燃料電池能源 (FCEL) 2018 Q3 法說會逐字稿

Good morning.

My name is Casey, and I will be your conference operator today.

At this time, I would like to welcome everyone to the FuelCell Energy Q3 2018 Earnings Call.

(Operator Instructions)

Tom Gelston, Vice President of Investor Relations, you may begin your conference.

Thank you, Casey and good morning, and welcome to the Third Quarter 2018 Earnings Conference Call for FuelCell Energy.

This morning, FuelCell Energy released financial results for the third quarter of 2018.

The earnings release as well as a presentation that will be referenced during this earning call are available on the Investor Relations section of the company website at www.fuelcellenergy.com.

A replay of this call will be available approximately 2 hours after its conclusion on the company's website.

Before proceeding with the call, I would like to remind everybody that this call is being recorded and that the discussion today will contain forward-looking statements, including, without limitation, statements with respect to the company's anticipated financial results and statements regarding the company's plan and expectation regarding the continuing development, commercialization and financing of its fuel cell technology and its business plans.

I would like to direct listeners to read the company's cautionary statements on forward-looking information and other risk factors in our filings with the U.S. Securities and Exchange Commission.

Now I'd like to turn the call over to Chip Bottone, President and Chief Executive Officer.

Chip?

Thank you, Tom.

Good morning, everybody, and welcome.

Please turn to Slide 4, Highlights.

Today, we announced our third quarter 2018 results and current business highlights, which include: backlog and project awards totaling $1.9 billion; new contract awards in Connecticut comprised of 22.2 megawatts of fuel cell projects awarded by the Connecticut Department of Energy & Environmental Protection, or DEEP, in June as part of a competitive solicitation for Class 1 energy -- clean energy; execution of a 20-year service agreement in South Korea with Korea Southern Power Company or KOSPO; closure on the sale of a 1.4-megawatt Trinity College project to AEP OnSite Partners; continued execution on several high-profile projects that represent our versatile technology's utility grid, micro grid and tri-generation capabilities, including projects totaling 39.8 megawatts for New York's Long Island Power Authority or LIPA; a 7.4-megawatt fuel cell park for CMEEC, a municipal electric cooperative, which will serve the U.S. Navy Submarine Base in Groton and a secure micro grid; and our multimegawatt tri-generation fuel cell power plant for Toyota at the Port of Long Beach in California.

I'll share more details on each of these exciting developments later in the call.

Relative to KOSPO, I just returned from Korea, where, among other things, FuelCell Energy was honored in a very thoughtful ceremony hosted by KOSPO officials, including its CEO, Dr. J.S. Shin (sic) [J.

S. Lee] . The 20-megawatt power plant showcases our capabilities, is operating as expected and the KOSPO leadership is thrilled and very proud of its first fuel cell project.

At the start of the fourth quarter, we closed on the sale of the 1.4-megawatt project at Trinity College in Hartford to AEP OnSite Partners.

We are excited to enter into this transaction and build a relationship with AEP, one of the largest electric utilities in the U.S., through its subsidiary, AEP OnSite Partners.

FuelCell Energy takes pride in AEP's recognition of our performance profile and customer-focused clean energy solution and its decision to add the Trinity project to AEP's over 26,000 megawatts of power production capacity.

Our total backlog reached a record $793.2 million at the end of the third quarter, and with addition of the recent project awards not yet in backlog, we are at a total of $1.9 billion, the highest in the company's history.

Adding FuelCell power projects to our generation portfolio delivered predictable, recurring revenues that are an increasingly important component of our future sustainable profitability while cash from the sale of select assets supports construction of additional projects.

Responding prudently to this record increase in our backlog and project awards, we have announced a ramp in production at our North American manufacturing facility in Connecticut.

Beginning next month and continuing into March 2019, we'll be -- we'll incrementally increase the annual production run rate at our Torrington facility from the current 25 megawatts to 55 megawatts, an increase of 120%.

We are already in the process of hiring over 100 new employees for highly skilled manufacturing jobs between now and March.

Once executed, the ramp is expected to eliminate the underabsorption of manufacturing costs in our plants by mid-2019, helping to drive improvements in profitability.

I'll discuss more of our business execution after Mike Bishop, our Chief Financial Officer, reviews our financials.

Mike?

Thank you, Chip.

Good morning, everyone, and thank you for joining our call today.

Please turn to Slide 5 titled Financial Overview.

FuelCell Energy reported total revenues for the third quarter of fiscal 2018 of $12.1 million compared to $10.4 million for the third quarter of fiscal 2017.

The gross loss generated in the third quarter of fiscal 2018 totaled $2.1 million compared to a gross loss of $2.6 million in the third quarter of fiscal 2017.

Margin in the quarter was impacted by the low production volume and a service-related charge.

Manufacturing variances primarily related to low production volumes totaled approximately $3 million for the 3 months ended July 31, 2018, compared to $3.4 million for the 3 months ended July 31, 2017.

Also, service margins in the third quarter of fiscal 2018 were impacted by $1.2 million of costs related to the termination of a legacy sub-megawatt service agreement in the quarter.

Given the level of backlog and recent project awards, the company announced in July its decision to increase its production rate with the goal of reaching an annualized run rate of 55 megawatts by April 2019.

We expect this increased production rate to lead to improved margins over time.

Operating expenses for the third quarter of fiscal 2018 totaled $12.4 million compared to $11.7 million for the third quarter of fiscal 2017.

Net loss attributable to common stockholders for the third quarter of fiscal 2018 totaled $17.6 million or $0.20 per basic and diluted share compared to $17.8 million or $0.31 per basic and diluted share for the third quarter of fiscal 2017.

Net loss attributable to common stockholders in the third quarter of fiscal 2018 includes a deemed dividend totaling $939,000 on the company's Series C convertible preferred stock.

Adjusted loss before interest, taxes, depreciation and amortization or adjusted EBITDA, which is a non-GAAP measure, in the third quarter of fiscal 2018, totaled negative $11.3 million compared to negative $10.9 million in the third quarter of fiscal 2017.

Please see our earnings release for a reconciliation of adjusted EBITDA to the most comparable GAAP measure.

As illustrated by the chart on the top-right side of the slide, backlog and project awards combined to total $1.9 billion at the end of the third quarter of fiscal 2018.

Contracted backlog sat at a record level of approximately $793.2 million at the end of the third quarter.

Subsequent to the end of the third quarter of fiscal 2018, the company sold the 1.4-megawatt Trinity College project asset, which has previously been classified as generation backlog, to AEP OnSite Partners.

As a result of this sale, this project was removed from generation backlog and classified as product backlog and services backlog.

The product backlog will be recognized as revenue in the fourth quarter of fiscal 2018.

The services backlog will be recognized as recurring revenue over the term of the company's service agreement with AEP, which is 15 years.

At the end of the third quarter, services backlog totaled $317.8 million, up significantly with the addition of the recently signed long-term service agreement with Korea Southern Power Company, or KOSPO, in South Korea.

Generation backlog totaled $430 million and Advanced Technology backlog totaled $35.8 million.

Product sales backlog totaled $9.5 million, primarily consisting of the Trinity College project that was sold to AEP in August of 2018.

Project awards not included in backlog as of July 31, 2018, totaled approximately $1.1 billion.

These include the Long Island Power Authority project awards totaling 39.8 megawatts and the Connecticut RFP project awards received during the third quarter of fiscal 2018 totaling 22.2 megawatts.

Cash, cash equivalents and restricted cash totaled $87.3 million as of July 31, 2018.

This includes $48.7 million of unrestricted cash and cash equivalents and $38.6 million of restricted cash and cash equivalents.

The chart at the bottom right of the slide shows the project asset totals on the balance sheet.

Project assets totaled $89.7 million as of July 31, 2018.

Investment in project assets in the first 9 months of 2018 totaled $28.4 million and includes the 3.7-megawatt Triangle Street project, which has an expected commercial operation date in the fall of this year as well as the 2.8-megawatt Tulare BioMAT project and the 7.4-megawatt Groton sub-base project, both with expected commercial operation dates in fiscal 2019.

As a result of the sale of the Trinity College project asset, this project was removed from long-term project assets and will be recognized as cost of sales in the fourth quarter of 2018.

Finally, I would like to discuss recent financing activity.

Part of the company's strategy is to build and retain certain project assets in order to benefit from their consistent, long-term positive cash flow profile.

At scale, we believe this portfolio can support the profitability of the company and reduce its reliance on new project sales to achieve cash flow positive operations.

To support the growth of our portfolio, the company expects to employ a variety of financing strategies.

Last week, we closed on the issuance and sale of a new convertible security, our Series D convertible preferred stock, that raised approximately $25 million of net proceeds for the company.

Also last week, we announced the sale of the 1.4-megawatt project located at Trinity College to AEP OnSite Partners.

We're looking forward to building a long-term relationship with AEP.

This transaction demonstrates that we, from time to time, have the option to sell projects out of our portfolio to return capital to the business.

And we will continue to strategically evaluate such opportunities as they arise.

One of our focuses continues to be on raising project financing for the company's portfolio.

We have seen diverse interest in providing both construction and term debt, tax equity financing or acquiring assets outright.

We expect to provide updates in the coming months on project financing progress for the assets currently being executed on in our portfolio.

Now I would like to turn the call back to Chip who will provide a broader business update.

Chip?

Thank you, Mike.

Please turn to Slide 6, Business Execution.

Starting with our projects currently in execution, all 3 of the projects totaling 39.8 megawatts for New York's Long Island Power Authority are progressing well and are on schedule.

We are currently in the project execution of permitting stage of these projects.

We anticipate the PPAs will be executed in the fourth quarter of this year, and we expect to be in construction in 2019, all in accordance with the schedule.

Our project with CMEEC and the U.S. Navy will be operating an electrical efficiency of more than 60%.

On July 25, we celebrated the groundbreaking for the 7.4-megawatt fuel cell park located on the U.S. Navy Submarine base in Groton, Connecticut.

Operated under a PPA with CMEEC, a regional municipal electric cooperative, the project will use 2 of our innovative SureSource 4000 high electrical efficiency fuel cell plants, producing 3.7 megawatts of power each.

Configured as a micro grid, our power plant will supply the U.S. Navy with ultra-clean secured power, ensuring energy resiliency in the event of a power outage.

Construction is underway, and the power plants are scheduled to begin operating in spring of 2019.

As announced in June, the Connecticut Department of Energy & Environmental Protection, or DEEP, awarded us fuel cell projects in a competitive RFP for Class 1 clean energy totaling 22.2 megawatts.

The projects include one 14.8-megawatt project located in Derby, Connecticut and one 7.4-megawatt project located in Hartford, Connecticut.

Welcomed by their respective communities, these projects will provide clean baseload power, grid resiliency benefits and renewable energy credits to the Connecticut utilities under a 20-year power purchase agreement.

Our project development team is now in the regulatory process required to finalize the PPAs with the local utilities, working to obtain the siting approvals and interconnection agreements and finalizing site engineering.

These 2 projects, which add more than 22 megawatts to our generation backlog, support our production ramp and will contribute to our push to profitability.

Our team is making excellent progress on our first carbon capture installation partially funded by the Department of Energy and located at Southern Company's plant in Alabama.

This project is facilitated by a joint research and development agreement with ExxonMobil.

ExxonMobil continues to be enthusiastic about the unique capabilities of our innovative technology, improving the ability to simultaneously generate clean electricity while capturing carbon emissions.

This high-profile carbon capture project is anticipated to be operational in 2019.

Next, designed around our core carbonate technology platform, our innovative multimegawatt, tri-generation fuel cell plant for Toyota is moving forward in California.

This application, unique to our carbonate fuel cell technology, will simultaneously produce power, heat and hydrogen.

The Port Authority of Long Beach has approved the project and the groundbreaking is scheduled for the end of September, after certain permitting is completed.

The project is 100% renewable, being fueled -- by directed biogas secured in California from agricultural waste and represents a key step in advancing the hydrogen economy while also providing Toyota with a major step forward in its environmental goals.

Please turn to Slide 7, Summary.

FuelCell Energy's backlog and awards increased by over $200 million in the third quarter to nearly $2 billion, the highest in our company's history.

The record backlog supports 120% increase in annual production.

Our team is currently executing on nearly 85 megawatts of projects that will be built, financed and generate revenue for our company in the near future.

As Mike mentioned, we see a clear and diverse path for project financing, based on the quality of our projects and building on our successful customer relationships globally.

Our record awards and backlog, combined with strong financial posture, successful project execution and positive global market trends towards clean energy, give us substantial momentum to execute on our business plan into fiscal 2019.

Continued execution on our strategy, including growing our power generation portfolio and selling select assets to finance new construction, is contributing to enhance margins and profitability and supports our progress towards EBITDA-positive results.

Operator, we'll be happy to take questions at this time.

(Operator Instructions) And your first question comes from the line of Colin Rusch with Oppenheimer.

Guys, can you talk a little bit about the cadence of moving your sales pipeline forward from lead into awards and then awards into actual bookings and what the rate is that you're seeing?

Any sort of drops from those project awards into your end of the bookings or backlog?

Colin, this is Chip.

Yes.

So from a cadence perspective, the way a project works is you get an award and then you sign a power purchase agreement.

So between the time it's an award, it shows up in the award number, which I talked about.

And then once you sign the power purchase agreement, it actually goes into the booking category, as I think we've explained.

So -- but that's a normal process here.

You have to go through that process every time the new -- on all these different projects, it happened the same way.

And that's why I said on the LIPA thing, we expect to sign those shortly.

And then subsequently, when -- the ones in Connecticut, there's -- those will get done in the fourth quarter, by the end of the year as well.

So that's just kind of the normal cadence.

It's probably 6 months or so after you get the award that you sign a -- the PPA.

Relative to project cadence here, as far as new business, it varies, obviously, quarter-to-quarter.

But I would say that we're being pretty thoughtful on which projects we close and things like that.

And I would say that our pipeline of activity is as high as it's ever been.

It's diverse as it's ever been.

And we have annual bookings numbers that we try to do to support, basically, the production plan that we lay out for ourselves.

So just so I'm clear, you're not seeing any of your project awards not turn into backlog and the pacing of the sales pipeline moving into the next stage is pretty steady at this point and you guys are being judicious about that, just so I'm clear on that.

Is that right?

Yes, absolutely.

We, again, Colin, we don't -- I mean, our experience is -- there's 2 parts to that.

One is when we get a contract, it always ends up getting finalized, number one.

Number two, we always build them, so even in the execution portion of this, which is interconnection and things like that, again, we do our homework ahead of time so they always get done.

Great.

And then in terms of the diversity of capital available for these projects, certainly, we've seen any number of other transactions in the last year, a lot of money chasing these projects.

Can you talk a little bit about the pool of folks that you're talking to and how quickly that process is moving towards some of the financing?

And certainly, as you'd be able to integrate some tax equity, the economics around some of these projects are going to change pretty dramatically.

How close are you guys to being able to start finalizing some additional financing sources to move some of those things forward?

Colin, this is Mike.

I'll take that one.

So as I said in my prepared remarks, we are seeing a diverse interest in project financing.

Obviously announced the sale of the Trinity College project this quarter to -- in the fourth quarter to AEP, so that's obviously an example of a potential buyer of projects.

We've had interest from utilities, from banks, from specialty lenders.

Tax equity, as you mentioned, given the size and depth of our portfolio, it's attracting a lot of interest.

We will be judicious about how we put a portfolio financing plan in place.

But again, as I said, we expect to announce traction on that here in the next couple of months.

Your next question comes from Jeff Osborne with Cowen and Company.

Maybe just following up on one of Colin's line of questioning.

As in the past presentations, you guys had a great graphic that showed the projects in the pipeline, some that had PPAs and some that didn't, and then the expected time of construction and when it would be completed.

I just want to better get a sense of -- as we look out to 2019 and 2020, are any of those projects moving faster or slower than the past graphic that you had 3 months ago?

Jeff, this is Mike.

So I'll take that question.

And yes, we have all that disclosure in our 10-Q on pace of project execution.

But I can walk -- and I tried to do some of this in my prepared remarks but I can walk down the list as we talk here.

So with Trinity coming out of our project awards, we currently have 83 megawatts of projects that we're executing on over time.

The new news this quarter was we added the 22 megawatts of Connecticut projects.

The projects that we expect to come online this year, in calendar 2018, are the Triangle Street project, 3.7-megawatt project.

That's a 60% efficient project that's here in Connecticut.

In 2019, we expect the Groton Sub Base to come online, the Tulare and Bolthouse projects to also come online.

Those are in California.

So the Groton project is 7.4 megawatts, Tulare is 2.8 megawatts and Bolthouse is 5 megawatts.

And then beyond that, you have the Toyota, LIPA and the Connecticut projects, that would be late '19 and then into 2020.

But we do have the dates and the offtakers laid out in our 10-Q for the whole year.

Yes, I'm seeing it now, so that's helpful.

I appreciate that.

I just wanted to make sure that there wasn't any major delays but I hadn't put through the Q prior to the call.

And then in terms of the OpEx run rate, as you're hiring folks, the OpEx this quarter was a bit higher than we were modeling.

Is this the new normal at these levels?

And then as you hire more people, that will ramp up through March?

Or were there any onetime items in OpEx this quarter?

I know you had a service gross margin issue but I just want to make sure there weren't any onetime issues in either SG&A or R&D.

No.

We expect to get leverage out of SG&A and R&D as we continue to grow.

A little bit more of product development activities this quarter as some of our engineers are focused on that rather than commercial activities.

But the range that we're in is where we think we should be in the future.

There's always going to be a little bit of growth for inflation and things like that but we don't see any radical changes in OpEx as we grow into next year.

Yes.

And just 2 other quick ones here.

One, Mike, I was wondering if you could just quantify roughly or exactly the underabsorption that you highlighted just as you move from 25 to 55 megawatts.

Is there a way to think about what the negative overhang is on a quarterly --

Yes, and we have that in our -- I tried to highlight that in our remarks, and it's in the release.

It's $3 million is what it was this quarter.

When you get back up over 50 megawatts, that should all go away, and you'll -- you see it all right now, it's very apparent in the product cost of sales line.

But that drag on overhead should go away as we ramp up.

Got it.

The last one I had was just on the -- you've highlighted for several quarters now the flexibility that the company has in terms of capital needed for these projects from tax equity to debt to equity in construction financing.

Can you just reflect on the recent capital raise, and specifically, what that funding would be used for just given the flexibility that you had as well as its timing, coincidentally, with the project sale at Trinity?

Sure.

So as you mentioned, we recently closed on a convertible preferred capital raise, brought $25 million into the company.

As we said in the past, we do expect a portion of projects, as they're in the construction phase, to be funded from working capital.

You would expect to get construction and term financing in the 70-plus percent range.

But where we sat today, we wanted to just make sure we had strong balance sheet as we both execute on the production ramp and then get into portfolio project financing here as we go forward.

(Operator Instructions) Your next question comes from Carter Driscoll with B. Riley FBR.

So I guess my first question, can you help us with the decision-making process to sell a project that you had been contemplating keeping on balance sheet?

I mean, is that a pure ROI decision?

Is it at all related with the financing?

Maybe your partners got a lower or significantly lower cost of capital, maybe it makes more sense and that factors into it.

Just trying to get a sense of the priorities that would determine keeping on balance sheet versus a project sale, cash recycling, things of that nature.

Yes, sure.

Carter, this is Mike.

Well, certainly, the quality of our customer in this case played into that but it does obviously come down to economics.

We ran a process for this project and as we typically do for all projects: syndication process, seeking both financing terms or selling project outright; struck a really nice relationship with AEP OnSite Partners, feel like they are a good partner for the company; liked the profile of both the product sale and the long-term service agreement and made the decision for this project to sell in the quarter.

This is a project that we had developed and financed on balance sheet.

We didn't have any debt out.

And typically, when you sell projects at COD is when you're able to attract the best terms.

The customer can obviously monetize the tax benefits right out of the gate and get the full benefit of the operating cash flows upon closing on the transaction.

So we are really happy with the transaction, happy to partner with AEP and look forward to additional opportunities with them in the future.

And does that mean -- like you said, you're hoping to build a longer-term relationship with AEP.

Does that factor into your desire to sell them a project if that's what they would wish to do with it, is part of the long-term relationship development?

Is that a factor in determining the sale?

Carter, this is Chip.

Yes, sure.

I mean, one is timing, as Mike said and one is terms.

And yes, I mean, having relationships, if you kind of look at it, we have some pretty deep relationships with some pretty big players.

That's kind of part of our strategy here, whether it's Exxon or Dominion or AEP.

So yes, I think that has a huge benefit to it because frankly, when we -- some of these projects, we look at it as a project, they have an overall strategy, in some cases, to serve these customers or other customers in adjacent spaces as well on things that we don't have.

So they look at this well as a strategic investment.

So for sure, that helps our reputation of developing good projects and so on and so forth.

So I think there's a lot of things go into it but it clearly is a timing opportunity for us.

We're not going to do anything -- we're only going to do it if it makes sense and a lot of factors.

And we recycle the capital into developing these other projects, which are, in fact, bigger, that Mike was alluding to, such as CMEEC and others that are currently under construction.

Okay.

Can you talk about maybe the -- I mean, I think maybe the investor community underappreciated the O&M agreement you signed with KOSPO.

Maybe talk about the economic impact and then maybe just the relationship typically for, given project sale size and a typical O&M agreement, maybe a parameter, a threshold on what you could expect if -- typically does happen or is there a service agreement component to that project sale?

Just help us understand from forecasting perspective if we choose to estimate that you're going to sell future projects.

So Carter, you win the award so far for the underestimation of a statement so far.

Yes, to say that was underappreciated is absolutely correct.

Let me add some color to that.

So not only was that contract in itself over $100 million, okay, it's with one of the largest utilities in the nation in Korea, KOSPO.

And that plant that we built is a beautiful plant.

I just came back from there.

I spent 2.5 hours with the entire leadership company of KOSPO, including the CEO.

If you look at the slide deck, he's in the picture, and talking about how well that project was designed, how well that project was constructed and project managed and how we're going to do a 20-year operating agreement for a customer who has 2 gigawatts of power on the same site, right?

So we did that all the right way, the right terms.

We'll make money at it.

It's a big deal.

From a company that's not Korean, and I think we are also trying to, in that whole process, without getting in too much detail, we are also trying to lead in some of the market direction of the country as well.

And I think our credibility and the pace of which we did that and the way we did it was extremely helpful for future projects, which there are numerous.

So our philosophy has always been, particularly with big companies like this, is that bad projects never get better, don't do them but good projects get recognized and then you get more from that.

So that's been our philosophy, and that's absolutely true from the way we did it.

But that was over $100 million for us.

It's good money.

But the impact of that from a credibility in the marketplace and market signals is very, very impactful that nobody ever gave us any credit for.

So thank you for asking the question.

Sure.

And then just the second part is just, is there a reasonable relationship between size of project and the O&M agreement you hoped to sign?

I'm just trying to think, like a 20-megawatt project could potentially lead to a similar-sized O&M agreement in the future or a 2.8 megawatts or a 5 megawatts.

Does the relationship hold relative to the scale of the project?

Yes, it does, and we -- everybody's pricing and things might be different Carter, so I want to be careful here.

But for sure.

I mean, typically, if it's a 20-year contract, the value of the -- building the plant, the contract is equal if not greater than that, then the service agreement is equal if not greater than that.

So that's why you want to do the projects right because if you lock yourselves into a bad project and you have a service agreement that's not good, that's not a good business proposition.

So -- but it's absolutely a big deal.

So that recurrent revenue is pretty nice to have, right?

So we're focused on the whole project, not just building the thing.

A couple of clarifications.

When you talk about PPAs for LIPA, you're talking about calendar 2018, not fiscal?

Sorry, Carter, could you repeat that, please?

I'm saying you're anticipating PPAs for the LIPA projects, was that calendar 4Q '18, not fiscal 4Q, correct?

Yes.

So Mike was -- I think Mike commented or I did in my comments here.

But yes, this fall, whether -- yes, I would say in our fiscal year is the plan, yes.

Okay, all right.

And then the service charge you took, was that related to the same project decision you made, the impairment from last quarter?

I think with the New York-based project, is that correct?

And it carried over into this quarter?

No, this is Chip.

Yes, so we had a project, it's a legacy project going back to -- I forget when it got in place but it was a small project back in the day.

It probably goes back 10 years.

And frankly, we -- a lot of those early-day projects that we did and others did, didn't really make a lot of economic sense for the clients nor for us but they were viewed as demonstration projects.

So that was an amicable termination of a project that no longer made any sense.

So that's a nonrecurring item.

It's done.

And we would have had that legacy loss, if you will, on the service line for years to come if we didn't just deal with it, so we dealt with it.

But the good news is that it was done amicably, and secondly, we -- the one we did prior to that, which I think goes back to Q1, I don't remember exactly, again, was another amicable one that we've got it off our balance sheet.

So we've really cleaned up our service and you'll see that in the margin going forward.

You don't anticipate a lot of similar types of legacy projects potentially [stopping] going forward?

No, we're at the end of that.

All right.

Just a couple of others for me.

So Exxon, construction completed by year-end and hopefully, COD sometime first half '19, is that still the time frame?

Any other maybe more granular update you can give on the progress there?

Has it been, for both sides, both the coal and the gas, is done concurrently?

Is there one or the other that you're prioritizing?

So the project itself is starting off coal first.

That was always the plan.

Then we have to build it then we have to do certain testing in certain time and then we'll convert it to gas.

Same location, just converted to gas.

There's ways to do that.

As far as the execution of it, construction in '18 into '19 and then depending on that construction schedule, I think we said end of '19 for commercial -- or operation of the plant.

But as far as the interest in it and the policy behind it, that's stronger than it's ever been.

The policy, obviously, is frankly favored towards fossil fuels and our issue is to try to clean up the CO2 and NOx emissions from that, which that project is a perfect example of.

And then obviously, the enthusiasm, as I mentioned, from the Exxon folks and others to do this on a commercial scale is certainly increasing in interest as well, so.

You have an update on your work using solid oxide towards energy storage?

Obviously, there's been a lot of development, at least pairing storage and solar, trying to get a sense of when maybe commercial opportunities could begin to percolate for your energy storage investments.

Yes.

So probably in future calls, we'll have more to say about solid oxide but there's kind of 3 things there.

One, we will be talking about a power generation installation here shortly that we have installed.

Second, you've probably seen several awards, we've gotten probably close to $10 million of awards directly from different portions of the Department of Energy and other areas.

So that's all good.

And then yes, we're talking to people, putting in proposals for storage using solid oxide, and particularly, hydrogen is the medium there.

You basically take power, create hydrogen, run the hydrogen and back to the fuel cell to create power again for the storage part.

So I would say that's progressing and the interest level is there from a lot of different people, primarily, Carter, as you can imagine, utility companies that are seeing a need for longer-duration storage.

It's a little bit of an education process, to be honest, because a lot of people, when they're asking for storage, were asking for short-term storage because that's all they thought they could get.

But that's not necessarily what they need.

So we've kind of come in the door and said, "Well, perhaps we can give you what you need, which helps you as part of your future strategy, increasing renewables in your network or whatever." So I would say I'm pleased with that.

I don't have anything to announce but that we are actively pursuing opportunities for deploying storage using our solid oxide as well.

Maybe just lastly, since you were over in Korea so recently, talk about the engagement process physically there, since Korea seems to be the most lucrative in terms of the project sizes, at least relative to what you've typically done in the U.S. Maybe your near-term outlook for potentially adding another project of a similar size to what you did with KOSPO just recently?

Yes.

So yes, I mean, we -- I went there for multiple reasons last week but there's a lot of activity.

And you need to be thoughtful when you do these things, as we have been.

And the same sort of things apply here, right?

You need to have offtakers for power racks, you need to have proper financing, so on and so forth.

So we're active on a lot of different things over there, everything from power generation like we built for KOSPO, to hydrogen and even perhaps talking at some point about carbon capture.

So everything we offer is of interest to that marketplace.

Speed is important but doing projects correctly is the most important because you got long-term relationship with these folks.

So I would say that the market is good.

The projects tend to be larger in size, 15 megawatts, 20 megawatts, 25 megawatts, 30 megawatts, whatever.

And that's because everybody's trying to hit an RPS objective that's dictated by the government.

So -- but again, I think that on paper, it's a good market but the devil is in the detail in these things.

And you've got to make sure that you're doing projects and you can get the financing and so on and so forth, and we're on that pretty actively right now.

And there are no further questions at this time.

I will turn the call back over to Chip Bottone for closing remarks.

Well thank you, everybody, for joining today.

I think we had a broad range of questions, so thank you for the people that ventured to ask them.

I think you can kind of see from the comments in the prepared remarks as well as in responses to the questions that we're moving along.

We're moving forward with the business model that we said with good projects, with good people.

And I can tell you that going -- not taking any shortcuts is really the right way to do things.

And on a lot of these projects we're getting, you don't necessarily see it but the locational value, the relationship value we have is going to bode well for us in the future.

So we're clearly in execution mode of what we have in front of us, which is pretty substantial.

We are very active on -- as I said in my remarks, with things in our pipeline and trying to get those to closure and balance those out with the commitments that we have in front of us.

So Mike and his team have done a great job of looking at the project financing now that we're at that stage, and we feel really good about that.

So all in all, we're moving forward, as we said.

And we look forward to updating you for the full year here just later on in the year.

So thank you, everybody, for joining today, and have a great day.

And ladies and gentlemen, this concludes today's conference call.

You may now disconnect.