FuelCell Energy (NASDAQ:FCEL) Q1 2020 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by and welcome to Fuel Cell Energy's first quarter fiscal year 2020 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Tom Galston, Senior Vice President of Finance and Investor Relations. Thank you. Please go ahead, sir.

0:30 Thank you, Julian. Good morning, everyone, and thank you for joining us on the call today. As a reminder, this call is being recorded. This morning, Fuel Cell Energy released our financial results for the first 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 and 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 two hours after we conclude the call. Before we begin our prepared comments, please direct your attention to the disclosure statement on slide two of the presentation and the disclaimers included in the press release related to forward-looking statements.

1:17 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 continued 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 Security Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical fact, 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.

2:04 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 and the reports we file with the SEC regarding these risks and uncertainties, and in particular, those that are described in the risk factor section of our annual report on Form 10-K and the cautionary statements 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. Lastly, during this call, we'll 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 press release and the reconciliation document posted on our investor relations portion of our website.

3:03 Now turning to slide three, I'd like to highlight some upcoming events on the Fuel Cell Energy's Investor Relations Calendar, which are reflective of our ongoing and broadening participation in public discussion regarding clean energy and the role fuel cell energy plays in the space included. In May, we plan to, on May 12th, we plan to present at the Oppenheimer Emerging Growth Conference in New York. On May 21st, we're scheduled to present at the B. Riley FBR Institutional Investor Conference in Beverly Hills, California. And on May 28th, we will present at the Cowen TMT Conference in New York. For our call today, I am joined by Jason Few, Fuel Cell Energy's President and 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 and be joined by other members of the leadership team.

4:00 Jason? Thank you, Tom. Before turning to slide four, Good morning, everyone, and thank you for joining us on the call today. Before we get started, I would like to highlight how proud I am of the Fuel Cell Energy team. This last six months has been a transformational period for our company, and we have made significant progress on executing our plan driven by our focus on backlog project execution, revenue generation, cost containment, and disciplined capital allocation. I also want to take a moment to offer prayers of healing and support to any of our team members, shareholders, suppliers, fellow Americans, and citizens around the world impacted by the novel coronavirus known as COVID-19.

4:50 We also offer support to those on the frontline working on all of our behalf. I will address the current impact of COVID-19 and our company's response in more detail later in my prepared remarks. As we refresh, or for those of you who may be less familiar with our business, we have included a company snapshot on slide four that depicts revenue for the most recent full-year period, fiscal year 2019. Last year, we recorded $60.8 million of total revenue with the three largest categories, service and licenses, advanced technologies, and Generation, providing diversified sources of recurring revenue to the company.

5:37 Additionally, I would like to draw your attention to some of the customers illustrated on the slide. All of these customers have multi-year contracts with us. We believe our existing customer base offers growth opportunities for our company and that both current and future customers will benefit from the enhancements to our technology platform over the past few years. including our extended seven-year stack life, combined heat and power, microgrid applications, on-site hydrogen generation, and in the future with the commercialization of our solid oxide platform capabilities to deliver electrolysis and long-duration hydrogen-based energy storage.

6:24 Turning to slide five. Steel Cell Energy's purpose is to enable the world to live a life empowered by clean energy. Our purpose guides our strategy, our people, and our work. It also guides how we allocate capital, the innovations we are focused on bringing to the market, and the solutions we deliver to our customers. Said simply, it is our collective DNA. Turning to the first quarter of fiscal 2020 on slide six. I am very pleased with our execution on several fronts, including an increase in revenue over the fourth quarter of fiscal 2019 and our continued disciplined management of operating expenses.

7:11 Solid execution on both revenue and operating expenses helped us achieve a gross profit of $3.3 million for the quarter and improved gross margin, and we continue to make progress towards strengthening our balance sheet. We have also continued to execute on our powerhouse business strategy across our global operating model, which I will cover in more detail shortly. Along with executing on our project backlog, we have increased our sales presence in the marketplace and ramped up our sales efforts. Consistent with our purpose, we continue to demonstrate and extend our leadership in sustainability and environmental stewardship. We continue to believe that carbon capture is necessary to make significant progress in reducing the global carbon footprint without asking most of the world to forgo many of the modern-day comforts energy has brought to society, or asking the developing parts of the world to hit the pause button.

8:11 Fuel cell energy's technology is currently the only known carbon capture technology that captures carbon while producing power at the same time. Together, With ExxonMobil Research and Engineering Company, under our second joint development agreement, we continue to refine our fuel cell technology that concentrates CO2 in industrial applications, coal and gas fire power plants, while also generating power from the fuel cell stack. And finally, a few additional comments on how we are managing our business in the wake of the coronavirus. First and foremost, I am thankful that as of now, none of Fuel Cell team members around the world have reported having symptoms of the virus.

9:00 We pray for the continued health and safety of our global team. We will continue to monitor the situation and our business practices daily. And of course, the health of our employees, customers, and suppliers is our number one priority. We appreciate the healthcare workers, local communities, and governments around the world We remain vigilant and are taking precautions to help our team members remain safe and are monitoring supply lines and the potential impact of the coronavirus on our operations. It goes without saying, however, that we are complying and will continue to comply with all state, federal, and international governmental rules that dictate how we must respond to the virus.

9:51 Our improved performance as a company, our prudent management of our balance sheet, and positive feedback from our key stakeholders gives us confidence in our ability to deliver on our plan over the balance of 2020 and beyond. And now I'll turn the call over to Mike to discuss our financial results in more detail.

10:14 Thank you, Jason. Let's begin by reviewing some highlights for the quarter shown on slide 8. We executed well on our plan in the quarter and revenue met our expectations at $16.3 million. This is a 9% decline versus the prior year quarter but was an increase sequentially versus the fourth quarter of 2019. To add a bit more color on the revenue mix, generation revenues totaled $5.4 million, an increase of 268% over the prior year period primarily benefiting from the additional revenue associated with the Bridgeport Fuel Cell Park project, which was acquired in 2019. With the commissioning of the Tulare Biomap project during the quarter, we now have 28.9 megawatts of operating power plants in our portfolio as of January 31, 2020, compared to 11.2 million as of January 31, 2019, increasing generation assets in order to benefit from the long-term recurring cash flows remains a strategic focus of the company. Advanced technology contract revenues increased by 15% to 5.2 million due to the addition of our joint development agreement with ExxonMobil Research and Engineering Company.

11:29 The balance of advanced technology contract revenues in the first quarter of fiscal 2020 relates to the continued development of our solid oxide platform as we prepare to deliver Electrolysis, and long-duration hydrogen-based energy storage platforms. Service and license revenues decreased by 52% to $5.6 million. A key driver of the decrease was there were no module replacements during the quarter. Revenue recognized in the period includes license revenues of $4 million associated with our joint development agreement with ExxonMobil Research and Engineering Company. The absence of any product sales in the quarter reflects our previous strategic decision to focus on utility-scale power purchase agreements, or PPAs, to grow our generation portfolio rather than selling our projects outright, as well as the continuing situation with POSCO Energy that is limiting sales in the Asian market.

12:26 Gross margins for the quarter were 20.2%, or $3.3 million, which represents a 249% improvement compared to the gross loss of $2.2 million in the prior year quarter. Results for the first fiscal quarter of 2020 benefited from our restructuring in 2019, which resulted in lower manufacturing costs, contributions from our larger generation fleet related to the acquisition of the Bridgeport project, and license revenue recognized in the quarter. Operating expenses for the first fiscal quarter of 2020 decreased by 51% and a number of others. Administrative and selling expenses also benefited from a legal settlement of $2.2 million received during the quarter. And finally on this slide, we finished the quarter with backlog of $1.36 billion and an increase of 9% compared to January 31, 2019. Please turn to slide 9, first quarter financial performance.

13:53 Net loss was $40.2 million in the first quarter of 2020 compared to a net loss of $17.5 million in the first quarter of 2019. Net loss includes a $34.2 million non-cash charge related to the change in the fair value of the liability associated with the warrants issued to Orion Energy Partners under our credit agreement. This charge accounted for approximately a $0.17 per share impact on the reported loss per share. We are very happy with the significant improvement in both loss from operations and adjusted EBITDA, which reflects our progress over the last nine months in improving our operational efficiencies, lower operating expenses, growing our generation fleet, and executing on our joint development agreement with ExxonMobil Research and Engineering Company. Loss from operations improved to 3.1 million in the first quarter of fiscal 2020 when compared to a loss for operations of 15.2 million in the first fiscal quarter of 2019. Adjusted EBITDA totaled negative $222,000 in the first fiscal quarter of 2020 compared to negative adjusted EBITDA of $12.1 million in the first fiscal quarter of 2019.

15:11 In the center of the slide, cash and cash equivalents and restricted cash and cash equivalents totaled $73.9 million as of January 31, 2020, including $38.3 million of unrestricted cash, $8.2 million of short-term restricted cash, and $27.5 million of long-term restricted cash. During the quarter we drew down $65.5 million from our $200 million credit facility with Orion Energy Partners bringing the total balance drawn under that facility to $80 million, and we received an additional loan of $3 million from the Connecticut Green Bank. Subject to lender approval, we have availability of $120 million under the Orion facility.

15:57 Subsequent to quarter end, we closed a tax equity sale leaseback transaction with Crestmark Equipment Finance, a division of Medibank, on the 2.8 megawatt Tulare Biomap project. We are thrilled to add Crestmark as a financing partner to our commercial deployment platform. Turning to the chart on the right side of the slide, we finished the quarter with backlog of $1.36 billion of 9% compared to January 31, 2019. Backlog is comprised of generation backlog of $1.1 billion, service and license backlog of $190.5 million, and advanced technology contract backlog of $64.6 million. In summary, we are very pleased with the progress we have made and look forward to continued execution against our backlog and future growth opportunities.

16:48 And with that, I will now turn the call back over to Jason.

16:53 Thank you, Mike. Next on slide 10, I want to provide more insight on our accomplishments under our powerhouse business strategy, which we unveiled last quarter consisting of the following priorities, transform, strengthen, and grow. Fiscal 2019 and the first quarter of fiscal 2020, we undertook various restructuring initiatives to support the next phase of our business strategy. We accomplished several foundational milestones, but recognize there is still work to do. Thus, we are keenly focused on additional improvements, while we are also shifting focus to growing our business, achieving profitability, and establishing our position of industry leadership. We continue to focus on progressing our advanced technologies innovations across carbon capture, hydrogen generation, electrolysis, and hydrogen-based long duration energy storage.

17:49 As we detailed last quarter, we implemented a cost reduction and restructuring plan that resulted in annualized operating savings of approximately $15 million in fiscal 2019. We plan to continue to deliver on a lower operating expense profile. Moving to strengthening. We're now focused on strengthening our business by optimizing capital deployment. We will continue to focus on disciplined capital deployment and securing lower cost long-term financing and tax equity financing for completed generation projects. The most recent example is the successful sale of Leaseback of Killary Biomat Fuel Cell Project.

18:37 Pursuing commercial excellence. Over the past quarter, we have focused on strengthening our customer relationships and building a world-class customer-centric reputation by keeping close to the markets we serve and responding to the needs of our customers. We also remain focused on developing business opportunities for the company. We are encouraged by the marketplace's response to our product solutions and our reinvigorated and broadened go-to-market efforts. Our priority is to continue to provide a deep and strategic partnership to our existing customers and develop such relationships with future customers. On operational excellence, we strive to execute on projects, manufacturing and customer service. I am pleased with the current performance of our operational platform particularly with the delivery of the Tulare project and the progress of our project at the United States Navy Base in Groton, Connecticut.

19:37 In addition to these projects, we continue to evolve our operational management processes and approaches with the goal of ensuring our ability to execute against growing future demand. Related to cost reductions, we continue to be focused across all aspects of our organization and operations on continued lean resource management and cost reduction opportunities while adhering to safety and product quality standards. These efforts have yielded a reduction in our run rate expenses and we expect to continue to pace our additional capital deployment to revenue and financing over the strategic horizon.

20:22 As we grow, we will also pursue the following growth strategies for sales growth, We will seek to increase product sales to empower purchase agreements with strategic customers and prospective customers around the world. We intend to build alternative distribution channels, win new projects by exploiting the differentiating capabilities of our products, grow service revenues, and further reduce the total cost of ownership for our customers. I am encouraged by the positive change in the tone and Tanner of our conversations with both customers and prospective customers over the past six months. We are very active in CHP, microgrid, biofuel, hydrogen and power generation conversations across customer segments, energy applications and global geographies.

21:17 We will continue to innovate. We will continue to focus on increasing product life, reliability and exploiting our competitive advantage on multi-fuel use applications, our scalable platform, and multi-feature capabilities. In addition, we intend to develop and commercialize our advanced technologies platforms across carbon capture, distributed hydrogen production, and long-duration hydrogen-based energy storage. On solution leadership, we will seek to capitalize on our core strengths, meeting customer needs for power and Combined Heat and Power utilizing available biofuels for power production which contributes to the reduction of greenhouse gas emissions by eliminating the need to flare biogas, enabling microgrids and generating distributed hydrogen for industry, transportation and ultimately energy storage and power generation.

22:20 We continue to believe that education is important. and that governments and companies like Fuel Cell Energy must work together to pursue a transition to clean energy that continues to advance societal progress while intelligently addressing climate change. We are working to ensure that policymakers, environmental advocates and consumers understand the environmental, increased security and enhanced reliability benefits realized by deploying Fuel Cell Energy platforms. It is important to note That transformation, strengthening, and growth of our business is happening, and we intend that it will continue to happen, including in international markets. We are working to regain access to the Asian market, including taking recent steps to ensure we can realize the intended benefits of our license agreement with POSCO Energy.

23:17 There is a growing global appreciation for our technology solution. and we intend that international growth will be a part of our go-forward story. Turning to slide 11. As I just outlined, execution on project backlog is key to our long-term success. I want to take a quick moment to highlight progress on projects that are nearing the mobilization phase, which consists of our 7.4 megawatt project in Yapank, Long Island, New York, our 14.8 megawatt project in Derby, Connecticut, and our 1.4 megawatt biogas project at the San Bernardino municipal wastewater treatment facility.

24:04 Our project management teams have been hard at work establishing the detailed timelines for our EPC contractors, working to put in place all necessary permits, site approvals, Dibble Site, and Interconnect Designs required for us to commence on-site construction. On this slide, we've provided visual renderings of what two of these projects are expected to look like upon completion. We are approaching the time when site work commences and these distributed power projects begin to take shape. Additionally, we continue to focus on our advanced technologies. including carbon capture technology under our joint development agreement with ExxonMobil Research and Engineering Company.

24:50 Earlier this month, we announced that the California Public Utilities Commission confirmed Steel Cell Energy's understanding of the Biomap program rules, allowing us to proceed with the deployment of our SureSource hydrogen tri-generation platform at the Toyota facility located at the Port of Long Beach. The 2.3 megawatt power plant platform will be carbon neutral and enable to meet the energy needs of Toyota's onsite facilities at the port in Long Beach with excess electricity going to the Southern California grid. Hydrogen generated biotrigem platform will provide the carbon free fuel needed to power Toyota zero emission fuel cell vehicles Additional environmental benefits delivered by our Trigen platform include improved air quality and reduced water usage.

25:44 The installation also supports the growing demand for hydrogen infrastructure and transportation applications leveraging fuel cell technology. Turning to slide 12, we felt it was important to provide longer-term targets and goals that add context to our strategies. With a time horizon looking out over the next few years, we are targeting by fiscal year 2022. Increasing our generation portfolio by 100% from the 26.1 megawatts we had at the end of fiscal year 2019. Delivering double digit percentage compounded annual revenue growth rate over our revenue amount at the end of fiscal year 2019 and Each target is tightly linked to execution of our project backlog, which drives recurring revenues through power generation and long-term service agreement revenues.

26:47 We are also focused on future goals, including our aspiration to drive our cost per kilowatt hour lower to achieve grid parity in even more markets than we do today. Fundamental to our strategic business model, is eventually delivering recurring positive EBITDA as well as consistent positive free cash flow generation. And as I said in the presentation, we are focused on delivering an appropriate return on invested capital with the ultimate goal of delivering financial returns for our stockholders. The keys to achieving these goals are execution on project construction and achieving commercial operation which delivers recurring revenue for the company.

27:32 Winning New Business Globally to Replenish and Grow Our Project Pipeline, Continued Cost Discipline, Achieving Our Strategic Initiatives, Continuing to Promote a Culture of Accountability, and Optimizing Capital Decisions Among Our Portfolio of Choices. On slide 13, I will conclude my prepared remarks today with the highlights for fuel cell energy. Fuel Cell Energy has strengthened its balance sheet with our credit facility with Orion Energy Partners and our prudent balance sheet management. We expect this $200 million credit facility to help us deliver long-term projects that generate long-term recurring revenue for the company in the future.

28:19 We have an organization committed and focused on project execution, achieving financial milestones, operational efficiencies, and living our core purpose. The breadth and depth of our technology portfolio is second to none, and we are implementing our powerhouse business strategy to transform, strengthen, and grow our company for the long term. In summary, we delivered a strong quarter compared to where we were over last year. We are more excited than ever about our progress, the opportunities that lie ahead, Our ability to successfully navigate headwinds and the role our SureSource platform plays in the global energy future.

29:04 This concludes our formal remarks. Before we begin the Q&A, I want to introduce a few more team members that have joined Tom, Mike, and me. We are joined by Mike Lazowski, EVP and COO, Tony Leo, EVP and CTO, Joe Crossman, SVP Finance, Ben Tobey, SVP, Direct Sales and Customer Service, and Frank Wolak, SVP Sales, Americas. I will now turn it over to Jillian to begin Q&A. Thank you. As a reminder, to ask a question, please press star followed by the number one. Your first question comes from Eric Stein from Craig Hallam. Your line is open.

29:47 Good morning, everyone.

29:49 Good morning, Eric. How are you?

29:50 I'm fine. You?

29:53 Doing great. Thank you.

29:54 Good. Good. Well, just wanted to dig more into the product. Some of the plans there, obviously, you're fully committed and have made very good progress on the generation side, but I know product backlog and product inroads have been lacking. So maybe just talk about some of the steps you're taking, whether it's with key customers, Eon, Toyota, et cetera, and just maybe some milestones or signposts we should look for going forward.

30:25 Great. So if you think about the work that we're doing with Eon, which is really targeted on the European marketplace, there's something that we're doing there that is different than in the U.S. market. We have our sub-megawatt platform there, both a 250-kilowatt and a 400-kilowatt platform that we think fits the European market quite nicely, in addition to the fact that we will continue to sell Megawatt Plus platform there also. I think the milestone I would say to look for there is our opportunity to win some new business in Europe beyond the current set of customers we serve today.

31:10 In terms of product extensions and what we're doing product-wise, I think if you look at the Toyota project, that's an example where you're going to see A pretty significant extension to our product platform where we're doing actual on-site hydrogen generation that will support Toyota's efforts to both from a fueling standpoint of large trucks in addition to fuel cell vehicles coming off the ships through the port. I think groundbreaking there would be a milestone I would point you to look at in terms of extending our product portfolio in that regard. Mike, would you add anything to that?

31:53 The only other thing, as I said in my prepared remarks, Eric, obviously Korea has been a bit of a headwind, but we are working diligently to get back into that market, and obviously those opportunities are quite large as well.

32:10 Yep. I mean, that's, I guess, a good segue to my next question. I know that there's been some back and forth and some recent developments with POSCO. and maybe there's not anything you can give just, you know, while things are developing near term. But if there is, that would be great. And, I mean, you're clearly positive about that market, just, you know, wondering whether it's with Cospo or, you know, some of the other opportunities you've talked about in the past, how you see that playing out.

32:45 Yeah, we, as you know, we have... We issued an AK in terms of where we are with POSCO today. We are working through the process that is consistent with our agreement to try to achieve resolution. As we think about the market and the opportunity there, we're probably not at a point where we can say more about where we will end up, but we remain very positive about the market in South Korea and Asia overall, and we intend, as we've stated, to aggressively and many more. Thank you. That is largely from generation, that is correct.

33:51 We do intend, as we said, to be back in the market from a product sales perspective, but this is largely driven by generation.

34:00 Okay, thanks a lot.

34:02 Thank you. Your next question comes from Colin Rush from Oppenheimer. Your line is open.

34:10 Thanks so much, guys. I know it's early days here, but as you look at your construction pipeline and the products that you have going, what What can you say about resiliency of your timelines in the face of work shortages or stoppages, processes around permitting and approvals, things like that at this point? How far into the planning process are you and what can you say?

34:36 So, Colin, maybe I'll start and then I'll turn it over to Mike Lazowski to maybe add some additional comments. As it relates to our in-flight projects, we still feel very good about not only the progress we're making, but about the plan on a go-forward basis to complete those projects on the current timeline. We acknowledge and recognize that those projects could be impacted by actions that state or federal governments may take with respect to work, work stoppage, but as of today, We have no indication that we're going to be impacted from a project development standpoint. Mike, would you add anything to that? Mike Lazowski?

35:22 Yeah, Jason, thank you very much. And Colin, thank you for the question. All I would add in addition to Jason's comments is we have a very existing, robust corporate operational risk management program. And we use that program to manage all of the project execution of all projects that are in project backlog. Based on our current solid inventory positions, the existing current direct labor workforce, the key actions that we've taken relative to our supply pipeline, I feel very confident that we're well positioned to continue to make progress on the items that you listed relative to project execution.

36:08 and then continuing on through the construction phases and overall project execution. We're well positioned at this point and feel confident that we'll be able to efficiently and effectively execute on those projects going forward. Again, we'll continue to monitor very closely the situation and as things develop, we'll take appropriate actions where needed.

36:31 Great. And I guess the second question is really around the supply chain. So you may have just answered it, but In terms of the equipment that you have on hand and the additional pieces that you need to bring in, how many of those sources are domestic and how many of them are international? And I guess really what the question is is the inventory that you need to bring in outside of the U.S. to complete these projects. And this may be just being a little bit extreme here in terms of asking the question, but how many things do you need to bring in from outside the country from an equipment perspective to actually complete these projects?

37:07 Colin, this is Mike Lasowski again. The way I would characterize that is our assessment is we have low to moderate supply risk relative to the existing projects in backlog. We have a fair amount of equipment in finished goods inventory that we have well positioned to deploy to the project when ready. and the balance of the equipment and direct materials that are needed to execute on the project are either in semi-finished goods inventory or well along their way into supply. Thanks so much, guys. Thank you. As a reminder, if you would like to ask a question, please press star followed by the number one. Your next question comes from Jeff Osborne from Cowan & Company.

38:18 Your line is open.

38:21 Thanks. Good morning. A couple questions on my end. First of all, Mike, on the $62.5 million that you drew down, which projects are those for? Is that all for the Groton facility or something else?

38:36 Good morning, Jeff. So we drew down $65.5 million in the quarter, the second draw on our Ryan credit facility, and predominantly that's targeted at two projects, but we also refinanced short-term debt. in conjunction with that drawdown. But the two projects that are under the Orion facility as we sit here today are the Groton and SubBase project that has a COD date of July of this year, and then the LIPA project, which has a COD date in 21 of next year.

39:17 If you recall, we talked about a little bit in the Fourth quarter call, I think we talked about moving roughly $34 million or so of short-term debt into long-term debt as part of the way we've utilized the funds from Orion.

39:37 Okay. That's helpful. And then speaking of the LIPA projects, can you just give us an update, if there is one, on the two other projects that I don't think have signed PPAs but that you have been awarded in the past?

39:52 Yeah, as you know, those two projects do not have signed PPAs yet. We continue to work with LIPA to try to advance those projects, but have not signed PPAs as of yet.

40:08 Is there something from the outside world we should be watching, either an RFP process that would lead to that, or is it, I guess, any sense of what you can share, maybe what the holdup is?

40:24 I don't think there will be an RFP process. It's not part of the process. It's just really trying to work through where both LIPE is and some of the policy and legislation things that are being considered in the state of New York. But other than that, there's no other indicator I would tell you to look at.

40:46 Okay. And either for yourself, Jason, or maybe for Tony, is there anything you can share as it relates to the Toyota Facility in Long Beach on the hydrogen side, how we should think about the cost of generation relative to, say, electrolyzers using low-cost renewables. It's certainly an intriguing asset that you have there and a new vertical of growth as part of your platform. But just given sort of the surge in interest among investors as well as the broader hydrogen economy and electrolyzers, I was just curious how we should sort of benchmark I certainly appreciate the lower water usage that you highlighted, but any other facets you could share would be helpful.

41:30 Yeah, the cost of hydrogen production with what we call tri-generation is reduced by the fact that we have the second revenue stream for power. In the case of this feed-in tariff, it's a pretty significant revenue stream. If you had to pay that much for power for an electrolysis project, it would be pretty expensive hydrogen. So it obviously varies depending on power price and fuel price. But like carbon capture, the fact that you're producing power while you're making hydrogen really enhances the economics.

42:02 That's good. Thank you. That's all I had. Appreciate it. Thanks, Jeff. We have no further questions. I turn the call back over to Mr. Jason Few for closing remarks.

42:13 Julian, thank you. I want to conclude our call today by reiterating that our thoughts and prayers go out to those around the world impacted by the coronavirus, and we provide our complete support to those on the front lines. I also want to express again how proud I am of the many accomplishments achieved by the Fuel Cell Energy team in the short timeframe since I joined the management team. I also want to thank our customers, our value partners, and our stockholders that invest both their money and their trust in our team. I am very excited about the future and the opportunity Fuel Cell Energy has to deliver on its purpose to enable the world to live a life empowered by clean energy. In closing, I want to thank everyone for participating in our earnings call today and for your interest in Fuel Cell Energy. If you have any follow-up questions, please don't hesitate to reach out to us. Thank you very much and enjoy your day.

43:14 Ladies and gentlemen this concludes today's conference call. You may now disconnect.