Earnings Call: Q2 2021

Jun 10, 2021

Good day and thank you for standing by. Welcome to the FuelCell Energy Second Quarter of 2021 Financial Results and Business Update Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tom Gelson, Senior Vice President of Finance and Investor Relations. Please go ahead. Thank you, Jason, and good morning, everyone. 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 Q2 of fiscal year 20 And the earnings press release is available on the Investor Relations section of our website at fuelcellenergy.com. Consistent with our practice, in addition to this call and Slide 2 of the presentation and the disclaimers included in the press release related to forward looking statements. The discussion today will contain forward looking statements including without limitation Statements with respect to the company's anticipated financial results and statements regarding the company's plans and expectations regarding the continuing development, commercialization and These forward looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today other than statements of historical facts are forward looking statements and include statements regarding our Forward looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from the results predicted, assumed or implied by the forward looking statements. We strongly encourage you to review the information in the reports we file with the SEC regarding these risks and uncertainties, in particular those that are in the Risk Factors section of our annual report on Form 10 ks and the cautionary statement concerning forward looking statements disclosed in the quarterly reports on Form 10Q. You should also review the section entitled cautionary statement concerning forward looking statements in this morning's earnings press release. During the call, we will use non GAAP financial measures when talking about the company's performance and financial condition. In accordance with SEC regulations, You can find a reconciliation of these non GAAP measures to the comparable GAAP measurements in this morning's earnings press release and the reconciliation For our call today, I'm joined by Jason Pugh, FuelCell Energy's President and Chief Executive Officer and Mike Bishop, Executive Vice President, Chief Financial Officer and Treasurer. Following our prepared remarks, we will be available to take your questions and be joined by other members of the leadership team. I'd now like to 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. We remain optimistic about the continuing momentum behind the global energy transition and We expect to play an important role with our primary technologies that include distributed generation, distributed hydrogen, long duration hydrogen energy storage and Carbon Capture. We are firmly committed to working hard to achieve revenue growth over time by an aid in decarbonization. For anyone who may be new to the story, we have included The overview shown on Slide 3. Taking a look at full year fiscal 2020 ended on October 31, We achieved revenue of $71,000,000 a double digit increase over the prior year. Our 3 largest revenue categories are service and licenses, advanced technologies and generation, all of which represent diversified sources of recurring revenue under multiyear contracts with investment grade customers. Looking ahead, we are focusing on opportunities to generate meaningful revenues from product sales. We see opportunities in markets, including the U. S, Asia and select countries across Europe and even domestically with certain customers who prefer to own the Under our PowerHouse business strategy, we have made it a priority to target product sales. We have been taking steps to rebuild our business development and go to market capabilities as an essential step in the strength and pillar of our PowerHouse business Strategy to ultimately support growth, recruit an unborn strategic talent, focus on market segments which deliver long term growth opportunities with repeatable business in carbon capture and separation in hydrogen applications and reenter targeted global markets and build client relationships. We have many customers Highlighted here on the slide, who are utilizing our multi featured fuel cell platforms. Many of these platforms integrate combined heat and power capabilities, Creating extremely high energy efficiency levels, while other installations enable micro grids, keeping essential resources powered And enhance grid resiliency and reliability. Some applications utilize on-site biofuels resulting in carbon neutral to carbon negative power. Certainly, we are not satisfied with the financial results that the company produced this quarter. If this is not your first earnings call, you've heard We continue to concentrate on improving the saving ratio across our organization and while our strategy implementation This morning. However, I want to stress that the financial results are a snapshot And not a complete reflection of the hard work and progress we are making in executing our POWERHOUSE business strategy. We will cover some of these actions and investments Now turning to Slide 4. As a company, we are committed to our purpose of enabling the world to live a life empowered As we are periodically reminded by extreme weather and other events, grid reliability remains a critical issue. FuelCell Energy is uniquely positioned to assist customers on their decarbonization journey and meet the grid reliability challenge with our broad product portfolio. It is important to highlight that we do not subscribe to the philosophy that the goal of decarbonization requires De industrialization or that developing countries around the world cannot participate in industrialized Carbonized base load power as a necessary complement to intermittent renewables in a manner which sustained high Next, I would like to turn your attention to some key messages for the quarter shown on Slide 5. The first is that we continue to make steady progress against our $1,300,000,000 of backlog as we execute our POWERHOUSE business strategy. In terms of rated capacity, completion of these projects will add 43.5 megawatts, more than doubling our current generation portfolio of Resolution of the interconnection issues on the 7.4 Megawatt project at the U. S. Naval Submarine Base in Groton, Connecticut, with 2 parties prepared to execute the current form of interconnect agreement, one of which is FuelCell Energy. The project Entering the final stages of construction and nearing completion with commercial operation currently expected in late summer assuming final signature The interconnection agreement is achieved. Related to project opportunities in the state of Connecticut, The Connecticut House of Representatives approved the passage of House Bill 6524 by 143 to 1 margin on May 24, Just last evening, the Connecticut Senate approved the passage of House Bill 6524 by a 26 to This bill includes several key provisions and amendments important to the state of Connecticut maintaining its Fuel cell manufacturing leadership position, the energy transition and the forecasted importance of distributed hydrogen positions Connecticut as a global leader in clean technology essential in achieving global sustainability objectives. The bill requires the Connecticut utilities to solicit proposals to acquire new fuel cell electricity generation projects that begin on or after July 1, 2021. Projects submitted under this mandate will be approved by January 1, 2022. Importantly, House Bill 6,524 provides preferences For projects that are cited on brownfields as Connecticut demonstrates its commitment to energy equity and for fuel cells that are manufactured in Connecticut. The bill now goes to Governor Lamont's desk for signing into law. At our 1.4 Megawatt Biogas Project at the San Bernardino, California wastewater treatment facility, construction is completed. We have received the necessary authorizations from the local utility on the interconnection process for this platform, and we have entered The commissioning stage of this project. We expect COD in our fiscal Q3 and once we achieve COD, fuel cell energy will Help yet another wastewater treatment plant turn off its flare, another example of fuel cell energy helping a customer to move Its decarbonization goes forward and eliminate methane flaring. Equipment, manufacturing, fabrication and early stage construction is The picture on the right side of the slide is a rendering of a first of its kind project. I want to unpack the value of generated Today, 100 percent of the state of California is in at least moderate drought Conditions and the areas surrounding Long Beach, California are classified in between severe and extreme, making the TriGain water production even more valuable to Toyota's water use at the port. This project is Together, these three projects totaled 24.5 Megawatts. After resuming production last year at our manufacturing facility with necessary COVID related safety enhancements, we have increased our annualized production rate rate of 45 megawatts by the end of this fiscal year. This increased production rate has been facilitated in part by our efforts in increasing hiring, reducing production, tax time and continued implementation of lean manufacturing principles. Operational excellence has always been extremely important to FuelCell Energy. And as validation of our efforts, I am proud that we have recently added ISO 45,000 and onetwenty 18 to our list of certifications. This recognition represents the world's international standard for occupational health and safety and is important to our company as it formally incorporates safety Toward the commercialization of our solid oxide power generation, storage and hydrogen electrolysis platform as well as growing our commercial capabilities. Our DOE supported programs continue to advance the design of our solid oxide stacks, efficiencies of about 90% with the capability to increase electrical efficiency to 100% with an external source of lasing. We are also executing the program to develop reversible And the 3rd key message today is our focus on strengthening our leadership in sustainability. The transition to clean energy continues to gain momentum as society looks for decarbonization solutions to address While grid reliability deteriorates, it missed challenges posed by climate change, underinvestment in infrastructure and cyber attacks. To meet this growing need, Fioso Energy remains focused on developing and deploying our distributed, decarbonized product portfolio solutions for some of the largest And now I will turn the call over to Mike to discuss our financial results in more detail. Mike? Thank you, Jason. Let's begin by reviewing financial highlights for the quarter shown on Slide 7. In the Q2 of fiscal year 2021, we delivered revenues of $14,000,000 compared to $18,900,000 in the Q2 of fiscal year 2020. Looking at revenue drivers by category, service agreements and license revenues decreased to $700,000 from 7,000,000 Reported in the comparable quarter of 2020, the decline in revenue is primarily due to the fact there were no new module exchanges during the quarter, while new module exchanges generated approximately $5,500,000 of revenue in the prior year quarter. The Q2 of fiscal year $6,200,000 from $4,600,000 primarily due to higher operating output of the generation fleet, which resulted in an increase generation revenues of approximately $800,000 and sales of renewable energy credits, which also resulted in an increase in generation revenues of $800,000 Advanced Technology contract revenues decreased to 7,100,000 from 7,300,000. Compared to the 2nd fiscal quarter of 2020, advanced technology contract revenues recognized under the Joint Development Agreement or JDA with Mobile Research and Engineering Company, or Emory, were approximately $400,000 higher during the 2nd fiscal quarter of 2021, reflecting continued performance under the JDA with Emory on fuel cell carbon capture solutions during the quarter. The increased revenues under the GDA were offset by $600,000 less revenue recognized $17,400,000 compared to $8,100,000 in the comparable prior year period as a result of higher gross loss and higher Gross loss for the Q2 of fiscal year 2021 totaled $4,800,000 compared to a gross Profit of $200,000 in the comparable prior year quarter. Impacting gross loss for the quarter were Lower service gross margin due to the fact there were no new module exchanges during the quarter and due to adjustments of Given the mix of activities in the quarter, these impacts were partially offset by lower manufacturing variances as a result of the increase in the annualized factory production rate. Operating expenses for the 2nd fiscal quarter of 2021 increased to $12,600,000 from $8,300,000 in the 2nd fiscal quarter of 2020. Administrative and selling Expenses in Q2 2021 included additional share based compensation of $800,000 due to the non cash Grants made in August November 2020 under our long term incentive plans. An increase in compensation expense and proxy mailing expenses Associated with the company's annual stockholder meeting also contributed to higher administrative and selling expenses in the 2nd fiscal quarter of 2021. Research and development expenses of $3,000,000 during the 2nd fiscal quarter of 2021 reflect increased spending on the company's hydrogen commercial Net loss was $18,900,000 in the 2nd fiscal quarter of 2021 compared to a net loss of 14 The lower net loss per common share despite a higher net loss attributable to common stockholders is due to the higher weighted average shares outstanding due to $11,300,000 in the 2nd fiscal quarter of 2021 compared to adjusted EBITDA of negative $3,300,000 in the 2nd fiscal quarter of Please see the discussion of non GAAP financial measures, including adjusted EBITDA in the appendix of the company's earnings release. Next, please turn to Slide 8 for additional detail on financial performance and our backlog. The charts on the left hand side of the slide graphically show the numbers we just reviewed for the 2nd quarters of fiscal years 'twenty and 'twenty one. Looking at the right hand Slide to the slide. We finished the quarter with backlog of approximately $1,300,000,000 a decrease of 1.5%. The backlog decrease was partially offset by the inclusion of $59,400,000 of generation backlog added during the quarter for the power purchase agreement for the 2.8 Megawatt project in Derby, Connecticut. This 20 year power purchase agreement was awarded as part of the competitively bid state sponsored Cash equivalents totaled $171,200,000 of which $32,100,000 was restricted Cash and cash equivalents represented by the green bar. On the right hand side of the slide, we have included a chart illustrating our Total project assets, which make up our company owned generation portfolio, which we continue to invest in. Investments to date include capital spent portfolio totaled 76.1 megawatts of assets as of October 31, 2021. This includes 32.6 megawatts of operating assets and 43.5 megawatts of projects in process. As projects in process come online, We are expected to contribute higher revenue and adjusted EBITDA. As noted in our release today, we are now targeting commercial operations Our San Bernardino platform in the Q3 of fiscal 2021 and commercial operations of the Groton Navy sub base project is targeted for late summer of 2021. Also as projects come online, we expect to seek long term project I will now turn the call back over to Jason. Thanks, Mike. Next on Slide 10 is a summary of the Four major technologies that FuelCell Energy is pursuing, each with its own significant total addressable market opportunity that Creates optionality for the company and is supported by our broad fuel cell platform portfolio. In distributed generation, we currently have 32.6 megawatts installed and operating with another 43.5 megawatts and our project backlog. Our distributed hydrogen and carbon separation solutions are commercially available, and as previously stated, Our carbonate distributed hydrogen solution will be implemented at the Port of Long Beach, California. Ours is the only platform we know of that can produce Both hydrogen and water. This capability has the potential to be particularly significant in areas with constrained water supply, as I previously Highlighted, hydrogen and long duration energy storage using our solid oxide technology is in advanced development And our unique carbon capture technology is currently being developed under a joint development agreement with ExxonMobil Research and Engineering We continue to advance our carbonate fuel cell platform's efficiency, capturing carbon from an external source while also producing power. As with our distributed hydrogen platform, we believe our carbonate fuel cell platform is the only system in the world that can capture carbon from an external source and produce more power at the same time. We can also directly capture our own carbon Next on Slide 11 illustrates our position across the hydrogen value chain. On the left, you will see a visual illustration of how FuelCell Energy has the potential to deliver Water and hydrogen and depending upon the configuration can deliver gray hydrogen, blue hydrogen when combined with our proprietary carbon capture technology for grain hydrogen when deployed utilizing biogas with or without carbon capture. And FuelCell Energy has spent 2 decades developing and refining in real commercial applications the technology to clean the impurities from our on-site biogas so that we can generate renewable energy and green hydrogen directly at the biogas source without expensive purification to pipeline quality. The platform we are currently building for Toyota at the Port of Long Beach is an example of tri gen delivering green hydrogen. Carbonate RAP, which stands for Reformer Electrolyzer Purification, can be utilized when co production of power is not required and it can deliver green hydrogen, Blue or gray? In essence, this is running our carbonate fuel cell in electrolysis, a reverse mode to singularly produce hydrogen. And third, we are advancing our solid oxide technology, which produces hydrogen through highly efficient, high temperature electrolysis. It can also operate in reverse mode using stored hydrogen to produce 0 carbon power. Slide 12 provides a more detailed overview of our solid oxide platform. A Pro Insight unit is currently running at our Danbury, Connecticut headquarters for testing the As Previously announced, we have been selected for a cooperative agreement from the U. S. Department of Energy to fund the design, manufacturer and testing of a large system at FuelCell Energy's Danbury, Connecticut facility to be delivered to Idaho National Laboratories. There, it will undergo rigorous testing to confirm the electrical efficiency as well as the ability to utilize nuclear power plant waste heat to obtain even higher efficiencies of up to 100%. This project represents a key step in FuelCell Energy's stack module that forms the core of the system is a modular building block easily scalable for larger systems up to gigawatt scale. Just last week, Senator Chris Murphy and Congresswoman Johanna Hayes visited us here in Danbury to witness firsthand electricity being converted To hydrogen by our prototype solid oxide unit, I think it is safe to say that both the Senator and Congresswoman are Excited about the development of our differentiated technology taking place in Connecticut, the role Connecticut can play in the energy transition and the opportunity to create clean tech jobs in the state they represent in Congress. We are thankful for their time, appreciative for their support Federal programs that encourage the continued and expanded deployment of fuel cells and encouraged by their leadership in important matters like decarbonization, Next, on Slide 13 is our POWERHOUSE business strategy, which is based on 3 core pillars of transform, strengthen We introduced the POWERHOUSE business strategy in January of 2020 to serve as a guidepost for our turnaround as We repositioned Pilso Energy to capitalize on the energy transition. The first phase of our plan was to transform the company by building a durable financial foundation and enhancing financial results. We have taken a number of important steps to strengthen the balance sheet, allowing us to finance new projects, Push forward with commercialization of breakthrough products and lower our cost of capital. Currently, we are focused on strengthening stage of our strategy and advanced product commercialization while adding top quality talent to our team. To fully deliver on the POWERHOUSE business strategy, Our 3rd pillar for long term growth is to penetrate markets and customer segments where our technology platforms can be the preferred solution. We are increasing our annualized production rate as previously mentioned and will generate operating leverage as we toward our 3 year long term targets and goals that we established with the launch of our POWERHOUSE business strategy looking ahead to fiscal year 20 Reaching these targets will require successfully executing against our 43.5 Megawatt project backlog and achieving commercial operation for each As I have explained in today's presentation, we are pursuing commercializing our advanced technology around RDP And solid oxide hydrogen and focusing on advancing the development of our carbon capture platforms for capturing carbon from external Each of which offers potential growth opportunities for our company. To conclude my remarks, I will review the key investment highlights to execute on our 3 year growth strategy. We have an exceptional leadership team and continue to add talent across the company. We are focused on taking care of Our customers, hitting our financial milestones and continually building upon our operational excellence while adhering to our core purpose. Our portfolio of innovative technologies has a potential key role to play in the global goals of decarbonizing the grid, We are working to implement our powerhouse strategy to strengthen our business, maximize operational efficiencies and position us for long term growth. Finally, we intend to be a leader in sustainability and environmental stewardship by delivering on sustainability through our technology and the I will now turn it over to Jason Stevenson to begin Q and A. We will pause for just a moment to compile the Q and A roster. Your first question comes from the line of Colin Rusch It's from Oppenheimer. Your line is open. Thanks so much. Guys, can I get an update on the pipeline of projects you're looking at and how they're outside of Connecticut? It's great to see you make some progress, but I'd love to see how you're competing in some of the other geographies. Yes, Paul. How are you this morning? I'm good. Good to hear your voice, man. Thanks for joining the call. Just to give you a sense of that, As we work to really through the work that we're doing around the transformation part of our pillar, another big Part of that has been trying to really build our pipeline and build opportunities not only outside of the state of Connecticut, but around other parts So if I could give you a sense of the pipeline, as we see opportunities today kind of across the U. S, they represent Approximately about 40% of the opportunities that we see in Europe and Middle East Right now, it's about 34% of the opportunity that we're looking at. And Asia, today, as we've reentered that market now, We're going about 13% and then across Latin America and other markets we're roughly about 12%. So we're starting See really good momentum in the markets that we're really focusing on and leveraging Our product really as a platform, so if you think about the way I talked about the Toyota solution, that's a scenario where we're offering more That's really a big focus of ours is to make sure that we can leverage the multi capabilities of our platform To attract more customer demand for our products. That's super helpful. I've got 2 more quick ones. First, on The inputs for manufacturing, obviously, as you scale up, raw materials become a bigger consideration From a purchasing perspective, we're obviously seeing a ton of inflation around some basic materials. But just want to get a sense of how you guys are positioned on that in terms of exposure on raw materials and any sort of hedges that you may have in place at this point. Collin, what I'm going to do, I'm going to let Mike Lizotte, our Chief Operating Officer, address that from a supply chain perspective. Colin, thank you very good morning and thank you very much for your question. Great question. So we have a very well established and solid These relationships span decades of periods of time. And We have pursued with our supply partners, in many cases, firm fixed forward pricing agreements We have for our supply line and look ahead to executing on the projects as articulated. Okay, perfect. And then one last one, our financing piece. Obviously, interest rates are tremendously low here. You guys have really supplemented the balance sheet in a Can you talk a little bit about the potential to refi the existing portfolio? What sort of savings we might see on that? And General sense of timing if you are presenting those sorts of opportunities. Yes. Good morning, Colin. This Mike, Bishop, thank you for joining the call. So as I mentioned in my remarks, the company, as we bring projects To commercial operations, we expect to bring in permanent financing for those projects, both in terms Of tax equity and back leverage, as we've done for the projects that are currently operating in our portfolio, we have over 40 megawatts of projects Coming online, so that's an opportunity to recycle capital back Into the company as those projects come online, as we mentioned in our remarks, San Bernardino project, expected to go commercial Operations in fiscal Q3 and then the Gratin sub base project expected late summer of this year. Perfect. Thanks guys. Yes. Your next question comes from the line of Praneeth Satish from Wells Fargo. Your line is open. Thanks. Good morning. Just wondering if you could comment on support you're seeing generally from the Biden administration for hydrogen adoption. I think there was A proposal by the DOE to try to earlier this week to try to get the cost of green hydrogen down to $1 per kilogram in a decade. So Just curious for your thoughts on this and maybe the likelihood at some point of greater subsidies and the like from the federal government. Good morning, Puneet. Thank you and thank you for that question. We remain pretty optimistic about what the Biden administration is trying to do overall with respect to the energy transition and even the focus that's there around Strengthening the reliability of the energy grid itself, and we think our technologies will have opportunity to participate with opportunities around microgrid as well as certainly across the 3 platforms as we discussed For hydrogen, if you look at the U. S, we certainly see the U. S. Trying to figure out how to move the hydrogen economy forward and A bit of catch up with markets like Europe and Asia in terms of the plans that have been announced across different countries across those regions. But we think that the Biden administration from everything that we're hearing and conversations that we have with the DOE, as you know, we do a lot of work with the DOE That there's going to be tremendous support for Hydrogen and we look forward to that. And as we indicated, we've got a A DOE supported project that we're working on that we'll do with Idaho National Labs, which is really gets to again Really thinking about how we leverage the multi capabilities of our platform. So as we talked about, we have the ability with Our solid oxide platform to produce hydrogen in a very highly efficient manner, as we talked about 90% we're demonstrating in the prototype We're running here. But to be able to leverage that platform and then integrate and extend the value of nuclear by utilizing Ray To even make the conversion of that electricity even more efficient is just another example of how, one, the Biden administration DOE is Supporting our work and leveraging the multiple capabilities of our platform. Great. Thanks. And just one more question. I was just wondering if you could give us an update on your carbon capture progress so far And maybe the road map there to commercializing it. Sure. Great question. And what I'll do is I'll maybe ask Tony Leo, our Chief Technology Officer, Give you a sense of the work that we're doing there and the progress that we're making. Sure. So we're making a lot of Progress with our joint development agreement with Exxon and a little bit of background on the objective of that. Our CardBank platform has been optimized over the years for power generation. The Exxon program is developing modifications to design to optimize it for carbon capture. So what we've been able to do and all the work we've done with them so far is really increase the capability, the amount of power we can make while we Capture carbon. We continue to do that work, and we continue to think about where the project will be demonstrated. Exxon has We talked about doing a demonstration at one of their facilities in the Netherlands in Rotterdam. So we are continuing to develop the plans for that demonstration as well as evolve the Technology for that project as well as projects beyond the timing. Exxon is still finalizing With us, so we can't be very specific about the timing, but we're happy with the progress we're making. And Priti, just to add on to that, I mean, as you think about our platforms and carbon capture, we And carbon capture, we really we think about it as both how do we leverage our platform around carbon capture related to sequestration And apply that technology toward large scale applications, whether that be gas power generation or standpoint and all the innovation that's going around how carbon is utilized in different ways, whether that's Making concrete and or plastics as an example or traditional uses for carbon like dry ice or pH balancing and water supply. But just to give you an example again of our platform with respect to leveraging carbon, We have the ability to capture carbon from our own platform. We can actually purify that CO2 to beverage or food grade And deliver that CO2 to a food company or a beverage company for utilization, whether it be in processing or carbonated beverages, while at the same time with that on-site generation delivering reliable electricity. And as I'm sure you appreciate, the thermal use in most of those locations is another area Our platform can deliver value, but increasingly deliver energy security to those production facilities in addition Certainly around pricing on carbon as an ingredient in their products, which is going to become an even bigger issue as we continue to see Prices put on carbon and or reduction in traditional sources of carbon from a supply standpoint. Got it. Thanks. Your next question comes from the line of Jed Dorsheimer from Canaccord Genuity. Your line is open. Once again, your next question comes from the line of Jed Dorsheimer from Canaccord I guess just on the generation side, what changed in pricing quarter to quarter? Is it Hey, Jed. How are you this morning? If we're on Zoom, I would have been if I were to tell you that you're on mute or something, but You're trying to talk. Yes. But no, great question. And I'll actually have Mike Well, now can you talk about this a little bit? But in general, right, the way you should think about it is just increased output with the things that we've been doing in terms of enhancing the operations And Jason, you hit it right on the mark. Jed, really the improvement there is based on the overall output generation of This is built and centered around the improvements that we've made with respect to replacement of modules at end of life and other Performance improvements that we made across the fleet and that those are the drivers for that improvement. Got it. Thanks. And then I guess just the percentage of the base that's Gray versus blue, I know the TriGen and sort of the capture is a relatively small portion, but I'm just curious, What is that percentage? When you say the percentage of the base So the percentage of the fleet that can do in terms of your base that's able to do Gray hydrogen generation that isn't doesn't have any of the capture technology versus What is sort of the non R and D that's actually capturing the carbon that's considered blue? Yes. So Jed, if you think about our existing operating portfolio today, None of those platforms that are currently deployed or grid connected or behind the meter of the customer are doing electrolysis or hydrogen production. So if you think about our platforms on a go forward basis, right, we our Carbonite platform, The way I would try to get you to think about it is, if you think our Carbonate platform, we have 2 ways of delivering hydrogen with our Carbonate platform. And across the Carbonite platform, we can deliver gray hydrogen, blue hydrogen Or green hydrogen depending on the configuration for where that platform is deployed. So The way that we do that is either with our Trigen platform. So if you just take the Toyota project as an example, where we're using direct biogas, that is Deliver green hydrogen, carbon neutral power and water off That Trigen platform, so 3 value streams get delivered to Toyota. Also with that Carbonite platform, we're working to Commercialize the ability to take that same Carbonite platform and run it in reverse mode for electrolysis. And again, with that platform, depending on the configuration, so let's just take a configuration where we're using natural gas, in this And if we were doing carbon capture with natural gas electricity, that could be blue hydrogen. And then if you take thirdly, our solid oxide platform, Again, depending on the configuration, so let's say we were doing electrolysis and we were using the input was renewable Energy sources, wind or solar, as an example, and we were using that electricity to convert to hydrogen, That would be green hydrogen. But if we're using grid electricity, kind of the blending of Nuclear and renewable and gas and coal, we would be making great hydrogen in that configuration. So it really depends on the But across both the carbonate and solid oxide platform, we have the ability to deliver hydrogen. And depending on the input sources, we He can deliver the various colors of hydrogen, if you will. Thanks. That's helpful. So I guess it begs the question, I guess, why focus on the U. S? Why not focus your efforts on Qatar, for example, which has its entire economy Based in shipping LNG, where you would have the most fruitful market In terms of is it the infrastructure, the demand for hydrogen is just not there? Or Is there some other reason instead of focusing on sort of these smaller projects? Yes. So we are not just focused Into our strengthening growth phase, part of that is adding resources, which equates to market coverage so that we can pursue broader opportunities across as well as relationships in various markets to help with those efforts. And we're recruiting some sales Jed, so if you're looking, you can we need a great salesperson in that part of the world. Sure. Well, listen, I appreciate it. I'll jump back in queue. Thanks. Your next question comes from the line of Noel Parks from Tuohy Brothers, your line is open. Hey, good morning. Good morning. Just a couple of things. Could you just talk a little bit more about the new project in Derby? Just curious about what the lead time was from inception to Signing, whether the pricing out of the deal is more or less typical? Sure. So let me make sure I'm answering the question you're asking. Are you asking about The 2.8 megawatt award that we discussed or I just want to make sure. Exactly. Yes. Okay. Yes. So that project was Part of a program called Shared Clean Energy Facilities, which was an open competitive bid process that we participated in, in the state of Connecticut. And we won that project As part of that open bid process where we competed against other generation resources like wind and solar, the product Award, I want to say the bid process and the award process lasted over several months was the process. Upon being awarded that project and now have an assigned PPA, it's part of our backlog now and we'll intend To move forward with development and construction of that project. Great. And for San Bernardino And Grak and Navy are both coming online sort of later in the summer. Just for some perspective, could you talk about, I guess the usefulness of having new FolioLife projects as sort of just in demonstration As far as trying to get new contracts and if you were replicating a project like San Bernardino today, just curious Where do you think the costs would be this time around, either efficiencies or lessons learned versus, I guess, maybe labor material service environment. Yes. No, I think I might have missed the first part of your question. But in terms of San Bernardino, I'll speak to that one here just a little bit, and then I'll ask maybe Mike to jump in. So the The way you could think about a project like San Bernardino is that it's more representative of other projects that we've done that are leveraging On-site biofuels for the production of carbon neutral power. If you think about that project just as We did in 2019, if I have my year right, the Tulare project as an example That was another example of a wastewater treatment facility that was using anaerobic digestering to produce biofuels and was We're flaring that gas. We were able to leverage our technology to utilize that fuel to produce clean power At Tulare in the State of California, we're doing the same thing with San Bernardino, which is another example of leveraging On-site Biofuels, which we think is a differentiated capability for the company. And We think that there's opportunities to do that across other areas where wastewater treatment plants or other Areas where biofuels are being produced. I mean, so just staying with California for a second, if you look at legislation there now that requires that Food waste not go to recycling, but then it uses anaerobic digestering. That's going to be another source of fuel as an example that we'll look to leverage in terms of creating The other example is if you think about the project you mentioned on the Navy base In rod, Connecticut, that's an example where we are excited about the fact that we're participating in a project where The U. S. Government and the military is committed to enhancing reliability on its installations. There, with Our platform, we will be able to provide microgrid services to the Navy in addition to grid power to the Great. And yes, I was sort of getting at as Sorry, I didn't mean was somebody else going to jump in? No, go ahead. Okay. Well, just thinking if the next time around if you had a similar water treatment project, Do you think the costs this turnaround, however many years later after your prior ones Would it be similar? Do you think there's a cost curve you can scale? I guess I'm just trying to think about how the economics might change as you replicate more and more projects like this over time? Yes. So I think if I'm understanding your question correctly, obviously, every project we do, there are opportunities That we take away from a learning perspective that we learn how to maybe think about doing on-site construction differently, How we think about our sourcing of EPC contractors as we build scale And in our manufacturing capabilities, all those things will contribute to us being able to lower Actual cost of the next platform, right? And so we look to continuously through continuous improvement Lean manufacturing and the way in which we approach each and every project to find ways to bring down overall cost Every time. And to your point, in terms of the next project, keep in mind that, right, the technology that we're deploying is Replicatable, it's the same technology. It's our same proprietary gas cleanup skid. It's our same carbon and fuel cell Platform. So we're not doing something new every time and that adds to obviously the efficiency And opportunities to drive down costs. Great. Thanks a lot. Thank you. Due to time constraints, we are going to have each other limited to one question. Your next question is from the line of Jeff Osborne from Cowen and Company. Your line is open. Hey, guys. Just a couple or The Connecticut 6,524 program, is Beacon Pauls eligible for that? Yes. Well, first of all, I But the answer is yes, a project like that would fall into that legislation Assuming signature by the governor. All right, perfect. Thank you. Your next question comes from the line of Chris Taylor from B. Riley, your line is open. Hey, guys. Just a quick one then on module exchange Timing for the rest of the year, are there any other key module exchanges that you're expecting throughout the year? Or how should we think about The timing of some of that. Chris, thank you very much. Great question. This is Mike Lisowski. So as you know, module replacements, They're an ordinary part of our business, and we do them when we need to do them. And overall, our field Replacement plan remains unchanged. We're really focused around 4 specific projects going forward in the future that we're going to be making module exchanges and that's really a mixture of lend between projects that are in our generation portfolio as well as under service agreement. And our manufacturing plan is in alignment with supporting those module replacements. So we're well positioned to support that. Understood. And just another one, if I could here, sorry, to kind of tell you, I'm doing things right. I wanted to get a sense of the pipeline, if you can kind of break it down between people looking at what you guys are going to be doing with Toyota And seeing potential with some of these additional value streams versus distributed generation and then some of the longer term opportunities, where if you could kind of break down the pipeline to kind of piggyback on Jed's question before. Yes. Thank We just to give you maybe a broad sense, right, in terms of how we think about that and the opportunities we're pursuing, We see a lot of opportunities around deleveraging biogas like we just talked about. We also see opportunity for our platform as We think about edge data centers, when you think about what an edge data center needs, it needs reliable power. It also needs A lot of chilling and the fact that we can integrate with Fortune Chilling creates an opportunity for us. We're seeing opportunities across both the education and health care sectors, food and beverage, as I described. We see opportunities around government sectors, I. E. Military as the fortification of our installations across the It continues to be an important priority for the administration. And across industrial and process type for manufacturing, We're seeing growing demand for not only reliability, but frankly as a way to try to find authentic ways To try to really contribute to decarbonization as opposed to what's typically done in terms of leveraging like virtual PPAs around renewable energy. And then we certainly anticipate when it comes to microgrids, both for commercial and industrial customers, but also for utilities, there's an Precine desire to implement Microgrid so that they can ensure that essential resources remain online And with Microgrid having the opportunity to eliminate or significantly reduce a lot of the above ground risk, we're seeing a lot more interest in those And then certainly across growing demand around pharma and biotech as well, where we're seeing Opportunity for reliable power generation, as you can imagine, those facilities require reliable power. A lot of money is spent in R and D, and so Having power available is critical and then being able to leverage aspects of our platform like steam in their manufacturing So again, really focusing on customer segments and opportunities where we can deliver Enhance value to the customer by really leveraging the full capabilities of our platform. So hopefully that gives you a sense. Okay. No, that's very helpful. Thanks guys. Thank you. Thank you. Your comes from the line of Eric Stine from Craig Hallum. Your line is open. Good morning, everyone. Good morning, Eric. Hey, just wanted to touch on the product side of the business. I know that's clearly a focus. You talked about Reengaging there. So maybe what have been some of the gating factors? What are some of the steps you're taking and maybe a timeframe to when you think that you start See some traction there. So Eric, in terms of the product or are you talking about the sales pipeline? I'm assuming No, I'm talking about Just product sales, I mean, obviously, you're making great strides, growing generation, but I know products selling product along with that as part of the mix is one of your objectives, so just thoughts there. Some liquidity for the company. Our Sales cycle generally for our utility scale projects range anywhere between 12 to 18 months. And so if you think about Where we are on that timeline, we fully anticipate that we'll start to convert Projects that we have in our pipeline, the sales and many of those opportunities kind of around the world are It needs to actually be product sales, but obviously with each one of those, we bundle a service agreement that runs coterminous with the life of the assets. That's generally a 20 year kind of service agreement as well. So we fully expect to start to see Some of those convert to sales opportunities and you'll see a mix of product sales in addition to what you've traditionally seen for us for a while now, There are no further questions. I'll now turn the call back over to Jason for closing remarks. Jason, thank you Thank you all again for joining us today. We will continue to execute on our PowerHouse business strategy working to deliver profitable growth and optimize returns. 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