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spk04: Good afternoon and welcome to TPI Conference's third quarter 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, today's conference is being recorded. We have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Christian Eden, Investor Relations for TPI Composites. Thank you. You may begin.
spk11: Thank you, operator. I would like to welcome everyone to TPI Composites' third quarter 2022 earnings call. We will be making forward-looking statements during this call that are subject to risks and uncertainties, which could cause actual results to differ materially. A detailed discussion of applicable risks is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, cpicomposites.com. Today's presentation will include references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. With that, let me turn the call over to Bill Sidewick, CPI Composites President and CEO.
spk06: Thanks, Christian. And good afternoon, everyone. Thank you for joining our call. In addition to Christian, I'm here with Ryan Miller, our CFO. Today, I'll discuss our third quarter results, our global operations, including our service and transportation businesses, then cover our supply chain and the wind energy market more broadly. Ryan will then review our financial results and then we'll open the call for Q&A. Please turn to slide five. We believe we are well positioned to address the current energy security and climate change crisis by helping to accelerate the shift towards a renewable powered world. The recent passage of the Inflation Reduction Act in the U.S. and the actions under the EU's proposed repower EU plan are just two catalysts to help drive that acceleration. However, a tightened energy supply, rising inflation, elevated logistics costs, geopolitical conflicts, and permitting and siting delays are jeopardizing the speed of that ship as well as impacting our profitability and demand in the near term. So while we have seen demand impacted by these challenges, the medium to long-term outlook for wind energy remains strong. Our mission is to continue to navigate through the near-term headwinds and prepare ourselves and our suppliers for the projected long-term growth of the wind industry both domestically and internationally. Our strategic initiatives have not changed. Safety of our associates is, of course, job one, and that is followed by continuing to improve our and the industry's quality, reduce our cost structure, optimize our manufacturing footprint and utilization, deeply collaborate with both customers and suppliers, drive innovation, expand our offerings, and be laser-focused on liquidity and balance sheet strength. So while the balance of 2022 and 2023 will continue to be challenging, our team is up to the task and remains committed to improving our operating and financial results. As it relates to the third quarter of 2022, we delivered sales of $459.3 million during the quarter, which was down from prior year. However, sequentially, sales increased over the second quarter by 1.5 percent, and our adjusted EBITDA was 16.4 million, including several non-recurring and or unique events that Ryan will outline later. Overall, a solid quarter, given the economic environment we are operating. We are also pleased that we have executed several contract extensions since the last earnings call. We extended two lines for Enercon and Trichier through 2025, as well as four lines for Nordex through 2023. In preparation for the expected growth in the U.S. market, we have signed an agreement with GE Renewable Energy that enabled us to secure a 10-year lease extension of our manufacturing facility in Newton, Iowa. Under the agreement, GE and TPI will be developing competitive blade manufacturing options to best serve GE's commitments in the U.S. market with production expected to start in 2024. We have agreed in principle with GE to extend all our lines in Mexico through 2025 and expect to finalize and execute the contract extensions before the end of this year. With this extension, we now have nine lines under contract with GE plus the five lines of potential capacity in Iowa. We are currently discussing a long-term partnering agreement to provide more capacity and flexibility along with higher utilization of our manufacturing capacity. More to come on this. Finally, we have agreed in principle to a seven-year global partner framework agreement with Vestas that aims to provide flexibility along with more capacity for them while enabling better facility utilization for us and the geographies that we serve Vestas. Together, we are investigating market-driven opportunities for local blade manufacturing of the B236 blades in Asia, the U.S., and Europe, And we are collaborating in the design phase of the V-163 blade while assessing the optimal manufacturing setup for this blade. Given the near-term challenges the wind industry is facing, we are commencing multiple cost savings initiatives to better position us for 2023 in the long term, including optimizing our global manufacturing footprint, reducing headcount primarily in geographies most impacted by demand, and reducing or eliminating loss-making operations. While a plan has not yet been initiated and therefore not finalized, we intend to cease production at our Yangzhou China manufacturing facility in December 2022. During the fourth quarter, we expect to record material restructuring and impairment charges with respect to closing this facility, additional headcount reductions in our other manufacturing facilities and corporate functions, as well as actions related to loss-making operations. We expect these actions to result in structural cost reductions of approximately $20 million to be realized in 2023 and beyond, while continuing to focus on operating efficiencies to drive annual productivity savings of over $20 million per year, which we have consistently achieved over the past three years. During 2023, we expect 36 lines to be in production. With the right sizing and optimization of our global footprint, and upon completion of current customer contracting, we expect to initially have as many as 14 lines with GE, 13 lines with Vestas, 12 lines with Nordex, and two lines with Enercon, for a total of 41 dedicated lines out of a total footprint capacity of 47 lines, which excludes the eight lines of capacity we currently have in China. At full capacity annually, we can produce up to 3,900 sets or approximately 15 gigawatts with a revenue potential of $2 billion. Turning to slide six, I'll now give you a quick update of global operations, supply chain, as well as the wind market. Our plants in China and India performed well ahead of plan in Q3. Our Turkey A plants are also well ahead of plan for the year, notwithstanding a short labor disruption in the quarter as we worked with the union to address the inflationary pressures on wages. As a result, sales for the quarter were impacted by approximately $8.9 million, most of which we plan to recover in the fourth quarter. Moving on to Mexico, in early August, TPI was requested by one of our customers to temporarily suspend production of one blade type manufactured in one of our Mexico sites due to a design change. TPI supported our customer with an expedited review and implementation of the new design and production resumed in September. The suspension of production impacted third quarter sales by about $12 million with minimal impact on earnings. Operations in our Nordex facility in Matamoros have improved, but we are still challenged from a profitability standpoint. Although we are working with our customer to determine how to best reduce the impact of this operation going forward, The negative impact on our overall adjusted EBITDA margin from this facility is expected to be approximately 250 basis points for the full year and was approximately 270 basis points in the third quarter. Bottom line, our blade operations, except for the newest facility in Matamoros, and notwithstanding the disruptions this quarter in Turkey and Mexico, we have performed extremely well. Excluding the challenges from the Matamoros operations, our adjusted EBITDA margin in the third quarter would have improved from 3.6% to 6.3%. In our service business, we are on track to exceed the 40% to 50% top-line growth expectations that we shared with you earlier this year. During the third quarter, our field service business grew sales 73% compared to the prior year. Our field service business generates higher margins than our blade manufacturing business, and we expect them to improve as the business achieves scale and therefore be more accretive to our overall margins over time. In our transportation business, supply chain issues have continued to impact us due to reduced volume needs by our customers. We now expect transportation revenue to grow by approximately 10% in 2022. Looking ahead into 2023, we believe that volumes and revenue will grow significantly compared to 2022, especially in our non-bus business as supply chain constraints ease. We are continuing to make progress through adding new development programs and converting programs to production. Since our last earnings call, we have kicked off production tooling with a Class 8 customer, and we plan to start serial production of large cab structure components in the first half of 2023. We have also kicked off serial production for another automotive program for battery pack components. This is our third serial production program with this customer. The awarded development programs are growing our customer base with the market segment leaders in commercial delivery and passenger vehicles. These programs have validated the cost and performance benefits of composites while allowing us to demonstrate our technical expertise, and develop tooling and manufacturing processes that provide higher value-added solutions with low investment industrialization. We expect the Inflation Reduction Act to be a demand catalyst in the U.S. for commercial vehicles, given the many provisions including the commercial clean vehicle credit, alternative fuel vehicle refueling property credit, and the clean heavy-duty vehicle grants and rebates, just to name a few. Moving on to our supply chain, the situation continues to be challenging. In the third quarter, although we saw price increases due to the higher energy prices in Europe, we did not have issues securing material to ensure uninterrupted production, and we have seen logistics costs start to come down, but still high relative to pre-pandemic pricing. As we look out into 2023, we expect pricing for raw materials to increase overall by low single-digit percentage. However, due to our contract structure and shared pain gain approach, we expect to be able to reduce the impact of TPI's margins to close to zero or even have a slight net benefit. We are continuing to diversify and de-risk our supply chain by qualifying sources in the regions in which we manufacture products to reduce the impact of high logistics costs provide security of supply, and build long-term strategic partnerships with key suppliers to ensure the best pricing and availability in the short, medium, and long term. On to the wind market. A quick update on RepowerEU, which targets 510 gigawatts of wind energy by 2030, up from approximately 190 gigawatts today. WindEurope expects that the negotiations between the European Parliament and the 27 member states on the Renewable Energy Directive to conclude by the start of 2023. This year, over a third of all of our blade shipments have been into Europe, so it remains an important market for us, and we expect the implementation of RepowerEU and the growing need for energy independence in Europe to accelerate our growth in the region in the future. In the U.S., we are certainly pleased with the passage of the Inflation Reduction Act of 2022. We believe this will bring long-term incentive certainty that is needed to supercharge the investment in clean energy construction and put the U.S. on a path to reach its Paris Agreement emission reduction pledge and be a critical contributor to energy independence. The historical key driver of the U.S. wind market, the production tax credit, has effectively been extended until the later of 2032, or when greenhouse gas emissions have been reduced 75% compared to 2022, which means it is likely that the PTC can last for the next two decades. One of the unique provisions of the bill that directly impacts TPI is the advanced manufacturing production credit that we believe will provide a credit of two cents per watt per blade. To put this in context, this could be $80,000 for a four megawatt blade or $240,000 per turbine. This would be on top of the domestic content adder of 10% that should also increase demand for TPI blades. The industry is waiting on guidance from the IRS and the Treasury Department, among others, to define and clarify the implementation of this complex legislation. We are in the middle of strategic planning discussions with our customers on how to best utilize the IRA and expect that we will have more clarity on our customers' needs over the coming quarters and as the guidance around implementation is released. So stay tuned for more information to come. Well, we recognize the challenges the wind industry faces in the near term. We are confident demand for wind energy will strengthen over the mid to long term, given the focus on energy security and independence globally and the necessity to decarbonize and electrify to meet the aggressive goals set to combat climate change. We believe TPI remains in a unique position with our global footprint and key strategic geographies, along with strong partnerships with our suppliers and our customers, to grow as the demand for wind begins to accelerate again. To repeat what I stated earlier, execution, cost control, right-sizing, and liquidity are at the forefront of our priorities while continuing to move forward on multiple strategic initiatives to enable TPI to capitalize on the expected long-term growth and development. With that, let me turn the call over to Ryan to review our financial results.
spk10: Thanks, Bill. Please turn to slide eight. All comparisons made today will be on a year-over-year basis compared to the same period in 2021. For the third quarter ended September 30, 2022, net sales were $459.3 million. Net sales at Windblades were $425 million in a quarter, a decrease of $25.7 million, or 5.7% compared to the third quarter of last year. The decrease in wind blade sales was primarily driven by an 11% increase in the number of wind blades produced due to a temporary production stoppage in one of our Mexico plants as the OEM implemented a blades redesign. A brief labor disruption in Turkey A as we worked with the union to resolve inflationary pressure on wages, as well as a reduction in manufacturing lines, transitions of existing lines and currency fluctuations, which were all partially offset by an increase in average sales price per blade due to the mix of wind blade models produced and the impact of inflation on blade prices. Net loss attributable to common stockholders for the quarter was 16.4 million, compared to a net loss of 30.7 million in the same period in 2021. Our adjusted EBITDA for Q3 was 16.4 million, or 3.6% of sales, compared to a break-even in the same period in 2021. The increase was primarily due to favorable foreign currency fluctuation, a 9.7 million decrease in startup and transition costs, and improved operating cost efficiencies. partially offset by approximately $3 million in non-restructuring-related operating costs at our locations where production stops, as well as cost challenges at our newest facility in Matamoros. Moving to slide 9, we ended the quarter with $129.1 million of unrestricted cash and cash equivalents and $62.1 million of debt. Our free cash flow for the three months ended September 30, 2022 with a net use of cash of $29.4 million, primarily due to improving the health of our supply chains and timing impacts from the Turkey labor disruption and the temporary production suspension in Mexico. During the quarter, we continued our focus on tight cost control, managing working capital and constraining capital expenditures. The current environment continues to be challenging across the wind market as we balance reduced demand in the near term, while at the same time trying to ensure we have a healthy supply chain. As we move forward, we are focused on our liquidity and ensuring we can capitalize on the recovery of the wind market in the medium to long term. Back to you, Bill.
spk06: Thanks, Ryan. Turning to slide 10. As we look forward to the rest of the year, we expect Q4 sales and adjusted EBITDA to be down slightly from Q3, reflecting normal seasonality in our business, and our formal guidance has not changed since last quarter. Moving on to slide 12. Again, we are pleased that we were able to announce today the extended Enercon and Nordex agreements. a long-term lease extension in Iowa, the agreement to extend GE contracts in Mexico through 2025, and the seven-year global framework agreement with Vestas. Our customers and many wind farm developers are deferring investments into the future until inflationary pressures and global economies stabilize and there is clearer regulatory guidance from the IRS and Treasury with respect to the IRA and more clarity around the implementation of the provisions of Repower EU. Therefore, we expect decreased demand for our wind blades from customers and therefore our total projected sales and results of operations in 2023 to decline compared to 2022. We are in the process of finalizing our 2023 annual plan and budget and will provide further information during our next earnings call. With that, we remain focused on managing our business through the near-term challenges in the industry and our efforts to position TPI as the preferred global solution provider to our customers to enable profitable execution and adequate liquidity. Finally, I want to thank all of our TPI associates once again for their commitment, dedication, and loyalty to TPI and our mission to decarbonize and electrify. I'll now turn it back to the operator to open the call for questions.
spk02: Thank you. If you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge that request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. Once again, to register for a question, it is 1-4 on your telephone keypad. And our first question comes from the line of Eric Stein with Craig Hallam. Hi, Bill.
spk08: Hi, Ryan.
spk06: Hey, Eric. How are you?
spk08: Hey, doing well. How about you? Just fine, thanks. Good. So maybe this high-level picture here, obviously it's been challenging in wind markets for some time. You know, curious if you think long-term that's shrinking to move to outsourcing, and clearly you're taking another step with Vestas. You know, just curious what you think this means longer term.
spk06: Yeah, I think for most of the OEMs in the wind market, I think that's the case. You know, we're certainly seeing a lot of activity along those lines here. whether it's us or others. So I would say, yes, I think this does continue, not only continue the trend, but potentially accelerate it.
spk08: And then maybe just on Vestas, I mean, clearly you've had a strong relationship for some time, but you've got a global framework, so you're taking it to a different level. I mean, maybe if you could go a little more in detail about how this new agreement changes that? I mean, what are the areas that, you know, that it will be different and curious? I mean, I know offshore is a focus and it's still off quite some time, but is this something that is potentially contemplated in this framework?
spk06: Yeah, I can't get into the specifics of the contract, but suffice it to say, as mentioned in the prepared remarks, It's around providing flexibility and capacity for Vestas moving forward, flexibility with that capacity, but also incenting them to highly utilize our facilities so that we can maximize utilization. Because at the end of the day, if we're fully utilized, it's better for us and it's better for them and ultimately for their customers and the end consumer. It's really designed around maximizing productivity in our facilities and reducing overall total landed cost for Vestas. And as far as from an offshore perspective, I'm not sure if you caught it, but we did talk specifically about the V236. That is their biggest offshore machine. And so this does contemplate working with them in the future. Nothing is finalized at this point, but As indicated, we are jointly investigating opportunities in multiple geographies for the production of the V236 blade.
spk08: Got it. Maybe just a quick one, one more, just on GE in Iowa. I mean, just curious on challenges there. Obviously, you're a big employer in Newton and closed, and now you're going to start up but not for a year. How do you manage that, trying to get the workforce filled up again, but knowing that it's still off 12-plus months?
spk06: Yeah, it actually works out pretty well for us, Eric. I mean, we're going to have to rebuild the workforce, right? But we're not anticipating beginning production until sometime in 2024. So it gives us adequate time to plan for that workforce reengagement. gives us time to maybe get back some of our core people that were with us really since 2007 when we started up Iowa. And so it actually, I think, could work in our favor to give us a little bit more time and plan for that ramp up in a very cost-effective and efficient manner. Okay, thanks. Yep, thank you.
spk02: Your next question comes from a line of Julie Dumoulin Smith with bank of America. Your line is.
spk00: Hi, this is Morgan Reed on for Julian. Just a couple of questions. Hi, thanks for taking the questions. Can you just talk about, I guess, I know building off of kind of the last commentary, it sounds like based on the latest partnerships that you're really doubling down on the U S market and the opportunities in Europe. between the different renewals, and it seems like the partial pullout of China, that there's sort of a shift in the geographical focus of the strategy. Can you just talk about that a little bit and how you're thinking about the business positioning here for the next several years?
spk06: Yeah, so if you think about, and I'll talk about China in a second, but if you think about ex-China wind market, you know, the U.S. is the largest individual market. Europe is a, you know, when you look at Europe combined, is a very large market as well. That's where our customers are asking us to provide capacity to. And so, certainly, we're going to focus. Historically, our blades to the U.S. has been in that 50 to 60 percent range. Europe, traditionally, it's been over a third. I think the last quarter, it was over 40 percent of our blades were going to Europe. So, those are two very key markets for us. So, Getting refocused with our customers on a total landed cost concept, not just a pure what's the blade cost X works for them, has resulted in kind of a reprioritization from a footprint standpoint for all of them. And so that's what you see. So on the China front, actually it's unfortunate. It's been a very productive location for us. We have an outstanding workforce in China. And we have for many years. We've been there since 2008. But again, with tariffs, with logistics costs, shipping costs, geopolitical uncertainty, there's a lot of de-risking going on from our customers as well as from us from a supply chain standpoint. And so that's the rationale for the move out of China.
spk00: Understood. That's helpful. And then just one more from me. If you could talk a little bit about the sort of plans for the transportation segment. Is there any, I know you kind of alluded to some difficulties with volumes this quarter, but can you maybe talk about your expectations for this business over the next couple of years, given some of the slowdown in some of the auto OEMs that we've seen in the broader market?
spk06: Yeah, Morgan, it certainly challenged us this year. We had much higher volume expectations, especially with our passenger programs. So the supply chain challenges with other components, not ours, has resulted in the volume dip. We do see it beginning to improve moving into 2023. Again, it's still early. But we do expect our, I would say, our non-bus volume, if you will, to go up fairly substantially from where we're at today. And with, quite frankly, with some of the other programs that we mentioned, the development programs, beginning production in 23, we see, you know, that'll certainly help. And we have a number of additional development programs right now that we expect to convert to production, to serial production. So, you know, we're still very optimistic in the long term for that business. Clearly, in the U.S., the IRA has lots of components that are beneficial for commercial vehicles specifically. So, yeah, we remain very optimistic on where that's going to go over the next couple of years.
spk00: Great. Thank you. I'll take the rest offline.
spk06: Thank you.
spk02: Your next question comes from the line of Greg Roszkowski with Weber Research. Your line is open.
spk03: Hey, good afternoon, guys. Can you hear me okay? Loud and clear, Greg. Good to talk to you. Okay, perfect. Bill, your opening remarks were really, really helpful. A lot of good color in there, so thank you. I think answers most of my questions. I'll end up checking the transcript to be sure, so I'll keep it to a couple quick modeling ones. The restructuring costs, if all goes according to plan there, can you give us a little bit more color on either the quantity or the size of restructuring costs and definitely the cadence on what to expect? Is it going to be contained into Q4, you think, or potentially slip into Q1, Q2 of next year as well?
spk06: Yeah, so I can't give you the quantity at this point because the plans are still, you know, we're not finalized with the plans. I would say we are trying to complete everything by the end of this year, so hopefully contain the bulk of it in Q4. As you may or may not be aware, under some of the accounting rules, there will likely be some spillover cost into 23. that you're not allowed to provide for as a restructuring reserve. We would certainly call those out separately next year so you guys can understand what that is. And when we get into our Q4 call, I think we'll be in a better position to talk specifically about those. But look for something between now and the end of the year that will give you a little bit better feel for what the actual quantum is. We're still finalizing that.
spk03: Understood. Okay. Thank you. And then on transitions, the pop-up transition in Q3 seems to make sense. Seems like some of that stuff is out of your control sometimes. But what are you expecting for startup and transition activity in Q4 versus Q3? And then maybe a little preview as to 2023 versus 2022 would be helpful too.
spk06: Yeah, I think for the balance of this year, there's very little activity other than kind of, I'm not sure if we're, we still might have a little bit from MX6, the Nordex Matamoros facility. And into 23, quite frankly, we see very few transitions and maybe one or, depending on timing, maybe one or two line startups. And also it'll depend on Iowa, right? If GE decides to accelerate, we could see some startup costs at the back half of next year. Otherwise, very few transitions next year and very few startups. Okay.
spk03: That makes sense. If I could squeeze one more in real quick, just on GE and Iowa. So when you guys start that up in 2024, are they going to take up 100% of the capacity in that facility or is there technically room to add more lines with them or someone else?
spk06: Well, our arrangement with them is that they have the rights to the full capacity. If at some point in time they choose not to use the full capacity, then there's an option for us to do something different with it. But we fully anticipate that they'll utilize that capacity.
spk03: Okay. Very helpful. Thank you, Bill.
spk06: Thanks, Greg. Good talking to you.
spk02: And your next question comes from the line of Pavel Molchanov with Raymond James. Your line is open.
spk07: Thanks for taking the question. First, kind of a high-level one. You've talked several calls in a row about the fact that in the wind market, there is not enough appreciation of the cost of electricity. And particularly given the European energy crisis, it certainly seems like power prices are escalating pretty sharply just about everywhere. Is that being reflected in the economics of the wind value chain in your mind?
spk06: I would say it's starting to. You know, you look at what some of, if you look at the ASPs from our customers, Over the last year, I know Vestas released yesterday, and they're up, you know, 30% year over year. But it's still not fully appreciated, Pavel, and I don't think we're seeing it yet. That's something that we need to, we as an industry need to focus on, and I think there is a lot of focus on it. But I still think, you know, once you get past the immediate crisis that we see in Europe specifically, depending on how it looks this winter, maybe we'll make more headway as we move through the winter and then into the spring.
spk07: Okay. For the Chinese facility that you're shutting down, have you looked at the option of keeping it open and supplying the domestic Chinese market even though everything in China is intensely price competitive?
spk06: Yeah, we've We're continuing to evaluate options for what we ultimately do with the facility, Pavel. So, you know, we've talked about the domestic Chinese market for a number of years. We've worked very hard to try to penetrate that market. But for a whole bunch of reasons that you're probably aware of, it's very difficult from a cost standpoint and a terms standpoint to come to an arrangement that would make sense. But again, it's not completely out of the picture, but we're continuing to evaluate our options for that facility. We still have a lease term there. Technically, we're still under a free rent period, if you will. So we'll continue to finalize that plan here over the next couple of months before the end of the year and go from there.
spk07: Okay. And just a point of clarification on that. which you said about 2023. So revenue is down, but should gross margin improve from 2022 levels?
spk06: You know, it actually could, Pavel. I mean, with some of the actions we may take in the fourth quarter of this year, it could help with what the results look like next year. Plus, You know, again, we're going to work very hard on the cost side of the equation. We talked about a $20 million structural cost out that we should see the benefit of that next year, along with our normal annual cost out target. So, you know, although we said profitability would be down, we're still not complete with our 2023 plans. And as we work through the balance of it, you know, the numbers – The numbers could be better from a gross margin percentage standpoint once it's all said and done. All right.
spk07: Thanks very much. You bet. Thanks, Pavel.
spk02: And as a brief reminder to all to register for a question, it is 1-4 on your telephone keypad. Your next question comes from the line of Justin Clare with Roth Capital Partners. Your line is open.
spk09: Yeah. Hi. Thanks for taking our questions.
spk05: You bet. Hey, Justin.
spk09: Hey. So I guess first off here, just related to the IRA, based on the conversations that you're having with customers, do you expect wind blades to be a key component in meeting domestic content requirements? Just wondering, based on discussions with customers, are they really focused on manufacturing blades within the U.S.? ? So any commentary there would be helpful.
spk06: Yeah, I'd say it's a little mixed. Again, it depends. It's a little bit OEM specific on what else they do in the U.S., and there still needs to be clarification around exactly what will count, you know, do foundations count, etc. So I think you know, part of the clarification everybody is waiting on, uh, will, will tell us better whether blades have to be in the U S or not. Um, clearly, um, um, it will, it will help. And plus the domestic content adder, not just the AMPC, you know, is, is, is a benefit if you can get both, which you would, obviously, if you got the AMPC, you'd get the domestic content. So, um, Again, whether they have to have it or not is one question and whether they want it is another. And I think most would want it clearly from an economic standpoint, but whether they have to have it to meet the, you know, the domestic content credit is a little bit OEM specific.
spk09: Right. Okay. And then, so I guess, have you had discussions on potentially opening greenfield facilities, you know, beyond Iowa? And if so, you know, when could a facility be opened if, if, you know, your customers wanted to go down that path?
spk06: Yeah. Um, we, we have had discussions, you know, it's a, it, you gotta find, you gotta, you know, identify where the right place is with the right rail access, et cetera. Um, it's probably a 24 month period from start to finish. Um, But, yeah, I mean, those discussions are ongoing. I mentioned in the prepared marks about strategic planning and some of that planning is around, you know, do we look at greenfield sites or not? So more to come on that, but that's certainly an option.
spk09: Okay, great. And then let me just one more. We haven't really touched on the facilities you have in India yet. I was wondering if you could get an update there. what kind of demand are you seeing for that part of your manufacturing base? And are there lines coming up for extension in India, either at the end of this year or next year? So just kind of a general update on the performance there.
spk06: So the performance has been outstanding. They have really – outperformed our expectations for this year. The team there has done a really, really nice job. We do have two lines of capacity available there. And I don't, Christian or Ryan, do we have anything coming up in the next couple years? Yeah, we don't have any lines that are due for extension there over the next few years.
spk09: Okay. Great. Thank you.
spk06: Yep. Thanks, Justin.
spk02: Your next question comes from the line of Kashi Harrison with Piper Sandler. Your line is open.
spk05: Hey, this is Luke on for Kashi. Most of our questions have been asked. One thing that hasn't really been discussed all that much yet is ASTs and kind of how to think about that for 23 and beyond typically. ASPs have gone up, you know, kind of a high single-digit range. So, curious if you have any commentary on what kind of trend to expect on that. ASPs for next year? Yeah, next year.
spk06: Hey, Cashie, I think we were up, I think, 5% this quarter. As we mentioned, we aren't complete with our plan for next year. But if you think about the inflationary impacts that we're seeing and you kind of look at the mix of blades that we'll be building next year versus this year, I would expect them, the ASPs to go up again next year. Can't give you an exact percentage, but would expect them to be, you know, to be rising again just because of mix as well as the inflationary impact on the blade price.
spk05: Okay, that's helpful. And then is there kind of like a rule of thumb, like if we have a view on blades continuing to get longer, kind of like what's the translation in longer blades is to ASP?
spk06: Now, that's really hard to do. It would make it a lot easier for us if it was easy, trust me. But it's really not just the length because the weight generally increases significantly. So it's more about weight than length in many cases. And the components, you know, whether, you know, whether it's a ultra high modulus glass or carbon or the different types of, of resins and stuff. So it really varies by, by OEM quite frankly, and then by the weight of the blade. So it's, it's a little hard to just extrapolate based on length.
spk05: Gotcha. Thank you. And so that's, that's all we had. Great. Thanks.
spk02: Your next question comes from the line of William Gripen with UPS.
spk01: All right, great. Thank you. Just a couple quick ones here. The first, you talked about as part of the restructuring some actions related to loss-making operations. Could you just detail what specifically, you know, what parts of the business you're referencing here?
spk06: Just, you know, we've got a couple of, or we've got one location where we're challenged from a blade manufacturing standpoint. And, again, taking actions as it relates to our transportation business. You know, what do we do different to turn that to profitability sooner rather than later? So it's really, you know, potential actions around that business as well as some of our more challenging locations from a blade standpoint.
spk01: Okay. So I guess on the transportation side, it sounds like not contemplating potentially shrinking that business. It's more about being more efficient. Is that fair?
spk06: Exactly. Yeah. Being more efficient and a better utilization of available capacity.
spk01: Got it. And then you went through this pretty quickly in your prepared remarks, but I just want to I guess, level set the contract extensions that you've announced relative to kind of what's expiring. And I think you had previously said 14 lines expiring at the end of 2022 and then 20 lines expiring at the end of 2023. So what do these agreements that you have, the potential agreements and the executed agreements, what does that give you visibility to actually extending relative to those figures?
spk06: So I would think that virtually all the ones from 23, with the exception of the China blades, the China, would be, yeah, well, let me get back to you on the exact number on what that looks like. But obviously, we extended the GE lines. That was nine of the 14. We extended Nordex, which was another four. So that's 13 of them, right? for this year. And then Enercon 2. And then Enercon 2. So we extended everything for this year effectively. And then for next year, it's a little bit different with the global framework that we're working on with Festus, where we'll go down in number of lines, but we'll shift some of that volume to some of our other geographies. So I think we said we'd have 47 lines of capacity excluding the China lines. So, we'd be down eight lines of capacity kind of year over year, if you will. Is that very helpful?
spk01: Yes.
spk06: Okay. Yep.
spk02: Appreciate it.
spk06: You bet.
spk02: And there are no further questions at this time. Please continue with your presentations or closing remarks.
spk06: Well, thank you. Excuse me. Thank you again, everybody, for your time today and continued interest in support of TPI. Thank you.
spk02: And all that does conclude the conference call for today. We thank you very much for your participation. You may now disconnect your lines.
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