Ameresco, Inc. (AMRC) Earnings Call Transcript & Summary

Okay. Good morning, everyone. Thanks so much for coming. We're so delighted to have a room full of all of you. Before I get started, however, I have to get a few things out of the way. So first of all, I wanted to start with a safety moment. It's something that we do at the beginning of every week at Ameresco and most of our construction teams do at the beginning of their days. So just a quick reminder for everyone. The exit is there if you need to -- if we all need to exit, take a right door, go back down the steps. I'm also reminded that the most common workplace injury are slips, trips and falls. So as we're all coming up and down here today and also if we need to exit the stairs, please be very careful. Now moving on to my next thing. I would like to take a moment to talk about forward-looking statements. Before we get started, I wanted to remind everybody that today's discussion will include forward-looking statements about our future expectations. These statements are subject to risks and uncertainties. Please refer to the safe harbor language on Slide 2 of this presentation and to our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use non-GAAP measures in this presentation. You can find a definition of these measures in our Q1 earnings materials. Okay. All the hard stuff out of the way. Now let's get to the really good stuff here. So again, we're very delighted to have you here today to Ameresco's first Investor Day in London. We did an Investor Day last year in New York City, and we very purposely chose to be here in London this year. We have so many exciting things happening in Europe, and we thought the best place for us to be was to be here with all of you in a place where we see exciting opportunities. So we wanted to take a minute for you to not only be here with us, but for you to meet so many members of our team and so many members of our team that are specifically focused here in Europe, also to take the time and meet some of our great partners that are here with us, and finally, have the great opportunity to meet one of our great customers that is here. So all of that is going to be wrapped in for the next 2.5 hours, and we look forward to sharing this with you. We will take breaks and ask questions and have opportunities for you all to ask questions. So please note that we would like this to be a very interactive session. So as we get going here, again, I refer to our safe harbor language. Please know that this is something that's quite important to us. Agenda, real fast if I can just walk through this with you. George is going to open us up with some welcoming remarks. Then we're going to go right ahead into Britta's presentation on our European strategy and some of the policy here. We're then going to walk into our first panel hosted by Josh Baribeau where he will talk about EU merger and acquisition and some of our partnership success strategy. I will then take you into the next panel session where we're going to dive a little bit more into what's happening here in the U.K. and some of the success that we've had. Then I'm very excited that we have Counselor Kye Dudd here to talk about the Bristol City Leap project. Then Doran will come up and walk through some of the financial updates that you're all eagerly awaiting. And then finally, we'll ask George to come back up on stage with some closing comments before we kick off a nice Q&A session. With that, these are all of the folks that here joining us today. The top row is a mix of all of the corporate folks as well as some of the regional people. As you go down, we have more of our European teams here. And then also note we have Kye Dudd, as I mentioned before, and our partner here Konstantinos from Sunel. And now, George, come -- everyone wants to hear from you. So come on up.

[indiscernible]

Yes. Be very careful.

Thank you very much.

Okay. Green, let's go.

Thank you very much, Leila, and good morning, everyone. And of course, welcome to our first investor conference in Europe. And it's very appropriate that we will do it in the U.K., in London, because this is our first step coming into the European market. We started with London. And of course, you guys went through the Brexit, and that took some time for our company to evolve, but it was a great opportunity for us. And we feel very, very good where we are today. A few comments that I would like to make. As many of you know, we have become the first class and the #1 cleantech integrator. In the United States, we were the #1 market share when it comes to the ESCO market. And as it turns out, in the U.K. right now, we are again created the #1 as ESCO as well. What we want to do now, expand that footprint across Europe because we think the opportunity is great in the European market right now because of the energy prices where they are as well, as people looking for more resiliency. And what has happened in the market place, they distributed energy generation or renewable generation. It makes very good economic sense for the particular customer as well as economic sense as well as resiliency for those particular customers, especially the C&Is, the data centers and so on. So -- but our mission here, we want to become the #1 brand in Europe. And now I will talk a little bit how we're going to get there. And how we're going to get there, basically, it's going to be a similar strategy that we did in the United States. We will start basically doing some acquisitions, whether it's talent people or companies. But if we acquire companies, we want to make sure they are accretive and they are in a particular place that we want to establish a strong footprint. But in order to be successful in the European, we have -- so -- and I come from Greece, and I understand the cultures and so on. Each and every country has a different culture. So you've got to be -- in order to be effective and serve that particular country, you're going to establish a local presence. So in the acquisition, though, we will be measured. And generally, they will be smaller, and we will grow them because that's the value that we bring to the marketplace, and that's how you create value overall in the company. So we'll have organic growth as well as the acquisitions, joint ventures. They have helped us a lot. And Konstantinos, we will look -- talk about it later on in the discussions, and we look at the partnerships that they will help us [indiscernible]. And then the other thing that we will do in the Europe like we did in the United States, have broad and deep technical expertise. The one-stop shop that we have developed in the United States has helped us tremendously. Otherwise, a particular customer because with the integrator, if they want solar, distributed solar, we can do it. They want a microgrid, we can do it. They want a smart streetlights or whatever the case, maybe energy efficiency, we cover a comprehensive -- all the measures otherwise associated with that. And that's -- and we will develop the project, design it, finance it in the valuable position. We'll guarantee performance through that, and it works very, very well. So we will try to rematch, do in Europe exactly the same thing that we did in the United States. It's proven. And then the other one, we will leverage Ameresco's proven execution track record. In the marketplace, every time that the federal government in the United States, they go out with a request for proposals, we always scored #1 on technical competence and project execution. And at the end of the day, that's where the customers are buying. And we are paranoid about customer satisfaction. And the year is good. And many of the projects, the RFPs request for proposals. The customers go out. It's a qualification. So the qualification is how well did you do with the last job that you performed. And if the customers are satisfied, then you will do very well in going down the road. One of the [indiscernible] government agencies, one of the largest projects that we won with some [indiscernible] $200 million project some time ago in [indiscernible] and in the start-up operations, he says, George, would you like to know why we picked you? I said, why? He says, your customer satisfaction was unparalleled. He says, how did you do it? I said, well, I have to buy it. He says, how you buy it? I said, delivering always exceed their expectations. And that is something very, very well. That's how we built the company, and we want to do the same thing [indiscernible]. So we will leverage our track record. And then the other thing -- I talked a little bit the holistic approach. And I talk to the people in Bristol City, and they are here today. They will discuss one of the why they picked us. There were 25 other companies that responded to the request of proposals. They picked us to decarbonize the city because we have the expertise on the solar, with the wind, with the geothermal, on the energy efficiency, the smart -- light smart cities and so on. So at the end of the day, with this decarbonization evolution, we will be the key player that helps the cities and town, the community, the customer to get there. When we established the company and we said our mission is to energize a sustainable world, you say, well -- and that was way, way back when we started in 2000. But now the world has evolved around our strengths. Back then, some people will say, well, I will get you to carbon [indiscernible]. Well, they used to get [indiscernible]. Today, they want it. And the other thing that has happened, not only they wanted because of the climate change and so on, but the intersection of the cost of the technologies. The costs have come down, and thereby, it makes more economic since we have distributed generation today than anything else. And the best renewable resource is energy efficiency. People underestimate the potential of energy efficiency. 30% of the energy that we're using can be saved and can be safe economically. And what do I mean by economically? Less than 7-year payback. It's not that the many investors that you find with less than 7-year payback. And that's why it makes sense. I was talking to the Greek government when the situation in Ukraine started and the gas prices came up. And they said, well, how are we going to survive this winter? I said, you will underestimate the potential how much energy will be saved by the people because they recognize that they have to do it. And I said, don't be surprised that 5% to 10% of the energy will be saved without doing anything. And actually, that's what's happened in Europe. They survived, and they are doing really well. So -- but on the other hand, the people woke up, and they say, we got to do something about it. And we are at the right place at the right time. And people, when I started Ameresco back in 2000, and I told my staff, we had a meeting that we want to be #1 in this space. Some people, they thought we were dreaming. But sometimes what looks impossible, it becomes possible by precisions and execution and bringing together the right talent. We are in the service business and so on. But at the end of the day, in order to execute very well, we've got to have the right talent, the right people, and we got to be more evasive. And because the environment is so -- and the young generation today, they are concerned about climate change, and we offer them more technologies. So as they say they want to go to the renewable natural gas, we do it. They want to go to the geothermal technologies, we can do it. They want to go to the smart cities. So we give them more flexibility, and that has started very well. So we feel very comfortable where we are. We feel very comfortable with Europe. And basically, we're going to redo our story. What we did in the United States, acquiring the 20 companies, that gave us a great footprint, we will do the same thing in here. But on the other hand, though, we will be very measured in our approach, what companies we buy, what talent we bring on board and so on. And now I will turn the forum over to Britta to go ahead and talk a little bit more about it. And Britta, by the way, she took over U.K. some time ago, and she has done an excellent job. We went from a little engineering company to #1, right?

Always really difficult to follow, George. Now I'm not that -- I'm never that lucky. Really glad to see everybody here. So thank you for taking time out of your day. Let's see if I can move this forward. All right. So let's talk just a little bit about where we are here. I love London, it's been my second home for a long time now. And so I'm very glad that we're here. Yes, George mentioned the fact that we all went through Brexit as well. So yes, okay, not technically part of the European Union, but still part of that whole family and opportunity. So when we started in the U.K. or at least in the United States and decide that we wanted to sort of look outside of the -- of North America for potential expansion opportunities, we decided to start here. And you could sort of say, well, because we speak English here. I will say I never thought I would have to learn how to speak English twice because it's a different kind of English, but it was a great opportunity for us to start in a place that we're more familiar with. And we looked for 2 very small and really capable energy consultancy firms that had, as George mentioned, great talent, great customers and a track record of really good execution. And we look to build those entities so that they could provide the types of projects that we do provide in the United States, renewable energy assets, energy efficiency, as George was talking about, sort of as a bedrock and operations and maintenance services. And what happened in the course of doing that is we went from a very small footprint within the United Kingdom to one now that covers assets in Ireland as well as projects probably in just about every corner of the United Kingdom. And we're really, really proud of that. There are projects across all market sectors, universities, hospitals, councils, schools, it just sort of continues to build, and they run the gamut of all of the types of services that we provide. Typical energy efficiency, as I mentioned, wind power, solar, we're doing a lot of that now, and that's starting to sort of morph into solar and battery energy storage here. So being able to bring advanced technologies to our projects in the U.K. is really fantastic. And then some of the standard things like lighting and street lighting, and all of that leads to, as George was mentioning, a sort of a holistic approach to tackling problems. It allows us to start really thinking about doing things that are transformational for our customers like decarbonization. You're going to hear more from Kye on what -- we're just incredibly proud to be partnering with the City of Bristol to decarbonize their state. That's just a monstrous step forward that others can replicate, and we can really, really move the needle on climate goals if we do that. So that's sort of where we were with the U.K. Sort of that next natural progression into Greece. As George said, he is from Greece, and so soft spot in his heart for everything that's there. But it's also an excellent location for us to do the kinds of projects that we really do well. Renewable energy generation, amazing natural resources there for doing renewable energy projects. And so we started with about 10 megawatts of wind on one of the islands in the [Indiscernible] Sea. We're right now in the middle of working with one -- with our partner, Sunel, to build 100 megawatts of PV literally on the side of a mountain, not on top or in a valley, but on the side of the mountain. And that's allowed us to also sort of start to expand and build relationships with other developers to allow us to help build their PV portfolios in and around Greece and other countries. And so that was -- again that's sort of first foray out of the U.K. bubble. And where we are now is we've just recently made the acquisition of the firm Enerqos located in Milan. Also super excited to have them as part of the Ameresco family. They also come with an amazing group of customers, an incredible talent base that will allow us to help them grow into an entity that also serves customers like we do in the United States. All right. So we're -- as far -- as we talk about sort of the European expansion, what does that really means to us? The strategy really has been -- is to replicate what we've done in the United States, a proven strategy and execution of finding accretive acquisitions, people that can bring amazing talent, strong track records and solid customer portfolios, looking for opportunities where we can do that where there are amazing resources, where there is underserved parts of Europe that need the help to take that step, that advanced technology step into the future and provide secure and reliable power. And so where we've gone already in the blue, we're looking to sort of continue to expand out into other countries that you see here on the map. And we'll do that in a very deliberate and careful manner and in a couple of different ways, right? We want to do that through partnerships. We want to do that through acquisition. And then we also want to do it where our customers that we develop long-standing relationships with take us to. So there are many customers that have portfolios of opportunities all over the region. And if we can work together with them and become their trusted partner, it's very easy for us to support them as they also look to expand around the European Union. So some of the drivers that we look at when we consider where we want to go next in the European Union, really, it's climate policy-driven and then also geopolitical issues happening in and around the continent right now that are providing great opportunities for us to offer our services to other countries and other customers. There are some really amazing climate-neutral actions happening in countries all around the European Union, and those are the kind of things we really want to look for. Many of the cities and towns that we talk to have already declared climate emergencies. They need the help that we can provide so that they can figure out how they take that next step in their decarbonization journey, how do they get to net zero. So those are all things that we look for as well. And then just customers that are demanding sort of very quick approach provides us with a real opportunity as well. I think you can probably take a look back at the last decade, and lots of people have been talking and talking and talking about decarbonization plans and climate change and climate strategies. And I think that probably for the first time in my career, we really see this trifecta of climate needs -- real, real climate needs that are existential problems that we want to help solve. We also have a customer base that really has set up now and taken notice and said, look, we need to do something, and we need to do something now. And then together with our capabilities, we can help solve those problems with them. It's really an exciting time for us as a company. On the geopolitical side, I mean, can't look away from the fact that there are tensions all around the globe, and there are tensions here in Europe as well, but those provide us with some real opportunities. Not only do customers, but also governments want to figure out, how do they manage their electricity supply, their energy supplies? How do they make it secure, reliable, renewable? Those are all things that we look to do, and it provides us with an -- just an unbelievable sort of landscape where we can help to move these countries forward and secure their energy supply. All right. So just quickly wrapping up on this. Our approach, and George has already spoken to much of this -- really, we want to take our global solution that we have been -- started in North America and is now moving here to the U.K. and the European Union, together with our bench strength, our technical capabilities, but really amazing talent that we have throughout the organization as well as our strong financial backing as the company allows us to really take some really big steps and help move the needle in different countries. We're going to really just focus on a couple of different things, right? The acquisitions that we want to target, we want to make sure that they're accretive, that they're smart, that they bring additional good talent to the organization. Our joint ventures and partnerships that you'll learn more about later on are really, really important to us and allows us together to be more strong as we approach customers to help them out with what our increasingly large portfolios of projects. And then we really want to just make sure that we're taking that blueprint that we've created in the United States on how to acquire companies, how to acquire additional customers, how do we build additional businesses and bench strength and repeat that here in the European Union as well. So I think that I'm going to turn this over to Josh now. And you'll hear a little bit more about the strategy that we've undertaken here in the European Union and hear from some of our partners and our new members of the Ameresco family. Make sure I don't fall going down. All right.

Thanks, Britta, and good morning, everybody. Thanks again for attending our first European Analyst Day, as you've heard before. Going to spend just a minute talking about M&A, which you've heard about a little bit abstractly so far from George and Britta. But for those of you that aren't familiar with our history, M&A is not new to us at all. We've acquired and integrated well over 20 companies in the past 23 years. And that's really how we were able to grow from the 3 people around a cocktail napkin in a restaurant in 2000 to a public company in 2010. And now, as you heard, #1 market share in the United States, #1 in the public sector in the U.K., and hopefully eventually in the next few years, #1 in Europe as well. But more importantly than going through the financial metrics and other details, maybe just the point here is that it's a very diversified portfolio. We've acquired businesses in our project segment, O&M segment, asset segment and other. But more importantly than that is that we don't acquire manufacturing facilities. We don't acquire a significant amounts of technology. What we're acquiring because we're a services business is people. And what I think I'm the most proud of as we talk to investors about what we've done as a company is we've been able to retain the key talent of the management team of many of the companies that we've acquired. We have executives from the United States that have been with us 13 years that came from acquisition, 14 years, 18 years. We have folks in the room here today that we've acquired that you'll hear from a little bit later, 10 years, almost 20 years. The entrepreneurs have stayed with our company. Why? Because we allow them to retain the entrepreneurial spirit that they have when they had their own companies, but with the backing of a global corporation with our ability to finance, shared services like legal, accounting and whatnot. And really, what we allow them to do is continue to innovate for their customers, take care of their employees, and they take care of us. So we love to do M&A, but it has to be a perfect fit. And I think we're really great, like I said, at keeping those people, which brings me back to our panel. So today, I'm joined by some of the management teams of the companies we partnered with or acquired. We've got Giorgio Pucci. He's the Founder and Chairman of Enerqos; Enrico Giglioli, he is the current CEO of Enerqos. We've got Konstantinos Zygouras, who is the CEO of Sunel Group. And I think many of you already know Doran, our CFO. I won't spend too much time in introduction. So I think why don't we just jump right into the questions, which, of course, I forgot at my desk. But I do remember the first one. It was to Doran. It was, Doran, tell us a little bit about Ameresco's M&A strategy and just the things we look for as we approach M&A, some of the criteria.

Yes. Absolutely. Thanks, Josh, and great to see everyone here today. So from an M&A perspective, we really look at the world in a very opportunistic way, right? We've seen the success of integration of a number of companies that Josh just demonstrated. And I think that when we look at M&A opportunities, there's a situation analysis and then there's the kind of critical factors. We're looking for businesses that are going to be accretive for the company, both functionally and financially. We need strong management team. And we look for this -- I don't know. It's an attitude. It's an understanding that the management team that we're bringing on board sees the world the way we do and not just from an operational perspective, but from the perspective of future growth, how they expect to fit in within a larger organization. I think it's a great strategy, and it's not something that we look at as a must-have, a must-do. We see M&A as a way to build a business. We look at the rightsize of companies to acquire and basically feed their growth, right? We've often found people who are looking to grow, who need that extra edge, that extra umph of a large company like Ameresco to bring track record, to bring financial capacity to the table.

And Doran, would you say that Ameresco has a set target for M&A in any given year, a number of companies, amount of revenue or earnings growth from?

There's not -- there's -- we don't bake in M&A -- required M&A into our future targets. We think about M&A so opportunistically that we don't want to force ourselves into spending money on M&A. We want to be extraordinarily smart about it. And as a result, we don't have specifically set targets, right? We just go opportunistically.

We're joined here by, as I said, Konstantinos, one of our joint venture partners here in Europe. How does Ameresco decide to do a joint venture versus an acquisition? What drives that?

So that's oftentimes situational, right? There are some situations where acquisition is going to make sense. There are some situations where joint ventures are going to make sense, right? And what we gain from a joint venture is the ability to participate, to partner, to grow our own business, both again functionally and financially, but at the same time, operate in a fashion where perhaps it takes a little bit less oversight management. Clearly, joint ventures can be financially efficient. If we're only contributing half or minority or slight majority of the equity contribution.

Okay. So no set targets, does have to be a good fit and really sort of much like our traditional business. As we serve customers, it really situational-dependent whatever is best for the situation. Konstantinos, I'll turn to you. You run Sunel. That's one of our joint ventures, as I noted. What attracted you to Ameresco as a partner?

Yes. Thanks a lot, Josh. I'm really excited to be here with you. There were 5 main points that made us partner with Ameresco. So first of all, the brand name of Ameresco is well known to everyone, well established and efficient in delivering sustainable solutions to the customers. And the commitment to environmental sustainability fits perfect with our core, values and mission. Second, it's also very important for us is this amazing team of Ameresco. So from the first discussions, we saw people that are talented, well informed about the market. And what was also very important for us is the whole mentality and doing business with integrity and transparency. Again, we believe that this is a very strong foundation to have a long-term partnership. Third point was the financial strength of Ameresco. So we see in the market, their projects become larger and larger. And also both investors and finances of these projects, they have high requirements that maybe are not easy to be met only from our company. So by joining forces with Ameresco, we can undertake any size of projects, including also battery storage projects. Fourth, also very important thing is a wide variety of services of Ameresco. In Sunel, we have focused in the previous years mainly in solar PV projects. But we understand that in order to support our customers in their journey to sustainability, we need to have a much broader variety of services. As Mr. Sakellaris also said, a more holistic approach to support our customers. Fifth is the main -- it's the general mindset of Ameresco. So people can be flexible and also innovative. In the market that continuously saying this, if we don't change, then we're not going to be successful. So all these 5 important points made us ask ourselves, okay, why we should not partner with the leader of the market and have, let's say, a joint path, a joint journey to be successful? So we're very happy to be part of Ameresco family, and we're very keen in supporting for the future to become stronger and better.

Excellent. Thanks. [Indiscernible]. Okay. Giorgio, you have a very successful career in large corporations, technology, global leadership roles and very large corporations, as I've noted. But once you were running and founded Enerqos, what approach -- when Ameresco first approached you, what attracted you to Ameresco [Indiscernible]?

When we started to talk with Ameresco, the company main shareholder was [indiscernible]. And the fund are useful, but especially on the short-term strategy, what I was looking was an industrial partner, financially strong, but also very innovative, which is, by the way, the story of my life. And we found exactly Ameresco fitting in our strategy. And I could say quite rapidly, we reached an agreement, and we are now part of Ameresco.

Excellent. Enrico, also a successful career of global leadership roles and very large domestic and international corporations. Now that we've closed the sale, this was March 30, everybody, you're running our Italian operations, describe some of the early benefits you're seeing now being part of our company versus being part of a smaller independent company.

Yes. We closed the deal end of March already. I mean this first half, together with Ameresco, we put together initiatives -- well, to become #1 in Italy, #1 in Europe, as George was saying before. So our target is really to become the leader in this business. We are putting together the Ameresco product range because as Konstantinos was saying before, it's important to leverage the product range that Ameresco has developed in U.S. and bring it to the European customer. For example, we were not focused on biogas and biomethane. But now that we have Ameresco, we can offer our clients in Italy also this solution. Secondly, we put together our strengths on the financial side, as George was saying, as a small company, we were not addressing a big part of the market where financial scale is needed in order to approach big and larger projects. And now we are doing that. So we have already acquired large projects being developed that being an independent company would not be addressable. And the third one is really the brand and the history of Ameresco is that both with clients and suppliers, but also with the talent and people development because, as George was saying, this is a business also particularly of people. So really, the Ameresco Group is one the [indiscernible] leader in the U.S., and we have this objective to make the leader even in Europe. So we feel there are really the difference also in our recruiting and talent development to attract the best people in our team and provide the best service for our clients. We already positioned as a very high-quality provider in Italy. So we serve already multinational customers. But of course, we want to -- further to position us as the best in the market for quality and delivery and cost of the solutions.

Great. So let's see. It sounds like culture. It sounds like the strategic vision as well as the ability to leverage our global resources. I think that's kind of the summary from our 3 partners. Back to Konstantinos. So we're working on the Delfini project together, but there is a press release a few weeks ago about a much larger opportunity set. Can you talk a little bit about those opportunities and some others that you're pursuing with us?

Yes, Josh. So for [indiscernible] Defini is a 100-megawatt project, solar PV project in Greece. It's a very difficult project. As also Britta said, it's part of a mountain. During this project, we managed to overcome many challenges of the project and meet all the requirements of a very demanding customer, which is a cell generation. We managed and established a strong lines of communication with Ameresco and to understand that actually, we aligned our strategy for EPC business in Europe. All the energy investors, the new Ameresco and also the new Sunel individually, but they were extremely excited to see that we partnered so that we could jointly deliver more projects with high quality, on time. And as you know, this is a big problem, a big bottleneck for this energy investors, how they can actually keep implement and construct the projects. Currently, we're bidding -- we're invited to bid for 1.5 gigawatt of projects in different countries in Europe, mainly in U.K., Spain, Italy, Greece and Romania. Although I cannot disclose more information since the bidding processes are ongoing, we are feeling quite confident that we can be awarded a significant part of this pipeline. And this is only the beginning because we have started also discussing with more customers for more projects, and we aim to become one of the key players in the EPC business in Europe. In addition, we are also examining other opportunities for energy efficiency or battery storage projects. So I think the future is right, and we can see a lot of things happening with Ameresco in the future. As I said, this is a long-term collaboration for us, and we aim to do a lot of things.

Giorgio or Enrico, where is the growth coming from in the Italian energy efficiency, renewable sector? And how will Ameresco continue to win?

Well, the growth is coming first from what Giorgio was saying before. There is an economic convenience to save the energy. So this -- all our customers realized this, particularly in the last year, when there was the gas crisis. And so the growth is coming from the awareness of customers that -- by doing energy efficiency or producing energy or [indiscernible] convenient. Then the growth is coming also on regulation because also, the government has realized this is an important piece also for the economical recovery of Europe and Italy. So for example, we see the next European directive on building energy efficiency that is under discussion, but will impose a very stringent target of retrofitting the buildings to improve the energy efficiency. So in Italy, we are talking about half of the buildings that are -- the one that need to be retrofitted in order to reduce the energy consumption by 30%, 50%, for example. So regulation as realized is an important things to do. And third, of course, economic convenience is becoming more and more convenient and because, I mean, the solutions that we provide to customers and the costs are really more and more convenient. And also, I think that the brand, also the imaging that the customer wants to project [indiscernible] is more and more on green and sustainability. So there is also this third very important element that since the customer become more aware of the important to be green, also the companies become more and more important to show their customer [indiscernible] they follow this green path.

So energy and some desire to decarbonize just like we've seen in the space. [ Vicki ], if you're ready. If there's any questions in the audience, happy to open up the panel here so you don't have to just hear me all day. Anyone? I'll give you another chance before I finish up. So the whole panel -- maybe we'll start Giorgio with you. So when many investors at least in the United States think about renewables or efficiency in Europe, they think about the majors like [indiscernible] et cetera. In the U.S., at least, we tend to think of Europe as actually ahead of the U.S. in terms efficiency renewables space. You have smaller cars, you were early adopters to lighting, and then there were the large German and Spanish Italian subsidies for renewable energy in the early 2000s. So what is the opportunity set remaining? And what does the competitive environment look like for a company like ourselves?

Thank you for the question. The point is that I already saw this transition from major incumbents to more affected companies 20 years ago when I was at Nokia running their operation in South Europe. And [Indiscernible] at the time the movement from the big players like France Telecom, Telecom Italia, Deutsche Telekom and into the mobile business. And if you go back, I think what did happen at that time, these giants did not realize that the world was changing. And it's exactly the same now. The big [indiscernible] are still too much focused on gas, traditional gas, traditional retail, while the industry is moving into another direction, which is the energy efficiency, the new way of producing electricity, photovoltaic [indiscernible] and not only because, for instance, I mean, we have mentioned RNG, which will be a major fact into the next production of cash. Remember that, I mean, we had the problem with Russia and Ukraine. But I mean, going after Egypt or Algeria is not exactly very safe. The best for us in Europe is manufacturing the electricity using the renewables, and this will be a paradigm shift, which is already happening.

So let's say the big companies are potentially failing to innovate. Enrico, what's your opinion?

I think that when you have such a shift in the market, in the industry and that will need -- basically to build a new ways of doing business because, I mean, as Giorgio was saying, so until 2 years ago, we were running with a carbon intensity. And now, next 10 years, we need to half the carbon consumption. So -- and this is a tremendous market because we have to rebuild all the way to produce energy with clean energy, and we have to reduce at least by 50% our consumption of the energy. Now -- so you can imagine how many plants you need to build because at the moment, there are these large plants with large carbon. And so when a new market open up, it's -- well, it's fair to say that also the new players could win because we are -- and these market incumbents are not incumbents because the market is new. So it's true that incumbents, their history, the brands, so of course, [indiscernible] that we are starting from the same lane, and so we can pick our large share because it's not the incumbent market. It's a new market where incumbents are very similar market trying to compete, but we are a newcomer. So we are all new.

Konstantinos?

Yes. Just a little bit about the opportunities in the EPC business. So we've seen that apart from the traditional energy investors, now we have a new generation of energy investment that are very keen in investing heavily. They are quite aggressive. And we all need strong EPC companies to support them. As I said, the bottleneck for them is always the construction, the implementation of the business plan. We see that the demand for such EPC contractors is very high, and the current companies cannot cover this demand. So this becomes an opportunity for us. And as Britta said before, our aim is to find these companies, these investors that fits to our profile, support them and follow them in the different markets they have projects. So most of them, they have projects in multiple countries that are in the range of the countries that interest us. So together with the abilities of Ameresco and ours, we believe that we can get a significant part of the pie.

So the local presence with kind of global backing. Doran, we focus mostly on Continental Europe on this panel so far, but there was some opportunistic M&A in Ireland over the past few years. Talk a bit about what drove those opportunities and what the future might hold there.

Yes. Sure. So the -- Ireland is a tremendous place for wind resource. And I think we've seen it kind of front and center. And what we discovered early on was that there was an ability on a bilateral basis to come in and purchase some operating wind turbines that could be refurbed sometime between the immediate post acquisition to 2 or 3 years later, which had either existing PPAs, and also Ireland had a fairly healthy wholesale market. So we went in and we've managed to buy a couple of assets on bilateral terms. These are assets that were oftentimes developed and owned and built by the farmers that own the land. And they were at a point in time where they were ready to effectively cash out a bit, and we felt like the value proposition was there for us. So with the wholesale market that has very strong electricity prices, the availability of offtake in the form of corporate PPA, even in the absence of any government incentive programs, presented a great opportunity for us. We could come in, buy an operating asset, immediately start seeing cash flows, immediately to start seeing EBITDA from the projects. And then over the course of the next year or 2, do some refurb and repower these wind farms and see them increase production and, obviously, increase revenue. It's been a great strategy. And I think that we see plenty more opportunity there for that one.

I'm going to take a little bit of a queue from George here. What's next?

So what's next? There's -- we're just getting started, right? I think back to what the guys were saying, there's a combination of factors going on here in Europe, right? The built environment still has a tremendous amount of aging infrastructure that we can come in and do work on reducing consumption by replacing the traditional energy infrastructure. That is without question there. Secondly, large-scale renewables continue to be built as we talked about Sunel. We've got this joint bidding platform that we're going after some really, really nice large projects. Renewable energy in the form of offshore wind has been rolling out in Europe. And I think there's kind of this follow-on of the need for battery storage where we see a tremendous amount of opportunities for battery storage across the continent. Lastly, despite the history of incentives in Europe and how it's kind of far ahead of North America, the truth is there's -- this trend for city is going net zero. We're obviously going to hear from Bristol, but we think that, that is going to only be met -- this desire to go net zero, this desire for a carbon-free economy has to be met not just with this utility scale, but also with plenty of distributed generation. And I think that we've set ourselves up nicely for that.

Great. So it sounds like a little bit of opportunistic geographic expansion in exciting markets like battery storage and whatnot. Open it up to the audience one last time. A couple of minutes left in the panel here.

So from my perspective in the U.S., right, you have a business that's extremely successful in the U.S. You're expanding into Europe. Just curious, what are the biggest challenges you see the sort of both successful on the execution front and the financial side. And I imagine the JVs and acquisitions help you get over that. But could you talk a little bit about sort of how you think about those risks relative to doing business in the U.S.?

Sure.

Yes, sure. I'll start with the fact that we -- one of the challenges, of course, is competition. How do you win deals, right? And the answer has been these 3 here and our other partners that we're working with. I think with the U.K., we address those challenges by virtue of showing up with expertise and bringing the track record, but winning deals is challenge #1, right? And I think that it's all about making sure that your local and local expertise. We talk [indiscernible] about this in the U.S. about the way we win deals is by being local, the 60 offices around the globe, right? We're really working to do the same thing here, right? And so that's kind of number one. In terms of other challenges, I think the -- we need to ensure that we manage project risks, of course. And that's something where when you're building a PV plant, right? You think about mechanical risk or the risk of choosing the right products, et cetera, the sequencing, making sure you've got access to labor. There, you get that combination of factors where you need the locals who understand the local market, but you need folks like Ameresco with its track record of having managed those exact same risks in other projects because they do look similar when you get into the nuts and bolts of the mechanical, the electrical, right, the civil installation. So I think those are the 2 -- kind of those are the 2 big ones. I don't know, Josh, if you have...

No, I think that's well said. Anything else? About a minute left, probably last call for this panel. There will be another Q&A session towards the end of the event, if you don't get a chance in this piece here. Nothing else. Okay. So let's see if I can leave the group with 3 points here. It's that M&A is definitely an important part of Ameresco's strategy, but we'll only do so if it is accretive and if there's a strategic fit. And I think, of course, we need to make sure we can rely on the strength of the management team. So thanks again to our panelists here. And thanks to all online and in the room for your interest in Ameresco. I get to now pass it over to Leila for her panel on the U.K. specifically. Thanks again, everyone.

Okay. Here we are. It's hard to be Josh's panel, but I do have my questions, Josh. So I'm off to a pretty good start here. Okay. So as we thought about the different kinds of content that we could bring to you today, we started with wanting to give you some insight in terms of some of the strategic locations we're looking for expansion into Europe. We then thought even more exciting for you to actually meet one of our recent acquisitions, the Enerqos team and also one of our great partners, Sunel, and you saw the press release that came out just recently on the great development that we're looking to do with them. The next step we thought that would be helpful is to drill down a little bit and take a closer look at how we've been able to successfully grow a company and our series of companies so well in the U.K. and really use that as a template as we think about our growth in some of those other regions. So this panel is really all about that. It's about taking a moment, stepping back, looking at specifically what we've been able to do in the U.K. and understanding some of the mechanics behind how we were able to achieve that kind of growth, okay? So maybe it would start by putting up the slide for this panel. Josh, maybe I spoke too quickly before. Okay. So before we get started and I start going through some of the questions, you've already heard from me today, you've also already heard from Britta, but I thought it would be helpful if I ask both Mark and Kath to do a quick introduction of themselves. So Mark Apsey is our Managing Director of our U.K. London office. Mark, would you just give us a little bit of color around your background here?

Yes, of course. Thanks, Leila. Great to see you all. So I'm Mark Apsey. I'm a chartered chemical engineer by background and I've been working in the energy space for over 2 decades, and with Ameresco since the acquisition of a company called Energyexcel back in 2014, so [indiscernible] the nearly 10 years that Josh was mentioning, who've stayed within the business. And back then, it was a really exciting time. We built a business from 2007, which was focused on energy efficiency solutions within the commercial and industrial sector. And we had some great success with customers like GlaxoSmithKline [indiscernible], which we did a lot of work for in the early days. But then when we became part of Ameresco, we were able to really go on another journey and use Ameresco's financial strength and experience in the public sector to then establish ourselves in the U.K., doing all the things that Ameresco does. So all of the projects, all the O&M services, all of the asset type deals across all technologies and all sectors. And that's how we got here today.

Great. Thanks, Mark. And Kath Chapman is the Managing Director of our U.K. Leeds office. So Kath, can you give a little introduction to yourself?

Good morning, everybody. Yes, I'm Kath Chapman, and I've been in the energy sector now for over 30 years. And actually, the business I founded was actually acquired by Ameresco 10 years ago actually. So I am one of those people who have stayed within Ameresco. And one of the things that really attracted Ameresco to us as a business was we very much looked after the industrial and commercial sector. That's our client base. And whilst we could provide them with consultancy services and a lot of carbon services, we felt that by joining Ameresco, we could really broaden that service offering to our client base and give them [indiscernible] the one-stop shop, so we could provide them the sort of physical and engineering solutions as well as commercial solutions that we are already offering.

Great. Great. For those of you that have been carefully following the words carbon reporting and carbon consulting, sneak peek, we're going to get to that in a little bit, but that's really what Kath's Group is all about. Again, of course, one of the hottest topics right now. So before we go there, if we could just jump back a little bit. Britta, I'm going to lean to you to answer this first question. We've heard so much about the growth of the U.K. and what we've been able to do and how we were able to get to that #1 position. Can you take us back a little bit? I mean I remember 5 years ago when I joined Ameresco, we were not there yet. And can you talk a little bit about the mechanics behind that growth? How were you able to put that in place? What are some of the details that have to come together in order for us to see that kind of growth.

Yes, sure. As Mark said, when we acquired Energyexcel, they were really focused on the C&I space and had some really strong partnerships and relationships with clients, like GlaxoSmithKline, like [indiscernible], as Mark had mentioned. But what we were missing was that public sector side of the business to really make us a totally well-rounded entity. And breaking into the public sector marketplace is just a completely different animal, as you probably know, with our federal business in the U.S. It really requires a strong portfolio that you can demonstrate superb execution, technical capability, project and construction management skills, all of these things as well as financial strength, the ability to bond projects, the ability to guarantee savings. So breaking into that public sector market was really one of our very first goals. And that requires understanding the marketplace, understanding what our competitive landscape is going to be. In here in the U.K., they establish, much like in the U.S., frameworks that you had to bid into becoming a participant on the framework, which then allowed you permission to bid for tenders that would be released by public sector entities. So part of what we had to do was work together with our clients -- I mean, with our colleagues in the States, to be able to respond to get onto those frameworks to show that we had a portfolio of successful projects already from all of our experience in the U.S. that we had that same power that we could make guarantees on financial and savings performance and back those things up. So that was really the first order of business. We're getting on that first framework, and then the second framework and then the third framework. Every framework that we could get on, that was public sector related. And then the second thing was to figure out how to win those projects. And we really had such a strong body of work in the U.S. and examples of really incredible proposal responses that we were able to lean on our colleagues all around the U.S., to help us develop our own really compelling proposal and tender responses so that we could start winning those first projects. The very first project that we won [indiscernible] I think, my first slide, up in Scotland. It was just an extraordinary opportunity for us to enter and to break into the public sector marketplace. And I'm really proud that over those 5, 6, now 7, almost 8 years, we now hold a leading position in the public sector for businesses of our kind from [indiscernible] from scratch, from nothing 8 years ago. And it really speaks to not only the bench strength that we have in London and in the U.K. offices, just an extraordinary group of engineers and project managers and construction managers, but just the value of having such a strong parent company behind us that we could also lean on for additional technical capability for financial strength, just for the confidence to say, go for this, we've got your back, and it's paid off over time. So really, really excited where we're at.

Great. That's great. And I mean I personally remember you flying back and forth every other week essentially, right, to help provide that support system. Great. Great. Mark, do you want to talk a little bit, I mean, Britta just sort of walked us through, I think it's so important as we think about especially replicating this in another region, we need to get into those frameworks. We need to have those capabilities if we're going to penetrate a market and start developing a portfolio. Can you talk to us a little bit about a particular customer that you can -- that you want to share, kind of walk us through that process from the customer side of it.

Yes, sure. And yes, once you -- as Britta said, getting into the public sector and establish ourselves with the first project, and we've now grown to be delivering projects for lots and lots of public sector customers across the U.K. I think largely driven by the expertise that Britta and Ameresco brought to us, but also that real focus as an independent company so we can pick the best solutions as a customer-focused business and then execution. So once we've executed the first one, it was a bit of a snowball. One of the -- I guess, one of the projects I wanted to talk about most recently is a project we did for the University of West London, which is [indiscernible] surrounded by housing, very constrained from a geographical perspective and ambitious to get to net zero, not just because that's the right thing to do it and they want to do it because it also encourages more students to come into the university and they're more making choices about that, so that's really imperative. And we helped them win the first round of public sector decarbonization scheme grant funding for this particular building. And the reason the project is so exciting for me is that it's a combination of new technologies that have not been put together anywhere else, and has taken that building almost completely [indiscernible] down to zero carbon with [indiscernible]. And how we did it was by using solar PV thermal panels, 584 panels on the roof. We put in 16 ground source heat pumps connected to 34 vertical boreholes, so 100, 150, 170 meters deep because we couldn't do loops for the ground sources, no land there, and got all that installed. It was the first project grant funded under the scheme. The first project delivered under [indiscernible] scheme. And we just got through the first winter, and I don't think they had to turn the gas boilers on at all in that building. So a really good example of executing and building on that success.

Wow, fantastic absolutely fantastic. And in your situation, I know, Mark, because we've worked together on some pieces. It's very common that you'll do sort of a Phase 1 of a project with council or municipality or something like that and then go back and do more.

Well, that's right. And the University of West London, in fact, that project I just talked about was the second, third phase, I think, actual work we've done with them previously. And so it does just show you the benefit and everyone's talked about, I think, really in the stage of executing really well and then going back and the customer wants you to come back and do the next project and the next project and the next project. And that's what we've seen a lot of in the U.K.

And now something that I think is very exciting that we've seen in the U.K., and we expect that, that will sort of follow into other regions, too, is this idea that you don't necessarily have to do it piecemeal and start with Phase 1, Phase 2, Phase 3. But in fact, looking at someone over -- across the room over there, you can actually think about this holistically and think about the entire decarbonization and net zero journey and put in place a plan to do the entire thing. You can't do it in a year, you can't do it in a few, but you actually can create an overall comprehensive plan to think about all of the things that you need to do.

Yes, that's right. And so I mean you're talking about Bristol City, clearly. And it is a world first. I think it's a really good initiative. The piecemeal approach is not going to get us to net zero quickly enough, and some of the projects we do, the procurement takes longer than the project itself. And just simple math is that means we're never going to get to our targets. What Bristol has done, and we'll hear from Kath in a minute about the customer side of the journey is set out their piece, recognizing that they couldn't do it on their own. They didn't have [indiscernible] do it and to come out to the market and say what we really need is a long-term energy partner to help us transition, deal with our estate, decarbonize that and then also land in Bristol and expand and address the commercial industrial markets there, the other public sector organizations there and help with the [indiscernible] domestic retrofits and work that needs to go on. So I think that project is a great example and something that's particularly [indiscernible] elsewhere. And we're already seeing more interest from other cities who are looking closely at Bristol City Leap as an example of how to do this on a large scale. And I mean I think for Bristol, we've committed with our partner [indiscernible] to spending over $400 million in the first 5 years of the project to decarbonize and that's everything. So that's retrofitting buildings, the traditional energy efficiency work, it's rooftop solar, it's ground-mount solar, it's onshore wind, battery energy storage, microgrids, EV charging infrastructure. There is no limit to the technologies we can deploy there. But we've done the procurement. So all we have to do within the Bristol itself, is come up with the projects, put the business cases forward and then roll through those. And that's why I think it's so appealing for other cities. Because they all set targets for net zero, different years, but in the U.K., particularly, we had a kind of a rush of that in 2019, 90% of local authorities had declared a date to get to net zero and a climate emergency. And now City Leap is offering a real pathway to get there. So yes, very exciting project.

I can't wait to hear more about it in just a little bit. Great. So one of the things that you were talking about, Mark, is that sort of net zero and decarbonization journey and so much of the work that we do, we might start at the very beginning of that or we might be able to do the entire sort of plan for that. But that brings me back to you, Kath, because this is such a hot topic. And I think 10 years ago, when you came over to the Ameresco team, I think it was sort of in the very, very beginning of people understanding what that is, why it's important, why you want to think about that now, whereas fast forward today, where you really can't have a conversation with a prospect or a customer, and that's not a hot topic that they're talking about. So can you talk a little bit more about the work that you do and also how that has evolved so much and also the work that you do, how it relates to the rest of the Ameresco team and how you're sort of bringing those services forward for everyone to have the benefit of?

Yes. And I think it's very true to say that 10 years ago, sort of the carbon agenda was kind of bubbling along as opposed to being right at the top of the agenda. The U.K. also had a regulatory framework that sort of supported carbon reporting fairly early on. So the U.K. government introduced something called streamline and energy carbon reporting, which is a mandatory reporting system of emissions, which any company over a certain size has to include within their statutory returns within the annual report and accounts and filed with [indiscernible]. So it had an environment that was already lending itself to forcing customers -- companies to think about their carbon emissions. So obviously, we've established a service to do that. And then we realized that as a business, we were used to dealing with complex energy data, which was a large driver of the carbon emissions and then we [indiscernible] that service out. And if we fast forward now to where so many businesses have stated their carbon goals, it's not just in the public sector, it's across all large businesses, including many multinationals, most have a statement that by 2030, they will be here or by 2035, they will be carbon neutral, which gave us a great opportunity to increase that service offering and to work with the rest of the Ameresco team to work out how we could actually help them deliver those ambitions, whether it's commercial solutions in the form of commercial power purchase agreement or whether it's actual on-site generation, distributed generation solutions. And what we've seen now over the last sort of 18 months, 2 years, is now stability and security of supply has also gone right up the agenda. But as you're looking at that, it's a great time to look at ESG at the same time. And as I say, what we can do is offer sort of commercial solutions and the long-term engineering solutions as well to really help organizations get to the net zero and provide the reporting package as well. And carbon reporting is one of those services. It was kind of -- it was global. So that we have to establish that from the very outset, which was what we did with the service provision that we give to our customer base.

And so it's so great because 10 years ago, George had the insight to know that this was going to be something that was going to be very important to our future. And what's so fun for us now is, especially with the ESG pressures that are out there and so many people looking to accomplish the net zero and decarbonization goals, this is a great launchpad for customers that we have yet to be able to work with as -- let's just start here and help create a program and a plan and then be able to use the rest of the things that Ameresco does and our whole solution and implement that plan. So it really is the beginning of the whole discussion now, and it's one that whether we're here in Europe or whether we're back in the States, it's becoming a critical element to what Ameresco has as an offering.

Yes. And one of the big challenges is creating a platform that is both robust [indiscernible], particularly when you're working in some jurisdictions that may not have the quality of data, emissions data that we see in most European countries and we see in the U.S. So for companies that operate in lots of different jurisdictions, that's part of the challenge coming up with something that is robust and auditable and can be reported.

I experienced that challenge directly. I'm part of our ESG ambassador team, spearheaded by Doran over there, and we went through the very fun process of capturing our own carbon baseline and footprint and all of that and what was most exciting, I think, for Doran and I and certainly George, was that in order to do that, we were able to lean into the technology we already have. [indiscernible] is sitting in the back of the room, his team with asset planner and of course, Chapman and her team. We already had the tools in-house to be able to capture our own carbon baseline and also have that auditable track record, which we were able to publish in our recent ESG report that just came out. And by the way, we have QR codes in the back room that you can download that report if you want to have a look at it. So shout out to you for your help for that for sure. I want to open it up for questions right now. Do we have any questions? I have a couple more topics that I'd love to go through. But if we have questions from the audience, I want to make sure we save some time for that. Wow, you're also nice. You don't want to put anybody on the hot seat here. Okay. Well, then I will because I have some questions, and I like to put people on the hot seat. So Mark, back to you. Can you talk a little bit about competition? Because especially as we grow a business and we are able to make traction, we have to recognize that there are competitors in the space. How were you really able to differentiate Ameresco as you -- as George mentioned, so many different competitors, for instance, in the Bristol City Leap Project. What makes us stand out and how are you able to build those building blocks so that we really are a differentiated offering?

Yes, sure. So I mean in the U.K., particularly, we see categories of competitors in 3 general buckets that I think of. So we come up against utility companies, particularly who are in some energy services and trying to get into that space and do it on the side, if you like. We come up against facilities managed businesses who are looking at the soft services [indiscernible] but then often task in the course of looking after assets to do energy efficiency, but probably not their core. And we come against the traditional equipment suppliers who are doing energy services, particularly to sell their own products and their own technologies. So the way, I think, we are very different. And by the way, in the U.K., I think -- in fact, we've got one of the largest energy services teams even against some of those big companies because they have much smaller teams doing what we do as opposed to a big competitive offering that's just started on only this. But it is to do what I spoke about earlier, really, which is our independence. So we are able to look at the customer need, really understand what they want and then come back with the solution that works ideally for them. And in Bristol City Leap, it was a big invitation to tender. There was lots of outcome-based criteria that we had to meet. We really had to get under the skin. We spent -- I spent hours and hours in meetings with customers along with the team to understand exactly what was trying to be achieved there. So that when we put our bid in and we put our proposal forward, it really hit all of the things that they wanted, the carbon savings, the renewable generation, the big social value elements, that a big contract like a 20-year concession agreement like Bristol allows us to really dig in and do more of in terms of local jobs and investment in the local community and all those sorts of things. So it's being able to listen, I think, be free, be independent and then deliver what the customer wants.

I'd actually take that one step further and say because of those other companies, this is all we do. And so our priority as a company, as a corporation, is to deliver these services day in and day out for our customers. These other companies that may be an offshoot of an electric utility company, an offshoot of a facilities management company, an offshoot of a manufacturer, their priorities change depending on what their overall business plan happens to be in any particular year. And so we often see those competitors coming in and out of the marketplace. There'll be a year when one, we'll try to bid every single project we're bidding. And then all of a sudden, they vaporize, like what happened to them. And so having some staying power in the marketplace and being able to demonstrate that no matter what's going on in the climate of the environment, we're here, lends a lot of credibility when customers are making a selection of a partner that they want to have for the long term.