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spk02: Hello everyone and welcome to the Energia Q3 conference call and webcast 2021. My name is Daisy and I will be coordinating today's call. You will have the opportunity to register a question. If you would like to ask a question, please press star followed by one on your telephone keypad. I will now hand over to your host, Darlene Webb, Investor Relations from Energia to begin. So Darlene, please go ahead.
spk00: Thank you very much, Daisy. Thank you and good morning, everyone. This call will discuss our earnings for the third quarter ended September 30, 2021. If you're following along on our slide deck, I'll be directing my comments to slides one through three. Today, I'm joined by Dr. Andrew Benadek, Energia's founder, board chairman, and CEO. Dr. Yaneth Sherson, Energia's chief operating officer, and Mr. Hani Casey, Energia's chief financial officer. Before beginning our formal remarks, we would like to refer listeners to slide two of the presentation, which contains a caution on forward-looking information and a note on the use of non-IFRS measures. Listeners are reminded that today's discussion may contain forward-looking statements that reflect current views with respect to future events. And such statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in these forward-looking statements. and AGEA doesn't undertake to update any forward-looking statements, except as may be required by applicable laws. Listeners are urged to review the full discussion of risk factors in the company's prospectus, which is filed with Canadian securities regulators. Lastly, while this conference call is open to the public and for the sake of brevity, questions will be prioritized for analysts. And with that, I turn the call over to Andrew.
spk05: Thank you very much, Darlene. First, I want to apologize to all of you for releasing a press release, a second one so shortly after the first. We, as a general rule, don't like to release information until it's done. And it just so happened that this particular agreement has had many delays. uh legal issues just you know no fundamental problem but just a lot of legalese so we weren't sure if it would close or wouldn't as it happens it closed this afternoon in europe european time so we released it immediately because it's something that you should know but expecting that it would close we have alerted you in the press release anyway Anyway, bottom line, we weren't trying to design a second press release so quickly, but we're obligated to release when things happen. In terms of the quarter, we've had, I'm on slide three now, we've had three important, actually in terms of the time since we had the last press conference, we've had three important boos starting up. One of these is in Italy, and that's the only one that happened before the end of the quarter. The two additional ones that we're listing here have happened since the quarter. And we had announced the Denmark one, We have one in Italy that we are announcing. It's called Ambiente Risorcia in Italy. And then we had one recently closed in North Carolina. The increase in revenue backlog is referring strictly to the quarter. So the other two are not in this backlog number. They will be at the end of the year. The revenue actually is lower than last year, which is obviously not expected for a growth company. However, it's important to remember that this was last year's highest quarter for some reason, the third quarter. As I mentioned in the press release, normally it's the fourth quarter and will be again this year for us. And we still believe that we will maintain the growth roughly in line with analysts' expectations. Overall, for the nine months, we are growing the company and we are continuing with improving our profitability. And you can see that shows up on the EBITDA numbers for the nine months. I'm also grateful that there are two more analysts now covering our company. So we're mentioning the five that have been doing a really good job covering our company for the shareholders. And going on the next slide, You know, the good thing about our company is that we try to minimize risk of any one region, and that's turning out well. So Europe continues to be very strong and moving fast, as you see from these announcements. The equity market is a little slower than we expected. It is coming. Enforcement starts next year across the states. And we expect that California will be a very important market for us, a great opportunity, and we are not at all dampening our interest in that market. But short-term, you go where the immediate enforcement and incentives and permits that are available, and that's Europe right now. across the world in america and in europe the world as you saw this last week even this week in glasgow the world is very concerned as it should be about climate change and and we see incentives continuing to be there or even increase at this point i'll hand it over to honey our chief financial officer thank you andrew
spk03: And good morning, everyone, and thank you for joining. On this slide five that Andrew was talking about, during the quarter, our revenue backlog has increased from $3.2 to $3.5 billion. This increase of $259 million, which represents an 8% growth quarter over quarter and a 26% year over year increase, was primarily driven by the Ambiente acquisition that Andrew mentioned, which is a new build-on operate project in Italy. By the way, this project is sometimes also referred to as Maserati. Moving on to slide six, at $33.8 million, the Q3 revenues are 20% lower than the same quarter in 2020. This is due to normal quarterly variations and lumpiness, Because projects move between various stages of the execution cycle, and it depends on when that happens, it drives the revenues, you know, the movement in the revenue between the quarters. The nine-month period revenues are at $103.4 million, and that's compared to $88.1 million in the same period of the prior year. This represents an increase of 17%. And this growth rate in the year-to-date revenues, which was driven mainly by capital savings activities in EMEA and North America, is not as high as it is now expected to be for the fiscal year 2021. On the realtor side, the California market is continuing to improve, and feedstock supply continues to increase, and food capacity is anticipated to be reached towards the end of 2022. The gross margin has improved to 25% in the quarter and 24% year-to-date, and that's an increase from 19% and 21% respectively. This increase is mostly due again to the project mix. Our profitability is also up with an adjusted EBITDA totaling $5.1 million year-to-date and a significant year-over-year increase from the $1.5 million for that period, for the nine-month period in 2020. Mostly, the expected growth in revenue and EBITDA from 2020 to 2023 is not expected to be linear. And that's because important portions of the growth is expected to occur in 2022 and 2023 as BOO projects start going online. I pass it on now to Yaniv.
spk07: Thank you, Hani. Good morning, everybody. I'm on slide seven, PDF, page seven as well. Our business continues to transition, accelerating into recurring build-on-operate revenue, and we continue to grow our capital sales for short-term revenue and deployment of projects with recurring revenues from a growing service and operations business. And our build-on-operate business, as you've heard, has been growing substantially, particularly in Europe. On slide eight, focusing on our capital sales, Our year to date, as Connie mentioned, has increased by 17% despite a quarter that is lower than this time last year. This is primarily due to the transitional quarter where capital projects are winding down while new capital projects are ramping up. So we expect a strong growth in our capitals business in Q4. And jumping over to our focus on North America and EMEA, North American revenue in the capital has made an increase of over 11% compared to this quarter last year, primarily driven by the capital project to our SoCal Biomethane, which is a build-on-operate in Southern California. And EMEA has seen strong capital growth, 35% compared to this time last year, primarily driven by the acceleration of the build-on-operate portfolio in Italy. Italian government continues to have strong R&G incentives, driving sustainable growth in our capital business into 2022. And importantly, with the recent acquisition in Denmark, we see an opportunity to enter into an untapped market in Denmark and northern Europe, particularly the Scandinavian regions. Moving to slide nine, focusing on the service and build and operate business, we've seen strong growth in our service business, primarily due to the transition of two capital projects that have now entered into an operational phase. And our service capabilities continues to grow, particularly in North America, where we are adding personnel, increasing our warehouse size and capabilities. mainly in order to service a number of service agreements that are coming in imminently that are in late-stage development. So we're gearing up to be ready for those. On the build-on-operate front, we see a favorable outlook. The revenue is anticipated to grow substantially. primarily in the immediate term from the ramp-up of Rialto, the SoCal Biomethane project coming online, and the Italian portfolio, multiple projects coming online as well, end of this year and into next. Globally speaking, we have a visibility of over $200 million anticipated for investment in construction of the European and North American build-on-operate facilities. That's through the end of this year and into next year. Looking at slide 10, globally at the build and operate business, we see growth, as Andrew mentioned, in our acquisition in Denmark and recently in Italy. We're looking at a consolidated CapEx now of just over $700 million, more than 40% since the time of our IPO, and a run rate EBITDA of nearly $140 million. Some of the factors that are driving this is the acquisition of our Danish subsidiary to build an operating facility in Toner, Denmark. And this is a significant flagship for two primary reasons. It's a mega facility, like multiple of our large facilities in the world, 40% larger than our Rialto flagship. And this is also going to be opening up a significant market into northern Europe and a footprint, a very big footprint in Scandinavia. In North America, the Rialto facility is continuing to ramp up. Seed stock is increasing, although slower than anticipated due to the delay in ramp-up and roll-out of organics collection and implementation from COVID. But we see the restrictions easing and commercial volumes in the waste sector are starting to grow. New acquisition for a large 5 megawatt build-on-operate facility in North Carolina. This is benefiting from a long-term power purchase agreement with Duke for power sales as well as thermal recs, and importantly, establishes a footprint in a key market segment, North Carolina particularly, where there are incentives and drivers to deal with animal waste. And finally, our Victor Valley Soca Pao methane, also referred to, build-on-operate, did successfully close a $13 million debt facility and the facility to get online at the end of this year. And finally, on the Italian front, as Andrew mentioned, the acquisition of Ambiente, as well as six build-on-operate assets, are in execution. They're expected to ramp up and substantially contribute to a significant gas production and revenue generation this year and into next year. I'm honing in on a few projects. We'll start on slide 11. In Toner, Denmark, this is the facility, one of the largest in the world, and as we said, 40% larger than Rialto. You can see some of the financial metrics and the size of the throughput here. Moving to slide 12, the recent acquisition of the Charlotte facility in North Carolina, processing mostly food waste and animal-related waste streams, generating power, one of the largest on the eastern front in North America and a significant footprint into North Carolina. You can see some of the financial statistics here. And as a general course, we round to general numbers here. So these are close but not exact. Moving on to slide 13, you can see an image here for the Ambiente, a recent acquisition in Italy facility that's converting food and green waste to RNG. Typical size as our other portfolio, and this is now contributing to six of the loan operates in Italy that are in execution. And with that, on slide 14, I will hand it over.
spk05: We are ready for questions.
spk02: Of course. If anyone would like to register a question, please press star followed by 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by 2. When preparing to ask your question, please ensure you are unmuted locally. So that's star followed by 1 on your telephone keypad to register a question. Our first question comes from Aaron. Aaron, your line is open. Please go ahead.
spk07: Hey, good morning, all. Thanks for taking my questions. I'm hoping to learn a bit more about your expectations around Rialto and the shape of potential feedstock volume growth. And if you don't want to get into specifics, could you maybe just outline some of the key variables, like the timing of the second Forex installation and some other potential factors that may help us? model it out from a timeline perspective? Absolutely. This is Yaniv speaking. So, there's three steps, three phases as we see. Currently, the easing from restrictions and rolling out the organic collection and implementation is improving. this quarter in Los Angeles. So we're seeing more commercial businesses slowly coming back open and customers signing up now that the haulers can engage. So this has been a positive movement for the observation in increasing in tonnage, roughly 50% increase that has occurred month over month. Secondly, there's 1383 statewide regulation coming into effect next year. The law is officially in effect January of 2022, so we envisioned it to be an additional driver that will be encouraging more signing up and haulers to collect. And thirdly, as you mentioned, we have another OREX line coming online. Right now, it's slated for end of Q1. Some of this is dependent on our customers' timeline for getting final permits for their buildings. But this OREX line, as I said, end of Q1 next year, will be contributing sort of a stepwise function increase in feedstock to Rialto. Um, as mentioned by, we anticipate that the combination of these factors, uh, uh, contribute to reaching capacity towards the end of 22. Understood. And then maybe a follow up on that as it relates to the, the, um, LCFS certification, does that imply that this project doesn't get a CI value until early 2023? The CI can be obtained sooner, so in order for application to go through, it doesn't need to be at full capacity. So there's a two-step process that will likely be pursued with a temporary pathway followed by a permanent, but it's likely to be 9 to 12 months for the permanent CI to be in place. But gas sales should be realized sooner. Understood. And then as it relates to the guidance, you've maintained it for 2022, obviously, you know, a bit of movement in Rialto. What are kind of the other variables that give you confidence in the 2022 revenue and EBITDA guidance?
spk05: I'll try to answer that. Sorry? Yeah, go ahead, Andrew. Yeah. Yeah. so basically um what gives us confidence in the 22 guidance is that a european business is growing as you can see faster than we originally modeled and that should offset some of the delays in in realto and We see continuing activity also on capital equipment elsewhere that potentially beyond what we expected when we went public. I do want to say that everything we're doing is pretty much in line with what we set out to do. You see progress. We're going to have variations quarter to quarter. This is the nature of the kind of business we're in. but we continue to be in the right business in the right places, and things are unfolding, I believe, very much in line with what we want to do, and we'll be hopefully accelerating beyond what we assumed we could do. And in that context, having this additional mezzanine financing will extend our equity, so that we can take advantage of our strong financial position.
spk07: Understood. Last question for me, and forgive me as I haven't had a ton of time to dig through the disclosures, so I may have missed it, but the North Carolina acquisition, I noticed in the disclosures that the equity component will be nil and that you'll be taking on liabilities. So I assume that you know, the prior owners of this asset may not have been able to make a go of it. So can you maybe, you know, share with us what you bring to the table, what capital upgrades you need to make, if any, and, you know, any additional details on, you know, the project and the pricing scheme or whatever you feel you can share. Yeah. So the, the, um, The facility has been running at partial capacity, mostly because of technical issues in the plant that the prior owners didn't have the expertise to fully manage. I see an opportunity here because it's in a bright zone for both food waste and animal waste with a very strong utility leader, offtake partner, Duke, that's taking a leadership role through procurement of renewable natural gas through both gas agreements and power purchase agreements. And with our technical capability and technology, we see an opportunity here with relatively modest investment to upgrade the plant so that it technically runs reliably, which was a symptom from before of challenge. But more importantly, also benefit from the synergy. We're building large plants already in the States. and so have an existing footprint as well as existing operations and vertical integration that few have. So the vertical integration of our technology to improve the plant as well as operate the plant with the know-how is really what this plant was missing from before, sort of bifurcation across multiple parties.
spk05: Aaron, if I can add a word to this. and also Rhode Island just illustrate that there is something called an RNG gold digging. A lot of people want to get in on it, but it's not as simple as wind and solar. You really do have to understand process engineering, and you have to have the technology and the know-how. And we are the only people on the planet that can go from making a simple product, a single technology, to vertically integrate it, to optimize the process, operate it, and finance it. So we bring enormous power to this industry to get it right. Understood. Thanks for the time.
spk07: I'll turn it over.
spk02: Thank you very much. Our next question comes from Morgan Reid from Barclays. Morgan, your line is open. Please go ahead.
spk01: Hi, everyone. Thank you for taking my question for maybe something from Barclays. Just kind of going back to the Rialto plant, could you maybe just elaborate on the sort of sources of the delay for reaching the full capacity now at the end of this year? And then maybe just why that's happening. It sounds like it might be just the commercial fee stop taking longer than you expected just last quarter. Just any other detail you can offer that would be helpful.
spk07: Sure. So the COVID had a very adverse impact last year for two reasons. One is commercial sector is the main source of the feedstock. Commercial sector solid waste is the main source of feedstock for the Rialto facility. It's servicing about half of the city of Los Angeles commercial franchise, which is the largest commercial franchise in California. The shutdown of the commercial sector stymied the ability for reduced tonnages, food waste tonnages primarily. Secondarily, this franchise was being rolled out with signing up customers and getting routes implemented. during the time of COVID when things were shut down. So there was an inability for haulers to sign up to customers and get routes rolled out. So this is the source of the delay, and it's been a sluggish to rebound. With that said, and then second wave of COVID hits again and another closure, but what we've seen this quarter is accounts signing up, businesses reopening at a steady pace, and some normalcy, some return to normalcy with folks eating out again and returning to offices. And so This is helping increase the tonnages that we're seeing this quarter with increase. Secondarily, the implementation and enforcement is following, and there's been, you know, the city has been delaying enforcement because of the COVID pandemic. So we're seeing, sorry, just to conclude the thought, enforcement is a second piece that is following, and it's going to be overlaid much stronger next year, early next year with COVID. State Bill SB 1383, which officially takes into effect.
spk01: Great. That's really helpful. And just following up really quickly there, with SB 1383 and the local government kind of offering a little bit more leeway for because of the COVID delays and everything, is there any likelihood that the 1383 enforcement will also be delayed or maybe like softer enforcement next year as a consequence of these commercial waste delays?
spk07: The messaging from CalRecycle has been, which is all publicly available, enforcement's on track and nothing's changing. And so our expectation is, pursuant to what the power cycle is saying, 1383 is starting January of 2022, and enforcement's on track.
spk01: That's great to hear. Thank you. And then just kind of going back to the – just kind of cleaning up something really quickly from your – release of your third quarter numbers from 2020 it looks like you had a large capital sale um could you just maybe talk about what that segment looks like without that project or maybe just like the size of that project on a revenue and a gross profit basis just to get a because i know you talked about that being a seasonally much stronger quarter than you had expected so just trying to get a better sense for what the normal historical profile of the business looks like or maybe what we can expect like sans the growth that's expected here going forward
spk07: Surehani, do you want to take that one?
spk03: Sure. So, Morgan, for clarity, you're talking about the capital saving through 3Q 2020. How comes it was larger than other quarters?
spk01: Yeah, and just maybe what 3Q 2020 would have looked like for capital sales on a revenue and gross profit basis without that large capital sale.
spk03: I see. The level of revenues in 2020 in the first quarter was about $23 million. The second quarter was about $22 million. And the third quarter ended up being at $42.5 million, which was a significant increase over the prior two quarters. And Q4, I think, if I'm not mistaken, ended up around $40 million. So it was part of the growth. It just... It has happened, you know, the revenues coming from some of these projects happened in Q3 sooner than, you know, rather than building up over the fourth quarter, which is normally our typical high revenue quarter in the year. So without that, I would say it would have been probably maybe 30 million revenues and around the same gross margin.
spk01: Oh, that's really helpful. Thank you. And then just one other question on seasonality. For the capital sales business, you kind of reiterated that you're expecting fourth quarter this year to sort of return to that more normalized seasonal profile. Could you maybe just quantify your expectations for what that weighting is? Is that going to be like 30% or 40% bigger than what you saw this quarter? Just kind of also weighing that against the sort of tapering of the capital sales segment as you continue your transition towards the BOO.
spk03: It's, you know, the post-quarter is probably going to be taking us back in terms of the overall growth for the year to more in the 20% range over the, you know, versus the 17% that we're seeing now.
spk01: Great. And the 20% growth being sequential or year-over-year? Sorry, I didn't quite catch the last part of what you were saying.
spk03: Right. So if you look at the $40 million that we have in this – the $33 million that we have this quarter is probably going to see a growth of – a significant growth versus – Q4 is going to see a significant growth over the 33 million to take the whole year over the 17% growth that we have seen yesterday.
spk01: Got it. Thank you. That's all for me. I appreciate your help.
spk02: Thank you very much. Our next question comes from Rupert Mehra from National Bank. Rupert, your line is open. Please go ahead.
spk04: Thank you. Good morning, everyone. I'm wondering if I could ask you about the financing that you announced just prior to the call, 100 million euros. Maybe give us a little more color. How long have you been in discussions with the partner here? Maybe give us some color on what the terms of the deal are. Thank you.
spk05: I'll take that question. So around the time of the IPO, because you never know if the IPO will work or not work. We have already started the initial discussions and mentioned that in the due diligence for this particular financing. And post-IPO, we were not in a rush to complete it. However, after we looked at all our opportunities, we decided to go ahead because, simply, It's a really good way to finance our projects without losing ownership. And we want to have a much better return for our investment capital. So if we can get lower cost capital than the shareholder capital, and we can use the money, it makes a great deal of sense. So we went ahead and closed it as of today.
spk04: Okay, great. I haven't had a chance to go through the release in detail. Is there anything you can tell us on the terms of the financing?
spk05: I'd rather keep that confidential. But as I said, it's a good option for the shareholder.
spk04: Okay, thank you. And secondly, so we have a lot of build on operate activity that you've laid out for the next couple of years. If I look at your capital sales group, what's the manufacturing capacity out of that group? In any way, does that pace your project development activities?
spk05: No, our manufacturing capacity is sufficient for the growth and we can easily scale it up.
spk04: Okay. So no bottlenecks in manufacturing or engineering activities?
spk05: There are some issues with supply chain, but not bottlenecks within our factories.
spk04: Great. Well, that's leading to my last question, which is going to be if you could give some color on the supply chain. Are you able to get access to all of the components that you like, all the assemblies you like? And if you can maybe give some color on any inflationary impacts you may be seeing as well.
spk05: yeah so we're constantly looking at that and trying to estimate it i think anybody in manufacturing has to has to keep looking at that right now we we're relatively okay on all the older projects pre-supply chain restrictions and clearly all our future projects we now have to estimate with increases We can't assume that prices will come down substantially within the time frame of these projects, which is typically a year and a half. So, for example, Toner, the big Danish project, we did our best to estimate that and also make sure there's slippage and so on. Typically, we see not so much of an impact on pricing of a lot of the components. reduce heat on steel it's more of a delay and typically two or three months delay okay very good appreciate the color thank you
spk02: Thank you very much. Our next question comes from John Gibson from BMO Capital Markets. John, your line is open. Please go ahead.
spk06: Morning, and thanks for taking my question. Just first, I'm wondering if you could maybe provide some goalposts around runner EBITDA for the Tonder and Italian projects, as well as the Charlotte facility, or put another way, can we maybe expect CapEx to EBITDA multiple facilities to be relatively consistent with prior projects?
spk07: Yoni, do you want to take that? Sure. The answer is yes, that typically we don't either acquire projects or develop boot projects if they don't fit the build cost multiples within our guidance expectations. So for most projects, that's in the four to six range. Sometimes we may consider slightly higher for projects of scale with really firm long-term offtakes because the value of the revenue is fairly solid. So these projects are all within expectations.
spk06: Okay, great. Thanks. Second one, you speak to project economics for your boot projects in place and assuming you've built in some cost contingencies i'm just wondering if the economics have changed at all over the past few months just given the run-up and inflation here yeah you know like like everybody in the world uh uh escalation is hitting our projects as well um we're we're mitigating this through uh um
spk07: having contingencies, adding contingencies in our capital estimations and capital budgets for our projects to account. But more importantly, we're finding solutions through alternative supply chains. We have global procurement, so we're able to buy different parts of the world. We have greater visibility. and a greater pipeline of suppliers to pull from. And we also are mitigating through alternative material selections. So we use other materials that haven't had such an escalation. So through a systematic multi-pronged strategy, we're mitigating our risk on this front, but no doubt we have seen an impact and we're accounting through that with contingencies.
spk06: Okay. excellent is there a sort of a tipping point for your facilities you think of in terms of intake volumes needed to to reach you know positive economics or i'm more pointing to your rbf like if volumes come in lower than expected i guess longer term um how do we how do we look at the project economics there um well
spk07: RBS is a unique case because it has substantial scale, substantial economy of scale. It's a large facility by a large factor, by a lot, compared to typical food waste digesters in the North American market, and also is benefiting from strong RIN and LCFS pricing. So the facility does not need to be at full capacity to be profitable. In fact, it can be at partial capacity. And so we view that given the tailwinds here with the largest organic franchise in California rolling out and increasing in tonnage now, as I mentioned, about a 50% increase just over the last two months, as well as state enforcement, and more importantly, another OREX line. This is the technology that we manufacture that supplies. So one of the other leading haulers in the L.A. franchise is installing this system. It's been delayed to late Q1, but once that starts to run, there will be a step function increase in feedstock. So our view is that between the waste management and the UWS OREX lines in tandem, those two alone, we should be well on our way in increasing and in profitability.
spk05: Let me try to add something to this question. First of all, I want to remind you that Rialto is unique in another sense of the word too. It's the only one that's designed strictly for commercial food waste. because that's the first phase of the California law. And so that means that we are somewhat limited in the portion of the waste that we can handle and the choices of the waste, because if it makes other waste in it, which we could, then we lower the value of the gas. So we essentially require the... that particular waste. Now, in all our other jobs, there's more flexibility and the sources of the waste are more ample and it's not being hit by COVID. Now, continuing in terms of making this plant work, it is a first rate asset in an area of the world where there's plenty of this kind of waste. And this will be full and beyond full at some point. But in every project, there's a startup phase. Unfortunately, because of COVID, this startup phase is longer. But I am very comfortable with having this asset. So is our partner, SSI. And it's just a ramp-up issue, period.
spk06: Okay, great. Appreciate it. Last one for me, can you maybe just touch on how preliminary discussions have gone around the Michigan project? And again, I know it's longer term, but could we maybe assume similar build EBITDA multiple relative to other projects you've announced?
spk07: Yeah, that's right. Similar EBITDA bills cost multiple in our range, four to six cents range. And this is, as you noted, still early. We were selected and approved by the board of Kent County and West Michigan. And so we We are primarily beginning to be focusing on the development of the project to secure all of the agreements and permits necessary. There's strong local support and a truly visionary project that does much more than just divert waste from the landfill, but is an economic stimulus and a job creator. So we're looking forward to this social infrastructure that will do very positive impact.
spk06: Okay, great. I appreciate your responses. I'll turn it back.
spk02: Thank you very much. Our next question is from Justin Strong from Scotia Bank. Justin, your line is open. Please go ahead.
spk07: Hi. Good morning, everyone. So just kind of going back to some of John's questions there, just in terms of contingencies, I understand you don't want to kind of give away the goose, but maybe just I think people would benefit from kind of getting an idea for like a ballpark for exposure to steel, for example, factoring in the option for different materials for your contracted projects.
spk05: I've given that a try. Why don't you try?
spk07: Yeah, I gave it a try as well. I'll try again. Maybe I wasn't clear. So two parts to that, how we view this issue. One is in our projects that are contracted, we have the ability and flexibility to have multiple suppliers and sources. of materials as one hedge, as well as global procurement capabilities, which we have employed in projects if material or equipment cost escalations are getting out of hand. Many of our contracted projects, too, costs are locked in, and so we have cost security on large portions of the project. But with respect to the large growing revenue base from our build-on-operate, unfortunately, this is shielded in effect because of our tipping fees and our gas sales. Does that answer? Yeah, yeah, that's helpful for sure. So kind of moving over to the mezzanine financing, the what's kind of your ideal capital structure so you know if you do the basic math 10 million euro across 10 projects 10 million assuming your projects are all about the the same size what's kind of the the equity uh ideal equity component in those projects honey you want to take that on uh sure so typically um
spk03: Our projects are 35%, 65%, or between 30% and 40% equity, 60% to 70% senior debt, project senior debt. The remaining equity in cases of projects like these We would use the mezzanine financing to fund the equity, although part of the equity would need to remain financed by us. So if you take the remaining 35%, let's say, on a project which is, say, €20 million, 35 of the $20 million is $7 million. That's the equity that would have been required. Out of the $70 million, we would have to put ourselves something like maybe $1.5 million, $2 million, and then the remainder would come from the Najani financing.
spk07: Okay, that's great. Yeah, that's all for me. Thanks, guys.
spk02: Thank you very much. As a final reminder, if anyone would like to ask a question, please press star followed by 1. We have no further questions, so I'll hand back over for any closing remarks.
spk05: On my end, this is Andrew. I want to thank all of you for questions that are really important for the shareholders to have answers to. We've done our best to do so. And I just want to remind you that from our point of view, we are unfolding as we should. And we're very fortunate to be in the right market with the right technologies and the right people. and we're able to risk reduce by being in many markets. And we'll continue our progress, and hopefully we'll do well for our shareholders, you know, with variations. That's just the name of the game. Thank you very much again, and thanks for covering us, all the analysts on this call.
spk00: So as Andrew said, thank you, everybody, for joining us for our third quarter 2021 conference call and webcast. For additional information or with questions, please contact us at ir.energia.com or do visit our website at energia.com. Thank you. Thank you, everyone, for joining today's call.
spk02: You may now disconnect your lines and have a lovely day.
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