Ameresco, Inc.

Thank you for standing by. My name is Luella and I will be your conference operator for today. At this time, I would like to welcome everyone to the Q3 2024 Amoresco, Inc. Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Leila Dillon, Senior Vice President of Marketing. Please go ahead.

Thank you, Luella, and good afternoon, everyone. We appreciate you joining us for today's call. Joining me here are George Sakolaris, MRSCO's Chairman, President, and Chief Executive Officer, Mark Chiplock, Executive Vice President, Chief Financial Officer, and Chief Accounting Officer, as well as two of our executives, Nicole Bulgarino and Lou Maltesos. Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. Today's earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials the safe harbor language on slide two of our supplemental information, and our SEC filings for discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures and additional information in our supplemental slides that were posted to our website. Please note that all comparisons that will be discussed today are on a year-over-year basis unless otherwise noted. I will now turn the call over to George.

George? Thank you, Leila, and good afternoon, everyone. Before I begin, I would like to draw everyone's attention to the important announcement we made today regarding further steps we have taken to optimize our corporate structure to drive continued profitable growth. Today, we announced the promotions of four key executives to the role of president, leading their respective groups. Mike Backus, as president of the Renewable Fuels. Nicole Balgarino as President of Federal and Utility Infrastructure. Lou Maldonado as President of Central and Western USA and Canada. And Peter Christakis as President of East USA, Greece, and Project Risk. Now on to our results. Maresco's diversified business model continued to yield impressive results. with over 40% growth in both revenue and adjusted EBITDA, driven by our continued focus on execution against a strong industry backdrop. We also brought an additional 42 megawatts of energy assets into operation. This brings our total amount to a record, 2,000 megawatts, already above our 200 megawatt guidance for the year. Our total project backlog grew by 22%, expanding our long-term contract visibility to $4.5 billion. We were also very successful with contract execution as our contracted project backlog grew an impressive 56% to a record $1.9 billion. Our diversified customer base BASE continues to show very strong demand for our renewables, energy efficiency, and resiliency offerings. We are at the forefront of the energy transition, as our customers value our ability to integrate a comprehensive portfolio of cleantech solutions in order to meet their unique goals. All will offer budget-neutral cost-saving solutions. Before I turn the call over, let me make a few comments about the recent election outcome. Reiterating what we have said many times in the past, we believe we are well insulated from changes in the administration as our core efficiency solutions stand on their own without relying on any federal incentives. The technologies that qualify for incentives, such as battery storage, continue to receive strong bipartisan support. Inverses probably remember that the Maresco has some of its best years during the last Trump administration. There was very strong support for our performance contracts, especially our resiliency solutions with both civilian, but more importantly, the federal military part of the government. and especially in a budget-constrained environment. Also, we have become much more diversified and resilient over the years. We have purposely grown our recurring energy asset and O&M profit streams, which now account for the majority of our annual adjusted EBITDA. Geographically, we are also much more diversified with operations in every state, Canada, the UK, and our growing continent European footprint. Due to the great value proposition of our business model, we believe we are very well positioned to thrive under any administration as we have demonstrated for over 25 years of doing business. Similar to the last call, I have asked two key members of our executive team, Lou Maltesers, to join us today. Lou will cover the drivers of the strengths we have been seeing in our core markets and discuss some of the internal changes we have made to execute more efficiently in the current operating environment. Nicole will discuss how the increasing demand for resiliency continues to be a key catalyst for our business. And now I would like to turn the call over to Lou. Lou?

Thanks, George, and good afternoon, everyone. I'm pleased to be here today to talk about what we see as the bedrock of our business, the energy efficiency, distributed generation, and cost savings project work. This work is focused on our traditional core customer base, what we call the mush market. That includes state and local governments, colleges and universities, K-12 school systems, and the health care sector. While the scale of the projects we execute for these customers tend to be smaller than our federal or utility projects, they represent an important part of Amarisco's business and future growth. These projects address our customers' critical need to upgrade their aging infrastructure and reduce their deferred maintenance. At the same time, they improve the performance and comfort of our customers' buildings in a sustainable, budget-neutral manner. Within these markets, the fundamental drivers are consistent. Our customers need to fix their buildings, but are often budget constrained. A typical Amoresco project will optimize, update, or replace their HVAC, lighting, and building envelope and provide smart building automation systems. In addition, our projects often go beyond energy efficiency to incorporate customer-driven needs like water efficiency, electric vehicle charging, and solar car parks as part of a complete facility solution. Importantly, these projects can generate operational cost savings from day one with no upfront capital. Amoresco is unique in our ability to integrate a comprehensive set of solutions for our customers as opposed to them having to use a wide range of different products and service providers. A great example of this is a project we recently completed for Columbia County, Oregon. The project involved an extensive renovation of the county's historic John Gumm buildings. The core technical work included HVAC, lighting, and envelope efficiency. But the project went beyond those traditional energy conservation measures to address critical building needs, including the preservation and repair of historic features, the installation of a new elevator to ensure accessibility, and irrigation and landscaping. Like many of the projects in our core market, the impact goes beyond the immediate benefits of the energy efficiency work and supports our customers' core missions. In this case, we were able to revitalize a historic building so that it can be used to provide expanded services and be a resource to the community. To accelerate our growth further, over the last 12 months, we've taken steps to realign the company to maximize our ability to serve our customers across our various geographies. It's a program we call One Amoresco. This has enabled us to lower our OPEX, improve efficiencies, share our technical strengths, and bolster our ability to serve national accounts. Together, we're strategically targeting projects in our core markets squarely within our technical competencies. This organizational realignment is already in place, and it's proving successful. Given the great demand for our services, our unique ability to integrate comprehensive solutions, and the changes we have made internally to best capitalize on these opportunities, I couldn't feel more excited about the future. We're executing well and are focused on the mission. Whether it be a leading-edge transformational energy project or the practical efficiency projects in our core markets, I know we have the right team in place to drive future growth. I'll now turn the call over to Nicole. Nicole?

Thank you, Lou, and good afternoon. Before I talk about resiliency in particular, I did want to follow up on George's comments about the election. As George mentioned, our federal group has had some of its best years during the last Trump administration, with very strong support for our budget-neutral infrastructure solution. In fact, during the previous Trump administration, the volume of ESPC contracts was approximately three times what we have seen during the Biden administration. We continue to be a leader of ESCO services to the federal government and look to continue to thrive under the new administration as we did during the last time he was in office. Let me now talk about the growing customer focus on resiliency, which is a very big focus on our federal, civilian, and military customers. Energy resiliency is increasingly vital across the federal utility and municipal markets to ensure a continuous and reliable power supply, particularly in the face of rising natural disasters, cyber threats, and aging infrastructure. For federal markets, energy resiliency is critical for national security, ensuring the uninterrupted operation of vital civilian and military services, and even for supporting our military personnel and their families. While expanding the use of intermittent renewable sources, renewable sources like wind and solar, utility and municipal markets also need firm, robust systems to prevent widespread outages and maintain services during extreme weather events. They require resilient energy solutions to support local communities, emergency services, essential public infrastructure, and grid reliability. By investing in energy resiliency, these sectors can enhance the ability to withstand and quickly recover from disruption, ensuring the safety and well-being of the population they serve. Over the years, Amoresco has built a core competency and excellent reputation around many of the important technologies which enable resiliency, including microgrids and battery energy storage systems. We have successfully won in executing on several large resiliency projects this year. By way of example, we are currently in construction of a 50-megawatt battery energy storage asset for Silicon Valley Power in California. This system will... efficiently store the surplus renewable electricity on California's grid during the day and discharge it during the afternoon ramp of electricity demand, supporting the renewable assets and providing resiliency during these transitional times. Also in California, we are building a 10 megawatt solar and 50 megawatt hour battery storage project at the Naval Weapons Station Seal Beach, which we will expect to come online in the first half of 2025. The project builds on the public-private partnership model successfully deployed at our Kapono Solar Facility in Hawaii. Here, Amoresco is utilizing the Navy's land as the host for wholesale power project with the utility San Jose Clean Energy, and in conjunction provides resiliency improvements to the Navy installation. Another example of a different kind of resiliency solution we have with our military customers is the projects that we are developing at Fort Johnson in Louisiana. Here we are installing geothermal infrastructure and upgrading 3,600 homes for our military families. The project will not only reduce the load from the local utility, but more importantly provides reliable, sustainable, and highly efficient energy exchange with an underground geothermal system. This is a 33 million resiliency infrastructure investment and is one of the projects we are executing in partnership with Corbius, a leader in the Department of Defense's military housing privatization initiative. In closing, we believe that resilience is a key driver across our markets. Given the depth of our experience, as well as our portfolio of these kinds of projects, we are well positioned to be a leading solution provider to address this critical infrastructure need. I will now turn the call over to Mark to comment on our financial performance and outlook. Mark.

Thank you, Nicole, and good afternoon. As George mentioned, we had another strong quarter of revenue and profit growth. Our total revenue grew 49% to over half a billion dollars as each of our four business lines experienced double-digit growth. Revenues from our projects business grew nearly 60%, reflecting our consistent focus on execution and conversion of our backlogs. project's business development activity remained robust, with our total backlog increasing 22% to $4.5 billion. And importantly, our contracted backlog increased 56% on the strength of nearly $600 million of awards converted into contracts. Energy asset revenue grew 33%, largely due to the greater number of operating assets compared to last year. We brought 42 megawatts of assets into operations this quarter, bringing our year-to-date ads to a record 209 megawatts. This already exceeds our full-year guidance, again, a result of strong execution. Our large and growing base of operating energy assets now stands at 715 megawatts. Our O&M business also had a very strong quarter, with revenue growing 25% as we continue to win more long-term O&M business. The O&M backlog now stands at over $1.4 billion, An increase of 15% were $180 million compared to a year ago. Gross margin of 15.4% was lower and reflects a larger contribution from lower margin projects, along with additional costs associated with the SCE projects as described during the previous quarter. Adjusted EBITDA grew 44% to a record $62.2 million, driven by our revenue growth, along with cost savings and operating leverage. Non-GAAP EPS was 32 cents, as the additional contribution from our revenue growth was largely offset by higher interest and depreciation expenses. Those interest costs also included a non-cash negative adjustment of $3.7 million to mark-to-market unhedged derivatives, compared to a $3 million favorable adjustment last year. As a reminder, the results for the third quarter last year also included a discrete tax benefit of $7.2 million related to a prior year Section 179D tax deduction. Turning to our balance sheet and cash flows, we ended the quarter with approximately $114 million in cash and corporate debt of approximately $273 million. our debt-to-EBITDA leverage ratio under our senior secure credit facility of 2.8 times continued to decline and remains below the covenant level of 3.5 times. Our energy asset debt advance rate remained at a conservative 74%. Importantly, we continue to believe our access to energy asset capital is excellent with many financing options available. as demonstrated by us having secured approximately $237 million in new project financing commitments in the quarters and received net proceeds of $57 million. Our cash flow continued to be positive, with adjusted cash flow from operations of approximately $34 million. Our eight-quarter rolling average adjusted cash from operations, which we believe best represents the cash conversion over our full implementation cycle, was $39 million. During the quarter, we reached an agreement with SCE on the substantial completion of two of the three battery energy storage system projects. We received approximately $110 million in milestone payments, net of a holdback of $52 million for potential liquidated damages, which are still in dispute. A portion of these proceeds was used to catch up on outstanding vendor payments, as well as to pay down a portion of our corporate revolver. Final acceptance milestone payments on these two projects of approximately $36 million will follow upon completion. The third project, which is expected to reach substantial completion in Q4, has two remaining milestone payments, totaling $55 million net of potential liquidated damages. Finally, let me spend a minute on our 2024 guidance. we are pleased to be reaffirming our full-year guidance, reflecting revenue and adjusted EBITDA growth of 27% and 35%, respectively, at the midpoints, representing what we believe will be a very strong finish to a solid year of performance. While we expect higher interest and other expenses in the range of $70 million to $75 million, we are also maintaining our non-GAAP EPS guidance, largely driven by our estimated annual tax benefit rate. Now I'd like to turn the call back over to George for closing comments.

Thank you, Mark. MRSCO has excellent momentum as we head into the final quarter of 2024. We believe the strong results will carry into the new year, given the growth in our contracted backlog, our energy assets, and O&M contracts. The broad range of impactful solutions we provide She has never been in greater demand by governments, institutions, utilities, and corporations around the world. In closing, I would like to once again thank our employees, customers, and stockholders for their continued support. Operator, we would like to open the call to questions now.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of George Genericus with Canaccord Genuity. Please go ahead.

Hi, good afternoon, everyone. Thank you for taking my questions. Hi, George.

Hi, George.

Maybe to just ask about the changes in Washington, specifically around the potential impact on your R&G business. Just help us kind of think through the pluses and minuses to biofuel mandates. And also, last quarter you announced a supply agreement with a California-based natural gas utility. Anything else you can point us to that helps insulate any volatility in RIN prices? Thank you.

Yeah, good question, George. And we have Mike here, and I think we'll give some questions. good color to that particular question. But we think that that business is strong and we will continue to be strong.

George, I mean, I think to answer the last question on the utility, we're waiting now for the PEC approval. So the staff is going through the process to make the recommendations of commissioners. And we continue to see a big uptick in the voluntary segment with many utilities issuing RFPs for similar requests with longer terms as well. So that market remains pretty active. As far as the change in administration, you know, I mean, a couple things to think about. Much has changed in the last four years in our space. We have big oilers invested billions into the space, into the industry. There are many tax incentives that you're aware of that actually would benefit red states that we expect will stay in place. The Farm Bill, and remember, the RFS program is really a farm bill at the end of the day. The Farm Bill that came out big for President-elect Trump and Vance, and remember, Vance is someone from the rural roots and has great support from the Farm Bureau. I'd also point to the fact that Elon Musk invested almost $120 billion into Trump's campaign, and he does stand the most in gain if the even pathway should open up. One of the things that a lot of folks haven't been watching either, thinking about, is the Soya Lawson waiver credit, right? This year, we didn't have it, but it can come back into effect next year. And remember how that works. It's inversely proportional to fuel costs. So if gasoline costs actually go down, the waiver credit goes up and creates a much more robust ceiling for us. And I think Trump has been very vocal about opening the spigots and trying to drive costs below $2 per gallon for gas, which will only help our market. You know, I think overall, when you think about the incentives and everything else, with hydrogen as well. I think the market remains strong, and that's reflective in what we see in the trades. The trades the last couple of days have been pretty steady at about 3 to 3.05 around. Thank you.

Your next question comes from the line of Pavel Molchanov with Raymond James. Please go ahead.

Yeah, thanks for taking the question. Follow up on the election comments. If you go back to Trump's first term, were there any differences in the federal contracting landscape in terms of kind of demand patterns or, you know, the contract structures compared to the last four years? Or has it basically been status quo?

Yeah, I will let Nicole add a little bit more color to that, but during the first Trump years, the performance contracting business was very, very strong. Because one of the things, I remember talking to Speaker Boehner, and we were lobbying for something else, and he said, you know, the business, your performance contracts, the big guy really likes them, but some of the sellers from the roof, he's not that excited about it. No, actually, you know, the number that we use, that we did three times as many contracts under the Trump administration as we did under Biden. And one of the reasons, but I will let Nicole explain. One of the reasons behind it is because some of the programs, the incentives that they provided, even in the Obama administration or the Biden, many of the customers, they wait to see how much money they can get as an incentive before they sign the contract. So it slows down the process, Nicole.

Now, just to add to that, I think the other, what we saw in Trump's administration was the alignment with the military. So our work, a lot of good work that we did for the Department of Defense under the performance contracting to do infrastructure that you've got as a tool to do a lot of infrastructure improvements. We're, by administration, still doing some of that, but not near the volume of it. And a lot of focus on farm power, cogeneration facilities we had under those, that Trump administration under those contracts. So just a difference in the parts of the federal business that we see in between the two.

Let me follow up on the kind of international side of things. I saw several announcements recently about projects in Greece. Is it safe to say that Greece is now on par with the UK as basically your main operating areas in Europe?

Yes, I mean, in Greece, because we have a good partnership with Sunel, and people know us. And what happened there, and we're doing an excellent job, not for the Greek government or the local utility, but for many of the funds that invest in solar farms in Greece. And because we have the reputation of executing, and they know us, and we teamed up with them, and we're getting great traction in that particular part of the world. And that's why I appointed Peter Christakis, who has been with us for a long, long time, as president of Greece in order to monitor the performance of those projects. But don't forget Italy. Italy, we are doing very well, and we are expanding that particular market as well.

Thanks very much.

And that's why I brought her up. You know, the fact that we have the Trump administration and things might change in the United States, it's a good diversification a little bit. Nothing's going to happen to the Europeans. There's more and more demand.

Your next question comes from the line of Stephen Gingaro with Stifel. Please go ahead.

Good afternoon, everybody. Hi there. Hi. So, I mean, can you help us just, and I think part of it's the energy asset deployments you had in the quarter, but can you just help us sort of bridge the third quarter to the fourth quarter? Because you're kind of implying, I think about 81, 82 million of EBITDA, which would be obviously a really healthy quarter. Can you just kind of help us understand the moving pieces?

Sure. Yeah, Steve, this is Mark. I mean, I think we're certainly expecting a strong revenue quarter in Q4. You know, I think we've got good visibility to, you know, not only where the revenue is coming from, you know, the heavy part of that's coming from contracted revenue, but the mix of that revenue we expect to have, you know, a better gross margin profile. So, EBITDA margin-wise, we should expect to see, you know, a better EBITDA margin in Q4, and I think that's really – you know, that part of it, you know, for the EBITDA bridge, and then, you know, obviously the EPS bridge is tied largely to the tax benefit that we're expecting at the end of the year.

Male Speaker And is that margin comment applicable to projects and assets?

Yeah, I mean, I think we've seen some pretty steady margins on the assets. It's really more focused on the projects because we've seen, you know, certainly in the last couple of quarters, project margins be a bit lower, you know, just based on a combination. We've talked about the SEC costs, but also just some larger, more design-build-type projects that carry a lower margin profile. So, yeah, I think, again, mix of the project stuff will also help that improved margin.

Okay, thanks. And just as a follow-up to that, when you – When you highlight in a release kind of the next 12 months of project backlog that you call out as part of the press release, any comments on what that margin profile looks like relative to what you've kind of registered in projects over the last few quarters? Just trying to get kind of a glimpse into 25.

Yeah, no, it's a good question. I expect the project margins, the underlying project margins to be pretty consistent with Again, you have to kind of go back when you kind of normalize RSE. We've seen project margins maintain a pretty steady level. The one thing that is pulling it down a bit is as we're adding more revenue from Europe. That does carry right now a bit lower margin profile. The good news is that we're actually starting to see more projects in the European pipeline that are getting higher margins. But the projects coming out of the backlog, again, I'd expect, you know, without Europe, fairly steady from what we've seen. And then, you know, then the mix of Europe, we'll pull that down just a little bit.

Great. Thank you, Mark.

You got it.

Your next question comes from the line of Eric Stein with Craig Helen Capital Group. Please go ahead.

Hello, this is Luke on for Eric. We've got a couple questions here for you. First, looking at the mix between utility and transportation in the R&G business, what's your outlook for growth with utility customers going forward, and where do you see that mix trending long-term? Thanks.

Mike, go ahead. Utility customer.

Are you talking about utility customer in terms of the voluntary market?

Yeah. Okay. Yeah, exactly. Okay.

Well, look, what I would tell you is that the voluntary market is picking up in a big way. I think that's really the long-term growth of the addressable market. We are seeing some gas starting to leave the country as well, which is freeing up some capacity in the RFS program. I think long-term, you'll see at some point the voluntary segment will surpass the demand in the transportation sector.

Perfect. That's helpful. And just one more quick follow-up for us here. So touching on the long-term partnership with Bristol, do you see opportunities to offer full service to other municipalities, and are you seeing any other competitors really pursue similar arrangements in this space? Thanks.

No question about it. There are other competitors that they are pursuing in that space, but since we got the first one, we have a leg up on them. Yes, we are talking to several other series in the UK and in other parts of Europe. And we envision that things will happen. And actually, we have hired... a couple of consultants in Europe that will help us expedite that particular market.

Thank you. That's it for us.

Your next question comes from the line of Noah Kay from Oppenheimer and Company. Please go ahead.

Thanks for taking the questions. I wanted to ask about the leadership structure that you highlighted at the beginning, George, You know, all folks that have been with the company a long time, you know, lots of experience here, so happy for all of them. But just help us understand, what does this do or where should this maybe affect a change in terms of the way the business is run going forward? Is it around, you know, capital allocation, project selection? Like, how should we think about this change impacting the business going forward?

It's... No question about it, project selection as well as investments, how we invest our dollars, procurement, otherwise consolidate it or do it all units together, and give the people a little bit more responsibility and visibility around the company. For example, when they call taking over the utility infrastructure, And being the president, he's been there for a long time. The same with Lou. Lou is basically now managing the better part of the United States and Canada. He has broad visibility, and then the same happens with Peter. But one of the things that they are doing, all the senior managers now along with Mike, they work very, very, very well together. So basically not only procurement, but how we execute contracts and so on. We standardize across the organization, and thereby one team helps the other, and they share resources on the technology side and so on. And the project management, it helps a lot, saving costs.

That's helpful, George. And then on that subject of capital allocation in particular, you know, I think it's the company talked much in previous quarters about maybe going a little bit more capital light on some of the energy asset development other than RNG. You know, now that you're seeing leverage, consolidated leverage decline, just talk a little bit about the philosophy around, you know, capex and what you're keeping on the balance sheet. How are you going to manage the development?

Very good question. Very, very good question. Look, we have said before that we want to grow the asset base by about 20%, you know, about 20%, and we're doing 100 to 110 or 50 megawatts per year on average over four or five years. And we will continue to do that. We just don't want to overstress our balance sheet. And the other thing that we get some lower, underwrite some what we call lower than our cost of capital projects, and we monetize those because it's a very good business for us. There are third parties out there that they will get those projects. So it generates very good cash flow for us. And we have developed, like I said before, a great team. And basically we developed many more projects than we can hold in our balance sheet. And so we monetize them. I think it's a great, great business. It's helping a lot.

That makes a lot of sense. Thanks for taking the questions.

Thanks, Noah.

Thank you.

Your next question comes from the line of Sam Kussman with William Blair. Please go ahead.

Hey, thanks for taking our questions here. Hi. I guess to start, relating to the election and your project business, Do you ever see federal contracts that are already funded ever get delayed or the bidding process sort of paused due to changes in the administration? I guess I'm wondering if it can be kind of common for sort of a slowdown in federal projects that, you know, the GSA or other agencies to occur, at least for a short time, given kind of the noise associated with the presidential transition.

The first part of that would be that there actually will be a push to get projects done in this quarter four to be able to accomplish goals of this administration. And wouldn't normally expect there to be a slowdown into the next administration. I mean, there'll be time to adjust messaging and looking at the projects that they put out. But there's an active pipeline now and a lot of projects that we have in their construction and in the awarded that we should convert this year. and then continue to be able to convert in the 2025 year. Male Speaker 1 Got it.

That's helpful. I guess what can you explain here? Go ahead.

Female Speaker 1 I was going to say, and also keep in mind, too, that most of the stuff that we're doing in the federal government is not budget. I mean, it's budget neutral, and that is performance contracting. So, it's not depending on capital allocations from the federal government. So, that makes a big difference in bipartisan supported.

Got it. Thanks for that. Yes, maybe more related now to your supply chain, too. I think you mentioned, maybe, George, in previous quarters that your supply chain and labor were kind of constraints that hadn't yet improved, but were sort of stabilized, which made it possible to land around. I'm curious how you'd characterize the market. Yeah, how would you characterize that today in Dallas?

It has stabilized a little bit, but we still find bottlenecks here and there in certain parts of the country, whether it's labor. But one of the biggest constraints that we have right now is finding transformers for some of our battery storage projects and solar plants and so on. And the other one, and that's why it's very hard sometimes to make estimates how many megawatts we'll put online, interconnecting the utilities, actually.

But it's better than what it was before. Got it. Appreciate the cover there.

Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Ben Calo with Baird.

Please go ahead.

Good evening. Thanks for taking my question.

Just kind of following up on that last point, George, you made about interconnection and taking longer. As we look into next year, how comfortable are you guys with that 150 megawatts or thereabouts of assets coming online?

No, no. Yeah, the 150 is the average. We're going to put this year, by the time we get done, we have one more RNG plan coming online. That's about 16 megawatts and probably another – 5, 10 to 15 megawatts of solar. And depending on making sure that the utility interconnects. Next year, we are looking for around 100. I think it's a better estimate. Maybe we'll go up to 120 based on where we are.

Okay.

Thank you for that. But we have, you know, almost 600 megawatts in development. And we'll see how many we end up putting on service. But For the time being, because we did so much this year, I would say next year it will be in the 100, 120 range.

Thank you. And then just, you know, back to, you know, kind of the uncertainty in IRA. You answered this on the government side a little bit, but does it impact any of your customer orders or projects? And then for your own assets, is there any kind of, you know, slowdown in a particular asset class, you know, as you await for change or is it kind of just all speed ahead? Thank you.

I mean, look, you know, look at our business. We have the project business, and I don't see any issue associated with any incentives associated with the federal government that we were waiting for. And then on the assets, on the ITC, the key issue, but I don't think that, especially on the batteries, but I don't think that's going to go away because it's a great bipartisan support. And And the other one, don't forget, the IRA is a law that will become the act of Congress right now. And it's going to be very hard to reverse it. There might be some slight modifications. One of the things that President-elect has pointed out, some of the subsidies for the electric vehicles. Other than that, I don't see any issues. Mike, do you want to add any more?

No, and I would suggest that some of the benefits go, again, to the red states. Yeah. That have big support there, so I don't see much material. And we're not counting a lot of that stuff at the beginning anyways.

Thank you, guys. I appreciate it. Yep.

Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of William Gripen with UBS Financial. Please go ahead.

Good evening. Thanks very much. I just wanted to come back to the ITC point here quickly. We've heard of some larger utility scale focused developers actually looking to safe harbor equipment just as a matter of prudence. I hear your point on the ITC. tend to agree with you, it's likely to stay. It's been a fairly durable policy through multiple administrations. But is that something you might look to do, just again, as a matter of prudence here, into 2025? I think one of the...

We will save some equipment or some of the RNG plants. Definitely, we will do that, too. And some of the solar plants, because they are smaller, we might do a couple, but not that much. Because I don't think the ITC for solar is going anywhere anytime soon. The other thing I want to point out, and because President-elect has come against the offshore wind farms, if you think what the previous administration was planning, 30,000 megawatts of wind farms of the offshore, if those things don't happen or half of them, it will play to our market because we are focusing much more on the 5 to 50 megawatt solar plants And they are well distributed across the various states. They don't require as much transmission, so they are much more resilient and better. And then when you combine it with batteries storage, it's much lower risk profile. That provides much better resiliency. And because people have come, they work in the solar group, they have talked to me. So I told them, at the end of the day, a year from now, we might be busier than we are today.

Got it. Appreciate that. And then just on the on the R&G side, you know, some of your peers have both public and private have announced ITC sales related to their R&G CapEx. Is that something that you're maybe getting a little bit closer to doing?

Yeah, we have to start looking into that because we have great, great potential. And I had Mike put some numbers together. And you guys can do your own arithmetic. But we are looking into it, and we'll see where it goes.

Appreciate it. Thanks very much. Thanks, Wilk.

Seeing as we do not have any more questions at this time, we have come to the end of the question and answer session. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now