Q1 2025 Ameresco Inc Earnings Call
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Dustin: Thank you for standing by. My name is Dustin and I'll be your conference operator today. At this time, I would like to welcome everyone to the Ameresco Inc first quarter of 2025 Ernst Conference Call.
Dustin: If you'd like to ask a question, please press star and the number one on your telephone keypad. If you would like to draw your question, please press star one again. Thank you.
Dustin: I would now like to turn the conference over to Leila Dillon, Senior Vice President of Marketing and Communications. Please, go ahead.
Leila Dillon: Thank you, Dustin, and good afternoon everyone. We appreciate you joining us for today's call.
Speaker Change: Our speakers on the call today will be George Sakellaris, Ameresco's Chairman and Chief Executive Officer, and Mark Chiplock, Chief Financial Officer
Leila Dillon: In addition, our Chief Investment Officer, Josh Barrabo, will be available during Q&A to help answer questions.
Leila Dillon: Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks Thanks.
Leila Dillon: Today's earnings materials contain forward-looking statements, including statements regarding our expectations.
All forward-looking statements are subject to risks and uncertainties
Leila Dillon: Please refer to today's earnings materials, the Safe Harbor language on slide two of our supplemental information, and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements.
Leila Dillon: In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliation to these measures and additional information in our supplemental slides that were posted to our website.
Leila Dillon: Please note that all comparisons that we'll be discussed today are on a year-over-year basis, unless otherwise noted.
Leila Dillon: I will now turn the call over to George. George? Thank you, Leila. Good afternoon, everyone. First, I would like to thank the entire Ameresco team that will celebrate the company's 23th year anniversary.
Leila Dillon: It's been an amazing journey establishing Ameresco as a leader in our industry and delivering over $16 billion in customer solutions
Leila Dillon: dedicated to reducing energy consumption and enhancing energy infrastructure and resiliency and developing proven pathways to decarbonization.
Leila Dillon: Well, the current environment remains challenging. The drivers of our business remains strong.
Global Power to Men Gros
Leila Dillon: electricity costs continue to rise and grid reliability is deteriorating and we saw in Europe a few days ago.
Leila Dillon: All of this will increase the demand for distributed, diversified, resilient energy solutions.
Leila Dillon: The team's outstanding execution led to a strong start to the year, with results exceeding our expectations.
Leila Dillon: Friscoa Revenue and Adjusted Ibadah, Glue 18 and 32% respectively
Leila Dillon: This results as we also highlighted the strength of our diversified business model as we experience material growth in both our projects and energy asset business.
Proudin, Strong Performance in Europe and Canada. [inaudible]
Leila Dillon: We also increased our total project backlog to almost $5 billion million dollars.
Leila Dillon: Bringing our total revenue visibility across our businesses to almost $10 billion
Thank you.
Leila Dillon: This was another corner of significant contract execution conversion success, resulting in a contracted project backlog of $2.6 billion, representing a growth rate of almost 80% year over year.
Leila Dillon: and these positive business trends have continued into the second quarter.
Leila Dillon: I also wanted to comment on some of the well-known challenges facing our industry and provide some insights into how the Ameresco team is working to overcome them.
First, let me cover our work with the Federal Government. Thank you very much.
Leila Dillon: This business accounts for approximately 30% of our current total project backlog, with military-related customers accounting for approximately two-thirds in GSA or civilian agency-related project work of approximately one-third.
Leila Dillon: We have provided the breakdown of our backlog by end market in our supplemental slides.
Leila Dillon: Because these federal contracts have multi-year execution cycles, they are expected to account for less than 20% of our 2025 project revenue.
Leila Dillon: We noted in our last conference call that we had encountered one consolation on a project once drafted early on in January .
and a pause onto other contracts.
Leila Dillon: We have pledged to report that the project that has been cancelled has now been riskoped and the other two contracts have now been unposted.
Leila Dillon: Also, we have not encountered any additional cancellations or delays in our federal contracts.
Leila Dillon: So, well it is too early to say that there will be no additional security disruptions, we are cautiously optimistic.
Leila Dillon: And as the current administration's priorities come into focus, we believe our broad and deep technical expertise in our agnostic and budget neutral approach will help us promote our offerings.
Leila Dillon: Interestingly, we are now seeing a significant number of recently issued Federal RFPs focused on our core competencies of resiliency and increasing the power supply through new energy infrastructure.
Leila Dillon: The government's recent release over a quest for information about the possible use of DOE land to support growing demand for data centers.
Leila Dillon: Following that, the DOE has identified 16 potential sites uniquely positioned for rapid data center construction, including in place energy infrastructure with the ability to fast track permitting for new energy generation.
Leila Dillon: For example, we are seeing more opportunities to leverage federal lands for critical energy
Leila Dillon: Copano, 44 megawatt solar, and 44 megawatt battery project is a perfect example of how this can work.
Leila Dillon: We leverage and exhaustive slits with an A.V. at Pearl Harbor to build this critical energy infrastructure that supports not only the base but also the Hawaiian electric grid [inaudible]
Leila Dillon: We are also developing a 99 megawatt firm power plant and advanced microgrid project on the same base.
Leila Dillon: We are utilizing similar structures including enhanced use lists to develop data center energy infrastructure projects with a department who depends.
Leila Dillon: As we captured on another new slide on our supplemented deck, detailing our project backlog by technology, Ameresco is very well diversified in our expertise with efficiency, resiliency and power production solutions.
Leila Dillon: Approximately 50% of our total project backlog includes energy infrastructure projects using generation technologies such as gas turbines, engines.
Leila Dillon: Solar, Hydroelectic, Eregenicity Technologies, such as large scale battery storage and micro grids [inaudible]
Leila Dillon: We believe our solutions are a good match for the evolving energy landscape which is demanding every increase in amounts of electricity and higher levels of resiliency.
Leila Dillon: We are very excited about the opportunities it has for our work with not only the federal government but with all of our customers across our core markets including utilities, data centers, co-ops and large CNI
Leila Dillon: I also wanted to discuss the dynamics tariff landscape that we, like every other company in our industry are facing.
first.
Leila Dillon: I would like to point out that much of the equipment for carrying ongoing projects and energy assets in development has already been purchased and is in the country or already on the work sites which we believe shields us from near-term price increases.
Leila Dillon: Longer term, we will work to mitigate price increases during contract negotiations and reprise where possible.
Leila Dillon: It's important to note that the majority of our solar and battery projects are international, and they are not subject to US tariffs [inaudible]
Leila Dillon: As many of our sharp shareholders know, this is not the first time a bicycle can face tariffs or inflation.
and we have experienced overcoming similar difficult rising dynamics.
Leila Dillon: We have strong relationships with domestic and global inventors and a healthy...
Leila Dillon: Back logo projects, giving us a position of strength for our bandos and partners. I will now turn the call over to Mark to comment on our financial performance in 2025 Outlook March.
Thank you, George, and good afternoon everyone.
Mark Chiplock: We delivered strong first quarter results with total revenue growing 18% and adjusted EBITDA growing 32%. Our project's business revenue grew 23% reflecting outstanding execution and our laser focus on the conversion of our backlog. [inaudible]
Mark Chiplock: Also, as George mentioned, we did not encounter any additional delays or cancellations with the federal government and those contracts that we highlighted during our fourth quarter call, which have now been unpaused or re-scoped.
Mark Chiplock: Beyond our federal project where we also had a strong quarter in Europe , Canada, and several US regions.
Mark Chiplock: This performance speaks to the diversity of our customers, geographies, and types of solutions that is a hallmark of the Ameresco business model.
Mark Chiplock: Energy Asset Revenue Group 31%, driven largely by the growth of assets in operation compared to last year, with our base of operating assets now standing at 742 megawatts.
Mark Chiplock: We have also taken steps to mitigate lower rent prices for the year, through our dynamic hedging strategy, with our remaining 2025 anticipated rent exposure at only 20% We have also taken steps to mitigate lower rent prices for the year, through our dynamic hedging strategy,
Mark Chiplock: The revenue decline in our other line of business is attributed directly to the divestiture of our AEG business at the end of 2024 in 2004.
Mark Chiplock: Gross Margin, a 14.7% was largely in line with our expectations, reflecting a greater mix of revenue from large European EPC contracts.
Mark Chiplock: As a reminder, while these design build projects have a lower gross margin profile, they help to diversify our business as well as create strong operating leverage as they require very little incremental operating expense for the gross profit of as they contribute. Thank you.
Mark Chiplock: Net income attributable to common shareholders was a loss of $5.5 million or 10 cents per share.
Mark Chiplock: Adjusted EBITDA, a 40.6 million, increased 32%, reflecting our strong revenue growth, tight-cost controls, and the power of our lean, scalable business model.
Mark Chiplock: We continue to see substantial growth in our total project backlog which grew 22% to $4.9 billion million dollars.
Mark Chiplock: Importantly, we converted $330 million of awards to contracts during the quarter, driving our contracted project backlog up 80% to $2.6 billion.
Mark Chiplock: Our project teams continue to deliver on contract conversion and execution to increase revenue and cash flow generation.
Mark Chiplock: We also added $367 million of new product awards to our awarded backlog during the quarter.
Mark Chiplock: Joining to our balance sheet and cash flows, we ended the quarter in a solid cash position with approximately $72 million in cash and total corporate debt of $270 million and $2 million.
Mark Chiplock: During the first quarter, we successfully executed approximately $334 million in financing commitments, which included extending and upsizing our senior secured credit facility to help fund our growth.
Mark Chiplock: With our strong first quarter results and forward visibility, we are pleased to reaffirm our guidance ranges for 2025 revenue and adjusted EBITDA of $1.9 billion and $235 million at the midpoints.
Mark Chiplock: Our team's outstanding execution drove faster implementation during the first quarter of approximately $30 million of Project Revenue [inaudible]
Mark Chiplock: To assist with shaping for the remainder of the year, we are maintaining our expectation for the cadence of revenue in the second half of 2025 to represent approximately 60% of our total revenue.
Mark Chiplock: Accounting for our strong Q1 results, we anticipate Q2 revenue will be in the range of approximately
Mark Chiplock: Now I'd like to turn the call back to George for closing comments. Thank you, Mark.
Mark Chiplock: As you have heard, we got a very solid start for the two of the year and we have seen this momentum continuing to the second quarter.
Mark Chiplock: For over 25 years, we have built an organization with unmanned expertise in developing, structuring and delivering energy projects [inaudible]
Mark Chiplock: Our business model is resilient, with a majority of our electricity but are coming from our long-term recurring revenue businesses, as well as from the strong multi-year visibility inherent in our project backbone. [inaudible]
Mark Chiplock: Furthermore, we believe our project business will continue to grow as we expect to capture more of the emerging infrastructure and resiliency built out.
Mark Chiplock: We are also a global business diversified by our customer, technology and geography which would allow us to continually support changing policy in any geography, will maximize our growth and earnings.
Mark Chiplock: In closing, I would like to once again thank our employees, customers and stockholders for their continued support. Operator, we would like to open the call to questions.
Thank you [inaudible]
Speaker Change: Before we open the floor for questions as a quick reminder, if you'd like to ask a question, please press star and the number one on your telephone t-pad. You'd also like to ask it to kindly limit yourself to one question and one follow-up. Thank you.
Speaker Change: And with our first question, this comes from the line of Noah Kaye from Oppenheimer Thank you very much for your time.
The lines are open.
Well, thanks for taking the questions.
Speaker Change: So, clearly from 4Q to now, a nice turn of events around the federal business. I wonder if it could take us a little bit into some of the transpiring that went on.
Speaker Change: during the quarter to maybe kind of get the visibility in some of the contract situations into a better place. I think...
Speaker Change: We start from the premise that these are energy saving and net positive for any assets that the projects are going into, but maybe talk a little bit about how it played out and maybe the nature of some of these new RFPs you're seeing.
Speaker Change: Yeah, so Noah Hayden, Mark, maybe I'll just talk to the first part of that with respect to those federal contracts. I mean, again, I think we...
Speaker Change: We were fortunate that, again, the one contract that was cancelled, that has now been re-scaled, we think we'll come back under a future mod and so that will ultimately remain pretty neutral to where it started. Thank you very much.
which we think is a great outcome.
Speaker Change: and then on the other two that were paused, that are now unpause. Again, those will ultimately be rescoped. We feel that the rescoping...
Speaker Change: Probably will result in a small haircut on those, but again, you know, certainly not the worst case, which we know what you could have been with those being canceled. It's a small town.
Speaker Change: I think generally speaking, it was a good outcome for the three contracts that we talked about in the beginning.
Speaker Change: And the bottom line is the fact that this contract is up for a military energy of businesses, a budget new talk.
Speaker Change: and all its administrations, they like this particular project. And I think the fact that they would have signed in January , probably got something to do with it. And that's why what we people took a lot of the book out at the once they realized it's good for the government. Yeah.
Speaker Change: The plan to go ahead. And the goal would be with the GSA, the contract that was cancelled couple of the buildings, they would be sold. So they took a lot of amount of work and they put it in other buildings. So it...
Speaker Change: That's why we feel very good to where we are, which is...
Speaker Change: We did administration and the work with them, that they like the budget approach and they like to resiliency and more power generation in federal facilities in order to together resiliency required. And hopefully other things and that's why I try to cover on my notes, how do they maximize the use and get more return from some of the land that's in the federal basis, it's
That's what happened at Burr Harbour and so on.
Mark, I think last quarter you gave us some...
Speaker Change: Some direction on how to think about the shape not only of revenue but maybe even round sort of margins obviously no things you know can move around a fair bit with project timing but any color on sort of the shaping of margins either for 2Q or the balance of the year
Speaker Change: I mean, we feel really good about our full-year guide on the, especially on the Gross Margin range, which was 15.5 to 16 percent
Speaker Change: I think Q1 was a little bit lower than our expectations, but as I mentioned, we did see a heavier mix of European and PPC contracts that do have a little bit lower margin profile. But I feel pretty good about the margin range for the rest of the year.
Speaker Change: Okay, maybe last one to speak, it's always hard to resist the temptation to ask about recent events and that I think...
In this case, it's quite appropriate. [inaudible]
Speaker Change: The Blackouts in Southern Europe . I guess we're still figuring out what caused them but it does go to a question around building infrastructure, reliability on the grid.
Speaker Change: and I'm curious to think about how you, the Ameresco's opportunities set when you look at events like that and kind of the type of project flow and opportunity you're seeing in Europe broadly. The Ameresco's opportunities set when you look at events like that and kind of opportunity you're seeing in Europe broadly.
Speaker Change: Yeah, it happened not only in Spain a few days before that, it just happened partially in Greece.
Speaker Change: The fact that all these countries are getting so much renewable power [inaudible]
and it's intermittent.
Speaker Change: and you're going to see that happening more and more in the United States, but happening in Texas.
some time ago with the Freeze. [inaudible]
Speaker Change: and now we put more and more view on the system.
Speaker Change: I think the distributive generation is going to take much bigger fee for the action on the large scale of power plants and transmission land because...
Speaker Change: I do not think that being able to build the transmission line necessary to improve the green
Speaker Change: Michelin, for much a distance to Rosalia, it took us ten years to get the right away. So it's very difficult and the other thing that happened
Speaker Change: What's your business admission line? So once you have an average, sometimes you do two of them, you don't have the spinning reserve to back up what might happen, and that's how we have these averages.
Speaker Change: Back in the utility days when I used to film the long-range planet, we used to have 5% to 10% spin and reserve. You don't have it anymore.
Thank you very much.
Thank you [inaudible]
Speaker Change: Our next question comes from the line of George Gianarikas from Canacorn Genuity. The line's open.
Everyone, thank you for taking my questions.
George Generichos: I was wondering if you could give us an update on any projects, any projects.
George Generichos: who's economics are sensitive to changes in the inflation reduction act. What does the world look like there? And what are those projects still moving forward? Are you seeing a little bit of a delay to see the dust settle? I'm just curious if you can share any commentary there. Thank you.
George Generichos: I think for the projects that are coming online this year, especially on the RNG, we say Barbara, the ITC related to those projects, so we feel pretty good about that, even beyond that, for about...
George Generichos: Three-quarters of the projects in our asset development pipeline. We've safe harbored the ITC on that as well. I think we mentioned that last quarter around 200 million of additional ITC.
George Generichos: So the team has done a great job to take the necessary steps to try and save Barbara that.
I think for... [inaudible]
George Generichos: For assets outside of the R&G, again, I think we've done a pretty good job of safeguarding most of that so I don't expect any short-term impact if there were something to happen with the IRA.
George Generichos: Maybe as a follow-up, the changing dynamics in the landscape impacted your decision tree around projects versus willingness to own assets, and how's your philosophy changed there over the last three to six months?
George Generichos: Yeah, the interest environment, you know, it's a little bit higher than what we would like it to be.
George Generichos: and I think it goes without saying and that's why you've seen the growth in the project business a little bit more. We've put it with more emphasis on the project. Thank you very much.
George Generichos: But of course they generate pretty good cash flow and we have a pretty good niche in the marketplace there and now is the evolution happens with more resiliency and more power generation. We want to take a good piece of that action and it's like right up to our expertise and. We'll do that.
George Generichos: But on the other hand, I mean, we have over 600 megabytes of essence in development, which it can take care of for us for the next two, three.
Yeah, so we are not taking...
George Generichos: We like the project business a lot and we actually get to know those very well so we are focusing on that a bit more.
Thank you [inaudible]
Speaker Change: Thank you. Our next question comes from the line of Cassie Harrison from Piper Sandler. The line's open.
Cashew Harrison: Good afternoon, thanks for taking the questions and congrats on 25 years [inaudible]
Um...
Speaker Change: So, you know, nice to hear that the projects that had paused have now resumed. I was just wondering, have you seen any negative impacts from the reduced federal workforce on your business or is the approval process and? [inaudible]
Speaker Change: Just the day-to-day work for the federal government on going without any interruptions from less workers.
Speaker Change: Yeah, that's a good question. To be honest, we haven't seen anything yet, but we certainly could see a situation where...
Speaker Change: The things that are happening, the personnel could have an impact on the timing [inaudible]
Speaker Change: of how awards can convert to contracts or just administrative challenges that could impact the timing of bomb.
Speaker Change: of the progression of our projects. I think we've tried to build in some amount of conservatism into our guide and to the numbers for the year, but kind of in your term we haven't seen anything as of yet.
Speaker Change: on the momentum, because the body is neutral.
Associated with our projects
Speaker Change: If you recall, the previous Trump administration, we actually did more performance construct under them than we did under the Biden administration because they like this concept. So even though we might think, let's say, the movement from awards to proper.
and contracted backlogs, the late Neil Behr, but the number...
of construction proposals most likely will go up.
Speaker Change: That's a helpful additional color. Maybe just two more quick ones for me. George, I think you you discussed.
Speaker Change: that you're in a good spot on storage and the exposure is not even that great, or is not that high anyways, to the US, it's more international.
Speaker Change: and then you said demand, it sounds like demand hasn't really been impacted by tariffs, but I'm just curious are there any other, excuse me, are there any other implications to your business from tariffs that we need to be thinking about in any of the individual segments that maybe weren't covered in the prepared remarks?
Speaker Change: I mean, on the barriers, the projects we are doing this year and next year, on this year, they were all pre-purchased before any impact on the tourists.
Speaker Change: Half of them they've been repurchased. The other half what we've been able to do with some of our customers, dollar for dollar, it's closing the contracts that the purchase power agreements that wherever the tariff is will be a passable. [inaudible]
Speaker Change: We'll recalculate the rate of their pass rule. So, that's...
Speaker Change: And the same thing in the play with some of the panels. But what is the other thing that we have been trying to do by as much domestic as possible? But still, if you get tired so the domestic price will go up as well. But so far, we have met us very, very well where we are, you know? [inaudible]
Speaker Change: I appreciate the color. And then maybe just one final one for me.
Speaker Change: I was just curious whether you've observed any dislocations.
evaluations between private transactions, or what your...
Speaker Change: You know, pieces of your portfolio may be able to get in the private market versus what you're seeing in the public markets and whether there's any appetite to, you know, to show the public markets the value of your assets via transactions. Thank you.
Speaker Change: I think that's up to Joseph Ali, thanks George, hey, Cassie, so I think the answer is...
Speaker Change: Yes, we do believe that there are still robust private valuations for the types of projects and assets that we are implementing. Nothing we can really share now, but I think that...
Speaker Change: The public valuations in our whole sector have definitely been, we'll call it disproportionately impacted on maybe rational and irrational fears about changes in the government, you know, news cycle, etc. But fundamentals of our energy efficiency offerings, our R&G assets, our pipeline, our portfolio and our platform remain incredibly strong. And people that have the ability to look at these things, you know, from a project financing perspective or some of our develop and sell, those equity investors, those private equity
Speaker Change: Still like what they see, and we're still able to monetize the value that we're creating.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Eric Stein from Craig Hall.
The line's open [inaudible]
Speaker Change: Hi everyone, maybe just sticking, hi, maybe just sticking with the tariffs and I guess I'm, you know, great news on how things are set up for 25 and for part of next year but...
Speaker Change: Just thinking about this, if this period of uncertainty were to last for longer than that, you know just
Speaker Change: I just want to dig in a little bit on kind of the structure of the contracts. Is it pretty common to have that?
Speaker Change: Past through language, I guess what I'm getting at is, I mean, is this a, is this kind of a painstaking contract by contract renegotiation? Or is this something that's pretty standard? It's in the contracts and it's pretty much accepted by your customers? [inaudible]
Well, I...
Very much, I can tell our people that...
New Contracts, we'll have the language that...
Speaker Change: We are protected against tariffs and sometimes if we too much equipment is coming from abroad, foreign exchange fluctuations as well, that just become right now the mark but it goes from customer to customer We are protected against tariffs and sometimes if we too much equipment is coming from abroad, that just become right now the mark
Speaker Change: For example, this particular customer is a large contract, it's a better storage project, and they had a certain deadline that they want to help him.
Thank you very much.
Speaker Change: The tariffs come and the prices goes up. You have to be on the hook for it as well for the transform and so on. And they step up to the plate. And we've seen more and more some of the largest year. It does look as much. [inaudible]
Speaker Change: Looking for resilience, you better restore it and so on and so forth.
Speaker Change: I think at the end of the day they will need to do what is necessary to protect their operations.
Speaker Change: Yeah, no, I think, you know, I think beyond even the contracts, we continue to diversify the supply chain, right? I think we're taking quite a few learnings that we came out of COVID and, you know, so we've been focused on bringing materials and faster on our projects, diversify the supply chain, looking at domestic sources. So, you know, I think the combination of building those protections into the contracts.
Speaker Change: as well as kind of maintaining that diversification that's going to help us to mitigate most of the exposure to terrorists moving forward.
Speaker Change: Got it, all right, that's helpful. And then maybe just back on the federal government work, and this is just a question that was just asked but just wanted to clarify.
Speaker Change: In terms of the reduced workforce, I mean, it sounds like you are viewing this more as a delay, you know, potential delays rather than...
Speaker Change: Just cancellations and I know what you've seen to this point is you had the one which will be re-scoped, you've got the two that have kind of come back, but...
Speaker Change: So is it more from an approval process and a timing just to get through everything that's necessary to move forward rather than seeing a bigger risk that
Speaker Change: fewer buildings, housing that smaller workforce and changing the overall scope.
Speaker Change: I mean, we have, I wouldn't say that we have potential delays. I mean, it would be immaterial.
Speaker Change: because that's where I tried to point out because of the power of the venue proposition of our offerings.
Speaker Change: He's so strong in administration, one that's so bad, it needs this kind of work because it's the other day they get to use the structure upgrade and they don't have to use their budget in order to do it. They don't need to acquire the capital, so there will be more push.
Speaker Change: to save money. So even if they have fewer people, at the end of the day, I will expect that we will see more contracts signed with this case.
Speaker Change: Yeah, but I think, I think, generally speaking, if there is risk, we look at it being more administrative and just potentially slowing down, slowing down the process around award conversions or contracting. So, and again, we haven't seen anything yet.
Okay, I'll just keep it to two, thanks. [inaudible]
Thanks, Aaron. Thanks, Steve.
Speaker Change: Thank you. Again, if you'd like to ask a question, please press star and the number one on your telephone keypad.
Speaker Change: Again, that is star in the number one on your telephone keypad. And our next question comes from the line of Craig Irwin from Roth Capital Partners. The line's open.
Craig Irwin: Good evening and thanks for taking my questions. So George, Mark, everyone, thank you for the data point on your Rhin hedging position. I'm sure you're well aware of some of the controversial love.
Forecast that I'm in out there from different analysts about Rins, but hopefully they've been cut in half.
Speaker Change: You know, not something that you would expect one of the big oil desks to say.
Speaker Change: But can you just remind us what the processes you go through? [inaudible]
Speaker Change: Evaluate the potential profitability on your assets before you go and deploy capital. How you structure these agreements.
as far as sharing of the rinse and other incentives.
Speaker Change: and how you stress test these projects before you ever spend any money. [inaudible]
You know, breaking ground to build to ensure profitability across the cycle
Speaker Change: I think Josh, you're due to let her work for us in a minute.
Josh Barabo: Hey, Craig. So, we have a pretty thorough process of vetting the RNG projects throughout their development, including multiple steps with our investment committee.
Speaker Change: We of course have some pretty well-entrenched financing partners as well and we run a lot of the projects through them early on.
Speaker Change: to make sure that their expectations for the Ren Curve match ours or match something that's reasonable in the market.
Speaker Change: And we layer in the financing assumptions in terms of the amount of debt, the cost of debt, the tenor, etc. In conjunction with what our models are showing us and what the development team is producing.
Speaker Change: and in a base case scenario and in a stress case scenario, if they meet our hurdle rates which you've talked about as sort of a levered teens IRR on a risk adjusted basis, then we proceed throughout those next steps, those gates throughout development.
Um...
Speaker Change: So there's a lot in there, but we definitely aren't taking kind of historical rune rates or even current rune rates. It really is kind of a downward-sloping curve based on forecasts that we have from all sorts of market parties as well as our proprietary analysis of supply and demand from the RVO, etc.
Understood, thank you for that.
Speaker Change: So my next question is about the operating expenses. You had more than $50 million in revenue growth, but you were down
Speaker Change: over the last couple years for the first quarter for your operating expenses. Thank you.
Are you allocating personnel, maybe, to project execution from...
from development activities. Is there anything sort of going on? [inaudible]
Re-budgeting on the operating expense line. And, you know,
Speaker Change: If there was maybe the move of personnel to execution, could you maybe quantify for us what that might have been on a margin basis?
Speaker Change: Yeah, I mean, I think that from an allocation, we are seeing probably slightly better utilization, I think as you look at the trend. Remember also
Speaker Change: You know, last year we had the additional op-ex from our AEG business, which was divested. So we're seeing a direct reduction from those costs still under being in the P&L. But I think, you know, generally speaking, you know, the cost controls around op-ex are really what is helping to keep op-ex steady or even down as we, you know, managing the timing of what we're bringing in, you know, new employees and only adding as we need to. We still have pretty strong operating leverage with a lot of the larger products that we're being doing. So we're seeing a direct reduction from those costs still under being in the P&L.
for being brought on.
Speaker Change: But we'll congrats on a strong start to the year.
Thank you, Craig. Thanks.
Speaker Change: Hi there guys, thanks for all of the detail. Two questions. First, I mean, George, you're alluded to...
Speaker Change: Non-US exposure in your, in particular, your solar and energy storage backlog. I'm just wondering if you can maybe put some rough numbers around that. Obviously you've got 63% of...
Speaker Change: You're energy asset backlog and in those two sectors it's harder to tell what the number is for the project backlog but help us understand how that might roughly break into US and non-US business and then I have one other question.
Speaker Change: Most of the European and Canada workers are always probably 1.5 gigawatts, but primarily though EPC, I think it's only a very small portion that we will hold and that's up in Canada, in Europe .
Speaker Change: All the projects that we have, but with exception of a small one, maybe 10 megawatts, it's EPC of concept.
Speaker Change: All right, I guess I'm not understanding. You've got 618 megawatts of energy assets and construction 63% of winter solar battery. I'm trying to understand what portion of those is US versus non-US.
Speaker Change: It's almost all exclusively US, sorry, Joe, we were answering a question on the project backlog, it didn't realize you were entering on the app, but that's quite helpful. So the project backlog is more geographical, but the energy asset backlog is more US.
Thank you.
That's correct [inaudible]
Speaker Change: Okay, great. Thanks. And next question, I heard some comments about
Speaker Change: diversifying procurement, which is great, and there's a few options on the solar module side. Man, there's not a lot of LLP production in the United States right now, and most of it is spoken for.
when you look at your storage business.
Speaker Change: Are there options for buying in the US? Are you going to buy nickel-based cells? Or, you know, have you found a factory nobody knows about? Or I'm curious what your procurement strategy is for cells? And I assume you're using mostly LFP. [inaudible]
Thank you.
Speaker Change: Good job, Joe, it's Josh Yes, sorry, we're we're we're following back and forth over gets who gets this one
Speaker Change: The short answer is mostly a traditional lithium ion, and unfortunately we don't have any brand new factories that nobody knows about to announce on the call tonight.
as it pertains to bankability and performance because...
Speaker Change: as I think you know, and we've tried different solutions that hasn't been quite as successful. Thank you very much, Paul.
George Generichos: That being said, I think the key here is that the stuff we have that asks in development for this year is George mentioned, have been safe Harvard And or already delivered on site for the most part we have one big project that will be kind of mid year COD
George Generichos: which makes up the bulk of the assets and operations that we guided to last time. [inaudible]
George Generichos: and then new projects. So let's about procurement and more about contract structure. The new projects we're inserting change in law. Provisions, as George mentioned, kind of a dollar for dollar adjustment to tariff or IRA type of changes.
George Generichos: So it's less about procurement and more about working with our customers to get a fair deal in this uncertain environment.
Okay, and just as our last follow on to that, other... [inaudible]
George Generichos: People in this business have alluded to those pass-throughs but also indicated that there are...
George Generichos: Brackets around that limiting exposure, so let us suppose that we are paying 130%.
George Generichos: LFP tariffs a year from now. Is it your intention and your belief that you can pass all of that along to customers? Or will you bear some of it?
We'll try to pass the ones who are our customers.
George Generichos: Yeah, it's hard to say, unless the project margin is such that we could approach some, then we would look at economics very, very hard before we take on that kind of risk.
George Generichos: of course, and the end of the day, the economics of the president of today.
George Generichos: It is what it is, yes, thank you for your answers [inaudible]
Yep, next jump.
Speaker Change: Thank you. There are no further questions. This now concludes the question and answer session. This also concludes the conference call. Thank you all for joining. You may now disconnect.
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