Moses Sutton

Moses Sutton asked if pricing for U.S. gas turbines is peaking or softening, specifically if CCGT build costs have surged to $2,500/kW and if new negotiations show any softening.

Answer

CEO Scott Strazik confirmed the directional $2,500/kW figure and GE Vernova's 30% share as practical. He disagreed with softening pricing, attributing perceived changes to a mix shift towards smaller, higher-priced-per-megawatt aero-derivative gas turbines in Q3. He emphasized that slot reservation agreements show accelerating price and more attractive margins, expected to convert to orders in the next 12 months.

Moses Sutton inquired about the pricing trends for U.S. gas turbines, specifically asking if CCGT build costs have surged to $2,500/kW with GE Vernova capturing 30%, and if new negotiation pricing is softening.

Answer

CEO Scott Strazik confirmed the directional $2,500/kW figure for CCGT build costs and GE Vernova's approximate 30% share in turbine sales. He refuted claims of softening pricing, explaining that perceived changes were due to a mix shift towards smaller, higher-priced air-derivative gas turbines in Q3. Scott Strazik emphasized that overall gas turbine pricing, particularly in slot reservation agreements, continues to accelerate.

Moses Sutton of BNP Paribas inquired about gas turbine pricing, asking if GE Vernova's content remains 30-35% of a new plant's cost and how pricing varies by geography and shipment year.

Answer

CEO Scott Strazik confirmed the directional accuracy of the cost and content percentages for an H-class plant in North America. He clarified that there is currently little pricing distinction between '27 and '28 slots, as demand is pushing conversations towards 2029. He also highlighted that a bigger challenge for project fulfillment is the availability of EPC support.

Moses Sutton of BNP Paribas inquired about the low volume of closed transactions in Q2 and asked about the timing of a potential inflection point in cash flow as legacy investments move past the tax equity waterfall.

Answer

President and CEO Jeffrey Lipson advised against focusing on a single quarter's volume, noting its inherent lumpiness and reiterating expectations for full-year 2025 volume to exceed 2024. CFO Chuck Melko acknowledged that while cash distributions from older deals are increasing as they move past tax equity hurdles, it is difficult to pinpoint a portfolio-wide inflection date because new investments with similar structures are continuously being added.

Representing Moses Sutton, an analyst asked for a breakdown of the greater than 10.5% yield on new investments, inquiring if certain assets were yielding much higher and whether the expansion was driven by mezzanine debt or equity.

Answer

CFO Charles Melko explained that the Q1 asset yields were consistent with the previous quarter. He clarified that while yields are strong and in the double digits, they are not seeing a significant jump into the mid-double digits for the types of assets HASI is currently investing in.

Moses Sutton asked how much elevated warranty costs are still impacting gross margins and how many basis points could be recovered as these issues abate, noting the negative warranty flows in the cash flow statement.

Answer

CFO Asaf Alperovitz stated that product quality is continuously improving, which should lead to an ongoing positive trend in warranty impact. He highlighted that the simplified NexSys platform is expected to further improve quality and serviceability. However, he did not quantify the specific basis point impact on current or future margins.

Moses Sutton asked about the incremental gross margin on U.S. residential inverters, excluding distortions from fixed costs and low revenue levels.

Answer

CFO Ariel Porat declined to provide this level of detail, stating that SolarEdge does not break down its cost structure or margins by individual product components.

Moses Sutton of BNP Paribas asked for clarification on Sunrun's ITC safe harbor strategy, questioning the timeline and its relationship to the 2028 margin bridge on Slide 11. He also inquired if the full-year cash generation guidance accounts for the safe harbor spending.

Answer

CFO Danny Abajian explained that the slide illustrates two distinct points: a multi-year safe harbor plan to extend the ITC and a separate analysis showing a path to margin recovery post-ITC. He confirmed that the cash generation guidance fully reflects the working capital impact of the safe harbor activities.

Moses Sutton questioned Sunrun's plans for equipment safe-harboring in anticipation of potential IRA modifications to the ITC. He also asked about the potential impact if tax credit transferability were eliminated.

Answer

CFO Danny Abajian explained that significant safe-harboring actions would await more clarity on policy changes, noting the company's strong cash position provides flexibility. Regarding transferability, he highlighted broad industry support for the mechanism and stated that while its removal would cause a temporary shift, Sunrun's deep experience in the traditional tax equity market would allow them to adapt effectively.

Moses Sutton from BNP Paribas asked whether the large 70-gigawatt North America booking opportunity pipeline represents incremental market demand or a reallocation of demand from competitors facing supply chain disruptions.

Answer

CEO Mark Widmar responded that it is likely a mix of both. He cited examples of customers coming to First Solar after their Chinese suppliers reneged on deals, suggesting a reallocation of existing demand. However, he also believes some of the pipeline is incremental, particularly from hyperscaler and AI-related data center demand, which could be a new catalyst for near-term market growth.

Moses Sutton asked about Bentek's estimated market share and manufacturing capacity, and whether Nextracker is seeing pipeline visibility extending out to 2028.

Answer

President Howard Wenger positioned Bentek as a 'top 3 or 4' eBOS supplier in the U.S. that was previously undercapitalized. He expressed confidence that Nextracker's platform can unlock its growth potential. While not commenting on 2028 specifically, he noted Bentek has a project pipeline that extends out.

A representative for Moses Sutton asked about the expected lumpiness of Outcomes segment margins heading into 2025 and how the mix of recurring revenue versus one-off deals will impact the margin profile.

Answer

CFO Joan Hooper stated that while she expects full-year 2025 Outcomes gross margins to increase versus 2024, there will continue to be quarter-to-quarter variability due to the segment's subscale nature. She cautioned against using Q4's high 44% margin, which was boosted by one-time license revenue, as a new baseline, reiterating that lumpiness will persist even as the margin trend improves annually.