarter of fiscal year 2023, the resulting net loss per share attributable.
To common stockholders in the first quarter of fiscal year 2024 was negative <unk> <unk>.
Unchanged from the first quarter of fiscal year 2023, the net loss per common share remained steady rather than increasing primarily due to the higher number of weighted average shares outstanding as of January 31, 2024, due to share issuances and the net loss attributable to Noncontrolling.
Michael S. Bishop: The net loss per common share remains steady rather than increasing primarily due to the higher number of weighted average shares outstanding as of January 31st, 2024 due to share issuance. And the net loss attributable to non-controlling interest during the quarter ended January 31st, 2024, which totaled $24.6 million and was primarily due to the tax equity financing of the Derby, Connecticut project. The impact of this net loss attributable to non-controlling interest was approximately five cents per share compared to the net loss attributable to non-controlling interest in the prior year period, which was approximately 2.5 million, or one cent per share.
Trolling interest during the quarter ended January 31, 2024, which totaled $24 6 million and was primarily due to the tax equity financing of the Derby, Connecticut projects the.
The impact of this net loss attributable to Noncontrolling interest was approximately <unk> <unk> per share compared to the net loss attributable to noncontrolling interest in the prior year period, which was approximately $2 5 million or <unk> <unk> per share.
Michael S. Bishop: Adjusted EBITDA totaled negative $29.1 million in the first quarter of fiscal year 2024, compared to adjusted EBITDA of negative $14.4 million in the first quarter of fiscal year 2023. Please see the discussion of non-GAAP financial measures, including adjusted EBITDA, in the appendix at the end of our earnings. Finally, the company has a strong total cash position at over $348 million as of January 31, 2024. Next, on slide seven, you will see additional details on our financial performance and back. In the graph on the left-hand side of the slide, revenue is broken down by category. Note that there was no product revenue for the three months ended January 31, 2024, compared to $9.1 million in the comparable prior year period.
Adjusted EBITDA totaled negative $29 1 million in the first quarter of fiscal year 2024, compared to adjusted EBITDA of negative $14 4 million in the first quarter of fiscal year 2023.
Please see the discussion of non-GAAP financial measures, including adjusted EBITDA in the appendix at the end of our earnings release.
Finally, the company has a strong total cash position at over $348 million as of January 31, 2024.
Next on slide seven you will see additional details on our financial performance and backlog and the graph on the left hand side of the slide revenue is broken down by category note that there is no product revenue for the three months ended January 31, 2024, compared to $9 $1 million in the comparable prior year period.
Michael S. Bishop: Our December 2021 settlement agreement with POSCO Energy Company Limited and its subsidiary, Korea Fuel Cell Company Limited, or KFC, included an option to purchase an additional 14 months. That option included a material right related to an extended warranty obligation for the. The option was not exercised, and as a result, we recognized $9.1 million of product revenues during the first quarter of fiscal year 2023. Service agreement revenues decreased to $1.6 million for the first quarter of fiscal year 2024 from $13.9 million in the prior year period.
Our December 2021 settlement agreement with Posco Energy Company limited and its subsidiary Korea fuel cell company limited or KFC included an option to purchase an additional 14 modules that option included a material rate related to extended warranty obligation.
For the modules the option was not exercised and as a result, we recognized $9 1 million of product revenues during the first quarter of fiscal year 2023.
Service agreement revenues decreased to $1 6 million for the first quarter of fiscal year 2024 from $13 9 million in the prior year period.
Michael S. Bishop: There were no module exchanges during the quarter, whereas the first quarter of fiscal year 2023 included module exchanges at the plant in Woodbridge, Connecticut, and at the plants owned by Korea Southern Power Company. Generation revenues increased 10% to $10.5 million from $9.6 million, primarily due to revenue recorded for the Toyota and Derby projects, which began generating revenues in the first quarter of this fiscal year. Please note that the Derby projects were placed in operation late in the quarter.
There were no module exchanges during the quarter, whereas the first quarter of fiscal year 2023 included module exchanges at the plant and Woodbridge, Connecticut and at the plants owned by Korea Southern Power Company.
Generation revenues increased 10% to $10 5 million from $9 6 million, primarily due to revenue recorded for the Toyota in Derby projects, which began generating revenues in the first quarter of this fiscal year. Please note that the Derby projects were placed in operation late in the quarter Accordingly.
Michael S. Bishop: Accordingly, we expect to see a full quarter of contribution from those projects in our second quarter results. Advanced Technology Contract revenues increased slightly to $4.6 million from $4.5 million. Compared to the first quarter of fiscal year 2023, advanced technology contract revenues recognized under our joint development agreement with ExxonMobil Technology and Engineering Company were approximately 0.1 million higher, and revenue recognized under government and other contracts was approximately 0.1 million lower. Looking at the top right-hand side of the slide, I will walk through the changes in gross loss, profit, and operating expenses. Gross loss for the first quarter of fiscal year 2024 totaled $11.7 million compared to a gross profit of $5.2 million in the comparable prior year quarter.
We expect to see a full quarter of contribution from those projects and our second quarter results.
Advanced technology contract revenues increased slightly to $4 6 million from $4 5 million compared to the first quarter of fiscal year 2023 advanced technology contract revenues recognized under our joint development agreement with Exxonmobil Technology, and engineering company for approximately 0.1 million higher.
<unk> and revenue recognized under government and other contracts was approximately <unk> 1 million lower.
Looking at the top right hand side of this slide I will walk through the changes in gross loss profit and operating expenses.
Gross loss for the first quarter of fiscal year, 2024 totaled $11 7 million compared to a gross profit of $5 $2 million in the comparable prior year quarter.
Michael S. Bishop: The gross loss in this first quarter of fiscal 2024 is a result of unfavorable margins for generation, which included construction and gas costs related to the Toyota project of $3.5 million and a derivative loss of $1.9 million related to natural gas purchases during the period. The gross profit in the prior year period is a direct result of favorable product margins as revenue recognized had no corresponding costs, along with lower manufacturing variance. In the first quarter of fiscal year 2023, the company also realized higher service margins due to new module exchanges occurring in the quarter, offset by lower generation margins due to $7.6 million of non-recoverable costs related to the construction of the Toyota plant. Operating expenses for the first quarter of fiscal 2024 increased to $30.8 million from $27.7 million in the first quarter of fiscal 2023. Research and development expenses increased to $14.4 million during the first quarter of fiscal year 2024, compared to $12.7 million in the prior year period.
Gross loss in this first quarter of fiscal 2024, as a result of unfavorable margins for generation, which included expense construction and gas costs related to the Toyota project of $3 5 million and a derivative loss of $1 9 million related to natural gas purchases during the period.
Gross profit in the prior year period is a direct result of favorable product margins as revenue recognized had no corresponding costs, along with lower manufacturing variances.
In the first quarter of fiscal year 2023. The company also realized higher service margins due to new module exchanges occurring in the quarter offset by lower generation margins due to $7 6 million of non recoverable costs related to construction of the Toyota project.
Operating expenses for the first quarter of fiscal 2024 increased to $30 8 million from $27 7 million in the first quarter of fiscal 2023.
Research and development expenses increased to $14 4 million during the first quarter of fiscal year 2024, compared to $12 7 million in the prior year period.
The increase in research and development expenses reflects an increase in spending including spending on labor and materials on the company's ongoing commercial development efforts related to our solid oxide power generation and electrolysis platforms and carbon separation and carbon recovery solutions compare.
Michael S. Bishop: The increase in research and development expenses reflects an increase in spending, including spending on labor and materials, on the company's ongoing commercial development efforts related to our solid oxide power generation and electrolysis platforms and carbon separation and carbon recovery solutions compared to the comparable prior year period. On the bottom right of the slide, you will see that backlog decreased to $1.03 billion as of January 31st, 2024, compared to $1.06 billion as of January 31st, 2023, primarily as a result of revenue recognition under the Generation, Service, and Advanced Technologies Agreement. This decline in backlog was partially offset by new service agreements backlog as a result of the agreement with Noel Green Energy Company Limited entered into during fiscal year 2023 and new advanced technologies backlog as a result of the purchase order received from ESSO Netherlands BV in January 2024.
<unk> to the comparable prior year period.
On the bottom right of the slide you will see that backlog decreased to 1.03 billion as of January 31, 2024, compared to 1.06 billion as of January 31, 2023, primarily as a result of revenue recognition under generation service and <unk>.
<unk> technologies agreements.
This decline in backlog was partially offset by new service agreements backlog as a result of the agreement with no Green Energy Company limited entered into during fiscal year, 2023, and new advanced technologies backlog as a result of the purchase order received from Esso Netherland BV in.
<unk> 2024.
Turning to slide eight this is a view of our generation portfolio. We are very pleased to have added three new generation assets enhancing our recurring revenue profile with the addition of the Toyota project and the two new projects in Derby, Connecticut as of January 31, 2020 for the generation portfolio total.
Michael S. Bishop: Turning to slide eight, this is a view of our generation portfolio. We are very pleased to have added three new generation assets, enhancing our recurring revenue profile. With the addition of the Toyota project and the two new projects in Derby, Connecticut, as of January 31st, 2024, the generation portfolio totaled 62.8 megawatts of assets. It's important to note that as the Derby projects were placed in service, we were able to execute long-term tax equity financings, allowing us to recycle capital back into the business. On slide nine, we have provided a profile of our service fleet, including estimated module replacement schedules for each site.
62, eight megawatts of assets.
It is important to note that as the Derby projects were placed in service, we were able to execute long term tax equity financings, allowing us to recycle capital back into the business.
On slide nine we have provided a profile of our service fleet, including estimated module replacement schedules for each site.
These are customer owned assets, which are separate from the company's generation portfolio.
Looking at historical data you can see that the company has completed a multiyear fleet upgrade having replaced approximately 30 megawatts of modules over the past three years. This does not include module replacements under the new no Green Energy service agreement, which were provided by KFC.
These investments are expected to result in enhanced performance lower future maintenance cost and improved margins over the life of the modules.
Michael S. Bishop: These are customer-owned assets which are separate from the company's generation portfolio. Looking at historical data, you can see that the company has completed a multi-year fleet upgrade, having replaced approximately 30 megawatts of modules over the past three years. This does not include module replacements under the new Noel Green Energy Service Agreement, which were provided by KFC.
We are now entering a lighter macho replacement cycle since we have installed longer life modules across the platform base.
We currently do not expect any megawatt class module exchanges to occur until the fourth quarter of fiscal year 2024, and as a result, we expect lower service revenues in fiscal 2024 compared to fiscal 2023.
Michael S. Bishop: These investments are expected to result in enhanced performance, lower future maintenance costs, and improved margins over the life of the model. We are now entering a lighter module replacement cycle since we have installed longer life modules across the platform base. We currently do not expect any megawatt class module exchanges to occur until the fourth quarter of fiscal year 2024, and as a result, we expect lower service revenues in fiscal 2024 compared to fiscal 2023. However, as noted last quarter, we believe that we have additional potential service opportunities in Korea to transition customers to new repowering agreements similar to the contract that we executed with Noel Green Energy, adding to our long-term service revenue opportunities. Finally, on slide 10, we provide an update on our liquidity and ongoing investments in project assets. Cash and cash equivalents and restricted cash and cash equivalents totaled $348.8 million as of January 31, 2024. This includes approximately $297.5 million of unrestricted cash and cash equivalents represented by the darker blue bar on the chart in the center of the slide and $51.3 million of restricted cash and cash equivalents represented by the purple bar.
But as noted last quarter, we believe that we have additional potential service opportunities in Korea to transition customers to new Repowering agreements similar to the contract that we executed with Noel Green energy, adding to our long term service revenue opportunity.
Finally on slide 10, we provide an update on our liquidity and ongoing investments in project assets.
Cash and cash equivalents and restricted cash and cash equivalents totaled $348 8 million as of January 31, 2024.
This includes approximately $297 5 million of unrestricted cash and cash equivalents represented by the darker Blue bar on the chart in the center of the slide and $51 3 million of restricted cash and cash equivalents represented by the purple bar.
Looking at the right hand side of the slide there is a chart illustrating our total project assets, which make up our company owned generation portfolio investments reflect capital spent on completed operating projects as well as capital spent on projects currently in development and under construction as of January 30 <unk>.
2024, our gross project assets totaled approximately $308 9 million, which excludes accumulated depreciation.
We are pleased with the project financing activity in the quarter and have taken and will continue to take proactive steps to maintain the balance sheet strength required to support our growth initiatives. As an example, given the companys current carbonate inventory position, we have continued to monitor and make adjustments.
Michael S. Bishop: Looking at the right-hand side of the slide, there is a chart illustrating our total project assets, which make up our company-owned generation portfolio. Investments reflect capital spent on completed operating projects, as well as capital spent on projects currently in development and under construction. As of January 31st, 2024, our gross project assets totaled approximately $308.9 million, which excludes accumulated depreciation.
To our production rate to meet current and expected demand from our Torrington facility the.
The company continues to prudently invest in its commercialization strategy, which we expect to enable growth in future periods.
Michael S. Bishop: We are pleased with the project financing activity in the quarter and have taken and will continue to take proactive steps to maintain the balance sheet strength required to support our growth initiatives. As an example, given the company's current carbon inventory position, we have continued to monitor and make adjustments to our production rate to meet current and expected demand from our Torrington facility. The company continues to prudently invest in its commercialization strategy, which we expect to enable growth in future periods. I will now turn the call back to Jason. Thanks, Mike. Turning to slide 12.
I will now turn the call back to Jason.
Thanks, Mike turning to slide 12 I.
I would like to reemphasize again, the pillars of our powerhouse business strategy, which underpins our approach towards achieving long term growth.
The first and it is growth.
Our working to optimize our business for achieving growth in markets, where we see significant opportunity for clean energy applications our platform technologies address.
The second is scale, we plan to scale, our existing platforms by investing in and extending the application solutions, our platforms address and growing the capabilities of our entire team across the organization.
And third innovate for the future.
We believe our platform technologies and our culture will allow us to continue building our significant global patent portfolio further enabling our participation in the growth of the hydrogen economy and carbon capture emissions management utilization and storage.
Jason B. Few: I would like to reemphasize the pillars of our powerhouse business strategy, which underpins our approach toward achieving long-term growth. The first tenet is growth. We are working to optimize our business for achieving growth in markets where we see significant opportunities for clean energy applications our platform technologies address. The second is scale.
We plan to develop diversified revenue streams by delivering a range of solutions and services anchored by our multi future platforms that support de carbonization applications and the global energy transition.
Accordingly on slide 13, I'd like to share some additional details on the recent commercial successes for our solid oxide platform as.
Jason B. Few: We plan to scale our existing platforms by investing in and extending the application solutions our platforms address and growing the capabilities of our entire team across the organization. And third, innovate for the future. We believe our platform technologies and our culture will allow us to continue building our significant global patent portfolio, further enabling our participation in the growth of the hydrogen economy and carbon capture emissions management, utilization, and storage. We plan to develop diversified revenue streams by delivering a range of products and services anchored by our multi-feature platforms that support decarbonization applications and the global energy transition. Accordingly, on slide 13, I'd like to share some additional details on the recent commercial successes for our solid oxide platform. As I mentioned earlier, we recently announced an agreement with the U.S. Department of State to participate in a private-public project that will use FuelCell Energy's solid oxide electrolysis technology with small modular nuclear reactors in the Ukraine. FuelCell Energy's 1.1 megawatt solid oxide electrolysis unit, which was selected for this project, is expected to produce 600 kilograms per day of hydrogen to support approximately three tons per day of ammonia production. Additionally, we are conducting a design and cost study for a plant that would be capable of making 3,000 tons per day of ammonia.
As I mentioned earlier, we recently announced an agreement with the U S Department of state to participate in a private public project that will use fuel cell energy solid oxide electrolysis technology with small modular nuclear reactors in the Ukraine.
Fuel cell energy is one one megawatt solid oxide electrolysis unit, which was selected for this project is expected to produce 600 kilograms per day of hydrogen to support approximately three tons per day of ammonia production. Additionally, we are conducting a design in <unk>.
Cost study for a plant that would be capable of making 3000 tonnes per day of ammonia.
We are excited about this important opportunity to deploy our solid oxide electrolysis platform integrated with new scale small modular reactor to support energy security and agriculture and Ukraine.
Additionally, as I mentioned earlier, we recently entered into an eight year power purchase agreement with the Yukon to install for 250 kilowatt solid oxide fuel cell units.
Yukon will provide all utilities, including low carbon natural gas fuel and our platforms will power. The innovation partnership building the university's new on campus center for cutting edge research and industry collaboration and innovation.
We believe that these planned commercial applications will highlight the specific advantages of DSO energy solid oxide fuel cell and solid oxide electrolyzed or cell technologies, our technologies offer fuel flexibility efficiency reliability and a small footprint.
For easy co location.
We believe solid oxide presents one of the best opportunities to minimize overall cost while maximizing efficiency and that our platform can give more organizations the option to implement a flexible energy strategy.
Jason B. Few: We are excited about this important opportunity to deploy our solid oxide electrolysis platform and integrate it with NuScale's small modular reactor to support energy security and agriculture in Ukraine. Additionally, as I mentioned earlier, we recently entered into an eight-year power purchase agreement with UConn to install four 250 kilowatt solid oxide fuel cell units. UConn will provide all utilities, including low-carbon natural gas fuel, and our platforms will power the Innovation Partnership Building, the university's new on-campus center for cutting-edge research and industry collaboration and innovation. We believe that these planned commercial applications will highlight the specific advantages of FuelCell Energy's Solid Oxide Fuel Cell and Solid Oxide Electrolyzer Cell technology.
Most of the cost of hydrogen produced by electrolysis are related to the cost of input power efficiency is one of the most effective ways to lower zero emission hydrogen cost.
And we believe fuel cell energy solid oxide platform as among the most efficient electrolysis technologies available.
Finally, I would like to note that we have recently published our fiscal year 2023 sustainability report.
We have included some highlights on slide 14.
I want to reaffirm our dedication to achieving net zero, which remains in the forefront of fuel so energy's priorities.
We have reiterated our commitment to achieving net zero on scope, one and scope two emissions by 2030 and scope three emissions by 2050.
Jason B. Few: Our technologies offer fuel flexibility, efficiency, reliability, and a small footprint for easy co-location. We believe solid oxide presents one of the best opportunities to minimize overall cost while maximizing efficiency, and that our platform can give more organizations the option to implement a flexible energy strategy. Because most of the costs of hydrogen produced by electrolysis are related to the cost of input power, efficiency is one of the most effective ways to lower zero-emission hydrogen costs.
We are aligned with the leading standard organizations and the United Nations climate action goals that we believe we can impact in.
In addition to commitments to our environmental objectives. We are focused on the safety of our employees on the people and the communities in which we work and live and on maintaining a diverse.
Equitable and inclusive organization.
This commitment is shared across our company and our board of directors, we are a clean technology energy delivery and emissions management company.
Jason B. Few: And we believe FuelCell Energy's solid oxide platform is among the most efficient electrolysis technologies available. Finally, I would like to note that we have recently published our fiscal year 2023 sustainability report, and we have included some highlights on slide 14.
But we are also a responsible corporate citizen wholly committed to protecting the environment.
Attaining net zero goals being a diverse equitable and inclusive company and exercising good governance.
Jason B. Few: I want to reaffirm our dedication to achieving net zero, which remains at the forefront of FuelCell Energy's priorities. We have reiterated our commitment to achieving net zero on Scope 1 and Scope 2 emissions by 2030 and Scope 3 emissions by 2050. We are aligned with the leading standards organizations and the United Nations Climate Action Goals that we believe we can impact. In addition to commitments to our environmental objectives, we are focused on the safety of our employees, on the people in the communities in which we work and live, and on maintaining a diverse, equitable, and inclusive organization. This commitment is shared across our company and our board of directors. We are a clean technology energy delivery and emissions management company. But we are also a responsible corporate citizen, wholly committed to protecting the environment, attaining the Net Zero Goal, being a diverse, equitable, and inclusive company, and exercising good governance.
Environmental sustainability is at the heart of what we do.
Before moving to Q&A I.
I will conclude my prepared remarks with some takeaways on slide 15.
I remain excited about our company's trajectory as our newest innovative technologies are progressing towards commercialization and are expected to have a positive impact on our world in the future.
We are making continued operational progress and we are executing on large complex projects for our customers, including putting three new generation assets in service, which adds to our recurring revenue profile.
We believe our technologies have a critical role to play in transitioning to a low carbon future.
We are delivering for our customers, we are increasing our manufacturing capacity and we're preparing for the commercialization of our new technologies and extending the value streams delivered from our existing technology platforms.
Jason B. Few: Environmental sustainability is at the heart of what we do. Before moving to Q&A, I will conclude my prepared remarks with some takeaways on slide 15. I remain excited about our company's trajectory as our newest innovative technologies are progressing toward commercialization and are expected to have a positive impact on our world in the future. We are making continued operational progress, and we are executing on large, complex projects for our customers, including putting three new generation assets in service, which adds to our recurring revenue profile. We believe our technologies have a critical role to play in transitioning to a low carbon future. And we are delivering for our customers.
We believe we are poised to capture market opportunities over the coming years.
We have a strong balance sheet and have demonstrated discipline in the allocation of capital to support growth.
We believe we have appropriate liquidity to continue to fund projects in development and platform commercialization activities and to execute on our growth strategy in our target markets.
We have had success in our growth efforts in Korea, where we see tremendous additional opportunity for the future.
And finally, we see growing momentum behind policy support for the energy transition in the U S and internationally.
And we believe we have the platform solutions that will enable fuel cell energy to benefit from these tailwind I.
Jason B. Few: We are increasing our manufacturing capacity, and we are preparing for the commercialization of our new technologies and extending the value streams delivered from our existing technology platform. We believe we are poised to capture market opportunities over the coming year. We have a strong balance sheet and have demonstrated discipline in the allocation of capital to support growth.
I will now turn it over to the operator to begin Q&A.
We are now opening hours for a question and answer session. If you'd like to ask a question. Please press star and number one on your telephone keypad.
Operator: We believe we have appropriate liquidity to continue to fund projects and development and platform commercialization activities and to execute on our growth strategy in our target market. We've had success in our growth efforts in Korea, where we see tremendous additional opportunity for the future. And finally, we see growing momentum behind policy support for the energy transition in the U.S. and abroad, and we believe we have the platform solutions that will enable FuelCell Energy to benefit from these tailwinds. I will now turn it over to the operator to begin Q&A. We are now opening our floor to questions and answers. If you'd like to ask a question, please press star and number one on your telephone keypad.
And number one on your telephone keypad. Our first question comes from George <unk>.
Cash from Canaccord Genuity. Your line is now open.
Hey, good morning, everyone and thank you so much for taking my question.
George Good morning, and thank you for calling in.
Just maybe a first question.
Can you. Please just give us an operational update on the Toyota program, and whether or not you've seen additional interest from new parties in the product.
Yes, the Toyota project is operational as we've previously reported it is producing power hydrogen and water all being utilized for Toyota in support of their operations at the Toyota Logistics Center, which is what they operate at the port of long Beach.
George Gianarikas: Our first question comes from George Gianarikas from Panacord Genuity Airlines Network. Hey, good morning, everyone, and thank you so much for taking my question. George, good morning, and thank you for calling in.
The hydrogen is supporting the imported Toyota MRI as well as the jointly developed class eight vehicles.
Jason B. Few: Just maybe a first question. Can you please just give us an operational update on the Toyota program and whether or not you've seen additional interest from new parties in the program? Yes, the Toyota project is operational, as we previously reported. It is producing power, hydrogen, and water, all being utilized for Toyota in support of their operations at the Toyota Logistics Center, which is what they operate at the Port of Long Beach. The hydrogen is supporting the imported Toyota Mirai as well as the jointly developed Class A vehicles that they have developed with PACCAR under the Kenworth and Peterbilt brands, and then water for the car washing operation, reducing the amount of water that they need to use, which is consistent with their environmental objectives.
With Pac are under the Kenworth and Peterbilt brands, and then water for the car wash operation, reducing the amount of water that they need to use which is consistent with their environmental objectives.
With respect to additional opportunities, we do see additional opportunities for Cryogen.
Domestically one of the big questions now is really how does 45 D play out and we think that that is having some impact on pacing, but there is there is strong interest both at a port level as well as the realization around the distributed nature of the platform.
And that by it being a distributed platform. There is a number of hurdles that you can avoid and trying to get these hydrogen projects implemented.
Jason B. Few: With respect to additional opportunities, we do see additional opportunities for Trigen. Domestically, one of the big questions now is really how 45V will play out, and we think that that's having some impact on pacing, but there is strong interest both at a port level as well as in the realization around the distributed nature of the platform, and that by it being a distributed platform, there are a number of hurdles that you can avoid in trying to get these hydrogen projects implemented without needing to get through a lot of the infrastructure So we see solid interest in the Trigen platform, and we think once we get through some of this clarification, we expect that to hopefully turn into opportunities for the company. Any guidance on the level of credits you see based on the changes in 45E for that project per kilogram of production?
Without needing to get through a lot of the infrastructure challenges that exist and tried to do centralized projects. So we see we see solid interest in the <unk> platform and we think once we get through some of this clarification.
We expect that to.
So hopefully turn into opportunities for the company.
Any guidance on the level of credits you see based on the changes in 45 years for that project per kilogram of production.
No I mean, we remain optimistic that the ultimate.
Rulemaking from the Treasury Department is going to be consistent with the views that we've had on the Toyota project, but of course, you know, we we like many others we're part of.
Organizations that commented on on the <unk>.
On the Treasury Department proposed rules and so we remain optimistic that there won't be a change but.
We certainly can't say for certain because we don't know where theyre going to land.
Jason B. Few: No, I mean, we remain optimistic that the ultimate rulemaking from the Treasury Department is going to be consistent with the views that we've had on the Toyota project. But, of course, you know, we, like many others, were part of organizations that commented on the Treasury Department's proposed rules, and so we remain optimistic that there won't be a change, but, you know. We certainly can't say for certain because we don't know where they're going to land.
Got it and just one follow up.
On slide 10.
So that your projects in development have now basically come to zero I'm curious as to whether that's a conscious decision on your part to kind of slow the growth of <unk>.
The development of projects and allocate resources in other directions or should we expect that to kind of grow over time.
No we expect that to continue to grow over time, I mean, we talked about our Trinity project previously we just talked about on this call the project with Yukon.
Jason B. Few: And just one follow-up. Slide 10 shows that your projects in development have now basically come to zero. I'm curious as to whether that's a conscious decision on your part to kind of slow the growth of the development of projects or allocate resources in other directions, or should we expect that to kind of grow over time? Thank you.
Thats not reflected in the backlog numbers, yet that you see.
But we will be in our in our next quarter backlog numbers. So yes that we intend.
To continue to grow our projects.
Got it thank you.
Thank you.
Question comes from Manav Gupta from UBS. Your line is now open.
Can I just wanted to understand a little bit we are finally seeing traction on the <unk>.
Jason B. Few: No, we expect that to continue to grow over time. I mean, you know, we talked about our Trinity project previously. We just talked about on this call the project with UConn that's not reflected in the backlog numbers yet that you see, but will be in our next quarter's backlog numbers. So yeah, we intend to continue to grow projects.
Solid oxide fuel cells as well as Electrolyzed, Liz I think shell signed up something with one of your peers yesterday as I'm just trying to understand where are you in this process of developing that offering and do you actually see.
More orders come through in the second half of 2024 and 25 on the electrolyte upfront.
Manav Gupta: Thank you. The question comes from Manav Gupta from UBS. Your line is now open.
Jason B. Few: Guys, I wanted to understand a little bit. We are finally seeing, you know, traction on the solid oxide fuel cells as well as electrolyzers. I think Shell signed up something with one of your peers yesterday.
Hey.
You for the question and being on the call today.
Look we if you think about the solid oxide for us.
First starting broadly as a platform that is clearly opened up new opportunities for us. If you think about some of the things that we've recently announced if you take the Trinity opportunity, we announced if you take the Yukon opportunity, we just announced both of those are.
Jason B. Few: And I'm just trying to understand, where are you in this process of developing that offering? And do you actually see more orders coming through in the second half of 2024, in 2025, for the electrolyzer? Hey, Manav, thank you for the question and being on the call today.
No.
The Connecticut, the Yukon opportunities of megawatt Trinity is smaller at 250 kilowatts. Those are two opportunities that at least in the U S context, we would not have been able to participate in before because our module started at one four megawatts. So we see a.
Jason B. Few: Look, if you think about solid oxide for us, first starting broadly as a platform, that has clearly opened up new opportunities for us. If you think about some of the things that we've recently announced, if you take the Trinity opportunity we announced, if you take the UConn opportunity we just announced, both of those are, you know, the Connecticut UConn opportunity is a megawatt, you know; Trinity is smaller at 250 kilowatts. Those are two opportunities that, at least in the U.S. context, we would not have been able to participate in So, we see a wider aperture of opportunities being created as a result of having now commercialized our solid oxide platform. So, we're very excited about that opportunity because there are many more, you know, segments and opportunities we can pursue, and we think that time to power, and particularly for behind-the-meter applications, that opportunity from a sub-megawatt perspective, we think is fairly significant. On the electrolysis side, we think that solid oxide is the platform that, ultimately, will be the winner in the market because of its efficiency advantage.
A wider aperture of opportunities being created as a result of having now commercialize our solid oxide platform. So we're very excited about that opportunity because there is many more.
<unk>.
The segments and opportunities, we can pursue and we think that time to power and particularly for behind the meter applications that that opportunity from a sub megawatt perspective, we think is fairly significant.
On the electrolysis side, we think that solid oxide is the platform that ultimately over time will be the winner in the market because of the efficiency advantage and if you look at some of the demonstrations that we've announced for example that we talked about today with <unk> in Canada pairing.
Our technology with nuclear the Ukraine announcement when.
When you think about the fact that those are baseload technologies that we're integrating our high efficiency platform with.
Without Pete we're 90 plus percent efficient and whiskey, which we don't need a source of heat, but if we had a source of waste heat or processes were at 100% electrical efficiency.
The aim is to produce hydrogen.
Clearly solid oxide is going to be the winner from an efficiency standpoint. If you just if you just assume that power being the biggest cost when you get to scale across the different platform technologies.
Jason B. Few: And if you look at some of the demonstrations that we've announced, for example, we talked about today with CNL in Canada, pairing our technology with nuclear power, the Ukraine announcement. When you think about the fact that those are baseload technologies that we're integrating our high efficiency platform with. Without heat, you know, we're 90 plus percent efficient, and with heat, which we don't need a source of heat, but if we had a source of waste heat or process heat, we're at 100 percent electrical efficiency. If the aim is to produce hydrogen, clearly, solid oxide is going to be the winner from an efficiency standpoint.
If you think about.
If you just use Tencent is a mess.
Measuring stake if you will.
Cost of input power.
Anywhere from $1 52, more advantage from a cost differential on a price per kilogram, that's significant and we think that.
Yesterday's announcement, we think is is emblematic of the fact that as we start to really think about scaled projects and really getting to the 90 million metric tons of hydrogen that are produced already that might fall into if we were to use a color gray hydrogen.
Jason B. Few: If you just assume that power is the biggest cost, you know, when you get to scale across the different platform technologies, you know, if you think about If you just use 10 cents as a measuring stick, if you will, or the cost of input power, you know, that's anywhere from $1.50 to more advantage from a cost differential on a price per kilogram. That's significant. And we think that, you know, yesterday's announcement is emblematic of the fact that as we start to really think about scaled projects and really getting to the 90 million metric tons of hydrogen that are produced already that might fall into, if we were to use a color, gray hydrogen, that's a lot of hydrogen, and you're going to want a very efficient platform for producing that. And we think we're going to be well positioned Perfect. My quick follow-up here is that there is a lot of demand for electricity, especially from the data centers. As we understand it, utilities are struggling to meet that demand.
<unk>.
That's a lot of hydrogen and youre going to want a very efficient platform for producing that and we think we're going to be well positioned to play in that opportunity.
So I'll take my quick follow up here is.
There is a lot of demand for electricity, especially coming from the data centers.
As we understand utilities are struggling to meet that demand and how are you positioning your company in a way.
Judy you can break into this market and yet.
20 megawatt order a 30 megawatt order is that something you would be changing and if so how would you be positioning our company to basically succeed in the data center electricity providing market.
Yeah, Great question. So if you think about our company and you look historically at what we've been able to do and you talk about large scale projects today. Our technology is fuel cell energy represents the largest deployed fuel cell parks of any fuel cell provider.
<unk> in the World, we have a 58 megawatt platform in Korea leverage using our technology. The two largest fuel cell projects in North America also happen to be feel so energy platform. So from a large scale perspective, we're very comfortable with that.
Jason B. Few: And how are you positioning your company in a way where, eventually, you can break into this market and get like, 20 megawatt orders, 30 megawatt orders. Is that something you would be chasing? And if so, how would you be positioning your company to basically succeed in the eventual data center electricity supply? Manav, great question.
Also with the introduction of our solid oxide technology and the ability to transition a customer from utilizing natural gas as an example to ultimately use utilizing 100% hydrogen we now have the ability to offer the customer that solution as well and so we think were well positioned.
Jason B. Few: So if you think about our company, and you look historically at what we've been able to do, and you talk about large-scale projects, today, our technology is FuelCell Energy represents the largest deployed FuelCell parks of any FuelCell provider in the world. We have a 58 megawatt platform in Korea leveraged using our technology, and the two largest FuelCell projects in North America also happen to be FuelCell Energy projects. So from a large scale perspective, we're very comfortable with that.
To go off to data centers and we've also demonstrated the ability to effectively operate at a micro grid applications. So as we think about our company and integrating to be a really compatible solution to data centers, we think about our baseload capability, we think about how we add other resources for quick ramping because we are in.
High temperature resource, we think about how you integrate with the grid and and we think our technology is well suited for that.
Jason B. Few: Also, with the introduction of our solid oxide technology and the ability to transition a customer from utilizing natural gas, as an example, to ultimately using 100% hydrogen, we now have the ability to offer the customer that solution as well. And so we think we're well positioned to go out to data centers. And we've also demonstrated the ability to effectively operate in a micro grid application.
But to add a little bit more to that I'll, maybe turn it over to Mark <unk>, Our chief commercial officer to give you a sense of how we're approaching that opportunity. Thank you Jason.
So as Jason alluded to when you look at this opportunity there is.
Dimension to it there is a time to power challenge where companies today are looking to build these data centers and other high density load.
The requirements more quickly than the grid can can facilitate it but but even even beyond that there is just a grid capacity issue in some cases in some geographies. There is no timeline in which the grids are going to go there and it isn't just a phenomenon thats limited to any specific geography. So.
Mark Fiesel: So as we think about our company and integrating to be a really compatible solution for data centers, we think about our baseload capability, we think about how we add other resources for quick ramping, because we're a high-temperature resource. We think about how you integrate with the grid, and we think our technology is well suited for that. But to add a little bit more to that, I'll maybe turn it over to Mark Fiesel, our Chief Commercial Officer, to give you a sense of how we're approaching that opportunity. Yeah, thank you, Jason. So, as Jason alluded to, when you look at this opportunity, there are a few dimensions to it. There is a time to power challenge where companies today are looking to build these data centers and other high-density load requirements more quickly than the grid can facilitate them. But even beyond that, there is just the grid capacity issue. In some cases, in some geographies, there is no timeline in which the grids are going to go there. And it isn't just a phenomenon that is limited to any specific geography.
You can think about Singapore and Asia, you can think about Ireland.
In Europe and several areas here in the U S. This is an issue where the simple fact is the grid capacity is not going to be there and so these represent prime power applications, Jason I think hit on a real key topic. It isn't just about delivering power it's delivering power.
With a with a pathway to deliver better sustainability. So this ability to incorporate hydrogen as a feedstock overtime important considerations.
Thank you so much guys.
Thank you.
Our next question comes from Eric Stine from Craig Hallum. Your line is now open.
Good morning, everyone.
Good morning, Eric.
Hey, So just curious you mentioned.
Initiatives to speed the sales closure process I am wondering if you could just add some some details to that and then just curious I mean, obviously you want to add product backlog. So maybe a view of where ideally you would like to see that end up maybe at the end of fiscal 'twenty four and how you see it trending going forward.
Mark Fiesel: So you can think about Singapore and Asia, you can think about Ireland in Europe, and several areas here in the U.S.; this is an issue where the simple fact is the grid capacity is not going to be there. And so these represent prime power applications. Jason, I think, hit on a really key topic. It isn't just about delivering power; it's delivering power with a pathway to deliver better sustainability. So this ability to incorporate hydrogen as a feedstock over time is an important consideration. Thank you so much.
I'll, let mark give you a sense about how were moving projects through our sales funnel and really trying to accelerate what we would call stage four and Thats why were in contracting and five is closure.
And we talked about a couple of those closed projects. This morning that we've done but I'll, let mark hit on that a little bit and then we can talk a little bit more about how we think about.
Eric Andrew Stine: Our next question comes from Eric Stine from Craighalion. Your line is now open. Good morning, everyone.
Jason B. Few: Warren Air, Hey, so just curious. You mentioned initiatives to speed the sales closure process. I'm wondering if you could just add some details to that. And then just curious, I mean, obviously, you want to add product backlog. So maybe a view of where you'd like to see that end up, maybe at the end of fiscal 24, and how you see it trending going forward. I'll let Mark give you a little sense about how we're moving projects through our sales funnel and really trying to accelerate what we would call Stage 4, and that's when we're in contracting, and 5 is closure. And we talked about a couple of those closed projects this morning that we've done, but I'll let Mark talk about that a little bit, and then we can talk a little bit more about how we think about... long Sure, there are many aspects to that, but maybe one common denominator is that if you think about delivering energy to someone or hydrogen to someone, doing so in a way that transfers risk away from that person.
Long term targets sure, yes, there's many aspects to that but maybe one common denominator is if you think about delivering.
<unk> to someone.
Or hydrogen someone doing so in a way that transfers risk away from that person historically people have procured gasses from an industrial gas supplier in electricity from utility now requiring them to embrace new technologies in order to do that of course is always a challenge it's different than the existing business model.
This can be this can be addressed via partnerships and so.
You've seen us.
Being involved in scenarios in which partnering in energy as a service.
Type arrangements, where the technical regulatory and financial risks are transferred away from that end users to a consortium that includes fuel cell energy and other partners in order to go accomplish that we also think about our ability to deliver.
Deliver with excellence.
A specific geography or in a specific market segment. So an example that may be our partnership that we've announced with Malaysia, Marine and heavy engineering and Asia to <unk>.
Mark Fiesel: Historically, people have procured gases from an industrial gas supplier and electricity from a utility. Now, requiring them to embrace new technologies in order to do that, of course, is always a challenge. It's different than their existing business model. However, this can be addressed, though, via partnerships. And so, you know, you've seen us being involved in scenarios where partnering in energy as a service type arrangements where the technical, regulatory, and financial risks are transferred away from the end users to a consortium that includes FuelCell Energy and other partners in order to go accomplish that. We also think about our ability to deliver with excellence in a specific geography or in a specific market segment.
Really help us figure out how to address key customers and concerns in that geography, leveraging their local presence and expertise and ability to scale.
In addition, additionally, Eric as you think about it we've got a material opportunity in Korea through Repowering, that's a real near term opportunity, we talked about we executed on the <unk> opportunity.
We're optimistic about the opportunities that we see going forward there and in addition to Repowering. When you think about Korea, which is still the largest fuel cell market in the world today.
Under their CHP as they've talked about 15 gigawatts of deployment of fuel cell technology eight of that being in countries seven of that being out of country really trying to support <unk>.
Jason B. Few: So an example of that may be our partnership that we've announced with Malaysian Marine and Heavy Engineering in Asia to really help us figure out how to address key customers and concerns in that geography, leveraging their local presence and expertise and ability to scale. In addition, you know, in addition to that, Eric, as you think about it, you know, we've got a material opportunity in Korea through repowering. That's a real near-term opportunity.
Import hydrogen market for for for their own domestic use but if you think about that now that we have a platform that today with our solid oxide platform that we can deploy today in Korea and as that hydrogen becomes available.
To switch as the fuel source that same platform with our solid oxide, we can switch to utilizing 100% hydrogen and we again it opens up the aperture of opportunities, where we think that we can effectively compete and so we're very optimistic about that.
Jason B. Few: We talked about, you know, we executed on the Noel Green opportunity, and we were optimistic about the opportunities that we see going forward there. And in addition to repowering, when you think about Korea, which is still the largest fuel cell market in the world today, you know, under their CHPS, they've talked about 15 gigawatts of fuel cell deployment, eight of that being, you know, in-country, seven of that being out-of-country, really trying to support the import hydrogen market for, you know, for their own domestic use.
Got it and I mean is it something where you have a kind of a specific goal U K exiting.
Keeping fiscal 'twenty for your product backlog is this I mean, certainly you anticipate growth, but is this more of a.
Setting the stage for 'twenty, five 'twenty, six 'twenty, seven or or do you think that at the end of 'twenty four.
You could have a decent amount of product backlog.
Jason B. Few: But if you think about that, now that we have a platform that today with our solid oxide platform that we can deploy today in Korea, and as that hydrogen becomes available to switch as the fuel source, that same platform, with our solid oxide, we can switch to utilizing 100% hydrogen. And we, again, it opens up the aperture of opportunities where we think that we can effectively compete. And so we're very optimistic about that. Got it.
We certainly have a target relative to backlog in building our backlog throughout the fiscal calendar year for US 2024, and we think these opportunities will play into that we think repowering is one of those opportunities and as we've seen just to your recent.
<unk> the opportunities with our solid oxide platform and we talked about.
Last quarter, which we're working through contractual terms on a commercial win around leveraging our platform for Biofuels in California, and we think with the growing biofuel market, our R&D and our ability to take direct biofuels again positions us really well to start turning this pipe.
Eric Andrew Stine: And I mean, is it something where you have a kind of specific goal; you think, hey, exiting? Exiting fiscal 24, your product backlog is this. I mean, certainly you anticipate growth, but is this more of setting the stage for 25, 26, 27?
<unk> into closed transactions throughout 2024.
Got it thank.
Thank you and then maybe just the last one here and I'm not sure I think last quarter you model provided some specifics, but clearly now given the setup in South Korea, there is a big opportunity on the service side.
Jason B. Few: Or do you think that at the end of 24, you could have a decent amount of product back? Look, we certainly have a target relative to backlog and building our backlog throughout the fiscal calendar year for us in 2024. And we think these opportunities will play into that. We think repowering is one of those opportunities.
Any any specific specifics in terms of kind of near term visibility pipeline any details would be great.
Yes.
We are.
If you step back and look at our opportunity in Korea with respect to Repowering.
Jason B. Few: And as we've seen, you know, just here recently, the opportunities with our solid oxide platform, and we talked about last quarter, which, you know, we're working through contractual terms on a commercial win around leveraging our platform for biofuels in California. And we think with the growing biofuel market, our R&D and our ability to take direct biofuels, again, positions us really well to start turning this pipeline into closed transactions throughout 2024. Yeah, the, Thank you.
We directly sold the opportunity at <unk> and so that one is one that we continue to manage as we always have under our framework of our long term service agreement.
We have successfully now been able to re power no Green, which was a project that was sold by our previous partner in the Korea market and now as those modules came up for.
The replacement or upgrading those modules, we were able to do that and now have the long term service agreement for that opportunity, we see the balance of the Gen codes that have our platforms deployed so call. It 100 megawatts of opportunity as repowering opportunity for us as a company.
Eric Andrew Stine: And then maybe just the last one here, and I'm not sure. I think last quarter you might have provided some specifics, but clearly, now, given the setup in South Korea, there is a big opportunity on the service side. Any specifics in terms of kind of near-term visibility, pipeline, any details would be great. Yeah, so we are. If you step back and look at our opportunity in Korea with respect to repowering, we directly sold the opportunity at COSPO, and so that one is one that we continue to manage as we always have under our framework of a long-term service agreement. We've successfully been able to repower Noel Green, which was a project that was sold by our previous partner in the Korean market.
Now we need to go execute that.
Those agreements and come to agreement on <unk> on a go forward basis for those opportunities, but those translate into two things for us one.
It's new module sales because we need to upgrade those models as part of the Repowering and of New long term service agreement that goes along with those modules that run coterminous. If you will with those models. So we see that as a real market opportunity for us and Mark and his.
Jason B. Few: And now, as those modules came up for replacement or upgrading, we were able to do that, and now we have the long-term service agreement for that opportunity. We see the balance of the GENCOs that have our platforms deployed, so call it 100 megawatts of opportunity, as a repowering opportunity for us as a company. Now, we need to execute those agreements and come to an agreement on LTSAs and a go-forward basis for those opportunities. But those translate into two things for us.
Team is very focused on the repowering opportunity in Korea.
Okay. Thank you.
<unk>.
Our next question comes from Ryan Lynch.
From B Riley your line is now open.
Hey, good morning, guys.
Good morning.
First question around Opex, just wondering how we should think about R&D going forward as we get closer to commercialization on some of the next Gen Tech does that start to trend lower year over year and 25, maybe up year over year. This year.
Jason B. Few: One, it's new module cells because we need to upgrade those modules as part of the repowering, and a new long-term service agreement that goes along with those modules that run coterminous, if you will, with those modules. So we see that as a real market opportunity for us, and Mark and his team are very focused on the repowering opportunity in Korea. OK, thank you. Thank you. Our next question comes from Ryan Pfingst from Be Riley. Your line is now open.
Good morning, Ryan This is Mike I'll take that question and thank you for joining the call. So.
As far as R&D, you have seen it trend up over the last several years and this is really related to the commercialization efforts that the company is putting into our solid oxide platforms as Jason mentioned around power Gen and electrolysis as well as as well as carbon capture.
Ryan Pfingst: Hey, good morning, guys. Good morning. My first question is around OPEX, wondering how we should think about R&D going forward as we get closer to commercialization of some of the next-gen tech. Does that start to trend lower year-over-year in 2025, maybe up year-over-year this year? Good morning, Ryan. This is Mike.
It has trended up.
The targets that we put out for this year were between 60 and $70 million for that line. So we're right in that range kind of at the lower end of that range. So I wouldn't I wouldn't expect to see a material increase from where we sit today.
That's helpful.
Michael S. Bishop: I'll take that question. And thank you for joining the call. So, as far as R&D is concerned, you have seen it trend upward over the last several years, and this is really related to the commercialization efforts that the company is putting into our solid oxide platforms, as Jason mentioned, around power generation and electrolysis, as well as, as well as carbon capture. So it has trended up. The targets that we put out for this year were between 60 and 70 million for that line. So we're right in that range, kind of at the lower end of that range.
And my second question is do you have an update.
<unk>.
The potential Bowie loan guarantee or maybe any sense of timing that you could help us with there.
Yes, so we are.
Where we look to leverage the deal.
Our loan program opportunities in is in two potential areas. One is around expanding our capacity for solid oxide in North America.
And as we talked about we've.
Jason B. Few: So I wouldn't expect to see a material increase from where we sit today. That's helpful. And my second question is, do you have an update on the potential DOE loan guarantee or maybe any sentiment timing that you could help us with there? Yeah, so we are, you know, where we look to leverage the DOE loan program opportunity in two potential areas. One is around expanding our capacity for solid oxide in North America.
<unk> been doing the work to identify potential new locations.
Which also may include.
Additional expansion capacity at our existing facility here in Torrington, which would also be eligible for the Doe loan guarantee if we go that route. The other area is ultimately what we ended up doing around expansion of our carbon at platform tied to ultimately our view of the carbon capture.
Jason B. Few: And as we talked about, we've been doing the work to identify potential new locations, which also may include, you know, additional expansion capacity at our existing facility here in Torrington, which would also be eligible for the DOE loan guarantee if we go that route. The other area is ultimately what we end up doing around the expansion of our CarbonNet platform tied to our view of the carbon capture opportunity. So now, you know, there's about a four-phase process that you go through with the DOE. And we are progressing through that process, but we don't have a specific answer on the timing of closure of that as we sit here today. Got it. Thank you. I'll turn it back.
Opportunity.
Now there is about a four phased process that you go through with the Doj.
And we are we are progressing through that process, but don't have it.
A specific answer on timing of closure of that as we sit here today.
Got it thank you I'll turn it back.
Thank you.
Our next question comes from Noel Parks from Tuohy Brothers. Your line is now open.
Hi, good morning I.
I apologize if you touched on this earlier I got on a little late but I wondered if you could talk a bit about.
Exxon Mobil.
<unk> ship and.
Sort of.
Okay.
Noel Augustus Parks: Thank you. Our next question comes from Noel Parks from TUI Brothers. Your line is:
Announced that.
Noel Augustus Parks: Hi, good morning. I apologize if you touched on this earlier. I got on a little late.
Yes.
They had sort of formalized making your technology to the carbon capture technology of choice and.
Jason B. Few: But I wondered if you could talk a bit about the ExxonMobil partnership and, sort of, you know, in December, they announced that they had formalized making your technologies their carbon capture technology of choice. And so if you could just talk about maybe the pace of further developments from here as you look ahead. Yeah, good morning. No, how are you doing this morning?
And so if you could just talk about maybe the case of further developments from here as you look ahead.
Yes. Good morning, how are you doing this morning.
Yes, so as we announced.
That we have.
We reached a point in the work that we've been doing with Exxon to move forward on the Rotterdam demonstration project at one of their facilities.
Jason B. Few: Yeah, so as we announced, we have reached a point in the work that we've been doing with Exxon to move forward on the Rotterdam demonstration project at one of their facilities, and so the team is working on building the platform in support of that demonstration effort with Exxon. We, you know, remain very excited about the opportunity around carbon capture, but the current focus right now is really around the demonstration effort and getting that platform built and ultimately building the demonstration project. And, you know, we also put out an announcement in February about the funding of the order in support of that demonstration project.
And so the team is working on building the platform in support of that demonstration effort.
With Exxon.
<unk>.
We remain very excited about the opportunity around carbon capture but the current focus right now is really around the demonstration effort in getting that platform built and ultimately building the demonstration project.
<unk>.
In February we also put out.
An announcement around the funding of the order in support of that demonstration projects.
We're continuing to advance the advance the program.
Great.
Jason B. Few: So we're, you know, we're continuing to advance the program. Great, and this might be a little bit of over-triangulation between various projects you've had, but I was wondering about the Trifon project with Toyota for the long term. Is there any analogous use case? I'm thinking about, for example, maybe the U.S. Gulf Coast and, you know, oil tankers, export facilities, and so forth.
This might be a little bit.
Over triangulation between.
Various projects you've had but I was wondering.
The trial.
Project with Toyota at long Beach.
Is there any analogous use case I'm thinking about.
For for example, maybe U S Gulf Coast and.
Oil tankers export facilities, and so forth, there's a lot going on with LNG.
Jason B. Few: There's a lot going on with LNG there as well on the horizon. Any similar opportunities that you've talked about or that customers have written to you about doing Trigen in a setting like that? Yeah, when you think about the Trigen platform, and if you just take two of the value streams out of the Trigen platform, setting water aside for just a second, you know, clearly opportunities around power generation for distributed power, and then hydrogen. Beyond using hydrogen for transportation, there's conversations around hydrogen for gas blending to help, you know, reduce the overall carbon intensity of net gas is another way in which the platform can be utilized.
LNG, there as well on the horizon.
Any similar opportunities that you've talked about how customers approach you about around about doing try general floating like dawn.
Yes, when you think about the Tri Gen platform and if you if you just take two of them.
The value streams out of the Tri Gen platform setting water aside for just a second.
Clearly opportunities around power generation for distributed power and then hydrogen beyond using hydrogen for transportation there is conversations around hydrogen for gas blending.
To help reduce the overall carbon intensity of Nat gas is another way in which the platform can be utilized we certainly see opportunities around ports, especially when you think about the efforts to decarbonize ports and if you just take goods movement on site at the port and the knee.
Jason B. Few: We certainly see opportunities around ports, especially when you think about the efforts to decarbonize ports, and if you just take goods movement on site at the port and the need for a source of hydrogen and power as those things either move to hydrogen as a fuel or electrification as a fuel, those clearly become ways in which our TriGen platform is advantaged to pursue, you know, additional opportunities that look a lot like what we're doing already at Long Beach The relevant part about that is, right, we now have a reference to show what the platform can do, and it's being used in a real commercial application. Thanks a lot. Thank you, and and Ellie. I think that's all the questions that we have. That's all the questions that we have.
For a source of hydrogen and power as those things either move to hydrogen as a fuel or electrification as a fuel those clearly become ways in which our tri Gen platform is advantaged to pursue.
Additional opportunities that look a lot like what we're doing already.
Long Beach and the.
And probably the most.
Relevant part about that is right we now have a.
As a reference to show what the platform can do and it's being used in a real commercial application.
Sure the demonstration value for sure so okay.
Okay, great. Thanks, a lot.
Thank you.
Okay.
And.
In early.
I think thats all the questions that we have.
That's all the question is does he have I'd now like to hand back over to Jason for a few closing remarks.
Operator: I'd now like to hand back over to Jason for a few closing remarks. Ellie, thank you. We will continue to execute on our powerhouse business strategy with the goal of delivering value to our customers, growth, and optimizing returns. Thank you all for joining the call today and for your interest in FuelCell Energy. We look forward to updating you again next quarter. Have a great day! Thank you for attending today's call. You may now all disconnect. Have a wonderful day.
Thank you, we will continue to execute and execute on our powerhouse business strategy with the goal of delivering value to our customers growth and optimizing returns. Thank you all for joining the call today and for your interest in fuel cell energy. We look forward to updating you again next quarter have a great.
Day.
Thank you for attending today's call you may now all disconnect have a wonderful day.
Okay.
[music].