Good afternoon, and welcome to TPI Composites Third Quarter 2022 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we’ll conduct a question-and-answer session. [Operator Instructions] 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 Edin, Investor Relations for TPI Composites. Thank you. You may begin..

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 risk is included in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, tpicomposites.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 Siwek, TPI Composites’ President and CEO..

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 5. 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 REPowerEU 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 shift 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 power 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%. 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 in Türkiye 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 extension 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 in the geographies that we serve Vestas.

Together, we are investigating market-driven opportunities for local blade manufacturing of the V236 blades in Asia, the U.S. and Europe. And we are collaborating in the design phase of the V163 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 the 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 rightsizing 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 or 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 6. 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 Türkiye 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.

This 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 disruption this quarter in Türkiye 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 customer. 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 truck customer, and we plan to start serial production of large-cap 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 derisk 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. Wind Europe 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 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 a 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 $0.02 per watt per blade. To put this in context, this could be $80,000 for a 4-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.

While 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 in 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, rightsizing 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 in the wind market. With that, let me turn the call over to Ryan to review our financial results..

Thanks, Bill. Please turn to Slide 8. 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 of wind blades were $425 million in the 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% decrease in the number of wind blades produced due to a temporary production stoppage in one of our Mexico plants as the OEMs implemented a blade redesign, a brief labor disruption in Türkiye as we work with the union to resolve inflationary pressure on wages as well as a reduction in manufacturing line, 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 breakeven in the same period in 2021.

The increase was primarily due to favorable foreign currency fluctuations, a $9.7 million decrease in start-up and transition costs and improved operating cost efficiency, partially offset by approximately $3 million to non-restructuring-related operating costs at our locations where production was stopped 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, was a net use of cash of $29.4 million primarily due to improving the health of our supply chain and timing impacts from the Türkiye 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..

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 agreement, 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 clear regulatory guidance from the IRS and Treasury with respect to the IRA and more clarity around the implementation of the provisions of REPowerEU.

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 we’ll 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 in our mission to decarbonize and electrify. I’ll now turn it back to the operator to open the call for questions..

Thank you. [Operator Instructions] And our first question comes from the line of Eric Stine with Craig-Hallum..

Hi, Bill. Hi, Ryan..

Hey, Eric.

How are you?.

Hey, doing well.

How about you?.

Just fine, thanks..

Good. So maybe just high-level picture here. Obviously, it’s been challenging in wind markets for some time. Curious if you think long term that shrink in the move to outsourcing, and clearly, you’re taking another step of Vestas. Just curious what you think this means longer term..

Yes. I think for most of the OEMs in the wind market, I think that’s the case. We’re certainly seeing a lot of activity along those lines, whether it’s us or others. So I would say, yes, I think this does continue – not only continue the trend, but potentially accelerated..

And then maybe just on Vestas. I mean, clearly, you’ve had a strong relationship for some time, but you 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 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?.

Yes, I can’t get into the specifics of the contract, but suffice 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.

So 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 say – 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..

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?.

Yes. 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..

Yes. Thank you..

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America. Your line is open..

Hi, this is Morgan Reid on for Julien..

Hi, Morgan..

Hi, thanks for taking the question. 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 pull out of China that there’s sort of a shift in the geographical focus of the strategy.

Could you just talk about that a little bit and how you’re thinking about the business positioning here for the next several years?.

Yes. So if you think about – and I’ll talk about China in a second, but if you think about ex China wind market, the U.S. is the largest individual market. Europe is a – 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.

We’ve – historically, our blades to the U.S. has been in that 50% to 60% range. Europe, traditionally, it’s been over a third. I think the last quarter, it was over 40% 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, it’s – 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..

Understood. That’s helpful. And then just one more for 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?.

Yes. 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 2023, we see that will sort help.

And we have a number of additional development programs right now that we expect to convert to production, to serial production. So, 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 yes, we remain very optimistic on where that’s going to go over the next couple of years..

Great. Thank you..

Thank you..

Your next question comes from the line of Greg Wasikowski with Webber Research. Your line is open..

Hey good afternoon guys.

Can you hear me okay?.

Loud and clear, Greg. Good to talk to you..

Okay. Perfect. Bill, your opening remarks are really, really helpful. A lot of good color in there. I think answers most of my questions, and I’ll end up checking the transcript to be sure, but – so I’ll keep it to a couple of 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?.

Yes. So, I can’t give you the quantity at this point because the plans are still – 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 2023 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..

Understood. Okay. Thank you. And then on transitions, the pop-up transition in Q3 seems to make sense. It seems like some of that stuff is out of your control sometimes. But what are you expecting for start-up in transition activity in Q4 versus Q3? And then maybe a little preview as to 2023 versus 2022 would be helpful, too..

Yes. I think for the balance of this year, there’s very little activity other than kind of – I’m not sure if we – we still might have a little bit from MX 6 [ph], the Nordex, Matamoros facility. And into 2023, quite frankly, we see very few transitions and maybe one or – depending on timing, maybe one or two line start-ups.

And also, it will depend on Iowa, right? If we – if GE decides to accelerate, we could see some start-up costs at the back half of next year. Otherwise, very few transitions next year and very few start-ups..

Okay. That makes sense. If I could squeeze one more in real quick, just on GE and Iowa.

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?.

Well, they – 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..

Okay, very helpful. Thank you Bill..

Thanks Greg. Good to talking to you..

And your next question comes from the line of Pavel Molchanov with Raymond James. Your line is open..

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?.

I would say it’s starting to. 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 are up 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 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..

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?.

Yes. We’ve – we’re continuing to evaluate options for what we ultimately do with the facility, Pavel. So, 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..

Okay. And then just a point of clarification on what you said about 2023.

So revenue is down, but should gross margin improve from 2022 levels?.

It actually could, Pavel. I mean, with some of the actions we may take in the fourth quarter of this year, it would – it could help with what the results look like next year. Plus, 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 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, the numbers could be better from a gross margin percentage standpoint once it’s all said and done..

All right, thanks very much..

You bet. Thanks, Pavel..

[Operator Instructions] Your next question comes from the line of Justin Clare with ROTH Capital Partners. Your line is open..

Yes, hi. Thanks for taking our questions..

You bet.

How are you Justin?.

So I guess, first off here, on the – 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.? Any commentary there would be helpful..

Yes. 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, two foundations count, et cetera. So I think part of the clarification everybody is waiting on will tell us better whether blades have to be in the U.S. or not.

Clearly, it will help. And plus the domestic content adder, not just the AMPC, is a benefit if you can get both, which you would, obviously. If you got the AMPC, you’d get the domestic content. So 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 domestic content credit is a little bit OEM-specific..

Right. Okay.

And then – so I guess have you had discussions on potentially opening greenfield facilities beyond Iowa? And if so, when could a facility be opened if your customers wanted to go down that path?.

Yes. We have had discussions. It’s a – you got to find – you got to identify where the right place is with the right rail access, et cetera. It’s probably a 24-month period from start to finish. But yes, I mean, those discussions are ongoing.

I mentioned in the prepared remarks about strategic planning, and some of that planning is around, do we look at greenfield sites or not. So more to come on that, but that’s certainly an option..

Okay. Great. And then maybe just one more. We haven’t really touched on the facilities you have in India yet. Just wondering if we 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..

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 of years? Yes, we don’t have any lines that are due for extension there over the next few years..

Okay, great. Thank you..

Yep. Thanks, Justin..

Your next question comes from the line of Kashy Harrison with Piper Sandler. Your line is open..

Hey, this is Luke on for Kashy. Most of our questions have been asked. One thing that hasn’t really been discussed all that much yet is ASPs and kind of how to think about that for 2023 and beyond. Typically, ASPs have gone up 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?.

Yes, next year and....

Yes, hey Kashy. 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 the ASPs to go up again next year.

Can’t give you an exact percentage, but would expect them to be rising again just because of mix as well as the inflationary impact on the blade price..

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?.

No, 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, whether it’s an ultra high-modulus glass or carbon or the different types of resins and stuff.

So it really varies by OEM, quite frankly, and then by the weight of the blade. So it’s a little hard to just extrapolate based on length..

Got you. Thank you and so that’s all we have..

Great. Thanks..

Your next question comes from the line of William Grippin with UBS. Your line is open..

Hi great. Thank you. Just a couple of 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 – what parts of the business you’re referencing here?.

Just – 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, what do we do different to turn that to profitability sooner rather than later.

So it’s really potential actions around that business as well as some of our more challenging locations from a blade standpoint..

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?.

Exactly. Yes, being more efficient and a better utilization of available capacity..

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 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?.

So I would think that virtually all the ones from 2023 with the exception of the China blades, the China would be – yes, 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, too..

And then Enercon, too. 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 Vestas 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 had 47 lines of capacity excluding the China line. So we’d be down eight lines of capacity kind of year-over-year, if you will..

Very helpful. Thank you..

Okay, yes..

Appreciated..

You bet..

And there are no further questions at this time. Please continue with your presentation or closing remarks..

Well, thank you again everybody, for your time today and continued interest and support of TPI. Thank you..

And all that does conclude the conference call for today. We thank you very much for your participation. You may now disconnect your lines..