Babcock & Wilcox Enterprises Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 9, 2023

There are 7 speakers on the call.

Operator

Good evening. My name is Hannah, and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you.

Operator

Sharon, you may begin your conference call.

Speaker 1

Thank you, Hannah, and thanks to everyone for joining us on and Wilcox Enterprises Third Quarter 2023 Earnings Conference Call. I'm Sharon Brooks, Director of Communications. Joining the call today are Kenny Young, B&W Chairman and Chief Executive Officer and Lou Salomone, Chief Financial Officer to discuss our Q3 results. During this call, certain statements we make will be forward looking. These statements are subject to risks and uncertainties, including those set forth in our Safe Harbor provision for forward looking statements that can be found at the end of our earnings press release and also in our Form 10 Q that will be filed today and our Form 10 ks that is on file with the SEC and provide further detail about the risks related to our business.

Speaker 1

Additionally, except as required by law, we undertake no obligation to update any forward looking statement. We also provide non GAAP information regarding certain of our historical and targeted results to supplement the results provided in accordance with GAAP. This information should not be considered superior to or as a substitute for the comparable GAAP measures. A reconciliation of historical non GAAP measures can be found in our Q3 earnings release published this afternoon and in our company overview presentation that will be filed on Form 8 ks this afternoon and posted on the Investor Relations section of our website at babcock.com. I will now turn the call over to Kenny.

Speaker 2

Thanks, Sharon, and thanks, everyone, for joining us today. Well, as you can tell by our earnings release, it's been a busy Q3 for Babcock and Wilcox. I'd like to start the call today by first reviewing our Q3 performance on a continued operations basis Accounting for the announced reclassification of our solar business as well as the latest advancements across our Bright Loop and Climate Bright Initiatives. I'll also discuss our announced strategic business realignment and the rationale behind that decision as well as details related to our 2023 2024 Financial Targets, which are based primarily on the strong performance of our aftermarket parts and services businesses And before turning the call over to Lou, let me start by highlighting the broad based activity that drove revenue growth across All business segments during the quarter. Revenue for the Q3 was $239,000,000 which is 13% improvement compared to the prior year and our 3rd consecutive quarter of revenue expansion on a year over year basis.

Speaker 2

Our top line improvement was led by thermal revenues that increased approximately 17% when compared to the Q3 of 2022, followed by Renewable, more specifically our Renewable Services as well as Environmental Revenues increasing 11% and 4%, respectively. Our aftermarket parts and services business in Thermal and Renewable typically our higher margin businesses Continue to perform above our internal expectations. Consolidated adjusted EBITDA From continuing operations for the quarter was also impressive at $20,000,000 an improvement of $7,000,000 or 54% When compared to the same period last year, this is inclusive of roughly $2,000,000 in expenses for BrightLoop and Climate Bright in Q3 2023. While product mix was a large factor in the adjusted EBITDA performance for The quarter attributable to the higher margin nature of our aftermarket businesses, we also demonstrated strong execution on increased volumes of projects Within our Environmental segment. While continued operations, bookings and backlog were mostly flat year over year, This is largely attributable to timing of new bookings as negotiations on a few larger opportunities are taking slightly longer than anticipated.

Speaker 2

Some of these delays are positive due to increased scope for B and W Aftermarket Services as many utilities and large energy companies or reevaluating the timing of new build projects and deferring to upgrades due to higher interest rates and other geopolitical factors. Our outlook for near term booking opportunities remains robust, positioning us well to achieve updated Our growth in a range of $550,000,000 to $650,000,000 by year end 2023 based on continued operations, not including our to Unified Assets. In addition, based on our improved performance of Thermal Parts and Services and our global reach in providing clean energy technologies, We remain confident in achieving our revised full year adjusted EBITDA target from continuing operations of $85,000,000 to $90,000,000 Transitioning to BrightLoop And Climate Bright commercial activities, we are pleased to provide several updates related to our hydrogen generation technology and project portfolio. As previously mentioned, we are developing a small BrightLoop hydrogen production plant in Mattsland, Ohio, very near our headquarters here in Akron. We are close to signing a definitive agreement for hydrogen uptake at this location for up to 3 tons per day of hydrogen production for the next 10 years.

Speaker 2

We are also excited to announce we have a letter of intent for project level financing and we have signed a lease agreement and are moving forward with construction to produce hydrogen by the end of 2024 or very shortly or early into 2025. With regard to our medium and larger platforms, we are also excited to announce a collaboration with Air Products, which represents a key step forward in our development of net negative carbon intensity hydrogen production facility in Louisiana Utilizing BrightLoop Technology. More specifically, we have signed a memorandum of understanding with their products to enter into a definitive offtake agreement for up to 200 tons of carbon negative hydrogen per day as well as the CO2 produced at the facility with the initial production The facility expected to be operational in late 2026. This comes on the heels of our previously announced offtake agreement with General Hydrogen to acquire both hydrogen and CO2 from our medium sized biomass BrightLoop platforms. Both of these agreements Based on the trend the traction we have received to date, it has become clear that commercial solutions that address Carbon neutral targets have become imperative.

Speaker 2

Importantly and parallel, we continue progressing in Wyoming And within recently announced hydrogen hubs, especially in West Virginia. This includes permitting, fuel commitments and collaboration, offtake, land Allocations as well as project funding. While our recent developments across Brightwood projects continue to progress, We are also pleased to announce a meaningful update to our Board of Directors. Effective today, Doctor. Naomi Bonnett will join our Board of Directors, bringing And extensive expertise within the energy sector, particularly in hydrogen generation and carbon capture.

Speaker 2

We welcome Naomi to the Board and are Confident her deep industry experience will prove valuable as we continue to accelerate our hydrogen strategy going forward. To reiterate, our updated pipeline when excluding the reclassified operations is over $8,500,000,000 across all three segments With approximately $1,000,000,000 in BrightLoop opportunities, we believe this puts us on a pathway to reach $1,000,000,000 in bookings by 2028 with a Combination of small, medium and large projects, we feel confident that could lead to $1,000,000,000 in revenues from BrightLoop by 2,030 and beyond and would still only represent 1% of the market share of total hydrogen spend by 2,030. I'd now like to focus on the announced strategic business realignment, including what it means for the company going forward and its immediate impact to our current operations. In response to today's market conditions, which include higher interest rate costs and reduced or delayed growth capital expenditures by our customers, We see a growing global trend in extending the operational lifespan of existing power and industrial generation facilities. This presents us with an opportunity to shift our focus to the more predictable revenue streams generated from our aftermarket businesses.

Speaker 2

We plan to utilize these cash flows to strengthen our balance sheet and reduce our overall debt. While we are also evaluating strategic Aftermarket alternatives related to non strategic assets. Further, we expect to realize up to $30,000,000 in annualized cost savings, primarily through reduction of the high overhead associated with seeking multiple newbuild projects. Our heightened focus on producing more predictable cash flow generation is consistent with our approach to provide long term profitable growth for the company and its shareholders, Ultimately driving our decision to streamline our efforts to concentrate on aftermarket businesses and capitalize on higher margin parts and service opportunities. In order to ensure a successful realignment of our updated strategy, our focus is on the following: Want a greater emphasis on higher margin aftermarket parts and services across all three segments, while further reducing overhead costs associated with certain large new build project opportunities.

Speaker 2

Reducing our senior secured letters of credit facility by up to $20,000,000 by the end of fiscal year 2024, refinancing our existing senior secured credit facility to reduce our interest Vince by up to $5,000,000 and just today announcing a commitment for $150,000,000 in refinancing, Bolstering cash flow generation and strengthening the balance sheet and utilizing federal, state and project level financing to accelerate the deployment of our Bright Loop and Climate Bright Technologies. While we recognize the long term growth potential for Solar from both the community and utility standpoint, there were several key factors that our management team and Board considered when evaluating what steps The company would take regarding the pathway and for continued growth. As part of this evaluation process, we have decided to reclassify our solar business Out of continuing operations, this is primarily due to the historical projects, the higher risks and the margin profiles. Looking ahead to next year, our focus on promoting future growth aligns with the sustained demand we observe across all segments, Paving the way for improved performance in 2024 with our announced adjusted EBITDA target range of $100,000,000 to $110,000,000 when excluding BrightLoop and Climate Bright. Importantly, given our strategic business realignment, we now have increased visibility and confidence in our outlook As a significant portion of our targeted adjusted EBITDA will be generated from existing backlog with less reliance on large projects.

Speaker 2

I'll now turn the call over to Lou to discuss the financial details of the Q3. Lou?

Speaker 3

Thanks, Kenny. I'm pleased to review our Q3 results And our recent commitment for the refinancing of our senior credit facility, further details of which can be found in our 10 Q that is on file with the SEC. I'd also like to call your attention to the fact that I will be referring to amounts of our continuing operations. Our 3rd quarter consolidated revenues were $239,400,000 which is a 13% improvement compared to the Q3 of 2022. This is primarily attributable to higher volumes in our Renewables segment due to the B and W Renewables Services operations As well as the Thermal segment volume, which increased due to higher levels of construction and parts activity.

Speaker 3

Our net operating income for the Q3 of 2023 was $5,500,000 compared to an operating loss of $2,700,000 in the Q3 of 2022. Our adjusted EBITDA was 20,000,000 as compared to $13,000,000 in the Q3 of 2022. Bookings in the Q3 of 2023 We're $198,000,000 and the ending backlog at the end of the quarter, Q3 in 2023 was 507,000,000 Our net loss per share in the Q3 was $0.18 as compared to a loss per share of $0.15 in the Q3 of 2022. As Kenny mentioned, we've reclassified the solar business out of continuing operations. As a result, We'll have taken an impairment charge of about $56,600,000 and recognized contract losses of 47,900,000 which include future estimated losses, both of which are reported in discontinued operations.

Speaker 3

We're pursuing potential recoveries of certain of these amounts up to $40,000,000 and there is no assurance that these amounts will be recovered. Accordingly, such recoveries have not been recognized in the financial statements. I'll now turn to our Q3 segment results. Within our Babcock and Wilcox Renewables segment, revenues were $87,100,000 for the Q3 of 2023, which is an 11% increase compared to $78,500,000 in the Q3 of 2022. The increase in revenue is due primarily to higher volume associated with Renewable Services and our adjusted EBITDA And the Q3 was $10,100,000 as compared to $4,500,000 in the Q3 of 2022, primarily due to the higher revenue volumes as described above.

Speaker 3

Within the Babcock and Wilcox Environmental segment, revenues were $46,400,000 in the Q3 of 2023, which is an increase of 4% compared to the $44,600,000 in the Q3 of 2022. The increase is primarily driven by a lower volume related to flue glass treatment process projects offset by a higher overall volume of cooling technology projects. Adjusted EBITDA was $5,000,000 for the quarter as compared to $3,100,000 for the same period last year. And again, this is primarily driven by higher product mix higher margin product mix as described above along with favorable closeout of Flue Gas Treatment Plant, sorry about that, hard for me to say, flue gas. Turning our Babcock and Wilcox to our Thermal segment, Revenues were $107,000,000 in the Q3 of 2023, which is an increase of 17% compared to the $91,300,000 in the Q3 of 2022, and this was primarily attributable to the higher level of volume in our construction projects as well as parts and service and our package boiler businesses.

Speaker 3

This was partially offset by a decline in certain service projects. Adjusted EBITDA in the Q3 of 2023 was $11,300,000 compared to $10,800,000 in the Q3 of 2022. This is primarily driven by the higher revenue volume and product mix described above. I'll now turn to our balance sheet, cash flow and liquidity. Total debt at September 30, 2023 was $377,600,000 and the company had cash, cash equivalents and restricted cash balance of $65,100,000 Additionally, subsequent to September 30, 2023, we obtained a commitment to refinance our senior credit facility and amend our existing reimbursement agreement, including updating certain financial covenants thereunder.

Speaker 3

The refinance commitment is expected to reduce our interest costs by up to $5,000,000 per year based on current interest rates. The financing and strategic alignment should significantly improve our liquidity this quarter and onward. I'm also pleased to announce that we have as Kenny had mentioned, we've signed a letter of intent for the financing of our first Bright Loop Hydrogen Project being developed in Mass Now I'll turn the call back over to Kenny.

Speaker 2

Thanks, Lou. Well, in closing, While Q3 wasn't without challenges and included several strategic decisions to improve the fundamentals of our business, we are extremely excited about the growth opportunities ahead of With increasing commercial interest in our core and new technology and global demand for our baseload power generation, Our market outlook remains robust and we see the momentum in booking activity accelerating into 2024 and beyond. Finally, as always, I'd like to recognize the efforts of our employees as they continue to drive our success as an organization worldwide. With the outstanding support of our extremely talented and experienced employees and the continued confidence of our customers, we're driving innovation and supporting the global transition to And we're focused on delivering strong profitable growth for our shareholders. We are entering a new phase And as we execute our strategic business realignment and we look forward to the transformation that will enhance overall margins and improve cash flows I'll now turn the call back over to Hannah, who will assist with any questions.

Speaker 2

Hannah?

Operator

Thank you. Our first question is from the line of Aaron Spiechalla with Craig Hallum. You may proceed.

Speaker 4

Yes. Good afternoon, Kenny and Lou. Thanks for taking the questions.

Speaker 2

Hey, no problem.

Speaker 4

Thanks. First for me on the guidance, appreciate some of the color there. Can you just talk a little bit more about the Exclusion of kind of BrightLoop and Climate Bright there, what those investments might look like as we think about 2024? And then Just elaborate a little bit. You talked about some kind of project level financing and other things that you're pursuing there?

Speaker 2

Sure, no, be happy to. So I would think about BrightLoop and Climate Bright from a broader company standpoint to be, I don't know, under $10,000,000 but $5,000,000 to $7,000,000 perhaps somewhere in that neighborhood just to give some transparency there. From a B and W standpoint, obviously, the project financing that we're referring to will go in at the project level versus an impact necessarily to B and W. So There'll be a timing and depending on how that project financing is set up and the exact structure of ownership of those particular projects, how the revenue will flow back Forward to B and W as we've mentioned in the past, but from an expense perspective, rough order of magnitude, that's how we're thinking about BrightLoop and Climate Bright.

Speaker 4

All right. Thanks for that. And then second, just on the backlog, you talked a little bit, but can you just Give a little more color on some of those projects. It sounds like maybe just slipping into 2024. Do you have any of those been lost or is it just kind of more of a project timing?

Speaker 4

And then you kind of talked about accelerating momentum, just Maybe some of the areas that you're looking for as we head into 2024?

Speaker 2

Yes. Well, actually, I would Yes. Even though we're in November here, we're talking about Q3 on this call. I would say some of those are slipping more into Q4, maybe into 2024. It just We work through these negotiations on a few projects that we're trying to complete on that.

Speaker 2

As referenced in my comments, Some of those delays I've referred to is increasing some scope and activity potentially for B and W. As a few of the projects, we're looking to larger upgrades and enhancements and some of our customers are now trying to ascertain how they Can extend out the life of these plants longer than maybe they had anticipated. So it's caused us to or caused them to relook at some of scope in a positive way as it relates to B and W and so we're excited about that. But, so those negotiations continued, but hopefully and we have Full intent to get those books still in Q4, but 1 or 2 of those may slip out into 2024 as well. But it's More of a timing, I think, just from a negotiations aspect and as the customers relook at Their approach to some of these technologies and the lifespan of the plants, which in the long run bodes well for us as an aftermarket provider.

Speaker 2

So That's how we look at it. I think worldwide, obviously, some new build opportunities, in particular, I would say And renewable energy, waste energy, some of those are delayed a little bit because of the interest rate increases and timing of capital expenditures, but not for any other reason. So there's a few that will probably extend into next year overall. But for us, as we talked about on the businesses as reducing the overhead associated with Large new build, which this is an opportunity for us to do that. We also see potentially increasing opportunities around licensing and licensing some of our waste energy technologies and in support of some of the new direction that we want to take in So, we'll balance that as we transition more towards licensing, and less on specific large new build opportunities.

Speaker 4

Understood. Thanks for taking the questions. I'll turn it over.

Speaker 3

Thanks.

Operator

Thank you, Mr. Spichalla. Our next question is from the line of Brent Thielman, D. A. Davidson.

Operator

You may proceed.

Speaker 5

Thanks. Good afternoon. Hey, Kenny, Lou, I just wanted to confirm the 2024 EBITDA Target is 100 to 110 ex Brite Loop and Climate Bright?

Speaker 2

That's correct. Yes.

Speaker 4

Okay.

Speaker 5

And I just again, another clarification. I think you said $5,000,000 to $7,000,000 Against that potentially in costs just in support of BrightLoop and Climate Bright, is that the right sort of Thanks, Brian.

Speaker 2

Yes. I think that's say below 10, but somewhere in that range, I think it's a good number. It will We can vary a little bit depending on the project financing and how we deal with that on these projects as they continue to advance in the timing of some of for the state funding that we're anticipating as well as other, SPV level investors that would be investing in those projects. So there's just an element of that timing piece and how the revenue flow Between the projects back to BW would take place, which could plus or minus those expenses from an EBITDA standpoint. But And it's a little early to predict precisely how that will work in the timing of that, but we see that pathway unfolding.

Speaker 2

So just to give you some range, that's kind of how we're thinking about it.

Speaker 5

Okay. That's helpful. And then I guess, I mean, Particularly in regard to some of these moves to boost the cash flow of the business, can you talk about what sort of your expectations Are assuming kind of this 2024 EBITDA target range should get some benefits from this overall strategic Realignment, I assume there's less drag from certain operations as a function of this. How should we think about that 24 EBITDA Converting into cash flow.

Speaker 3

Yes, Brent, from our standpoint with the emphasis On the thermal business and what we're now what we also call power business, which generate much more cash flow than new build projects, We should start seeing a better conversion than we've had in the past from adjusted EBITDA to the cash. Some of that cash will be used as Kenny talked about to continue to expand our BrightLoop penetration. But we should be able to convert a much higher percentage than we've converted and have positive cash flow Coming into the Q2 of next year, conversion rate would probably be I'll be a little bit broad on that because of CapEx, but the conversion rate would probably be in the 60% range with respect to cash.

Speaker 5

Starting 2Q, is that right, Lou? Yes.

Speaker 3

Yes. I'd say middle of Q2, we'll start seeing that. Q1, as you know, Brent, Q1 is always a slow quarter for us as well as others in this industry.

Speaker 5

Yes. Okay. And then I guess just in regard to some of the financing That you've done here recently, maybe give me your thoughts, next steps just related to the capital structure that you may or may not need to take, I guess, in order to sort of Support the ongoing kind of financing commitments you've got out there, support the growth of the company, support Bright Loop. Do you feel like the capital structure is in a place You can do all that at this stage.

Speaker 3

Yes, I think the committed financing that we talked about Earlier, for the $150,000,000 for the senior credit facility, which will be both, the What I'll call the letters of credit facility and the revolver certainly helps our capital structure as does the lower interest rate. And as Kenny mentioned, we're kind of looking at some of the strategic areas that may not fit with our new direction And that may generate some cash.

Speaker 2

Yes. If I can add to that just real quick though, but that $100,000,000 to $110,000,000 EBITDA range, it's important to note and Try to emphasize this that we were lessening, if you will, the reliance on large newbuild projects as it relates to that Target, that doesn't mean that we won't be entering into certain projects if it makes sense for us to enter into. We're trying to obviously allow those to be more upside to that target rather than a necessity in order to achieve the target. So Try to be a little more conservative on that approach with putting that guidance or targets out there.

Speaker 5

Okay, great. Thank you, Kenny.

Speaker 2

Yes.

Operator

Thank you, Mr. Seyalman. Our next question is from Rob Brown with Lake Street Capital Markets. You may proceed.

Speaker 6

Good afternoon. I just want to clarify a little bit more on your comments on the realignment and And then not sort of pursuing these larger projects, so what kind of the I assume it's waste to energy, but Are you then no bidding projects or how do you sort of go to market with that and how do you change your focus there?

Speaker 2

Yes, it's not as complicated as it sounds. We're simply twofold and I'll explain it further. Certain opportunities in certain parts on waste energy, particularly international opportunities require certain security package levels. The security packages, I. E.

Speaker 2

LCs, letters of credit, as it relates to us, come with High interest rates, right. So, a lot of in waste to energy, the margins are not as high on newbuild, Clearly not as high as our aftermarket parts services on Renewable Services, but those letters of credit and the interest Associated with them really compresses the margins plus additional risks. So as we look at going forward, Two aspects. There are opportunities and projects that we're in discussions and negotiations on regarding waste energy, specifically that So those are positive ones or opportunities for us to pursue. But we want to remove the reliance of that in our forecast so that there are more upside rather than a necessity, if that makes sense.

Speaker 2

But secondarily, We do see an expansion opportunity on licensing. We have been licensing our waste energy technology in several markets and that typically comes at even higher gross margins and significantly lower amounts of letters of credit. So the Great expenses are or the cost of that are much more attractive to us from a margin standpoint. So it's not necessarily a no bid or 0 bit. It's just as we continue to focus, we'll reduce the overhead down to match what we think is The hand 1 or 2 or 3 or whatever the projects that we think that are a stronger Opportunity for us from a margin and cash flow standpoint as we also increase the licensing model that we have, particularly around our waste energy technologies.

Speaker 2

So it's, I don't know if that makes sense, but it's as simple as that sounds.

Speaker 6

Okay, got it. Thank you. And then on the BrightLoop pipeline, I know you've given Pretty good color on it over on your last analyst kind of update. But how is that pipeline kind of at this point? Are you seeing more projects come into it?

Speaker 6

Are you seeing What's the direction in terms of project certainty in some of those projects that we're waiting for, some of the government supports and financing incentives?

Speaker 2

Yes. So we are excited about the opportunities in the pipeline building. When we announce The pipeline we typically keep it to a 3 year projects that we think will book in the next 3 years. So I guess if we expanded that pipeline to Total opportunities, you would see several more billions in those opportunities. And that's mainly around BrightLoop as it relates to those large projects.

Speaker 2

So, our overall opportunities on BrightLoop keep growing around that. We have As a result of that, we keep expanding that organization going forward in BrightLoop and Climate Bright. We haven't got to a final decision on this yet, but we're debating and discussing whether or not we should move BrightLoop and Climate Bright maybe to A separate, at least discussion, not necessarily segment going into next year, but we're not at that point yet. But the short term aspect, the opportunity as Lou mentioned, Ohio now is moving into A real project for us. The financing is coming into place.

Speaker 2

The off take agreements are moving into definitive agreements for up After 10 years of take or pay on that hydrogen, obviously, it's not a big plant relatively speaking, but it's important because it puts in the ground commercial Technology for us, it moves it from where we were before. The state discussions that we're having with Several states now continue. Those applications are moving into a real status. Some of those will start to move into public domain soon and you'll see further announcements on that. It might be a phased in approach on some of that funding coming from states.

Speaker 2

And we're We continue the discussions on the federal level as well too. The other aspects, again, it's kind of circular piece, but the hydrogen hubs that were just recently announced by the DOE, in particular, the Appalachian hub, There's mentioned we've mentioned before previously some of the work that's taking place there in Mountaineer in West Virginia that's I'll pull through that will eventually some of that will get down to us. That's going to take time obviously, but those things keep moving on. We've increased Testing now, boy, I'm going to throw out a number. It's probably we're up to about 30 different fuel testing or samples that we're testing across A broad range both in utilizing solid fuels such as certain coal developments, also in Biomass developments in multiple locations that's going through our labs at this point in time.

Speaker 2

So we keep increasing the amount of fuel testing related to the And we keep developing the opportunities as we keep unfolding the projects that are there before us. But as mentioned on

Speaker 4

And the

Speaker 2

comments today, the developments around Air Products and getting to a 10 year agreement with moving forward with them to finalize a 10 year agreement. That location is a big step. That plus the general hydrogen announcement puts us in an offtake of up to 2 20 tons a day. We are in negotiations on the feedstock aspect, mainly biomass in that particular location and we're in negotiations on the lease and then The air permitting process there, we are also in discussions on funding around that project. So All corners of that pyramid are coming together, the same in some of the other locations and We'll keep announcing that obviously as we continue to make progress there.

Speaker 2

But BrightLoop keeps expanding and we're excited about those opportunities. One of the areas, I didn't talk about in the comments, but I'll say it on the call here that we're starting to see more early on this. So we'll identify it as we move along. But what we're starting to see globally and potentially in the U. S.

Speaker 2

Is actually combining ammonia Either net negative or net neutral ammonia with coal fired plants to reduce the overall CO2 offset of those coal fired plants. We see a wide that activity happening a lot, especially in Asia. There's been some discussions with a few here in the U. S. So Really early on, on that application, but that's exciting for us because, as I mentioned before, a lot of these plants now are looking to Extend their life cycle and power generation.

Speaker 2

And if we can introduce a net neutral Our net negative ammonia production from biomass, which BrightLoop can do, these power plants can actually have a carbon offset That would take literally depending on the mix could take a coal plant down to net at least net neutral by 2,030. And we think that's an exciting development. We're early in that discussion, but it bodes well for us because it's both aftermarket parts and services for our baseload power generation and thermal group, but it also opens up offtake for the ammonia produced by net negative Carbon intensity, BrightLoop using biomass. So we're excited about both ends of that spectrum and that's one of the decision points that went into our thinking to get more around our thermal parts and services and our renewable parts and services and focus more on the Bright Loop Climate Bright because it's becoming more real for us, At the same time, reduce some of the costs associated with some of the other areas. So all of that adds into that realignment strategy.

Speaker 2

Okay, great.

Speaker 5

Thank you

Speaker 6

for all the color. I'll turn it over.

Operator

Thank you, Mr. Brown. Our last question is from the line of Alex Rygiel with B. Riley. You may proceed.

Speaker 5

Thanks. Good evening, Kenny and Lou. A lot going on here. So let's get into a couple of things. First, as it relates to the $30,000,000 in the annual Can you comment on the timing of that and how important is that in getting to your guidance of maybe $100,000,000 to $110,000,000 next year?

Speaker 2

Yes, some of that has already started and will help out a little bit in Q4 and clearly will So that process has already begun. Obviously, we're taking steps. Some of the timing of that may be more in Q1 than now, but they've been identified and Those are in process to be implemented, I guess, best way to describe it.

Speaker 5

Excellent. And then there was a reference to strategic alternatives related to non Strategic Assets. Is there any chance you could quantify kind of the possible value here that you could realize in making

Speaker 2

Great question, Alex. I wish I could, but I'll leave that out for the moment. But just wanted to say we look at various Some of those could be property locations and other things, assets that no longer strategically that we need going forward, but I don't have a valuation or anything that we'd want to put out at this point in time.

Speaker 5

Great. Thank you very much.

Speaker 2

Thanks, everyone.

Operator

That concludes the question and answer session. I would now like to turn the call over to for any closing remarks.

Speaker 1

Thank you for joining us today. This concludes our conference call.

Operator

That concludes today's call. Thank you for your participation. You may now disconnect your lines.

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Babcock & Wilcox Enterprises Q3 2023
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