燃料電池能源 (FCEL) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to FuelCell Energy's Fiscal Third Quarter 2020 Financial Results and Business Update Call.

(Operator Instructions)

I would now like to hand the conference over to your speaker today, Tom Gelston, Senior Vice President, Investor Relations.

Thank you.

Please go ahead, sir.

Thank you, Julian.

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

As a reminder, this call is being recorded.

This morning, FuelCell Energy released our financial results for the third quarter of fiscal year 2020, and the earnings press release is available on the Investor Relations section of our website at fuelcellenergy.com.

Consistent with our practice, in addition to this call in our press release, we have posted a slide presentation on our website.

This webcast is being recorded and will be available for replay on the company's website approximately 2 hours after we conclude this call.

Before we begin our prepared comments, please direct your attention to the disclosure statement on Slide 2 of the presentation and the disclaimers included in the press release related to forward-looking statements.

The discussion today will contain forward-looking statements, including, without limitation, statements with respect to the company's anticipated financial results and statements regarding the company's plan and expectations regarding the continuing development, commercialization and financing of its fuel cell technology and its business plans.

These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.

All statements made on this call today other than statements of historical facts are forward-looking statements and include statements regarding our anticipated financial and operational performance.

Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made.

Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements.

We strongly encourage you to review the information in the reports we file with the SEC regarding these risks and uncertainties, in particular, those that are described in the Risk Factors section of our annual report on Form 10-K and the cautionary statement concerning forward-looking statements disclosures in our quarterly reports on Form 10-Q.

You should also review the section entitled Cautionary Statement concerning forward-looking statements in this morning's earnings press release.

During this call, we will use non-GAAP financial measures when talking about the company's performance and financial condition in accordance with SEC regulations.

You can find a reconciliation of these non-GAAP measures to the comparable GAAP measures in this morning's earnings release and the reconciliation document posted on the Investor Relations portion of our website.

For our call today, I am joined by Jason Few, FuelCell Energy's President, Chief Executive Officer; and Mike Bishop, Executive Vice President, Chief Financial Officer and Treasurer.

Following our prepared remarks, we will be available to take your questions.

I would like to now hand the call over to Jason for opening remarks.

Jason?

Thank you, Tom, and good morning, everyone.

We appreciate you joining us on our call today.

I am pleased with our third quarter performance as we continue to execute on our Powerhouse business strategy that we first announced in January this year.

Despite the ongoing challenges of COVID-19 and resulting economic uncertainty, the FuelCell Energy team continues to operate with safety as our #1 priority while continuing to execute on the projects in our backlog, delivering on our customer service and support obligation and moving business development opportunities forward.

Each quarter, we include the overview of FuelCell Energy shown on Slide 3 for investors who may be less familiar with our business.

During fiscal year 2019, which ended on October 31, we recorded approximately $61 million of total revenue, primarily across our 3 largest categories: Service and License, Advanced Technologies and Generation, which together represent a diversified source of recurring revenue under multiyear contracts.

During the first 9 months of fiscal year 2020, we have generated approximately $53.9 million in revenue or 88% of total revenue generated in 2019.

Near the top of the slide, we highlight many of our well recognized customers currently using our technology platforms, including our extended stack life fuel cells and combined heating power systems that enable micro grids and leverage multiple fuel types, including carbon neutral biofuels.

The same molten carbonate fuel cell platform is capable of providing distributed hydrogen, which is what when we'll will implement for Toyota at the Port of Long Beach, California.

We are working toward commercializing our solid oxide platform capabilities to deliver hydrogen production through highly efficient electrolysis, long duration hydrogen-based energy storage and zero-carbon hydrogen power generation, which will support the increasing penetration of intermittent renewable technologies around the world by providing a way to store the power generated by renewables for use when needed.

I would also like to note that since the commercialization of our first fuel cell power platform, we have delivered more than 10 million megawatt hours of clean power.

Moving to Slide 4. We are excited about the progress we are making sure fulfilling our purpose of enabling the world to live a life empowered by clean energy.

This purpose guides our people.

The work we do, our strategic focus and the innovations we are developing and commercializing, we believe consumers and businesses around the world, rather in Asia, Europe, developing nations are here in the U.S. will continue to demand always on power.

And as the electric grid continues to evolve, our technology portfolio will be ready to provide the reliable power that the energy grid of the future must deliver.

Now let me highlight key themes that summarize our quarterly progress and where we are today as we continue to execute our Powerhouse business strategy.

Slide 5, please.

First, our underlying results for the fiscal third quarter demonstrates successful execution of our project backlog with a continued emphasis on managing our operating expenses and positioning FuelCell Energy for growth.

As CEO, my first conversation with you solidified our commitment as a team to execute for our backlog, and we continue to do just that.

In a moment, Mike will review our quarterly financial results.

But to put our results into perspective, we had 32.6 megawatts of operating power platforms and our generation portfolio at the end of the quarter compared to 26.1 megawatts as of July 31, 2019, representing a 25% increase.

While we have increased the overall capacity of our generation portfolio, we incurred increased expenses in connection with the early replacement and upgrading of our fuel cell modules at our Tulare natural gas plant.

While one of the module require replacements, we took advantage of the opportunity to perform an additional step and upgrade the second fuel cell module at the plant with our new, reliable and longer-life SureSource platform.

The expense associated with this module replacement impacted our operating results.

However, these investments are expected to result in enhanced performance, lower future maintenance costs and improved margins over the life of the modules to better deliver against our contractual commitments.

Second, we continue to make progress against our project backlog, including our installation in Groton, Connecticut.

Currently, this project is awaiting the completion of a coordination study by a third-party and electrical interconnection work to be executed by other third parties.

We have completed the majority of our scope of the work.

Once the third-party study and other work is complete, the plant will be ready for commissioning and commercial operation.

Also, we continue to make progress on constructing our next biofuel power plant in San Bernardino at the San Bernardino Municipal Water Department.

Third, as previously reported, we resumed factory operations in June after proactive closure at the onset of the pandemic to ensure the safety of our team members.

In addition to prioritizing the safety of our team members, we made the decision to retain all team members on payroll with benefit, which enabled us to quickly and efficiently reopen the facility after making safety enhancements, including use of social-distancing protocols and the necessary PPE for all team members.

Fourth, we terminated our license agreement with POSCO Energy, which had previously been our technology licensee for South Korea and the broader Asian market.

With the termination of those license agreements, we have commenced directly marketing our products and service in those markets.

This is an important development as we position FuelCell Energy for growth.

Our platform is uniquely advantaged to deliver combined heat and power, inclusive of steam, which our fuel sale competitors cannot deliver.

We are able to offer customers in Korea and across Asia, our full suite of platform offerings, including our hydrogen technology.

Our TriGen hydrogen platform would provide the Asia market with a distributed hydrogen platform to support transportation and a number of industrial and commercial applications.

Six.

To strengthen our liquidity, in June, we executed an open market sale agreement with Jefferies to sell up to $75 million of our common stock.

To date, we have sold 28.3 million shares, generating net proceeds to the company of $70.1 million, which may be used for working capital, corporate liquidity, the repayment of debt and to support the financing, the completion of our project backlog.

We had strong institutional and retail demand for our shares, and are pleased with the execution of the program.

Finally, consistent with our purpose, we continue to strive to be a leader in sustainability and environmental stewardship.

To this end, FuelCell Energy remains focused on 4 of the largest global energy opportunities: one, distributed baseload generation.

Two, distributed hydrogen generation.

Our multi feature platform is advantaged by its steam delivery capabilities utilization of multiple fuel types and capability of delivering hydrogen through our distributed hydrogen platform.

Hydrogen can then be used as a transportation fuel in industrial applications and for the decarbonization and/or repowering of existing gas turbine power generation structure and blending down the carbon intensity of low-carbon natural gas.

Our distributed hydrogen platform is the technology we plan to deploy at our facility in Long Beach, California.

Three, our solid oxide platform, which is capable of providing electrolysis, hydrogen generation, long duration high duty energy storage and zero-carbon hydrogen power generation.

As we look to the future, our hydrogen-generation capabilities through electrolysis can enable a zero carbon energy storage platform for the future.

The FuelCell Energy hydrogen energy storage system is a closed-loop platform when operating in reverse mode that leverages store hydrogen to produce carbon-free power.

These technologies position FuelCell Energy to capture meaningful opportunities in the growing hydrogen economy around the world.

And fourth, Carbon Capture.

We continue to believe that carbon capture is key to meeting global goals for reducing the world's carbon footprint, thus enabling much of the existing power generation infrastructure to remain in place and since energy is the linchpin of modern development and industrialization, providing developing nations with an opportunity to foster economic growth without sacrificing the environment.

This requires affordable abundant energy.

We believe that FuelCell Energy's carbon capture technology is currently the only known method that concentrates and capture carbon while simultaneously producing more energy.

Together with ExxonMobil Research and Engineering Company, we continue to develop our fuel cell technology that has the ability to concentrate CO2 across industrial applications such as coal and gas-fired power plants, which also producing power from the fuel cell stack.

And now I will turn the call over to Mike to discuss our financial results in more detail.

Mike?

Thank you, Jason, and good morning, everyone.

Let's start by reviewing the highlights of our results as shown on Slide 7. Total reported revenue in the third quarter was $18.7 million, a decrease of 18% year-over-year.

Recall that the third quarter of 2019 included $10 million of revenue related to the ExxonMobil Research and Engineering Company license agreement.

Breaking down total revenues, service and license revenues decreased 38% to $7.1 million from $11.5 million in the year ago period.

Service and license revenues for the prior year period included revenues of $10 million recorded for the aforementioned license agreement that was entered into with ExxonMobil Research and Engineering Company.

The service and license revenues for the 3 months ended July 31, 2020, include revenues recorded from module replacements and routine maintenance activities.

There were no module replacement revenues recorded in the prior year quarter.

Generation revenues decreased 13% to $4.7 million from $5.4 million due to plant maintenance activities, primarily related to downtime while upgrades were performed at our 14.9 megawatt Bridgeport, Connecticut facility.

Advanced technology contract revenue increased 20% on to $6.9 million from $5.8 million as a result of revenues recognized in connection with our joint development agreement with ExxonMobil Research and Engineering Company, which was executed during the first quarter of fiscal 2020, and timing of activity under other existing contracts.

Cost of service and license revenues increased $7.7 million to $8.8 million for the 3 months ended July 31, 2020, from $1.1 million for the 3 months ended July 31, 2019, due to the fact there were module replacements in the 3 months ended July 31, 2020, compared to no module replacements in the prior year period, and also due to a $2.8 million increase in our loss accrual during the 3 months ended July 31, 2020, to reflect charges expected -- changes in expected timing of future module replacements at one plant in order to improve operating performance.

Site-specific issues at one of the company's plants required an earlier-than-expected module replacement, and the company opted to replace another module earlier than expected at the same time in order to maximize plant efficiency.

Gross loss totaled $3.1 million compared to a gross profit of $8 million.

This change is partly due to the fact that the quarter ended July 31, 2019, included $10 million of revenue recognized under our license agreement with ExxonMobil Research and Engineering Company, while there was no comparable revenue or profit recognized during the 3 months ended July 31, 2020.

Additionally, the results reflect the $2.8 million increase in our loss accrual recorded during the quarter ended July 31, 2020, to reflect changes in the expected timing of future module replacements.

Results were also negatively impacted by manufacturing variances primarily related to low production volumes and unabsorbed overhead costs, which totaled approximately $2.6 million, of which approximately $1.1 million is related to the factory shutdown due to the COVID-19 pandemic in the quarter ended July 31, 2020.

Operating expenses decreased 16% to $7.6 million compared to $9 million in the prior year period.

This decrease was driven by a reduction in research and development expenses to $1 million from $2 million in the prior year period, reflecting the reduction in spending from restructuring initiatives implemented in 2019 and the reduction in resources being allocated to research and development versus revenue-generating engineering activities.

We also recognized a reduction in administrative and selling expenses to $6.6 million or $7.1 million in the prior year period, reflecting lower legal and consulting costs.

Please turn to Slide 8 for additional detail on financial performance for the quarter.

Looking at the chart on the left side of the slide, net loss attributable to common stockholders for the third quarter ended July 31, 2020, totaled $16.1 million compared to a net loss attributable to common stockholders of $8.3 million for the quarter ended July 31, 2019.

Net loss for the quarter ended July 31, 2020, totaled $15.3 million compared to a net loss of $5.3 million for the quarter ended July 31, 2019.

Adjusted EBITDA totaled negative $5.6 million for the quarter ended July 31, 2020, compared to a positive adjusted EBITDA of $3.2 million for the third quarter ended July 31, 2019.

Total depreciation and amortization expense for the quarter ended July 31, 2020, was $4.7 million, of which $3.4 million is attributable to our generation portfolio.

Please see the discussion of non-GAAP financial measures, including EBITDA and adjusted EBITDA as well as applicable reconciliations in the appendix of our earnings release.

As demonstrated by the chart on the right side of the slide, we finished the quarter with backlog of $1.3 billion, which is a 4% decrease from the quarter ended July 31, 2019, reflecting the continued execution on our backlog partially offset by an increase in advanced technology backlog, primarily as a result of the joint development agreement with ExxonMobil Research and Engineering Company.

Total backlog consists of $1.1 billion in generation backlog, $176 million in service and license backlog and $52 million in advanced technology contracts backlog.

Next, turning to Slide 9, I would like to highlight steps we have taken to provide additional liquidity to execute on our business plan, which includes building out our backlog of generation projects.

In June, we entered into an open market sale agreement to sell up to $75 million of common stock pursuant to an existing shelf registration statement and a prospectus supplement filed with the SEC.

From June 16, 2020, through August 6, 2020, 28.3 million shares were sold under the agreement at an average sales price per share of $2.55, resulting in gross proceeds of $72.3 million.

Net proceeds to the company were approximately $70.1 million.

We believe that the at-the-market sale program under the open-market sale agreement has helped the company make progress towards our goal of improving our liquidity at an efficient cost of capital.

As of July 31, 2020, cash, restricted cash and cash equivalents totaled $107.3 million, of which $41 million was restricted cash and cash equivalents.

Unrestricted cash and cash equivalents, as presented on our consolidated balance sheet includes project cash and cash equivalents borrowed under our credit agreement with Orion Energy Partners, which can only be used by project subsidiaries for project construction, purchases of equipment and working capital for projects approved under the credit agreement.

Project cash and cash equivalents totaled $16.2 million as of July 31, 2020, and is highlighted at the green bar in the chart.

We also have unrestricted cash and cash equivalents, which can be used by the company for general corporate purposes, including working capital at the corporate level.

This balance totaled $50.1 million as of July 31, 2020, and is highlighted by the dark blue bar at the bottom of the chart.

In total, as of July 31, 2020, unrestricted cash and cash equivalents totaled approximately $66.3 million compared to $9.4 million at the end of fiscal 2019.

In closing, we are pleased with the progress that we've made towards achieving the goals under our Powerhouse business strategy, and we look forward to continuing to execute our -- against our backlog as well as other future growth opportunities in the coming quarters.

I will now turn the call back to Jason.

Jason?

Thank you, Mike.

Next on Slide 10, I want to provide an update on the Powerhouse business strategy that we announced earlier this year.

The first phase of our plan was to transform the company to build a durable financial foundation for growth.

Just before I assumed the role of CEO, approximately 1 year ago, we implemented a number of restructuring initiatives to strengthen our financial footing to support future phases of our strategy that we are now working to execute.

Currently, we are focused on the strengthening stage of our strategy by improving our capital deployment.

While we raised additional capital through the sale of common stock under our open market sales agreement during the quarter, our ultimate goal is to obtain low cost, long-term financing through our delivery generation projects, which subject to approval of our existing lender would allow us to recycle capital to finance completion of our other projects that are underway.

As we think about capital deployment opportunities, we're focused on reinvesting in our power generation portfolio to enhance our operating performance, maximize uptime and reduce costs in addition to investing in new project opportunities.

Building on our sales pipeline, strengthening our customer relationships and delivering our platforms against targeted applications that help our customers get the center jobs done is our core focus.

And operational excellence is the key to our success as we strive to execute on project delivery, manufacturing efficiency and customer service.

We remain focused on continuous improvement and optimizing production efficiencies.

Our team continues to develop and implement process yield improvements and advancements of our leaning principles by reducing process cycle times and reducing waste.

We have worked to improve our cost structure over the past year, and this is evident in our results.

Reducing costs, while adhering to safety and product quality standards goes hand-in-hand with our pursuit of operational excellence.

Across our value chain, we remain driven to continue to reduce risk, accelerate process improvement and advanced cost reduction initiatives.

Now let me spend some time on our initiatives that will support achieving our long-term growth objectives of delivering positive cash flows and increasing the penetration of our platforms and the positive environmental impact they deliver.

We continue to optimize our existing core business to drive sales growth through delivering on combined heat and power, utilizing available biofuels for power production, enabling micro grid and large megawatt platforms and working on platforms to generate distributed hydrogen for industry, transportation and ultimately, energy storage and power generation.

We are investing in industry-leading innovations, a core expertise of ours for over 50 years.

We are continuously working toward increasing product life and reliability to expand our competitive advantages, reached the ultimate -- reach and ultimately beat grid parity pricing and deliver the cleanest environmental footprint among baseload power generation platforms.

We have commercial products available to meet distributed generation and distributed hydrogen applications.

We also intend to develop and commercialize our advanced technology platforms across carbon capture, long duration hydrogen based energy storage and zero-carbon hydrogen power generation.

Continuing, we are in the process of expanding our addressable market and geographies.

We are extremely excited to be back in the Korean market, where our former technology licensee was effectively absent for some time.

With the termination of our license agreement with POSCO Energy, we are now actively pursuing business in the Korean and Asia markets.

While we expect it will take time before we achieve sales in Asia, we have customer interest and inquiries.

Projects in the Korean market are typically large-scale projects with a time-consuming RFP process, lasting 6 months or longer in some cases.

We already have technical support staff in the region that we look to increase over time as we grow our product base.

We also continue to work with channel partners to build opportunities in Europe, including sub-megawatt applications, which represent a growing opportunity in that region.

To support these efforts, we are actively recruiting for the next-generation of sales and engineering talent to grow our expertise and strengthen current customer relationships, establish new ones and build a world-class customer-centric organization.

We remain vigilant about our cost structure, which we are thoughtfully making investments in long-term growth and talent as both are critical to achieving our goals.

Turning to Slide 11.

Let me drill down into the specific growth opportunities in clean energy and how these are aligned with our product portfolio.

Our generation portfolio is currently delivering utility-scale distributed generation, while our long-term power purchase agreements make up more than $1 billion of our project backlog.

Our TriGen SureSource platform is anticipated to deliver 3 value streams: first, our platform will deliver clean energy; second, the thermal energy and naturally produced water in our platform can be used as a source of hot water, steam and/or heating and cooling applications; third, our TriGen platform will generate hydrogen for use in transportation and/or industrial applications.

And finally, in the case of the Port of Long Beach, our platform will assist the Port in meeting California's air quality standards as the platform is the designed to admit virtually no SOx, NOx or particulates that contribute to poor air quality.

We have demonstrated this technology in our prior projects that received Department of Energy support, and we have announced we will be deploying this technology in a new facility at the Port in Long Beach, California.

This power platform will support Toyota global operations to hydrogen we produce, to power zero-emission fuel cell trucks and consumer vehicles in California.

We continue to advance our innovation technologies that we believe will enable hydrogen power cars and trucks that cleanly operate and are actively pursuing additional customer relationships.

The importance of the growing hydrogen economy is substantiated by the July 8, 2020 announcement by the EU's European Clean Hydrogen Alliance, setting forth its ambitious deployment of hydrogen technologies by 2030.

The alliance calls for the installation of at least 6 gigawatts of renewable hydrogen electrolyzers in the EU by 2024 and 40 gigawatts of renewable hydrogen electrolyzers by 2030.

There is a solid momentum across Asia and the United States as well.

We continue to advance the commercial development of our solid oxide technology through research and development cooperative agreements with the U.S. Department of Energy.

We are excited about our potential to revolutionize long-duration energy storage and better integrate intermittent sources of power into the complex grid of tomorrow.

We also continue to focus on commercializing advanced technologies, including carbon capture, under our joint development agreement with ExxonMobil Research and Engineering Company.

Carbon capture has a strong secular tailwind, given worldwide focus on sustainability, and we feel confident in our ability to meaningfully work with ExxonMobil Research and Engineering Company to deliver scalable carbon capture solutions.

Next, on Slide 12, we want to reiterate our long-term targets and goals, which we continue to reevaluate given macroeconomic uncertainty.

Our targets and goals are intended to give context around our long-term strategy.

And therefore, we are looking past the current economic uncertainty with a time horizon stretching fiscal year 2022.

Key to achieving the plan is the continued execution of our project backlog and achieving commercial operation for each of those projects, which are expected to deliver recurring revenue through power generation and long-term service agreements.

Turning to Slide 13.

I would like to conclude today by reviewing key investment highlights for FuelCell Energy.

Last year, we established access to construction financing for our projects through our $200 million credit facility with Orion Energy Partners.

We expect this financing to play a core role that enables us to bring our projects to commercial operation, which will then generate long-term recurring generation and service revenues.

We continue to look for opportunities to enhance our liquidity and reduce our cost to capital.

We have an outstanding organization that is focused on delivering our projects, achieving financial milestones and building upon our operational excellence while living our core purpose.

We are working to implement our Powerhouse business strategy to transform and strengthen and grow our company for the long term.

On a personal note, over a year ago, I accepted the opportunity to join the FuelCell management team during a pivotal year.

Since that time, the team has continued to work hard to regain a leadership position in the eyes of our customers, restoring pride in this great company and repositioning it for the future.

We are now on firmer financial ground, and I believe that we have the momentum necessary to move into the future.

One of the reasons I joined FuelCell was the passion, the energy and the focus on the future.

Over the past year, in the midst of the turnaround and the pandemic, I have drawn inspiration from my teammates who strive to be the best because we believe that the platforms we build, install and run are important to the world.

This spirit is a reflection of our past, which we honor and is a force multiplier for our future.

As I've moved into my second year with FuelCell Energy, I'm excited that we are collectively focused on continuing to improve the company to become a key advocate for a clean energy future.

This concludes our formal remarks.

I will now turn it over to Julian to begin Q&A.

(Operator Instructions) Your first question comes from Colin Rusch from Oppenheimer.

And congrats on all the progress.

Can you give us an update on some of the project finance conversations?

Given the extended lifetime on the stack life as well as the improved equity position, do you feel like you're getting close advances to place some of the opportunities for refinancing?

And how much are terms improvement from what we're seeing historically on these projects?

Colin, this is Mike.

I'll take that one, and thank you for the question.

Just to provide a little bit of background.

So the company -- for projects that are in construction, the company finances those projects with a combination of construction debt from our Orion credit facility, $200 million facility.

We've drawn down $80 million on that facility and FuelCell equity.

At commercial operation, the company recycles that capital out by bringing in long-term permanent debt financing and tax equity or a combination thereof.

Earlier in the fiscal year, the company completed a tax equity financing with Crestmark, a $14 million tax equity financing, which recycled capital back into the company.

The company is executing on projects in our pipeline.

Now the next 2 projects that are nearing commercial operation would be the Groton Navy sub base project as well as the San Bernardino project.

We would expect to bring in permanent financing when those projects get to commercial operations.

We are actively involved in dialogue with various financing entities and expect to provide further updates as those projects get closer to permanent financing.

Okay.

I'll take it off-line.

Just trying to get a little bit more on that one.

And then the advanced technologies work is running at a little bit faster cadence than we expected.

Could you speak to why that's progressing so quickly?

And how we should think about that going forward?

Colin, thanks for joining us.

This is Jason.

I'll give you a perspective on that.

Look, the important, the work that we've been doing under our Powerhouse strategy is really to look at what are the areas and opportunities as a company we have to really accelerate growth.

Obviously, as we look across the 4 major areas of opportunities we're focused on from distributed generation, distributed hydrogen, carbon capture and electrolysis long duration energy storage, we see a market opportunity and momentum really building around hydrogen and the role that hydrogen will play and the transformation of the energy grid.

As part of that and the work that we've been doing with DOE, we really began to accelerate the pace at which we're working and have a much stronger emphasis and focus on advancing that technology on the hydrogen side as well as we put ourselves in a good position with the JDA to agreement with ExxonMobil Research and Engineering to really advance our carbon capture work.

And as more momentum builds around that, as we continue to get our organization focused on core priorities, being very clear about the applications we're going after.

That's why you're seeing some faster pacing as we just have a lot more clarity about the order of battle, what we're focused on and where we're going to drive future value for this company.

And then the progress with the facility, the fueling facility in California.

I guess, can you speak to the potential for growing pipeline on those drilling facilities?

Obviously, a modular facility with clean electrolysis, it could be pretty compelling, given some of the opportunities that we're seeing out there.

Is there a growing number of folks interested in that opportunity from a commercial perspective at this point?

Or is it still pretty early days?

Yes.

When you think about our opportunity in the area to provide hydrogen for transportation, if I just think about transportation as one application in which we can address with our technology, we have a commercial technology today will address that with our TriGen platform.

And we certainly see an opportunity and are having increased conversations around how to use that platform to distribute an infrastructure around completing routes, if you think about it that way, from a transportation standpoint to make sure that the hydrogen infrastructure is there.

As we look a little further out to what we can do with electrolysis, we certainly see a lot more increased conversations and are engaged in a lot more conversations around electrolysis and hydrogen storage, not only for transportation, but obviously for grid reliability and resiliency, the storage applications around that and then repowering as well.

So we -- the level of activity and conversations we're having around hydrogen has increased quite a bit.

And we feel very well positioned in our existing multi-carbonate platform to deliver hydrogen through our TriGen application.

But then as we go forward, we certainly see a much larger opportunity with our -- with electrolysis and long duration hydrogen energy storage.

Your next question comes from Eric Stine from Craig-Hallum.

Well, so I was hoping just to kind of get an update on some of your long-term targets for the generation portfolio.

I know you reiterated your fiscal '22 goals this morning.

I'm just curious, is that still kind of the 50- to 60-megawatt level that's what you would target to get there?

And then also curious, does that include any contribution from product sales or partially limited to generation and then the service side?

Eric, this is Mike.

So in the -- in our material, the targets that we put out there, the long-term targets that we put out there for fiscal 2022 is based on our existing backlog generation portfolio and continued contributions in advanced technology, as Jason had been discussing, does not assume additional product sales on top of that.

To provide a bit more color on where we are with fully constructing the generation portfolio, today, and this is in the appendix material, Slide 17, today, the company has 32.6 megawatts of operating assets on balance sheet.

We have another 40.6 megawatts of assets that are in various stages of development and construction.

I mentioned the Groton project and the San Bernardino project, which are the farthest along, but we expect these projects to be constructed over the time period that we're talking about here.

Got it.

And then on the 2 LIPA projects you're still bidding on, I mean, I would assume those are still progressing.

Any thoughts on timing?

Or is it still more just kind of get through the process, interconnect, et cetera?

Yes.

It's -- Eric, it's -- we'll get through the process.

Our Yaphank project, though, we are well into that process for that project.

And expect that -- and we're making good progress there, but we're going through the interconnects and all the things that you have to do, and those things take time.

Okay.

Maybe just last one for me on South Korea specifically.

I know that, as you said now, you're kind of freed up and you've reengaged extent there.

But -- and I know it may take some time.

But is there -- I mean, certainly, there's a level of (inaudible), know the name FuelCell, you've done a project with KOSPO.

So just curious, I mean, level of engagement, whether it's with KOSPO or KEPCO, and is that something that potentially speeds that to where you are fully reengaged in that market?

Yes.

So Eric, great question.

So I won't make any comment around specific customers, but I will say this that obviously, the Korean markets, the largest fuel cell market in the world, there's public announcements from the Korean Government that support over the next couple of years over a gigawatt of opportunity that are targeted toward fuel cells.

We are having very positive conversation with customers in the Korean market.

And I'll tell you, we're excited about the energy level of those conversations, if you will, no pun intended there.

But we think that, to your point, our name is known, our technology is known.

We have 160 million megawatts there.

So -- yes, I60-plus megawatts there.

We -- and if you think about KOSPO, as our direct customer there that platform form has performed incredibly performed above expectations, and that certainly, for us, is an anchor and a reference to what we can bring to the market.

In addition to the things that are advantages for us in our platform versus other fuel cell providers, everything from, one, our scalability; two, the advantages we have from a combining power platform and then certainly our distributed hydrogen platform as well.

We have no further questions.

I'd like to turn the call over to Jason Few, for you for any closing remarks.

Julian, thank you.

Thank you again for joining us today.

We continue to execute on our Powerhouse business strategy working to strengthen FuelCell Energy to deliver profitable growth and optimize returns.

I'm encouraged by the positive attitude and teamwork I see on display in our organization, day-in and day-out, and I'm excited about our work to deliver on our purpose to enable world to live life empowered by clean energy.

We are committed to delivering long-term shareholder value and appreciate your continued interest in FuelCell Energy.

Thank you for joining, and have a great day.

Ladies and gentlemen, this concludes today's conference call.

Thank you for your participation.

You may now disconnect.