Nextpower Inc.

All right. Thank you for everyone sticking around for the last panel of the day. I know it's been a long day for a lot of folks. I personally started with the 7 a.m. intro spiel, so I can feel everyone's fatigue already. But you're in for a treat. Last panel of the day, we saved the best for last. To my immediate right here, we have CEO and founder of Nextracker, Dan Sugar. He is an industry vet, rock star. You can put lots of different monikers on his name. But he knows solar. So if you want to learn about solar, you've come to the right panel. This is the best 35 minutes you're going to spend all day on the solar topic. So with that, Dan, thank you for being here. We always like to talk about outlooks at a first week of January conference. We'd love to hear your view on where the market is. Given that Next Tracker is a very globally diversified company, clearly there's been a lot of discussion around the U.S. market policy. We'll get into those things, but we'd love to hear just kind of around the horn how you're viewing the outlook for this year and some of your key geos. Sure.

Well, first, Brian, thank you for the invitation to participate in the conference and what you've done for the renewable energy industry. We were just sharing with our CFO, Chuck Boynton, who's here, and Sarah Lee, our Director of Investment Relations, that you helped them go public at their prior yield code, 8.3, in the past. So thanks for that. We feel very bullish about solar, where the industry is. I do have to contextualize my comments. We are in the middle of a quiet period. It's right after the quarter end, so we're timing the conference. But let's just talk big picture for a minute. I can then throw some numbers around with the backlogs we report on our last earnings call. So I started life as an electric utility planner. I'm an electrical engineer doing electric transmission planning between generation and distribution. And for my entire career, which started there in the mid-80s in the utility sector, demand's been pretty flat, kind of like 0% to 1% plus or minus. And we've seen really, really strong demand growth for a variety of reasons. We can get into that. At the same time, a lot of legacy power generation facilities are going offline. So in the U.S. there's very strong demand growth. There's also strong demand growth overseas. And if you look in the U.S. power generation in the U.S. grid, which is about 1,300 gigawatts, there's like more than that of solar and solar plus storage trying to get connected. So there's 80% of the queue in the utility grid are solar and solar plus storage projects. It's staggering. Over 7,000 projects and it spans across the country. And we've seen also utilities get a lot more involved in building out solar programs once the production tax credit became law. as part of the Inflation Reduction Act. So that's been reflected in very strong demand. And let me just also, another sort of fun fact, this was in our last investor letter. Over the last five years, five years ago, if you look at how much was solar part of the power, the capacity installations that were happening on an annualized basis, solar was about 10%. Last year, not 2024, but 2023, 2024 will be bigger. So it was over 50%. So we've gone from 10% to 50% in like five years. And the Q is dominated by solar and solar plus storage. Now, if we reflect that, that's in the US. And overseas, I can speak to the overseas market. We're seeing strong demand in solar. in Europe, very strong demand. The Ukraine war, the detonation of the Nord Stream pipeline just last week, Ukraine stopped transmitting Russian gas through their territory to Latvia and other places. So you're seeing a lot of Migration heat pumps for heating, which is creating electric demand. And you're seeing gas being exported from the United States through LNG terminals. This is like first order big stuff. So the demand from Europe is very strong. I was in Madrid last month, being with our team at our office in Madrid. Very strong demand in Europe in solar. We're seeing strong demand in the Middle East, some of the largest Projects in the world are happening there. Next Tracker is part of that. We did the first utility scale project in Saudi Arabia. We're in Dubai, certainly Dubai Electricity and Water Authority. There's multi-gigawatt projects happening there. India is on fire from a market growth standpoint. I was in India last year also personally. The Prime Minister Modi has very much leaned in, and there's a lot of good things happening there. Nextracker has a strong position in that market. Latin America is strong. Brazil is the largest market. But throughout Latin America, a lot happening. Australia, we've had an office there for nine years. And over 100 completed projects in Australia and the Oceania region. Australia is a strong market. And Africa is also growing. So globally, there's a very strong market for solar. Now, the way we've expressed that in terms of backlog at Nextracker, first, we have the highest standard for backlog. Backlog for us is a signed contract which has liquidated damages if we don't deliver or the customer doesn't take with a deposit on a named project with a specific bill of materials and a definitive ship date. That's what backlog is. By that standard standard, When we did our IPO, Nextracker, about two years ago, our backlog was about $2.2 billion. Our backlog at the end of the quarter that ended at the end of September was over $4.5 billion. So we're very confident in the overall market. We're confident in Nextracker's position. We have seen a flight to quality in terms of with our customers, and that's been reflected in strong share position. Nextracker's maintained number one market share globally for nine years in a row, and our position in the U.S. feels stable, and so that's the sort of big picture, if you will, Brian.

That contextualization is great. I wanted to maybe follow up with... your initial comment about the load growth, right? For utilities, we haven't been talking about 2.5% annual load growth through the end of the decade ever, at least not while I've covered this space. And even going back to when you were, it sounded like a utility operator. So this is a new dynamic. The fundamentals just seem very ripe for all types of new generation. And as you also mentioned, solar's gone from 10% to 50%, and I think I've seen EIA stats that said during certain quarters of 24, it was as much as 70% to 80% of the new ads for that quarter. So why, I guess, in that context, isn't utility-scale solar in the U.S. growing 20%, 30-plus percent a year? You look at these third-party market forecasts, whether they're right or wrong, what they are calling for is more of a steady, eddy, mid-single, maybe high single-digit growth-type rate. What unlocks the growth potential for, I guess, utility-scale solar to more fully participate in some of the power demand trends we're seeing in the country?