Good morning. My name is Chantelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the FuelCell Energy 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. Tom Gelston, you may begin your conference.
Thank you, operator. 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 our financial results for the first quarter of fiscal year 2022, and our earnings press release and our quarterly report on Form 10-Q are available in the investors 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. Before we begin, please note that some of the information that you will hear or will be provided with today will consist of forward-looking statements with 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 fuel cell 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 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 a reconciliation of those measures to GAAP financial measures. Our earnings press release and a copy of today's webcast presentation are available on our website at www.fuelcellenergy.com under Investors. For 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 our leadership team. I will now hand the call over to Jason for opening remarks. Jason.
Thank you, Tom, and good morning, everyone. Thanks for joining us on our call today. I want to start by offering prayers and support to the people of Ukraine who are suffering. While we do not have operations in Ukraine, we are hoping for the restoration of peace in the face of the humanitarian crisis. We also launched a matching gift program in support of the overwhelming interest of the FuelCell Energy team members to support the citizens of Ukraine.
In our first quarter, we made continued progress in executing our Powerhouse business strategy, including the publication of our first sustainability report, making clear our short-term net zero targets for Scope 1 and Scope 2 emissions to be achieved by 2030 and our longer-term 2050 Scope 3 commitment, reimagining our global brand to better reinforce our agenda to decarbonize power and produce hydrogen, expanding our carbon capture product development in Canada, working with Canada's Clean Resource Innovation Network, which includes Chevron Canada, Shell Canada, Suncor Energy, and Canadian Natural Resources Limited, growing revenue by over 100% year-over-year and working to define our company as a global leader in decarbonizing power and producing hydrogen. Mike and I look forward to providing some insight around these activities and the other first quarter results in the coming slides.
As I always do on these calls, I'd first like to provide a brief overview of the company. As shown on slide three, FuelCell Energy achieved annual revenues for fiscal year 2021 of almost $70 million, which came from three revenue categories, service and license, advanced technologies, and generation, all of which represent diversified sources of recurring revenue under multi-year contracts. Over the past two fiscal years, we have had no revenue from product sales. However, in the first quarter, product sales returned to our revenue mix as we delivered six replacement modules to service POSCO Energy's existing installations in South Korea under our recent settlement agreement with POSCO Energy.
With the market once again open to us as a result of the agreement, we are optimistic that we will see revenue from new product sales in South Korea in addition to sales of replacement modules on a going-forward basis. We are also looking forward to building our sales pipeline in other Asian markets as well as select countries in Europe, the Middle East, Africa, and North America, where we have made it a priority to target product sales. Turning to slide four. As a company, we are committed to our purpose of enabling a world empowered by clean energy. We believe that our technology is well-positioned as every industry and every company will be impacted by the transition to net zero. In parallel, organizations must solve for energy security and energy independence, which represents important macro themes for our company.
The world will always need reliable 24/7 power created in an environmentally responsible manner. Therefore, when it comes to what we do, we believe FuelCell Energy is uniquely positioned to assist customers on a safe, secure, and practical path to carbon zero. How we do this is by decarbonizing power and producing hydrogen. We believe we have the only technology that can capture CO2 while producing power and hydrogen, produce hydrogen, power, and water simultaneously, produce hydrogen in multiple ways, for example, using electricity and water or biogas. FuelCell Energy's technology provides localized solutions for clean energy that deliver real-time benefits to the communities in which our platforms operate and reduce Scope 1 and 2 emissions.
We do this in a manner which supports high standards of living and economic growth while protecting the environment, minimizing land use when compared to wind and solar projects, avoiding costly transmission build-outs, and adapting to new resource challenges. This purpose drives our strategic focus and the work we are passionate about doing. Next, I would like to turn the discussion to business results and corporate development during the quarter, summarized on slide five. Our quarter was defined by execution against our backlog, including achieving commercial operations of the LIPA Yaphank project, recognition of product revenue through the sale of 6 modules to a subsidiary of POSCO Energy in South Korea, successfully demonstrating the advancement of our carbon capture capabilities by achieving a technical milestone under our joint development agreement with ExxonMobil Research and Engineering Company, and receiving a carbon capture project award from Canada's Clean Resource Innovation Network.
Overall, I'm very pleased with the progress our team has made in advancing our long-term goals, including executing on our existing backlog. Commercial operation commenced in early January on the 7.4 MW utility-scale LIPA Yaphank project. The project has been added to our generation portfolio, bringing the total megawatts driving recurring generation revenue to 41.4 MW. This is an important step forward to continue to enhance the recurring revenue profile of FuelCell Energy. With respect to the 7.4 MW project at the U.S. Navy submarine base in Groton, Connecticut, we're in the process of repairing and upgrading a mechanical component that was not performing according to engineering specifications. Upon completion of the repair, upgrade work, and reinstallation of the mechanical components at the project site, we will restart the process of commissioning the project.
Let me be clear, this did not meet our expectations for delivery, and I appreciate the efforts and focus of the FuelCell Energy team as they work to put us on a path to achieving commercial operations. Once fully operational, incorporation of this platform into a microgrid is expected to demonstrate the ability of FuelCell Energy's platform to increase grid stability and resilience while supporting the U.S. military's efforts to fortify base energy security and demonstrate the U.S. Navy's commitment to clean, reliable power with microgrid capabilities. The Toyota project at the Port of Long Beach, a 2.3 MW tri-generation platform, will produce electricity, hydrogen, and water, offering a unique set of capabilities from a single platform. FuelCell's platform equipment has been built and delivered to the site, and civil construction work is underway.
When it achieves commercial operation, this power plant will deliver carbon-neutral electricity, green hydrogen, and water, enabling Toyota to avoid water consumption in a region experiencing extreme drought conditions, enhances operations through a more reliable power, and advance both passenger vehicle and Class 8 heavy-duty truck hydrogen transportation. Hydrogen has the opportunity to fully repower the transportation sector. Second, having executed a favorable settlement agreement with POSCO Energy and its subsidiary, Korea Fuel Cell, we sold and delivered via Ex Works the first six of the initial 12 modules ordered under the settlement agreement to Korea Fuel Cell, resulting in $18 million in realized product revenue in the first fiscal quarter of 2022. We have planned production of the additional eight modules required to be purchased by Korea Fuel Cell under the settlement agreement across the balance of the calendar year.
This settlement agreement not only provides FuelCell Energy with the opportunity to sell modules to Korea Fuel Cell for POSCO Energy's existing customers, but importantly confirms our access to the South Korea and broader Asian markets. My third key message is that we have successfully achieved a significant technical milestone in the development of our carbon capture application under our joint development agreement with ExxonMobil Research and Engineering Company. FuelCell Energy's unique value proposition for carbon capture is that we believe we are the only carbon capture technology that can capture carbon while producing power and hydrogen at the same time. Other carbon capture technologies are a parasitic load on the power source. In other words, they require a significant amount of power to operate.
One of the key focus areas of the JDA with Exxon has been to increase the power the cells can produce while concentrating and capturing carbon dioxide. This is important because the more power we can produce while capturing carbon, the more revenue can be generated through either the sale of electricity or avoiding the cost of purchasing electricity from other sources, thus lowering the cost of capture. We believe that achievement of the milestone is an indication that the JDA has yielded cell improvements that may enhance the economics of carbon capture with our carbonate platform. Fourth, we are a clean technology energy company, 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.
We have shared our commitment to environmental, social, and governance issues through the issuance of our first sustainability report in early February. Although much of the work isn't new, we are proud to establish a solid ESG reporting baseline, and we will work to improve both our performance and disclosure in the coming years. Lastly, I'm keeping the strategic comments on this call fairly short as we look forward to hosting our 2022 Investor Day next week on Wednesday, March 16th at 10:00 A.M. Eastern. We are excited about our prospects and our future and anticipate sharing more about our vision, capabilities, and team with everyone on the webcast. Now I will turn the call over to Mike to discuss this quarter's financial results in more detail. Mike?
Thank you, Jason, and thanks to those that joined our call today. You have heard from Jason about a number of significant developments that took place during our first quarter, and now I would like to spend a few minutes providing some details regarding our financial results for the first fiscal quarter of 2022. Please turn to financial highlights shown on slide seven. In the first quarter of fiscal year 2022, we reported revenues of $31.8 million compared to $14.9 million in the first quarter of fiscal year 2021, an increase of approximately 114%. Looking at revenue drivers by category, product revenues returned this quarter totaling $18 million, reflecting the Ex Works delivery of six fuel cell modules to a subsidiary of POSCO Energy under the recent settlement agreement.
Service agreement revenues decreased 56% to $2.2 million from $4.9 million. Revenue recognized in the first quarter of fiscal 2021 related to module exchanges at several plants and routine maintenance activities. The decrease in revenues for the first quarter of fiscal 2022 is primarily due to the fact there were no new module exchanges during the quarter compared to the prior year period. Revenue from service agreements is variable on a quarterly basis depending on the number of module exchanges in the period. Generation revenues increased 53% to $7.5 million from $4.9 million, in part due to the inclusion of the 7.4 MW LIPA Yaphank project in January 2022 and the 1.4 MW San Bernardino Renewable Biofuels project in July 2021.
In addition, generation revenues increased due to the higher operating output of the generation fleet portfolio as a result of investments in maintenance activities made in the prior year. Advanced technologies contract revenues decreased 19% to $4.1 million from $5.1 million. Compared to the first fiscal quarter of 2021, advanced technology contract revenues recognized under the Joint Development Agreement or JDA with ExxonMobil Research and Engineering Company or EMRE were approximately $1.4 million lower, offset by an increase in revenue recognized under government contracts of $0.3 million. As Jason mentioned, during the three months ended January 31st, 2022, the company achieved the first technical milestone under the JDA. As a result, the company will receive a payment of $5 million.
The company has not recognized revenue in connection with this milestone achievement as a result of our prior agreement with respect to a future potential demonstration project with EMRE at ExxonMobil's Rotterdam Refinery in the Netherlands. Under this agreement, we agreed to either make an investment in the amount of $5 million in the Rotterdam project or discount EMRE's purchase of the company's fuel cell module and detailed engineering design for the Rotterdam project by the same amount. The company will continue to evaluate revenue recognition of this milestone achievement as project negotiations with ExxonMobil or a subsidiary thereof evolve. Gross loss for the first fiscal quarter of 2022 totaled $2.9 million compared to a gross loss of $3.6 million in the comparable prior year quarter.
The decrease in gross loss is in part a result of revenue recognized in connection with sales of modules during the quarter to a subsidiary of POSCO Energy. In the quarter, the company realized lower service margin due to no new module replacements occurring in the quarter, $3 million of non-recoverable costs related to the construction of the Toyota project, and a $1 million asset impairment charge related to a legacy conditioning facility at our Danbury, Connecticut headquarters. Operating expenses for the first fiscal quarter of 2022 increased to $41.9 million from $10.8 million in the first quarter of 2021. Administrative and selling expenses in the first quarter included $24 million of non-recurring legal fees associated with the settlement of the POSCO Energy proceedings.
Excluding these fees, the increase in administrative and selling expenses related to higher sales and marketing and consulting costs as the company is investing in rebranding and accelerating its sales and commercialization efforts, and an increase in compensation expense resulting from an increase in headcount. Research and development expenses of $5 million during the quarter reflect increased spending on the company's hydrogen commercialization initiatives compared to the prior year period. The loss from operations totaled $44.8 million in the first quarter of 2022 compared to $14.4 million in the comparable prior period. Net loss was $46.1 million in the first quarter of 2022 compared to $46 million in the prior year period. Both periods were impacted by non-recurring expenses.
The first fiscal quarter of 2022 was impacted by the previously mentioned non-recurring legal expense of $24 million associated with the settlement of the POSCO Energy proceedings. The first quarter of 2021 was impacted by charges associated with a change in the fair value of a warrant liability issued to a legacy lender under a now extinguished credit agreement totaling $16 million. Additionally, the first quarter of 2021 included a loss on extinguishment of debt and a loss on extinguishment of a preferred stock obligation of subsidiary totaling $12.1 million. Interest expense was also lower in the first fiscal quarter of 2022 compared to the first fiscal quarter of 2021. The net loss per share attributable to common stockholders in the first fiscal quarter of 2022 was $0.11 compared to $0.15 in the comparable prior year quarter.
The lower net loss per common share reflects a lower net loss attributable to common stockholders despite the $24 million or approximately $0.07 per share of non-recurring legal expense associated with the settlement of the POSCO Energy proceedings. The lower net loss attributable to common stockholders was partially offset by a net loss allocated to non-controlling interest totaling $5.5 million for the LIPA Yaphank project tax equity financing transaction, or approximately $0.01 per share. There was no comparable net loss for the prior year as the LIPA Yaphank project tax equity transaction closed and the project began operating in the first quarter of fiscal 2022. The lower net loss per share was also a result of higher weighted average shares outstanding due to share issuances since January 31st, 2021.
Adjusted EBITDA totaled - $13.6 million in the first fiscal quarter of 2022 compared to adjusted EBITDA of - $7.4 million in the first fiscal quarter of 2021. Please see the discussion of non-GAAP financial measures, including adjusted EBITDA, in the appendix of the slide presentation or in the appendix at the end of our earnings release. Next, please turn to slide eight for additional details on our financial performance and backlog. The chart at the left-hand side of the slide graphically shows the numbers we just reviewed for the first quarters of fiscal years 2021 and 2022.
Looking at the right-hand side of the slide, we finished the quarter with a backlog that was approximately 3% higher year-over-year at approximately $1.31 billion, reflecting continued project build execution and adjustments to our generation backlog and the addition of product sales backlog from the module order from a POSCO Energy subsidiary. Module exchanges with higher future output and expected revenues, and the inclusion of the 2.8 MW project in Derby, Connecticut, which was awarded in fiscal year 2021. Our advanced technologies backlog reflects new contracts from the U.S. Department of Energy, partially offset by work performed under our joint development agreement with EMRE. Turning to slide nine, I would like to bring some perspective to the company's enhanced liquidity and continued investments in our project assets.
In the first fiscal quarter of 2022, we closed a tax equity financing transaction with a subsidiary of Franklin Park for our LIPA Yaphank project, which delivered $12.4 million in gross proceeds to FuelCell Energy. As of January 31st, 2022, we had total cash and cash equivalents of approximately $405.4 million. This includes approximately $377 million of unrestricted cash and cash equivalents represented by the darker blue bar on the chart in the center of the slide, and $28.5 million of restricted cash and cash equivalents represented by the lighter blue bar. On the right-hand side of the slide is a chart illustrating our total project assets, which make up our company-owned generation portfolio. We continue to develop, construct, and grow our portfolio project assets.
Investments to date reflect capital spent on completed operating projects, as well as capital spent on projects currently in development and construction. At the end of the first quarter of fiscal year 2022, our gross project assets totaled approximately $256.1 million, which excludes accumulated depreciation. As detailed on slide 18 in the appendix of this presentation, our generation portfolio totaled 75.3 MW of assets as of January 31st, 2022. This includes 41.4 MW of operating assets and 33.9 MW of projects in process. As projects in process begin commercial operation, they are expected to contribute higher revenue.
Additionally, as these projects in process reach mechanical completion and/or achieve commercial operation, we expect to see long-term tax equity financing, such as the example I previously discussed, as well as back-leveraged debt transactions to further recycle capital back into the business. We are pleased with the continued progress being made. From a financial perspective, we believe we are well-positioned to invest in capabilities to support the future growth and product commercialization opportunities. I will now turn the call back over to Jason to further discuss these initiatives.
Thanks, Mike. On slide 11, I wanna share some highlights of our recently updated Powerhouse business strategy to take us to the next phase of the company's journey toward long-term growth. Grow. We want to pursue growth in markets and customer segments where we see significant opportunities. Scale to achieve growth. We plan to scale our existing platforms by investing in extending and deepening our leadership and total human capital across the organization. Innovate. Over our 50-year history, we have never stopped innovating. We plan to continue to innovate for the future to enable our participation in the growth of the hydrogen economy and carbon capture and to deliver on our purpose. Our Powerhouse business strategy has evolved to focus on growth.
The energy transition is happening at an accelerated pace, and we believe our platform technologies will play a significant role in helping the global society achieve our collective sustainability goals. Thus, we are moving forward with making investments in capacity, capability, and global talent, which we believe will enhance our ability to capture more of the market opportunity over the coming years and deliver enhanced shareholder returns over the long run. Looking at slide 12, I am proud of the progress we are making as an organization, including the recent launch of our new brand identity. Evolving the FuelCell Energy brand is intended to be a signal to our customers, communities, team members, and you, our stockholders, of our absolute commitment to enabling a safe, secure, and practical approach to realizing the goals set forth in our inaugural sustainability report.
Our brand encompasses our purpose, what we do, and how we do it. We are focused on enabling a safe, secure, and practical path to carbon zero, and we help to decarbonize power and design and build fuel cells that produce hydrogen. Three design points define the new identity. First, it represents the journey we are helping our customers take to carbon zero. The design's use of gradients signals the journey our customers are taking to carbon zero. Additionally, the reductive footprint of the broader design system reinforces how frictionless adoption of clean energy can be. Second, it takes inspiration from our DNA. Fuel cells don't combust their fuel, but are fuel-flexible in that they can run on biogas, renewable natural gas, hydrogen and natural gas blends, natural gas or a mixture of those fuels and hydrogen.
In all cases, the fuel cell produces a chemical reaction which results in electricity. The design of the logo is inspired by the bonds between the molecules that are broken and formed in the chemical reaction in our fuel cells. Its letters formed incorporates FCEL, our stock ticker symbol. If you look closely, the logo also forms a zero, representing our customers' journey and ours toward net zero. It is also an integral part of our commitment to global net zero goals. On slide 13, we highlighted the successful launch of operation of our 7.4-MW LIPA Yaphank project. This project can power approximately 7,500 homes.
Situated on a landfill that is being transitioned to a clean energy park, the fuel cell delivers to Long Island the benefits of our distributed power solution, namely clean and resilient baseload power and improved air quality versus conventional power generation sources, and reduces Long Island's dependency on transmission and the incremental investment required to build new long-distance high-voltage transmission lines. This project has been added to our generation portfolio, and we are working to complete the capital structure that will allow us to return significant capital back to FuelCell Energy, while also providing increased recurring revenue and margin going forward. Turning to slide 14, I encourage you to download and review our sustainability report that I mentioned earlier.
This inaugural sustainability report is meant to outline how we fulfill our corporate purpose by actively managing environmental, social, and governance risk, our active focus on diversity, equity and inclusion, and opportunities material to our business and stakeholders. In fulfilling our corporate purpose, we find ourselves in the enviable position of helping customers achieve their own sustainability goals by reducing their Scope 1 and 2 emissions and enhance the communities in which they operate through improved air quality, more efficient land use than intermittent resources, and generating local tax revenues. Additionally, we have committed to a net zero target for our Scope 1 and 2 emissions by the year 2030 and to net zero by 2050 for our Scope 3 emissions.
Before I open the call to questions, I wanted to remind everyone one last time that on Wednesday, March 16th at 10:00 A.M. Eastern Time, we will host a virtual investor day to give a deeper explanation of our strategy and our plans to bring new technologies to market. We are excited to share our thoughts on topics such as the company's long-term growth opportunities and strategy, business execution, capital allocation priorities, global team, and plans to drive long-term shareholder value. You can register for and view the Investor Day presentation by accessing the link on the events calendar on the investor page of our corporate website. We welcome your participation. With that, I will now turn it over to the operator to begin Q&A.
At this time, I would like to remind everyone, in order to ask a question, press star one. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Jed Dorsheimer with Canaccord Genuity. Your line is open. Jed Dorsheimer, your line is open.
Sorry, I had it on mute. Hey, thanks for taking my question. Just around ExxonMobil, I was wondering if you could provide more details and substance to the breakthrough. It clearly sounds like it could be game-changing between, you know, blue versus gray and green hydrogen. That's my first, and then I have a follow-up.
Jed, hey, good morning. Thanks for joining the call. This is Jason. With respect to ExxonMobil, you know, the work that we're doing with them is really focused on carbon capture, and our platform has the ability to capture carbon from an external source and also produce and deliver hydrogen. The work that we're doing and our focus is on ensuring that we maintain, you know, optimal performance from a power output standpoint, as well as optimal performance in terms of our ability to concentrate carbon and capture that carbon for whatever the use may be, whether that be sequestration and/or utilization. As we've laid out the work plan with ExxonMobil Research and Engineering, we set a number of milestones that are really, you could think about them as mile markers.
Those mile markers give clear indication that we're progressing along the things that we think are most technically important to demonstrate that the technology will perform at a level that will do a few things. One, that we will efficiently concentrate, capture, and separate carbon. Two, that we'll maintain, you know, power density or power production. Three, that we can do that efficiently across a number of different flue streams, which give us the ability, we believe, to ultimately deliver a much lower cost of carbon capture as a result of being able to sell power and/or replace power that's being used at that particular facility. You know, this achieving the milestone is just another mile marker along the way to demonstrate that our technology actually has the ability to be effective in carbon capture.
Got it. I guess as my follow-up, and perhaps a bit of an extension here, you know, so far in the U.S., you know, it's been, you know, the commercialization has been slower, I guess, would probably be the right adjective. You're now looking at kind of a pivot or expansion, I guess, into the Korean markets. One of the issues in the U.S. has been sort of an adoption of green hydrogen or the use of electrolysis. Maybe you correct me if I'm wrong in that assumption.
I guess that's why I was asking with respect to the ExxonMobil, and as you look at Korea, there seems to be sort of a broader understanding of the use of gray and blue. Is there something else that's going on in terms of that expansion into Korea? Do you see that as a more favorable nation, if you will, or region for your technology? And/or do you see, with what's coming out of the ExxonMobil, a rethink in the U.S. that may shift some things around?
Jed, no, great question. We believe that both Asia and Korea specifically, as well as Europe, is ahead of where the U.S. is today with respect to announcements on projects around hydrogen. However, that being said, you know, we do think that the current infrastructure package and the $8+ billion that have been announced in support of these hydrogen hub projects are a good indication of the U.S. intent to try to catch up, if you will. In Korea, we are excited about the opportunity because, as you know, over the last six years, we've effectively been out of the largest fuel cell market in the world.
Now, with the settlement and our ability to be back in that market in a way in which we can actively pursue opportunities, we think that our platform, our existing carbonate platform, is well-positioned because those projects in Korea tend to be large-scale utility projects that actually also have a need for the high-grade heat that our platform provides, which is also a differentiation between us and other fuel cell players. If you look at or one of our projects in Korea that exists today, it's a 20-MW project that's grid connected and then also connected to the district heating system where we provide high-grade heat for that. On a core business platform, we're excited about the opportunity, and we think we're well-positioned to go after utility scale projects in that market.
With respect to hydrogen. The government has announced a very robust, you know, set of objectives around hydrogen, and we think that gives us an opportunity not only on our Tri-gen platform, but also the work that we're doing to commercialize our solid oxide technology because we think hydrogen is gonna be an important part of the energy economy on a go-forward basis in Korea. We're very optimistic about that. When you think about one of the early adoption opportunities around hydrogen utilization being mobility applications, you know, just like Toyota, you know, here in the United States and in Japan, Hyundai in Korea is also very committed to fuel cell electric vehicles.
We think that there's a demand that's being created for hydrogen in that market beyond just the government programs there that we think are gonna play well for our overall market opportunity in Korea. If you just kind of ladder up and broadly look at it, you know, if you think about what the Hydrogen Council has put out there between, you know, if you look at hydrogen production, investment needed for transmission and distribution, although we think our distributed capabilities can help mitigate some of that, and the in-use applications, I mean, you're talking about, you know, the Hydrogen Council suggests over $700 billion in investment by 2030 against those three categories. We think Asia and Europe are gonna lead in that regard.
We're excited about the opportunity to remove the cloud that we had across the Asian markets.
That's helpful. I'll jump back in queue and look forward to the Analyst Day.
Okay, great. Thank you.
Thanks, Jed.
Our next question comes from Colin Rusch with Oppenheimer. Your line is open.
Thanks so much. Guys, can you quantify the exposure you have on natural gas prices relative to your PPAs and how we should think about generation gross margins on a go-forward basis?
Good morning, Colin. This is Mike. On our power purchase agreements as far as natural gas goes, the way we think about that is kind of twofold. One, as you look at our portfolio today, for a large part of that portfolio, the off-taker is actually procuring natural gas.
As we look at some of our larger projects, for instance, like the Yaphank project that came online this quarter, and there is fuel price exposure there, but what the company does in those examples is puts long-term contracts in place, so we actually have a seven-year fixed price agreement for that, and you know, we'll follow natural gas prices and continue to extend that when it makes sense in the future. That's really our strategy around mitigating increase in natural gas prices, Colin.
Yeah, Colin, just to add maybe a little bit to that. You know, as a company where we do have gas exposure, right, we don't take a fundamental view on gas prices. We work to hedge those risks off, and we'll continue to do that, and we'll leg in as, you know, years pass, we'll leg in more to limit that exposure. You know, as you know, it's challenging to go get a 20-year long-term commitment on nat gas, and may not even be a good decision to do that anyway. We do have an active program around how we hedge and manage those risks.
Okay, great. I have a couple other nuanced questions I'll take offline around that.
Okay.
Yeah, moving forward toward the product backlog, you know, with the existing finished goods inventory that you have, you know, how much of that backlog can really be met with the existing configuration that you have in that finished goods backlog or inventory? Are there some developments that you guys need to bring forward on the technology to meet that backlog?
Colin, you're asking about our current backlog of projects, which equates to almost 34 MW in backlog. Is that what you're referring to? Is it-
You know, with the product backlog that you guys have that you're announcing the $60 million versus the existing inventory, you know, if all of the inventory that you have on hand can actually be sold against that product backlog or if there's product development that needs to happen to hit the spec for the orders that are in that backlog?
Colin, this is Mike. I'll take that one. So as you saw come through, this quarter as a result of the settlement agreement that we put in place with POSCO Energy, as part of that settlement agreement, POSCO Energy placed an order for 20 modules. We shipped ex works in the first quarter six modules that came out of finished goods inventory and recognized $18 million of revenue. And that's our current configuration to answer your question around configuration, that's our current configuration, 1.4 MW modules. We will continue over the course of this year to build inventory to satisfy the balance of that commitment. So no, we don't need to do any technology changes, no configuration changes.
It's our standard 1.4 MW modules to satisfy service needs of POSCO's existing fleet in Korea.
Oh, that's super helpful. Thanks so much, guys.
Yep.
Our next question comes from Mark Strouse with JP Morgan. Your line is open.
Yeah, good morning. Thanks for taking our questions. Just a follow-up to Colin's question there, and I'm sorry if I'm missing this, but.
Can you help me reconcile the six modules that you've delivered to POSCO already and the eight that you're expecting over the balance of the year? How do I tie that with the 20 modules that you're expecting from POSCO?
You want me to take it?
Sure, Mark. Good morning. This is Mike again. The way the agreement with POSCO was structured was there's essentially two orders that POSCO committed to: a firm order, which was placed in January for the initial modules, and then they committed to placing a second order for the balance of the 20 by the end of June of 2022. We would expect to see that second order by the end of June of 2022 per the settlement agreement, and we'll deliver against both of those this year.
Yeah. Mark, the initial order is 12, right? We've shipped via Ex Works or delivered via Ex Works six of those. The remaining eight will be ordered in June, but the expectation is in calendar year 2022, we will deliver all 20 of those modules to POSCO Energy/Korea Fuel Cell Company, which is their subsidiary that's actually taking delivery of our modules. The other thing I would just point out about that as you think about the market for us in Korea with the settlement, and you think about the installed base in Korea that we have with our technology, through that settlement, we are the only, you know, source of providing those replacement modules on a go-forward basis.
We expect that will create additional opportunity for us over time, just on that book of business, if you will, alone.
Okay, that's helpful. Actually, Jason, you started to answer my follow-up question there, just the ability to open up the rest of the Korean market outside of POSCO. I know it's still early, but just qualitatively speaking, can you talk about any kind of inbound requests that you're getting from customers outside of POSCO in that region?
Yeah. If you think about our existing business in Korea and the business that POSCO had done in Korea, you know, the customer in those markets are the GenCos, so not really POSCO itself. You could think about them as formerly a channel partner for us, if you will, in that market that had rights to sell and offer our solution across Asia. Those customers, the GenCos, we are, you know, seeing interest from those GenCos. In fact, you know, we've been building out a sales team there now, which we didn't have to have before because POSCO was our channel partner. We are actively engaged in real conversations about opportunity there.
Because they tend to be larger projects, you know, they are projects that take a little bit of time to develop. You know, the largest fuel cell platform in the world exists today leveraging our technology in Korea, and it's 59 MW, right? These are large scale projects. We feel pretty good about our technology to serve the GenCos, given megawatt scale, and the attractiveness of the high grade heat that we can deliver off of our existing platform.
Right. Okay, that makes sense. Thank you very much.
Thank you.
Our next question comes from Laurence Alexander with Jefferies. Your line is open.
Good morning. I may have missed this. Have you framed just how many megawatts of capacity are installed in South east Asia where replacement modules could be needed in the next three to five years?
Yeah. In Korea, with customers that were originally served, if you will, by POSCO Energy through our channel partnership, for lack of a better expression, there's about 140 MW installed that fall into that category that ultimately, beyond what module replacements POSCO Energy may have already done, beyond the module replacement that the 20 modules that we are providing to POSCO Energy or Korea Fuel Cell Company for replacement, ultimately, there will be most likely additional opportunity for module replacements for the rest of the installed base.
Is the module replacement economics stable? That is, can we use the POSCO agreement as a proxy for the future economics, or how might that evolve over time?
I would think that over time, you could probably use that as a watermark, because, you know, we would suspect that, you know, as time moves, you know, you might see pricing move up or, you know. I would not suspect, you know, downward movement on pricing. Time and market conditions will tell. I would suggest maybe using that as a watermark today.
Thank you.
Thank you.
Our next question comes from Leo Mariani with KeyBanc Capital Markets. Your line is open.
Hey, guys. I was hoping you could provide a little bit more information about the nature of the delays at the Toyota plant here. Kind of what's your best guess as to when you might be able to get this up and running? I guess do you also have like a you know an annualized revenue number for what you might see when that plant comes online?
Leo, good morning, and thank you for your question. With respect to the Toyota project in Long Beach, California, that project, as we indicated a little bit earlier, is in construction today as we speak. That project, we expect that the delivery of that project is targeted in 2023. We'll see substantial work completed around the construction of that project in this calendar year. You know, we feel good about where we are on project development for that project.
We've not put out long-term revenue numbers yet on what our expectations are around that Toyota project, but it is under a long-term power purchase agreement, both for the hydrogen, for that project, as well as we are under a tariff in California for the power.
Okay. No, that's helpful for sure. I guess just wanted to jump over to your 14 MW Derby, Connecticut project. That seems obviously very sizable in the portfolio. Do you guys have a better sense of what roughly the in-service plan is there in terms of date when that may come online?
Yeah, Leo, thank you for the question. This is Michael Lisowski, Chief Operating Officer with FuelCell Energy. We have mobilized and launched the construction phase and site civil construction, as well as mechanical assembly of our Derby project. We have made significant progress in equipment deliveries and mechanical assembly this year. In parallel with that work, we're continuing to advance the electrical interconnection process that's required for this facility to come online. Both of those, I'll call it, key milestone activities are continuing to advance well, and we're moving that project forward in advancing it towards commercial operation. I would say, you can expect to see continued advancement of the project through the balance of this calendar year and looking ahead to commercial operation in 2023.
Okay. Some kind of 2023 startup. Okay. That's helpful. Just on your ExxonMobil JV, correct me if I'm wrong, but I think that was maybe scheduled to expire sometime in April. Obviously, you hit a milestone recently. Is that in process of, like, being extended or re-upped here? What can you tell us about that?
Yeah. The current JDA two, as we call it, is set to expire at the end of April. However, we are in discussions with Exxon about the next phase of what we do from both the development work that we're doing, in addition to the prospects around the demonstration project in Rotterdam, which Exxon has, you know, publicly talked about. The way that you could think about it is the milestone that we hit, like I indicated earlier, is a mile marker that indicates that the technology can do the things that we need to be able to demonstrate that we can be effective in capturing carbon, as well as producing power at the same time. As a result of hitting that milestone, that gives us more confidence around the extended nature or opportunity that exists between us and Exxon.
As you know, I can't speak for Exxon, but you know, Exxon has, you know, created through their reorganization a separate business unit that's called their low carbon business unit. One of the aspects of that business unit is delivering carbon capture as a solution for their company. You know, we will work very collaboratively with Exxon as we have done over the last, I believe, 10 years we've worked together. We're in the process of negotiating what the next phase of our development relationship looks like.
Okay. That's helpful color. Then just lastly, y'all did talk about expectations for other revenues outside of POSCO and in South Korea. Would you expect those to be significant here in fiscal year 2022, or you think that's more of a fiscal year 2023 item?
You know, just in terms of the time it takes on these projects, and even if you get, you know, an order 60 days from now, right, to be able to put that order into our production schedule, ship a project, do all the permitting, all the things that you need to do, the construction around that project, you should probably, you know, think about that more as a 2023 than 2022 in terms of actually being able to realize revenues around that.
Okay. Thank you, guys.
Again, if you would like to ask a question, please press star one. To allow time for everyone to ask a question, please limit yourself to one question and one follow-up. Our next question comes from the line of Chris Souther with B. Riley. Your line is open.
Hey, guys. Thanks for taking my question here. Can we maybe talk a little bit about the Scotford project in Canada? Maybe just of those three joint owners you're working with, who are you working with the most in development there? I wanted to get a sense of how this could develop more future opportunities to collaborate with, you know, any or all of, you know, Canadian Natural Resources, Chevron or Shell. That'd be great.
Chris, good morning, and thank you for your question. I'll ask Tony Leo, our Chief Technology Officer, to speak about the project and the work that we're doing with all of the partners that are engaged on this opportunity.
Yeah, you're right. It is a consortium of different oil sands companies, including some support from some Canadian government entities. The lead for the project is Canadian Natural, CNRL. They're our principal contact there. It is a Shell upgrader. That is jointly owned between Shell and CNRL and a few others. It's operated by Shell. The leader of that consortium is CNRL.
Maybe, Tony, you can just very quickly describe, you know, the carbon capture that we'll actually demonstrate from the upgrader facility itself.
Yeah. One way to think about that is that as we work on optimizing the performance of our cells and our stacks for carbon capture with ExxonMobil and just improving the technology in general, we do have a technology. The units that we make today in our Torrington factory are capable of doing carbon capture. Those units can be suitable to do certain projects that have a very high CO2 value or power value or demonstration projects. This is a demonstration of capture from some of the process heaters in that upgrade facility, which will be capturing the CO2 from these process heaters as opposed to, say, a power plant or something like that. It's a good demonstration opportunity.
There are a variety of different options that they're looking at for what to do with the captured CO2. There will be more to come on that. It just happens to be a prime focus, decarbonizing the oil sands industry in general. They view this as a really attractive way to do that.
Got it. That's great to hear. I'll hop in queue. Thanks, guys.
Thank you.
Our next question comes from Praneeth Satish with Wells Fargo. Your line is open.
Thanks. Good morning. Just wondering if you could give us an update on your gross margin expectations for the year. I guess how much of the gross margin in Q1 was kind of weighed down by the inflationary pressures that we're seeing? And I guess when do you expect gross margin to turn positive? Just any commentary around margins would be helpful.
This is Mike. Thank you. Good morning, and thanks for joining the call. I'll provide a couple comments around gross margin. In the first quarter, it really wasn't weighed down by supply chain issues or cost pressures. We generally have long-term contracts in place for our materials. A couple things coming through gross margin that I would highlight. On the product side of the business, we did have a $1 million impairment charge, as well as about $2 million of variances and absorption costs. When you back that out of product, and these are disclosed in our 10-Q, when you back that out of product, you'd see around 16% margin on the sales of those modules.
Also on generation, we have a non-recoverable cost coming through related to the Toyota project of about $3 million. As we disclosed, there's also depreciation expense that comes through the generation portfolio. We like to look at the generation portfolio on an EBITDA basis. When you take those two numbers out, you're looking at about a 45% EBITDA margin on the generation portfolio. We've said historically that we target 45%-50% EBITDA margins there. Those are the comments that I'd make around our Q1 margins. We do not put out annual targets around margins or guidance.
Got it. No, that's helpful. Then, just my second question here is just if you could give us an update on your solid oxide commercialization progress. I guess, where does that stand today? Then, where do you expect that to be most meaningful in terms of, you know, industries, applications? I mean, you mentioned in South Korea, it's more gonna be your carbonate platform. Where do you expect the most success on the solid oxide side?
Praneeth, hi, this is Jason, and then I'll also ask Tony maybe to comment on this as well. You know, we've now demonstrated a couple of different things with our solid oxide technology. We've demonstrated the ability to have an efficiency, electrical efficiency of 92%+, so in other words, converting electricity and water into hydrogen. We are working on a project, and we'll do another demonstration where we'll show this year in working with Idaho National Laboratory from a nuclear application standpoint to show leveraging nuclear power and waste heat to be at 100% electrical efficiency. We are very actively advancing the commercialization of that platform.
As we've indicated even in our last quarter call, you know, we now, given the strengthening of our balance sheet, we are making more investments in that commercialization effort than we have historically. We think that the efficiency that we have, given that we're a high-temperature fuel cell, the architecture that we've chosen to leverage in our design gives us some advantages, as it relates to efficiency. We think that as you look to long-duration energy storage applications, the efficiency of our platform will play quite well in that type of an application. Given the size and distributed nature of the platform, we believe whether you're talking about producing hydrogen that's gray, blue or green, the ability to deploy our platform with high efficiency can be used at a number of different industrial applications.
Including things like, you know, manufacturing of steel or cement, provide the heat values that you need. We believe overall that hydrogen has the ability to be either a replacement or additive to all of the work that's going on around clean fuels, and particularly around the hard to electrify heavy industrial type opportunities. We think that we'll play quite favorably there given the efficiency of our platform. Tony, I don't know if you would add anything else to that.
The one thing I would add is that, you know, our focus has been developing a solid oxide platform that is versatile and that can address power generation applications, electrolysis applications, and energy storage. We demonstrated the power generation application a couple of years ago, actually, in a field trial that we did in Pittsburgh. We demonstrated the electrolysis, as Jason mentioned, at our labs in Danbury and later this year at INL. If you think about this high efficiency electrolysis, the high efficiency power generation, combine those together with stored hydrogen, and then you've got a really effective energy storage system. We're pretty happy with where we are in the technology for solid oxide right now.
Then Praneeth, I'd like to just go back to one thing that you also said as it relates to Korea. You know, beyond our carbonate platform, which we see as a more immediate opportunity, right? We also believe that our solid oxide technology has an opportunity to compete very effectively in that market as well as we commercialize that technology. You know, today, if we look at things that are on the shelf, that's our carbonate platform. We absolutely see opportunity for our solid oxide business in Korea as well. You know, the government has a very strong commitment, publicly stated commitment to making hydrogen a big part of the energy economy there.
Got it. Thank you.
Okay.
Our next question comes from Eric Stine with Craig-Hallum. Your line is open.
Hey, good morning. I'll just sneak one in here at the end. I might have missed it. Just curious if you maybe this is something you wait for the Investor Day next week, but just curious if you would update the you know the targeted break-even megawatt level for the generation portfolio.
Good morning, Eric. This is Mike. A little bit of color on the generation portfolio. This quarter, we finished construction and entered commercial operation for the LIPA Yaphank project. That brings the operating portfolio to 41.4 MW. If you look at what we have in backlog for the balance of the portfolio, it's another 33.9 MW. All up and running when these projects are built over the medium term, that'll bring the total portfolio to 75 MW. As far as revenues, last year, we had about approximately $24 million of revenues come through the financial statements related to the generation portfolio. That will obviously grow with the LIPA project coming online and other assets as they come online.
We haven't really put out a break-even target, but what we've said, as I said in one of my earlier responses, is we do target EBITDA margins for the portfolio in the you know 45%-50% range is really what the company targets.
Got it. I think in the past, you'd given a 50 MW kinda level. I mean, and I know that there was some dependence on what your level of product sales would be as well. I guess it seems like that's a number that probably is fairly appropriate, all things considered.
Yeah. I see where you're going with the question there. One of the reasons why the company strategically went down the path of building out this portfolio was to have a portfolio of long-term contracts. If you look at the average life of these contracts, it's over 15 years, right? With tier one customers that will be producing recurring revenues and cash flows for a long period of time, which obviously helps the EBITDA profile of the company. Now, with product sales coming back online as well, that improves the profile, obviously, because we'll get gross margin from those sales.
We really haven't, you know, put out a target that says, "Okay, if we do 50 MW a year of production, the company is either gross margin or EBITDA positive." As we continue to, you know, grow, mature, you know, have a larger backlog, we'll look at putting out some of those guideposts again in the future.
Okay. Thank you.
Yep.
We have run out of time for Q&A on today's call. I'll turn the call back over to Jason Few for closing remarks.
Chantelle, thank you. Thank you again for joining us today. We will continue to execute on our Powerhouse business strategy, working to deliver growth and optimize returns. The FuelCell Energy team is excited about our work to deliver on our purpose of enabling a world empowered by clean energy, and we are excited to deepen the understanding of the company's platforms, opportunities, and priorities next week during our Investor Day. Finally, I again want to offer our prayers and support to the people of Ukraine and all of those impacted. Thank you for joining, and have a great day.
This concludes today's conference call. You may now disconnect.