Craig Irwin: Thank you. So, my second question is about margin and backlog particularly contract backlog. So, your growth in contracted backlog is really impressive. But now that EBITDA guidance is lagging versus this growth? So, can you maybe help us understand if we are seeing compression from the increased size of large projects increased contribution from large projects and maybe lower margins on energy storage products. I’m compressing the profitability of that of that backlog and pipeline or is this something that’s really just a short-term item that will happen?
Doran Hole: I’ll add to that Craig. So, I think that if you look at the awarded backlog and the contracted backlog conversions during the year, entirety of the year of 2023, no fundamental changes in the margins from. I think Q4 certainly had some larger awards in there where the margins on some of the solar EPC, especially in Europe, are a little tighter than what we normally would go after. Again very, very good operating leverage for that because it doesn’t require a huge amount of resources from us because we have a JV partner that manages the execution. But that to me it actually feels like the latter part of your question sort of you know make maybe a temporary jump in that because we did we did sign a couple of a few pretty sizable projects in Europe in the fourth quarter that that probably would have had that impact.
But I don’t see that necessarily impacting long-term. And in fact, post-signing those contracts, George and I have been back to that team on the origination and you know preaching the same thing we’re preaching in the U.S., you need to go with the higher margin higher hit rate projects. We’ve got a lot of great stuff in the backlog, but let’s focus on the really high quality stuff going forward.
Craig Irwin: Great. Well if I can say congratulations for that success in Europe. George the 15 plus years I’ve known you, you’ve been trying to figure out how to get a business there and grow it. And it’s nice to see Ameresco figure out that formula and seeing real success driving revenue and profits over there. So congrats.
Doran Hole: Thanks Craig.
George Sakellaris: Thank you, Criag. We are good to pay — a good place, I would say.
Craig Irwin: Thank you.
Operator: Thank you. Our next question is coming from Tim Mulrooney of William Blair. Your line is open.
Tim Mulrooney: Yes, thank you. I just have a couple of industry-related questions as it relates to energy storage. We recently read an article about at Duke Energy decommissioning cattle battery systems that can presume military base. We know you do work from military bases. Do you think we’ll see more of this type of action across the government space? And how do you think that might impact your business if at all?
Doran Hole: So, I’d say that there probably will be more of an action similar to that as the national security concerns start to raise, no different than the you know 5G network stuff that was going on right a couple of years ago. That being said, the primary concern doesn’t really have to do with the CATL battery containers or the quality of their systems. They’re still one of the largest manufacturers of those in the world and in fact most battery manufacturers use their cells. It’s really about the software in the battery management system, the BMS systems, right. And I think that, you know CATL is going to need to respond and figure out a way to ensure that they can get the federal government comfortable with what the BMS systems are and so I think there’s more to come on that space.
Importantly, from our perspective, we are agnostic to suppliers. CATL is not the only game in town. We’re deploying batteries from numerous other manufacturers in our projects and things that are in our backlog. We’re bidding other manufacturers into these projects. And those are those just don’t — they simply don’t carry the same concerns.
George Sakellaris: Yes, that’s great. And let me add plus this game with the two reality. I went back and I checked with Nicole that runs the federal group, whether we have any of the capital barriers with the military bases, we have none.
Tim Mulrooney: That’s interesting. I appreciate all that clarification. That’s really helpful. Sticking on batteries, we’ve heard lithium-ion phosphate batteries come down quite a bit, even since you’re at the prices that has got even since your last earnings call. I guess my question is, are you seeing that as well? And can you talk about what kind of impact a greater availability of batteries for energy storage or lower cost for these batteries might have on the project economics for you and your customers?
Doran Hole: Yes, certainly positive — positive moves in the in the economic benefits. You know whether it ends up. I mean you’ll ultimately all this ends up benefiting the ratepayers in the utility districts where these utilities are putting the batteries, right that utilities are rebasing either a long-term capacity contract with they have with us, when we own the batteries or it’s just the EPC price and the cost of the batteries. If it’s coming down, those rates come down and it really helps us — helps them pass those savings onto their rate payers.
Tim Mulrooney: Okay. So input prices here doesn’t really impact project economics for you. It’s more about the end customer?
Doran Hole: I guess I mean, it certainly gives us a little bit more room, but yes, it did allows us to sharpen our pencils on contingencies that we have to include, right. That’s you know — that’s most certainly the case now.
Tim Mulrooney: Okay. Okay. Thanks so much.
Operator: Thank you. One moment for the next question. And our next question is coming from Pavel Molchanov of Raymond James. Your line is open.
Pavel Molchanov: Thanks for taking the question. You have a lot of interesting businesses in Europe, except one, I don’t believe you’ve ever operated an RNG plant in Europe. Would you be interested in either developing or acquiring RNG assets in Europe?
George Sakellaris: Naturally, we are looking at some, but you’re right, we haven’t done one of them over there yet. But we have hired a project at a business developer to go after our RNG facilities in Europe and don’t be surprised that we might have some partners. But rather than we’re not a bank to operate to just buy operating assets unless we believe we can add some value to it and get a good return. But we are looking, no question about it. Actually, I have seen two days ago, I approved a particular proposal that we are making in Europe for a long-term business.
Pavel Molchanov: Okay. Kind of a big, big picture question about the economics of energy efficiency, we’ve talked about made through the past two years, constant escalation in power prices and the incentive for building owners to invest in energy efficiency. Is that economic rationale the best it’s ever been right now?
George Sakellaris: I would say so, because energy prices are going up. Even though inflation is going up, there’s still the value proposition. And that’s why in my commentary, from my script I said, the energy efficiency doesn’t need any government incentives whatsoever but with 179, it helps. And that’s why I’ve been preaching to the world that the 30% of the energy can be saved economically and it pencils out so, and what the other thing that’s happened in the technological advancements that we have in bringing the cost down. So, it’s great and it’s getting greater, I would say.
Pavel Molchanov: Okay. Thanks very much.
Operator: Thank you. One moment for the next question. Our next question will be coming from Craig Share [ph] of Tucci Brothers. Your line is open.
Unidentified Analyst: Good afternoon. Thanks for fitting me. A couple of quick ones. First, last quarter you all mentioned similar supply chain and project execution issues but noted that Europe had been largely exempt from that. Is that still the case?
Doran Hole: It is. Yes, Europe has still been really good availability of solar modules. Of course, we’re all kind of spooked by the Red Sea, but it ended up kind of not being much at all. And we have a supply management consulting business in the UK as well. And I talk to the head of that business quite often about what’s going on with the natural gas and power supply markets and what happened with the Red Sea on supply chain. And yes, not a whole lot impacting our business. It’s been good.
Unidentified Analyst: Great. And staying on Europe a little low, George, as you talked about more internal communication, centralized purchasing increasing project sizing, how do you see those kinds of internal initiatives playing into your European strategy?
George Sakellaris: Go ahead, Doran.
Doran Hole: Yes. I mean the short answer to that is me, because George ask me kind of directly involving my — the execution of the operational aspects of a lot of what’s going on in Europe and those some of that many of those centralized functions are things that have been developing over the last couple of years on the procurement side, enterprise risk management, et cetera, Risk Review Committee. So we have mechanisms in place to ensure that these large projects go through risk reviews that involve the folks in the U.S. who have been involved with the large projects and also that we can kind of capitalize on these efficiency measures — these operational efficiency measures that we’re implementing here. We’re still a very flat organization. We’ve got a lot of direct involvement directly with the gentleman who runs our Italian business Enerqos directly with the JV partner, directly with the guy who runs our U.K. business we’re in constant conversation.
Operator: Thank you. One moment for the next question. And our next question is coming from Benjamin Kallo of Baird. Your line is open.
Benjamin Kallo : Hi. Thank you. Good evening. If possible could you use any kind of color back to the envelope or any kind of color on the assets you add to the balance this year? What kind of your EBITDA you project to layer on for next year or they’re all completed?
Doran Hole : So I don’t think I’ve got a really good guide. We can probably reiterate some of the guidance we’ve provided in the past as far as you know EBITDA per megawatt with respect to solar and battery, right? We’re talking about a couple of hundred thousand dollars per megawatt mostly solar. I think the range for the renewable natural gas still kind of remains valid there on the EBITDA side $750,000 to call it and 1.5 million with RIN prices are doing great. But those — based on those particular cadences, I think that term should give you some idea of the breakdown and you probably have the megawatt numbers that we’re looking at the three RNG plants. I think we have a total of is that above 20 megawatts of the new megawatts going in this year is RNG. The rest of it is kind of solar and battery with that 200,000 number being a good a good back of the envelope like you said, Ben.
Benjamin Kallo : And thank you. Have you guys changed anyway that you contract or think about do we energy storage or battery developed by either your own balance sheet or for customers because of SoCalGas? Thank you.
Doran Hole : Actually, no, I think the on the contracting framework as it relates to that the things that we think about if it’s an EPC project, obviously, we’re being very, very tight with working capital. Now we’ve got a lot of guidelines out to the business units to minimize the amount of working capital that is associated with any project where we’re doing EPC. And then secondly from an execution perspective, clearly, a lot of heavier focus upfront about the commissioning process and in that feeds into supplier selection. But as far as markets where we’re developing, types of assets that we’re developing, we’re still kind of pulling things in from multiple jurisdictions and economics and risk will determine whether we end up putting those in kind of a development and selling category or put them on the balance sheet. So that’s probably the best description I can give you, Ben.
Benjamin Kallo : Great. Thank you guys.
Operator: Thank you. This does conclude today’s conference call. You may all disconnect.
