Ameresco, Inc. (AMRC) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Ameresco’s Q4 2015 Earnings Conference 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. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to introduce your host for today’s conference call Mr. Gary Dvorchak. You may begin.

Thank you, Kevin and good morning everyone. Thank you for joining us for Ameresco’s fourth quarter 2015 earnings conference call. I am joined on the call today by George Sakellaris, Ameresco’s Chairman, President and Chief Executive Officer; and John Granara, the Company’s Chief Financial Officer. On the call, management will review the operating and financial highlights of the fourth quarter as well as discuss full year 2015 results. Following the highlights, we will take questions from the audience. Before I turn the call over to George and John, I’d like to make a brief statement regarding forward-looking remarks. This call contains forward-looking information regarding future events and future financial performance of the Company. Ameresco cautions you that such statements are just predictions and actual results may differ materially as a result of risks and uncertainties that pertain to our business. Company refers you to the press release issued this morning and the Annual Report filed on Form 10-K with the SEC, which discusses important factors that could cause actual results to differ materially from those contained in the Company’s projections or forward-looking statements. Company assumes no obligation to revise any forward-looking statements made on today’s call. In addition, the Company will be referring to non-GAAP financial measures during the call. The non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. A GAAP to non-GAAP reconciliation as well as an explanation behind the use of non-GAAP financial measures is available in our press release as well as our prepared remarks. I’ll now turn the call over to George Sakellaris. George?

Thank you, Gary and good morning everyone. As I look back on 2015, I can see that our value proposition is increasingly relevant and enduring. Government agencies, schools, hospitals and other organizations face unending pressure to reduce operating costs across their facilities. Our clients turn to energy efficiency as a natural solution, because the savings can be meaningful and can finance the work. Coupled with market forces that encourage living in a sustainable manner, the rationale for energy efficiency and renewable energy will persist well beyond 2016. We entered 2015 optimistic about our prospects. That confidence was borne out by our solid performances, notably in our core business. We delivered good growth despite challenges in certain business units. Our Federal team grew revenue by 20% in 2015, to over $127 million. The U.S. Regions team grew its revenues by 14%. Adjusted EBITDA for the entire Company grew 12% to $46 million, building on the 45% growth in 2014. We also achieved success in another strategic goal, which is to grow our recurring revenue streams, those being operations and maintenance, and the sale of electricity generated from the distributed generation assets that we own. Federal market O&M revenue increased 15% in 2015. O&M contracts are typically multi-year, giving us good visibility on income for years to come. Our Federal O&M contracts currently sum to over $700 million of revenue over the next 18 years. Similarly, during 2015, we achieved growth in the sale of renewable electricity from assets we own, up 6.5% to $55 million. Our approach to this business is unique, in that we are not attempting to be an IPP. Rather, we build and own renewable power plants associated with ESPC clients, thus leveraging our relationships with those clients. We currently have 158 megawatts of producing assets, and another 20 megawatts under construction. To drive growth, we are capitalizing on three clear trends in our markets. Projects are getting larger, there is more renewable energy as part of the overall solution and there is expanding interest in efficiency driven by economic and social imperatives. The trend to larger projects is especially apparent in the public housing market, where we are a leader. In recent years, our public housing energy specialists have implemented ESPCs with project capital exceeding $500 million. Just this year, we announced projects in Birmingham, Alabama, Holyoke, Massachusetts and Syracuse, New York. Most importantly, on last quarter’s call we mentioned an extremely large housing award in a large Northeastern city, which we carry in our backlog at $75 million. We are now completing the audit that will determine the exact scope of the project. Our success in 2015, and our confidence in continued growth in 2016 and beyond, is not simply a function of market growth. We have established ourselves as a trusted sustainability partner, making our competitive position strong. We also have a multiyear track record of delivering on our customer commitments, earning us a reputation for reliability. And we are a recognized innovator, constantly using new technologies and techniques to better deliver on our value proposition. Our position as an innovator is very important, so let me elaborate to that. Here are some examples of innovations we realized in 2015. In distributed generation, we installed the largest solar facility in the state of Minnesota. We also installed 18 megawatts of on-site generation with the U.S. Army. And in Maine, we completed a micro-grid demonstration project that included battery storage. Furthermore, we also pioneered in the area of deep energy retrofits, with a project in Maryland that reduced energy consumption by more than 60% across 1 million square feet of office space. Finally, in Washington State we installed a first-of-its-kind LED street lighting project. Our clients look to us for innovative solutions that meet their energy efficiency and renewable objectives. In 2016, we intend to again lead our industry in innovation. As we look back in 2015, we met most of our goals. We accelerated revenue growth, expanded operating margins, and grew EBITDA. However, I know we could have done better. Even with our core businesses putting up double-digit growth, consolidated revenue grew only 6%. Like all businesses, we had challenges, and we tackled them head-on. First of all, issues in Canada were a drag on our results. Revenue in Canada was down 30% this year, and we lost a material amount of money. The main issue was a large project, referred to internally as SRO. The SRO project is not representative of our core business, as it is mainly a general construction project. In retrospect, we see that it was bid inappropriately, both in pricing and terms. It suffered extensive cost overruns during its life, including unanticipated new costs this quarter. We expect to have SRO completed and behind us this year. As we put SRO project behind us, we expect profitable growth to resume in Canada in 2016. Most important, we recruited an outstanding new leader. In September 2015, we recruited Bob McCullough to lead this unit. Bob has more than 30 years of experience in leadership positions within the energy efficiency, building technology and construction industry. Under Bob’s leadership, we reconstructed the Canadian operation, so that the organization and cost structure fit the realistic size of the market opportunity. John will provide more details on the actions taken and associated one-time charges. The second challenge was our energy monitoring and management software business. This unit was not performing to its potential, and we decided to go to market in a different and we think better way. Rather than a stand-alone business, we are integrating the software and analytics into our project work. This leverages the sales effort being made already, and adds value to our project offering, improving the odds of an award. As a result of restructuring the software group, we took charges in the fourth quarter to account for the cost of realignment. John will review those in his remarks as well. The third challenge was sluggish demand in the off-grid integrated PV business, which was down 24%. In this business, our principal application is micro-grids for oilfield exploration and production. With the plunging price of oil, exploration is slowing significantly as CapEx budgets get cut. Looking forward, we are excited about our prospects. We came in 2015 optimistic, due to our value proposition and our market opportunities. We enter 2016 even more optimistic, and with good visibility. Our $1.4 billion of total backlog is higher than what we started with in 2015, thanks in part to over $0.5 billion of new awards this year, the highest level since 2012. We have put in place four long-term strategies to drive growth. First, we are committed to aggressively but prudent spending in project development. We want to continue to build our project pipeline, and the only way to do that is with people calling on prospective customers. Analysts expect our industry to grow 6% to 8% annually for the next few years, but we want to grow faster. We spent $2 million more this year compared to last year on business and pipeline development. A good portion of that additional $2 million was used to fulfill a second element of the growth strategy, which is to penetrate new regions in the U.S. in which we were underrepresented. We have established a new presence in six states, including two of the largest in the U.S. The addressable market in those two states alone is quite large, and we expect them to become meaningful contributors in the next year or two. Third, we will continue to build our portfolio of distributed generation assets. That revenue is recurring and high margin, and creates a great foundation for the Company. More projects are including a renewable energy component, which plays perfectly to our expertise. We expect to add more than 20 megawatts of productive capacity to our portfolio in 2016. Fourth, we have restructured and optimized to overcome the challenges that were a drag on our results in 2015. Naturally, revenue growth and profit can accelerate just by restoring growth in Canada and eliminate the losses there. Furthermore, the software business will now shift from investment mode to supporting our project efforts. In summary, our confidence in the outlook is supported by tangible data. The trends driving market growth are clear and compelling. Our position as an industry leader, especially in innovation, is unparalleled. And we are taking specific actions to fix the challenges of 2015, and to capture the new opportunities we see developing. We believe all of this will again lead to revenue growth, expanding margins, and higher EBITDA for the years ahead. Let me now turn the call over to John. He is going to provide more details about our financial results, including the fourth quarter performance. John?

Thanks George and good morning everyone. As we get started, please note that unless otherwise stated, all the amounts I reference relate to either Q4 2015 or the full year 2015 and all the comparisons are for year-over-year change. On our last call, we alerted you that we would incur charges related to the restructuring and realignment initiatives that George just discussed. In order to make it easier for you to understand our normalized performance which is how we analyze our business, we have included non-GAAP measures which exclude the impact of these charges, as well as an unanticipated additional charge related to the SRO project in Canada. We also excluded a benefit related to the non-controlling interest in our Fort Detrick project. Moving on to the results. Looking at the fourth quarter, revenue of $173.8 million was down 4%. Project revenues were essentially flat year-over-year, after coming off of a seasonally strong Q3, while revenues generating from our operating assets were up 4%. However, we saw declines in our off-grid solar business and our restructured software business. Sales related to off-grid solar equipment were down 31%. For the full year 2015, revenue increased 6.3% to $630.8 million. Growth was primarily driven by the strength in the Federal and U.S. Regions segments, which were up 20% and 14%, respectively. This growth was partially offset by the anticipated 30% decrease in Canada, and declines in the all other segment. Breaking out our lines of business, project revenues of $434.4 million were up 12%. Sales of energy generated by our operating assets grew 6.5% as we placed new assets into service. O&M was flat as anticipated, as all of the new 2015 O&M awards replaced the revenue we lost from a late 2014 contract amendment. As an aside, we expect O&M revenue growth to resume in 2016, due to the addition of new O&M contracts signed this year. The project and energy sales growth was partially offset by a 24%, or $12.5 million, decline in our integrated PV off-grid business. We are not expecting growth in this business during 2016. Before I cover the rest of the P&L, let me discuss the restructuring charges we incurred in Q4. During the quarter, we booked a $6.2 million restructuring charge to cover two things: One, the costs associated with the reorganization of our Canadian operations; and two, the restructuring of our enterprise energy management business unit. The charge included $1.8 million in termination benefits, which are cash costs. The balance of the charges will not require a significant outlay of cash and included $2.9 million of charges related to the write-off of receivables, contract termination costs, and a variety of smaller non-cash items. After these actions, we believe we have the proper organization in Canada to drive renewed profitable growth. We also believe our software business is now positioned to thrive, with the focus turned to sales that are integrated into project work, rather than stand-alone offerings. In addition to the charges, we also incurred another, and hopefully the last, cost overrun, associated with the SRO project. As you will recall, in Q1 we reserved for the losses we expected to incur as we complete that project. Unfortunately, in Q4 we had to reserve for an additional unexpected $3.4 million loss, reflecting new cost overruns and delays in completing the project. We expect to have SRO completed this year, with no additional excess costs anticipated to hit our P&L. Of course, we cannot guarantee this until the project is completed. Let me give you some specifics on how we reorganized our Canadian operations. Our goal in Canada is to have a smaller, more efficient and profitable business unit pursuing projects that fit our infrastructure and capabilities there. The principal restructuring activity was to reduce staff to a level that aligns the cost structure with the realistic market opportunity. We are optimistic about the outlook for the resized unit. We believe Canada is still a good market for us. We met our goals there for sales, awards and backlog for the year, and hit milestones such as the first sales of municipal street lighting and energy storage systems. There is meaningful government support for further energy efficiency initiatives. We believe this market will have a tailwind for growth in the years ahead. Now, let’s move on to the rest of the P&L. My analysis will include results that remove the effects of the restructuring charges, the loss associated with the SRO cost overrun, and the positive impact of the Fort Detrick non-controlling interest. As George and I and the whole management team analyze our business, we look past these factors, which do not reflect the ongoing economics of our core operations. We want you to see and understand the business in the same manner that we do. So, let’s look at gross margin and operating expenses. Gross margin before the loss on the SRO project was 19.4%, down from 20.1% in the same quarter last year. The gross margin decline was due mainly to revenue mix, with project revenue increasing as a percent of total revenue. Gross margin on a GAAP basis for the fourth quarter was 17.4%. For the full year, gross margin before the loss on the SRO project was 19.6% compared to 19.8%. GAAP gross margin for the full year 2015 was 18.6%. SG&A expenses before restructuring in the quarter were $27.3 million or 15.7% of revenue, which is down 10 basis points from 15.8% last year. Total operating expenses were $33.5 million or 19.3% of revenue, when including restructuring charges of $6.2 million. For the full year, operating expenses before restructuring charges were $103 million, compared to $102 million. Total operating expenses including the restructuring were $110 million. Full-year 2015 operating expenses included a total of approximately $6.6 million in restructuring charges in the second and fourth quarters. We expect the restructuring charges to result in at least $4 million per year in permanent annual savings. Adjusted EBITDA for the fourth quarter was $13.1 million, compared with $15.2 million in the prior-year quarter. The full-year adjusted EBITDA increased to $46 million from $41 million a year ago. I mentioned the $5.5 million benefit related to the non-controlling interest. We did this using the so-called Hypothetical Liquidation at Book Value, or HLBV, accounting method. Because HLBV accounting produced income not related to the performance of the project, we classify this as non-core. Non-GAAP net income in the quarter was $4.2 million or $0.09 per share, down from $10.6 million or $0.22 per share. On a GAAP basis, the Company reported net income of $1 million or $0.02 per share. Non-GAAP net income for the full year 2015 was $9.6 million or $0.20 per share, down from $12.6 million or $0.27 per share. GAAP net income for the full year 2015 was $3 million or $0.06 per share versus net income of $10.4 million or $0.22 per share last year. For the year, the decrease in net income was attributable to income taxes and foreign exchange. Both GAAP and non-GAAP net income was reduced by $2.4 million due to the appreciation of the U.S. dollar against the Canadian dollar in comparison to $1.1 million in the prior year. Looking at taxes, in 2014, we recognized a benefit of $4.1 million, while this year we had a $2.8 million provision or expense. Let me explain our tax rate for the year, which might seem a bit confusing. Our effective tax rate in the U.S. was 16%. That rate is especially low because Congress extended the 179D deduction for energy efficiency, an action, we anticipated all year, but we were not sure of the timing. So, in the U.S. we earned money and paid taxes at that rate, and you see the $2.8 million provision on the P&L. Our P&L does not consist only of our U.S. operations, however. It also includes Canada, which had a significant loss this year. So, the consolidated P&L has taxable income that includes the profit in the U.S. and the loss in Canada, but the tax provision reflects only what we are paying in the U.S. So, the simple calculation of the tax rate does not reflect what we are actually paying. Now, this will change in 2016, when we expect improvement in Canada. For long-term modeling purposes, you may want to use a tax rate of around 25%. Now, let’s turn to our balance sheet. Cash was up slightly from Q3. Receivables were up approximately $10 million from Q3, primarily due to an increase in unbilled revenue. Days sales outstanding were up to 99 from 83 in Q3. Consolidated debt increased $23.6 million. Of that amount, $11.3 million was additional draw on the corporate revolver, while the balance was an increase in non-recourse project debt. We have $91 million of non-recourse project debt, which is the majority of our total debt of $119.2 million. Looking at CapEx, gross capital expenditures for the year were $53 million. We anticipate 2016 CapEx to be in the range of $50 million to $75 million. Total project assets are now $244.3 million. Next, turning to backlog and outlook, we started the quarter with $379 million in fully contracted backlog and ended with $390 million, representing a sequential increase of 2.9%. Our implementation teams completed $129 million of work, while our sales teams successfully converted $132 million of awards into contracts. Q4 is typically a seasonally low quarter for new awards, but we did add $56 million of awards during the quarter. This brought our total of new awards in 2015 to $540 million, an increase of 64% from prior year, and the highest annual total since 2012. Now for guidance. As George noted, we are optimistic about our outlook, and confident we can achieve another year of solid revenue growth and improving profitability. We expect consolidated revenue in 2016 to be in the range of $645 million to $680 million. This outlook reflects double-digit growth in our core U.S. businesses, coupled with decent growth in energy sales. We expect Canada to be flat, and we still expect some challenges in off-grid PV equipment sales. Gross margin is expected to be in the range of 19% to 20%, and operating expenses are expected to be around 15.5% to 16.5% of revenue. Operating expenses reflects the investment in the growth initiatives that George talked about earlier. We expect EPS in the range of $0.25 to $0.29 and adjusted EBITDA to be in the range of $51 million to $57 million. Note that this outlook excludes the impact of the non-controlling interest, as well as any lingering charges related to the restructurings in Canada and enterprise software group. Most of the charges have been taken, but we do contemplate more small charges which we believe will be less than $1 million. Now, I’d like to open the line for your questions. I’ll turn it back over -- call over to our coordinator.

[Operator Instructions] Our first question comes from Noah Kaye with Oppenheimer.

Thank you. Good morning, everyone. Maybe, I could just start with a bit of housekeeping on the small scale infrastructure side. So, the big jump that we saw, just to clarify, in revenues, in the quarter, going up to a little over $20 million, that’s at the top-line recognizing this -- the NCI benefit, right? So, if we strip that out, and the rate run rate to think about would be just under $15 million in small scale infrastructure revenue; are we reading that correctly?

Yes. So, no, in the prepared remarks, we’ve actually decided to provide a little bit more details on the revenues, which actually shows the revenues not only by segment, but also on our lines of business. And we’re doing that because our segments are basically how we run the business from an accounting standpoint. And we have one group that was referred to as small-scale infrastructure that not only developed the assets that we own internally, but will also be turnkey project for others. And what you’re seeing there is, if you look at the table, we actually have project revenues, and we’ve actually included the detail. So most of that is being driven by the project revenues related to a project that I believe just started to hit construction in the second half of the year. So that’s the -- non-controlling interest benefit actually is at the bottom of the P&L. And that $5.5 million comes at the bottom. So what we’re trying to do with the new lines of business breakout is, all of our segments actually sell everything, and that’s projects, O&M, operating assets and then of course we do have other engineering and consulting. So, what -- and especially next year, as we move forward, as Fort Detrick comes on line, they’re actually going to have revenue related to energy assets as well, Canada has revenue related to it. So, in addition to the segments, which really are end markets, we’re actually providing the details of the revenue based on the line of business. So, we are hoping that will help provide a little bit more clarity to investors and shareholders around the different lines of businesses from our market.

Sure. So, if I look at the small-scale infrastructure operating assets revenue contribution for 2015, and you’ve put them on the table; you have around $53 million. Kind of in your guidance for next year, what does that look like, what’s growth specifically on operating assets line?

Yes, the operating assets lines, it’s about 10%. So, again, most of the impact at the assets actually impacts earnings, more than it does revenue. And so, you’re looking at historically about 40% EBITDA margin, so looking at $10 million additional revenue, so you are looking at adding about $4 million of the EBITDA, approximately. And that’s going to be coming from Fort Detrick, which actually went on line in December, which is the reason why we had the benefit related to the non-controlling interest. And also, we did -- for the year, we placed 22.2 megawatts in service and we’re also planning on putting throughout the course of next year, about 20 megawatts in service, next year as well.

I wanted to follow up on that. In the past, you talked about having as large as 100-megawatt pipeline. George, I know that you guys have invested in growing the solar business; particularly following the ITC expansion, you have a longer run right now. Are you being conservative with that 20-megawatt number and where is your pipeline right now? Maybe you can help us understand a little bit of the thinking around the guidance there.

Yes, I can provide you the detail there. So, we did place the 22.2 megawatts in service this year, which is what we had planned. When you look at our pipeline, and I think we said it was about 80 -- or over 80. So, that’s about where we’re at right now, for our 80 megawatts of total pipeline for assets in development. I should mention, about 30 megawatts are non-solar; two new -- we have couple of biogas projects that we’re developing as well. So that puts the solar aspect or the solar piece at about 50. About 15 megawatts right now are delayed in Massachusetts related to the net metering cap and the SRAC 2 [ph] allocation that’s essentially for commercial sized projects, small commercial projects; the SRAC 2s [ph] are essentially expired.

Yes.

So, our guidance for this year of the 20 megawatts takes that into account. We are not planning on those 15 megawatts coming on line. If we are able to get more clarity on that, then we would expect to actually have 35 to 40 megawatt come on line. We are hopeful that that would be the case. But we thought it would be prudent to, without having any visibility as to the exact timing, give you a number that we are comfortable with, based on what we have contraction, what we have in development and shove already.

That makes sense. Thanks for the detail. And on the biogas, I am assuming that’s also not in your guidance; those are longer term projects. Are you expecting…

That’s correct.

Okay.

That correct. They won’t hit in following year.

Okay, great. Thanks. Maybe just turning to the ESPC project business, we’ve certainly seen a lot of chatter regarding what’s going on in the capital markets and in the debt markets, seeing a divergence in spreads between investment grade and non-investment grade. Obviously, the bulk of your business is with government and emerged customers. Just wondering, maybe you could touch on where you are seeing projects are transacting at right now for your core customers? And then touch on kind of what’s going on with your C&I customers in terms of financing and whether not there is any headwind there?

I’ll let John answer that, but my tone is that interest rates and the finance, and especially the institutional sector, it’s very readily available; and actually the long term rates the last few weeks have gone down. As far as the C&I, they’re ones that we haven’t done that much in that space. But, we don’t envision in the short term to have -- or even in the long term, interest -- our ability to finance the project would be bigger impact. [Ph]

Yes, I mean including the spread of 150, 200 basis points, Noah, I think we are still in the 4% range for some of the long term projects. So, I don’t think it’s having a major impact on our public and institutional customers or those projects. We are obviously aware of that. But as George said, we actually saw them decrease most recently. So, we are not seeing any pressure on rates, impacting our performance contracts.

And then on the C&I side, your -- George, I mean your comment implies that that’s not in terms of how you are thinking about your guidance for ‘16 or…

It depends what clients on C&I, you want to finance, but if they occur worthy customers, I feel pretty comfortable that we would be able to finance them.

And what about C-PACE and some of the newer…

We are looking at some projects especially in California that aimed and they will be realized in C-PACE financing.

Okay, great. Thanks. I’ll jump back in queue.

Our next question comes from Chip Moore with Canaccord.

So, as you’ve seen a move to larger size projects, maybe you can talk about any related challenges there, any processes you have to put in place, particularly in light of what you’ve seen on that SRO project?

Yes. We see that the average the size is picking up, before I would say the average was 5 to 10, now it’s [indiscernible] closer to 10 rather than 5. But, the only issue is timing. Some of the larger projects, they take longer to move from the awarded categories to the construction, executed contracts and moving forward. The other thing that margins might be little bit depressed on the high side, but on the overall, because administering the project, it’s a larger project, the contributions to the EBITDA, it’s not that different from smaller scale project. So, this is -- the only thing is time than might be anything.

Yes. And Chip, I did just want to follow up on one thing because you did refer to the SRO project. I mean obviously that was a project that was entered into a few years ago. But, just want to assure everyone that -- we have taken steps and procedures to ensure that a project like that would not something that we would do again. And using hindsight obviously, we are able to see where we had some missed use in our process in terms of bidding for that project. We certainly want to make sure that doesn’t repeat itself.

Okay. No, that’s fair. And, maybe you can talk on the federal side at least, now that we enter sort of a seasonally slower period. Historically, what you’ve seen in an election year and how you’re thinking about that, how that trend plays out?

Yes. Certainly, I think with an administration change there, there are people that may speculate whether or not there is going to be a change. We look at the pipeline of activity, the federal government that they produce. And right now, they’re saying that they’re at 138% of their goal, based on the challenge. And that’s the $4 million goal to have performance contracts, 4 billion goal by 2016. So, it looks like they’re on target to hit that goal. We’re optimistic that things are going to continue to move forward and that both sides of the House really support energy efficiency. And so, whether you have a Republican or a Democrat as a President, we think energy efficiency has bipartisan support. And really when you look at it, some of the dynamics and the drivers behind that, looking at the building infrastructure and the aging infrastructure and the pent-up maintenance and all those things, they still need to spend money. And so, the energy efficiency projects are away from them to do that and the projects fund themselves. So that really isn’t a partisan or change in administration, that is just pure economics. And so, we think an energy efficiency performance contract is away for the federal governments reduce the spending. And we think that that’s going to continue on.

Okay. And I guess last for me, can you -- just give us a sense of rough size, now that it’s depressed on the oilfield related business and what you’re baking in, in there for declines I guess in ‘16?

Yes. So, it’s above 40 -- it was 40 million last year. We’re hopeful that it won’t be much lower than that. I would say in that $35 million to $40 million range. I will say, the good news was at least last year, is that it was not a drag on earnings, as much as Canada was as an example. So although it was down 24%, we actually still had positive EBITDA. And that’s a inventory-based business, that’s a book ship business. So, we are -- it impacts working capital more than it does earnings. So, we’re balancing those two. And we’re trying to look ahead at the demand, but we’re not planning on any significant growth this year in that business.

Okay. That’s helpful. I appreciate it. Thanks.

Our next question comes from Carter Santos with EVR Research.

Hi. Thanks for taking the questions. I have several. I’m sorry if some these have been answered. I had a little trouble getting in the queue. Does the assets in development figure you disclosed, people to potential revenue expected from those assets over the duration of their contracts or does that simply represent the amount that would appear as incremental project assets on your balance sheet?

It would be the latter. And thanks for asking the question. It is -- that amount essentially is the value of the assets we’d be putting on. As I mentioned, it’s about 80-megawatt portfolio right now, consisting of above 30 megawatts of non-solar assets and then the rest predominantly solar. And so that is essentially what we would end up putting on our balance sheet. And that more reflects the cost of construction.

Okay. Were all the projects held on to by the Company?

In the existence of the company, we have actually -- our model is that we -- and this is what makes us unique. We always say that we are not buy [ph] stuff from a technology standpoint or product standpoint, we are actually agnostic. And we are also agnostic from a process standpoint, meaning that we will develop the project for a customer and build on it or will own and operate it and they will get financed through a PPA arrangement. So, what you see on our balance sheet, the $244 million of assets, those are the assets that we’ve candidly owned and operate. But, if you think -- if you are asking if that’s for this upcoming year, I can say that it was predominately going to be assets that we constructed were for our own use. But we do have some large solar installations in the West Coast, as an example that we are constructing that we’re not owning.

Okay.

And that gives [ph] results for us.

And on sequential basis, the assets and development fell more than the project assets on the balance sheet went up, can you explain what’s happening?

Yes, I think so the -- well, are you looking at it sequentially from the quarter?

Sequentially 3Q to 4Q.

Okay. Yes. So, we did place significant assets in service and that was Fort Detrick, and so that was 18 megawatts. So, that was a large amount to replace. So, we are down sequentially because of that asset. And, so, when you consider the fact that our total portfolio is 80 megawatts and was actually closer to 100, we actually did have more awards this quarter but they weren’t greater than what we placed in service. So, it’s just a matter of timing of when we placed our Fort Detrick solar installation in service.

Okay. What needs to happen before you all disclose publicly the potential value of the EBITDA expected from those assets in development?

Yes, I mean that’s a good question. I think what we have done is, is we have at least this year, we just said that we have added about $4 million of estimated EBITDA for what we placed in service. I think as we get a little bit more clarity in terms of the timing of when we are going to be putting these assets on the books, we will do that. As one of the other calls had asked or had mentioned the biogas projects takes significantly longer amount of time to develop. And so, when those come on line and close to being placed in service, I think that’s when we would be providing a little bit more color, at least in the near term. In the medium to long term, I think if you look at the megawatts that we’ve placed in service, for solar that can be a proxy for what we are trying to do going forward. And the 20 megawatts that we have for this year, would be representative of what we are putting in service this year as well.

Okay. On the guidance, what does that -- I assume in terms of EBITDA from the wholesale, the PV wholesale business?

The -- so related to the off-grid PV business?

Right.

Yes, it’s very minimal; it’s about $1 million loss. No. It’s about $1 million -- breakeven to $1 million is our -- that’s what’s reflected there.

And does guidance reflect Canada reaching breakeven?

Breakeven? Yes. So, breakeven on an adjusted EBITDA basis. Yes. So that is the plan.

Okay. It’s our understanding that a key competitor of yours is suing the U.S. government to get back into contention for inclusion on the list, for those able to participate in the next DOE IDIQ. If they are ultimately excluded, is that a small benefit or a large benefit for your federal business?

We certainly don’t want to comment about a competitor and the ultimate outcome. But, our goal is to be a part of the companies that are part of that IDIQ. And so, as I am sure you are aware, it’s more than one or two. So, could it be a benefit? Well, it’d be a benefit to everyone that’s part of that IDIQ if there’s one less person. But we can’t say that we would be the direct beneficiary if that were to happen.

Okay. And maybe lastly…

I am sorry. Go ahead.

No. Please continue.

The only thing I wanted to add is our position in the federal market right now is very strong. We seem to do win in our good percentage of it. So, we feel very good about our position in that particular market.

Okay. Lastly, could you break out fully contracted backlog growth for the U.S. Regions, U.S. Federal and Canadian segments?

John?

Yes. So, I can tell that the U.S. federal fully contracted but was flat, and Canada was as well. So really, if you are looking at across the board, it was pretty much flat, year-over-year. And part of the reason is that the awards that we added during the year will take 12 months to 18 months, on average 15 months, so going to contracted. The bulk of the awards this year came in Q2 and Q3. So that means we wouldn’t expect that to start converting until the middle or end of this upcoming year. But, I can say on the awarded side, the federal group, about $600 million of our total backlog. And with -- the U.S. Regions, let me again see here, 420 of the total. So, the bulk of the backlog is coming from our U.S. Regions and the federal too.

Okay. Thank you all very much.

[Operator Instructions] And I’m not showing any further question at this time. I’d like to turn the call back over to George.

Thank you, Kevin. And to close, I want to first thank all of our talented and hard working employees for the efforts they put in each and every day. They are really the basis of our success. I also want to thank our shareholders for their support. We are excited about 2016 and look forward reporting progress to you on our Q1 call in May. Thank you.