Barry,
I first want to thank you for your continued ownership of the past 10 years.
When I came and joined FuelCell Energy just a few months back, I certainly brought with me some ideas on how we can improve communications. I certainly understand that it can be frustrating at times when there seems to be no communications on ongoing activities regarding the various fuel cell projects. Going forward, we are going to be providing a more granular look into the various projects we have ongoing, as well as a sense for the timeline associated with each project. Certainly LIPA was a major win for FuelCell Energy, and we are extremely pleased with how the three separate projects are proceeding… as is LIPA. While certain projects can move at a very quick pace, Long Island isn’t one of them due to the complexity of the various permitting processes and other local regulations. I can assure you that these projects are on-track, and that we have strong support for these projects from both the local town officials and LIPA. We refer to these projects as awards, not contracts, as officially the contract (and it being added to our backlog) would be upon the signing of the PPA, or Power Purchase Agreement, with LIPA. Per rules in Long Island, this cannot happen until several steps are complete such as the approved engineering drawings for the interconnection (how the power gets onto the grip) and local permits for construction are approved. These are in process, and would expect to officially sign the PPA sometime this summer. I should note that the award did have attached as an exhibit the fully negotiated PPA, so it is not a matter of negotiations, but rather complete the aforementioned steps for construction.
LIPA has had a history of awarding projects and then not completing them. Large solar fields, for example, have failed to be sited, driven by the pushback from Long Island citizens that did not want large sites like this in their neighborhood. The FuelCell Energy product is strongly supported locally, as it operates quietly on otherwise brownfield sites adjacent to the Long Island Rail Road. These land parcels will now generate local real estate tax revenue, aiding the local tax burden.
As to financing, each project can independently support specific construction or project financing that would be outside of the Hercules loan. Additionally, with the renewal of the ITC, or Investment Tax Credit, there is additional value to certainly lenders or investors in projects that would further limit the amount of actually corporate cash we would need to front. It should also be noted that the chart on the timing of projects will illustrate when published will highlight that there is a staggered nature to all our projects, so working capital intensity will be spread out over time. Lastly, as you saw us do about a week ago, we can choose to selectively sell operating projects from our balance sheet to raise capital, and still have the benefit of being the service provider over the life of the project. And I should note that the Company had ~$76 million in cash on the balance sheet as of 1/31/18, so the Hercules debt transaction and the sale of the Tulare plant would be additive to that balance.
I hope this helped bring some understanding and comfort on these matters.
All the best,
Tom
Thomas Gelston | Vice President - Investor Relations
Direct: 203.830.7494 | TGelston@fce.com
FuelCell Energy | 3 Great Pasture Rd. | Danbury, CT 06810
www.fuelcellenergy.com |
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