Energy Vault Holdings, Inc.
Q1 2022 Earnings Call Transcript

Published: 16 May 2022

[Operator:]

Greetings, and welcome to the Energy Vault 's First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laurence Alexander. Thank you. You may begin.

[Laurence Alexander:]

Thank you. Good afternoon and welcome to Energy Vault's First Quarter 2022 Earnings Conference Call. As a reminder, Energy Vault earnings release and a replay of this call will be available later today on the Investor Relations page of our website. This call is now being recorded. If you object in any way, please disconnect now. Please note that Energy Vault earnings release, and this call contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only predictions and may differ materially from the actual future events or results due to a variety of factors. We caution everyone to be guided in their analysis of Energy Vault by referring to our 10-Q filing for list of factors that could cause or results to differ from those anticipated in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, please note that will be presenting and discussing certain non - GAAP information. Please refer to the Safe Harbor disclaimer and non - GAAP financial measures presented in our earnings release for more details including a reconciliation to comparable GAAP measures. Joining me on the call today is Robert Piconi, Chairman and Chief Executive Officer, and David Hitchcock, our Interim Chief Financial Officer. At this time, I'd like to turn the call over to Robert Piconi.

[Robert Piconi:]

Thank you, Laurence. And welcome to everyone dialing in today. What a milestone with our first earnings review as a public company, and here we are already midway through the second quarter. It feels a bit like old times for me personally, given my prior roles in public companies. And I'm happy to be back and supporting our customers, investors, and the great people that are the foundation of our Company here at Energy Vault. I'll begin the discussion today with a review and update on our progress as a company from the founding a bit, but with a more near-term focus over the last three months to six months in particular both strategically and operationally, followed by an update of our successful execution relative to the plans that we first introduced to all public investors in September of last year. I will then turn the call over to David Hitchcock, who will cover our latest financial results in more detail. Well let's go back to where we started as we founded the Company. Our mission remains the same today as it was 4.5 years ago

[David Hitchcock:]

Thanks, Rob. I'm pleased to be joining you today, and I look forward to meeting many of our investors and analysts in the near future. I'll review our results for the quarter. But first, I would like to share my initial observations since joining Energy Vault in mid-April. So I'm four weeks in and very happy that I was able to work with and see the team in action as the quarter and 10-Q came together. It is clear to me that we have a solid base of talent on the finance team and a strong foundation of finance systems infrastructure and internal controls. In the near-term, I plan to folk -- to continue to work with my colleagues across the organization to identify areas where we can further enhance our capabilities as we mature as a public company to provide a best-in-class finance function, focusing on adding required resources to strengthen and solidify the team, and continuing to implement and strengthen key systems and processes to enhance our visibility into the business. Moving on to our financial results for the first quarter of 2022. Revenue in the quarter was $42.9 million, reflecting the license agreement with Atlas Renewable. Licensing revenue is largely recognized upon the transfer of intellectual property to the customer, which we partially completed in the first quarter. There's roughly $7 million for other services that we have deferred until we deliver them in the future. From a cash perspective, we received the first $20 million payment for the IP transfer in Q1, and as Rob mentioned earlier, we have received the second scheduled payment of $25 million this quarter. First-quarter 2022 gross profit was $42.9 million, driven by the Atlas licensing revenue I just discussed. The costs for developing the IP we transferred is included in our historical R&D expense base. Sales and marketing costs for the first quarter of 2022 were $2.6 million compared to $0.1 million in the prior-year period, driven by an increase in marketing costs, including the costs for our IPO, along with expanded headcount and an increase in stock-based compensation expenses. Research and development costs for the first quarter of 2022 totaled $9.7 million compared to $1 million in the prior-year period, driven by an increase in personnel-related expenses including stock-based compensation, depreciation, and engineering and development costs. G&A for the first quarter was $9.8 million compared to $1.9 million in the prior-year period. Primary drivers for these increases were due to an increase in personnel, stock-based compensation expenses, legal fees, insurance, consultants, and other expenses. In-line with our business plans, we expect that our operating expenses will continue to increase for the foreseeable future. As we further expand globally and invest in the overall growth of the business. Operating income for the first-quarter 2022 was $20.9 million, an improvement from a loss of $3 million in the prior year period. Again, driven by the recognition of the high-margin licensing revenue. I should note that the operating income includes a charge of $9.2 million for non-cash stock-based compensation expense. First-quarter 2022, adjusted EBITDA was 31.2 million. Compared to a negative 3 million in the prior-year period, our earnings release and 10Q which we filed this afternoon, includes a bridge from net income to adjusted EBITDA. The key non-cash or non-recurring items that we added back are the 9.2 million of stock-based compensation, 20.2 million of change in fair value of our warrant liability relating to our public and private warrants, and 20.6 million of transaction costs. As of March 31st, 2022, we had approximately 304 million in cash and cash equivalents, leaving us well-positioned to continue to progress on our growth objectives in 2022 and beyond. The first quarter, which included the closing of the [Indiscernible] and the pipe was a very strong start to the year from a financial perspective. That, coupled with the commercial initiatives Rob discussed, and those that we have in progress, give us a good line of sight to delivering on our 2022 top-line plan. Looking forward, we are focused on executing for a strategic partners and customers and delivering on our business plan. I will now turn the call back over to Rob.

[Robert Piconi:]

David, thank you. And I just want to complement also you on four weeks in and getting up to speed on the business here so quickly. David is somebody that I've known from about 20 years ago. And our path that cross together in the telecommunications industry and was able to convince him to come out of retirement to join us here on our mission. I want to thank you David, for doing that.

[David Hitchcock:]

Thanks.

[Robert Piconi:]

I'm pleased with our first-quarter of 2022 as we made substantial progress towards achieving our goals. Were very well-positioned through the balance now that we enjoy a number of supportive factors. The factors include, a first strong Q1 financial performance as David just reviewed, across our income statement and cash flow, but perhaps more importantly, strong customer commercial validation across some of the largest customers, and the most important markets for renewable and energy storage across the globe. We had a growing number of signed LOI and executed agreements totaling approximately 2500 megawatt hours or 2.5 gigawatt hours across our gravity energy storage system portfolio alone. These are the signals that really, to me, give a lot of confidence and a lot of visibility as we look forward now into the business with our deployments this year and in the following years. We also built a strong differentiation and sustainability. From the beneficial reuse of waste materials to leveraging a localized supply chain that minimizes greenhouse gases from the transportation sector and supports local job growth. And I think this aspect of our sustainability is so important for our customers, it's important for our investors, our employees. Fight this reason for joining the company that we're thinking not only about what we produce and how we produce it, and all finish with the fact that we're the only energy storage company that has this aspect for the beneficial reuse of waste materials. We've had a great partnership with CEMEX along the way in this development and we continue to build on that partnership across the globe. And finally, we finish with a world-class management and employee base. Globally diverse, deep domain expertise, large project development and construction experience, with most all of us with strong prior public company experience and a track record of delivering results. But what unites us is the universal passion toward broader clean energy adoption and deployment of energy storage that enables it. Finally I want to finish the call with a thank you to all of our employees for their hard work and dedication. In particular, over the last six to nine months, as we went in to the IPO market and the stock market, announced the deal and had to keep focused on our customers. They never took their eye off delivery for our customers while we navigated both the pre-IPO market to support our transition to a public company, and then became public and began to execute as a public company, with their focus, determination, and passion to the decarbonization of our planet, none of this would be possible. I think about our employees in three groups. The first group, and to give an example of how we built this company, was a group that made it through the very difficult COVID period, an uncertain time for all of us, had to take up to 50% salary cuts. We did not lose one employee through that period. And it's just testament to their dedication and passion for our mission, and also to keep focused on the prize through a very difficult and uncertain period. There's another group of employees, as we tripled the size of the company in terms of employee headcount in the last 12 to 14 months, that joined us from other companies that we're much larger, much more predictable, that had revenue, that weren't going through an IPO process and weren't associated with the SPAC market, that came under a lot of criticism back in the second half of last year. I really want to thank those employees for their faith in us, for joining us, for staying true to their desire to pursue decarbonization with a company with a global footprint now of customers to go execute against. And then, just as an example to point out just the recent hires announced. I already mentioned David Hitchcock, who had a very successful career as both a public company and private company, CFO for also a large private equity firm. Kevin Keough, we also announced concurrent with David. I worked with Kevin Keough at Danaher. Most of you are aware Danaher is the most successful public company for about 25 years, averaging between 19% and 20% return on equity. We have a real recipe there for delivering results. I spend time there, Laurence Alexander, who's next to me here, our Chief Investor Officer. We bring that experience here to this company, and these are people that have chosen to join us with our mission. And then this morning announcing Josh McMorrow, based out of Germany and a very seasoned Legal Officer across various industries. Some of them the energy sector, a few IPOs under his belt, and a lot of strategic transactions. And I want to officially welcome all the new folks, thank all of our employees in the company and attribute to all of you for us being here today and beginning our process as a public company with our first quarterly earnings. With that, Operator, we're now ready for questions.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instruction]. Your first question comes from Stephen Gengaro with Stifel, please go ahead.

[Stephen Gengaro:]

Hello, gentlemen. Congrats on a good start.

[Robert Piconi:]

Hey there. Thank you.

[Stephen Gengaro:]

Well, thanks for taking the time to -- thanks for taking my question. So two things I want to touch on. One is, clearly the royalty payments were a big plus in the quarter. When we started thinking about how the year looks, and we're not asking for specific guidance numbers, but when you start thinking about the revenue recognition on projects and how we think about '22 and '23 unfolding and maybe relative to even the management forecast you put out there during the process of I think $150 - ish million this year and $530 - ish million next year, how is the progress there and how should we think about how the year unfolds from here?

[Robert Piconi:]

Great, thanks, Steven. Well, to the first comment on the license revenue, that obviously is more of a onetime item. We're very happy to have. Not only that recognized, but $45 of the $50 million in the bank. So that cash, obviously it's going to go to use to support our development for the rest of the year, which is I think is the main focus of your question, which is how does the rest of the year look in terms of you mentioned revenue, rack and execution. So we have projects that we just talked about above in the commentary here that are going to be in the United States, in Australia. In addition to building out the a 100 Megawatt-hour project in China. So I'd say from a regional perspective, those regions are going to be our focus. We have a lot of demand in a lot of other places. We announced Stephen and TPC in India and working toward now a collaboration with them to really look at their evolution into renewables over 60 gigawatts. Some of these players, we're just not going to able to get to this year, but for the core ones that I mentioned in these locales, you can expect that we're going to begin with revenue recognition for gravity projects. In our third quarter this year and then for the second half -- through the second half. As you're aware, we recognize revenue on a percentage of complete accounting mechanism, so that's under U.S. GAAP. As we build the systems and build them out toward progress milestones that get payments from customers along the way, we're allowed to recognize that revenue. We'll be matching up the cost for spending with our progress and recognizing revenue in line with those projects. We talked about here in the release Enel Green Power in Texas, we fully expect to get started on that. In earnest in the second half, we also mentioned Korea Zinc, BHP in Australia. They're both investors and customers, so that's a big focus for us. And we mentioned the a 100 megawatt hour in China, in Rudong that will continue now to be built out from the breaking ground in March of last quarter.

[Stephen Gengaro:]

Right now. That's hopeful color Rob and the other question I just wanted to touch on was at this point when do you think you'll have your first commercial operational facility operating?

[Robert Piconi:]

So we've always said as we went through the investor discussions that we would be building this year and turning over in 2023. I do think as we got started very quickly in China, that even that China unit from the February announcement to the mid-March breaking ground has moved and is moving very quickly as you've, I think heard a bit on the way the license payments have come through to us with most of it on the balance sheet now. And the fact that they not only are already breaking ground, but they announced also last week, China Tianying announced the agreement with the local grid operator for the integration of the grid into the State Grid. So I would say that if any units going to be first to turnover, I think in China just outside of Shanghai, there would probably be the first unit that we turn over based on how I see them moving, based on the fact that we're already in the ground there. And just the tremendous support that we've had from the local company, from Atlas renewable, and quite frankly from the local, regional municipal authorities in really expediting a lot of the approvals to have something announced and then breaking ground within 6 weeks with all permitting and things in place. So I believe pretty strongly that that's probably where we're going to see our first unit that gets turned over.

[Stephen Gengaro:]

Great. Well, thank you for the color.

[Robert Piconi:]

Thank you, Steven.

[Operator:]

Your next question comes from Thomas Boyes with Cowen and Company, please go.

[Thomas Boyes Jr.:]

Thanks for taking my questions. First one being, just love to get a better understanding of maybe with the CapEx expectations are for the year. I would imagine a good portion of it would be earmarked for the construction of maybe the mobile mass machines, so any insight there would be helpful, and maybe as a follow-up, what are the cost of the [Indiscernible] machining and how should that trend over time?

[Robert Piconi:]

Sure. Yes. The primary use of our capital is going to be associated with our brick machines, as you know, so that's really our main CapEx. We originally, Thomas, had budgeted in our very first five-year plan a lot of capital, I think over $300 million over 3 years to use for a lot of on-balance sheet financing and co-equity investments in order to get the projects built. That's really changed significantly from what our expectations were over a year ago, that we have customers that really want to acquire and own these things. So that's not to say that we aren't going to deploy capital strategically with some projects where we feel it's relevant. As we announced with the DG fuels for example, we did invest a bit in that project. But in general, the bulk of the CapEx is going to be focused on these brick machines. And a little bit also in these initial projects focused on building out to a little higher level our overall EPC and construction management. I think as you're aware, it's difficult environment out there for a lot of the companies that are actually very busy in building and constructing, especially with some of the supply chain challenges. So that's put some stress in the system and we want to de-stress that a bit with investing a bit in our own resources. That includes the software team, by the way, that we announced in October bringing that on. I'd say from a CapEx planning perspective, primarily no surprise around these brick machines. You asked roughly how much are they? They're are a modular type of brick machine construction, so they can for smaller projects will make them from anywhere from 2 million to 4 million range. For larger ones, we can build them out or do multiple manufacturing lines and spend more. Now, remember, even if we spend more on a single project, these things are amortized over many, many projects, over many, many years. We own them, so they will move around locally in the region, we aren't going to be shipping these things over oceans. They will be built in regions. They will be shipped in regions. And we will re-utilize those from site-to-site on a country in a regional level.

[Thomas Boyes Jr.:]

Excellent, and I appreciate the color. Maybe just switching quickly over the licensing business, what are the expectations for that outside of China? There's other places that you think, that that model makes sense for specific market or geography?

[Robert Piconi:]

Yeah. We had budgeted some licensing in our plan. Now, we didn't budget as much so early in our five-year plan. So this was a -- this agreement. And as I think you're aware, we had budgeted volume in China. We always just put together an individual line item in our internal budgets for licensing. But this was a little larger on the earlier front. As far as other locations and regions, there are other regions where this could make sense, and those are things we're exploring. We really like this model, Thomas, because it enables us to work with the right local partners with a design that's existing and proven for them just to go execute and for us to support what they need on road maps and even what they need from a technical support perspective, it's as required, and then they just go execute for that model to be successful. And I would say what we've done in China despite being unique in the sense of an introduction of a new U.S-disruptive technology concurrent in China. So a U.S-disruptive technology introduced in China first and in parallel with other continents, that -30-year career, I don't recall new U.S. technology starting in China. So that's was significant of itself. But the fact that this company has invested over $95 million of $100 million in Energy Vault now. So think about that. They've invested in a way that demonstrates that they're committed, that they're going to protect our IP, and that they want to go build a big business to solve a massive problem in China. I think, as you're probably aware, that China is planning to increase greenhouse gases for the next nine years till 2030, and then they're only going to become net carbon-neutral in 2060 and that's something the whole world will suffer. I'd say that in terms of us looking at these opportunities to license, I think it's a great model that starts with having the right partner, where you can move very quickly and it's the right balance between the partner leveraging their network locally and executing and building and us just supporting and having a royalty stream that's ongoing relative to that volume deployment. I think the way we structure China is a great model and we will seek to replicate that in the right locations.

[Thomas Boyes Jr.:]

Absolutely. I appreciate the insight a lot. I'll hop back in queue.

[Robert Piconi:]

Thanks, Thomas.

[Operator:]

Next question comes from Joseph Osha with Guggenheim Partners. Please go ahead.

[Joseph Osha:]

Hi, guys. And I'm sorry if this question is duplicative. I got booted off and I had to get back on. You had in the past been willing to share an aggregate megawatt backlog or commitment numbers. Is that something that you're able to do today or did you perhaps share that when I was off the call?

[Robert Piconi:]

Yes. We actually threw some of the talking points here. We had shared that, so that same number Joe, that you remember from before in our investment reviews back in Q4, we pointed to that number as well, which is about 2.5 gigawatt hours between LOI's, MOU's in agreements. And that's significant in the sense of there are things we sign where we've been selected as the technology and even as the company and we work forward to get to a notice to proceed, that then generates a final announcement. And something similar in nature to what we discussed on this call already for example, pointing to the Enel Green Power projects where we actually named the location and the sizing of it. So yes, that would be the number I think that would be the reference points right now in terms of the things we've executed in different stages of agreements that are the things we're going to be building to, now as things progress to notice to proceed and as we go forward here for the rest of the year and into next year.

[Joseph Osha:]

Okay. Thank you. That's helpful. And I assume assigning a duration to that is a little difficult so we should just probably think of it in gigawatt our terms.

[Robert Piconi:]

Yes, I think that's in megawatt hours or gigawatt hour term for now. When we get to the specific projects where the customer allows us, we may be explicit with the power. So for example, what have we said already? China, it's 25-megawatt, 100 megawatt hours. So that's a four-hour system. We disclosed the Enel Green Power, both power and duration, 18 megawatts, 36 megawatt hours. Interesting Joe, that's a two-hour system for gravity, right? For the largest global IPP in the world. I think these are significant and it also demonstrates why our strategy for EBX was the right one. It was market-driven based on what our customers tell us and that's why we adapted and went to the EBX architecture. So we could participate in this higher end of shorter-duration and have something that's flexible, modular, customizable. Because our customers were asking for it.

[Joseph Osha:]

That makes sense. Thank you. I also wanted to ask, as you talked about turning units over and I did hear from your discussion that this would be China. What sort of tests in terms of performance or costumer acceptance do you base in? And are there any concerns you have or hurdles when we might want to think about once you turned a project over, in terms of being able to recognize revenue?

[Robert Piconi:]

Yes. So the first question, what are the things we have to measure in turning something over? Typically there's a number of days that we have to operate the system after commissioning that it will be operating that generates our ability to have a final last payment from the customer. And typically our contracts are structured on availability of power, so first of all, we have to have a certain percentage on, let's say, of being able to provide and discharge power. In addition, I'd say probably the main other performance metric is efficiency -- or round-trip efficiency. So that's another important aspect, which is why, to your second question, do I have any concerns? And the reason we spent the capital and did a large Series B with SoftBank was to build out a commercial scale system. And not only build it, but interconnect it, not to diesel gens or other infrastructure locally, but interconnect it to a live grid. So that investment and all that testing and all of the optimization that we did allowed us to optimize the overall solution, and all those learnings went into the development and design of EVX. So in terms of concerns, we've done this before, we've done it at scale, it's gravity, it's not an idea, it's a law, right, for centuries, for lifetime. So it's, I'd say that for the core piece of the technology and we're using, as you know, motors and power electronics from the likes of GE, Nitec, Siemens, AVB. All the companies that have been around forever making these things for pump, hydroelectric dams, and a lot of other systems. So from a technology risk, throwing the software that obviously is pretty sophisticated, but we also proved that out. And we're building a building, we are building a 20-story building as far as that goes. So I don't really see a lot of risks there that doesn't mean that on first systems will it take a little longer maybe to commission some of them? It might. But that's just a when question, not an if and as I said, the main confidence we have is the fact that we already have integrated these things together in a new system called the EV1 tower that's still in Switzerland that we're going to actually be taking down here over the next few quarters. But in any event, I think we feel pretty good on both the technical viability, the lack of risks on the technology side and our ability to regardless get these things turned over in a pretty efficient way.

[Joseph Osha:]

Alright, thank you very much.

[Robert Piconi:]

Great. Thanks, Joe.

[Operator:]

Next question comes from Brian Lee with Goldman Sachs. Please go ahead.

[Brian J. Lee:]

Hey guys. Good afternoon. Thanks for taking the questions. I hopped on a little bit late.

[Robert Piconi:]

Hey, how's it going?

[Brian J. Lee:]

I might have missed this, but can you actually quantify your top-line guidance for '22. I know the last time you published a forecast, I think it was for a $148 million of revenue in 2022 and then post that, you announced the $50 million licensing agreement with Atlas, which is sounds encouraging you're receiving those funds. If my math is right, I guess it implies something in the roughly $200 million top-line range for recognized revenue in 2022. You made a comment during the prepared remarks that you feel pretty comfortable about the guidance. Is that the right number to be thinking about in the models here, your reconfirming the $200 million or so on top line for 2022?

[David Hitchcock:]

Yeah. This is David. I don't think we reconfirm that 200 number. I think given the good start in the first quarter and the projects that Rob laid out as we went through all of our commercial progress that we're focused and we've got good line-of-sight on delivered roughly a $148 million for the year.

[Brian J. Lee:]

Okay. Inclusive of the licensing. Okay. That's fair. And then maybe two more specific questions just as we try to calibrate the model. One is, you mentioned Enel and Korea Zinc and Atlas. I know DG Fuels, you also mentioned them, but can you give us an update as to the progress with that large customer and then whether or not you're anticipating to see shipments in revenue recognition from them this year? And then secondly, on Atlas, outside of the $50 million licensing revenue you'll see, can you give us a sense of the range of revenue you'll see on the 100-megawatt hour deployment? Given that's the first one, it sounds like that's going to be fully online and sounds like could be in 2022 when it's all said and done. Thank you.

[Robert Piconi:]

Yeah. Thanks, Brian. It's Rob here. I'll take these. First of all, regarding DG fuel. We just announced, as you would've seen, the up-scopes of that first contract, which was more than doubling it. And we, as far as the timing of that project, will be up to finally DG fuels and finalizing, as now we have a larger up scope, a lot of the work to put that together in terms of when we're actually going to get to a notice to proceed. Okay. We haven't assumed any of that revenue necessarily in this year. Okay. And so as David said, just to reiterate, our public guidance has always been a 148 million. If we announced something afterwards, that doesn't mean it's on top of the 148. That means that it's just a part of what we're announcing toward our number for the year which has not changed. And as David said, we feel good about where we are with this start and the projects underway. I would add in addition to Korea Zinc, as you mentioned, and their wholly-owned companies, ARC Energy and Sun Metals BHP to Australia. So they're, as you know, both an investor and someone we're working with on storage. For the 100-megawatt hour in China, we are, and have started building that and we'll be giving, I think, at our next call, some guidance on the rough timing of that. It's obviously gotten started already and we're working with them on supporting a lot of the development now that they're in the ground with their -- the piling activity and things. It was pretty amazing, Brian. As I mentioned on the call, I don't know if you caught it because you said you came in at a little later, but they, from the timing of the announcement, February I think, it was actually February 1st was when we announced it, the pipe investment of $50 million and then the license and royalty deal, they were in the ground in six weeks. China never ceases to amaze me. I've been working across three industries over the last 30 years there, so I will never underestimate the speed and efficiency that they can move around infrastructure, which is what this is. So to your question on the ability of what that -- is that going to fit in our plan, it's already in the ground. I expect that will be a part of our plan, and we'll give some updates next time around on what that's going to be relative to the second half of this year.

[Brian J. Lee:]

Alright, thanks a lot. We appreciate it.

[Robert Piconi:]

Yes. Yes.

[Operator:]

Next question comes from Noel Parks with Chewy brothers. Please go ahead.

[Noel Parks:]

Hi. Good afternoon.

[Robert Piconi:]

Noel, how are you?

[Noel Parks:]

Really good thanks. I wonder if you would talk a little bit about total cost of ownership and of course was some of the geopolitical events we've had on top of a big upsurge that here has been in lithium pricing. I know originally you talked about the differential between your total cost of ownership versus a lithium storage solution. I wonder, have you done any updated calculations or you have a feel for what that delta might look like now at current prices?

[Robert Piconi:]

Yeah. Well look, what I can tell you about that, because unfortunately that type of question is always -- it depends. And let me be very clear on what I mean by that. There's a power duration -- there's a duration of the storage, and then there's the power that you have to deliver that -- just as an example, the two projects we mentioned here, we were specific on them. You have Enel with 18-megawatt, 36-megawatt hour, a two-hour system that will have a certain cost profile based on what you have to invest to deliver that power and only over two hours. Okay? Then you have a system like the one in China that's 25-megawatt over four hours, so 100-megawatt hours. So that's going to have a different type of a profile. So the range -- so there will be a range of costs across the different power that you define and across the duration. Now that being said, let me get into your question a bit on the components of that. What you're calling total cost of ownership, we look at it as levelized cost of energy, or storage that feeds into the levelized cost of energy. So typically, you have a CapEx component. So you asked about Lithium. So we share that with Lithium. We both have CapEx that you have to invest upfront to build the system. That's number one. Now secondly, Lithium has, that we don't, what's called augmentation CapEx. That means as their battery cells degrade, because those cells degrade, as you know, just like your cellphone or laptop, or your electric vehicle car, those cells have to be replaced after certain years. And the more you cycle it, they deplete at an accelerated rate. So there's a second component of levelized cost is what's called augmentation CapEx, where there's technologies that degrade and that would be Lithium-ion if you asked about. The third component is the operating expense. Okay. So this is a very important component because it's drives what goes to the P&L every year for customers. So they're very sensitive on this point. And as far as Lithium-ion goes, those facilities have to be air conditioned, for example. If they are in hot areas, you're going to get a higher type of an OPEX costs vis -a - vis what we have, we have power electronics, but we're in a, essentially a covered building that we can operate really under any ambient temperature without any specialized cooling or heating. We have a, I think an advantage relative to the operating expense of these things. And we're just infrastructure, we don't degrade as well as you know, so you don't have to replace anything on our system except under normal maintenance of some of motors and the power electronics, there's a normal maintenance schedule and things like bearings and cables and things like that. So those things you replaced but you aren't replacing whole battery cells. So for us, because of also the fact that we don't degrade, that's another significant benefit both on augmentation CapEx, which we don't have as I said. And even on that operating expense and then you get into end of life. I think technology will evolve hopefully to recycle more and more of what today constitutes a Lithium Ion battery. We're not there yet. So that's a little bit of a liability on balance sheets for us. We're just a building and our infrastructure can be built. And last, we say our technical life, it's 30-plus years. So it's a building and just like pump hydro electric dams, they've been going for almost a 100 years. A lot of them are 40 to 50 years old and I don't think anybody is going to take them down, so we have a pretty long technical life. Does that help at least frame the comparison?

[Noel Parks:]

It does, it's interesting because just beyond the raw materials costs going into lithium storage, especially the operating and augmentation costs are helpful so thanks.

[Robert Piconi:]

Yes. Okay.

[Operator:]

Thank you. I would now like to turn the floor over to Rob Piconi for closing remarks.

[Robert Piconi:]

Okay. Great. Thank you, Operator. And I want to thank everybody. That's taken some time to listening with us today as hopefully you got a sense from us, we're really excited about the start that we have today. But more importantly, we're excited about the market validation and the commercial and customer progress that are things you don't see in last quarter and you may not see in the next quarter. But these announcements that we've made with the largest companies in their respective countries for power and TPC for example, the largest power provider in India with the likes of large industrial giants like Korea, Zinc, like BHP. With groups that are distributing and building out renewables and signing long-term agreements with utilities like Enel, Green Power. So the largest global IPP in the world. It's very significant and gives us a lot of confidence as we continue to build those relationships that are some of them quite new. So both Korea, Zinc and Atlas is a bit new, but just seeing tremendous focus from them and in particular in China, as you heard, the speed that we're moving there is really unprecedented from anywhere else in the world. So fairly I want to thank all of you here for listening in and again, thank our employees for supporting our development and who continue to support our development up to this point. Thank you very much.

[Operator:]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.