Good morning, everyone. I'm Brandon Oglenski, a U.S. airlines and transportation analyst from New York. Up next at our Americas Select Conference here at Barclays, we have FTAI Aviation. Joining us is Joe Adams, CEO of the company, and Alan Andreini's somewhere in the back there, I think, Head of IR. Joe, I guess I'll hand it over to you. I think you have a couple slides you wanted to talk about your business, and then we'll get into the Q&A.
Sure. Thanks, Brandon, and appreciate you having us here again this year. It's our second annual European conference, really enjoyed the opportunity to meet investors in the U.K. and EU on this trip. We're very happy to be here. Just to give you a little overview on FTAI Aviation, we think of ourselves today as being in three different businesses. They're all tied to us, really being an expert and a leader in advanced turbine technologies and for the most commonly used jet engines in the world, being the CFM56. Today we operate in three different businesses.
The first business is the one that we've been growing over the last few years, our aerospace products business and what we call an MRE product, which is to maintain, repair, and exchange. Essentially, the business model we created is to be the outsource provider of engine maintenance for airlines and owners in that, we've developed the capability to do that maintenance in better than anyone else in the world with an array of products and facilities and capabilities. We are able to perform the engine rebuild, which is to put hours and cycles back on an engine so that the owner and the airline doesn't have to do that. We provide a value proposition where it's cheaper and faster, which generally is two good things for, you know, for customers.
That business is doing extremely well. Our goal is to grow our market share now. We most recently announced a 12% market share of about a $25 billion a year spend. Our stated goal is 25% market share, and we don't think it's gonna stop there. Obviously, this current market environment for airlines is not the ideal market environment for airlines. We do provide a partnering function with airlines where we can provide liquidity and help airlines avoid spending money on engine maintenance. We think of in some ways, this could be an opportunity for us to increase our market share more rapidly as we did in previous crises before.
The second business we've grown over the last two years is our asset management business. We took some assets that we had owned on the balance sheet and raised third-party capital in a private pool of capital that we can own aircraft. Those aircraft are leased to airlines. As part of the transaction, we again eliminate engine maintenance responsibilities for the airline by providing engine exchanges from the public company, FTAI Aviation. It has the benefit of making FTAI Aviation more asset light, but also has the benefit of locking in long-duration contracts for doing engine exchanges and growing our market share, accelerating the growth in our market share.
This is a great environment for us because, you know, the industry obviously is looking at more ways to generate liquidity. One of those is sale-leasebacks. Also lessors who are selling assets become more focused on the counterparty they're dealing with and the track record of closing because the nightmare scenario for anybody is working on a deal for, you know, 2 months and then finding out that the lender doesn't wanna fund or something. It's a perfect environment for us to, you know, accelerate that business. We raised our first pool of capital, which is about $6 billion, which will be fully deployed by the second quarter and this quarter, and then in the market, raising another $6 billion pool of capital.
Ultimately, that's 300 aircraft and 600 engines in the first pool, then you could, essentially, we could double that in the next 12 months. A very large, high-growth business for us that is very exciting, which also feeds the, you know, MRE product. The third business is a relatively new business in that, it's the power business. It's turning CFM56 engines into generators of electricity, which obviously in demand market is growing extraordinarily with data center requirements. This product is designed, you know, for the data center user.
We have done the hard part of the engineering starting over a year ago, which is to convert the turbine into a piece of machinery that can power a generator, and we've done all the testing and the modifications on that part of the asset. We also last week announced that we've partnered with Jarrah Group, which is a leader in packaging, and they will be doing the assembly of the generator and the gearbox and the fuel control systems in a joint venture with us, so we can accelerate the growth of that business. We're estimating 100 units delivered in 2027, which with 25 megawatts per asset per what we call our Module 1. That's about 2.5 gigawatts of electricity capability generating next year.
The demand, obviously, in the industry is multiples of that for the next foreseeable number of years. We are very excited about that. It also has the added benefit of extending the useful life of the CFM56 engine in that. It could operate at the end of its, you know, aviation life of 20 or 25 years. You could move that into a ground-based operation and have it operate it for another 20 years. Again, the all three businesses, you know, work together with each other. It's all sort of feeds the ecosystem and then draws on our engineering and maintenance capabilities for the turbine technologies. Everything is, you know, is moving in a great direction.
Well, that's a great overview. Maybe it's always fun, isn't it? Because there's volatility all the time, especially the last 10 weeks. Maybe we'll start there because we've gotten a lot of questions from folks with flight hours potentially down and maybe down longer based on where oil prices ultimately land, and I know they're down this morning. How is that going to impact your business, or has it impacted the business thus far?
Yeah, it hasn't really had any impact to date. Fleet decisions that are made by an airline generally take a long time. If you think about, you know, the way an airline would have to change things is by retiring assets earlier, and then they need a replacement asset. Today the market has been very short new capacity, and if you want to add new assets to the fleet and go order from the OEMs, you know, you're looking at potentially, you know, multi-years before you get any of those deliveries. Secondly, people have learned previously that if you give airplanes back and then the market, you know, returns to a more normal level, you can't get them back. Airlines tend to be very slow to make these types of major fleet decisions.
The 737NG and the A320ceo are a core part of the world's narrow body fleet. They're profitable, they make money. You know, we could see, we haven't seen too much to date, is airlines could reduce some of the flying. Instead of flying 12 hours a day, maybe they fly 10 hours a day, and they change, you know, schedules so they don't fly on Tuesday or Wednesday or something like that. You might see some of that. In the end, it's not gonna have a material impact on our growth strategy because we're trying to go from a 12% market share to a 25% market share. Whatever rate of retirement you see is actually, you know, much smaller and less consequential than growing our market share.
If this environment allows us to grow faster and take more market share, then, you know, ironically that could be a good thing. We're not really worried. These platforms are gonna be around for many, many years and they're profitable assets in the aviation system. And again, we haven't seen any impact to date.
Well, can you talk to the older technology that you're in, the CFM56, which powers the prior generation 737 fleet and most or half of the A320 fleet? How does that relate to the newer technology like the LEAP and the GTF? We all know the GTF has a lot of issues, but the LEAP overhaul costs are coming in pretty significantly above budget too, right?
Yeah. The big picture, you know, trade-off is you get about 15% fuel savings for the new technology. The two negatives are it costs a lot more from a CapEx point of view, your maintenance cost is higher. If you're looking at it as an operator, you set up a model which basically, you know, compare what does a seat cost you to fly in different assets. You'll put in your stage length, your utilization, your. Then you build in a model for the maintenance costs. As I said, the maintenance cost is gonna be a negative to the operating cost, then you factor in capital costs. A brand-new, you know, new technology narrow body could cost you know, $50 million or $60 million eventually.
That compares to a 18-year-old or 16-year-old asset today of $15 million. If you're flying in a, if capital is an issue for you favor the older technology. If utilization is lower than, you know, the high-frequency operators, you're also gonna benefit by having the older technology. It's actually a fairly close call. Again, if you wanna grow and you need assets, both of them make money. It's all positive contributors. Those are kind of the puts and takes. Again, nobody makes, you know, rapid decisions on this type because it takes many, many years to affect it.
Well, I think there can still be confusion with your business 'cause a lot of folks will initially compare it to a traditional MRO business, but that's not what you're doing. You're an MRE. Maybe can you talk to the differences there too?
The key construct of our business developed years ago in that what we decided is the best way to do to manage a fleet of engines is to own the engine and own the maintenance facility together in the same company. Your orientation changes in that you're trying to be the most optimal provider of an engine hour and cycle in the world. You can recombine modules, you can manufacture, you can run your shop like a factory where you own all the parts in that shop, so everything as it goes down the line goes into the next engine. You don't have to wait for parts to be repaired and come back.
The whole process is much, much more efficient, and you can generate, you know, very high margins that way because you're optimizing green time. That is a fundamentally, just a very different construct. When you take that to the customer then, the net result is the customer could take their engine, send it out to a, like a mechanic, a shop, have the work done, and then the engine comes back. Oftentimes when that engine comes back, the bill ends up a lot higher because there's other things that need to be fixed. When we sell the product, we go to the airline and say, "Look, you tell us and based on your experience, how much does it cost you to put an hour and a cycle onto an engine?
We will match or beat that price, and then we'll eliminate your cost of ranging for spare engines, shipping it to and from the maintenance shop, having an engineering department track all of the decisions and the functions, the things you need to do, and source the parts often. All of those expenses go away, which often is between a half a million dollars and $1 million per shop visit. Very importantly, the risk of a cost overrun goes away because we provide the engine on an exchange on a fixed price, and you can inspect the engine, it's done, it's on the shelf, and you have an immediate replacement or immediate swap. When the airline thinks about that, they said, "Well, what's wrong? You know, what don't I like about that?" The answer is nothing.
People are like, "Why shouldn't I do that if I can get as good or better price, eliminate $1 million of expenses and I have no risk of a cost overrun? Why wouldn't I do that?" The answer is everyone comes to the conclusion ultimately that that is better, and that's why we, you know, expect to keep gaining market share. We accelerate the development of the market share by, in SCI, we immediately convert airlines to the exchange model. Oftentimes what happens now is we'll go buy 5 or 10 aircraft on lease to an airline. We go to them and say, "Great news. You don't have to do any engine shop visits ever again." They're like, "That's fantastic.
Why don't you go buy the other aircraft that are on lease to, you know, to my airline so that you can convert all of them? We're like, "We're happy to do that." You eliminate that friction that the leasing, you know, lessors and airlines have and that they're always fighting about return compensation at the end of a lease, or engine maintenance costs. It's a win-win for everybody and, you know, we continue to, you know, to develop that and point out the, you know, the significant benefits for the airline and really as a partner to them where we're always providing power and always having power available if they need it.
Well, this is effectively how a large airline would manage their fleet, right?
Correct. If you think about a large airline that developed, you know, their own capability 40 years ago, they had an engine shop, they did everything in-house, and they optimized. What we've done is take that same model of owning the engine and the maintenance shop and make it available to the rest of the industry.
Right. You're effectively offering small airlines economies of scale on the maintenance side.
Correct
otherwise they couldn't tap into.
Correct.
The customer profile.
Big airlines too.
Yeah. Well, that's right. The customer profile in the first quarter shifted. Is that right?
Yes. We've been surprised somewhat in that, you know, 12 months ago, 18 months ago, a lot of the bigger airlines are saying that, you know, "It's interesting, but I can do it myself, and I don't need that." Now we find a lot more airlines are saying, you know, "I'd like to access, you know, more engines, and I'd like to do more exchanges." So our goal ultimately with an airline is to get to the point where the airline says, "Okay, you do it all. You do everything for me." The result of that is that you can do a, you know, a small build engine, maybe de-deliver a 6,000 cycle engine, but they also want a 10,000 full, you know, restoration engine together.
The goal is to get all of that and ultimately be, you know, the solutions provider to the airline for everything.
How much visibility do you have in aerospace products?
It varies, but some we have multi-year relationships with airlines like we've announced with Finnair, LATAM, ITA, all the aircraft we own in SCI is fully contracted. The goal is to get, as I said, to the point where people say, "Okay, you can have all of it. Let's either structure it as a, you know, contractual relationship, or I'll basically do exchanges on this basis with you whenever I need an engine." We also have airlines that are still, you know, just trying the product, just developing, understanding how it works, seeing how we perform.
We also have some spot business as well that, you know, comes in where people say, you know, I'll say, "Just try the product and see if you like it." Or if you can't decide which way to go, you wanna manage some yourself and some we provide in exchanges, why don't you run them side by side and see which one after a year works better, you know, then choose.
Okay. with SCI, the first fund that you launched last year, $6 billion of capital. Is that right?
Can you talk to the economics on that?
We discovered that by providing a bespoke custom-built engine, you can actually generate a higher return for the investor, and they take less risk. What we did is we compared, take, for example, an aircraft that's on a 5-year lease, and at the middle of that lease in year 2.5, you need a replacement engine. It hits limiters. The traditional way to do that would be to send that engine to a third-party shop, and they would build you a 5-year engine. 10,000 cycle full build because that's what they have available in terms of parts and capability. You'd spend a lot of money, I mean, to do a full performance restoration.
Yet, at the end of that lease, two and a half years, then you have a big residual value in your engine. What we did, well, we can deliver, FTAI can build a two-and-a-half year engine, so the owner and the airline spend less money in that middle of that year, you know, putting a replacement engine in. At the end of the life of that lease, you have lower residual value, just part-out value. When you run the math, you can generate four or five hundred basis points of incremental return and have something which is less risky because you're less reliant on residual value and monetizing that residual value at the end of the lease.
That's basically the underlying economics that we present to the investors, like, here's a better, what I always say that every private credit investor in the world is always looking for higher return and lower risk. That's really what, you know, this model allows people to do. We're the only people in the world that can do it because we can build that 2.5-year engine because we build hundreds of engines a year, and we know when it's coming, and we know how to assemble the various parts to optimize that.
That's really the construct, and we've fully invested fund 1 by the end of this quarter, and then we're now in the market to raise fund 2, and we're getting a great reception because returns are good and the pipeline of deals is also very good.
Can you talk to the profile of that fund? I think it's closed in, right? You target just one lease term on the asset, right?
The assumption we make when we show the economics to investors that the 5-year asset that I mentioned would run at the end of the 5 years, and at the end of that, you'll sell the airframe and sell the engines, and you'll have a realization. We're actually finding a lot of extensions are happening, and extensions are additional upside because you don't have to do anything, you don't have to spend any money on that aircraft, and you continue to get rent and maintenance reserve. That, that's what we're seeing, you know, a fair amount of extensions that are happening, which we didn't model in to the original deal. Again, speaks to the strength of the CFM56 V2500 and the, you know, NG and CEO markets being very robust.
That's in this market environment, so it also speaks to the, you know, view of the airline as to when, you know, when they're gonna retire these assets. People are not, you know, giving them up at this point.
I guess how susceptible is your business to asset values?
Very little. I mean, if you think about the three different businesses, the MRE business, we're basically buying run out engines, rebuilding them, and then selling them. You have a relative, you know, a spread business, you have a relative value. We're adding hours and cycles more efficiently than anybody in the world can do, and that's not dependent really on, you know, how where assets are being sought, bought, and sold. We're relatively insulated from that as markets, you know, fluctuate. Historically, though, the prime driver of engine values is the parts value, which really is determined by how the OEM raises parts prices.
Historically, you know, that's been at a well above inflation on an annual basis, and that's why asset values and engines values tend to go up, you know, more than other parts of the industry. In the asset management business, I mentioned we're relatively insulated because we've got part-out value at the end for our engines, and we're seeing a lot of extensions. I'm not, you know, we're not seeing much in terms of asset value pressure, or it's not that sensitive to returns for the asset management business. In the power business, it's totally insulated in that we're basically buying run out engines to repurpose into a, you know, different market.
To the extent if part-out values were to go down, which they typically don't, you know, do by much, it would be good for us.
Do you run into problems because everyone knows you're in the market, I guess, for these types of aircraft, especially launching SCI 2? Does that negotiate against yourself at all, or?
I mean, if you think the market size on an annual basis for narrow-body current generation assets is a roughly $25 billion-$30 billion a year business of asset sales. Our first 18 months was $6 billion, so annualizes are roughly around $4 billion a year. It's not a market mover. It's a significant amount, it doesn't, you know, it doesn't move the entire market. Where I think, you know, we're moving into, though, is a market which is more favorable for us in that when assets are being sold by many of the big leasing companies, the counterparty strength is a really important factor when there's uncertainty in the market.
To the extent that they know we're gonna close, we don't have financing conditions, we're not a new fund. We know, you know, we're underwriting engines effectively. They know we're gonna close, and so that actually plays to our advantage. Then you also will have more airlines doing sale-leasebacks in this market environment because liquidity becomes, you know, the top priority in the airline. If this cycle, you know, is similar to others, then you will see more flow from airlines and more, you know, more focus on our strength as a counterparty to close from the big sellers.
Okay. Do you have capacity, physical capacity to get to 25% market share?
We do. I mean, we were able to double our capacity production year-over-year. We added a facility in Rome. We made an acquisition of additional property in Miami. Which also added a facility in Lisbon, Portugal. Looking ahead, we expect to grow our capacity across the board with more mechanics. We have the physical capacity to get from 12% to 25%, but we're also focused on most likely adding another facility somewhere, as we indicated, east of Rome, which would be Middle East or Southeast Asia in the next 12 months, so that we will have another location to continue ramping our production. The facilities we've acquired are not that expensive. I mean, typically, what we've bought were once great engine shops that for whatever reason, went out of business.
It was usually because it was part of an airline, either Alitalia or Pan Am or Air Canada, and they got out of the engine maintenance business, and they left a beautiful building with lots of tools in it, and nobody no business. We're able to acquire these assets for way less than replacement costs. The benefit we bring is we can immediately fill the shop. If you're competing with a third-party MRO who's looking at, "If I buy a shop, I've then gotta go get customers to let me put the engine in there," typically, the customers don't wanna be the first one in. We have a huge advantage, competitive advantage, looking at these types of assets.
Okay. You also have a partnership or, an agreement with GE Aerospace, is that right?
CFM.
Right. Sorry.
Which is a joint venture with Safran and GE.
Yep. Why is that significant?
It gave us a lot of additional supply of parts. We've been, if you think back to the example about a, you know, a smaller build and a full performance restoration, a lot of our business was focused on the smaller builds and doing lighter repairs, modules, exchanges, using used serviceable material. Now that we have, you know, a relationship, direct relationship with the OEM and an attractive deal, price deal, it gives us the ability to do more of the full performance restorations, the heavier shop visits. More parts, more flow. And it positions us really to be the go-to place for aftermarket shop visits in this CFM56 market for the foreseeable future. What we bring to the OEM is really investing in rebuilding engines to extend the life of the platform.
The OEM will ultimately benefit. If the asset flies longer, flies more, the OEM's gonna sell more parts. It's a, it's a win-win. I mean, there's a partnership benefit to both of us for, you know, investing in these platforms to keep the engines flying.
Okay. I wanna talk about power too. By the way, if there's questions in the audience, just raise your hand, we'll get you a mic. The margin profile on aerospace products, where do you see that longer term?
We're sort of guiding people to low 30s. As I just mentioned, if you think about the math of the 2 different engine types, if you take a 6,000 cycle engine, we typically would have sold that around $6 million. Our cost of goods sold was about $3.5 million. It's $2.5 million of profit, which is about a 40%+ margin on that smaller build engine.
If you also, as part of the, you know, program we're developing with some of the bigger airlines, they'll say, "I also want a 10,000 cycle engine, because you know, when I look at my fleet, I need a mixture of, you know, of assets that are going to last different lengths." That 10,000 cycle full performance restoration would likely sell for about $12 million, and our cost of goods sold would be about $9 million. That's a 25% margin on an asset that's twice as, you know, weighs twice as heavily on the overall margin. The combined margin of those two transactions is 31%. You want to do both. They're both good transactions.
You would never go to an airline and say, "Well, thank you very much, but I only wanna do the small build because my margins are higher." Of course not. You wanna do all of it. You wanna get the, you know, the market share now so that you can basically be the outsource provider of power for the whole industry on a go-forward basis. That's our mission, has shifted a little bit in that, you know, over the next several years, if we can, you know, build our market share, maybe at some point in the future, there's an opportunity to be more, you know, aggressive on price. Today we're looking at, you know, like, get the real estate now. It's all, you know, they're all good transactions. It's not like you're doing bad transactions.
You're doing 2 good transactions. It is, mathematically just gonna have lower margins.
Okay. Longer term, looking out a few years, should we be thinking FTAI gets into maybe one of the newer platforms?
We're expecting by 2028, 2029 to be in the LEAP and the GTF engines. That's about the time where you'll have enough engines that are off of the OEM Power by the Hour programs, and they will have stabilized the platforms. Right now there's still parts that are being upgraded for performance and durability issues. You want to wait till the, you know, the platform's gonna be in the long run part of that manufacturing process. The architecture of the LEAP is very similar to the CFM56. We have the licenses to be able to do the repairs at our existing facilities, it's really just economics that will drive us. We think by 2028, 2029 those parameters will line up so that we'll be in those businesses.
Most likely, we'll start by buying aircraft that have LEAP or GTF engines into our SCI vehicles, so we'll start to get ownership there, and then we'll develop the maintenance expertise and experience in our shops. It's gonna be a big market. The cost, as I mentioned earlier, the maintenance cost on the new technology engines is higher, they're not staying on wing as long. You're gonna have a much bigger market for maintenance, which for us is a good thing. The same value proposition of buying an asset, doing the work in our own shops, and delivering it on a completed basis to the customer will exist in that market too.
Okay. I think a great pivot may be into power, which seems to be like an endless opportunity right now, doesn't it?
It does.
How did you come about thinking the CFM56 is a proper aeroderivative platform for this business?
We've looked at aeroderivatives for over 10 years, primarily the CF6-80, which was, you know, when we first started the company, as you may remember, we had a variety of engines. The CF6-80 was one of our bigger ones. Every time we looked at an aeroderivative conversion, you know, the market wasn't that big, the end market, and the supply of, you know, feedstock wasn't that big. We, we have, you know, knowledge of how those markets work, but it never really lined up until, you know, the world changed with the growth in data centers. Now the constraint in the industry is really getting hot section parts.
The blades and the vanes is severely constrained because the production of those is an art as much as a science, and it's limited, and there's demand on all of those manufacturers from the LEAP, the GTF, the CFM56, the V2500, the IGT blades, everyone wants more blades. That's why if you go today to try to buy a significant amount of new generation assets, you can't get anything until 2030 or 2032. We looked at it and said, "Well, what's the answer to that?" The obvious answer is find an asset that doesn't need new hot section parts, which is an existing engine type, and there's no bigger platform in the world than the CFM56 engine. It became the obvious solution.
We had internal engineering capability, people with aeroderivative experience. We said, "You know, how difficult will it be to convert that to a aeroderivative since that's the path that every other product has taken?" We did that starting over 1 year ago. We did the hard part first, which is to modify the turbine. You take off the fan, you change some of the air flows, you change the fuel system. Then you make sure that that engine can operate with the efficiency that it was designed for. We did that starting over 1 year ago. We have 30 engineers in the company that are focused solely on this product.
Now we're in the phase of packaging it, putting it together with the generator, with the gearbox, with the trailer to make it a portable product that can be delivered in scale in the near term, which is 2027.
You're targeting 100 units next year?
100 units. It's a 25 MW per unit generator, so that's about 2.5 GW of power to the market in 2027. Estimates of, you know, demand are, you know, 60, 70, 80 GW that needs to be delivered for per annum. It's not a huge part of the market, but it's meaningful to us and it's a start. You know, it could get bigger from there.
You mentioned feedstock too. Do you have inventory that will meet that demand looking out next year?
Yes. Yeah. We called out Starting in the fourth quarter, we already started identifying and buying turbines, and we're converting those turbines now. If you think about the market overall, if you have 20,000 engines and you have in today's market, you have a roughly about a 2%, you know, scrap rate on the existing platforms, so that's about 400 engines a year that get parted out. We've been identifying candidates that we previously wouldn't have, you know, been interested in to buy to position for the power business, and there's plenty of feedstock out there.
Okay. Can you talk to the economics on the power business though?
Yeah. When we originally launched, we indicated that the margins would be as good or better than the aerospace products business. Also, people have been using a reference point of a $1 million per megawatt hour, so that $25 million, so roughly about $7 million-$8 million of EBITDA per unit. When we looked at the Jarrah Group structure, it's slightly different in that FTAI sells the turbine to the joint venture, and then the joint venture completes the product, and FTAI will own between 25% and 50% of the profits in the joint venture. When you add the two together, you effectively get to the same place for those units. You have a partner that's got 20 years of experience.
They manufacture a lot of the parts going into the aeroderivative, and they have four locations to do this work, and there's no learning curve for them. All of that, you know, essentially makes it, you know, de-risks the process but preserves the economics. That's why we decided to go that route.
JR is the JV partner, right?
Correct.
Is all the business gonna flow through the JV then on the power side?
We have the capability and preserve the right to be able to do our own packaging, in Miami, but we don't expect that we will do that. It's really a risk management, you know, tool.
Okay. Can you talk to the customer profile for this business?
The ultimate end market is data centers where there's, as I mentioned, 60, 80 gigawatts of demand and the customer base is assuming these will be base load. Most of the customers are looking at long-term leases, so they're expecting to have these operating for a number of years up to 10 years. They're also all looking for a service contract. What's not in the math is we will provide a long-term service agreement for each turbine that's in the field and will be paid on an operating basis for however many hours per. Very similar to aviation, you're paid on an hour of usage in advance, and then you provide the replacement turbine.
I do have one picture that I like here that's something that we've done that's very different on the maintenance side. I can't find it now. It's not here. Sorry. We built in a into the container a door on the side of it, and the door opens so that you can put a forklift in and remove the turbine from the power unit solely, and then replace a new turbine into that generator in two days. You can do a field service replacement of the turbine. That means you don't have to remove the whole unit, send it off to a shop, wait for six months for it to come back, and then put it back in service. We can do an immediate exchange.
That ultimately will lower the maintenance costs of the operation, and it reduces the number of units that people will need for redundancy. The lower maintenance costs and the lower asset intensity, you know, will make this a very, very competitive product in the market, and it's unique. I don't think anyone else is gonna have that capability ever that we have given our capability to manufacture these turbines and have them available in scale, in size.
Joe, we're only down to about 1 minute left. I appreciate you sharing some time with us today. I guess what could be a potential limiter on the power business here?
Well, it's primarily our ability to produce units, and that's just gonna be an execution issue between us manufacturing, you know, modifying the turbine in Montreal, which we feel very good about, and then JR being able to supply the parts for the assembled package unit.
You're hoping to have a prototype built this year. Is that right?
Oh, yeah, absolutely. We've every one of the potential customers has been to Montreal to see the turbine and to see the operation of the turbine and the testing of that. Now it's really more of an assembly process.
All right. Well, Joe, thank you very much for attending.
Thank you.