Good day, ladies and gentlemen, thank you for standing by. And welcome to the Ameresco, Inc. Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host Mrs. Leila Dillon, Vice President, Marketing and Communications. Mr. Dillon, you may begin..

Thank you, Chris, and good morning, everyone. We appreciate you joining us for today's call. Joining me here are George Sakellaris, Ameresco's Chairman, President and Chief Executive Officer; Doran Hole, Senior Vice President and Chief Financial Officer; and Mark Chiplock, Vice President, Corporate Controller and Chief Accounting Officer.

Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. This call contains forward-looking information regarding future events and the future financial performance of the company. We caution you that such statements are predictions based upon management's current expectations or beliefs.

Actual results may differ materially as a result of risks and uncertainties that pertain to our business. We refer you to the company's press release issued this morning and to our SEC filings.

These documents discuss important factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. We assume no obligation to revise any forward-looking statements made on today's call. In addition, we will be referring to non-GAAP financial measures during this call.

These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. Our GAAP to non-GAAP reconciliation as well as an explanation behind the use of non-GAAP financial measures is available in our press release and in the appendix of the slides which can be downloaded from our website.

I'll now turn the call over to George.

George?.

Thank you, Leila, and good morning, everyone. Third quarter results were marked by record Smart Energy Solutions awards, resulting in record total project backlog. We also had significant growth in the Ameresco asset development pipeline, resulting in a record asset backlog.

[indiscernible] of contracts expected in Q3 were delayed, shifting approximately $30 million of revenue out of the quarter. I will point out that the number of these contracts have already been signed since September 30. We expect the remainder to close in Q4. And most importantly, the overall trends in our business remained very strong.

Our robust asset development pipeline will allow us to more than double our megawatts in operation in the coming years, significantly increasing our base of recurring revenues and earnings. At the same time, we have continued to build our technical expertise to address the increasing complexity of our customers’ projects and company-owned assets.

As we have indicated, during the last year, we have made investments in order to develop significant domain knowledge in areas such as battery storage, micro grids, smart controls, and other advanced energy technologies across all of our regions. As you can see, the success of this strategy is resulting in our record awards.

We are also leveraging our expanded platform to grow our Ameresco asset business at a much higher rate than in the past. We are at the point where all regions are capable to compete and have begun to contribute to this advanced markets.

The Company's assets were traditionally developed out of the Northeast offices, we have now expanded our local capabilities into all regions. Our 70 plus offices in North America, offered us a unique competitive advantage for traditional Smart Energy Solutions work and asset ownership opportunities.

At the end of Q3, total assets in development more than doubled year-on-year, reaching 287 megawatts by quarter's end. We expect our assets in development to continue exceed the number of megawatts in operation. Our asset development opportunities are increasingly getting larger and more complex.

In fact, we recently announced our largest energy assets project a 25 megawatt solar plant in DePue, Illinois. Construction is expected to begin in the summer of 2020.

This installation highlights multiple benefits, as it will help the state of Illinois meet its renewable energy goals, while at the same time providing income to the local community and of course a good return for Ameresco.

During the quarter, our Canadian team held a ribbon cutting ceremony for our first company-owned grid-tie battery energy storage system. The 16 megawatts hour system has been used in Ontario to store power, using [ph] access supply and deliver it back into the grid when demand is high. These types of systems are an integral part of the grid stability.

And given the intermittent nature of renewable energy generation, we are confident that the success of such projects will lead to much wider adoption and greater opportunities for Ameresco. As you are aware, California's largest utility PG&E has been shutting off power to large portions of his territory to prevent potential wildfires.

Its block outs have impacted millions of residential customers along with numerous municipal, institutional and manufacturing facilities. It's estimated that today the block outs have cost over $2.5 billion in economic losses to the state.

We believe that these historic events are creating unprecedented demand for resilient distributed energy resources, which are relevant to our Smart Energy Solutions and Ameresco asset business, as well as our integrated solar distribution business.

For many quarters, we have been selling off grid standalone solar and energy storage systems into the California for applications such as cellular towers, water pumps and supporting local electric utility operations.

Years of utility under investment are growing and growing where the volatility increase the likelihood that such proactive blackouts will become more frequent and will spread to other geographic areas. PG itself believes that it will take up to 10 years to address this issue.

California has always been eligible in renewables and energy technologies for their environmental benefits. We now believe that California will become eligible in advanced technologies for power resiliency.

The state recently passed SB 1339 and the governor appointed [indiscernible], which should bring much more certainty and urgency around deployment of technology such as microgrids.

This will lead to increase adoption, not only in California, but across the country as they use of these technologies become more accepted by customers and begin to make more economic sense. We believe Ameresco is exceptionally well positioned to benefit from this emerging market.

As we have discussed in the past, our customers are requiring that resiliency being incorporated into more projects. Our core client base of the federal government, municipalities, universities, hospitals and other institutional clients are leading the charge in investing in resiliency programs such as microgrids, CHP and battery storage.

A great example of such project is our recently completed Lynwood project. This installation utilizes the latest in advanced energy technologies. It's powered by 2.5 megawatt natural gas fired engine, with advanced in emission controls, and a heat recovery system.

Utilizing microgrid controls, the system can operate as part of a functioning grid or in an island mode. That's providing continuous power for mission critical systems. Our existing customers continue to provide us with additional work. For example, we signed our third United States Postal Service contract this year.

One of which includes distributed energy generation with solar. The other two were focused in design built, built-in modernization. The design build wins are in part, due to the expertise brought to Ameresco from a recently completed acquisition.

We are optimistic for the potential of design built work as an additional complimentary revenue stream from our existing customer base. We will continue to pursue similar complimentary acquisitions. In summary, market conditions are very strong.

And we believe our position is excellent, supporting our confidence in a very strong finish to 2019 and solid growth for 2020 and beyond. I will now turn the call over to Doran to review the financials.

Doran?.

Thank you, George, and good morning, everyone. As I review the Company's third quarter financial performance, I ask that you please refer to our press release and supplemental slides for more complete financial information.

The record growth in project awards and another solid quarter of adding assets to our pipeline highlight the early successes of the investments in strategic resources and advanced technology we decided to make this year.

We achieved record project awards in the third quarter of 343 million, up 72% year-over-year, and in large part reflecting the increasingly complex projects that George spoke about earlier. Our Smart Energy Solutions project backlog at quarter end was 2.2 billion comprised of 787 million in contracted backlog, and 1.4 billion in awarded projects.

Our Ameresco asset development pipeline reached a record 287 megawatts at the end of the third quarter. This represented 61% year-to-date growth, and was more than twice the size of our pipeline at the end of last year's third quarter.

We added 37 megawatts of assets to this pipeline, including another earlier stage RNG plant that we have been talking about for a few quarters. The rest of the awards were solar, including the large DePue, Illinois project that George mentioned. We placed 8 megawatts into service in Q3, bringing our year-to-date total number 229 megawatts.

The rapid growth of our Ameresco asset business reflects our ability to leverage the Company's geographic footprint, customer relationships and technical knowledge to win additional asset opportunities. During the third quarter, we transferred 15 megawatts out of our assets in development metric into project awards.

These solar projects are for a large national corporate account, where during development, the customer decided that owning these systems outright versus entering into a power purchase agreement with Ameresco made more sense given its tax strategy and cost of capital.

While we do have the resources and balance sheet to build own assets, we want to remind everyone that we are a customer first organization and we have the flexibility to pivot our energy savings offerings based on customer needs.

We are pleased to be developing our C&I book of business with this new marquee national account, and we'll be talking about it more in the future. Third quarter revenue was 212 million, reflecting modest growth across all of our lines of business.

While a positive year-on-year comparison, the push out of several project contract conversions impacted revenue results by approximately 30 million. As you know, these projects have already been awarded Ameresco, but start dates are a function of client schedules and can slip from one quarter to another.

Net income attributable to common shareholders was 8.9 million. Net income per diluted share was $0.19. Non-GAAP net income was 8.5 million and non-GAAP EPS came in at $0.18.

These metrics are below the comparable 2018 figures, representing the increased investment in people and technology that we had anticipated for 2019 and in support of what we expect to be a very strong 2020. Adjusted EBITDA was 23.9 million. Cash flows used in operating activities were 11.5 million.

And adjusted cash generated from operations and non-GAAP financial measure was 21.3 million during the quarter. Our liquidity remains strong.

The company is well positioned to execute on its asset build out through a combination of cash on hand, cash generated, non-recourse debt, and the ability to monetize existing assets and recycle the proceeds into additional opportunities. Turning to our outlook.

Based on contracts signed after the end of the third quarter, and those expected to be signed shortly, we are reaffirming our 2019 full year guidance, namely, revenue to be in the range of 845 million to 885 million, adjusted EBITDA of 95 million to 103 million, and net income per diluted share $0.77 to $0.85.

We expect our tax rate to be between 12% and 15% for 2019. And we now expect to place approximately 40 megawatts of assets into operations this year. I would like to turn the call back over to George, for closing comments..

Thank you, Doran. I will summarize with three points. First, we expect to have an outstanding fourth quarter. Second, we are already seeing tangible results from the investments that we have made in people and platforms. And third, we expect to have a strong 2000.

Thanks to our fast growing asset development pipeline, and substantial contracted project backlog. We look forward to seeing many of you at our upcoming investor conferences. And now Chris, we would like to open the call to questions..

[Operator Instructions] And our first question comes from the line of Chris Van Horn with B. Riley FBR. Your line is now open..

Good morning, everyone. Thanks for taking my call..

Good morning, Chris..

So, you know, you mentioned, you know, right off the bat that, you know, 2019 was going to be an investment year. And it's obviously translated into some really robust award activity.

I'm curious where you are in terms of those investments? Do you see more coming? And do they go into 2020? And what's kind of your thinking around that?.

Yes. Basically, I will say that we are pretty much essentially done with an investment that we made for 2019, because that was the plan what I will call one shot, basically right size in all units of the company for the particular markets that we want to address, otherwise the advanced market opportunities.

As we go forward, I think you will see us be more opportunities and trying to add additional talent, but it will be matching to what we forecast in the past. We want to grow the bottom line at a faster rate than what we did at top line. So the operating expenditures, we will be more carefully monitor going forward.

And we pretty much done with the investment that we wanted to make. For that what I will call one shot deal for 2019 a better part.

We will – that's why we started seeing the results, you know, the impact, basically the talent that we brought aboard has some early successes, and not only in the northeast but it's in the federal group in the southwest as well in Canada. So we feel very good where we are..

Okay, got it. And then you know you mentioned in your outlook, accelerated growth entering 2020.

Would you be able to elaborate a little bit on that? And are you talking in terms of top line growth, or EBITDA, adjusted EBITDA expansion, any more detail there would be great?.

Yeah, we will give guidance on the next call, and maybe even a little bit before that, after the fourth year announcement. But I think it's important to note that basically where we are today, we think that by the end of the year, we will have a record contracted backlog.

Otherwise, the project contracts, will be at a record level based on where we are as of today. So that's why I feel very strong that next year is going to be a very strong year. In addition to that, we have a great pipeline or the assets in development that we have, so a good chunk of us will come into play next year. So that will contribute a lot.

The operation maintenance looks very good. So even though we are not giving actual guidance as a historical trend otherwise growing the top line at the high single digits, I think is very, very doable. And the EBITDA line going to close to 20% with our historical trend for the last five years, again, it’s very doable.

So, I hope that gives you a little bit more color, but the fact that we will end the year with a record project, contracted backlog, which will be in good shape..

Got it. And last one for me, if you don’t mind.

Can you maybe talk about the competitive landscape? Obviously, you’re seeing a lot of award activity and I’m just curious what you’re seeing from a competitive standpoint, or competitors rising and you’re seeing more and more small players kind of starting to emerge or are you guys just benefiting from just taking all this share because of the lack of players in the space maybe?.

I will say we have picked a little bit share from the largest competitors like the [indiscernible] because we have more of the focus and broader strategy that they do across all these advanced technologies, the flexibility, we own the system, we let the customer own the system and so one approach our solution from the customer perspective.

And the fact that we made the investments over this last years to be broad and deep. Technical expertise is helping us a lot and we take market share from the big guys.

But on the performance contracts on a smaller scale, the contracts I would say 2 million and below where you have some mechanical contractors or local engineering firms, you will see that they are picking some of the small contracts. And some of our units they focusing on the smaller contracts and the less complex contracts.

They have some challenges where the units that they focus on the broader technologies and more comprehensive projects, they have some great wins..

Okay, great..

The overall market, the market is evolving on these larger projects. And the fact that I think we pivot the company over the last few years to take advantage of the emerging markets, we are very, very well positioned.

The other thing I want to – may be Doran might want to comment a little bit on this on the competitive landscape when we are going into the asset ownership, especially one the solar was helping us a lot in the solar business is the fact now that over units across the country otherwise you have 240 plus developers that can develop these projects.

And in addition to that, in the market we addressed the 30 megawatts and below, which is a local municipality client and so on. We have relationships. So, again, it helps us..

I think the competitive landscape in solar is obviously different than the traditional energy efficiency business.

And so I think, as George mentioned before, that flexibility to allow clients to own the assets or to allow us to own the assets is really a competitive advantage and then furthermore, just simply the local presence, as we talked about in the call earlier, 70 plus offices around the country.

We’ve got the penetration and then in addition to that, the technical capabilities in the regions to actually develop the projects just gives us the competitive advantage. It’s a very local business. So, it’s necessary to have that..

Okay, got it. Thank you so much for that color, and thanks for the time..

Thank you. And our next question comes in a line of Noah Kaye with Oppenheimer. Your line is now open..

Hi, good morning. Thanks for taking the questions..

Good morning, Noah..

Housekeeping to start with.

From a segment perspective, can you help us understand where that 30 million of revenue per share happens? Which segments?.

Yeah, basically, I know is with chunk of money, but basically on all these projects, the contracts are very, very mature. And close to $30 million about $25 million to $30 million is in development expense as we have already invested on this particular project. So, when that process gets signed, all that hits the top line, the income statement.

And that’s why it had a major impact on the quarter. And it gets shifted, you might say by your quarter that particular revenue going out..

I’m sorry, my question was on which segments, federal regions, Canada, where did it happen?.

Yeah, it’s mostly federal, Noah, and most of that is related to federal awards..

Okay, with the federal I know, there’s been some timing issues potentially related to a large DoD projects, authorization that’s expiring.

Can you maybe kind of connect the dots here for us on some of this in quarter, timing, softness, and the large awards that you mentioned? Can you help us kind of connect it up there a little bit?.

Some of those contracts – and you can add something to – I mean very good sign. And we have very, very good visibility and feel very confident that they will be signed prior to December 16, which is the idea to this particular one..

Yeah, and I think as we said in the past, Noah, I think, certainly the asset, but these are really pretty mature in the overall sales and development cycle on both ends. So, although it’s, we didn’t – we didn’t get the one sign that we had possibly expected in Q3, pretty confident that those will come in before the expiration of the IDIQ.

And as George mentioned, we’ve already, signed some and expect to sign the rest in the coming weeks..

And I’ll just add in the quarter-on-quarter….

Sorry, go ahead..

Yeah, I was just going to add, the quarter-on-quarter slip in the federal business. You also had an impact just from a practical perspective of their September 30 fiscal year end, right, where, where the frankly, people on the other side of these contracts have a lot on their plate to get done before fiscal year end.

And so as a result, these things slip..

So, I guess – can you talk about your conviction level for the fourth quarter? I think at this point to hit the midpoint of your revenue guidance, you’d have to do with 305 million fourth quarter sales and that would be 40% higher than your previous mark for the quarter, at the low end of your guidance to do 285 million in sales.

Again, that would be well above your previous high mark.

So, just talk about what’s driving these expectations for a record quarter and get part of it maybe recognizing this $30 million from 3Q to 4Q but just how much visibility you have to it coming through? And maybe you’ve affirmed your guidance, but where is your bias at this point within the range or pretty close to the end of the year at this point?.

Yeah, hey Noah, this is Mark. I think why we feel so confident is that 85% of the revenue we’re expecting in Q4 comes from contracted sources, so either our contracted backlog or from other things revenue streams, the recurring revenue streams, or integrated PV.

And so again, 85% of that revenue, we feel pretty confident, just given the visibility from contracted sources. And then the rest is coming from the awards. And as we mentioned, we feel highly confident that the awards not sign in Q3 as well as the ones that we get always expected in Q4 will sign.

So, we feel like there’s a very strong visibility to our Q4 revenue..

Okay. So, if I was to take that midpoint 305, it implies for the fourth quarter, 260 million of that essentially is in the back and then the rest is just what comes through that.

Is that correct numerically?.

The revenue from contracted sources, we feel pretty good about. So yeah, your math is correct. I think we just feel confident because, once it’s in our contract backlog, we can move to recognize that. And as long as we’re executing, we feel very good about that. The rest comes from awards..

Excellent.

Can you give us any color on the RNG project that you added to the asset development pipeline this quarter?.

Yeah, it’s another plant in California and its very good size, close to the woodland plant. And it’s an existing site that we have conversion from landfill gas to electricity and it is a large plant. But we have excess gas, so we are not converting otherwise, taking down the electric plant we have right now.

It will be an additional plant and it would be a green plat. And the fact that it’s an existing plant on the other sides there was landfill owner. And we feel very, very good about it. We’ve been working for it for some time.

And the other thing I wanted to add up because we have been talking about the other five, six plants that they are in the early stages of development, but we have not put them in our pipeline, they have not gone away, we still working on them. And I wouldn’t be surprise that we probably add a couple of them into our backlog by the end of the year.

And in addition to that, the plants that we have in construction that we said, one will go into operation late next year, and the other two, the second half of 2021. Again, it’s on schedule, no any delays, we’re on schedule.

And now we’re trying to get for 2022 to have the new ones that we just signed, and probably a couple more by the end of the year. We have a better visibility as to the 2022..

So, you’re continuing to back and actually augment that RNG pipeline which is terrific to say. Can you maybe talk a little bit about the demand environment for RNG broadly? We’ve seen some indications that this is starting to broaden from the transportation sector into the utility gas market.

Are you seeing that impacting your opportunity? Do you think we might have to see down the pipe some projects for the utility sector?.

No question about it. No, I just said, that’s a great point. And this is what is making us feel better about this particular market segment. The fact that now we’re beginning to see the emergence where I will call potential long term contracts with great credit worthy customers.

And it’s the utilities, the gas utilities there is because many states and regulators right now they say, you better reduce your carbon footprint. And the only way they can reduce it at this time is with this green gas.

And actually, we are talking to several utilities and I wouldn’t be surprise that down the road we will have some long term contracts with him. In addition to that, many colleges, universities and other institutional accounts, they might have a coal generation plants or whatever the case might be, and they want to become 100% carbon neutral.

The only way that they will be able to accomplish that by green gas. And we are talking to a couple of colleges whereby that we will sign long term contracts. We will buy some of these outputs. And Doran, you want to add something.

I know you’ve been looking at…?.

Yeah, no. I would only say that, look, the nature of these contracts they are long term, they’re typically looking like fixed price contracts that clearly allows for better revenue visibility and it improves our financing terms.

So, clearly that’s an improvement for us in terms of what we believe the, economic feasibility and economic stability of these projects looks like..

Okay, I’ll follow-up with that offline, but thank you very much for your comments..

Thank you,.

Thank you. And our next question comes from the line of Chip Moore with Canaccord. Your line is now open..

Morning. Hey, thanks..

Morning, Chip..

Wondering if we could go back to the 30 million of push out, if you just give us a ballpark on what still needs to get signed there? And then, on Q4, just to follow-up.

Any puts and takes as we think about this typical seasonality and you’re thinking there?.

Yeah, I would say and then Mark might want to add something. Primarily these contracts it’s about close – several contracts about couple hundred million dollars’ worth of contract. And primarily the issues or the delays is administrative.

And Doran pointed out the fact that it was because of the fiscal September 30, the deadline of the federal government. In addition to that, not only us but many other companies, they have contracts that the people on the other side, they’re working on it. And – but we feel very good.

We have signed a couple of since that time since the September 30, and we have great visibility, actually the timing of the balance of them. The government have given us a schedule and we feel very good about that particular schedule.

And why the $30 million which sits in the development expands? The fact that these projects are very complicated, and we have spent a substantial amount of money on our site in order to develop this project and to bring them to this point.

In addition to that, you got to think on the other side, the government, they have spent a lot of time and they are desperate. They are motivated. They do want to get these projects moving. So, all the delays – that’s why we feel very confident. The incentive or the capitalist from the other site is there.

These projects are great project from the government and it’s not just something that was just save them the energy is something that will give them the infrastructure, upgrades and the resiliency that they need. And Mark, if you want to add something to that,.

I think you hit on that. I think, again that we feel it comes back to our confidence level based on the visibility, we feel like we’ll get those awards converted, but that still needs to happen. And then certainly with the visibility to the contract at peace, we feel very good about that, but we need to execute.

We feel like, we’re in a position to control that and we’ll hit those numbers so..

Understood and thanks.

You know we’re very early days here, post public power shut off at west, but can you talk broader about how you think about positioning there? What are the biggest opportunities? And any investments you may need to make?.

Look, we are talking to various commercial and industrial customers as well as colleges and universities. They are concerned – and municipalities. And they are concerned about what’s going on. And basically, you will see combined heat and power, battery storage, solar and the microgrid controllers. And we have the ability to have an island mode.

I’ve been talking for a long time the old days of the central large power plants, long submission lines, they are acceptable to measure our edges. And now what has happened the economics of the distributed generation to the point that they compete with a central power plants and emission. So, they give the customer not only resiliency, but economics.

I mean, we are talking some of the – or it’s Apple, or it’s Google, they say that 100% of carbon footprint. But the first thing that they invest in solar because it competes with a lot the liquidity prices. So, it’s a great investment, not just makes great environmental sense, it’s great investment.

Now, take some of the datacenters that they have in order to bridge the gap because the solar is not all the time up. They need some kind of a battery storage. They need some kind of microgrid. So, we see a huge opportunity for us down the road.

And we already have started talking to the utilities, all of them in California and some of the people that we hired in the battery storage at the microgrid, they are located in California. So, look, it started with the federal government.

The first one we did up at Portsmouth, New Hampshire in microgrid, because they have a base that they cannot afford the interruption with during the ice storms that we get in New England and we’ve been very successful. And then we have them four or five of them now in the federal government, Naval Shipyard in Philadelphia and so on.

And now some of the Kaiser Permanente, which is one of our clients that we have, and we do installation. Now, they’re coming back and they say, okay, now we have to look at this resiliency issue. So it’s beginning to get traction in the marketplace. That’s why I brought it up.

I think it’s –we made the investment in the past with the existing customers, but what’s going on in the marketplace right now it brought in that, what I would call market segment..

Yeah, let me let me just touch on a couple of things. So, George mentioned, so some of the expertise on the microgrids and the battery storage stuff, those were investments that we made this year already. So, we don’t necessarily need to expand that further.

Certainly from a processing and sales coverage perspective there, potentially some opportunities that the demand goes on. But I would categorize this opportunity into two things. One of them is, a little bit longer term, all of these customers that we have now, plus the utilities thinking about microgrid applicability.

They’re going to be thinking about the economic value proposition differently, because the economy effectively shut down when those shut offs happened.

And the money that they lost by not being able to actually work and even individuals not being able to work, not being able to communicate, is going to be something they’re going to have to take into account when deciding whether it’s worthwhile to spend the money to put a microgrids together.

The second piece is our integrated solar distribution business which has already been happening. And, that’s more immediate. These are off site kits that can be shipped and you’ve got cell phone service towers that can use those. There’s irrigation on the farming community. There’s a variety of applications there.

And so I think that’s a little bit more near term..

Okay, that’s helpful. Thanks a lot..

Thank you. And our last question comes from the line of Craig Irwin with Roth Capital Partners. Your line is now open..

Hi, Great. Thank you, So, George. I guess I’m going to be the only one not to bug you about the quarter and maintaining the year, I guess. Obviously, this is construction and these things happen. My questions are about the landfill gas business in particular and the green gas business in California.

So, many of my clients have been looking these businesses potentially long term driver of increased EBITDA at Ameresco over the next few years. But when we look at RIN prices, the last two years, they’ve come off quite a bit off the peak, right. We’re now roughly $0.70 RINs, down around 75% from the peak.

Can you maybe discuss for us your approach to locking in your RIN sharing agreements? How much do you typically lock away? What would we be comfortable sort of looking at as far as minimum RIN prices for projects? And how much exposure to this kind of volatility do you see translate through into your P&L?.

Yeah, I will try to handle the question and then Doran and Mark might want to add some more color to it. The better part, first I talk about going forward. We look at all the projects especially say the three in California we have right now and then that they are in development and the other one in Texas that’s in construction.

Each and every one of them even at the numbers that you see today when the RIN prices, they make good economic sense, better than the other assets that we will own. However, as I pointed out, we look at not just the RIN market by itself, and then if you took the LCFS, that has gone up substantially.

So, the California plans will benefit from that considerably. And we’re going forward on some of the new plants, I wouldn’t be surprised that you will see us execute some of the long common contracts that we’ve been talking about. So we sufficiently have.

As far as the existing ones, if you look at our overall asset portfolio, only 5% of the total output is merchant. And then as you take it one step down on the RIN prices, the green gas, even that we have hedge the better portion of that on a long term contract.

So, the exposure for us for this particular year, it’s minimal in on the new ones coming up with what I would say a strategy where not only this place will be economic on the low market price of the RINs, but also outside the transportation. And I think in the long term that offers a larger possibility for us and more predictability on the revenues.

You might take a little bit lower return and the high returns when the RIN prices were way up there, but on the other hand, you will have more stability on the return as well as and the financing like as Doran pointed out earlier, it would be even better.

The other thing I want to say, though, Doran – I mean, Craig, on the RIN prices where they are right now. As you probably know, everybody’s waiting to see what the new RVO will be set at. And if that set over 600, then you will see the RIN prices go up considerably, which people are working on that for some time.

So, any transactions right now they’re very, very, very small, if any, so they do not reflect what the market is doing. Most people they are holding back some of the sales.

You want to add something, Doran?.

I think you summarized it well. I think that the point is here that at least in our current situation, this RIN pricing, we don’t expect it to have a material impact on guidance that we gave for the year and that’s the bottom line..

Yeah and then going forward, each and every one of the projects, they go very well..

And just a point of clarification.

How long do you usually lock your in RIN sharing agreements for? Are they annual agreements that you have to resign and reset every year or some of these multiyear agreements?.

No, the one that we have right now, the multiyear contracts. And I don’t recall the exact date when they expire in but I know they go at least through next year..

Okay. Excellent. Then you mentioned LCFS and your three plants in California. So, obviously, LCFS is doing great with, I guess carbon prices close to 200 bucks a ton. That translates well into supporting the economics of clean fuels and green gas.

Can you maybe just confirm for us the relative importance of LCFS versus RIN prices? Do you see RIN as a de minimis contribution on these plants? It’s really LCFS driven.

And is there an opportunity to maybe focus more on California and other LCFS stage in the pipeline for development?.

Yeah. No. I would say this much based on where they are right now, I would say even contribution between RIN prizes and LCFS and then maybe it is bit more weighted to the LCFS. And the other thing I want to point out, Craig, is San Antonio plant, we ship that green gas to California too, so we take advantage of the LCFS as well..

Excellent. And then last question if I may.

Can you update us on the total fleet of plant – of green gas plants in development? When we expect those to potentially break ground and come online?.

Yeah, I gave a little bit color. We have the three right now that permitted infrastructure and we could give you the schedule of those. One will be coming on – the one actually we are breaking ground this month. We get those permits and that’s the McCarty project in Houston, Texas, – outside Houston.

So, that would be coming on the fourth – third – fourth quarter of next year. Then we have two more come in 2021, the second half of 2021. And then right now we have the plant that we just announced when you do the development in California that will become on 2022 and I would say probably the mid of 2022.

And out of the six – five to six that we have remaining, couple of them might show up in the development by the end of this year. And I would like to see at least three plans right now it’s a goal. But by the end of the year, we’d be able to give you more color. That will be up sometimes in 2022.

So one next year, two the year after and three of the year after. That’s the plan that we’ve been trying to work on that..

Congratulations on the progress there..

Thank you..

Thanks, Craig..

Thank you. And ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect..