Ameresco Inc (AMRC) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Ameresco Fourth Quarter and Full Year Earnings Results Conference Call. My name is Karma and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question and answer session.

(Operator Instructions)

I would now like to turn the presentation over to your host for today, Ms. Suzanne Messere, Director, Investor Relations, for Ameresco.

Please proceed, Ms. Messere.

Thank you, Karma, and good morning, everyone. Thank you for joining us today for Ameresco's Fourth Quarter and Full Year 2010 Financial Results Conference Call. I'm joined this morning by George Sakellaris, Ameresco's Chairman, President and Chief Executive Officer, and Andrew Spence, the Company's Chief Financial Officer.

This morning, Ameresco reported its Fourth Quarter and Full Year 2010 Financial Results. This release is available at www.ameresco.com. And, for your convenience, a replay of this call will also be available on our website.

Before I turn the call over to George and Andrew, I would like to make a brief statement regarding forward-looking remarks. Today's call contains forward-looking information regarding future events and the future financial performance of the Company. Ameresco cautions that such statements are just predictions, and actual results may differ materially as a result of risks and uncertainties that pertain to our business.

Ameresco refers you to the Company's press release issued this morning and its quarterly report on Form 10-Q, filed with the SEC on November 15, 2010, which discusses important factors that could cause actual results to differ materially from those contained in the Company's projections or forward-looking statements.

Ameresco assumes no obligation to revise any forward-looking statements made on today's call. In addition, the Company will be referring to non-GAAP financial measures during this call. These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. A GAAP-to-non-GAAP reconciliation, as well as an explanation behind the use of non-GAAP financial measures is available in our press release.

I will now turn the call over to George Sakellaris, Ameresco's Chairman, President and CEO.

George?

Thank you, Suzanne. Welcome, everyone, and thank you for joining us today. We are very pleased to be hosting Ameresco's Fourth Quarter and Full Year results -- our first as a public company.

We continue to see strong demand for our products and services in the fourth quarter. And the market trends and the environment continue to be favorable for our businesses.

Further, we are very happy to report that we executed our plans very well across all of our regions and markets. We finished the year with strong fourth quarter financial results and achieved record year across the board. We even exceeded most of our own internal financial metrics.

All in all, 2010 was an excellent year for Ameresco. Our achievements include the following -- record 2010 revenues of $618.2 million, an increase of 44% year-over-year; record 2010 EBITDA of $59.9 million, an increase of 71% year-over-year; record 2010 net income of $28.7 million, an increase of 44% year-over-year.

Our strong financials also resulted in record earnings of $0.69 per share for 2010, an increase of 14% -- very solid growth, given the fact that we increased the number of shares during the year due to the initial public offering.

For the fourth quarter, revenues, again -- they were strong -- of $179.3 million, an increase of 35% year-over-year. And, importantly, fourth-quarter operating income was $12.5 million, an 11% increase year-over-year. And it's important to note here that I used -- we used operating income for the fourth quarter because it's cleaner than the '09, because the '09 fourth quarter had many one-time unusual items in it.

And, now, I would like to turn the call over to Andrew, our Chief Financial Officer, who can provide more details on our financial results. And, then, I will be back with some closing remarks before opening up the conference call for questions and answers.

Andrew?

Thank you very much, George, and good morning, everyone. I would like to take you through a review of our fourth quarter and full year 2010 earnings results using year-over-year comparisons to 2009.

As George has already stated, fourth quarter revenues increased 35% to $179.3 million. The revenue mix for energy efficiency and renewable energy was 73% and 27%, respectively. Revenue from energy efficiency projects increased by $32.4 million, or 33%, as installation activity continued to grow.

Renewable energy revenue increased by $13.6 million, or 40%, again, due mainly to the increase in the size and number of renewable energy facilities being developed by us for our customers. Sales of renewable energy from facilities owned by us and from renewable energy products contributed approximately $5 million to the quarterly increase.

The principle drivers for our record full year 2010 results were higher revenues and better operating leverage. Full year 2010 revenue increased 44% to $618.2 million. The revenue mix for energy efficiency and renewable energy for the year was 74% and 26%, respectively.

For many of the same reasons we saw in the fourth quarter, revenue from energy efficiency projects increased by $114.7 million or 34%, and revenue from renewable energy increased $75 million, or 85%. And, again, sales from renewable energy from our facilities and from renewable energy projects contributed $15 million to the annual increase.

Total gross profit for the fourth quarter was $31.3 million, an increase of 17%. Year-over-year gross margin for the quarter declined to 17.4% in 2010, from 20% in the fourth quarter of 2009.

Typically, the last quarter of the calendar year benefits from the final closeout of projects and installation, as construction contingencies are recognized. However, in 2010, we have a significant number of projects where the installation activity continued through year-end and into 2011. With relatively fewer projects being completed, there was less opportunity for recognition of project cost savings.

Total gross profit for the full year was $110.7 million, an increase of 39%. The gross margin declined to 17.9% from 18.6% in 2009, due to the issue mentioned previously in the 2010 fourth quarter from the relative lack of construction period closeouts.

Operating expenses for the fourth quarter and full year were in line with our 2010 plan. And though they showed a year-over-year dollar increase, as a percentage of revenue, operating expense declined 10.5%. Salary and benefit expenses decreased to 5% of revenue, due to improved staff utilization on projects and development and implementation, and a decrease in stock-based compensation.

Project development costs for the quarter and the year increased which reflected our continued investment in new project opportunities and expanded marketing activities. General, administrative and other expenses increased by 27% and 23%, respectively, for the fourth quarter and full year 2010. As a percent of revenue, these were 2.3% and 3.3%, respectively. The principle drivers were higher depreciation expenses and professional fees.

Operating income in the fourth quarter increased 11% to $12.5 million, which contributed to our full-year operating income of $46 million, an increase of 82%.

Fourth quarter 2010 income before taxes increased 1.5% to $11.5 million. In the fourth quarter of 2009, interest expense was offset by other income which included an unrealized gain from a derivative and the capitalization of project related interest costs.

Full year income before taxes increased 52% to $40.9 million.

Our income-tax provision increased from $1.8 million in the fourth quarter of 2009 to $3.8 million in 2010, due to a higher effective tax rate of 33.1%. The tax provision in the recent quarter brings our year-to-date effective tax rate to 29.8%.

The 2009 fourth quarter effective tax rate was only 15.5% -- as we gained clarity in our permanent book and tax differences and what they were going to be for the year. Our effective tax rate for full year 2009 was 25.8%.

The principle difference between the statutory rate and the effective tax rate were the deductions permitted under Section 179D of the tax code, which relate to the installation of certain energy efficiency equipment in federal, state and local government owned buildings, as well as production tax credits to which we are entitled from the sale of electricity generated by certain plants that we own.

The 179D deduction is allowed when a project is completed, and represents a permanent difference between book income and tax income. When recognized, the 179D reduces our effective tax rate. Our earlier estimates for the full year effective tax rate were based on a lower level of pretax income and the current deductions under section 179D.

For the fourth quarter of 2010, net income was $7.7 million, compared to net income of $9.6 million in the fourth quarter of 2009. Earnings per diluted share were $0.17 for the fourth quarter of 2010, compared to $0.27 per diluted share for the fourth quarter of 2009.

Net income for the full year 2010 was $28.7 million, an increase of 44%. Earnings per diluted share in 2010 were $0.69, compared to $0.61 per diluted share earned last year, an increase of 14%. The growth in diluted earnings per share was affected by a 27% increase in the average number of shares outstanding, primarily from the initial public offering last July, the vesting of restricted shares near the end of 2009, and the overall increase in the share price.

EBITDA, which is operating income plus depreciation and non-cash stock-based compensation, totaled $15.8 million for the fourth quarter, an 11% increase. EBITDA as a percentage of revenue was 8.8% in the fourth quarter, compared to 10.7% a year ago, due to the decline in the gross margin discussed earlier. Full year EBITDA increased 71% to $59.9 million, which was 9.7% of revenue, compared to 8.2% in 2009 -- a healthy 150 basis point increase in operating leverage.

We refer you to this morning's press release for a discussion of EBITDA, which is a non-GAAP financial measure, and for a reconciliation of EBITDA to operating income, the most comparable GAAP measure.

Moving on to cash flows -- for the year, we generated positive operating cash flow of $22.9 million and, separately, we invested $37 million in renewable assets that we own and operate. In 2011, we expect to receive $12.6 million back from the US Treasury under the 1603 Grant Program, of which we have already collected $5.9 million. In addition, we are in the process of raising $25 million to $30 million of non-recourse debt for Ameresco owned projects.

Net cash provided from operating activities during the three months ending December 31, 2010 was $29.3 million, which was just below our expectations for the quarter. And, finally, as was noted in the press release this morning, our total backlog of projects that are contracted, and those that are awarded but not yet contracted, remain strong at $1.13 billion.

Of that, fully contracted backlog was $651 million at December 31, 2010, compared with $598 million a year earlier. Awarded- but not yet-contracted as of December 31, 2010 was $483 million, compared to $706 million in 2009.

With that, I will turn the discussion back to George.

Thank you, Andrew. The bottom line is we are very pleased with the progress we made in 2010. We achieved great financial results for the year and we built a solid foundation that has positioned us well for future growth.

As I mentioned earlier, we executed well across all regions and markets, with all businesses contributing double digit revenue increases. For example, during the fourth quarter, revenues generated from backlog which is mainly related to energy efficiency experienced exceptional growth, an increase of 50% from 2009 to 2010.

The federal business accounted for the lion's share of this increase, due to some catch-up related to the Department of Energy contract ceiling issue that was lifted in 2009.

Going forward, we expect the growth rate to normalize back towards historical rates and be more in line with overall industry trends. And since we are talking about the federal group, as we mentioned previously, we were expecting additional legislation to clarify enhanced competition in mid-summer 2010. The legislation was finally signed on December 29 of 2010.

As a result, there was a delay in converting some proposals from federal facilities to awarded and contracted backlog. The good news, however, is that we expect to see a healthy pickup in federal group contribution to awarded and contracted backlog for 2011 and 2012.

As for building our backlog overall, the number of contracts signed in the fourth quarter compared to the third quarter increased by more than 50%, which was ahead of our plan. Of note, we signed a $56 million energy efficiency project for North Carolina State and $9.4 million energy efficiency project with the City of Portland Maine, and a $10.96 million energy efficiency project with the Peel District School Board in Ontario, Canada, just to name a few.

And the final point related to our backlog, we finished the year with what we call a strong construction backlog of $1.13 billion, as Andrew pointed out, and an overall pipeline of about $2.4 billion, which includes proposals, awarded contracts, and contracted backlog.

On to the operations and maintenance business, which is represented by both energy efficiency and renewable energy projects. Even with the termination of the Boeing contract, the operations and maintenance unit was up 12.5% when comparing 2010 to 2009.

We anticipate O&M momentum to continue to build as projects such as McGuire Air Force Base, Savannah River and others move to the operation and maintenance phase in 2011 and beyond.

On the renewable side of our business, we placed three renewable energy projects in service and we commenced the permitting and construction process of five more LFG projects in 2010. We anticipate the annuity-based revenues from renewable assets we own will continue to grow at double digit rates over the next few years.

Now, to the integrated PV business -- again, it grew at 25% and made a very good contribution to our operating income. We expect double digit revenue growth to continue in 2011 and beyond for this unit.

This brings me to the next important point that I want to make about 2010. We continue our expertise and geographic reach by increasing headcount by over 16% and opening new offices. Our aggressive hiring has continued and we have been able to attract the right talent and solidify our expertise while broadening our market presence.

Of the headcount we added in 2010, 89% are deployed out in the field, otherwise in key areas that drive our business, such as sales, engineering, construction, operations and plant management.

We are also strengthening the bench at our headquarters. We hired Directors of Tax, SEC Financial Reporting and Investor Relations, as well as an SEC counsel and a Vice President of Supply Management.

Now, in terms of fulfilling our growth strategy for 2011 and beyond, and to help you understand where the opportunities lie, I'd like to share with you the following. For the existing business, first we focus in executing all contracts in a timely and cost effective manner. Then, we maintain good cost control while meeting our financial targets and provide for good future growth.

As for the future, as many of you know, we have no corporate debt. We are planning to raise long-term debt of about $30 million in the second quarter, since the rates and terms are attractive in this environment. The additional capital will allow us to implement when our growth strategy, which includes a disciplined approach to acquisitions.

And we are focused on increasing our market penetration in all areas where we operate.

Further increasing our proposal generation and success rate, which translates into continuously building up our backlog. And, of course, we want higher quality and higher margin backlog.

Further, we will expand our footprint. We'll open at least three to four more offices. And, of course, we can do that organically. But we will also continue to use strategic acquisitions to either expand geographically or offer additional services in existing markets, which most people will refer to as bolt-on or fill-in acquisitions. And, as we said before, they all must be accretive.

In addition, we will continue to invest in selective renewable projects that make good economic sense and meet our investment criteria. And, finally, we'll continue to improve margin and key business metrics for all of our businesses.

Now, looking into the future -- as we said earlier, the demand for our business remains strong, and that leads me to our outlook. We are expecting the following for 2011. Total revenues to be in the range of $690 million to $705 million; EBITDA to be in the range of $67 million to $70 million; net income to be in the range of $35 million to $37 million; and net income per diluted share to be in the range of $0.75 to $0.79.

And I'd like to point out that is based on the share count of 46 million to 47 million outstanding shares for the average in 2011.

Now, I would like to remind everyone that 2010 was an exceptional year. And, of course, that means that we are starting 2011 from -- a substantially higher base than we were contemplating a few months ago. That is why our top line outlook may seem a bit conservative when compared to 2010. While we believe that the current momentum will continue through 2011 and beyond, we feel comfortable being conservative for now.

Our focus will be, of course, on growth and quality of earnings. And that is why our net income guidance represents a range of 22% to 29% growth from the previous year, otherwise 2010, and we believe that it's possible to achieve through margin and leverage improvements.

Again, I do like to thank you for joining us on today's call. And, now, I would like to answer your questions, and I will turn the call back to Karma. Thank you.

(Operator Instructions)

And the first question comes from the line of Steve Sanders from Stephens, Inc. Please proceed.

Hey, good morning, guys -- good quarter.

Hi, Steve.

Hi. Thank you.

First, I wanted to see if -- George, is there any way that you can quantify the impact that the delayed signing of the federal legislation had on the backlog? You said it was December 29th, and --

Yes. It's hard -- and I don't want to give you, for competitive reasons, an exact number -- but I will say that we have, in the proposal stage, well over $200 million of contracts, so that -- it would be reasonable to assume that a good part of those which have fallen down to what we call awarded, or even executed for that matter.

But, on the executed, I don't think it has impacted that much. But it has impacted going from the proposal stage to the awarded stage, which we would have counted as part of our backlog.

Okay. And, then, the timing issue on the closeout of some contracts that typically would happen at year end and maybe slip -- so will we see somewhat of a catch-up there in the first quarter or is it spread more evenly across the year?

I would say that I would expect you to see it across the year and probably the later quarters of 2011, rather than in the first quarter. Because, as you might recall, what just happened -- many of our projects have become larger and larger, and they are multiyear construction projects.

And if you recall, on a couple of the calls before, we said that the average projects cost -- project size was probably $5 million or even less. And, now, we -- they are becoming multiyear projects. So we are not closed, especially for 2010 -- we did not close out many projects because they continue on to 2011.

Okay. And, then, two more quick ones -- the $2.4 billion pipeline that you mentioned that includes --?

Yes?

-- essentially everything that you're working on -- how does that compare, relative to the past couple of quarters?

It's a slight increase, and it's about where we were last year.

Okay. And your close rate -- how is that tracking?

Actually, our close rate has increased substantially.

Okay. And, then, last one -- for Andrew. What tax rate are we using in 2011?

I'm hoping to keep it under 30% -- below the rate that we reported for this year.

Okay, great. Thank you, very much.

Thank you.

And the next question comes from the line of Steve Milunovich from Merrill Lynch. Please proceed.

Thank you, very much. Could you give any guidance in terms of the revenue breakdown you expect next year between energy efficiency and renewable projects?

Yes, generally. I don't want to be 100% specific, but I would expect that from the -- what I call the annuity-based revenues coming out of the assets we own, and then the O&M, and in addition to that, the -- what I call the integrated PV business to be in the neighborhood of $140 million plus. And the balance will come from the energy efficiency contracts.

Okay. And, specifically, on Savannah River -- can you say how much revenue you've booked in 2010 and how much remains?

I'll let Andrew talk about it.

We're probably -- we're a little better than halfway through that project. So the total contracted revenue for Savannah River is about -- on the installation side -- it's a little over $150 million.

But that should be down in '11, from '10. Right?

Yes.

Okay. Given that you had such a strong fourth quarter in revenue, can you give any guidance in terms of what the first quarter might look like? Are you going to -- did you kind of pull some forward on a revenue basis? Any thoughts on the first quarter numbers?

We said this before -- and I like to stay away from -- especially when you compare one quarter to a previous quarter, or a quarter from this year to last year -- that it's happening out there right now. And our quarters are very lumpy because we have a lot of unusual items that come in. But I will say this much -- that we think that for -- we are in a very, very good position for 2011 to execute again on our numbers like we did in 2010.

I mean, the issue we had in 2010 -- we got a little bit ahead of the revenue side than what we were expecting.

All right, okay. And, Andrew, I have to model this out -- but we had a little trouble getting kind of from our EBITDA number down to the earnings guidance. So it looked to us like maybe the tax rate was going to be above 30%. You said it's going to be a little below 30%. Can you maybe take us through what you expect for stock-based comp -- anything unusual in interest expense, amortization -- some of the other line items?

No. We're expecting stock-based compensation to be consistent with what we saw in 2010. I am expecting a little higher in the way of interest. We are projecting a little more in the way of interest expense, as we've talked about some additional financing for this year. And, then, as I said before, as far as the overall tax rate -- we're trying to keep that down below 30% for 2011.

Okay. And, then, finally, any update on the Orlando US Air Force Contract?

Which -- the Orlando?

Yes, I thought you were bidding on a big Air Force contract down in Florida?

No, that was the city of Orlando.

There's a city project.

There's a city project, which we have won.

Okay. Maybe I'm thinking of something else, then. Thank you.

There were some larger projects that there were for the United States government, but they have not moved from the proposal stage to either awarded or contracted.

The next question comes from the line of Dale Pfau from Cantor Fitzgerald. Please proceed.

Good morning, gentlemen.

Hi, Dale.

Congratulations on a great year.

Thank you very much.

As you're looking forward -- thanks for the color there, on your total pipeline that you're looking at. And as you work through that, could you give us a little more color on here? Is it still primarily municipals, governments, and so on?

Are you seeing any stronger interest from the commercial side, there -- is the first part of the question? Number two, how are you seeing the lead times from proposal to actual signed contracts -- other than the recent push-outs due to the government bill, are you seeing those lead times shortened or not?

Okay. First, on the general business trend -- and I talked about this a little bit on the last quarter -- on the institutional market segment, which includes all federal government, state, locals, hospitals, colleges universities and so on -- people that were receiving some of the stimulus money in the first half of the year -- we had what I would call a little bit of a slowdown.

And beginning the third quarter and the fourth quarter, we saw that trend to -- beginning to rise, to increase. And it just continued for the first couple of months of this year. And we think it will continue to accelerate.

And, then, as far as the commercial and industrial, we are beginning to see some activity in that market segment. And we are making some efforts in order to develop the right product that will address that market. And we will take advantage of that opportunity. But I don't think we're going to see a major impact for this year. But, down the road, I think it could contribute.

As far as the lead time, I think it hasn't changed much in the institutional sector. In the commercial industrial sector, it might change, and it'll probably be less time. But I ought to wait and see what will happen there. So, for the time being, I will answer the question and say it has not changed that much.

And based upon the fiscal constraints that we continue to see -- we talked a lot last year about that being a help to you, particularly on the energy efficiency programs -- do you continue to see that? And is that a big selling point, as a lot of the states and government agencies --?

No question about it. And we see it picking up and we're getting thetraction on energy efficiency. People are beginning to realize that it makes great economic sense. They don't have to come up with the upfront capital costs. It can be arranged through a third party.

And they make an asset renewal, otherwise they change the new boilers, new chillers and so on. And it has tremendous, tremendous impact on the environment. And everybody is getting more concerned about that.

And one last question -- gross margins on your solar projects -- are they around the corporate average or are they above or below?

It depends. On the integrated PV business, that tends to be slightly above the energy efficiency contracts. Now, on the assets, we all win, of course. The gross margin is substantially higher. But we have to remember that, to achieve that, we have to invest capital.

Okay, great. Thank you, very much.

You're very welcome. Thank you.

The next question comes from the line of Stuart Bush from RBC Capital Markets. Please proceed.

Yes, good morning, guys.

Good morning.

Good morning, Stuart.

I was hoping you could comment on the health of the lending market for your financing vehicles. Like you just mentioned, the fiscal challenges that the state and local government are serving at the tail end to get these projects done, but how has the cost of capital or the look-through of the lenders to the final governments changed recently, if at all?

It hasn't really changed. In fact, it's gotten a little bit better, and I think there seems to be a growing interest among banks in lending to local governments for projects like ours. And I think part of it is due to the fact that we're providing services that -- to schools and housing and those kinds of entities -- that are important. And so the lending market, in that respect, remains very healthy.

And I think that also goes through to the federal side as well, as we see a growing number of lenders interested in financing our federal government projects, which are a little bit different and maybe a little bit more complex.

But you've seen an expansion in the number of lenders that are looking to participate, and your assessment is the cost of capital really hasn't changed?

Yes, we have seen an expansion of the number of lenders. And, with that, it becomes more competitive, and terms and conditions remain very competitive.

Okay. I was also hoping you could detail exactly what elements are going to drive margin improvement. I think you've touched on a number of them. If you can, just summarize the main drivers that's going to help give you more leverage into the next year.

Okay. Well, it's a couple things. First, we're going to see a growing component of operations and maintenance revenues, particularly as we move into 2012. As some big projects wind down, there are large substantial operations and maintenance contracts that follow on, and those carry a higher margin.

And also we are seeing stronger margins in our implementation -- the construction or installation part of our projects. Those projects are getting larger, and the margins there are expanding as well. So we should see that improvement coming in the next year, from the installation.

Okay.

And the other thing I will add to that is that the operational leverage -- that we will be able to push more revenue through the existing structure that we have.

Okay. And, then, just to give investors that may see the flat-lining of the total backlog year-over-year -- your confidence in the raised outlook for next year is primarily based on your conversion rate capabilities in the pipeline to come.

That is correct, because what we found out this past year -- that we executed extremely well. And that's why, even though we were forecasting that we will end our year at $595 million of revenue, we ended up at $618 million -- executed extremely well.

So, we know we have the backlog. And we feel very comfortable in executing and meeting the target that we have established.

And the other thing we have to remember -- that back in the end of 2009, we have what I will call a "pent-up" backlog because of the delay that we had on the DOE contract ceiling and some of the financing issues that we had before. But the key driver is, what contracts do we have already executed, and can go out and build? And that's just gone up from last year at this time.

Okay, thanks.

The next question comes from the line of Eric Glover from Canaccord. Please proceed.

Hi. Good morning.

Good morning, Eric.

Good morning.

I may have missed this, but did you provide the contribution you expect from Savannah River in your 2011 guidance?

We didn't break it out by specific budget, and I don't think we do.

We didn't break it out.

Okay. Second question is, what are your CapEx plans for 2011?

Around $30 million -- and it's -- that would be primarily project assets -- assets that we own. And that's part of what we're going to be project financing.

Okay. And, finally, you mentioned some of these projects were not completed in the fourth quarter -- these construction-period closeouts. Would you expect margins -- gross margins to rebound once those projects are completed, say, in the first and second quarters?

The way we've kind of presented this in the past is that when we do -- the way we account for construction revenue and percent complete -- we're very careful to use budgeted margins. And if there were ever an issue with a particular project, of course, we would accelerate that and recognize a reduction in the margin.

But with projects where we could have some cost savings or potential cost savings, that gets recognized when the project gets closed out and all of the payments have been received. So if there's any potential, then that will happen when these projects are wrapped up.

So I think that's kind of the nature. And, as I said in my remarks, that typically happens -- our cycle has typically been -- projects wrapped up at the end of the calendar year. This year, we're looking at different circumstances with such a high volume of projects moving into 2011.

Okay, thank you.

The next question comes from the line of Chris Wiggins from Oppenheimer. Please proceed.

Hi. Good morning.

Good morning, Chris.

Good morning.

Just to revisit the margins, then -- is it accurate to say that the margins you have in your current backlog are higher now than they were at this time last year?

That is correct.

And, then, on the acquisition front, you'd mentioned potentially taking out some debt. Is there a specific deal that you actually have on the radar that you're taking the debt out for, or is it just to be able to be flexible as you -- as things pop up?

And that's why we put it in there -- by the end of the second quarter, we will arrange for that debt. I like to have a couple small acquisitions to be able to use that money as soon as we get it.

But there's nothing --?

And, as you know, we are always working. And we cannot comment, but we're always working on acquisitions.

And can you provide an update on the Spain opportunity that you had mentioned last quarter -- some potential legislation going into place in Spain?

Yes. And we did win one contract -- the School of Mines, which we are working on right now. And we are more focused in finishing out the job associated with the US -- United States Navy. And the RFP that the Spanish government was contemplating on issuing -- it has not issued yet. But that office -- like I said, as far as local business, we are not contemplating much for the next couple of years.

Okay, great. Thank you.

(Operator Instructions)

Thank you, everybody, for joining us today. And we are looking forward to our next conference call.

Pardon the interruption.

You have a question coming from the line of Maureen Drew from Gagnon Securities. Please proceed.

Hi. George, Andrew -- Neil Gagnon and Maureen. Andrew, on the contracts that you couldn't get closed in the fourth quarter in a normal way, and now have continued into the 2011 year -- can you give us a sense of the magnitude of that, so we're really moving margin or earnings, if you will, from fourth quarter until 2011?

Okay, I see what you're saying. Well, yes, it is -- that's effectively what would happen as projects are not closing up in 2010. I don't want to -- I guess it's difficult to share the dollar volume, but I can maybe talk about some significant projects within our federal group.

We've got -- beyond Savannah River we've got several projects that are of substantial size that were begun in 2010 and will continue into 2011. Also, within our public housing group, we've got some very large projects that commence this year and will continue into 2010 and -- excuse me, 2011 and 2012.

I think we view it as a good problem to have. And it gives us larger projects generating revenue over a longer period of time.

Okay, good. Thank you, very much.

And the next question comes from the line of Steve Milunovich from Merrill Lynch. Please proceed.

Yes, I was just wondering if you had a number for any penalty payments you made in 2010. And, roughly, on average, how much energy savings you think your customers are gaining through your energy-efficiency contracts?

You're talking about penalties under ESA -- under energy services agreements?

Yes.

Zero.

Zero? And what was it in 2009?

Zero.

Can't do better than that. Okay, thanks.

And we have no further questions at this time. I would now like to turn the call back over to Mr. George Sakellaris. Please proceed.

Again, thank you very much for joining us today. And, like I mentioned earlier, we are looking forward to our next conference call. Thank you.

This concludes the presentation for today, ladies and gentlemen. You may now disconnect. Have a wonderful day.