FTAI Aviation Ltd. ($FTAI)

Hello everyone. I'm Brandon Oglenski, U.S. airlines and transportation analysts from New York and up next at our Americas Select Conference here at Barclays, we have FTAI Aviation, and joining us is Joe Adams, CEO of the company; and Alan Andreini is somewhere in the back there, I think, Head of IR. And Joe, I guess I'll hand it over to you. I think you have a couple of slides you wanted to talk about your business, and then we'll get into the Q&A.

Sure. Thanks, Brandon, and I appreciate you having us here again this year. It's our second annual European conference and really enjoyed the opportunity to meet investors in the U.K. and the EU on this trip. So we're very happy to be here. Just to give you a little overview on FTAI Aviation, we think of ourselves today as being in 3 different businesses. They're all tied to us really being an expert and a leader in advanced turbine technologies and for the most commonly used jet engines in the world being the CFM56 and V2500. And today, we operate in 3 different businesses. The first business is the one that we've been growing over the last few years, our Aerospace Products business and what we call an MRE product, which is to maintain, repair and exchange. And essentially, the business model we created is to be the outsourced provider of engine maintenance for airlines and owners in that we've developed the capability to do that maintenance better than anyone else in the world with an array of products and facilities and capabilities. So we are able to perform the engine rebuild, which is to put hours and cycles back on an engine, so that the owner and the airline doesn't have to do that. And we provide a value proposition where it's cheaper and faster, which generally is two good things for customers. So that business is doing extremely well. Our goal is to grow our market share now. We most recently announced a 12% market share of about a $25 billion a year spend. And our stated goal is 25% market share, and we don't think it's going to stop there. Obviously, this current market environment for airlines is not the ideal market environment for airlines, but we do provide a partnering function with airlines where we can provide liquidity and help airlines avoid spending money on engine maintenance. So we think of -- in some ways, this is -- could be an opportunity for us to increase our market share more rapidly as we did in previous crises before. The second business we've grown over the last 2 years is our asset management business. And we took some assets that we had owned on the balance sheet and then raised third-party capital in a private pool of capital so that we can own aircraft and then those aircraft are leased to airlines. And as part of the transaction, we then, again, eliminate engine maintenance responsibilities for the airline by providing engine exchanges from the public company FTAI Aviation. So it has the benefit of making FTAI Aviation more asset-light, but also has a benefit of locking in long-duration contracts for doing engine exchanges and growing our market share, accelerating the growth in our market share. And this is a great environment for us because the industry obviously is looking at more ways to generate liquidity. One of those is sale leasebacks, also lessors who are selling assets become more focused on the counterparty they're dealing with and the track record of closing because the nightmare scenario for anybody is working on a deal for 2 months and then finding out that the lender doesn't want to fund or something. So it's a perfect environment for us to accelerate that business. We raised our first pool of capital, which is about $6 billion, which will be fully deployed by the second quarter and -- this quarter, and then we're raising -- in the market raising another $6 billion pool of capital and ultimately, that's 300 aircraft and 600 engines in the first pool and then you could -- essentially, we could double that in the next 12 months. So a very large high-growth business for us that is very exciting, which also feeds the MRE product. The third business is a relatively new business in that it's the power business. It's turning CFM56 engines into generators of electricity, which obviously the demand market is growing extraordinarily with data center requirements. This product is designed for the data center user. We have done the hard part of the engineering starting over a year ago, which is to convert the turbine into a piece of machinery that can power a generator. And we've done all the testing and the modifications on that part of the asset. We also, last week, announced that we partnered with Jereh, which is a leader in packaging, and they will be doing the assembly of the generator in the gearbox and the fuel control systems in a joint venture with us, so we can accelerate the growth of that business. We're estimating 100 units delivered in 2027, which with 25 megawatts per asset per, what we call our, Mod-1, that's about 2.5 gigawatts of electricity capability generating next year and the demand, obviously, in the industry is multiples of that for the next foreseeable number of years. So we're very excited about that. It also has the added benefit of extending the useful life of the CFM56 engine and that it could operate at the end of its aviation life of 20 or 25 years. You can move that into a ground-based operation and have it operated for another 20 years. So again, all 3 businesses work together with each other. It's all sort of feeds the ecosystem and it draws on our engineering and maintenance capabilities for the turbine technologies, but everything is moving in a great direction.

That's a great overview. And maybe it's always fun isn't because there's volatility all the time, especially the last 10 weeks. So maybe we'll start there because we've gotten a lot of questions from folks. With flight hours potentially down and maybe down longer based on where oil prices ultimately land, and I know they're down this morning, how is that going to impact your business? Or has it impacted the business thus far?

Yes. It hasn't really had any impact to date. Fleet decisions that are made by an airline generally take a long time. And if you think about the way an airline may have to change things is by retiring assets earlier and then they need a replacement asset. And today, the market has been very short of new capacity. And if you want to add new assets to the fleet and go order from the OEMs, you're looking at potentially multi-years before you get any of those deliveries. Secondly, people have learned previously that if you give airplanes back and then the market returns to a more normal level, you can't get them back. So airlines tend to be very slow to make these types of major fleet decisions. The 737 NGs and the A320 CEOs are a core part of the world's narrow-body fleet. They're profitable, they make money. What we have -- we could see, we haven't seen too much to date is airlines could reduce some of the flying and instead of flying 12 hours a day, maybe they fly 10 hours a day and they change a schedule so they don't fly on Tuesday or Wednesday or something like that. And so you might see some of that. In the end, it's not going to have a material impact on our growth strategy because we're trying to go from a 12% market share to a 25% market share. So whatever rate of retirement you see is actually much, much smaller and less consequential than growing our market share. So if this environment allows us to grow faster and take more market share than ironically, that could be a good thing. So we're not really worrying. These platforms are going to be around for many, many years and they're profitable assets in the aviation system. So -- and again, we haven't seen any impact to date.

Well, and can you talk to the older technology that you've in the CFM56, which powers the prior generation, 737 fleet in the most -- or half of the A320 fleet. How does that relate to the newer technology like the LEAP and the GTF? We all know the GTF has a lot of issues, but the LEAP overhaul costs are coming in pretty significantly above budget too, right?

Yes. So the big picture trade-off is you get about 15% fuel savings for the new technology. The two negatives are, it costs a lot more from a CapEx point of view, and your maintenance cost is higher. So if you're looking at it as an operator, you set up a model which basically compare what does a seat cost you to fly in different assets and you'll look -- you put in your stage length, your utilization, your -- and then you build in a model for the maintenance costs. As I said, the maintenance cost is going to be a negative to the operating costs. And then you factor in capital costs. So a brand-new, new technology narrow-body could cost you $50 million or $60 million eventually. That compares to an 18-year-old or a 16-year-old asset today of $15 million. So if you're flying in a -- if capital cost -- capital is an issue for you, you favor the older technology. If utilization is lower than the high-frequency operators, you're also going to benefit by having the older technology. So it's actually -- it's a fairly close call. But again, if you want to grow and you need assets, both of them make money. So it's all a positive contributor. So those are kind of the puts and takes. But again, nobody makes rapid decisions of this type because it takes many, many years to affect it.

When I think there can still be confusion with your business because a lot of folks will initially compare it to a traditional MRO business, but that's not what you're doing, you are doing MREs. Maybe can you talk to the differences there, too.

Yes, the key construct of our business developed years ago in that what we decided is the best way to do -- to manage a fleet of engines is to own the engine and own the maintenance facility together in the same company. And then your orientation changes in that you're trying to be the most optimal provider of an engine hour and cycle in the world. So you can recombine modules, you can manufacture, you can run your shop like a factory where you own all the parts in that shop, so in that -- in the shop, so everything as it goes down the line, goes into the next engine. You don't have to wait for parts to be repaired and come back. So the whole process is much, much more efficient, and you can generate very high margins that way because you're doing -- you're optimizing green time. And so that is a fundamentally just a very different construct. And from -- when you take that to the customer then that result is the customer could take their engine, send it out to like a mechanic, a shop, have the work done and then the engine comes back. And oftentimes, when that engine comes back, the bill ends up a lot higher because there's other things that need to be fixed. So what we -- when we sell the product, we go to the airline and say, look, you tell us and based on your experience, how much does it cost you to build -- to put an hour and a cycle on to an engine. And we will match or beat that price and then we'll eliminate your cost of ranging for spare engines, shipping it to and from the maintenance shop, having an engineering department track all of the decisions and the functions, the things you need to do and source the parts often, all of those expenses go away, which often is between $0.5 million and $1 million per shop, is it? And then very importantly, the risk of a cost overrun goes away because we provide the engine on an exchange, on a fixed price, and you can inspect the engine, it's done, it's on the shelf, and you have an immediate replacement, and immediate swap. So when the airline thinks about it, they said, "Well, what's wrong -- what don't I like about that"? And the answer is nothing. So people are like, "Why shouldn't I do that? If I can get as good or better price, eliminate $1 million of expenses, and I have no risk of a cost overrun, why wouldn't I do that"? And the answer is, everyone comes to the conclusion ultimately that, that is better. And that's why we expect to keep gaining market share. We accelerate the development of the markets share by -- in SCI, we immediately convert airlines to the exchange model. And oftentimes, what happens now is we'll go buy 5 or 10 aircraft on lease to an airline. We go to them and say, "Great news. You don't have to do any engine shop visits ever again". And they're like, "That's fantastic. Why don't you go buy the other aircraft that are on lease to my airline so that you can convert all of them"? And we're like, "We're happy to do that". You eliminate that friction that the leasing lessors and airlines have and that they're always fighting about return compensation at the end of the lease or engine maintenance costs. So it's a win-win for everybody, and we continue to develop that and point out the significant benefits for the airline. And really as a partner to them, where we're always providing power and always having power available if they need it.

Well, this is effectively how a large airline would manage their fleet, right?

Correct. So if you think about a large airline that developed their own capability 40 years ago, they had an engine shop. They did everything in-house, and they optimized. And so what we've done is take that same model of owning the engine and the maintenance shop and make it available to the rest of the industry.

Right. You're effectively offering small airlines economies of scale on the maintenance side?

Correct.

Otherwise, they couldn't tap into it.

Correct.

Well, that's right. The customer profile in the first quarter shifted. Is that right?

Yes. We've been surprised somewhat in that 12 months ago, 18 months ago, a lot of the bigger airlines are saying that, "That's interesting, but I can do it myself, and I don't need that". Now we find a lot more airlines are saying, "I'd like to access more engines and I'd like to do more exchanges". And so our goal ultimately with an airline is to get to the point where the airline says, "Okay, you do it all, you do everything for me". And that -- the result of that is that you can do a small build engine, maybe deliver a 6,000 cycle engine, but they also want a 10,000 full restoration engine together. And so the goal is to get all of that and ultimately be the solutions provider to the airline for everything.

And how much visibility do you have in Aerospace Products?

So it varies, but some, we have multiyear relationships with airlines like we've announced with Finnair, LatAm, ITA. And then all the aircraft we own in SCI is fully contracted. So the goal is to get, as I said, to the point where people say, "Okay, you can have all of it, let's either structure it as a contractual relationship or I'll basically do exchanges on this basis with you whenever I need an engine". But we also have airlines that are still just trying the product, just developing, understanding how it works, seeing how we perform. So we also have some spot business as well that comes in where people say -- I'll say, "Just try the product and see if you like it" or if you can't decide which way to go, you want to manage some yourself and some we provide exchanges, why don't you run them side by side and see which one after a year works better, then choose.

Okay. With SCI, the first fund that you launched last year, $6 billion of capital, is that right? Can you talk to the economics on that?

Yes. So we discovered that by providing a bespoke custom built engine, you can actually generate a higher return for the investor, and they take less risk. And so what we did is we compared -- take, for example, an aircraft that's on a 5-year lease and at the middle of that lease in your 2.5, you need a replacement engine. It hits limiters. The traditional way to do that would be to send that engine to a third-party shop and they would build you a 5-year engine. The 10,000 cycle full build because that's what they have available in terms of parts and capability and you'd spend a lot of money, I mean, to do a full performance restoration. And yet at the end of that lease, 2.5 years, then you have a big residual value in your engine. So what we did is said, "Well, we can deliver, FTAI can build a 2.5-year engine", so the owner and the airlines spend less money in that middle of that year putting a replacement engine in. And at the end of the life of that lease, you have lower residual value, just part-out value. So when you run the math, you can generate 400 or 500 basis points of incremental return and have something which is less risky because you're less reliant on residual value and monetizing that residual value at the end of the lease. So that's basically the underlying economics that we present to the investors like here's a better -- what I always say that every private credit investor in the world is always looking for a higher return and lower risk. And that's really what this model allows people to do. We're the only people in the world that can do it because we can build that 2.5-year engine because we build hundreds of engines a year, and we can -- we know when it's coming, and we know how to assemble the various parts to optimize that. So that's really the construct. And we've fully invested, Fund I by the end of this quarter. And then we're now in the market to raise Fund II and we're getting a great reception because returns are good and the pipeline of deals is also very good.

And can you talk to the profile of that fund? I think it's closed in, right, and one, you target just one lease term on the asset, right?

The assumption we make when we show the economics to investors that 5-year asset that I mentioned would run at the end of the 5 years. And at the end of that, you'll sell the airframe and sell the engines. And you'll have a realization. We're actually finding a lot of extensions are happening and extensions are additional upside because you don't have to do anything, you don't spend any money on that aircraft and you continue to get rent and maintenance reserves. So that's what's -- we're seeing a fair amount of extensions that are happening, which we didn't model in to the original deal, again, speaks to the strength of the CFM56, V2500 and in the NG and CEO markets being very robust, and that's in this market environment. So it also speaks to the view of the airline as to when they're going to retire these assets. People are not giving them up at this point.

And I guess, how susceptible is your business to asset values?

So very little. I mean, if you think about the 3 different businesses, the MRE business were basically buying runout engines, rebuilding them and then selling them. And so you have a relative spread business, you have a relative value. We're adding hours and cycles more efficiently than anybody in the world can do, and that's not dependent really on how -- where assets are being bought and sold. So we're relatively insulated from that as markets fluctuate. Historically, though, the prime driver of engine values is the parts value, which really is determined by how the OEM raises parts prices. And historically, that's been at well-above inflation on an annual basis. And that's why asset values and engine values tend to go up more than other parts of the industry. In the Asset Management business, I mentioned, we're relatively insulated because we've got part-out value at the end for our engines, and we're seeing a lot of extension. So I'm not -- we're not seeing much in terms of asset value pressure or it's not that sensitive to returns for the Asset Management business. And in the power business, it's totally insulated in that we're basically buying run-out engines to repurpose into a different market. So to the extent if part out values were to go down, which they typically don't do by much, it would be good for us.

And do you run into problems because everyone knows you're in the market, I guess, for these types of aircraft, especially launching SCI too, is that negotiate against yourself at all?

I mean, if you think the market size on an annual basis for narrow-body current generation assets, is a roughly $25 billion to $30 billion a year business of asset sales. And so our first 18 months was $6 billion. So it annualizes roughly around $4 billion a year. So it's not a market mover. It's a significant amount, but it doesn't move the entire market. Where I think we're moving into, though, is a market which is more favorable for us in that when assets are being sold by many of the big leasing companies, the counterparty strength is a really important factor when there's uncertainty in the market. So to the extent that they know we're going to close, we don't have financing conditions. We don't have -- we're not a new fund, and we know -- we're underwriting engines effectively. They know we're going to close. And so that actually plays to our advantage. And then you also will have more airlines doing sale leasebacks in this market environment because liquidity becomes the top priority in the airline. So if this cycle is similar to others, then we'll see more flow from airlines and more focused on our strength as a counterparty to close from the big sellers.

Okay. And do you have capacity, physical capacity to get to 25% market share?

We do. I mean we were able to double our capacity production year-over-year. We added a facility in Rome. We made an acquisition of additional property in Miami, which -- also added a facility in Lisbon, Portugal. So looking ahead, we expect to grow our capacity across the board with more mechanics. We have the physical capacity to get from 12% to 25%, but we're also focused on most likely adding another facility somewhere, as we indicated, east of Rome, which would be Middle East or Southeast Asia in the next 12 months, so that we will have another location to continue ramping our production. And the facilities we've acquired are not that expensive. I mean, typically, what we've bought were once great engine shops that, for whatever reason, went out of business. It was usually because it was part of an airline, either Alitalia or PanAm or Air Canada, and they got out of the engine maintenance business, and they left a beautiful building with lots of tools in it, and nobody -- no business. And so we're able to acquire these assets for way less than replacement cost. And the benefit we bring is we can immediately fill the shop. So if you're competing with a third-party MRO who's looking at, if I buy a shop, I then got to go get customers, so let me put the engine in there. Typically, the customers don't want to be the first one in. So we have a huge advantage, competitive advantage looking at these types of assets.

Okay. And you also have a partnership or an agreement with GE Aerospace. Is that right?

CFM, which is a joint venture with Safran and GE.

But why is that significant?

So it gave us a lot of additional supply of parts. We've been -- if you think back to the example about a smaller build and a full performance restoration, a lot of our business was focused on the smaller builds and doing lighter repairs, modules, exchanges, using used service material, so now that we have a relationship -- direct relationship with the OEM and an attractive deal -- price deal that gives us the ability to do more of the full performance restorations, the heavier shop visits. So more parts, more flow. And it positions us really to be the go-to place for aftermarket shop visits in this CFM56 market for the foreseeable future. What we bring to the OEM is really investing in rebuilding engines to extend the life of the platform. And so the OEM will ultimately benefit if the asset flies longer, it flies more, the OEM is going to sell more parts. And so it's a win-win. I mean there's a partnership benefit to both of us for investing in these platforms to keep the engines flying.

Okay. Let's talk about power, too. And by the way, if there's questions in the audience, just raise your hand, we'll get you a mic. But the margin profile on Aerospace Products, where do you see that longer term?

So we're sort of guiding to people to low 30s. And as I just mentioned, if you think about the math of the two different engine types, if you take a 6,000 cycle engine, we typically would sell that around $6 million. Our cost of goods sold is about $3.5 million. So it's $2.5 million of profit, which is about a 40% plus margin on that smaller build engine. If you then -- also as part of the program, we're developing with some of the bigger airlines, they'll say, but I also want a 10,000 cycle engine because when I look at my fleet, I need a mixture of assets that are going to last different lengths. So that 10,000 cycle of full performance restoration would likely sell for about $12 million or -- and our cost of goods sold would be about $9 million. So that's a 25% margin on an asset that's twice -- weights twice as heavily on the overall margin. So the combined margin of those two transactions is 31%. Now you want to do both. They're both good transactions. You would never go to an airline and say, well, thank you very much, but I only want to do the small build because my margins are higher. Of course, not. You want to do all of it. You want to get the market share now so that you can basically be the outsourced provider of power for the whole industry on a go-forward basis. And so that's our -- that's our mission, has shifted a little bit in that over the next several years, if we can build our market share, maybe at some point in the future, there's an opportunity to be more aggressive on price. But today, we're looking at like get the real estate now. And it's all -- they're all good transactions. It's not like you're doing bad transactions or doing too good transactions, but it is mathematically just going to have lower margins.

Okay. And longer term, looking out a few years, should we be thinking FTAI gets into maybe one of the newer platforms?

Yes. We're expecting by 2028, 2029 to be in the LEAP and the GTF engines. That's about the time where you'll have enough engines that are off of the OEM power-by-the-hour programs and they will have stabilized the platforms. Because right now, there's still parts that are being upgraded for performance and durability issues. So you want to wait until the platform is going to be in the long run part of that manufacturing process. So the architecture of the LEAP is very similar to CFM56. We have the licenses to be able to do the repairs in our existing facilities. So it's really just economics that will drive us. And we think by 2028, '29, those parameters will line up, so it will be in those businesses. Most likely, we'll start by buying aircraft that have LEAP or GTF engines into our SCI vehicles. So we'll start to get ownership there, and then we'll develop the maintenance expertise and experience in our shops. But it's going to be a big market. The cost, as I mentioned earlier, the maintenance cost on the current -- the new technology engines is higher and they're not staying on wing as long. So you're going to have a much bigger market for maintenance, which for us is a good thing. So -- and the same value proposition of buying an asset, doing the work in our own shops and delivering it on a completed basis to the customer will exist in that market, too.

Okay. I think a great pivot maybe into power, which seems to be like an endless opportunity right now, doesn't it?

It does.

So how did you come about thinking the CFM56 as a proper aeroderivative platform for this business?

So we've looked at aeroderivatives for over 10 years, primarily the CF680, which was when we first started the company, as you may remember, we had a variety of engines. CF680 was one of our bigger ones. But every time we looked at an aeroderivative conversion, the market wasn't that big and the end market and the supply of feedstock wasn't that big. So we have knowledge of how those markets work, but it never really lined up until the world changed with the growth in data centers. And now the constraint in the industry is really getting hot section parts, the blades and the veins, is severely constrained because the production of those is an art as much as a science. It's limited and there's demand on all of those manufacturers from the LEAP, the GTF, the CFM56, the V2500, the IGT blades, everyone wants more blades. So that's why if you go today to try to buy a significant amount of new generation assets, you can't get anything until 2030 or 2032. So we looked at it and said, well, what's the answer to that. The obvious answer is find an asset that doesn't need new hot section parts, which is an existing engine type, and there's no bigger platform in the world than the CFM56 engine. So it became the obvious solution. We had internal engineering capability, people with aeroderivative experience, and we said how difficult will it be to convert that to an aeroderivative since that's the path that every other product has taken. And we did that starting over a year ago, and we did the hard part first, which is to modify the turbine, you take off the fan, you change some of the air flows, you change the fuel system. And then you make sure that, that engine can operate with the efficiency that it was designed for. And so we did that starting over a year ago. We have 30 engineers in the company. They are focused solely on this product. And now we're in the phase of packaging and putting it together with the generator, with the gearbox, with the trailer to make it a portable product that can be delivered in scale in the near term, which is 2027.

You're targeting 100 units next year?

100 units, it's a 25-megawatt per unit generator, so that's about 2.5 gigawatts of power to the market in 2027. Estimates of demand are 60, 70, 80 gigawatts that needs to be delivered per annum. So it's not a huge part of the market, but it's meaningful to us, and it's a start. It could get bigger from there.

And you mentioned feedstock too. Do you have inventory that will meet that demand looking out from here?

Yes, we called out in the -- starting in the fourth quarter, we already started identifying and buying turbines, and we're converting those turbines now. If you think about the market overall, if you have 20,000 engines and you have -- in today's market, you have roughly about a 2% scrap rate on the existing platform, so that's about 400 engines a year that get parted out. And we've been identifying candidates that we previously wouldn't have been interested in to buy to position for the power business, and there's plenty of feedstock out there.

Okay. Can you talk to the economics on the power business, though?

Yes. So when we originally launched, we indicated that the margins would be as good or better than the aerospace products business. We -- also, people have been using a reference point of $1 million per megawatt hour, so that's $25 million. So roughly about $7 million to $8 million of EBITDA per unit. When we looked at the Jereh structure, it's slightly different in that FTAI sells the turbine to the joint venture, and then the joint venture completes the product and FTAI will own between 25% and 50% of the profits in the joint venture. When you add the two together, you effectively get to the same place for those units. But you have a partner that's got 20 years of experience. They manufacture a lot of the parts going into the aeroderivative and they have 4 locations to do this work, and there's no learning curve for them. So all of that essentially makes it -- derisks the process but preserves the economics. So that's why we decided to go that route.

And Jereh is the JV partner, right?

Correct.

And is all the business going to flow through the JV then on the power side?

We have the capability and preserved the right to be able to do our own packaging in Miami but we don't expect that we will do that. It's really a risk management tool.

Okay. And can you talk to the customer profile for this business?

Yes, it's -- the ultimate end market is data centers where there's, as I mentioned, 60, 80 gigawatts of demand. And the customer base is assuming these will be baseload and most of the customers are looking at long-term leases. So they're expecting to have these operating for a number of years, up to 10 years. And they're also all looking for a service contract. What's not in the math is we will provide a long-term service agreement for each turbine that's in the field and will be paid on an operating basis for however many hours, very similar to aviation, you're paid on an hour of usage in advance and then you provide the replacement turbine. I do have one picture that I'd like here that's something that we've done that's very different on the maintenance side. I can't find it now. It's not here. Anyway, sorry, we built in a -- into the container a door on the side of it. And the door opens so that you can put a forklift in, remove the turbine from the power unit solely and then replace a new turbine into that generator in 2 days. So you can do a field service replacement of the turbine. So that means you don't have to remove the whole unit, send it off to a shop, wait for 6 months for it to come back and then put it back in service. We can do an immediate exchange. And so that ultimately will lower the maintenance cost of the operation, and it reduces the number of units that people will need for redundancy. So the lower maintenance costs and the lower asset intensity will make this a very, very competitive product in the market, and it's unique. I don't think anyone else is going to have that capability ever that we have given our capability to manufacture these turbines and have them available in scale and size.

Joe, we're only down to about a minute left. I appreciate you sharing some time with us today. But I guess, what could be potential limiter on the power business here?

Well, it's primarily our ability to produce units, and that's just going to be an execution issue between us manufacturing -- modifying the turbine in Montreal, which we feel very good about and then Jereh being able to supply the parts for the assembled package unit.

You're hoping to have a prototype built this year. Is that right?

Yes, absolutely. For delivery next year, we will have -- we've -- every one of the potential customers has been to Montreal to see the turbine and to see the operation of the turbine and the testing of that. So now it's really more of an assembly process.

All right. Well, Joe, thank you very much for attending.

Thank you.