NuScale Power Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

Key Takeaways

  • Romania Phase 2 FEED Authorized: RoPower and SNN received approval to proceed with Phase 2 Front End Engineering Design for the Romanian SMR project, with NuScale subcontracting under Fluor to deliver modules over a 12-month design period.
  • SMR Growth Outlook: Surging electricity demand—driven by AI/data centers projected to use over 9% of US power by 2030 and by industrial decarbonization—positions NuScale’s 24/7 clean baseload SMR technology as a timely solution.
  • Strong US Policy Support: The 2024 Energy appropriations earmark $800 million for two near-term SMR deployments and $100 million for Gen-III+ reactor development, while the Bipartisan Nuclear Advance Act streamlines NRC licensing and encourages foreign investment.
  • Technology & Manufacturing Lead: NuScale is the only SMR vendor with NRC design certification, expects approval of its 77 MW power module by mid-2025, and is accelerating module forging and fabrication through strategic supply-chain partnerships.
  • Q2 Financial Snapshot: As of June 30, NuScale held $136 million in cash with no debt, posted a $74 million net loss (including warrant valuation), cut operating expenses by $12 million year-over-year to $42 million, and signed a revenue-generating FEED contract.
AI Generated. May Contain Errors.
Earnings Conference Call
NuScale Power Q2 2024
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good afternoon, and welcome to NuScale's Second Quarter 20 24 Earnings Results Conference Call. Today's call is being recorded. All participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. A replay of today's conference call will be available and accessible on NuScale's website at ir.nuScalepower.com.

Operator

The web replay will be available for 30 days following the earnings call. At this time, for opening remarks, I'd like to turn the call over to Scott Kozak, Director of Investor Relations. Please go ahead, Mr. Kozak.

Speaker 1

Thank you, operator. Welcome to NuScale's Q2 2024 Earnings Results Conference Call. With us today are John Hopkins, President and Chief Executive Officer and Ramzi Hamady, Chief Financial Officer. On today's call, NuScale will provide an update on our business and discuss financial results. We will then open the phone lines for questions.

Speaker 1

This afternoon, we posted a set of supplemental slides on our Investor Relations website. As reflected in the Safe Harbor statements on Slide 2, the information set forth in the presentation will be discussed during the course of our remarks and the subsequent Q and A session includes forward looking statements, which reflect our current views and existing trends and are subject to a variety of risks and uncertainties. You can find a discussion of our risk factors, which could potentially contribute to such differences in our SEC filings on Form 10 ks for our fiscal year 2023 and in our prior SEC filings. I'll now turn the call over to John Hopkins, NuScale's President and Chief Executive Officer. John?

Speaker 2

Thank you, Scott, and good afternoon, everyone. To begin, I'll give an update on recent developments with the ROW Power project as outlined on Slide 3. In mid July, SNN and Rho Power were authorized to proceed with Phase 2 Front End Engineering Design or FEED. Later that month, NuScale attended a Row Powered floor signing ceremony in Romania to announce the authorization to proceed on the contracting of Phase 2 FEED with the Dorchester site between Fluor and Row Power. Along with the representatives from SNN, the Romanian government and the U.

Speaker 2

S. Secretary of Energy, Jennifer Granholm. We are working as a subcontractor under floor to provide NuScale SMR power modules. Next, let's consider the current nuclear landscape and why we believe SMRs, especially NuScale, are well positioned. As depicted on Slide 4, today's environment is experiencing a surge in electricity demand, while companies and governments seek to mitigate the production of emissions contributing to climate change.

Speaker 2

Nuclear energy is increasingly considered a secure energy solution to meet growing demand and achieve ambitious climate goals. Companies are pressured to source reliable energy while fulfilling their commitments to reduce emissions. They are concerned with having the energy to power their facilities and where that energy comes from, placing greater emphasis on decarbonized baseload energy. For instance, last month, Google reported that increased electricity demand driven by AI in its growing fleet of data centers caused the company's greenhouse gas emissions to grow 48% above its 2019 baseline, posing a challenge in meeting its carbon neutrality goals by 2,030. The U.

Speaker 2

S. Department of Energy aims to triple nuclear capacity, adding 200 gigawatts to meet net zero emission goals by 2,050. Nuclear energy is a valuable asset in the context of the global energy transition because it is a sustainable solution that operates reliably. This combination does not exist with other current energy solutions like wind or solar, which are intermittent and weather dependent. NuScale's growth potential in the U.

Speaker 2

S. Is significant as the need for nuclear energy transition becomes clearer. Another opportunity for advanced nuclear power is to decarbonize industrial processes. As you may recall, NuScale can provide process heat for industrial customers by offering a safe, clean, reliable baseload energy source with a limited land footprint. NuScale's compact emergency planning zone allows us to co locate with production facilities.

Speaker 2

This positions us favorably when engaging with potential manufacturing customers, many of which are thriving due to onshoring trends in the U. S. And we are having numerous productive discussions in this area. The most exciting source of new demand is the rapid growth of data centers to support AI. These facilities are projected to consume more than 9% of domestic electricity by 2,030.

Speaker 2

By producing uninterrupted power, advanced nuclear is the ideal solution to meet these energy needs. Slide 5 highlights the data center and AI landscape. Our developer partner, IntraOne Energy, is working diligently with us on deploying NuScale SMRs globally. With a combination of IntraOne Energy and NuScale, we have originated opportunities, projects and relationship with numerous potential end users, including some of the world's largest tech companies. These tech companies related opportunities emerged over the last several months, mainly driven by significant demand for hyperscale and AI infrastructure growth.

Speaker 2

Considering the evolution of tech companies' electricity needs, their current system urgency is justified. Data centers, AI and cloud storage are 20 fourseven power consumers that require an uninterrupted reliable power supply. And they are critical for many tech companies looking to compete in today's market. Goldman Sachs forecasts a 15% compound annual growth rate and U. S.

Speaker 2

Data center power demand through 2,030. The speed of demand growth is evident in Virginia, for example, where data centers are consuming 1 quarter of the state's electricity.

Speaker 3

Several of

Speaker 2

the country's most populous regions, including Dallas Fort Worth, Silicon Valley, Chicago, New York and Greater Atlanta have construction activity projected to lead to a significant 50% or higher increase. This is where NuScale comes in. NuScale is an SMR technology provider and will grow by focusing solely on installing our technology inside power plant projects. Our SMR technology resonates strongly in areas seeking reliable decarbonized energy because our solution is clean and always on 20 fourseven. Our SMRs are scalable, reliable and near term deployable, aligning with clean energy commitments.

Speaker 2

Our global development partner, EnterOne Energy has creatively engineered a flexible and bespoke business model that provides utilities and commercial consumers with a solution to get SMR generated energy offtake without the need to capitalize, own or operate a nuclear energy power plant. On Slide 6, we examine strong bipartisan support in the U. S. For advanced SMR and nuclear energy and new scale technology specifically. In today's ever changing political environment, the fact that both sides of the aisle agree on the importance of advanced nuclear is a testament to the unmet need for decarbonized baseload energy and the strength of our offering.

Speaker 2

Looking ahead, there are 2 new funding opportunities in the Energy and Water fiscal year 2024 appropriations that NuScale and its customers can pursue. The precise objectives of these appropriations are near term deployability, building a fleet and adding power generation. This includes $800,000,000 through a competitive cost share award to support up to 2 near term utility commercial deployments of light water reactor SMR technology in the U. S. In addition, dollars 100,000,000 will be devoted to supporting grid scale generation 3 plus reactor design, licensing, supplier development and site preparation to deploy by 2,030.

Speaker 2

The Department of Energy intends to announce final selections in mid-twenty 25 and we believe NuScale is well positioned for consideration to be a recipient or a recipient partner under both of these awards. In addition, the Bipartisan Advance Act was signed in July 2024, which seeks to streamline the nuclear energy regulatory process by allowing the U. S. Nuclear Regulatory Commission or NRC to hire more staff, reduce licensing fees, speed application processing and ease the burden of environmental reviews. For example, the act directs the NRC to complete reviews of combined license applications for new reactors at existing or adjacent sites on an expedited schedule, which should result in fewer delays and limit the cost of receiving a final decision on the license.

Speaker 2

The NRC was also directed to rely upon existing licensing information when a new reactor is built at an existing site, ensuring a more predictable and timely decision. The act includes several crucial provisions that could have a significant impact for NuScale. One provision aims to streamline the conversion of retired fossil fuel plants into nuclear facilities, potentially reducing costs and bidinfoting rigors in the United States that might otherwise struggle during the energy transition. Another provision seeks to encourage increased foreign investment in the American nuclear sector by removing restriction on foreign entities' ability to seek certain Additionally,

Speaker 3

the

Speaker 2

Additionally, the act supports international harmonization efforts to enhance the global regulatory process and promote more efficient licensing approaches with international customers. The impact for NuScale could potentially facilitate NuScale's collaboration with international customers and partners with strong backing from the U. S. State Department to ensure timely compliance with foreign regulations. Moving on to Slide 7, our readiness for deployment is far more advanced than our SMR technology peers and the gap continues to widen.

Speaker 2

We are the only SMR technology with design certification from the NRC. While our SMR competitors remain early in the process of working towards approval. Our standard design approval application for a 77 Megawatt operate is scheduled to conclude by mid-twenty 25. The design is based on our same fundamental safety case and features approved by the NRC in 2020. And we believe the 77 Megawatt NuScale Power Module supports an even more comprehensive range of customers.

Speaker 2

We're also leading the path on the manufacturing side. NuSon, our SMR manufacturer, continues making progress in producing the 1st new scale power modules and all the forgings needed to support the start of fabrication for our upper reactor pressure vessels. This continued work provides advantages to our next project deployment, shortening delivery significantly. When it comes to manufacturing our modules, NuScale's relationship with our long term supply chain partners, many of which are strategic investors, are one of our most significant sources of strength. Our robust supply chain has positioned NuScale as a clear manufacturing readiness leader in the SMR space.

Speaker 2

NuScale's ongoing efforts to cultivate these essential relationships set us apart from our peers. In June, we hosted our 3rd annual supplier working group in Fort Worth, Texas, where we engaged with 43 representatives from 22 supplier organizations, sharing our significant accomplishments, providing updates on our deployment progress and collaborating on supply readiness. These partnerships are crucial for the long term delivery of high quality cost competitive components. We remain devoted to working closely with our partners to develop a global supply chain that addresses the demand for NuScale's technology as it grows. I also want to touch on the request for proposal recently submitted by NuScale in IntraOne Energy to the Great British Nuclear SMR Competition.

Speaker 2

Given our regulatory head start and manufacturing readiness, we are uniquely prepared to deploy dependable, carbon free nuclear power across the United Kingdom. Before I turn the call over to Ramzi, I want to acknowledge that 17 years ago, Chief Technology Officer and Co Founder, Doctor. Jose Reyes' dream of designing a smaller, safer and more cost competitive alternative to conventional nuclear power became a reality as NuScale Power opened its doors. As we celebrate 17 years of memories, we remain committed to improving the quality of life for people worldwide through the advancement of SMR nuclear technology. I could say with confidence the exciting momentum building right now is remarkable.

Speaker 2

Whether it's industrial electrification, process heat or the rapidly escalating demand of the data economy, NuScale's SMR technology is part of the energy solution for the future. Given our ability to produce clean, reliable energy, reach end users and help them achieve their sustainability goals. We maintain competitive advantages of technology, safety, manufacturing readiness, siting and regulatory success and are prepared to produce and deliver. So as 2024 continues, we are pleased with where we are and look forward to updating you on our progress. Now I'll turn it over to Ramzi to provide our financial update.

Speaker 2

Ramzi?

Speaker 3

Thank you, John, and hello, everyone. Our financial results are available in our filings, so my focus will be on explaining major line items. Please Slide 8 for 2nd quarter results and relevant factors impacting our financial position. All figures following are for Q2, 2024, unless I say otherwise. NuScale's overall cash position was virtually unchanged during the period and in the 2nd quarter with cash and equivalents of $136,000,000 $5,100,000 of which is restricted and no debt.

Speaker 3

This compares to cash and equivalents of $137,100,000 $5,100,000 of which was restricted and no debt at the end of the prior quarter. For the quarter ending June 30, 2024, Leasekill reported revenue of $1,000,000 and a net loss of 74,400,000 This includes a non cash expense of $36,700,000 related to an increase in the fair value of warrants outstanding. During the same period in the prior year, the company reported revenue of $5,800,000 and a net loss of 29,700,000 dollars During the current quarter, we reported an operating loss of $41,900,000 compared to an operating loss of $56,100,000 in the Q2 of 2023. This year over year reduction in quarterly operating expense of $14,200,000 reflects the company's successful efforts to reduce expenses and operate more efficiently. Subsequent to the Q2 of 2024, the company executed a revenue generating agreement in relation to the advancement of the Dorjeste project FEED Phase 2.

Speaker 3

Over the next 12 months, we anticipate additional revenue from Fluor Corporation in respect of our continued contributions towards this project. Looking forward, we continue to be focused on managing liquidity and risk and remaining good stewards of shareholder capital. I will conclude my remarks with a brief view of our capitalization summary on Slide 9. Additional information may be found in our SEC Form 10 Q and earnings release. With that, I'd like to thank you again for joining today and for your continued support of NuScale.

Speaker 3

We'll now take questions. Operator?

Operator

Your first question comes from the line of George Giancaritas with Canaccord Genuity.

Speaker 3

Please go ahead.

Speaker 4

Hi, everyone. Thank you for taking my questions. Maybe if you could provide us a little bit more color on your discussions with some of the data center companies, the hyperscalers. To the extent there are bottlenecks in the deployment of your reactors, is it possibly due to the fact that there aren't independent third parties who are willing to provide the risk capital and maybe own the reactor? And to what extent can Enter 1 sort of play a role in helping to fill that void?

Speaker 4

Thank you.

Speaker 2

Yes. This is Sean. It's I've often stated and you're spot on in your comment, we have the technology, we have the capacity to execute. And what's been missing in this industry is the so called developer you just mentioned. We've been working close to 2 years now with EnterOne in the development of a model of how to approach customers that you commented on like the AI centers and data centers and industrials.

Speaker 2

These particular industries, they need 20 fourseven clean energy. They just don't necessarily want to own the nuclear asset. What they would like to do is have somebody provide them a build own transfer or a build own model where they provide the long term PPAs required. And our global developer partner helps bring the financing and the ability to do that build on or build on transfer.

Speaker 1

Got it. Thank you. And maybe as a follow-up, can you just

Speaker 4

maybe as a follow-up, can you maybe comment on any momentum? You did make some comments on what's happening in the U. K, but outside of the U. K, any highlights, any momentum, maybe in other geographies in Europe and Asia? Thank you.

Speaker 2

Yes. We're seeing significant interest in a lot of it in Central Eastern Europe is driven by inner security as well as climate disruption. Romania is a good case in point. The Romanian project, we've been working with the Romanian government for quite some time, as I commented. Floor Corporation will be the prime contractor.

Speaker 2

We're the subcontractor for that project, which will bring in our power modules to the Ropower project. But that's the one that's most furthest along in Eastern Europe or Central Europe, but we're also in discussions with other countries. Because again, it's the same comment as I said before, they need clean 20 fourseven reliable energy. So the whole market is starting to resonate after COP28, COP29 with the advanced act that we hear on urbanization. That's a very key piece because it allows the regulatory cooperation between a country's regulatory entity working with our NRC.

Speaker 2

So we're pretty bullish on what we're seeing in the market overall. Thank you.

Operator

Your next question comes from the line of Marc Bianchi with TD Cowen. Please go ahead.

Speaker 5

Thank you. I want to talk about data centers

Speaker 1

the last couple of quarters here,

Speaker 5

not just from you guys, but we hear it kind of everywhere you look in the market. What's the timeline to get something a project announced?

Speaker 2

Mark, this is John. We're working it hard with our both our customer and our developer. As you know, these are pretty complicated transactions and they just take time that we're in almost daily, not weekly communications trying to drive closure to some of these projects. We're as anxious as you are.

Speaker 5

Okay. On Romania, nice to see moving to Phase 2 FEED here. What's the timeline for that process and when would we expect to hear more about that?

Speaker 2

Yes, we actually kick off our initial alignment section next week with the customer, Fluor Corporation and NuScale to start the process. And as you said, the scheduling of starting and commencing that. The overall effort for the FEED Phase 2 will take approximately 12 months to complete. So, we're really looking forward to working with both our customer and Fluor Corporation on advancing this project.

Speaker 5

And the revenue that you talked about in the slides and in the comments is related specifically to the Phase 2 feed? It would seem that way if you're talking about the next 12 months. And then any steer you can give us on the magnitude of opportunity there?

Speaker 3

Mark, this is Ramsey. How are you doing?

Speaker 1

Good. Thank you.

Speaker 3

Good. How are you doing? I'm very well. Thanks. I'm glad you're asking about this because I remember back in I think we first met in October last year and talked about during our Investor Day in New York and talked about the business model.

Speaker 3

And I think what this highlights very importantly is that our business model, as we outlined it, included revenues from services and technology, pre COD revenues and not just from the hardware of the reactors. And so this is a great example of the fact that we're generating revenue pre COD. I think that's important for us to note. In terms of the magnitude, Mark, I know it's been tough with me not providing guidance on earnings or on magnitude of revenues and we're still not doing that yet. I think once we have a couple more projects in the pocket and we have more visibility, we're going to start doing that.

Speaker 3

But right now, we're going to stay away from providing guidance.

Speaker 1

Yes.

Speaker 5

Okay. Maybe to ask you another number question on can you stay what cash from operations was in the quarter? I mean, I know we'll get it in the queue, but just so that we could frame kind of discussion about where that might go?

Speaker 3

Yes, absolutely. Yes, look, I'll focus on OpEx because what and I'm going to go on a look back basis, Mark, 1st person look forward basis, but here's some guidance I think and offer. Over the 3 quarters, let's say Q2 'twenty three to Q4 'twenty three, NuScale was averaging about, let's say, dollars 74,000,000 in OpEx. And if I take out CFPP, it's probably around $56,000,000 $57,000,000 dollars When we did our RIF back in January, we announced in a press release, we said we're realizing savings of 50,000,000 to 60,000,000 and I just had my team doing the analysis. So we started to realize those savings.

Speaker 3

So we've gone down from OpEx around $55,000,000 to OpEx at average $43,000,000 over the last two quarters. So I think that's a great achievement for us. That's delivering on what we said we're going to deliver, which is, real prudence in terms of our expenses and cost savings to our shareholders.

Speaker 5

Yep. Okay, that makes sense. Thanks, Ramsey.

Speaker 3

Thanks so much, Matt.

Operator

Your next question comes from the line of Ryan Fink with B. Riley Securities. Please go ahead.

Speaker 6

Yes. Hey, guys. Thanks for taking my questions. Just to follow-up on Row Power, could you remind us what the next steps are beyond FEED Phase 2 and the potential timing around those next steps?

Speaker 2

I'm sorry, I was on mute. This is John again. As I commented that we completed the preliminary FEED and it was very successful. This next phase, as we said, is the front end engineering design. And it's the engineering design approach used to control our project expenses and go through this next year to finalize to go into the final approval by the Romanian government for the next phase of the project would be which would be to move forward on the complete project itself.

Speaker 2

So the fee package for us is and for Fluor Corporation, as we stated, we're providing the engineering deliverables for our piece of it to Fluor. Fluor is the designated, EPC on the project, if that helps.

Speaker 6

Okay. Thanks, John.

Speaker 2

The duration of this, we kick off hopefully next week. It's about a 12 month program.

Speaker 6

Would you expect revenue to start contributing in 3Q related here?

Speaker 3

I'll add to that, Ryan. Yes, we signed a revenue generating contract. I don't want to make any statements around GAAP revenue just in terms of recognition until we actually book that, but we did sign a revenue generating contract.

Speaker 6

Okay. Thanks, Ravi. And then just one more, I guess. Can you talk about the competitive landscape today, not only on the SMR and nuclear side, but when you're talking to data center customers and others, are you also competing against other types of technologies?

Speaker 2

The customers who we're talking with right now, some of them will probably put out an RFP that would involve other technologies. It depends on what they're asking for. But a lot of conversations that we are engaged with right now, it's really about, as I commented before, the ability to bring the front the BLT model and the BOE model, we've yet to see another developer of the magnitude that we're seeing here with the Tier 1 banks that we're working with coming forward with that similar type model. We hear discussion about it that at this point, the competition as you know, as I commented before, we are going through our power upgrade, but we did get through the licensing process. And as far as I know, no other U.

Speaker 2

S.-based technology anyway has completed the design certification application for the Nuclear Regulatory Commission.

Speaker 6

Great. Thanks for that color guys. I'll turn it back.

Speaker 3

Thank you, Ryan.

Operator

Ladies and gentlemen, that completes the question and answer session. I'll now turn the call back over to NuScale's CEO, John Hopkins, for closing remarks. Please go ahead.

Speaker 2

Thank you, operator. NuScale, again with our strategic partner, Enter 1 Energy, is executing, we believe, a very robust project development pipeline and are prepared to deliver with industry leading manufacturing readiness. And we believe we're well positioned to commercialize the NuScale SMR technology. We're very pleased with our progress and remain steadfastly focused on our goals. And I'd like to thank everybody for participating today.

Speaker 2

Thank you.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.

Powered by Quartr