Ameresco Inc (AMRC) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ameresco Q4 2015 earnings conference call. (Operator Instructions). As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call, Mr. Gary Dvorchak. You may begin.

Thank you, Kevin, and good morning, everyone. Thank you for joining us for Ameresco's fourth-quarter 2015 earnings conference call. I'm joined on the call today by George Sakellaris, Ameresco's Chairman, President, and Chief Executive Officer; and John Granara, the Company's Chief Financial Officer.

On the call, management will review the operating and financial highlights of the fourth quarter as well as discuss full-year 2015 results. Following the highlights, we'll take questions from the audience. Before I turn the call over to George and John, I'd like to make a brief statement regarding forward-looking remarks.

This call contains forward-looking information regarding future events and future financial performance of the Company. Ameresco cautions you that such statements are just predictions and actual results may differ materially as a result of risks and uncertainties that pertain to our business. The Company refers you to their press release issued this morning and the annual report filed on Form 10-K with the SEC, which discusses important factors that could cause actual results to differ materially from those contained in the Company's projections or forward-looking statements.

The Company 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 the call. The non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles [in] a GAAP to non-GAAP reconciliation, as well as explanation behind the use of non-GAAP financial measures is available in our press release as well as our prepared remarks.

I'll now turn the call over to George Sakellaris. George?

Thank you, Gary, and good morning, everyone. As I look back on 2015, I can see that our value proposition is increasingly relevant and enduring. Government agencies, schools, hospitals, and other organizations face unending pressure to reduce operating costs across their facilities. Our clients turn to energy efficiency as a natural solution because the savings can be meaningful and can finance the work. Coupled with market forces that encourage living in a sustainable manner the rationale for energy efficiency and renewable energy will persist well beyond in 2016.

We entered 2015 optimistic about our prospects. That confidence was born out by our solid performances, notably in our core business.

We delivered good growth despite challenges in certain business units. Our federal team grew revenue by 20% in 2015 to over $127 million. The US regions team grew its revenue by 14%. Adjusted EBITDA for the entire Company grew 12% to $46 million, building on the 45% growth in 2014.

We also achieved success in another strategic goal, which is to grow our recurring revenue streams. Those being operations and maintenance and the sale of electricity generated from the distributed generation assets that we own. Federal market O&M revenue increased 15% in 2015. O&M contracts are typically multiyear, giving us good visibility on the income for years to come. Our federal O&M contracts currently sum to over $700 million of revenue over the next 18 years.

Similarly, during 2015 we achieved growth in the sale of new [electricity] from assets we own, up 6.5% to $55 million. Our approach to this business is unique, in that we are not attempting to be an IPP. Rather, we build and own renewable power plants associated with ESPC client, thus leveraging our relationships with those clients. We currently have 158 megawatts of producing assets and another 20 megawatts under construction.

To drive growth we are capitalizing on three clear trends in our markets: projects are getting larger, there is more renewable energy as part of the overall solution, and there is expanded interest in efficiency driven by economic and social imperatives. The trend to larger projects is especially apparent in the public housing market, where we are a leader. In recent years our public housing energy specialists have implemented ESPCs with project capital accreting $500 million.

Just this year we announced projects in Birmingham, Alabama; Holyoke, Massachusetts; and Syracuse, New York. Most importantly, on last quarter's call, we mentioned an extremely large housing award in a large northeastern city, which we carry in our backlog at $75 million. We are now completing the [audits] that will determine the exact scope of the project.

Our success in 2015 and our confidence in continued growth in 2016 and beyond is not simply a function of market growth.

We have established ourselves as a trusted sustainability partner, making our competitive position strong. We also have a multiyear track record of delivering on our customer commitments, earning us a reputation for reliability. And we are a recognized innovator, constantly using new technologies and techniques to better deliver on our value proposition. Our position as an innovator is very important, so let me elaborate to that.

Here are some examples of innovations we realized in 2015. In distributed generation we installed the largest solar facility in the state of Minnesota. We also installed an 18 megawatts of on-site generation with the U.S. Army. And in Maine we completed a microgrid demonstration project that include battery storage. Furthermore, we also pioneered in the area of deep energy retrofits with a project in Maryland that reduced energy consumption by more than 60% across 1 million square feet of office space.

Finally, in Washington state we installed the first of its kind LED street lighting project.

Our clients look to us for innovative solutions that meet their energy efficiency and renewable objectives. In 2016, we intend to again lead our industry in innovation.

As we look back in 2015, we met most of our goals. We accelerated revenue growth, expanded operating margins, and grew EBITDA.

However, I know we could have done better. Even with our coal business putting up double-digit growth, consolidated revenue grew only 6%. Like all businesses, we had challenges and we tackled them head on.

First of all, issues in Canada were a drag on our results. Revenue in Canada was down 30% this year and we lost a material amount of money. The main issue was a large project referred to internally as SRO.

The SRO project is not representative of our coal business, as it's mainly a general construction project. In retrospect, we see it was bid inappropriately both in pricing and terms. It suffered expensive cost overruns during its life, including an anticipated new cost this quarter. We expect to have SRO completed and behind us this year.

As we put the SRO project behind us, we expect profitable growth to resume in Canada in 2016. Most important, we recruited an outstanding new leader. In September 2015 we recruited Bob McCullough to lead this unit. Bob has more than 30 years of experience in leadership positions within the energy efficiency, building technology, and construction industries. Under Bob's leadership, we reconstructed the Canadian operation so that the organization and cost structure fit the realistic size of the market opportunity.

John will provide more details on the actions taken and associated one-time charges.

The second challenge was our energy monitoring and management software business. This unit was not performing to its potential and we decided to go to market in a different and, we think, better way. Rather than a stand-alone business, we have integrated the software and analytics into our project work. This leverages the sales effort being made already and adds value to our project offering, improving the [ultimate award].

As a result of restructuring the software group, we took charges in the fourth quarter to account for the cost of realignment, and John will review those in his remarks as well.

The third challenge was sluggish demand in the off-grid integrated business, which was down 24%. In this business, our principal application is microgrids for oilfield exploration and production. With the plunging price of oil, exploration is slowing significantly as CapEx budgets get cut.

Looking forward, we are excited about our prospects. We came in 2015 optimistic, due to our value proposition and our market opportunities. We entered 2016 even more optimistic and with good visibility.

Our $1.4 billion of total backlog is higher than what we started with in 2015, thanks in part to over $0.5 billion of new awards this year, the highest level since 2012. We have put in place four long-term strategies to drive growth. First, we have committed to aggressively put prudent spending in project development. We want to continue to build our project pipeline, and the only way to do that is with people calling on prospective customers.

Analysts expect our industry to grow 6% to 8% annually for the next few years, but we want to grow faster.

We spent $2 million more this year compared to last year on business and pipeline development. A good portion of that additional $2 million was used to fulfill a second element of the growth strategy, which is to penetrate new regions in the US in which we were underrepresented. We have established a new presence in six states, including two of the largest in the US. The addressable market in those two states alone is quite large, and we expect them to become meaningful contributors in the next year or two.

Third, we will continue to build our portfolio of distributed generation assets. The revenues [are] recurring and high-margin and create a great foundation for the Company. More projects are including a renewable energy component, which plays perfectly to our expertise. We expect to add more than 30 megawatts of productive capacity to our portfolio in 2016.

Fourth, we have restructured and optimized to overcome the challenges that were a drag on our results in 2015. Naturally, revenue growth and profits can accelerate just by restoring growth in Canada and eliminate the losses there.

Furthermore, the software business will now shift from investment mode to supporting our project efforts.

In summary, our confidence in the outlook is supported by tangible [data]. The trends driving market growth are clear and compelling. Our position as an industry leader, especially in innovation, is unparalleled, and we are taking specific actions to fix the challenges of 2015 and to capture the new opportunities we see developing. We believe all of these will again lead to revenue growth, expanding margins, and higher EBITDA for the years ahead.

Let me now turn the call over to John. He's going to provide more details about our financial results, including the fourth-quarter performance. John?

Thanks, George, and good morning, everyone. As we get started, please note that unless otherwise stated, all the amounts I reference relate to either Q4 2015 or the full-year 2015, and all the comparisons are for the year-over-year change.

On our last call, we alerted you that we would incur charges related to the restructuring and realignment initiatives that George just discussed. In order to make it easier for you to understand our normalized performance, which is how we analyze our business, we have included non-GAAP measures which exclude the impact of these charges, as well as an unanticipated additional charge related to the SRO project in Canada. We also excluded a benefit related to the noncontrolling interest in our Fort Detrick project.

Moving on to the results, looking at the fourth-quarter revenue of $173.8 million, was down 4%. Project revenues were essentially flat year-over-year after coming off a seasonally strong Q3, while revenues generating from our operating assets were up 4%. However, we saw declines in our offgrid solar business and our restructured software business. Sales related to offgrid solar equipment were down 31%.

For the full year, revenue increased 6.3% to $630.8 million. Growth was primarily driven by the strength in the federal and US regions segments, which were up 20% and 14%, respectively. This growth was partially offset by the anticipated 30% decrease in Canada and declines in the all other segment. Breaking out our lines of business, project revenues of $434.4 million were up 12%. Sales of energy generated by our operating assets grew 6.5% as we placed new assets into service.

O&M was flat, as anticipated, as all of the new 2015 O&M awards replaced the revenue we lost from a late 2014 contract amendment. As an aside, we expect O&M revenue growth to resume in 2016, due to the addition of the new O&M contract signed this year. The project and energy sales growth was partially offset by a 24%, or $12.5 million, decline in our integrated PV offgrid business. We're not expecting growth in this business during 2016.

Before I cover the rest of the P&L, let me discuss the restructuring charges we incurred in Q4. During the quarter, we booked $6.2 million of restructuring charges to cover two things. One, the costs associated with the reorganization of our Canadian operations, and two, the restructuring of our enterprise energy management business unit. The charge included $1.8 million in termination benefits, which are a cash cost. The balance of the charges will not require a significant outlay of cash and included $2.9 million of charges related to the writeoff of receivables, contract termination costs, and a variety of smaller non-cash items.

After these actions, we believe we have the proper organization in Canada to drive renewed profitable growth. We also believe our software business is now positioned to thrive, with the focus turned to sales that are integrated into project work rather than standalone offerings.

In addition to the restructuring charges, we also incurred another and, hopefully, the last cost overruns associated with the SRO project. As you'll recall in Q1 we reserve for the losses we expected to incur as we complete that project. Unfortunately, in Q4 we had to reserve for an additional unexpected $3.4 million loss, reflecting new cost overruns and delays in completing the project.

We expect to have SRO completed this year with no additional access costs anticipated to hit our P&L. But of course we cannot guarantee this until the project is completed.

Let me give you some specifics on how we reorganized our Canadian operations. Our goal in Canada is to have a smaller, more efficient, and more profitable business unit, pursuing projects that fit our infrastructure and capabilities there. The principal restructuring activity was to reduce staff to a level that aligns the cost structure with a realistic market opportunity.

We are optimistic about the outlook for the resized unit. We believe Canada is still a good market for us. We met our goals there for sales, awards, and backlog for the year, and we hit milestones such as the first sales of municipal street lighting and energy storage systems. There's meaningful government support for further energy efficiency initiatives, so we believe is -- market will have a tailwind for growth in the growth -- years ahead.

Now to move on to the rest of the P&L, my analysis will include results that remove the effects of the restructuring charges, the loss associated with the SRO cost overrun, and the positive impact of the Fort Detrick noncontrolling interest. As George and I and the whole management team analyze our business, we look past these factors which do not reflect the ongoing economics of our core operations. We want you to see and understand the business in the same manner that we do.

So let's look at gross margin operating expenses. Gross margin before the loss on the SRO project was 19.4%, down from 20.1% in the same quarter last year. The gross margin decline was due mainly to revenue mix with project revenue increasing as a percent of total revenue. Gross margin on a GAAP basis for the fourth quarter was 17.4%. For the full year, gross margin before the loss on the SRO project was 19.6% compared to 19.8%. GAAP gross margin for the full-year 2015 was 18.6%.

SG&A expenses before restructuring in the quarter were $27.3 million or 15.7% of revenue, which is down 10 basis points from the 15.8% last year. Total operating expenses were $33.5 million or 19.3% of revenue, when including restructuring charges of $6.2 million. For the full year, operating expenses before restructuring charges were $103 million compared to $102 million. Total operating expenses including the restructuring were $110 million. Full-year 2015 operating expenses included a total of approximately $6.6 million in restructuring charges in the second and fourth quarters. We expect the restructuring charges to result in at least $4 million in permanent annual savings.

Adjusted EBITDA for the fourth quarter was $13.1 million compared with $15.2 million in the prior year quarter. The full year of adjusted EBITDA increased to $46 million from $41 million a year ago. I mentioned the $5.5 million benefit related to the noncontrolling interest. We did this using the so-called hypothetical liquidation at book value, or HLBV accounting method. Because HLBV accounting produced income not related to the performance of the project, we classify this as noncore.

Non-GAAP net income in the quarter was $4.2 million or $0.09 per share, down $10.6 million or $0.22 per share. On a GAAP basis the Company reported net income of $1 million or $0.02 per share. Non-GAAP net income for the full-year 2015 was $9.6 million or $0.20 per share, down from $12.6 million or $0.27 per share. GAAP net income for the full-year 2015 was $3 million or $0.06 per share versus net income of $10.4 million or $0.22 per share last year.

For the year, the decrease in net income was attributable to income taxes and foreign exchange.

Both GAAP and non-GAAP net income was reduced by $2.4 million due to the depreciation of the US dollar against the Canadian dollar in comparison to $1.1 million in the prior year. Looking at taxes, in 2014 we recognized a benefit of $4.1 million, while this year we had a $2.8 million provision or expense.

Let me explain our tax rate for the year, which might seem a bit confusing. Our effective tax rate in the US was 16%. That rate is especially low because Congress extended the 179D deduction for energy efficiency, an action we anticipated all year, but we were not sure of the timing. So in the US we earned money in paid taxes at that rate. And you see the $2.8 million provision on the P&L.

Our P&L does not consist only of our US operations, however. It also includes Canada, which had a significant loss this year. So the consolidated P&L has taxable income that includes the profit in the US and the loss in Canada, but the tax provision reflects only what we are paying in the US.

So the simple calculation of the tax rate does not reflect what we're actually paying. Now this will change in 2016 when we expect improvement in Canada. For long-term modeling purposes, we may want to use a tax rate of around 25%.

Now let's turn to our balance sheet. Cash was up slightly from Q3. Receivables were up approximately $10 million from Q3, primarily due to an increase in unbilled revenue. Days sales outstanding were up to 99 from 83 in Q3. Consolidated debt increased $23.6 million. Of that amount, $11.3 million was additional draw on the corporate revolver, while the balance was an increase in nonrecourse project debt. We have $91 million of nonrecourse project debt, which is the majority of our total debt of $119.2 million.

Looking at CapEx, gross capital expenditures for the year were $53 million. We anticipate 2016 CapEx to be in the range of $50 million to $75 million. Total project assets are now $244.3 million.

Next, turning to backlog and outlook, we started the quarter with $379 million in fully contracted backlog and ended with $390 million, representing a sequential increase of 2.9%. Our implementation teams completed [$120 million] of work while our sales team successfully converted $132 million of awards into contracts. Q4 is typically a seasonally low quarter for new awards, but we did add $56 million of new awards during the quarter. This brought our total of new awards in 2015 to $540 million, an increase of 64% from prior year and the highest annual total since 2012.

Now for guidance. As George noted, we are optimistic about our outlook and confident we can achieve another year of solid revenue growth and improving profitability. We expect consolidated revenue in 2016 to be in the range of $645 million to $680 million. This outlook reflects double-digit growth in our core US businesses, coupled with decent growth and energy sales.

We expect Canada to be flat and we still expect some challenges in offgrid PV equipment sales. Gross margin is expected to be in the range of 19% to 20%, and operating expenses are expected to be around 15.5% to 16.5% of revenue.

Operating expenses reflects the investment in the growth initiatives that George talked about earlier. We expect EPS in the range of $0.25 to $0.29 and adjusted EBITDA to be in the range of $51 million to $57 million. Note that this outlook excludes the impact of the noncontrolling interest as well as any lingering charges relating to the restructurings in Canada and enterprise software group. Most of the charges have been taken, but we do contemplate more small charges, which we believe will be less than $1 million.

Now we'd like to open the line for your questions and I'll turn the call back over to our coordinator.

(Operator Instructions). Noah Kaye, Oppenheimer.

Maybe I could just start with a bit of housekeeping on the small-scale infrastructure side. The big jump that we saw, just to clarify, in revenues in the quarter, going up to a little over $20 million, that's at the top line, recognizing this -- the NCI benefit, right? If we strip that out then the right run rate to think about would be just under $15 million in small-scale infrastructure revenue. Are we reading that correctly?

Yes. Noah, in the prepared remarks that we have actually decided to provide a little bit more details on the revenues, which actually shows the revenues not only by segment but also on our lines of business. And we're doing that because our segments are basically how we run the business from an accounting standpoint. And we have one group that we refer to as small-scale infrastructure, that not only develops the assets that we own internally but will also do turnkey projects for others.

And what you are seeing there is, if you look at the table, we actually have project revenues and we've actually included the details. So, most of that is being driven by the project revenues related to a project that I believe just started to hit construction in the second half of the year. So that's -- the noncontrolling interest benefit actually is at the bottom of the P&L. And that $5.5 million comes at the bottom.

What we're trying to do with the new lines of business breakout is -- all of our segments actually sell everything, and that's projects, O&M, operating assets. And then, of course we do have other engineering, consulting.

And especially next year, as we move forward, as Fort Detrick comes online, they are actually going to have revenue related to energy assets as well. Canada has revenue related to it. In addition to the segments, which really are end markets, we're actually providing the details of the revenue based on the lines of business.

So we're hoping that will help to provide a little bit more clarity for investors and shareholders around the different lines of businesses from our markets.

Sure. So if I look at the small-scale infrastructure operating assets revenue contribution for 2015, and you're poking that on the table, you have around $53 million. In your guidance for next year what does that look like? What's the growth specifically on the operating assets line?

Yes, the operating assets line, it's about 10%. So again, most of the impact that the assets actually impacts earnings of more than it does revenue. And so, you're looking at historically about a 40% EBITDA margin. So you are looking at $10 million of additional revenue so you're looking at adding about $4 million of EBITDA, approximately. And that's going to be coming from Fort Detrick, which actually went online in December.

Which is the reason why we had the benefit related to the noncontrolling interest. And also we did -- so, for the year we placed 22.2 megawatts and service. And we're also planning on putting, throughout the course of next year, about 20 megawatts in servers next year as well.

I wanted to follow up on that. In the past, you had talked about having as large as a 100 megawatt pipeline. George, I know that you guys have invested in growing the solar business, particularly following the ITC extension. You have a longer runway now.

Are you being that conservative with that 20 megawatt number? And where is your pipeline right now? Maybe you can help us understand a little bit the thinking around the guidance there.

Yes, I can provide you the detail there. So we did place the 22.2 megawatts in service this year, which is what we had planned. When you look at our pipeline -- and I think we said it was about 80, or over 80, and so that's about where we're at right now for our 80 megawatts of total pipeline for assets in development. I should mention about 30 megawatts are non-solar. We have a couple of biogas projects that we're developing as well.

So, that puts the solar aspect or the solar piece at about 50 megawatts. About 15 megawatts right now are delayed in Massachusetts, related to the net metering cap. And the SREC II allocation, that's essentially for commercial sized projects or small commercial projects. The SREC IIs are essentially expired.

Yes.

So, our guidance for this year, the 20 megawatts, takes that into account. We're not planning on those 15 megawatts coming online. If we are able to get more clarity on that, then we would expect to actually have 35 to 40 megawatts come online. We're hopeful that that would be the case, but we thought it would be prudent to -- without having any visibility as to the exact timing, so give you a number that we are comfortable with based on what we have construction, what we have in development and shovel ready.

That makes a ton of sense. Thanks for the detail. And on the biogas I'm assuming that's also not in your guidance. Those are longer-term projects? Or are you expecting them to come online this year?

That's correct.

That's correct. They won't hit until the following year.

Okay, great. Thanks. Maybe just turning to the ESPC project business. We've certainly seen a lot of chatter regarding what's going on in the capital markets and in the debt markets, seeing a diversion in spreads between investment grade and noninvestment grade. Obviously the bulk of your business is with government and MUSH customers. Just wondering, maybe you could touch on where you are seeing project debt transacting right now for your core customers. And then touch on what's going on with your C&I customers in terms of financing and whether or not there's any headwind there.

I will let John answer that, but my feeling is that interest rates and the financing -- especially the [interdictional] sector, it very readily available. And actually the long-term rates the last few weeks have gone down. And as far as the C&I, the ones that we haven't done that much in that space, but we don't envision in the short-term or even in the long-term any interest -- our ability to finance the projects that they would [infer].

Yes, including the spread of 150, 200 basis points and all, I think we're still in the 4% range for some of the long-term projects. So I don't think it's having a major impact on our public and institutional customers toward those projects. We're obviously aware of that, but as George just said, we actually saw them decrease most recently. So, we're not seeing any pressure on rates impacting our performance contracts.

And then on the C&I side, George, your comment implies that that's not in terms of how you are thinking about your guidance for 2016 or (multiple speakers).

It depends, but the clients on the C&I you want to finance, but if they occur and are worthy customers, they feel pretty comfortable that we will be able to finance them.

And what about C-PACE and some of the newer (multiple speakers)?

We are looking at some projects, especially in California, that -- and in Connecticut that will be a [year licensed] C-PACE financing.

Okay, great. Thanks. I'll jump back in queue.

Chip Moore, Canaccord.

So, as you are seeing a move to larger sized projects, maybe you can talk about any related challenges there, any processes you have to put in place, particularly in light of what you've seen on that SRO project.

Yes. We're seeing that the average price is -- I mean the average size is creeping up. Before we would say that the average was 5 to 10; now it's probably closer to 10 rather than the 5. But the only issue is timing. Some of the larger projects, they take longer to move from the award category to the construction, execute the contracts and moving forward.

The other thing, the margin might be a little bit depressed on the high side, but on the overall, because in administering the projects, it's a larger project, the contributions to the EBITDA is not that different from a smaller scale project. So, the only thing, timing might be an issue.

Yes, and Chip, I did just want to follow up on one thing, because you did refer to the SRO project. Obviously that was a project that was entered into a few years ago, but just want to assure everyone that we have taken steps and procedures to ensure that a project like that would not be something that we would do again.

In using hindsight, obviously, we were able to see where we had some miscues in our process in terms of bidding for that project. And we certainly want to make sure that that doesn't repeat itself.

Yes, okay. No, that's fair. And maybe you can talk on the federal side at least, now that we had our seasonally slower period, historically what you've seen in an election year and how you are thinking about that. How that trend plays out.

Yes, I think -- certainly, I think with an administration change, there are people that may speculate whether or not there's going to be a change. We look at the pipeline of activity, the federal government, that they produce. And right now they are saying that they are at 138% of their goal based on the challenge. And that's the $4 million goal, to have performance contracts -- $4 billion -- goal by 2016. So it looks like they are on target to hit that goal.

We're optimistic that things are going to continue to move forward, in that both sides of the House really support energy efficiency. And so, whether you have a Republican or a Democrat as the President, we think energy efficiency has bipartisan support. And really, when you look at it, some of the dynamics and the drivers behind that, looking at the building infrastructure and the aging infrastructure and the pent-up maintenance and all those things, they still need to spend money.

And so, the energy efficiency projects are a way for them to do that and the projects fund themselves. So that really isn't a partisan nor a change in administration. That is just pure economics. So we think that energy efficiency performance contracting is a way for the federal government to reduce their spending, and we think that that's going to continue on.

Okay. And last for me, can you just give a sense of rough size now that is depressed on the oilfield-related business and what are you baking in there for declines in 2016?

Yes, so it's about 40 -- it was $40 million last year. We're hopeful that it won't be much lower than that. So I would say in that $35 million to $40 million range. And I will say that good news was, at least last year, is that it was not a drag on earnings, as much as Canada was, as an example. So although it was down 24%, we actually still had positive EBITDA. And it's an inventory-based business. It's a book-ship business, so we are -- it impacts working capital more than it does earnings.

So we're balancing those two and we're trying to look ahead at the demand. But we're not planning on any significant growth this year in that business.

Okay, that's helpful. Appreciate it. Thanks.

Carter Santos, EVR Research.

Thanks for taking the questions. I have several. I'm sorry if some of these have been answered. I had a little trouble getting in the queue. Does the assets in develop figure you disclosed equal the potential revenue expected from those assets over the duration of their contracts? Or does that figure represents the amount of that would appear as incremental project asset on your balance sheet?

It would be the latter, and thanks for asking the question. It is -- of that amount essentially is the value of the assets we'd be putting on. As I mentioned, it's about an 80 megawatt portfolio right now, consisting of about 30 megawatts of nonsolar assets, and then the rest predominantly solar. So, that is essentially what we would end up putting on our balance sheet, and that more reflects the cost of construction.

Okay. Were all the projects held on to by the Company?

In the existence of the Company? We've actually -- our model is that we -- and this is what makes us unique. We always say that we are a -- we're not biased from a technology standpoint or a product standpoint. We're actually agnostic. And we're also agnostic from our process standpoint, meaning that we will develop the project before a customer and they'll own it, or we'll own and operate it and they will get financed through a PPA arrangement.

So, what you see on our balance sheet, the $244 million of assets, those are the assets that we've retained and we own and operate. But I think if you're asking if that's for this upcoming , I can say that it was predominantly the assets that we constructed were for our own use. But we do have some large solar installations in the West Coast, as an example, that we are constructing that we're not owning.

And a (multiple speakers) gas projects that we built for others.

Yes.

On a sequential basis, the assets in development fell by more than the project asset on the balance sheet went up.

Yes.

Can you explain what's happening?

Yes. I think so. The -- well, are you looking at it sequentially from the quarter?

Sequentially 3Q to 4Q.

Okay. Yes, so, we did place a significant asset in service, and that was Fort Detrick. And so that was 18 megawatts. So, that was a large amount to replace, so we are down sequentially because of that asset. When you consider the fact that our total portfolio is 80 megawatts and it was actually closer to 100, we actually did have more awards this quarter but they weren't greater that what we placed in service.

So, it's just a matter of timing of when we placed our Fort Detrick solar installation in service.

Okay. What needs to happen before you all disclose publicly the potential value of the EBITDA expected from those assets in development?

Yes, that's a good question. I think what we've done is, is we have -- at least this year, we just said that we've added about $4 million of estimated EBITDA for what we placed in service. I think as we get a little bit more clarity in terms of the timing of when we're going to be putting these assets on the books, we would do that. As one of the other callers had asked or had mentioned, the biogas projects take significantly longer amount of time to develop. And so when those come online and closer to being placed in service, I think that's when we would be providing a little bit more color, at least in the near-term.

In the medium- to long-term, I think if you look at the megawatts that we placed in service for solar, that can be a proxy for what we're trying to do going forward. And the 20 megawatts that we have for this year would be a representative of what we're putting in service this year as well.

Okay. On the guidance, what does that assume in terms of EBITDA from the wholesale, the PV wholesale business?

So, related to the offgrid PV business?

Right.

Yes, it's very minimal. It's about $1 million.

Loss?

No, it's about $1 million -- breakeven to $1 million is --.

Contribution.

Is our --.

Okay.

That's what's reflected there.

And does guidance reflect Canada reaching breakeven (multiple speakers)?

Breakeven? Yes, so, breakeven on an adjusted EBITDA basis.

Adjusted EBITDA.

Yes. So, that is the plan.

Okay. And it's our understanding that a key competitor of yours is suing the US government to get back into contention for inclusion on the list for those able to participate in the next DoE IDIQ. If they are ultimately excluded, is that a small benefit or a large benefit for your federal business?

Well, yes, we certainly don't want to comment about a competitor and the ultimate outcome. Our goal is to be a part of the companies that are part of that IDIQ. And so, as I'm sure you are aware, it's more than one or two.

Could it be a benefit? Well, it would be a benefit to everyone that's part of that IDIQ if there's one less person, but we can't say that we would be the direct beneficiary if that were to happen.

Okay. And maybe lastly (multiple speakers).

The only thing I wanted to add there -- I'm sorry, go ahead.

No, please continue.

The only thing I wanted to add there is that our position in the federal market right now is very strong. And we seem to be winning a good percentage of the awards. So, we feel pretty good about our chances in that particular market.

Okay. Lastly, could you break out fully contracted backlog growth for the US regions, US federal, and Canadian segments?

I think John --.

Yes, so I can tell you that the US federal fully contracted was flat, and Canada was as well. So, really, you're looking at, across the board, it was pretty much flat year over year. And part of the reason is, is that the awards that we added during the year will take 12 to 18 months -- on average, 15 months -- to go into contracted. The bulk of the awards this year came in Q2 and Q3, so that means we wouldn't expect that to start converting until the middle or end of this upcoming year.

But I can say on the awarded side the federal group is about $600 million of our total backlog. And with the US regions -- let me -- going to see here.

420.

$420 million of the total. So the bulk of the backlog is coming from our US regions and the federal group.

Okay. Thank you all very much.

(Operator Instructions). And I'm not showing any further questions at this time. I'd like to turn the call back over to George.

Thank you, Kevin. And to close I want to first thank all of our talented and hard-working employees for the effort they put in each and every day. They are really the basis of our success. I also want to thank our shareholders for their support. We are excited about 2016 and look forward to reporting progress to you on our Q1 call in May. Thank you and good (technical difficulty).

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.