Oklo - Q2 2024

Transcript

Operator (participant)

Please note this call may be recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Sam Doan, Director of Investor Relations. Please go ahead, sir.

Sam Doane (Director of Investor Relations)

Thank you, operator. Good day, everyone, and welcome to Oklo's inaugural company update and earnings. Joining us today are Jake DeWitte, Co-founder and Chief Executive Officer, and Craig Bealmear, Chief Financial Officer. Oklo's Q2 earnings were announced after market close today. You can find a shareholder letter and supplemental slides on the investor relations page of our website. The information discussed during the course of our remarks and the subsequent Q&A session includes forward-looking statements, which reflect our current views of existing trends and are subject to a variety of risks, assumptions, estimates, uncertainties, and other factors that could cause actual results to differ materially from such statements. You are urged to carefully read the forward-looking statements language in our shareholder letter and supplemental slides. You can find a discussion of our risk factors, which could potentially contribute to such differences, in our most recent filings with the SEC.

Craig Bealmear (CFO)

Oklo assumes no obligation to update these statements, whether as a result of new information, future events, or otherwise, except as required by law. I'll now turn the call over to Jake DeWitte, Oklo's Co-founder and Chief Executive Officer. Jake?

Jake DeWitte (CEO)

Thanks, Sam, and thank you all for joining us today. I'm excited to share our quarterly update and provide some insight into the progress we've made over the past quarter. By way of introduction and a little bit of background and history on Oklo, the company was born largely out of a view that there was a significant amount of opportunity with advanced nuclear technologies. Personally, I grew up in New Mexico. I was born and raised there, and born and raised around the technology accordingly, and that's where I fell in love with it from a very young age. It was something that felt like it was from science fiction, but it was actually real. The fact that you can take an atom and split it, and harness the strong nuclear force, and produce 50 million times more energy than a conventional hydrocarbon oxidation reaction is crazy to me.

Craig Bealmear (CFO)

It's always been crazy to me, and still is today, but it's real. This is real technology, and it's been with us for over 80 years at this point. So I knew I wanted to work on it from a young age, and I had a unique set of experiences to be around the technology. In high school, I got hired into the nuclear weapons program, and I got a chance to learn a lot about it from that point, and from there, got a chance to springboard into a number of different facets of the industry, from academic and government R&D, to licensing and procurement on the fuel enrichment side, to reactor-commercial reactor design and R&D, as well as research projects on the academic side, touching conventional large light water reactors, as well as next-generation advanced reactors.

Along this path, I started to see a clear picture of what I thought was the case when I went into it, which was new technologies were going to be what ushered in some of these new areas of growth for nuclear. But that was only part of the story. In fact, it was much more oriented to fundamentally needing to do some new things in this space. What I observed was an industry that had fairly radically stagnated in how it did things and approached things, and there was a ton of opportunity to rethink about how you could approach taking new nuclear technologies to market. So that led my co-founder, Caroline, and I, to think about and ultimately start a company centering around three major pillars that we saw were really important to catalyzing significant changes and opportunities in the industry.

Those centered around taking, first, a different approach on the business model, second, a different approach around the size of the reactor, and third, a different approach around technology. So to kind of pick at those things really quickly, first, on the business model side, this is a really important differentiation point for us from how things have been done and are done, generally speaking, across the industry. Typically, the nuclear business model, from a reactor design perspective, has involved designing a reactor to about 80% or so completion, maybe designing the power plant to something between 50% and 80% completion, and then going off and trying to license out that design to your customers, asking them to then take the baton, to then complete the design, to then permit it, to site it, to build it, to own it, and to operate the plant.

That puts all of the burden on the customers, and it's a highly frictional process. We saw that people really wanted the wonderful attributes that nuclear power affords, so we decided to take a different approach. So early on, we took a view of asking the question: What would make it easier for people to buy what they really like about nuclear technology? In other words, how could we make it easier for people to buy what they wanted? And so that led us to ultimately follow into an opportunity that's built on what renewables had done very well for a long time, which was to design, build, and operate the plant ourselves, and then just sell the power through power purchase agreements. That has significant benefits because it's aligned with what customers want.

Perhaps that's the most important thing, and we see that reflected in how our customer interest and customer order book has grown and is growing. Additionally, we also see it reflected in the significant benefits that come to the company with this kind of recurring revenue model. And so those things are significantly enabling and accelerative to us as we think about how the future of nuclear needs to ultimately evolve. Additionally, we wanted to take a different angle on size. We didn't want to start at bigger size ranges, like a few hundred MWs or even a gigawatt, like today's plants. Instead, we wanted to start as small as we reasonably could, so that we could have a technology that could service a market of reasonable size and grow into.

So not so small that it's kind of like a toy or niche system, like a few hundred kilowatts or so, but actually big enough so that you could service a large market and grow into it. And so we found a sweet spot at about 15 MW, and that's allowed us to change the paradigm from needing billions of dollars to capitalize the plant and get it operational, to only needing a few $100 million. So that's allowed us to significantly change the paradigm to how you take new technologies to market... And finally, we took the approach on pursuing what we see as the best-in-class economic potential from a technological perspective. Specifically, we're working on what's called a liquid sodium-cooled fast reactor technology. That means we use liquid sodium as the coolant.

We do that because it's a technology that has a huge amount of potential with a really rich history of development behind it. As a society, we've built and operated more than 25 of these plants around the world. We've gained over 400 combined reactor years of operational experience. We've learned what works, what doesn't work, and we know how to take this technology ultimately into the market. In the U.S., we notably pursued a pathway of ultimately developing and demonstrating this technology in two meaningful ways, so in two plants. One was a plant in Washington State called the Fast Flux Test Facility, and the other was a plant in Idaho called EBR-II.

At Oklo, we most directly build our lineage and legacy off the EBR-II plant, which was a just under 20-MW fast reactor that sold power to the grid, ran for about 30 years, demonstrated superior operating characteristics to its contemporary commercial light water plants at the time, while also demonstrating the amazing features it had from an inherent and passive safety perspective that can afford plant design simplification and therefore cost reduction, as well as the ability to recycle fuel. Altogether, these are significant enabling benefits. We like sodium because it operates at high temperatures without being pressurized. It's compatible with common alloys. It allows us to tap into existing value and supply chains, and from there, we have the ability to leverage the technology that ultimately has best-of-breed economic potential in our eyes.

Not only are we building on a mature technology base that's behind it, the Nuclear Regulatory Commission has had experience in sodium fast reactors. We also have peers in this space that are developing sodium fast reactors, like TerraPower, who's developing a sodium fast reactor, but at a larger size. The progress made by them, the progress made by us, all gives us a pretty clear line of sight for how the NRC can review and evaluate sodium fast reactor technologies, and it has a long history of technology development and technology maturity behind it. A fun little fact is most people often talk about advanced reactors or Gen IV reactors as going to be, you know, milestones, or the first one to do some milestone coming up.

The reality is, the first reactor that actually produced usable electricity in the United States was a liquid metal-cooled fast reactor named EBR-I. It was the earlier predecessor to EBR-II, and it first produced usable electric power back in 1951. So we're ultimately, at Oklo, very excited to build up on the legacy of this technology and stand on the shoulders of the giants who came before us, that developed it to the spot where we can now move this technology forward. So specifically, we're implementing this in what we refer to as our product offering of the Aurora. The Aurora product line is designed to scale to 15-MW and 50-MW offerings today, and we're also evaluating a 100-MW or larger offering that we're developing. The core focus of the business at this point is developing the 15-MW and 50-MW plants. They look very similar.

They share the same fuel types, same materials, and coolant types, just slightly different sizes and packaging. We do that because we've been focused on being responsive to where customer interest and demand has been, and that's led us to these two size points to start. This technology is basically a way to make heat. When you split an atom, you're ultimately just producing heat that then conducts through the fuel, through the structure, and then is convectively removed by the coolant. We use sodium as that way to move the coolant from the fuel, then up to ultimately boil water. You can also use this heat product directly, which often opens the door for industrial heat processes, and we operate in a temperature range which allows us to service the vast majority of heat markets that are available today.

It also has some interesting connection points for advanced cooling technology, which I know sounds funny, but thermal-driven cooling technology has a lot of promise, especially for scaling data centers. Technologies like absorption chilling has some significant upside in the data center markets, and we're pretty excited about how that can integrate with our system. Aurora powerhouses are designed to maximize the use of materials, parts, and labor from non-nuclear supply chains. We develop and design this technology in a way to take advantage of these benefits because sodium gives us the ability to operate at high temperatures without being pressurized. It's compatible with commonly available alloys, like stainless steel alloys, such as 316L and 304L, in form factors that are similar or identical to components available in other industries, such as oil and gas, or food and beverage, or chemical.

That's great because we can then tap into existing value and supply chains to ultimately deliver these systems. The ability to utilize existing supply chain components allows us to leverage non-nuclear supply chains, which operate at much higher volumes and offer more diverse options that come at lower costs. This approach significantly enhances the economic scalability of our technology, and that's one of the reasons we're so excited about its economic potential. By leveraging the energy density of fission, Oklo's Aurora powerhouses have immense environmental benefits. It creates a pretty favorable technology platform that looks quite a bit different than what nuclear's been used to looking like, if you will, and that was a big focus of ours. We wanted to focus on something that has aesthetic appeal, while also offering something that has functional benefits from a constructability perspective.

Because of those benefits, the nuclear sector is receiving unprecedented support from all levels of government. This quarter has seen some pretty exciting developments, including the signing of the ADVANCE Act, but this builds on years of significant support at a federal, at a state, and an international level. One of the big benefits legislatively for nuclear, frankly, one of the biggest in the last few decades, was the passage and signing of the ADVANCE Act, and that just happened within the last few months. This is a significant piece of legislation that drives toward support for Congress, and also support from this administration that has clearly been in favor of propelling and advancing nuclear technology. It brings forward several major legislative developments and policy support levels to basically support and scale the deployment of nuclear.

This includes enhancing and modernizing NRC licensing and review timelines, as well as fee structures. It also supports driving forward accelerated deployment models, creating opportunities to enhance demand signals and demand indicators from the government, as well as aligning the NRC mission towards more successful and efficient scaling of nuclear technology. There's a lot more we can talk about what the ADVANCE Act does, and we will continue to do so, but we're quite excited about what this positions the industry to be able to actually do and drive forward the deployment of new technologies going forward. Oklo has one of the most extensive regulatory engagement histories with the Nuclear Regulatory Commission or the NRC. Accordingly, we find ourselves very well positioned to benefit as an early mover with the regulatory side.

We've been the longest engaged non-light water reactor company with the NRC, dating back to starting to work with them back in 2016. We've hit several significant milestones along the path there and are positioning ourselves to do a pre-application readiness assessment later this year, spanning into submitting our next application, early in the next year, followed by subsequent applications thereafter. Oklo's integrated build, own, and operate business model enables an integrated and streamlined licensing pathway that's a bit different from what the industry does otherwise. An important feature for our business model, as well as our licensing plan, is taking advantage of a regulatory approach that allows us to do all the licensing we need to do to get a commercial operating license in one step.

In other words, you can take a lot of steps to get to what you ultimately need, which is a commercial operating license, and some of our peers are taking a process where they go apply and get a construction permit. After that, they can go build the plant and then apply to get an operating license. After which, if they get the operating license, they can then commercially operate the plant. Others are taking an approach where instead of being the owner-operator, they're designing the plans to get a Design Certification or something similar to that, like a standard design approval. Then after that, going out and then working with their potential customers, who then need to go through the actual licensing process to get a commercial operating license themselves.

So that means their customers still have to go get a commercial operating license, even if a reactor design company has a Design Certification, 'cause that's only a piece of what you ultimately need to get a commercial license, and it's not needed to get a commercial license. So a Design Certification is not regulatory approval, but it's a step towards ultimately submitting an application that you're asking your customers to do to get that license. For us, we don't do any of that. We just go straight to the Combined License approach. This is largely because of what we're doing on a business model side. We're owning these plants. We're not just trying to sell the designs or license off the design.

So that means we go straight into licensing and allows us to build and operate our plants, which then sets the stage for us to then pursue this one-step licensing process and have the benefits of repeatability that this framework allows. One really important thing that's been developed in the past when they were developing these regulatory frameworks, was the ability to subsequently license additional plants in an expedited and more efficient manner. What that means is that after you've licensed your first plant, you get a Combined License for that first plant, that becomes your reference license. Then every license you submit thereafter becomes a subsequent license. In other terms, your reference license becomes your reference Combined License, and then your subsequent license becomes your subsequent Combined Licenses.

That benefits us because those subsequent reviews on the subsequent license applications are only focusing on the things that have changed from the reference application. That has significant benefits in terms of accelerating and reducing review timelines, while also, also allowing us to scale rapidly into follow-on plans. So on the design side, our product roadmap includes three reactor sizes to meet customer needs based on what we're seeing in the customer market, and that spans MW to GW scale deployments. What's great about this is it also positions us to have the benefit of spanning across a bunch of different markets according to these size offerings. We've long known that there's not a one-size-fits-all design in this space. Instead, we wanted to start as small as we could for the aforementioned benefits, but then have a pathway to scale using the same technology.

So we are currently offering a 15-MW and a 50-MW plant, and are also developing a 100 MW-200 MW plant as well. These are all very similar-looking technologies as we scale up, but just slightly bigger from a physical footprint. We are targeting 15-MW and 50-MW ranges to start because based on the feedback we've seen from our customers, that's a really great size range to be in to meet their needs. The numbers are very large around the opportunities to service some of these customers in these markets, especially with what our business model is, which is designing and owning and operating these plants and selling power to the direct customers.

So when we talk about providing power directly to energy users, these sizes offer a good entry point to a number of different markets, and these projects can be quite large when they aggregate together. The reality, too, is that data centers are making up a vast majority of the market opportunity we see in front of us. While the numbers are very large around those opportunities, especially around, you know, the larger scale AI purpose data centers, these projects are not being deployed all at once at a 1 GW or multi-GW scale. Instead, they're ramping into it. It's phased growth through a development process. When you're talking about these facilities as they grow up, they also need to have the ability to have power that meets their needs set, which, in other words, is something that is always on and with a high availability and high reliability.

That means they need to have something that offers them that kind of N plus one generation footprint, so that they are more or less confident to get the energy when they need it and how they need it. In other words, you're going to build more power capacity as you ramp up with your customers, which is a really exciting thing for us, given our size. We're uniquely positioned to do it, but it also allows us to grow with them as they build out their overall footprints, and they meet their customer needs and therefore need more energy as that goes forward. The important thing about this, too, just to emphasize this one more time, is that we can build up to match where our customers are going as they grow their order book and their demand in a phased way, while also building an extra reactor that is providing power on standby for them when they need it, because at the end of the day, we have to take some of our plants offline every once in a while to service them or refuel them.

That means we can deliver that full freight power solution for our customers and do so in a way that's economically attractive because we're not too large to do so. So our size is really in that sweet spot that matches very well with both the growth and the N+1 requirement that our data center customers have. And to dive a bit deeper on the data center side, one of the things that stood out to us in our engagement with potential customers is learning about what their energy needs really look like.

We're finding that, you know, a data center or data center campus is often made up of a number of data halls, as we like to call them. Those data halls are what are built out, kind of in building block fashion, to fill out an ultimate facility or campus. We're finding that most of the data halls today that are being planned, are planned to consume between 35 MW and maybe 50 MW each. So each company has their different architectures and different approaches, but we're seeing that there's a significant amount of upside and opportunity around where those data halls are. We also see some development that's on the smaller side, power chunks between 10 MW and 20 MW. So at the end of the day, that gives us a really good position in the market to service a different range of power levels.

So in summary, when we think about our sites and our project opportunities, we're matching very well with how we see data center markets and other industrial markets developing. As we look at the market today, based on the conversations we have with our partners and customers, we see that the ranges of power needed on a site-by-site or project-by-project or even sort of data center phase development project basis, they're typically looking at needing power between 10 MW and 20 MW or between 30 MW and 50 MW chunks, while also needing that high reliability of power. Our ability to scale with them means we're really well positioned to build up.

This positions us quite differently than if you were to go in and say, "Let's build one plant to provide all the power for a facility." That's been hard to offer an N+1 dynamic because you would significantly have to overbuild your capacity. So in this illustration, if you had a 500 MW project, to build two 500 MW projects to provide N+1, that would be a lot of stranded capacity. Whereas for a 500-MW project, we could build 10, 50-MW plants with then an additional 50-MW plant, so 11 total, to offer that N+1 reliability while also offering the same amount of power. Additionally, as customers build out, they're probably gonna need 500-MW all at once.

They're gonna need it over time, and that, that time might be a ramp-up of 2 or 5 or more years. So they might start by needing 50 MW, and then 100 MW, and then 250MW, and then 500 MWs in total as they scale forward. Well, that's great, because we can build up and match that with them. That also gives us the benefits of ordering parts for the reactor and components for the reactor in volume, just to meet one project. Very different dynamic than building one plant to purposely fill that. And if you built that 500 MW plant to fill that demand, you'd have a lot of stranded capacity while your customer would ramp up. That challenges some of the economics accordingly.

So our model really works well to match where we see data center development moving, as well as other industrial users and other power users. With that, I'll go ahead and hand off to our CFO, Craig, who's gonna take it over and talk to you about our business model. Craig?

Thanks, Jake. As we highlighted at our Investor Day presentation back in February of this year, slide 15 shows how we have developed and are implementing a business model with five key attributes that can be seen on the right-hand portion of this slide. Namely, recurring cash flow from power purchase agreements. We expect these contracts to be at least 20 years in duration, which supports our build, own, and operate business model. Second, capital-efficient approach to asset deployment, enabled by the size and technology foundational pillars Jake discussed earlier. Over time, this should allow us to reduce cost and asset construction time through purchasing economies of scale, as well as efficiencies that should come from deploying essentially the same asset over time. Third, these two factors should generate attractive asset returns on their own.

In addition, we look to deliver upsides to those returns by accessing investment tax credits, or ITCs, and utilizing project financing against the long-duration PPAs. Fourth, longer term, we are working to deploy fuel recycling technology, which should have the dual benefit of providing enhanced security to our fuel supply chain and potentially reduce our fuel cost by over 80% versus the cost of fresh fuel. And finally, a strong balance sheet to enable growth. Post the completion of our merger with AltC, we believe that we are now well-capitalized to execute our business plans, which should be a significant competitive advantage. Slide 16 reflects that we expect this approach to asset and capital efficiency to create a strong position for our business in terms of our overall delivered levelized cost of energy, or LCOE.

Initially, we expect our first of a kind, or FOAK, LCOE to be approximately $90 per MW hour. This figure should improve as investment tax credits, scale economies, and improved project execution capabilities are utilized across our business. The overall ability to produce power 24 hours per day and at a high capacity factor should make our overall LCOE very competitive versus other clean energy alternatives. Finally, I would note that this chart does not reflect the potential upside that can be achieved through the deployment of fuel recycling technology. Moving on, one question we've been asked is how we plan to capitalize the business going forward.

One of the benefits of the extremely low level of redemptions from our merger with AltC is that not only does it put us in a great position to execute our business plan, but it also means we can be strategic as we develop and implement a go-forward financing strategy. Moving left to right on chart 17, you can see that over time, we expect to utilize Oklo's equity in the form of cash on the balance sheet to finance anywhere from 25%-35% of our projects, with the remaining 65%-75% being financed potentially through a mix of project financing, tax equity structures, and the DOE's Loan Programs Office. We are currently assessing each of these options across a number of lenses, and we'll provide further updates as our plans mature.

As we have discussed at numerous investor and analyst meetings, we believe it is clear that there is significant untapped demand for the clean, affordable, and reliable power that nuclear in general can deliver, and that is ideally suited for Oklo's build, own, and operate business model. On slide 18, we see four macro trends that are providing tailwinds to our industry, which include increasing electricity demand, decreasing electricity capacity, grid reliability challenges, and decarbonization targets. Moving to the next slide, the impact of this growth at the macro level is providing increased demand for Oklo's clean, reliable, affordable offer, as reflected on slide 18. As we have previously discussed, we are targeting customers across the six market sectors reflected on this slide.

In the 12 months, we have made announcements across each of these sectors, with the exception of master-planned communities, but we do have commercial discussions underway with customers in this sector as well. Overall, we believe the strong level of customer interest and traction demonstrates the applicability for our Aurora Powerhouses across a variety of use cases and should create a very strong pipeline of business to underpin sizable revenue growth. As reflected on the left bar on slide 19, at the time of our announcement of our merger with AltC, we noted that we had over 700 MWs of business that had been signed to a combination of memorandum of understanding and letters of intent. Since that time, we've made new announcements in the data center market sector with Equinix and Wyoming Hyperscale, as well as an announcement with Diamondback Energy in the oil and gas sector.

These more recent announcements have also served to demonstrate our customer-oriented approach, whereby we look to deploy 50-MW powerhouses to meet the needs of those customers. I would also like to point out that this customer momentum is continuing. May 10th was not only Oklo's first day of trading on the New York Stock Exchange, but also a day where we saw sizable inbound inquiries from customers looking to buy our power from Oklo. As such, we expect to make more customer announcements during the remainder of 2024. I would now like to turn back over to Jake.

Jake DeWitte (CEO)

Thank you, Craig. As we talked about a bit before, we have some significant advantages with respect to our timing in the market as well as our product offering. After closing the business combination with AltC, we raised a significant amount of capital through that process, leading to a well-capitalized balance sheet to now execute against our plans. We are uniquely positioned in the advanced nuclear industry with respect to being the only company that has a site use permit to build our first plant at Idaho National Laboratory, the site use permit from the Department of Energy, and having fuel that was competitively awarded to us from Idaho National Laboratory, both received in 2019. And that's on top of the significant regulatory traction we have to date.

Craig Bealmear (CFO)

Additionally, the differentiation with respect to our business model, our size, and our technology make us well-positioned to capitalize on the significant amount of opportunity in the market space building up today. Over the course of the next few years, we have a couple of exciting milestones to look out through. And as we think about the growth of the company, we're excited about the transition from turning our first plant on into growth and scale from there. Between now and 2027, we'll be working to deploy our first plant at Idaho National Laboratory. This is a fully commercial plant, and it's a plant that we have a Site Use Permit for, we have fuel for, and we have significant regulatory traction around.

In parallel to this, we'll also be developing plants in other areas and other sites to meet our growing customer needs and looking forward to ramping up our growth after 2027. Over the course of the first and second quarters of this year, we hit several major milestones. We closed the business combination and started trading on the New York Stock Exchange. We achieved a significant regulatory milestone with the Department of Energy with respect to our first fuel fabrication facility. We continued to advance our project in Southern Ohio and entered into land agreements to deploy two plants there. We signed an LOI to supply 50 MW of power to Diamondback Energy in the Permian Basin in Texas.

We signed an MOU with Atomic Alchemy, a radioisotope production company, to collaborate on isotope production, particularly with the use of our fast neutrons, as well as the radioisotopes that are co-products from our recycling facilities. We partnered with our Wyoming Hyperscale to deliver 100 MW to its data centers. We achieved significant milestones with Argonne National Laboratory, one of the leading experts in sodium and liquid metal fast reactor technologies, involving the use of their state-of-the-art thermal hydraulic testing facilities. We also established what we announced earlier today, our preferred supplier agreement for steam turbine generator products and services with Siemens Energy. We're very excited about this partnership because it is validation of our business model and our approach, that we can leverage suppliers that make components for other purposes that we can directly use in our system.

What we're buying from Siemens looks very similar to what they make for fossil-fired plants, and we're very excited about our partnership with them going forward. We also continue to make progress to put in place numerous supplier contracts that would be critical to the deployment of our first Aurora plant at Idaho National Laboratory and for our supply chain that will be required to deploy a fleet of powerhouses. Contracting is underway for site preparation and fuel fabrication at INL, which we expect to ramp up during the remainder of 2024 and beyond. In most cases, we are at the commercial negotiation stage with key vendors and hence are limited to the details we can provide at this time...

In addition, we recently announced that we have finalized our preferred supplier agreement with Siemens Energy, who will be providing steam turbine and generator technologies, as well as services for our fleet of powerhouses. We believe having an agreement with such a recognized name as Siemens Energy is unique for our industry and a testament to the type of partnership arrangement that our business model unlocks, not only for Oklo, but for our key suppliers. Additionally, one of the exciting parts of this business is what we can do on the recycling front. Fast reactors have the unique ability to recycle used fuel, and we've been actively pursuing this to diversify our fuel supplies and capitalize on the benefits of fuel recycling. This approach not only improves fuel economics, but also opens up additional revenue streams from the sale of co-products generated during the recycling process.

This is the technology that has been demonstrated before, and that is, in fact, already operating at a small scale at national laboratories. Our work with Argonne and our Department of Energy partners has been focused on furthering the development of this technology to prepare for industrialization and scaling up operations. We hit several milestones in the last quarter, notably demonstrating the successful end-to-end recycling process with Argonne National Laboratory. We also continued to advance our regulatory engagement with the NRC in our submitting white papers and holding pre-application meetings on several key topic areas. Finally, I mentioned this before, but we were also excited to advance and announce our strategic partnership with Atomic Alchemy, a company working on producing radioisotopes.

Our partnership entails work on using the fast neutrons we produce for radioisotope production, as well as partnering with them to process co-products from the recycling facility that can be packaged and sold into various industrial, medical, and other markets. So going forward, we look forward to keeping the market up to date on our progress in six major areas: reactor licensing progress, customer pipeline development, project execution, the development of fuel recycling, strategic partnerships, as well as financial updates. So with that, I'll hand it over to our CFO, Craig, again. Craig?

Thanks, Jake. Both Oklo and AltC are very pleased with the outcome of our merger, which closed on May 9th, 2024. Slide 27 demonstrates several of the key outcomes of this transaction, whereby a record 0.002% of redemptions translated into gross proceeds of over $300 million. After associated fees, over $276 million in cash moved on to Oklo's balance sheet. That is being used to fund our business. We believe the attractive pre-money valuation of $875 million, which also included the Equinix prepayment for power, as well as the straightforward nature of the deal that resulted in one class of common stock with no warrants or PIPE, were also critical drivers of this successful outcome.

As part of our public offering, as seen on Slide 28, Oklo established a new world-class board of directors with individuals with backgrounds in defense, oil and gas, power generation, capital markets, and artificial intelligence. This deep expertise will benefit Oklo as the company executes on its business plan to deliver its vision. Oklo is also lucky to have an experienced management team with a broad spectrum of backgrounds from large Fortune 500 companies, as well as relevant government agencies, including the U.S. Department of Energy and nuclear-focused research institutions such as the Idaho National Laboratory. Moving to slide number 30, we know that there have been some questions post the close of our transaction regarding shareholder lockups. Post-deal completion, our total outstanding share count is slightly over 122 million shares.

Of those outstanding shares, our co-founders, as well as our chairman and the AltC sponsor, are under multi-year lockups that include an early release mechanism for share price appreciation, with triggers set at $12, $14, and $16 per share. These lockups represent approximately 34% of total shares outstanding. In addition, we have a few early-stage investors who are subject to 180-day lockup from the transaction date, that equate to roughly 11% of shares outstanding. All other original investors did not have lockups, which were therefore freely tradable on May 10, which resulted in no sizable overhang on the stock. Moving on to our financial highlights.

Year-to-date, Oklo's cash used in operations sits at $17 million, made up of a net loss of $53.3 million, offset by $38.9 million in non-cash impacts, the main drivers of which I will highlight momentarily. At the end of second quarter, cash and marketable securities were $294.6 million, primarily driven by the $276 million in proceeds, net of fees, received at deal closure. Year to date, our operating loss of $25.1 million included $9.2 million of non-cash stock-based compensation expenses, which was primarily driven by a one-time fair market value adjustment of $7.8 million related to earn out shares that would be payable to Oklo staff who have vested options at the time of deal closure.

Full year 2024, our operating loss expectations are still in line with our prior guidance of $40 million-$50 million that was noted in our 8-K filing. Our year-to-date net loss of $53.3 million, including non-cash fair market losses of $30 million associated with a SAFE note revaluation and $7.8 million losses in stock-based compensation. Both of these non-cash adjustments will require these book closing entries. Further details on our second quarter and year-to-date results can be found at the end of these materials and in our 10-Q that will be posted to the investor section of Oklo's website. Post the filing of our 10-Q for second quarter, we are looking forward to several upcoming investor events... including Canaccord Genuity's Annual Growth Conference and Citi's one-on-one Midstream and New Energy Infrastructure Conference, both of which will occur later this week.

In addition, we are scheduling an Ask Me Anything session with our executive team for later in the month of August. So finally, to close and to emphasize the points made during this conversation, we believe there are six factors that make Oklo such a compelling investment proposition. First, technology and size that is based on a proven fast reactor approach that we look to deploy at scale to reduce complexity, cost, and time to delivery. Second, an attractive business model that is customer-oriented and enables recurring revenue and profits. Third, superior economics that look to deliver power and very competitive Levelized Cost of Energy. Fourth, a diverse and growing customer base with interest across six market sectors. Fifth, a streamlined approach to regulatory approval, underpinned by our Combined License application process that leverages years of experience in our work with the NRC.

Finally, a well-capitalized balance sheet that positions us well for the implementation of our business strategy. With that, I would like to thank you for your time, and Jake and I will now open the call for questions.

Operator (participant)

Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. We'll pause for a moment to allow questions to queue. We'll go first to Vikram Bagri with Citi. Your line is open. Please go ahead.

Vikram Bagri (Senior Analyst)

Hi. Good afternoon, everyone. A very thorough update from the letter presentation release and prepared comments. Appreciate the color. To start off, very impressive increase in pipeline from 700 MW to 1.35 GW now. The letter cites the AltC merger as one of the drivers of the increase. I was wondering, like, what led to this meaningful increase in the pipeline? Is it due to more visibility from the merger? Is it driven by data center AI power needs or more liquidity now that you have to actively engage the customers and/or progress on regulatory front? If you can, identify what's sort of like driving this level of interest and what sectors are majorly contributing to this demand?

Craig Bealmear (CFO)

Sure, Vik. It's Craig. I can take that. So the growth from 700 MWs to the 1.3 GW-1.4 GW was really the result of the things that we announced between deal announcement and deal closure. So that would be the Equinix transaction, Wyoming Hyperscale, Diamondback Energy. But what we did see on May 10th is Jake's phone started to ring off the hook, and Brian Gitt's phone started to ring off the hook with even more customers expressing interest. But I think there probably was an element of some of those customers wanting to see if the deal would close and at what level the deal would close. And once it did, I think that gave them confidence to progress business development conversations.

I would actually think that as those conversations progress and when we do an update in the third quarter, you know, that 1.3 GW-1.4 GW, you know, we could be in a world where that figure could be higher, and we'll continue to work on those announcements or on those, those deals with customers, and we hope to have more to announce in the coming months.

Vikram Bagri (Senior Analyst)

Thanks, Craig. And then on a related note, the slides mention that you're looking at converting a lot of these letter of intents into PPAs later this year, next year. I was wondering if you can talk about how many of these cases are you doing site evaluations? How are you thinking about doing site evaluations? And then how are you incorporating fuel costs in your PPAs when you convert these LOIs into PPAs? Will fuel costs be passed through? And then finally, we've seen, you know, significant increase in capacity prices in recent auctions. If you can also talk about the PPA rates that you're seeing in the market, it seems like those should be higher, much meaningfully higher than what you had indicated at the time of the merger.

Jake DeWitte (CEO)

Yeah. Thanks, Vikram. This is Jake. It's a good set of questions and a good thoughtful set of questions. I think from a matriculation perspective, what we're excited about seeing is kind of a pool of LOIs that then set the stage for us to start working with each of those customers, as well as others in the pipeline that, you know, are coming forward to then identify basically site-specific considerations that move into the PPA negotiation process. So right now, we are actively looking at, you know, site exploration around several of the partners we've announced, about where, not just where to go, but where on their specific sites of land that they already have, make the most sense to deploy. So we're going through a characterization process there.

Craig Bealmear (CFO)

We have a methodology we've developed and we've been working on and, basically executing against with our partners to identify what makes most sense for their needs and for our needs. So those things all then play into then the specific PPA, terms and pricing development. Anyways, we try to set those forward, at least, you know, at that stage, to make sure we're all working in the same, same direction. But then that will help sort of fine-tune what's to be expected based on the specifics that, that evolved during the actual PPA negotiation process. PPA negotiations take a long time, so, you know, we're, we're excited to be, you know, in those discussions with several groups, and we're excited about more kind of continuing to migrate into that space.

That said, in terms of the question around fuel costs, I think what we're seeing, and this ties to the other part of your question, which is, you know, right now, energy pricing is quite constructive to what we're doing because there's a significant demand uptick, of course, for a lot of reasons. You know, to your earlier question, if you look at the 650 MWs we brought forward and announced here over the second quarter, 600 of those MWs were for data centers. So, that is, I think, a somewhat reasonable approximation for the breakdown in customer input or engagement that we're seeing by sector. But accordingly, we're seeing obviously demand, limited supply for power. That's constructive to us, of course.

It allows us to monetize those benefits, you know, and, and have some leverage in that case, which is great. But since fuel is a scarce item for everybody in the nuclear side, scarce is the wrong word. Since fuel is a pricing, I would say, a volatile pricing input for everything in the nuclear side right now, especially for new advanced plants, you know, we found that there's an openness to fuel cost pass-throughs. And we have a unique advantage in the fact that, you know, as we pursue recycling, it also opens the door for our customers to be quite open to having the discussion of fuel cost pass-through, if they can also then get the benefit of the fuel cost savings if recycling comes online, when and if recycling comes online.

And so that creates a pretty, I think, favorable dynamic for us so that we can, you know, not get hung up early on necessarily with some fuel pricing volatility, but have a pathway to get to market. And then, you know, that helps us drive the case for deploying, you know, recycling even sooner, which then helps us deploy more reactors and lower costs altogether.

Vikram Bagri (Senior Analyst)

Thanks, Jake. I have a couple more, and then I can jump back in the queue. I was wondering if you can share, Jake, how many pre-filing discussions you've had so far. The letter indicates the first plant will be by 2027 versus the previous expectations of, you know, in 2026 or 2027. I was wondering if I'm reading too much into the language or, you know, there is, you know, a slight delay in the timeline. And if you can just share how those conversations are going, and how many hours of conversations you've had so far.

Jake DeWitte (CEO)

Yeah. Lots of conversations with the NRC. I think the latest tally in our slides is, you know, we've had, we've submitted about 55 drafts and technical reports to the NRC, dating back through our engagement starting since 2016. We've had over 500 technical and planning meetings, so a lot of engagement. We continue at a pretty regular pace. I went through a meeting, on average for a few hours once every couple of weeks right now, as we ramp into the pre-application readiness assessment to then go forward. That's helping us and the NRC make sure we define the scope of what we expect out of the readiness assessment, appropriately and move forward from there.

Craig Bealmear (CFO)

One really significant feature that puts a lot more work on companies, but again, I think it's a significant feature, is the flexibility that the NRC has in terms of how you can ultimately get a commercial license from pre-application all the way through licensing. So there's a huge menu of items you can choose from. And what's nice then is each company can kind of pursue the path that makes the most sense for them. And for us, that works very favorably because of our business model, we're going straight to build and operate. We go straight to the, you know, license to actually build and own and operate the plant.

As opposed to taking steps to get, like, a Design Certification, and then have to go through the process we're going through or take the steps to, you know, get a construction permit and then get an operating license. Instead, we do it all at once, which has some significant efficiencies for us. And then similarly, on the pre-application side, as we ramp into preparing for submitting the application, you know, you can do all sorts of things, in that pre-application process to make sure you're moving forward, you're sort of retiring the risk as the company engaging as the pre-applicant accordingly, and getting the right feedback with the NRC and helping the NRC accordingly prepare for a review. So it's highly iterative. It's highly dynamic.

We, you know, we're engaging with them on the reactor front, as well as now on the, you know, fuel recycling front and the larger scale fresh, you know, fuel fabrication front. So a lot of activity there, but at the end of the day, you know, we're working to, you know, basically be in a position to submit an application as soon as we reasonably think we can get to, which is in next year. Sort of looking at having that application go in next year, followed by subsequent applications to come in in the latter part of next year, depending on the timelines of how those PPAs and other things develop to then have, you know, several and staggered review.

That's a big feature for our model, as well as the benefits that come from having multiple, kind of in a staggered parallel review path. In terms of the timeline, I would say, you know, when we announced the deal, we were looking at 2026, 2027. Kind of that was built somewhat under the context of us closing the deal, and, you know, not... With the possibility that we could close the deal in 2023. Because that ended up happening closer to the midpoint of 2024, I think that's where it kind of delayed some of the deployment of the full capital to then start executing fully against that. So it kind of fully shifted us towards the 2027 date.

Additionally, there are some other factors that, you know, are on hand with respect to, you know, how we're working through on the supply chain, the site development, and all those other pieces. But so far, those have largely been moving forward, reasonably well. You know, it's nice for our first plant that we have fuel awarded and allocated to us. We're not subject to some of the supply limitations, for that first plant. Of course, we will be for our subsequent plant, so that's why we've partnered with Centrus and others to actively work through that. But it's nice to take some of that risk for your first plant off the table, which is a big deal for us.

So that's how that's kind of why the timeline is pretty firm up on the 2027 date, and 2026 is really just isn't really achievable, from the perspective of when the deal closed in 2024 versus when there was a possibility of it closing in 2023.

Operator (participant)

Once again, if you would like to ask a question, please press star one on your telephone keypad now. We ask that you please limit yourself to one question and one follow-up, rejoining the queue for any additional questions. We'll move next to Thomas Meric with Janney Montgomery Scott.

Thomas Meric (Director and Equity Research Analyst)

Good afternoon. Congratulations on all the success there. Just wanted to start out on EBR-II, and the question's really around capacity factor of sodium-cooled fast reactors. And, you know, what does the data suggest, as you've reviewed it, that a sodium-cooled fast reactor can hit on a real world, real-world capacity factor basis? And I, I'm asking just kind of with the perspective of we have a, a long, deep history of operating large light water reactors at 90% and 92% capacity factor, and it took us a while to get there. And, you know, how should I think about the time it'll take for your Gen IV reactor to get to capacity factors in the 90s?

Jake DeWitte (CEO)

Yeah, that's a great question, and actually a real fun little nugget of information that's, that's not the easiest thing to pull out. We developed all of these amazing things in the nuclear industry that came out, starting, you know, back in the 1950s and 1960s, of course, on paper. So, all of the great records of history and operations and all these things were largely paper-based for EBR-II and for prior fast reactors, as well as the Fast Flux Test Facility, FFTF. But the FFTF and EBR-II are the plants we kind of most directly derive technical legacy and learnings from as kind of the latest iterations, if you will, from prior development in the U.S. The reason I point out that they were on paper is it makes accessing that less scalable, historically speaking.

Craig Bealmear (CFO)

There's been a big effort to digitize all those records, which has been great. We've been pushing forward on that. We've been working, you know, and very thankful for the work that the National Labs and the Department of Energy has done to do that, 'cause that stuff is a, you know, treasure trove of information and data. But one of the great things that kind of stood out to this, and one of the things that when I learned it, you know, back around the formation of the company, was kind of mind-blowing in a positive sense, was EBR-II and FFTF, both liquid sodium-cooled fast reactors, actually achieved superior operating capacity factors and operating characteristics than commercial light water plants at the time were achieving. And to me, the thing.

That's great, you know, and there's reasons why, but what was even more, like, incredible about that to me, was that both of those reactors, their job was not to produce power. Their job was actually to, you know, test materials and fuel. So they were moving stuff in and out of the reactor at a high cadence, at a high frequency, means you're shutting it down, turning it back on, shutting it... intentionally doing all of that, and they still beat what was going on on the light water side. And there were contributing factors. You can pull out more information from occupational dose rates, other things like that, that can affect and dictate sort of operational timing and maintenance timing, and how you work around the plant, and what you can service in the plant, while operating and without having to take the plant offline.

All of those things were actually, generally speaking, lower than what you were seeing commensurately at commercial light water plants. And a lot of that just the inherent kind of design and I would say benefits of sodium fast reactor technology. The fact that it showed you could do those things was a huge validation point that you could achieve commensurate, if not superior, operating capacity factors. At the end of the day, I think we can get up into the, you know, mid-90s. I think is a trajectory we can get to potentially as we build out and get a lot of experience.

It's gonna take some time to get there, though, because, like you pointed out, we have tons of operational experience with light water reactors, and a lot of that is directly applicable to us, but not all of it is. But thankfully, there's experience with what we're doing in the past that was quite successful that we can draw from accordingly and then benefit from that. So the fact that we're already starting at a better place than sort of light water plants were, you know, 40, 50 years ago, to me, gives me a lot of confidence that we have a pretty good trajectory to actually, you know, outperform those technologies. At least match those technologies, if not outperform those technologies.

As we work with potential customers, you know, we generally build in some flexibility in how we want to scope what our early plants are going to be operating at from a capacity factor perspective, just so we can obviously get through those sort of initial learning curves to get these things going into the higher-end ranges of capacity factors that we can achieve. But it is the only technology that, in a meaningful way, actually outperformed light water plants. Everything else has actually been pretty significantly worse than light water. Because light water is a great technology. It just happens to have some features that make it fairly operable or operator-friendly, I should say.

Thomas Meric (Director and Equity Research Analyst)

All super helpful. Thank you. Then on the demand side, just curious, your thoughts around the defense applications. You know, just thinking of Defense Innovation Unit solicitation from earlier this summer. Just thoughts around that, and just microreactors at defense, generally speaking. And then just kind of sneaking the last one in here, and kind of an administrative question, but how do I think about programs with the DoD and NRC licensing, and is there, like, a crosswalk there that makes, you know, one more easier than the other? Just generally, how do I think about those licensing programs?

Jake DeWitte (CEO)

Yeah.

Thomas Meric (Director and Equity Research Analyst)

That's it for me. Thanks.

Jake DeWitte (CEO)

Yeah. Yeah, of course, no, great questions. On the sort of defense engagement, you know, we've been actively working obviously with the different departments and the different branches in the Department of Defense for some time. You know, a year ago, we were awarded initially for the Eielson project up in Alaska. As that had been a threat of a protest, the kind of conservative, cautious procurement actions that is, you know, very common today in terms of the protest cycles with the Defense Department, that was then pulled back to update the review. It was then re-awarded to us in February. Then there was a protest filed that was pulled in March that's going through the next updates there.

Craig Bealmear (CFO)

Given the cadence before was about 6 months, you know, we expect, you know, hopefully that we'll be entering into kind of an update on that front as well. The fact that we were awarded it twice gives us some confidence, but of course, we'll see kind of where that moves. The thing is, is we're offering something based on that call, and then if you look at the Defense Innovation Unit kind of call, it's pretty well aligned with what they're looking for, in terms of business model. And we have some flexibility to get down into the size ranges they wanna, they wanna be looking at. We're not gonna be serving the 1 MW and kind of small scale.

We see a lot more opportunity, obviously, at the higher ends of those ranges, but we can definitely perform and deliver a very competitive and attractive solution. So, yeah, we're good to see how those projects and those things develop. At the end of the day, the energy needs that we've learned from the Department of Defense, and what they project forward is quite diverse in offerings. So there's gonna be, I think, multiple solutions that can, you know, offer well, multiple companies that can offer different solutions that are successful for them. And I think we see ourselves being positioned potentially to be one of those, especially given our sort of prior success there. One of the things that was part of the Air Force call was they wanted it to be licensed with the Nuclear Regulatory Commission.

But generally speaking, and there's a lot of nuance here, but generally speaking, the Department of Defense can actually authorize their own, you know, nuclear plants. So that is a pathway some are looking at pursuing, some of the branches and some deployment cases are looking at as well as a potentiality. The thing we like about that is it provides sort of a, in our perspective, a backup option to the NRC, but it also provides a good sort of motivation that, hey, look, this is something that can be done, but their preference is that the NRC does it. And their preference isn't based on just wishing and hopeful thinking.

You know, the Air Force has been around some of these NRC meetings dating back to 2018, maybe even earlier, but like, they've been engaging there to know that this is something that they have confidence that can be done, right? I can't speak fully for them, but from what we've seen, you know, what they've identified is what's important about what they're offering. Powering these bases is mission critical for them. So they aren't gonna be sort of jeopardizing that with some hopeful thinking about what a regulator can do. Instead, I think they made those decisions intentionally based on what they expect to be able to be done.

That said, they also have optionality, which gives them great positioning, and we see that as, generally speaking, a broad benefit for everybody, us included, you know, as well as others. So that's kinda how we see that playing out. The nice thing for us in general, it's sometimes very nice to work with government-owned land because it's well understood. It can also be a challenge, obviously, because it comes with the fact that it might have other things around and on it. But at the end of the day, there are some benefits there. So our model of being able to site where a customer wants us, including on their land, works pretty favorably for us and for the off-takers.

Jake, it's also one of the reasons why we were really glad to get somebody like Retired General Jansen on our board to get insights around that market sector. I would also note that, you know, I think this call is scheduled to end at 6 P.M. Eastern Standard Time, but Jake and I are more than happy to stay on and continue answering questions.

Operator (participant)

We'll move next to Ryan Pfingst with B. Riley.

Ryan Pfingst (Equity Research Analyst)

Hey, guys. Thanks for taking my questions. Just curious, are you seeing a difference in demand between the 15 MW and 50 MW plants? You know, maybe if we're looking at the pipeline, how would that break down between the two?

Craig Bealmear (CFO)

Yeah. So it's a great question, Ryan. So I think if you actually look at, you know, the things that were announced when I started with the company, back in August of last year or so, the projects in Ohio, the project in Idaho, the project at Eielson, those were all in the 15-MW size range. But most of the things that we've announced subsequent to that, that's really caused that growth in the order book, is more in the 50, 50-MW size range. Jake and I were also in a meeting a couple of weeks ago at our headquarters, with a potential data center customer.

You know, and one of the things that was great about that conversation is getting into the details of how are they thinking about, deploying data centers at a greenfield site, and how might we match up a deployment schedule of 50 MW powerhouses, to support that? So I think it's just also an example of, you know, we're trying to be customer-oriented and customer-responsive, you know, and, and I think now our order book kind of reflects that with probably more things in the 50 MW size than the 15 MW.

Ryan Pfingst (Equity Research Analyst)

Got it. Appreciate that color, Craig. What about any update on how you're thinking about the estimated construction and fuel costs for your plants? I know we've spoken about $70 million-ish being a good target for the 15-MW version, but wondering if you have an update there.

Craig Bealmear (CFO)

You know, so if you look at our Investor Day materials, I don't have it right in front of me, but I, you know, the 50 MW size is, I think our first of a kind was about $145 million. It decreases, you know, when we apply some of those economies of scale. Fuel costs have gone up since that time, so I think we would see, you know, an increase on that number. But also, as we were speaking earlier, just the overall demand and power and the pricing around PPAs is also going up to help offset.

The other thing that does help us a bit is, in all of those financials that we showed back in the Investor Day, we were not assuming any benefit from ITCs, but the ITC actually goes against both the asset cost and the fuel cost. So there is a little bit of an element of the ITC, be it in that 30%-40% range, that can act as a hedge against those inflationary pressures.

Operator (participant)

We'll go to our next question from Jeffrey Campbell with Seaport Research Partners.

Jeffrey Campbell (Senior Analyst)

Good evening, and, thank you for all the color. As you think about possible Title 17 loan applications, is this effort aimed more toward installations after the initial Idaho National Laboratory installation? And if so, are you thinking more about a project-by-project type of financing or perhaps multiple projects in one application?

Craig Bealmear (CFO)

I think, Jeff, at this point, we're probably looking at both of those scenarios. And there's probably a middle ground that if we do have a project that is made up of more than one powerhouse, you know, you could actually bundle that up as well as we look at exploring financing strategies. The other thing I tried to call out in the slide that looked at that mix of, you know, for each project, how much is coming from cash off the balance sheet versus financing structures.

You know, one of the things that Graham Johnston, who's our treasurer, and I are starting to look at is, overall, what would be the right mix around tax financing structures, things like the Loan Program Office, as well as project financing structures, just so we can get both the right mix of cost of capital. But, you know, not all financing structures are created equal in terms of the effort it's gonna take to put one of those in place.

Jeffrey Campbell (Senior Analyst)

Okay, thank you. As you look ahead to a time when you have multiple installation projects operating simultaneously, do you imagine that the work will accrue to a handful of EPCs who will have aligned to your work, or is it gonna be more of a, a separate EPC aligned to each separate project?

Jake DeWitte (CEO)

Yes, it's a thoughtful question, and it's more the former. Our view strongly has been to, you know, create and maintain a competitive environment amongst the EPCs, and work with a number of different experience, characteristics, or preferences. But that way, we have, you know, diversity in our sort of EPC bench, while also having flexibility.

Operator (participant)

We'll take our next question from Graham Price with Raymond James.

Graham Price (Senior Equity Research Associate)

Hi, good afternoon. Thanks for taking my question and for fitting me in. Just one on my end. Just wondering if we could get an update on the project with Diamondback Energy. Specifically, you know, what's a realistic timetable for deployment there?

Jake DeWitte (CEO)

Yeah. So basically, you know, we announced the partnership with them largely stemmed from, you know, engagement we started having with them towards the end of 2023. So we're going through the process of identifying the specific sites they want us to be on. I'm sorry, the specific site of the number of sites they're looking at, they want us to be on. You know, from our perspective, we view this as a kind of an initial project. I think given what we see as the sort of the demand projections for electrification in the Permian, this is just like, you know, a toe in the water, so to speak.

Craig Bealmear (CFO)

So, an exciting one, but wanting to obviously make sure it's impactful and also something that positions things for more successful scalability. So as we go through that effort, I think we're targeting, you know, developing out the specific site, developing out the specific PPA, with all those factors in mind, to, towards, you know, potentiality for future expansion, possibly. So it takes a good amount of work to go through those efforts. There's also a lot of grid constraints down there, and just broadly speaking, in the Permian, but not everywhere. So obviously, mindful of that kind of changes how we think about the site selection processes and down selection processes.

And then, you know, I think depending on timelines, we'd expect something in the 2028-2029 window for initial power generation at this point. But some of that's gonna be largely dependent on sort of where and how Diamondback is gonna wanna proceed with those specific location selection process. But that's, that's kinda how we're marching forward on our end.

Graham Price (Senior Equity Research Associate)

Got it. I guess just broadly, how does the opportunity set look for the oil and gas space in the Permian and other basins as well?

Jake DeWitte (CEO)

You know, it's pretty. It's very exciting. It's very large. I think as we see what we've been learning about, or I should say, we, myself personally, have been learning about the opportunities around electrification and the benefits that gives to operating in the region, it's pretty promising. You know, I think we, we see, you know, we see a pretty large order book potential down there, and our model is well positioned to kind of provide into that. You know, the numbers are gonna be, you know, it depends on a number of factors, but we've seen people talk externally on the, you know, like, high hundreds of megawatts to a couple of gigawatts of power would be needed for electrification.

Craig Bealmear (CFO)

And so, so I think as you kind of think about how to ballpark size it, I think that's a reasonable starting point. That said, you know, part of our view and part of the sort of strategic developments we've taken here, you know, last year, we raised capital, before the transaction, of course, so last year, from Liberty Energy, and through that process, got to know, you know, Chris Wright, who then joined our board here, after we closed the transaction. And given his position and expertise in the field, part of his conviction about this was, obviously, he loves the story around nuclear and energy abundance, but also some of the potentiality for the market development side on the oil and gas piece of things. So, so I see quite a bit of upside on there.

I just was the one that rambled, while our CFO actually spent a good amount of time in the oil and gas industry. So Craig, I don't know if you want to add anything on that, but.

I, I would just say, you know, 30 years in the oil and gas sector, and most of the operations need to operate 24/7. They want reliability, and most of the majors have got some form of carbon reduction targets that they're trying to meet too. So I think our offer works works very well to meet those needs.

Operator (participant)

We'll move to our next question from Ivan Feinseth with Tigress. Your line is open. Please go ahead.

Ivan Feinseth (Chief Investment Officer)

Thank you. Congratulations on the progress and the first public call, and thanks for taking my questions. On slide 20 with your pipeline, can you give us some, like, outline of the steps from signing the initial letter to going through the process to getting a final power reactor?

Jake DeWitte (CEO)

Yeah. So basically, you know, the way this works for us, kind of from a process perspective is, as we start engaging with customers, is to sort of progress it through that relationship. Because, each site, each consideration around the market, each customer. When I say the market, I mean the local market consideration, each customer, everything is variable. So we go through a process of sort of, you know, marching through progression as we engage with customers and they're interested to move forward.

Craig Bealmear (CFO)

Often starting with either a memorandum of understanding, which can kind of set a broad scope to survey things and figure out where we want to go, and then that often kind of goes into a letter of intent to effectively, you know, purchase power from us that outlines site and size and, you know, price ranges. Yeah, sometimes customers know enough, so they kind of leapfrog the MOU, and they get straight to the LOI. Actually, that's been more often the case for us. And then from there, we go through a process of working with them to determine the site, determine where we want to—like, where it makes the most sense to go. Oftentimes, these projects or these kind of, you know, these LOIs would entail multiple plants being built.

So you want to be mindful about how the growth plan works there, too, as we go through site selection sort of, you know, process. And then once those things are identified and determined, you know, you're going through that, you're doing the PPA development and then detail negotiations accordingly, in parallel, and then in subsequent, you know, to develop finalizing on site. At which point then, once you have a PPA signed, we kind of transition into execution. But right now, it's in our advantage not to just rush into PPAs, given there's so much demand out there, and they're going to constrain our opportunities or our ability to, you know... Let me rephrase that.

As we look at what the demand, you know, curves are and the indications out there, and we look more high level at what the projections are, right, for what people are talking about needing and all of these factors that are very good for us. It does, it does create, you know, a situation where we might be oversubscribed in our, you know, our ability to deliver for a couple of years, just given that there's so much interest. Now there's a lot of interest on the back end for that timing, so we want to work with customers to see what makes most sense at the stage of those things. But it's a great place to be because it gives us a good position in terms of how we think about, you know, prioritization and execution accordingly.

And Ivan, it's Craig. I know one of the challenges on a day like today is we put a lot of materials out there, and there's only an hour to look at them. But I think it's page eight of our shareholder letter, actually has a nice little visualization of the steps from that MOU stage that Jake mentioned, until actually getting a PPA in place.

Ivan Feinseth (Chief Investment Officer)

Okay, but now, one of my questions, let's say you have a potential customer that's already running a data center, they have land, and they want just to contract with you. Would they be able to streamline the licensing permitting, you know, the approval process? I mean, I would believe that you have tremendous demand, and probably the bottleneck is the ability to get regulatory approval all the way down to, you know, permits to build and eventually implement. So, do you have customers in the pipeline that would fit, like, that outline, that could streamline the process? And also, what is the process of, let's say, taking deposits or financial commitments that also could help finance the, you know, the build-out of the reactors?

Jake DeWitte (CEO)

Yeah, I'll just start on the siting and Craig, feel free to chime in. So there are some benefits when they have a site, and we know where we want to go for various reasons. Oftentimes, they have infrastructure in hand and everything else, so that does just have some benefits. But most of those benefits are going to be realized on the actual, like, construction and installation phase. The permitting process itself, you know, at the local level, might benefit some, but that's largely wrapped up in the federal side. So you mostly are going to see those benefits kind of on the construction side. That said, it helps drive the process forward, and it makes things clearer and simpler, which is a good thing when you do have a customer who's like that.

Craig Bealmear (CFO)

I would say, you know, of several—like, of the customers we've announced and been talking quite a bit about, on the data center side, it's a mix of, sometimes a site they very specifically know and want power at. Others have, you know, a variety of sites that they're kind of exploring, and trying to prioritize where, you know, they're going to see the demand go and then where we can go. So it's co-iterative. It just depends, you know, kind of on a case-by-case basis.

But I do think in general, places that have sites, and have the area and the land for us to be able to go build with them, have a strong advantage when it comes to, you know, the overall speed of deployment, if that makes sense.

I would say, you know, the question on financing, and we've already got one, great example of Equinix investing in the company. You know, every customer is going to look at those sorts of things differently. It made me more than happy to entertain those sorts of conversations with some of our other customers that.

Operator (participant)

Thank you. That will conclude the analyst Q&A portion. I will now turn the call back to Sam Doan to address retail questions.

Sam Doane (Director of Investor Relations)

Thanks, Jess. Our first question from our retail investors are, AI has been a big buzzword, but where else is the focus for Oklo, and what goes beyond powering just that facet of the future?

Jake DeWitte (CEO)

Yeah, I think it's definitely getting a lot of attention, in terms of you know, growth, opportunity, energy needs, all those things. I think we see it's quite constructive in driving, obviously, like, data center development and growth. But there were a couple of big macro factors in hand, even before sort of, I would say, AI kind of came storming out of the scene from an energy perspective. Obviously, given our chairman has a pretty unique insight in the future of AI, we've kind of been excited about what could be in the data center side for some time. But the reality is, there's been several dynamics here that are favorable for us. One is, you know, we have the energy transition perspective in hand, in process, I would almost call it that way.

Craig Bealmear (CFO)

That is, I think, moving at pace. You know, that was kind of you know, I think we're coming up right around now, is the two-year anniversary of the Inflation Reduction Act. Obviously, a big piece of legislation and policy to move, move forward and try to accelerate the energy transition. That is creating a huge amount of demand for electrification, and that, that number might take time to fully realize. But if you look at what's on hand for that and for incentivization for that, the numbers are, are, are staggeringly large. And that's a huge amount of opportunity just there. Additionally, we also have this other big macro factor occurring, which is, you know. Let me just add some context on energy transition.

It's not just generalized electrification and sustainable and actually scalable electrification in a meaningful way, which means, you know, we need to have a whole, portfolio or a whole of grid perspective, and nuclear is gonna play a really important part of that. Which is why, you know, over a year ago, the Department of Energy had a report that, that projected nuclear capacity would something like triple or so, in terms of, you know, just meeting energy transition needs. That's a huge, right, opportunity alone there. And you see capacity markets recently reflecting that.

The fact that capacity markets, pricing in PJM went, you know, a factor of nine up or something like that, a significant increase, that reflects sort of the obviously capacity factor for nuclear capacity value that a nuclear plant affords, and some of the shortfalls that some of the deployment of clean energy technology has had in terms of what it's strained on the grid and then how to make sure pricing reflects all the things. So all in all, the energy transition is one of the big pillars here for growth. It's, that's, you know, massive in scale. The other is then. When I mean massive in scale, is, you know, you, you look at those numbers, and it's, you know, tens to hundreds of gigawatts in total capacity size for that.

Additionally, as we look at this massive reindustrialization occurring in the U.S., the CHIPS Act is a good example of that, as we're trying to drive bringing manufacturing back into the United States. That needs energy. A lot of those facilities need 24/7 reliable energy, frankly, to run. And energy costs can be sizable for the input on that. And so I think you're gonna see that increasingly play a role in as, you know, companies are looking at siting manufacturing capacity somewhere in the U.S., if power availability or access or reliability is a challenge, which it increasingly is, they're gonna be turning to bring your own power solutions, which is a win-win for kind of everybody in many ways, and that's pretty constructive to us as well. So that's a big factor there.

And then, of course, you have, you know, the AI side. I think those three also then capture things in between. There's the defense op, you know, opportunities around resilience. There's opportunities for just replacing retiring assets, on the power generation side. So there's a lot of things here that are kind of driving forward on this. So at the end of the day, I think, I think, you know, AI is a big piece here, but there's a lot of other demand drivers at this point. But we see AI right now moving faster than everything else.

Sam Doane (Director of Investor Relations)

Thanks, Jake. Our next question is, could you provide an update on the expected completion timeline for your waste recycling facility? And once operational, what percentage of fuel in your powerhouses do you anticipate will come from this recycled source?

Jake DeWitte (CEO)

Yeah, so fuel recycling is one of the things I'm really excited about. I could probably take way too long to answer all sorts of fun things about this, so try to be concise on this. You know, so recycling provides a pretty important way to diversify fuel streams for us, as well as the opportunity to reduce fuel costs in a pretty meaningful way, while also enhancing and diversifying revenue streams for the business from co-product sales. All in all, pretty exciting, something that we're then pursuing, as quickly as we reasonably can accordingly. I think we aim to have a facility operational at the start of, you know, the decade, basically.

Craig Bealmear (CFO)

So getting something built out in the late 2020s to be operational come 2029, 2030, and then starting to ramp operations from there. The way this process works, electrorefining specifically, is it's modular, or it's a batch-wise process, so it's inherently modular. So as a result, we anticipate having sort of like a scale-up and ramp-up of modules in the larger scale facility to deliver our... as we scale.

You know, our goal will be to move as quickly as we can to take up as much of the recycling capacity as we can, but we still see a need that we'll have fresh fuel input on, largely because of sort of the order book and what we're anticipating the growth scenarios, like we were just talking about, driving sort of the demand for our ability to deliver, which is going to inherently, you know, be hard for us to keep up with on the recycling side.

So I think we target that, you know, I talk about this sometimes, you hear me say, we think in scales of very long time frames here, but I think it would take us, you know, frankly, you know, out for maybe 100-200 years to fully hit, like, a higher than maybe 85% or 90% full reliance on recycling. But in the near term, we try to get those numbers close to 50/50 as soon as we can. A lot of that's just gonna be dictated by growth on the recycling front, as well as, you know, growth on the order book.

Jake, just to prove I'm listening when you talk about it, you know, the other thing that excites me about recycling is, you know, not only what it can do around our supply chain for fuel and our price of fuel. But, you know, that process itself throws out, throws off some great co-products, some isotopes that are under a very high and ever-increasing demand, in the medical industry, in the aerospace industry. So, there's potential, we have business within that business as we develop it.

Operator (participant)

That will conclude questions altogether. I'll turn the conference back to Jake for any additional or closing comments.

Jake DeWitte (CEO)

Great. Well, thank you everyone for joining us today. We appreciate the attention, the time, and thoughtfulness around the questions. We're excited about these continuing, keeping you guys up to date as we proceed forward on executing against our plans, and march forward, getting our first plant built, getting recycling scaled up, and delivering and growing our order book, all the cool things that are gonna be coming for us. At the end of the day, one of the things that motivates us here, and me specifically at Oklo, it's pretty easy to get really excited about, is what the fundamental technology affords us the ability to do.

Craig Bealmear (CFO)

You know, fast reactors have significant economic upside, significant fuel efficiency benefits, that coupled with recycling, all of which is demonstrated technology, you know, truly has the potential to be a terminal energy and climate solution. In other words, you have a technology set that's been demonstrated and proven, that we now have the opportunity to scale forward, that can tap into known reserves of heavy metals on this planet and power the entire planet's energy needs for the rest of the planet's durable lifetime. That's a pretty exciting thing to be motivated to work, or exciting thing to get to work on, and pretty easy to get motivated to work on. So we're very excited about, you know, being a public company now.

Looking forward to keeping you all up to date as we progress towards our goal and our mission here, and look forward to the next one of these. Thank you, all.

Operator (participant)

Thank you. That does conclude today's program. Thank you for-