Tag Archives: utilities

PJM Capacity Auction Impact On Exelon And Other Electric Utilities

Summary PJM’s annual capacity auction was completed in August. This was the first year using the stricter capacity performance standards, which led to an increase in clearing prices. Exelon was the big winner in this year’s auction, with the potential to earn over $1.7B in capacity payments. Fewer new power plants bid into this year’s auction. This could be a positive sign for the long-run outlook of generation owners. For those who follow the electric utility industry, the PJM capacity auction is usually one of the big events on the calendar. (PJM is the regional transmission organization that essentially controls the operation of the electric grid from New Jersey to Chicago.) This year’s auction completed in August was no exception. The capacity auction was created a number of years ago to help support the reliability of the electric grid in a competitive market. The auction takes place three years before the capacity is needed, so this year’s auction was for the 2018/19 planning year. Electric demand fluctuates by time of day and by time of the year. There are some power plants that are needed for those few hours each year when demand is at its highest, but otherwise don’t have to run. These plants would never stay open if they were only paid for the few hours that they operate. The capacity auction essentially pays plants a standby fee to keep them open so that there is plenty of power available on high demand days. This fee is in dollars per megawatt of capacity for each day of the year. The size of the fee is determined in the capacity auction, and varies by location within PJM based on constraints in the electric transmission system. The following map shows the zones tested for transmission constraints in this year’s auction. Exhibit 1 (click to enlarge) Source: Brattle Group The arrows in the above map represent the connection between the parent zones and smaller sub-zones that might also have transmission constraints. For example, the MAAC zone has EMAAC as one of its sub-zones. EMAAC has its own sub-zones, including PSEG, which has its sub zone, PSEG-N. After the 2014 polar vortex caused reliability scares in PJM, changes, called capacity performance (NYSE: CP ), were made to the auction creating stricter eligibility requirements to participate. It also increased penalties for plants that receive capacity payments but are unable to perform when called upon during periods of peak demand. The creation of CP led to an increase in the clearing price for generation assets this year, as the higher cost of meeting the tighter eligibility requirements raised the auction bids for many participants. The clearing price of the RTO region of PJM (basically the areas in PJM without any transmission constraints) increased almost $45/MW-day over last year’s auction. Exhibit 2 Source: PJM Since this is the first year of CP, PJM only required 80% of the generation capacity to meet the new tougher standard. Eventually all capacity will have to meet the CP standard. Capacity in this year’s auction only meeting the old standard still received almost $150/MW-day in the RTO zone, which was close to a $30/MW-day increase in price. As you can see on the following map, only two areas priced separately due to transmission constraints this year, EMAAC and COMED. The prices in these zones were $50-60/MW-day higher than in the RTO. Exhibit 3 (click to enlarge) Source: PJM There are nine major generators that are impacted by the results of the auction. American Electric Power (NYSE: AEP ), AES Corporation (NYSE: AES ), Calpine (NYSE: CPN ), Dynegy (NYSE: DYN ), Exelon (NYSE: EXC ), FirstEnergy (NYSE: FE ), NRG Energy (NYSE: NRG ), Public Service Enterprise Group (NYSE: PEG ), and Talen Energy (NYSE: TLN ). The following chart shows the capacity each company holds inside PJM, and the zone where it is located. (A free excel file with information on the size, zone, and capacity of each company’s PJM plants, as well has historical auction prices is available here ) Exhibit 4 (click to enlarge) Courtesy Garnet Research, LLC You can see that the big player in PJM is EXC. You can also see that the majority of EXC’s capacity is in the COMED and EMAAC zones, which are the two zones that received higher prices this year because of transmission constraints. One thing to remember, though, is that having capacity in a region doesn’t necessarily mean you will receive payments for all of your capacity. Exelon actually issued a press release after the auction stating that three of its nuclear units (Quad Cities, TMI, and Oyster Creek), totaling 3,230MW of capacity did not clear the auction. The lost revenue from these plants not clearing is about $240M. Exelon already has plans to close Oyster Creek at the end of 2019. TMI and Quad Cities not clearing the latest auction probably means EXC will seriously be reviewing whether or not these plants should also be closed in the next few years. In general companies don’t publish which plants clear the auction because of competitive reasons, so it is difficult to know exactly which units will be receiving this revenue each year. Taking a company’s capacity in each zone and multiplying by the auction clearing price and by 365 days gives you an idea on how much potential revenue it could get from capacity payments. In this year’s auction, if you assume all of EXC’s capacity cleared at the latest prices, they would be receiving almost $2B in revenues. EXC is by far the biggest, but you can see the potential for the major players in the following table: Exhibit 5 (click to enlarge) Courtesy Garnet Research, LLC So without the three nuclear plants we know didn’t clear, Exelon still has the potential to earn over $1.7B of capacity payments. The above table also shows the biggest beneficiaries from the constraints in the electric transmission system. EXC obviously has the biggest benefit on a dollar basis, but PEG gets the biggest percentage benefit. Most of PEG’s plants are in EMAAC or in EMAAC’s sub-zones. Historically this has been a very good place to own power plants, because transmission constraints have impacted at least one sub-zone of EMAAC in all but one of the past capacity auctions. Exhibit 6 (click to enlarge) Courtesy Garnet Research, LLC So one thing to keep in mind when looking at PEG’s historical earnings is that they have been a big beneficiary of these transmission constraints. These constraints have been there for a long time, and with the difficulty in building new generation and transmission capacity, it is likely PEG will continue to be a beneficiary well into the future. This is actually the first time that COMED has ever broken out separately in the auction, which was partly driven by some power plant retirements. It remains to be seen if this year’s breakout was a one-time event, or the start of a trend. The ATSI zone, where the majority of FE’s assets are located, actually set an auction record with a $357/MW-day clearing price for 2015/16. But this year’s 2018/19 auction had ATSI just receiving the RTO price. So just because a zone received premium prices in an auction, it doesn’t mean this will continue for a long time. While EXC has the most potential revenue from the auction, on a percentage basis the impact to the bottom line is significantly greater for independent power producers Dynegy, NRG, and Talen. If you assume a $20 change in the auction clearing price across all zones, that all of each company’s capacity clears the auction, and a 40% tax rate on the incremental revenue, the impact is over 35% of NRG’s 2016 Street earnings estimate. The IPPs tend to trade more on EBITDA than EPS, and Talen Energy is actually the most sensitive on that metric. You can see the impact by company in the table below: Exhibit 7 (click to enlarge) Courtesy Garnet Research, LLC AEP, EXC, FE, and PEG all have sizable regulated wires businesses as part of their companies, which leads to the auction’s smaller bottom line impact for these names. While these names might not get as big a boost from the auction increase, their regulated business helps protect them when power markets suffer any downturns. Besides the increase in prices, this year’s auction may have brought additional positive news for competitive electric generators. Over the past few years record numbers of bidders have proposed adding new capacity to PJM. Last year almost 6,000 megawatts of new capacity cleared the auction, but this year less than 3,500MW was even offered. Exhibit 8 (click to enlarge) Courtesy Garnet Research, LLC This could be a sign that the economics of building a new power plant are becoming less attractive. The decrease in natural gas prices over the past few years has knocked down power prices and has been a big reason for the building binge, with generators trying to take advantage of a cheaper fuel source. If this buildout slows there would be fewer new power plants to compete with the current set of plants and would be supportive to companies that currently own capacity. This would be a positive for all generation in PJM, and could mean increased stability for power prices in the region. It also gives hope that the higher level of this year’s capacity auction might stick around for a while. Conclusion If the latest auction is a sign for a turnaround in the mid-Atlantic electricity markets, investors would benefit most by obtaining shares in DYN, NRG, or TLN. If investors want exposure to these markets, but with more regulatory assets to give some downside protection, then Exelon is probably the preferred name. FE and PEG are also similar to EXC, but they lack the added protection of Exelon’s geographic diversity. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

IDU: This Utility ETF Looks Just Fine, Until You Compare It To VPU

Summary IDU offers exposure to a great sector, utilities, which is excellent for portfolio diversification. The ETF had about 61 holdings, which is fine until you consider that VPU has 83 and the expense ratio is less than a third as high. The largest exposure is to electric utilities, but the breakdown within the utility sector would be better if “multi-utilities” were broken down by source of revenue. As I’m looking over the possible ETF exposures, I’d like to evaluate several options for utility exposure. Utilities are often poorly represented in ETFs and that trend can even occur in ETFs focused on high dividend yields. That can be a shame because utilities are a nice holding for many investors since they provide high yields, moderate levels of volatility when used in a diversified portfolio, and they allow investors to own the producer of a major personal expense. Of course, the expense I’m talking about is the utility bills. So long as the investor is human (a safe assumption?) they are likely to be purchasing the services of one utility company or another. Even if the investor decides to retire in an apartment that includes utilities in the rent, a long term increase in utility costs could drive up rents. Some people may opt to live off the grid with solar power and drink their water from a well, but I’d wager that is a very small portion of my audience. One of the funds that I’m considering is the iShares U.S. Utilities ETF (NYSEARCA: IDU ). Expense Ratio Investors are already paying for the utilities flowing into their house and the utility companies are paying for their own management and infrastructure. It would seem very unfortunate if investors had to add another layer of costs onto their investment by having a high expense ratio. Unfortunately, that high expense ratio is present in IDU as the ETF reports an expense ratio of .43%. No, I don’t care for that expense ratio one bit. For comparison, the Vanguard Utilities ETF (NYSEARCA: VPU ) has an expense ratio of .12%. Can you guess which one I’d rather be paying? It shouldn’t be hard. Largest Holdings The following chart shows the top 25 holdings of IDU and their respective portion of the portfolio. The total portfolio only holds 61 companies, so this is a very substantial portion of the holdings. For comparison, VPU had 83 holdings. The holdings list is fairly standard. In short, the top 10 holdings are the same as the top 10 holdings for VPU and the top 8 are in the same order for each ETF. This appears to be a fairly standard utility ETF. Within the Sector The following chart classifies the holdings based on which part of the utility sector they fall into: I find this chart to be much more interesting than the one that simply breaks it down by company because this method shows at a glance what those companies are producing. There is one weakness to the presentation though because “Multi-Utilities” is not very specific and it represents over 34% of the portfolio. It would be great if the individual companies could be broken down by the portion of their revenue coming from electric, gas, and water services. Then those percentages could be aggregated back to the portfolio level and it would give investors a better feel for how well they could match their ownership of the producers with their own individual bills. From an investment level, that isn’t really necessary but it would be interesting to do and it might encourage investors to save more. Designing an intelligent portfolio structure is very important, but being engaged and making the choice to fund that portfolio is also very important. The biggest weakness I see for many young workers today is a lack of engagement in investing. Using a “hands off” strategy with allocating a large amount of money to Vanguard target date funds is a fine investment strategy. I believe it would outperform many individual investors, but it still relies on having enough engagement to actually follow through with funding the account. Building the Portfolio This hypothetical portfolio has a moderately aggressive allocation for the middle aged investor. Only 30% of the total portfolio value is placed in bonds and a third of that bond allocation is given to high yield bonds. This portfolio is probably taking on more risk than would be appropriate for many retiring investors since the volatility on equity can be so high. However, the diversification within the portfolio is fairly solid. Long term treasuries work nicely with major market indexes and I’ve designed this hypothetical portfolio without putting in the allocation I normally would for REITs on the assumption that the hypothetical portfolio is not going to be tax exempt. Hopefully investors will be keeping at least a material portion of their investment portfolio in tax advantaged accounts. The portfolio assumes frequent rebalancing which would be a problem for short term trading outside of tax advantaged accounts unless the investor was going to rebalance by adding to their positions on a regular basis and allocating the majority of the capital towards whichever portions of the portfolio had been underperforming recently. (click to enlarge) A quick rundown of the portfolio The two bond funds in the portfolio are the PIMCO 0-5 Year High Yield Corporate Bond Index ETF (NYSEARCA: HYS ) for high yield shorter term debt and the iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) for longer term treasury debt. TLT should be useful for the highly negative correlation it provides relative to the equity positions. HYS on the other hand is attempting to produce more current income with less duration risk by taking on some credit risk. The Consumer Staples Select Sector SPDR ETF (NYSEARCA: XLP ) is used to make the portfolio overweight on consumer staples with a goal of providing more stability to the equity portion of the portfolio. is used to create a significant utility allocation for the portfolio to give it a higher dividend yield and help it produce more income. I find the utility sector often has some desirable risk characteristics that make it worth at least considering for an overweight representation in a portfolio. The iShares MSCI EAFE Small-Cap ETF (NYSEARCA: SCZ ) is used to provide some international diversification to the portfolio by giving it holdings in the foreign small-cap space. The core of the portfolio comes from simple exposure to the S&P 500 via the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ), though I would suggest that investors creating a new portfolio and not tied into an ETF for that large domestic position should consider the alternative by Vanguard’s Vanguard S&P 500 ETF (NYSEARCA: VOO ) which offers similar holdings and a lower expense ratio. I have yet to see any good argument for not using or another very similar fund as the core of a portfolio. In this piece I’m using SPY because some investors with a very long history of selling SPY may not want to trigger the capital gains tax on selling the position and thus choose to continue holding SPY rather than the alternatives with lower expense ratios. Risk Contribution The risk contribution category demonstrates the amount of the portfolio’s volatility that can be attributed to that position. Despite TLT being fairly volatile and tying SPY for the second highest volatility in the portfolio, it actually produces a negative risk contribution because it has a negative correlation with most of the portfolio. It is important to recognize that the “risk” on an investment needs to be considered in the context of the entire portfolio. To make it easier to analyze how risky each holding would be in the context of the portfolio, I have most of these holdings weighted at a simple 10%. Because of TLT’s heavy negative correlation, it receives a weighting of 20% and as the core of the portfolio SPY was weighted as 50%. Correlation The chart below shows the correlation of each ETF with each other ETF in the portfolio and with the S&P 500. Blue boxes indicate positive correlations and tan box indicate negative correlations. Generally speaking lower levels of correlation are highly desirable and high levels of correlation substantially reduce the benefits from diversification. Conclusion IDU is offering investors exposure to the utility sector which can deserve being slightly overweight in a portfolio. For ETF investors, it may be hard to get enough utility exposure without specifically buying utility ETFs. From the perspective of risk in the portfolio it looks desirable to include IDU. The fund has only limited correlation and moderate volatility which makes it a nice fit. However, the presence of VPU offering more diversification and significantly lower expense ratios makes the use of IDU questionable. If investors had few ETF options, I would consider IDU superior to having poor diversification. Since investors have a plethora of choices for broad market exposure and even a few decent options for utility sector exposure, I’d rather avoid IDU in favor of VPU. More diversification in the holdings combined with a much lower expense ratio would make it fairly difficult for IDU to outperform VPU over the next twenty years unless there was either a material change in the expense ratios or in the holdings. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: Information in this article represents the opinion of the analyst. All statements are represented as opinions, rather than facts, and should not be construed as advice to buy or sell a security. Ratings of “outperform” and “underperform” reflect the analyst’s estimation of a divergence between the market value for a security and the price that would be appropriate given the potential for risks and returns relative to other securities. The analyst does not know your particular objectives for returns or constraints upon investing. All investors are encouraged to do their own research before making any investment decision. Information is regularly obtained from Yahoo Finance, Google Finance, and SEC Database. If Yahoo, Google, or the SEC database contained faulty or old information it could be incorporated into my analysis.

Ocean Power Technologies’ (OPTT) CEO George Kirby Discusses Q1 2016 Results – Earnings Call Transcript

Ocean Power Technologies, Inc. (NASDAQ: OPTT ) Q1 2016 Earnings Conference Call September 8, 2015 14:30 ET Executives Allison Gross – The Blueshirt Group George Kirby – President and Chief Executive Officer Mark Featherstone – Chief Financial Officer Operator Good day, ladies and gentlemen and welcome to the Fiscal First Quarter 2016 Ocean Power Technologies Earnings Conference Call. My name is Chris and I will be your conference moderator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. And at this time, I would now like to turn the conference over to your host for today, Ms. Allison Gross [ph] with Blueshirt. Ma’am, you may proceed. Allison Gross Thank you and good afternoon. Thank you for joining us on OPT’s conference call and webcast to discuss the financial results for the three months ended July 31, 2015. On the call with me today are George Kirby, President and CEO and Mark Featherstone, Chief Financial Officer. George will provide an update on the company’s recent developments, key activities and strategies, after which Mark will review the financial results for the fiscal first quarter 2016. Following our prepared remarks, we will open the call to questions. This call is being webcast on our website at www.oceanpowertechnologies.com. It will also be available for replay approximately 2 hours following the end of this call. The replay will stay on the site for on-demand review over the next several months. Earlier today, OPT issued its earnings press release and will be filing its quarterly report on Form 10-Q with the Securities and Exchange Commission later today. All of our public filings can be viewed on the SEC website at sec.gov or you may go to the OPT website, www.oceanpowertechnologies.com. During the course of this conference call, management may make projections or other forward-looking statements regarding future events or financial performance of the company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to numerous assumptions made by management regarding future circumstances over which the company may have little or no control and involves risks and uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. We refer you to the company’s Form 10-K and other recent filings with the Securities and Exchange Commission for the description of these and other risk factors. And now, I would like to turn the call over to George to begin the discussion. George Kirby Thanks, Allison. Good afternoon, everyone. I will begin by reviewing our operations and provide an update on key activities and developments after which Mark will briefly review our financial results. Mark and I will then be available to answer any questions. So, let’s begin. First, we are excited that the company is continuing to achieve progress with both our new buoy designs and our commercialization efforts. And as announced earlier today, we have completed the deployment of our APB-350 A1. We have also established a Technical Advisory Panel, or TAP, which is a key development in our path to commercialization and will be instrumental in gathering commercial and technical feedback from industry participants and potential customers. I will be talking about the TAP in greater detail later on the call. Consistent with our strategic pivot, we also continue to make good progress on our technology roadmap, including the development of the APB-350 A2, which we are targeting to be ready for deployment later this fiscal year as well as advancing the development of the PB10. Our progress of APB-350 A1 utilizes the structure previously deployed in 2013, but with a newly designed power take-off. Our APB-350 A2 will feature an optimized hull geometry, which we expect to result in improved operating efficiency as well as reduced fabrication, transportation and deployment cost, all important factors in developing a commercial product for our target markets. The A2 PowerBuoy is expected to undergo a critical design review later this month and be ready for deployment this fiscal year. We believe that the APB-350 represents a very appealing value proposition to provide persistent and renewable power to offshore applications. The APB-350 is designed to provide a robust and cost effective alternative to incumbent solutions that utilize battery, solar and diesel power. An important element of our business strategy is to develop and expand our partnerships in key market areas, including ocean observing, defense and security, oil and gas and offshore winds. Based on our product and technology roadmap, we expect the APB-350 to undergo significant in-ocean testing throughout the next 6 to 12 months. And we are looking forward to sharing performance data with potential customers. As discussed in our earnings release issued earlier today, we have also recently formed a Technical Advisory Panel, or TAP, as part of our intensified effort to accelerate PowerBuoy’s commercialization and market adoption. The TAP consists of selected potential customers, end users and technical stakeholders from various markets, which cover a wide spectrum of applications and market requirements. Companies that make up the panel include a large international and multidisciplinary moving service company and the international certification body, which provides technical assessment, research, advisory, and risk management to the oil and gas industry, two major oil and gas operators, a large oil and gas equipment manufacturer and a leading meteorological and oceanographic sensor manufacturer. The University of Western Australia, Center for Offshore Foundation Systems is also a key TAP participant. The core function of the TAP is that the panel will review and provide critical industry feedback on market and application requirements and test protocols in order to increase our speed to market. This long-term collaboration is initially focused on the APB-350. However, it could extend to future PowerBuoy designs as well. Our goal is to provide reliable, durable and cost effective offshore autonomous power solutions where current solutions are either too costly or unavailable and we believe will enable many new customer applications. The TAP engages these market participants in the validation and commercialization process, which will help us to achieve our objectives more quickly and we will provide more detail on the TAP in the very near future. As we have discussed, there are four key markets which we are targeting, ocean observing, defense and security, oil and gas and offshore winds. We estimate that the total addressable market is well in excess of $1 billion and growing at 2% to 5% annually and we believe that our near-term opportunities could exceed about $75 million. Ocean observing applications for our PowerBuoy include weather forecasting, climate change monitoring, biological process monitoring, and ocean floor seismometry. We continue to see new applications as well, including power and docking systems for unmanned underwater vehicles, which could result in more frequent and reliable vehicle charging. Our objective within the next 1 to 2 years is to complete application demonstrations with our industry partners and to initiate our new product introduction through PowerBuoy leases and unit sales. Shifting to defense and security, the near-term addressable market encompasses remote sensor applications with high-frequency radar and sonar and network and communication systems. Our value proposition is that we expect our solution cost estimates to be substantially lower than incumbent solutions for manned and unmanned system operations, while providing persistent power to onboard payloads. We continue to identify applications in the U.S. and the international defense markets that we were seeking strategic relationships with potential servicing partners. Our third target market is offshore oil and gas and applications include communications, equipment monitoring and seismic mapping to support early exploration and reservoir management. Our value proposition is enabling access to deepwater resources in a cost effective manner. We continue to develop our technologies for applications, which require high power output through a combination of scaled-up PowerBuoy design, enhanced mooring systems and array technologies. Finally, the offshore wind industry continues to be very exciting for us. So, our objective and value proposition is to become the preferred integrated solution delivering up to 50% or more lifecycle cost savings over incumbent solutions. Near-term addressable market opportunities include multiple stakeholders across scores of sites in the U.S. and Europe over the next three years. We continue to see significant market interest in our PowerBuoy and we are discussing potential applications with stakeholders using our APB-350 as the power solution platform. To address all of these market segments, we are collaborating with potential users, as well as progressing toward agreements for further application development and demonstrations. With that, I will turn it over to Mark who will review our financial results for the fiscal first quarter 2016. Mark Featherstone Thanks George and good afternoon everyone. I will now briefly review results for the first fiscal quarter of 2016 before we open up the call for questions. For the three months ended July 31, 2015, OPT reported revenue of $0.1 million as compared to revenue of $1.5 million for the three months ended July 31, 2014. The decrease in revenues compared with the prior year period was primarily related to the completion of our WavePort contract with the European Union and decreased billable costs on our project with Mitsui Engineering & Shipbuilding or MES. The MES project is currently undergoing a stage-gate review with its project stakeholders. The net loss for the three months ended July 31, 2015 was $4.1 million as compared to a loss of $3.3 million for the three months ended July 31, 2014. The increase in net loss is primarily due to higher product development costs associated with the development of our legacy PB40 device and due to the redesigned APB-350. Subsequent to the end of the quarter, we retrieved the PB40 and deployed the APB-350. During the three months ended July 31, 2014, we recovered product development costs from prior periods under our cost sharing contract with the European Union for our WavePort project in Spain. This increase in product development cost recovery was offset by a favorable change of $0.4 million in our gross loss over the prior year quarter. The prior year quarter included a gross loss due to a change in estimated cost for the MES project. In addition, selling, general and administrative expenses were $1.2 million lower in the first quarter 2016 than in the prior year quarter, primarily due to reduced legal fees, decreased site development expenses, decreased patent amortization costs, as well as lower third-party consultant fees. These decreases were partially offset by increased employee-related costs. Turning now to the balance sheet, as of July 31, 2015, total cash, cash equivalents and marketable securities were $14.2 million, down from $17.4 million on April 30, 2015. As of July 31, 2015 and April 30, 2015, restricted cash was $0.5 million. Net cash used in the operating activities was $3.1 million during the quarter ended July 31, 2015, down slightly from the $3.2 million for the quarter ended July 31, 2014. As discussed in our last conference call, we have taken a number of steps over the last several months to reduce our cash burn rate, while also increasing our technical, operating and business development resources. As such, we continue to project that our operating cash burn in fiscal 2016 will be lower than that in fiscal 2015 despite increased deployment activity in fiscal 2016. We have also substantially increased our proposal efforts and remain active in pursuing commercial partnerships and other alliances with potential customers. As a result of these actions, we remain confident in our cash position and we expect to have sufficient cash to maintain operations into at least the third calendar quarter of 2016. With that, I will turn back to George before we open the call for questions. George Kirby Thanks Mark. Before we move to questions, I want to take a minute to reiterate a few compelling reasons to consider OPT. Number one, we believe we are the technology leader in wave energy conversion for offshore applications. We are seeing that our technology provides a critical solution for offshore distributed power generation for a number of industries discussed earlier. We have a clearly defined technology roadmap which focuses on driving down costs, improving reliability and durability and broadening commercial applications and we currently have and continue to develop significant intellectual property around our technologies and applications. Number two, we are targeting large addressable markets, including ocean based communication and data gathering, security, defense and offshore oil and gas. We are executing multiple PowerBuoy deployments, which we believe will further advance our product validation and will serve as near-term market catalyst. We are also engaging potential customers to develop PowerBuoy applications which can lead to solution demonstrations and market launch. And number three we have a solid leadership team in place at both the executive management and the Board levels. So in summary, we remain laser focused on launching our PowerBuoys into offshore market applications, where reliable and cost-effective power is critical. And we are very excited about the progress that we have made in advancing our core technologies toward achieving this goal. As we accelerate our technology development, we continue to receive very positive market feedback, as we expect our PowerBuoys to demonstrate cost-effective alternatives to incumbent solutions, which generally use less reliable and more costly sources of power. We continue to engage with potential partners for joint development projects as part of our commercialization efforts. We are very encouraged by the opportunities that are opening in front of us and we look forward to announcing further progress in the near future. So thank you for your time today. And operator, we are now ready to take questions. Question-and-Answer Session Operator George Kirby Okay. Given that there are no more questions, I want to thank everyone again for attending today’s call. If there are any other questions, please don’t hesitate to contact us in the future. And we look forward to providing you with further updates next quarter. Thank you everyone. Operator Ladies and gentlemen that concludes today’s conference. Thank you very much for your participation. You may now disconnect. Have a great day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. 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