Earnings Transcript for UGEIF - Q3 Fiscal Year 2021
Operator:
Good morning, and thank you for joining us to discuss UGE International's Third Quarter Fiscal 2021 Financial Results. On the call today, we have UGE's CEO, Nick Blitterswyk, and UGE's CFO, Stephanie Bird. During the call, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. We've collected investor questions via email but you can also submit your questions through the Q&A tab in the web portal at anytime. And management will ask them following the prepared remarks. Before management discusses the results, I'd like to remind everyone that certain statements in this call may be forward-looking in nature. These include statements involving known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. For clarity about forward-looking statements and risk factors, please see our MD&A for the year ended December 31st, 2020, which can be found on our Company profile at sedar.com and on the Company's website. I will pass the call over to UGE CEO, Nick Blitterswyk. Nick.
Nick Blitterswyk:
Thanks, Marcel. Good Morning. And welcome to the conference call. My name is Nick Blitterswyk, CEO of UGE International. And it's nice to have CFO, Stephanie Bird. For today's Q2 webinar, I'll begin by summarizing our key business highlights for the quarter. Next, Stephanie will run through our Q3 financial results. And from there, I'll provide some concluding remarks, we will look towards the future. I'll then take questions and wrap up the webinar. As a reminder, you can submit a question through a portable, on the left-hand side of your screen. And we'll run two questions at the end of the webinar. As always, our goal is to be mindful of your time and keep this webinar concise to the point. We will be speaking relatively high levels and our goal is to be mindful of your time and keep this webinar concise to the point. We will be speaking relatively high level and focusing on the areas that we feel are most important to understanding our business and financial results. Our website address is listed here as well, where you can download our full financials. We also want to remind our listeners that we report in U.S. dollars. So the results in this webinar are represented in U.S. dollars as well, unless addressed otherwise. So with that, let's start by talking about our key business results in the quarter. I'll start off by talking about our project development pipeline, which once again saw substantial activity in the quarter. Here you see the pipeline table taken from our MD&A. When we zoom in on the early stages of the pipeline, you see that the top of the funnel has grown dramatically so far this year. To break it down, we had 113 megawatts in these pipelines stages at the beginning of the year. At the end of the second quarter, it had basically tripled to 358 megawatts. As of September 30th, our pipeline had doubled yet again to 790 megawatt, which has continued to grow further since quarter-end. For example, last week we announced the addition of over 100-megawatt solar and storage projects in Massachusetts, as a new state for UGE. And 30 markets we've entered in 2021. These are almost all additions on top of what we see here. In terms of the timing, first and foremost, I want to call attention to the work we're doing to grow our origination and development efforts. Starting in March, we will create several additional members for origination team, which has given us greater reach throughout our market, and needs new team members specifically on running. Translating to pipeline that will feed our project backlog in the coming quarters, and operational projects thereafter. Of course, after I made such reference longer shipping numbers of origination team, as well. We've been also having a great year. Our backlog growth also speak to the opportunities available in our market right now and the work we've done to be a winner in this space. On the next slide, we share project backlog, which is represented by projects in stages 3.1 to 5. We've also seen strong growth in our backlog, throughout the year from 60 megawatts at beginning of the year to over 160 megawatts at the end of Q3. As noted in our subsequent events, our backlog has already sailed to 145 megawatts as of yesterday, smashing through our 2021 target of 120 megawatts. And then Q3, we had one U.S. projects with the capacity of 740 kilowatts with notice to proceed in this town construction. We expect project appointments to ramp considerably in 2022 as our backlog matures. As mentioned on prior calls, the time spent in each of these stages is not equal. To illustrate, we currently have approximately 10 megawatts of projects, which we expect [Indiscernible] stages, 4 or 5 by the end of Q1, several of which are currently in stage 3.1 as they await final interconnection approval. On this slide, we see the operating portfolio. In the big picture, these numbers are still low compared with our medium-term goal of 100 megawatts of operating assets. Well, we've seen growth of almost 100% since beginning of the year. We now have a full quarter of our newest operational projects in the U.S. being reported. And look forward to being able to report operations for the projects, turning the program in early 2022. Windmill is a smaller project tending to be quicker to deploy, and so our current operating portfolio has a smaller average project size than our overall backlog by significant factor. Here, our operating portfolio average is about 200 kilowatts per project, which compares to approximately 3 megawatts per project for overall backlog. Looking at the broader picture, we see a pipeline, as of December 30th, of 790 megawatts, which was 7 times at the beginning of the year. A backlog of 115 megawatts, which is almost double back at the beginning of the year, and operates all projects of 1.5 megawatts, again, almost double back at the beginning of the year, for a total portfolio of 908 megawatts. For the last slide, before turning things over to Stephanie, I wanted to highlight a few other important updates. First is, our pipeline activity has continued to be impressive so far in Q4. Notably, as we disclosed last week and as I mentioned above, we entered Massachusetts a [Indiscernible] this year, starting with more than a 100 megawatt of solar plus storage and standalone storage projects that are now at the early stage s of development. The first projects from the pipeline are expected to enter UGE 's backlog at the end of this calendar year and be built within 24 months. We also announced a partnership with T-Mobile in November to provide clean energy to offset their energy consumption. The contract supports T-Mobile 's commitment to power its business using 100% renewable energy. In the market itself, there continues to be significant movement. The progress continues to be made in several states from the national community as well. Last week, President Biden signed a bi-partisan infrastructure bill, which includes approximately 73 billion on electricity grid. Now, let me turn your attention to the Build Back Better Act, which the House passed last week, has exclusive support from President Biden, with the Senate being the last straw overcome. The Build Back Better Act includes significant incentives directed specifically at our industry. It includes a 10-year extension of the federal investment tax credit and a 30% rate, up from the current 26% rate. It also includes a provision to collaborate payment of this incentive, as opposed to [Indiscernible] to offset taxable income, which provides a meaningful additional benefit to develop groups like UGE. With no further induced incentives, which would drive down our input costs, as well as additional incentives towards low and moderate-income communities, which our community solar projects often offer there. Taken together, the Build Back Better Act will be a very significant tailwind for our industry, still watching it closely. Of course, achieve that everyone has been impacted by supply chain disruption [Indiscernible]. And the slower industry is no exception. In particular, solar panels increase in price this year by about 10%. Fortunately, we're not encountering project for supply chain disruptions have caused us to purposely delayed a project. You're also starting to see some light at the end of the tunnel. In the past 2 weeks, there have been 3 points [Indiscernible] in the [Indiscernible]. But first, let's reject the petition to extend tariff to several manufacturer in Southeast Asian countries, which account for a significant portion of the U.S. import market. The [Indiscernible] protracted tariffs has significantly slowed shipment in the U.S. Second, there was a change in language related to restrictions around material from Qingdao, China, which should make it easier for manufacturers to show that their panels are compliant [Indiscernible] imported to the U.S. And finally, last week the ruling removed tariffs on importing [Indiscernible] solar panels, which is a product we frequently use in our town projects. Taken together, we have great confidence that we should see pricing improvements going into 2022, especially when combined with historical increases in manufacturing capacity within the industry currently underway. We also see these moves as further validation of the Biden administration's significant support towards the solar industry. Lastly, we continue to have financing discussions for upcoming project [Indiscernible] the funding environment continues to be very strong. We are optimistic that our expectations of compressing interest rates as our volumes of equipment growth will hold and look forward to sharing our progress after our next close. For tax equity, we continue to be pleased with terms and availability and of course we're watching for that potential threat [Indiscernible] provision that I mentioned earlier. We are also seeing good availability for development capital. We've set debt product available for mature solar developers like UGE, and provide funding for development for the period before projects reach a risk to receive. Certain facility will provide UGE with a non-diluted disposable capital as our backlog continues to grow mature. I'll now turn it over to Stephanie, and just have her raise our Q3 Financial results. And then overturn for concluding remarks, we're taking your questions.
Stephanie Bird:
Thank you, Nick. And thank you for joining us today. I'm going to review a few key items in our Q3 financial results. Looking at this slide number 9, for the third quarter of fiscal 2021, UGE earned $465,000 of revenue from client-financed agreements, Philippine projects, and engineering services, decreasing from 528,000 in Q2 of 2021, and increasing almost 3 times from Q3 of 2020. These changes from prior periods are due primarily to the timing of projects progressing from contracting to construction. Year-to-date, UGE has earned $1.4 million from client finance agreements compared to $1 million in year-to-date in 2020. In part, the increase year-over-year reflects the easing of COVID-19 restrictions compared with 2020. UGE's energy generation increased 26% from the second quarter's 235,000 kilowatt hours to 295,000 kilowatt hours in Q3. This translated into that 65,000 of revenue in the third quarter versus 47,000 in the second quarter, and $16,000 in Q3 of 2020. Energy generation year-to-date, 2021, is 633,000 kilowatt hours, producing $137,000 in recurring revenue. These numbers will be influenced by seasonality and to the number of projects moving into operations as we move forward. Turning to gross margins, during the third quarter of 2021, our gross margin on client financing consulting revenue was 14% versus 37% in the prior quarter, and 38% in the year-ago quarter. The primary reason for the change was due to an accrual taken for equipment on our Philippines projects currently in construction. For the first 9 months of fiscal 2021, gross margin was 25% compared to 27% in the 2020 comparable period. Operating expenses in the third quarter were $1.5 million compared to $853,000 in Q3 2020. The increase in year-over-year quarterly operating expenses reflects a full quarter of headcount additions, which were mainly to our origination and development teams in the first half of the year. As well, operating expenses in the third quarter of 2020 benefited from temporary salary reductions and cost-saving measures related to the COVID-19 pandemic. For the first 9 months of fiscal 2021, operating expenses grew to $3.9 million from $2.6 million in the 2020 comparable period. The increase was likewise due to a combination of increased headcount in 2021 and decreased costs in 2020 that were related to the COVID-19 pandemic. Adjusted EBITDA in the third quarter of fiscal 2021 was $1.2 million loss versus a $662,000 loss in Q3 of 2020. And for the first 9 months of fiscal 2021, adjusted EBITDA was $3 million loss compared to $2 million loss in the first 9 months of 2020. Net loss for the third quarter of fiscal 2021 was $1.3 million versus the $349,000 net income in the year-ago quarter. We note that Q3 of 2020 benefited from $1.2 million of other income versus just $104,000 of other income in the third quarter of 2021. For the first 9 months of fiscal 2021, UGE 's net loss was $3.2 million compared to the $1.1 million net loss in the comparable 2020 period. As a reminder, we are in the process of transitioning from a one-time revenue model to a recurring revenue model. And losses are expected until the Company's self finance portfolio, which is a larger scale of project deployments and operational projects. Even so, it's important to note that developing and building projects can create positive cash flows through the development cycle by the retention of a developer fee. And this is despite accounting revenue not being recognized until the project is operational. We ended the quarter with 50 staff, steady with the 50 staff at the end of Q2, and up from 36 at the beginning of the year. As we saw in Q3, we expect more measured growth in costs over the next few quarters as the Company executes on its growth and deployment strategy. Moving to the next slide, let's take a look at our financial position. We exited the quarter with $1.3 million of cash, $739,000 of current debt, and a $1.8 million working capital deficit. With respect to our cash balance, we have earned cash from a small number of client finance projects, as well as our core continuing cash flow sources of developer fees, engineering services, and operating solar facilities. Our core continuing cash flows are not yet at the scale to have positive net cash results. So as we continue to scale up our development efforts and the backlog matures to yield more projects in deployment, cash inflows from the developer fees, in particular, will provide us with improved stability in our cash balance. Our Balance Sheet has been growing as projects progress through our backlog. Leases add to both our long-term assets and long-term liabilities and the quarter-over-quarter growth for both the ROU assets and the offsetting lease liabilities reflects the impact of 7 new long-term leases signed in the quarter. Also notable is the recording in Q3 of the receipt of a $262,000 government grant on our last project put into operation in Q2. This had the effect of decreasing the solar facilities in use as well as our project debt balances. We also received a government-sponsored COVID loan in Q3. And post the end of the quarter, we completed the CA$2 million convertible note raise that will be reflected in our November cash balance. We also saw the conversion of our former CA$720,000 convertible note into shares. That concludes my prepared remarks and I'll turn it back to Nick now.
Nick Blitterswyk:
Thanks so much, Stephanie. As you can see, we're racing towards progress towards our goals. In 2021, we set out to grow origination and development efforts to capture a greater share of this fast-growing market and to achieve greater seal as an organization. Our 116 megawatts of backlog at the end of Q3 almost pushed UGE past 120 megawatt goal we targeted for the end of the year. And we are proud to announce that we have since exceeded that goal with [Indiscernible] as of yesterday of 145 megawatts. With the growth in our pipeline and backlog, we're in a great position to exceed our 2024 goal of having 100 megawatts of operating assets as well. Of course, we really see 100 megawatts operating assets as just the tip of iceberg for this business. Our secondary 2024 goal, suggested at the beginning of this year, which is more of our teams, so we can achieve 100 megawatts of new backlog per year by 2024. Based on our growth this year, it is possible that we reached this figure this year, which could be 3 years ahead of schedule. With that, we'll wrap up the prepared remarks, by pointing you to where you can find more information. As mentioned earlier, our website is regularly updated and contains all of our financial filings and other updates. You can also find our financial filings at sedar.com. You can also visit Sophic Capital's website for additional information and follow us on Twitter to get an extra announcements and other media. Thank you, guys, for tuning in today. Marcel, back to you.
Q - Operator:
Thank you, Nick. We've collected the questions investors have submitted since issuing the financial results, and we've also collected the questions submitted through the web portal's Q&A tab. We'd like to thank all of you, participants, for your questions. Moving on to our first question. Have you seen much inflationary pressures in the business thus far in terms of components, shipping, or other? If so, what is the strategy to past through a rising costs?
Nick Blitterswyk:
I can take that. In -- I listened [Indiscernible] that solar panel prices have increased about 10% this year give or take. That is the input that we've seen the biggest change in. But at the same time, even with that increase, we are about within the contingencies that we hold our projects anyway. So like I said, there hasn't been a reason for us to terminate any projects as of yet. Across the other components, we haven't seen material changes just yet. And like I said, we are seeing light at the end of the tunnel with some of the recent announcements and hoping that shipping costs stabilize going into the year as well.
Operator:
With regards to recent offtake agreements with Bloomberg and T-Mobile, should we anticipate project-related funding costs to decline in the respective markets where the optics are in place?
Nick Blitterswyk:
I would say that -- I did mention earlier that we are already expecting our financing costs to decrease as our voyage increase. And I think associated with that -- working with [Indiscernible] overseas can be associated with that, that type of lock helps lower the rates repaying on debt for our profits as well, yes.
Operator:
Should we anticipate some seasonality in energy production revenue as we enter the winter months?
Stephanie Bird:
I can take that one if you want, Nick?
Nick Blitterswyk:
Perfect. Yeah Go ahead
Stephanie Bird:
So there will be some seasonality. It does depend on what market we're in and there's some places where they smooth the billing, and which the -- but seasonality, you'll generally see in the summer months, higher production revenue and in the winter months, lower.
Operator:
What are you seeing in terms of timelines for projects moving to the backlog? Any changes from interconnection approval times, supply chain, etc.
Nick Blitterswyk:
That really -- that would -- almost 2 possibilities; interconnection versus supply chain. It's really more of the interconnection essentially permitting where you would see those impacts. And then once you get to sit for MTP and our backlog, that is where supply chain considerations would come into effect. So on our last I think 2 calls, we talked about the interconnection process named this year has been slower than expected, and that's been a result of the pretty big wave of products being developed if we -- we, of course, one of the earlier companies to get into developing solar projects in that state. Since we last met 3 months ago, we haven't seen material changes to that. In fact, the projects we are expecting to get into 2 [Indiscernible] around the end of this year and into early next year, we're very much on track to do just that. I'd be remiss not to pull attention that -- the stages we have in our backlog is non-uniform in terms of the now's the time that project spend at each one. And if I take one of our main ground-mount projects as an example, that if 3.1 during wave connection approval, it is by far the longest time. And in fact, because it takes so long, we're often able to get the other stages done in the meantime. And so we're -- right now, we're prepping about 10 megawatts of projects to reach NTP in the next couple of months here, the next few months. A significant portion of those are actually currently sitting in 3.1 as we just wait for their connection approval. So I hope that helps a little bit in terms of how people think about the progression of that backlog. I also just say, those stages were set up. Good couple of years ago now, and as more for backlog has moved towards [Indiscernible] projects. It's something for us to consider [Indiscernible], whether we provide -- I mean, the Operator will [Indiscernible] approve, or something like that, we did enough first pocket.
Operator:
And a follow-on to that -- this prior question you just answered. More specifically, can you expand on how you and the team are thinking about being the apparent strong demand T-Mobile has for New York City projects?
Nick Blitterswyk:
It's -- [Indiscernible], just to make sure I understand it correctly. You're saying how we're thinking about T-Mobile strong demand for projects in New York area; is that right?
Operator:
Yeah, and how you're going to move the projects in the backlog for that.
Nick Blitterswyk:
Got you. Well, couple of things that I'll note on that. I think that, 1. Our roof top projects do move a bit more quickly than our ground mount projects. And that prior guidance that we've given, is now 9 to 18 months from interim backlog to operational project, forward comps as opposed to 18 to 36 months for ground mount. So on that basis, we're moving things forward at our prepaid cliff, we would say. One part of that T-Mobile agreement is for us to be able to bring in projects from other developers to create a finders keepers. And that's another way that we're helping T-Mobile reach their goals because they do have pretty substantial demand within the New York City area, which is primarily our [Indiscernible] this time.
Operator:
When do you think you'll be in a position to add the Massachusetts battery storage projects to the backlog? And when do you think those will begin to reach operation?
Nick Blitterswyk:
A couple important breaks on that. So the reason we came up with the announcement last week, is largely a wrap around -- we felt that that pipeline, a 100 megawatts plus that we announced, was mature enough for us to say, Okay, we are officially in Massachusetts and so what. So that 100 megawatts, those are all projects that actually already have client commitments. But because it's a new state for us, we haven't officially booked into backlog as of yesterday. But moving on, I expect the first ones to fall with the backlog by the end of the year as they complete the first interconnection stage. So in all of that 100 megawatts, I wouldn't be expecting -- let's say, I wouldn't be expecting more than 30 of them by the end of this quarter, but we would expect a majority of them by the end of Q1. And as you [Indiscernible] to say that if on top of that 100 megawatts, which is almost all since September 30th, we do have additional pipeline opportunities as well. So we look at that state to be a pretty meaningful one for us going forward here.
Operator:
What are the economics of storage?
Nick Blitterswyk:
Stephanie, you'll take that one?
Stephanie Bird:
Sure. There are differences between storage and solar. But generally, if you're looking at modeling it out for the same kilowatts and DC on a storage project, you can take the same economic output as being about the same as between storage and solar.
Operator:
A couple related questions to your growth targets. Results this year have been terrific from a pipeline and backlog growth standpoint. I think it's safe to say that your current 2024 goals are 100 megawatts of operating, 100 megawatts of backlog will be met. Any thoughts on updating those?
Nick Blitterswyk:
Yes. I think it's fair. We are ahead of our goals for this year and if I go back, and pretty simple like the letter to begin to get the FDA from our year-end results. Talk about this year really being focused on developing increasing the size of our backlog, and we thought that 120 megawatt goal was within the stretch goal to start with, and, of course, we've gone right to that high substantial market. When we look forward to 2024, we are growing ever more confident about being able to exceed that goal. In terms of when we will come back and immediate -- we think about revising that goal, it's something that we're going to push our budget in process for 2022, and so on, right now. So let's talk to get in Q1, but definitely excited for how the business is growing here.
Operator:
And a related question, do you intend to provide any 2022 goals or targets? If so, when might you look to do that? And might you look to introduce a target for operational projects?
Nick Blitterswyk:
Yeah. A couple of things I'll mention. I think at this point in time, as a baseline, we feel very confident that we'll built -- we'll be -- we will completed construction [Indiscernible], where being construction [Indiscernible] at least 25 megawatts of projects in 2022. And of course, you mentioned a couple of times already that we're currently prepping about 10 megawatts for construction. So when you compare that to our current operational portfolio of about 1.5 megawatts, you see that next year it is really going to be about scaling up our deployments, and so we're excited for that. For the overall year as a baseline, we expect to get at least 25 megawatts come out. In January, we realized as we're doing a noble course, we put out and announced that that summarizes our milestones in Q4 and that for the time will give us a bit better look to some of our expectations for 2022 as well.
Operator:
Any updates you can give us on your access to project level debt? Are you still considering pooling some products together for a lower cost of borrowing? Yeah, for sure. On this 10 megawatts that we've mentioned
Nick Blitterswyk:
a few times. We are in the market right now for the debt on those products. We've mentioned in prior calls, that we had booked were both at the end of this year, the CR tech costs comp below 5%, our most recent closings was at 5.5. As of right now, we feel very confident that we'll be substantially below that 5% mark on our next close. And a good portion of the reason for that, in addition to the maturation of UGE and the growth of UGE, is the fact that we're pooling more megawatts together or point in time.
Operator:
And related to that, are you being offered debt financing at early stages of the development cycle than before?
Nick Blitterswyk:
Yeah. If I understand the question correctly, we have -- the construction of perm debt that we had closed on in the past, that is really working on that at stage 4 and using that to carry the projects into the 2 operations. I did mention in some of my prepared remarks that development capital facilities are becoming increasingly available to us as well, and so we're definitely getting offers for that type of capital. Really, this is the type of capital that you could leverage really from stages 3.1 to stage 4 to fund the development to these projects and so on. So that's something we're looking at very closely right now and would be of course non diluted source of capital for us to continue to scale up as we are.
Operator:
Is selling part of your feature energy generation to a royalty streamer another form of non - dilutive financing?
Nick Blitterswyk:
It is potentially. All say that -- we're very close with Capital Focus, and so on that basis, looking at what options will be right for us. And right now, that's in more along the lines of the development capital facilities and also the construction of perm debt. But certainly, that's something that we've taken a look at before and we'll continue to take a look at as well.
Operator:
In what stages, for example, 3.1, 3.2, etc., can UGE choose to take developer fees in the form of cash on the balance sheet? And based on your backlog expectations over the next six months, what is the range in dollar amounts could UGE choose to receive and record as cash and use as working capital?
Nick Blitterswyk:
Steph, if you could cover.
Stephanie Bird:
Sure. So a good estimate for what we can draw for cash for developer fees. I'm put it around about $0.20 a lot. And if you take that 10 million that we're prepping for construction to that $2 million cash available, TG from those developer fees in 2022, and then expand that out to the 25 that we want to get out. It gives you -- get out by the end of the year. It gives you a good range of where we are going to be for -- where we expect to be for next year.
Operator:
Another question. I would like to understand in detail when cash flows from operations cover operating expenses and the business stops seeing external financing to finance its growth in order to achieve 2024 guidance.
Stephanie Bird:
You want me to take that one again?
Nick Blitterswyk:
Yeah, sure.
Stephanie Bird:
I think that if we take a look at a couple of things as we're looking with what both of us have said in the prepared remarks and the answers to some other questions, we've got development capital that we're taking a look at. We know that we're going to be able to have the developer fees as we come through and then the operating projects on by the end of the year. We feel that with those three non - dilutive sources, we really have the bridge in place and then gets us to when we're going to have the operating projects deal with our operating expenses.
Operator:
It appears as though UGE lost 5 megawatts of secured stage 3.2 backlog from Q4 2020 that did not fall down into further secured stages towards in order for us to proceed. Is that the case?
Nick Blitterswyk:
Yeah, I can take that one. There are, I think from Stage 3.2, there have been some positive progression. There was also 1 project that is still committed, still has Internet connection approval, which is at Stage 3.2, but it's a stuck up, not because of our profits, but because all of the property, there's other developing going on that is taking longer than expected and it originates from COVID which has delayed the original build-out plans for that property. So that's, actually, I should say 1 of our closest real estate relationships that we have. So we're still hopeful that we will be moving forward on that project, but we also like to be very conservative with the information we put out there. So for the time being, we did move back a stage, but we'll look to have positive progression on that project as soon as possible.
Operator:
What is the current time estimate to deploy current backlog for stages 3.2 and higher?
Nick Blitterswyk:
[Indiscernible] talked about the overall time frame of 9, 18 months through rooftops and 18 to 36 for ground-mounts. If it exceeds 3.2 or higher, what you see is that the vast majority of those projects right now are either in construction or moving pretty quickly towards construction. So -- and then of course, we mentioned earlier that stage 3.1 has a project that we're also expecting to get into construction by the end of Q1 as well.
Operator:
100 megawatts of projects in Massachusetts. Is that pipeline or backlog? And what's the split?
Nick Blitterswyk:
Yeah, I know I've answered the -- that question indirectly earlier. But when we announced last week, that was all still considered a pipeline. If you look at our pipeline, you see there's 1, 2, and 3.0, which aren't pipeline. I believe that all of that 100 megawatts is in 3.0. So [Indiscernible] to define it, but we were not yet calling it backlog, primarily because it's a new market and storage projects. And we wanted to clear the first interconnection fees before moving on projects in the backlog. So we do expect that for year-end numbers, we will start seeing, at least, [Indiscernible]. There was projects move into backlog.
Operator:
And industry commentary question here. Altus Powers is expected to go public via SPAC in the next few weeks. While recognizing that they may have many more producing assets that UGE currently does, they are being valued at $4 per megawatt, while UGE is about 1/10 that. Can you please comment?
Nick Blitterswyk:
Yes. That is absolutely correct. Altus is a Company that we know fair and well, in that deep -- they owned some assets that we developed because as we will follow the UGE story, we used to sell assets to firms like them. So there's a process going public, and my understanding is some time in December. Frankly, we look forward to that being a good course for us out there in the market. I think that, yeah, they have more projects operational, but at the same time, even though our pivot is a bit new to owning our assets, we also feel like our ability to execute on our backlog has been proven through the 100 megawatts plus experience we have over time. So all -- of course, anyone could do the math on a number of megawatts we have in our backlog plus operational and our current market cap, and if you do that comparison, you see a pretty -- a very significant disconnect between the two. Of course, we'll keep our heads down on moving our projects forward and are confident that over time we'll see the great value for our assets, as well.
Operator:
What are the biggest obstacles to get projects to operation after the interconnection study is completed?
Nick Blitterswyk:
After the green license has been given on interconnection, we may or may not have had permits on this place at that point in time if they're just on [Indiscernible] for a specific project. But permits are the other aspect to consider there. But aside from that, it really comes down to the engineering, the procurement of materials, and then the construction of these projects. Financing would be along the lines of those as well. But it's really an execution thing. Those are our bread and butter that we feel really good about going through step by step as time comes.
Operator:
What percent of your real estate partners properties are in your backlog? This investors trying to understand the runway with existing partners.
Nick Blitterswyk:
Hard to answer that question, if you know what I say. I think that across -- we mentioned before that the vast majority of our clients are repeat customers, whose a [Indiscernible] owner and often on very large portfolios and so on. I don't know what percentage [Indiscernible] in terms of what percentage of portfolios are in the backlog versus still being look ed at or not yet even being looked at, it's hard me to say. But I will say there's a lot of those repeat relationships that we looked at continuing to expand over time here.
Operator:
Can you discuss the entry into solar storage in more detail? What do these projects do operationally looking more to come?
Nick Blitterswyk:
Yeah. I think that big texture distributed generation, the sector that we're in. We see battery storage, having an important role going forward. Anybody who following the Company for some time, but around the middle of last decade when I would see that the store your out-of-store is really starting to be all. But the costs were sold about 5 times higher than they are now. And so it's hard to get much off the ground. One portfolio that we have taken off the ground at that point in time is what we have produced as our Rise NYC portfolio. In October we announced the anniversary of Hurricane Sandy and those projects being built out. We have had some experience. What we've seen in the last maybe 6 months is that battery storage time is coming much more quickly now. And so we've been looking at that for quite some time. We've also been looking at expanding into Massachusetts. Massachusetts has been a good solar market for many years now. And if you just look at the back of where we've been, it was a state that they'd obvious set for us. And so we has someone join our team, Jim, which has been a great addition on the origination side. You can bring 2 and 2 together, really started developing, based on key peak energy standards that was introduced in Massachusetts last year. And number of projects there were and, of course, some solar customers projects there as well. So that's the best thing about it. I think if you backup -- I expect storage becoming part of the portfolio in other states as well. We have some pipeline projects in New York state, and also a solar plus storage. And I expect that in the years to come become more commonplace heir seats as well.
Operator:
You mentioned that Massachusetts as the third new market that UGE has centered in 2021. Can we expect UGE to enter Massachusetts before year-end, or is that in 2022?
Nick Blitterswyk:
Yeah, I think -- given that it's late November now, I think that we are glad to have met that goal, but we can certainly expect more states this year. But of course, the growth is not in our pipeline and the backlog this year we wind up by continuing to expand as a Company. And so certainly, throughout 2022 to see that we expand further.
Operator:
And do you see Maine continuing to be a main driver towards your 2024 goals?
Nick Blitterswyk:
I think that material drive our 2024 goals, but not the main driver towards our 2024 goals. We've seen -- if you look at [Indiscernible], you'd actually see quite a diversity of states and projects coming in this year. And so on that basis, I think it also helps us only better manage our future forecasts and so on in terms of timelines being in multiple states. But, yeah. Maine is a good state, we like Maine, but we're really excited to be growing in a number of other states now as well.
Operator:
Okay. There are no further questions, so I'll now pass the call back to management for closing remarks.
Nick Blitterswyk:
Thanks again, Marcel. And thank you, everyone, for joining in today. And of course, we're always here for any questions that you have. So feel free to reach out anytime. And we look forward to continuing to share our progress with you all in the quarters ahead. So thanks again.
Operator:
This concludes UGE's International third quarter of fiscal 2021 conference call. Thank you for attending. The webinar has ended. Thank you for joining. Goodbye.