Bloom Energy Corporation (BE) Q1 2022 Earnings Report, Transcript and Summary

Good afternoon. And thank you for attending today’s Bloom Energy Q1 2022 Earnings Conference Call. My name is Austin, and I’ll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for question-and-answer at the end. [Operator Instructions] I would now like to pass the conference over to our host. You may begin.

Thank you and good afternoon everybody. Thank you for joining us for Bloom Energy’s first quarter 2022 earnings call. To supplement this conference call, we furnished our first quarter 2022 earnings press release with the SEC on Form 8-K and have posted it along with supplemental financial information that we will reference throughout this call to our Investor Relations website. During this conference call, both in our prepared remarks and in answers to your questions, we may make forward-looking statements that represent our expectations regarding future events and our future financial performance. These include statements about the company’s business results, products, new markets, strategy, financial position, liquidity and full-year outlook for 2022. These statements are predictions based upon our expectations, estimates and assumptions. However, as these statements deal with future events, they are subject to numerous known and unknown risks and uncertainties as discussed in detail in our documents filed with the SEC, including our most recently filed Forms 10-Q and 10-K. We assume no obligation to revise any forward-looking statements made on today’s call. During this call and in our first quarter 2022 earnings press release, we refer to GAAP and non-GAAP financial measures. The non-GAAP financial measures are not prepared in accordance with U.S. Generally Accepted Accounting Principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between the GAAP and non-GAAP financial measures is included in our first quarter 2022 earnings press release available on our Investor Relations website. Joining me on the call today are K.R. Sridhar, Founder, Chairman and Chief Executive Officer; and Greg Cameron, our Chief Financial Officer. K.R. will begin with an overview of our business, then Greg will review the operating and financial highlights of the quarter. And after our prepared remarks, we will have time to take your questions. I will now turn the call over to K.R.

Hello, everyone. Thank you for joining us today. And for your continued interest in Bloom Energy, we are very pleased with the resiliency of our operations in the face of an increasingly challenging global supply chain. We are delivering on customer commitments, expanding our capacity and developing future products. Greg will share our financial update in a moment. We are confident in both the financial guidance we provided for this year and in the outlook for growth we shared for the next 10 years. During our Investor Conference on May 25, we will share more details on our outlook and provide demonstrations of our products. Let me focus on some global trends and how they’re shifting the needs and expectations of large consumers of energy. I will address how legacy solutions are not able to meet those needs and then provide real world examples of how Bloom Energy’s unique platform is able to step in and fill the void in the marketplace by providing custom crafted value-based solutions. Commercial and industrial customers are seeing sharp spikes in demand for their products. Global instability, steep increases in logistics cost and the push to have more domestic content is driving businesses to expand rapidly in the U.S. and to rely less on long supply chains. Energy intensive businesses are not able to rely on utilities to meet their growing power needs, delaying them from expanding their operations and growing their revenue. Bloom Energy offers such customers a rapid time to power option. Here is one recent example. We completed a 12.75 megawatt microgrids contract with II-VI, a leading engineered materials company to provide mission-critical power to two of their facilities in Pennsylvania, allowing them to deliver on their production commitments, play their part in reducing microchip shortages and grow their business. Investors and regulators are increasingly demanding that companies disclose the business risks and financial impact that climate change poses in the short, medium and long-term and subject those disclosures to third-party audit. Climate change and energy security risks are increasingly C-suite and board level issues. In a digitally transformed world, energy is the lifeline for businesses to operate. Hence corporate risk assessment now involves energy security, resiliency, and decarbonization. In addition to cybersecurity, more than ever, businesses are recognizing a need to take active control of their energy future. Bloom empowers its customers to choose the degree of power reliability, cost predictability, and decarbonization that suits their needs. It offers them solutions that are implementable today and gives them the flexibility to upgrade in the future. In all cases, it’s about giving the customer the ability to take control of their present and future energy security and carbon footprint needs, thereby protecting their businesses. A major contributor to decarbonization in the short and midterm will be the switch from coal to natural gas. This will create demand growth for natural gas. However, we at Bloom Energy fully recognized that this increase in demand must be matched by efforts to abate methane leaks. To that end, we recently announced a certificate trade agreement or CTA for certified responsibly sourced natural gas in partnership with EQT, the largest producer of natural gas in America. The use of certified natural gas is gaining interest among major corporations, such as T-Mobile, who value the benefits of clean, reliable, and resilient energy and the cost savings that come from reducing their electricity costs. Bloom Energy servers will power approximately 20 T-Mobile data centers across multiple states with responsibly sourced natural gas. Now, we have taken an industry leading step to pledge that our entire U.S. energy server fleet will be 100% powered by responsibly sourced gas. We encourage the rest of the industry to follow our lead, as this will be a major step to decarbonization of the energy sector. Reducing methane emissions from oil and gas production by 75%, a technically proven and economically viable option today will have the same impact as replacing 60% of the world’s coal power plants with renewable electricity. Another decarbonization solution that Bloom offers is waste to energy. As organizations and communities seek to decarbonizes, there’s growing interest in localized onsite waste to energy solutions. Just today, we announced a unique 1.5 megawatt project in collaboration with the Public Works Commission of Fayetteville, North Carolina to generate renewable electricity from a mix of landfill, waste water and swine gases as input fuel. This innovative collaboration demonstrate how municipalities can repurpose their waste, abate methane emissions and provide clean and resilient electricity to their communities. We applaud Fayetteville for leading the way with the innovative waste to energy project and are confident that other communities will follow Fayetteville fleet. The quest for a decarbonized future hinges on the ability to produce green hydrogen economically. Bloom has the world’s most energy efficient hydrogen electrolyzer technology. This January, we successfully completed our first international deployment of the Bloom electrolyzer in Gumi, South Korea. Since then, it has been producing onsite hydrogen. It is operating with high efficiency and demonstrating its ability to handle intermittent electricity input effectively. The purpose of operating the electrolyzer intermittently is to simulate intermittent renewable power inputs, such as solar and wind. It is unlocking a pathway for economically viable green hydrogen. We are collaborating with SoCalGas to generate and then blend hydrogen into the existing natural gas network. This demonstration on the Caltech campus will show how we start greening the gas in today’s natural gas infrastructure. This is a pathway and stepping stone for a net zero energy pipeline of tomorrow. We are supportive of SoCalGas’ plan for the Angeles Link, a green hydrogen transport system that delivers hydrogen produced from 100% clean energy and electrolyzers to the Los Angeles basin. We are excited to collaborate with them and look forward to accelerating the hydrogen economy. These examples illustrate how Bloom Energy’s value proposition is getting more compelling by the day. Customers are increasingly procuring Bloom Energy servers to not only save money, but also to secure clean power and decarbonize. After all, Bloom Energy solutions enable customers to take control of their energy destiny. I’m very excited about our future. We are seeing our vision and mission become a reality. I’ll close now by saying that I look forward to seeing you all at our investor conference on May 25, hopefully in person, if not virtually. With that, let me turn it over to Greg.

Thanks, K.R. It’s clear. Bloom is meeting the challenges of today as we build a long-term high growth company. Like previous quarters, we have included our financial performance in our earnings release and have posted additional information to our supplemental financial package to our corporate webpage. This quarter, based on your feedback, we’ve adopted a simplified format for the presentation of our non-GAAP reconciliations. Let me point your attention to a few key highlights. We had a record first quarter revenue of $201 million in line with our expectations and nearly $500 million in cash we maintain ample levels of liquidity to fund our near-term investments. We are on track for adding an additional 1 gigawatt of manufacturing capacity. We continue to navigate a challenging global supply chain. We are reaffirming our 2022 guidance. With those as highlights, let me provide some additional context on 1Q performance. Our commercial pipeline remains strong. Our power generation value proposition of sustainability, resiliency and predictability continues to resonate with customers, whether it’s providing a roadmap for decarbonization or delivering resilient power without backup diesel generators, our 24/7 AlwaysON energy server is receiving the attention of commercial and industrial customers. As K.R. described, we are seeing an increase interest in our ability to quickly bring additional power to a customer site. The time to power value proposition is especially meaningful for manufacturers and data centers, when a local utility is unable to provide additional power to support their growth. This positioning is attractive as it moves the commercial discussion from cost to value. It’s no longer simply a customer asking how much can I save? But more importantly, how quickly can you be operational? We expect these opportunities to continue to grow, especially with a resurgence of U.S. manufacturing, increasing electrification and an acceleration of the digital economy. Our record first quarter acceptances and revenue were driven by strong deliveries to our partners in South Korea. As we discussed in February, our first half of 2022 deliveries are limited as we replenish inventories from our record fourth quarter 2021 shipments and increase our stack manufacturing capacity. As we were constrained in the units that we could provide in 1Q, we prioritize South Korea deliveries to ensure we meet our full year commitments to SK ecoplant. As we proceed through the year, we expect to increase our build and acceptances each quarter with our second half volumes more in line with our historical U.S. to international mix. We continue to invest in our manufacturing capacity, research and development and our commercial resources. We ended the quarter with $494 million in total cash. This year, we plan to invest $150 million to increase our fuel cell stack manufacturing capacity from 280 megawatts to 580 megawatts by year end 2022 and over 1 gigawatt by the end of 2023. These are attractive investments because as they reach full utilization, the payback on our investment is less than one year. Our first quarter non-GAAP gross margins of roughly 16% are below our 2021 exit point. While our average unit selling price was roughly in line with the prior year average, our unit product costs were elevated. Material costs, which accounts for roughly 75% of our product costs were roughly flat versus prior year, while our non-material costs increased. Non-material costs such as labor, facilities, logistics increased as we’d begun to absorb the expense of our capacity investments. We also had 30% fewer builds in the first quarter versus the fourth quarter of 2021 as we needed to replenish materials from Q4 builds. The combination of increased cost and fewer builds has temporarily elevated our unit product costs. As our volumes increased throughout the year, our non-material cost per kilowatt will decrease. Like all power generation equipment, our suppliers utilize commodities such as copper, aluminum, steel and nickel. Historically, we’ve been able to achieve supplier price reductions through design optimization, simplification and leveraging volumes, but recent inflationary pressures have made this difficult. However, our supply chain team has been proactive and so far has been able to offset inflationary pressures, keeping our material costs relatively flat over the past four quarters. This is not only a testament to our team’s performance, but to the design of our product and the ample headroom we have in our cost down learning curves. Given the current environment, we now expect to reduce product costs by low single digits versus our 10% target. We plan to offset the resulting margin pressure by prioritizing higher margin acceptances in maintaining our targeted non-GAAP gross margins for the year. We are reaffirming our 2022 guidance for revenue, margins and cash. With our strong backlog, we remain confident that we will deliver 240 to 250 megawatts of acceptances this year. Based upon these acceptances, we should achieve the $1.1 billion to pull $1.15 billion of revenue with roughly 24% non-GAAP gross margin. We should deliver non-GAAP operating margin and positive cash flow from operations, a first for Bloom. These are strong results that coupled with the manufacturing capacity expansion will put us on a firm trajectory to grow revenues and margins in 2023 and beyond. As we look toward the second quarter, we expect to increase in our builds and acceptances versus the first quarter. I would expect revenues roughly flat to the second quarter of 2021 with margins improving versus the first quarter of 2022. As in previous years, our second half revenue is planned to be greater than our first half. We’re excited about our investor conference on May 25, which will be held at our Fremont, California manufacturing facility. Under our theme Mission to Decarbonize, we’ll provide a strategic update on how our technologies facilitate customers achieving their net zero emission goals. We’ll also give a more detailed update on the long-term outlook summary we provided at the beginning of the year. As we’re planning this to be an in-person event, we’re excited to share demonstrations of our technology and provide tours of our newest facilities. There’ll be a great opportunity to see our progress firsthand and meet the people who are building the future of energy. We’ve included the participation information as part of today’s earnings release. In summary, we were off to strong start to the year like other global industrial companies, we are navigating challenges in our supply chain, but we have significant tailwinds with the push for abundant, clean, resilient energy. We have a very strong backlog to deliver on our 2022 targets. We believe the company is at an inflection point to build upon our mature technology platform, solid record of accomplishment and robust growth roadmap. We’re extremely excited about our future. With that operator, please open up the line for questions.

Thank you. [Operator Instructions] Our first question is from Michael Blum of Wells Fargo. Michael, your line is open.

Thanks. Good afternoon, everyone. Thanks for taking my question. I wanted to ask a little bit about this partnership with EQT on responsibly sourced gas. The question is, do you think until now not having that offering has somehow hindered your penetration of selling energy service to certain customers. And do you think now with this partnership that will open up new fronts? Thanks.

That’s a great question, Michael. And so here is the way to think about it. Our customers want to do good to start with. For them, if they need reliable always on operations, today 24/7 in large quantities. The only option for them to take control of their own power is to put Bloom Boxes and use natural gas. If we can provide that natural gas without methane emissions, and they’re able to not only secure their power, not only save money, but along the way, save the planet. Why would they not do it? That’s why we are doing it. We want to take the lead and we want to ask everybody on the planet, why wouldn’t you be doing this? Because it’s technically viable, it’s economically viable. It’s here today. It’s not some future solution that may happen later. The planet isn’t parallel. Let’s go do it. So we are taking the lead on this and we feel very proud about it and we encourage, we urge, we nudge everybody else to follow our lead.

Great. That’s very helpful color. I appreciate it. Second question I just wanted to ask was on service margins, which obviously are dragging the overall gross margin down a bit. Can you just discuss what’s going on there? And kind of what’s the outlook to improve that. Thanks.

Yes. Thanks Michael. It’s Greg. So kind of two things in there. First is the product cost, first cost of the power modules it’s the same cost as the new. So you’re seeing some of that come through within the quarter. That’ll get better as volumes increase in the second half of the year. You’ve also got some timing on when we do our power modules. We’ve prioritized doing them early in the year. So we get the benefit – as we get that benefit of them over the quarter. So there’s a little bit of timing in there. We still expect our service margins to be profitable for the year and we’re targeting a strong second half. So we are still within our framework to be profitable there within the year.

Great. Thank you very much.

All right, take care.

Our next question is from Julien Dumoulin-Smith from Bank of America. Julien, you may proceed.

Good afternoon, team. Thanks for the time. I hope you guys are all doing well. Looking forward to seeing you guys.

Great.

Absolutely. Thank you. So maybe this is a Greg question here, but can we talk a little bit about the gross margin trajectory and just what the uplift is? Because I know you alluded to margins being kind of slightly better in 2Q here. Can you walk through it? I know you already alluded this in part in the remarks, but maybe you can elaborate in a little bit more detail. What exactly is driving the big uptake? Because obviously you’ve got this average number for 2022 and you’ve got a weaker for 1Q and then something of an uplift in 2Q, but clearly implies a very strong back half. And Greg, I need you to take it a step further, what does that say for the 2023 as well? Just if you have that kind of an exit run rate.

Yes. So, Julien it’s a great question. So a couple things to think about. Generally we run 40-60, meaning our acceptance is in the first half of the year, about 40% of what we do in the second half of the year. We are bringing on manufacturing capacity in the second half of the year. So if you just run rate it out, we’re probably going to be 30% in the first half versus the 70%. So I have a lot more operating leverage in the second half of the year than I do in the first half. The other thing I’ll tell you is, we are investing significantly and quickly to get our operating capacity online in our plant in Fremont. We see the demand coming that we have to meet not only this year, but into the future. We are investing and you’re starting to see some of those investment dollars, whether they be costs in the near-term coming through on our product costs. And that’s driving things up in the near-term that will get better and abate as we go in the second half of the year. So it’s both a new numerator and a denominator issue in the first half that gets better in the second half of the year. I think as we get through this and get to our exit point at the end of the year, we’re still targeting 24% for the year. So that gives you a sense of where we believe exits will be towards the end of the year. And we think we’ll go into 2024 – 2023, 2024 and beyond with that momentum.

Got it. Excellent. Just can you define how much more kind of cost there is weighted in the first half, if you think about it to get that ramp going, et cetera, that you alluded to more in the numerator kind of side of things.

I mean, you can see it, right? If you take in and look at our margins this quarter versus where they expect to be, it’s in the kind of low single digits, mid single digits on a dollar range. So we only had $200 million of total revenue, so you can see 3 or 4 points there, what it would equate to in dollars. It’s not a lot given the first quarter revenue number.

All right. Okay. I just didn’t want to assume all of it there. All right. Excellent. Thank you guys. Appreciate it. I’ll leave it there. See soon.

Thanks Julien. See you soon. Yes.

Our next question is from Leo Mariani from KeyBanc. Leo, you may proceed.

Just wanted to get a little better sense on electrolyzer sales, obviously you have that successful demonstration that you had in South Korea. Wanted to get a sense of whether or not you think there’s going to be some sales here in 2022. And maybe you can just talk about broad market acceptance of your product there given that’s the most efficient one in the market.

That’s a great question, Leo. So look for us, when we look at hydrogen, the only way we think about hydrogen is scale. Without scale hydrogen doesn’t hunt. Okay. So look at what we are focused on in the projects we have. We have partnered with SoCalGas to produce hydrogen, inject that into the pipeline. We see that and they have announced the Angelus Link, right? It is 4,700 standard cubic feet per day of hydrogen is what they’re looking for. That’s larger than any project announced. We’re like partnered there. Why? We want to prove it out now with them, we want to grow with them. We believe in this huge market. Look at what we are doing on the nuclear side, working with Idaho National Laboratory and demonstrating the ability to do what we need to do. Because again, if you just look at the renewable penetration, the nuclear industry today has gigawatts and gigawatts of curtailed power, and they have the heat being able to combine those two and get hydrogen in. It’s going to happen faster than any renewable excess capacity being available for hydrogen after taking care of the needs of everything you need to do when we look at scale, right? So we are focused on the areas and the partnerships where we can make impact on scale. That’s all we are focused on. As you know and as you should know, we have the most efficient electrolyzer on the planet. You put that together with the scale that we are going after as is our tradition, we will announce about sales orders when we close them.

Okay. And I guess, could you maybe just talk about any progress in the European markets obviously as a result of the Ukraine tragedy, Europe is certainly taking some aggressive moves on the energy side, including some specific hydrogen mandates that they’ve got over there. Can you maybe just talk about how the sales pipeline in Europe has evolved? And do you see situation in Ukraine lean to say maybe, a lot more significant orders and say 2023 and 2024?

Yes. Great question again. Look there are two different things happening, right? Number one, the insecurity that this entire invasion has cost in the minds of corporates of having energy security and wanting to take control of their energy destiny in their own hands, we play right into that. If there’s a cyber attack on the grid, again, a distributed system is going to help, it plays very well as the tail went for us. You look at European Union, saying natural gas based investments can be clean investments that plays right into our sweet spot. We would definitely expect in that timeframe that you’re talking about for us to be very engaged. And I can tell you that our European team right now feels like they have very strong momentum with customer inquiries and the funnel.

Okay. Thank you, guys.

The next question is from Colin Rusch from Oppenheimer. Colin, your line is open.

Yes. Guys, can you talk a little bit about the efforts that you’ve made so far in terms of procuring renewable natural gas? There’s certainly a lot of moving pieces in that market. Just curious about the opportunities you have to lock in some of that supply for your customers.

Colin, that’s again a big area for us. What we can tell you is that entire industry plays for us in two different ways. The first way it place for us is our customers more and more are asking us, even if they start at natural gas today, RNG today, where will they go? In terms of that next step, many of them are looking for RNG as a fuel source, so they can get to net zero carbon as opposed to the credits, which more and more people believe are not going to be sufficient for them to meet their goals and targets. The second place that it plays in for us is the producers of RNG use a lot of electricity. And when they use Bloom instead of a much higher carbon footprint, utility electricity, their carbon intensity score lowers, and the value of the Bloom System powering those RNG plants is significantly greater than if they just use the utility. So we see the RNG producers of the customer and we feel that the RNG they produced will be used by our customers. So it plays in both sides. And our biogas team will tell you again, they’re seeing a very robust funnel and interest in this sector.

All right. Thanks so much. And then in terms of the dynamics you’re talking about in terms of migrating towards the deployments for higher price systems, relative to some of these costs and some of the things that you guys have done a lot of work on in terms of moving the sales funnel towards some larger customers, I guess I’m trying to kind of square some of the commentary around those larger installations and pricing relative to the dynamics you’re talking about of higher cost or higher than plan cost, how to think about that?

This is Greg. So the way to think about it is we’re blessed by having a $2 billion backlog here, right. So as we looked at the year and looked at where we were with cost and where we wanted to be on our targets both at the gross margin line and at the operating income line, we saw it was clear that we were going to prioritize some of the higher margin things. I think we’re probably going to do a few more repowerings than we would’ve done before. We’re going to prioritize them in the middle part of the year. And we are going to take a few of the deals where we were a little bit more strategic, maybe on the little bit larger side, we were pulling those in for the year. And to secure that commercial relationship with the customer, we’re going to delay those a quarter or two. It’s not going to impact the strategic relationship at all, doing that gets me the mix. I need to cover off this little bit headwind I have on the cost here in the near-term as we build out capacity. So we’re blessed by having optionality here. I think it’s a more short-term move than a long-term move.

Okay. Thanks so much, guys.

Our next question is from Alex Kania from Wolfe Research. Alex, your line is open.

Great. Thanks very much. Two questions, maybe the first one is, could you just talk a little bit about your customer discussions, just in terms of kind of economics in the current natural gas price environment and kind of, what does that mean for your discussions there? And then also is that kind of affecting any kind of sense about customers really trying to accelerate towards – kind of like hydrogen solution or something like that sooner rather than later?

Yes. Hey Alex, it’s Greg. So on the natural gas side, right. We use it obviously in generating electricity here, but so doesn’t the grid in producing the electricity. So when we talk to a customer, you’ve almost got that inherent natural hedge, right, where the best alternative on a cost basis would be them and versus us so our expectation is those two things offset each other and you still get the benefits of the sustainability, the predictability and the resiliency on it. So it hasn’t really changed a lot of the discussions. The other thing I’d point to is the time to power discussion is becoming more and more relevant for our customers, meaning it’s less about and I think I said this in the script, but a lot less discussions around, can you save me a penny or two it’s more around, hey, how do you get your product here quickly? So I can operationalize because we can save a lot more money by creating product in revenue, in dollars for the company than they would save a little bit on the electric bill. So in some ways it’s just – I’m not saying that you still have a commercial relationship there, but it is definitely a different dynamic than we’ve had before.

Great. And then that’s helpful. And then maybe just in terms of kind of customer interest on like the hydrogen side, if there’s kind of any right now or is it more still theoretical? And then kind of a related question, I guess, related to hydrogen and electrolyzers, what sort of kind of you mentioned nuclear, but are there any other kind of interesting industrial customers that would really kind of be most interested in this from a scale perspective?

Yes, so it is – our strong belief based on our conversations that we are having is the hard to decarbonize industries such as steel, such as chemical refining ammonia production becomes extremely, extremely interesting. And they’re talking to us, but at the same time, I think it is going to take a little bit of what – a little bit of market them knowing the pricing of carbon and the market acceptance, but very strong interest. That’s where the interest is. Those will probably most probably be the first places that you’re going to see the adoption of these technologies.

Great. Thanks very much and see you in a couple weeks.

Great. Looking forward to it, Alex.

Our next question is from Maheep Mandloi from Credit Suisse. Maheep, your line is open.

Hey, thanks for taking good questions. Just on the previous question around natural gas, could you just talk about like how your customers generally either hedge gas prices or look at gas prices – especially with gas going to $9 like I understand like it’s probably does a natural hedge against the utilities literally, but also like in terms of the uncertainty in gas prices, how do they deal with that? Thanks.

Yes, Maheep. It’s Greg. So each customer has a little bit different view on what risk they want to take. I would say some of our customers, the gas risk is all within on the customer. We don’t take that risk. But as we look at it with them, there are some that really don’t want to take much risk at all. And they will lock in either through pre-purchase or a hedge to make sure that they don’t have price volatility. Other ones, especially large purchasers will use spot markets more because they can get some benefits on that price or a combination thereof. So it’s really around how that customer decides how they want to procure that.

Got you. And then can you check like the new tower design – the thing that saw some news around, you’re getting some pattern approvals around it that like something for just the current market or U.S. market. So like, how do you think about that product? And it’s suddenly recover.

The power tower market is extremely interesting to us. Okay. And the reason it’s extremely interesting to us is as electrification happens of like vehicles, of automotive as more energy is needed, when we go to this digital transformation, large concentrated cities where real estate is very expensive, putting that last mile of grid upgrade is going to be difficult, bringing that resiliency is going to be difficult. So just like we see in Seoul and we have done it, we have done a similar tower in Long Island. And we want to, we think that in major cities where land is of premium, it’ll be a Bloom tower and an additional benefit of the Bloom tower in addition to saving space and location is that now we can even concentrate some of that heat and provide hot water to the customers, thereby giving an additional benefit and further decarbonization. So we are fairly bullish about that concept, but it is more applicable to places where space is a premium.

Got you. Look forward to hearing more on the analyst day. Thanks.

Great. We’ll see you. Look forward to seeing you.

Our next question is from Graham Price of Raymond James. Graham, your line is open.

Hi good afternoon. Thanks for taking the question. Just following up quickly on kind of green hydrogen in Europe, really appreciate the comments there and just wanted to see, is there any opportunity to kind of accelerate the timetable for starting that production, given all the tailwinds that we’ve seen or is that pretty much that?

Yes, listen, I think, when we look at the market in Europe is interesting, for sure. There’s some incentives there that make the market attractive. There’s a lot of interest in that space. And given that what’s happening with Ukraine is bringing a lot more interest into it. These are projects that are going to take time in order to build out and deliver. And we are in conversations with folks to use our technology to help them build out their space. But you’re definitely seeing the continued tailwinds and movement based on what’s happening here today.

Got it. Understood. And then for my second one thinking about the infrastructure bill would set aside funds for the BOE to create hydrogen hubs across the U.S., just wanted to see kind of what progress there has been from what you’ve seen.

Our teams are engaged in hubs, no matter where it is in the country. And clearly, there are integrators and those integrators ultimately for them to be competitive have to pick the most competitive technology. So you shouldn’t be surprised that they’re all coming to us for the electrolyzer. And so we are engaged with many of these teams and we’ll be happy to support any and all of the ones that win.

Got it. Good to hear. Thank you very much.

Our next question is from Jeff Osborne of Cowen and Company. Jeff, your line is open.

Good afternoon. Two quick ones in a housekeeping question on the quick ones, when will the Idaho National Lab report the around like third-party validation of the electrolyzer.

Again those units are with the lab and they will conduct the test and we like to give them the independence. And when they say, they’re ready, we will do it. We know our systems will work. It’s them auditing, validating and feeling comfortable with it. And we don’t like to rush them. So – but sometime in the near future, you should be expecting that, everything is going well.

Yes. Unlike, those are the technologies we don’t use membranes. But no, look, China as a rule whether by the time you get to Tier 2, Tier 3, Tier 4 suppliers, the entire planet, I don’t care where your live is dependent one way or another on China. So China doing well is important for all of the world, and we hope those situations for the sake of the Chinese people, as well as the global economy improve very fast. Our teams are extremely resilient. They have managed through everything. And the good news that you need to know is knock on wood. We have met every single customer shipment and expectation on schedule, and that speaks volumes to our teams.

Absolutely. Great to hear. And Greg, just a quick housekeeping one, you mentioned repowering a couple times the 240 to 250 acceptances relative to your capacity. Can you just touch on how many megawatts will be repowered this year?

It’ll be in the – well, it’ll be in the single digits. It won’t be large. It won’t be a big number, but it’s – they’re enough that they can help balance out a little bit of cost [indiscernible].

Makes sense. Thank you. That’s all I had.

All right. See you soon, Jeff.

Our next question is from Noel Parks of Tuohy Brothers. Noel, your line is open.

Hi, good afternoon.

Hey, Noel.

Hey, Noel.

I really wanted to pivot back to the EQT transaction. And at the time it was announced, I remember, thinking to myself, aha, at last and it seems kind of obvious to me that an agreement like this is exactly where gas producers should be heading. And – but it’s interest striking to me that and pretty familiar with EQT. It seems that there hasn’t been much initiative, even from those who’ve put together good volumes of certified gas to look for applications like fuel cells. So I wondered if you could just talk a little bit about how that came together. And I was wondering, is there anything analogous, maybe as far as your Baker Hughes relationship as maybe somewhat coming together of legacy generation and transportation and what fuel cells can enable.

Look in the very – let’s say good question you’re asking for the roots of how this happened, right? At Bloom, we are always asking what is the most responsible right thing to do. And for us, it seemed very obvious that methane emissions is something we should not accept. Then it is very easily possible to prevent those emissions. Look, the history of this company comes from us putting rovers on Mars and making them do what they need to do. For [indiscernible] sake, we should know how to stop a molecule of methane from a reasonable price. And so Ian Toby [ph] rise and an EQT, we found a great partner who said, we are willing to do this. Ian MiQ, we found a great partner that said, we are willing to independently audit it. And then we found this report that said, 75% of methane leak from oil and gas, which is technology exists today to prevent it. You’re talking about pennies on a gallon or pennies on a MMBTU to be able to provide the premium to do this. That would be the equivalent of retiring 60% of global coal power plants and replacing them with renewable. Can you imagine how long that’s going to take? We can do this today. When we saw that, we said we have to be the leader and we have to do it. And similar to the first person buying a fair trade coffee or organic vegetables, somebody has to start the moment and everybody will follow. So we wanted to be the leaders and EQT and MiQ wanted to be leaders with us. And we found a tremendous partner in T-Mobile that came and said, can we be the first corporate customer that can do this? So that’s how it happened. And now we have placed there are entire fleet – Bloom’s entire fleet in the U.S. will run only on responsibly sourced gas, whether our customer pays for it or not.

That’s terrific. My next thought goes to having been the first to achieve an agreement like this. Can you talk at all about, how it’s helpful for your sales effort? Because I imagine, it gives another whole dimension to the story you can tell, when you’re – so people are pitching the value proposition overall.

It is definitely of great interest, because today when we sell to any of our corporate customers, there is definitely a sustainability and ESG discussion that goes on along with it. And the fact that we are able to tell them that you will be able to take the best available technology today with the lowest carbon footprint, while at the same time protecting and securing your business 24/7, that’s a very compelling argument. And it is definitely helping. This is one great case of do good and make good.

Right. It’s very helpful, because it does sort of just illustrate how, in a way, this is such a low hanging fruit. What you’re talking about was missing emissions being so easily mitigated.

Thank you.

That concludes our question-and-answer session. So I will hand the conference back to the management team for any final remarks.

Thank you, operator. Again, everyone, this is K.R. I want to thank you all for your questions and interest in Bloom. Let me leave you now with these three fundamental thoughts about Bloom Energy and our position as a leader in this energy transformation. The first thing is, our business is really matured over the last several years. And you can see how we are executing on our business plan. How we are resilient in managing through this global turmoil that you’re seeing around us. I’m exceptionally proud of our team that has handled all these broader global supply chain challenges in macros and continued to execute, execute, execute so well. Second, of all the trends that we’ve been talking about for years, whether it’s resiliency, whether it’s decarbonization, whether it is the predictability of price of power, whether companies needing to take control, which one of those have become less relevant today, which ones have become more relevant. They all become more relevant. This digital transformation is making companies understand that if they don’t take care of their own energy, they’re putting their business at risk. Legacy solutions, like, the grid are not able to meet this goal. And we, on the other hand, have solutions and the C-suite and the boards and the government are finally beginning to listen to us. The third part is we have a platform – a energy platform with fuel flexibility, incredibly high efficiency and adaptability to a variety of applications in the marketplace. It provides our company Bloom Energy with a degree of optionality that no other company in this area can claim. So all these combined you can very clearly tell, makes me very excited, optimistic, and enthusiastic. I look forward to seeing you – seeing many of you in the coming weeks during our Investor Day and look forward to showing and discussing with you in a lot greater detail. Thank you for your time today.

That concludes the conference call. Thank you for your participation. You may not disconnect your line.