TPI Composites, Inc. (TPICQ) Earnings Call Transcript & Summary

Hi, good morning, everyone, and thank you for joining. My name is Laura Sanchez. I'm an equity analyst here at Morgan Stanley and I'm part of Stephen Byrd's team, who covers Utilities, Power and Clean Energy companies. With us, we have Bryan Schumaker, CFO of TPI Composites; and Chad Plotkin, CFO of Clearway Energy. Before we start this conversation for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representatives. [Operator Instructions] So with that, I think we can start. So Chad, why don't we start with you? Could you please give an overview -- a high-level overview of Clearway Energy, the company's asset mix and how that has changed over time?

Sure. And thank you, everybody, for taking the time. Hopefully, everybody knows who we are at this point. So I will try not to spend plenty amount of time. But I think if you think about Clearway, the way I would describe us is, especially on a panel where we're joined with Bryan, about the value chain. We are pretty much all the way downstream where our business model is all about the long-term ownership of large physical generation assets, primarily renewable assets. At the end of the day, we are an infrastructure company and with a capital allocation philosophy that's really built around providing income and income growth to our investors. I think to answer your question as to how we think about our business mix, we are predominantly renewables. We do have a subset of our business that is nonrenewables. But the way we've always looked at it is, it's about marrying the right types of assets together. And when we think about our business platform overall, we have a little over 7 gigawatts of generation equivalent assets. And of that, when we think about our operative metrics, while only a little bit over 60% of what we refer to is our cash available for distribution as renewables, when we think about the nature of our generation fleet, nearly 85% of our generation or megawatt hours that we produce in any given year is renewables. And that's generally built on the back of the fact that our other nonrenewable assets tend to either be reliability assets, large peaking gas plants, primarily in California. And plus, we have a small business that's called -- that's in the district energy and cooling business, which actually provides a lot of efficiency in metropolitan areas, providing steam and chilled water. From a business model perspective, we are a traditional drop-down sponsor-oriented vehicle. There's a lot of merits with that business model as it relates to how we think about our capital allocation philosophy. And through that, we have our sponsor, which is Global Infrastructure Partners. They're one of the largest infrastructure managers and investment managers in the world. And through that, our parent company, which is Clearway Group, is one of the larger renewable developers in the country with a pipeline of over 9 gigawatts of opportunities, that as those ultimately mature and become projects ready to be dropped down, et cetera, we would ultimately work with them on the acquisition of that. Just to close the loop, I think the evolution of our business is pretty simple. I think while I gave you some of those earlier metrics, our expectation is as growth is driven by renewables, I think we are in, as everybody knows, a very interesting macro environment, both from the standpoint of policy, momentum behind new renewables, sustainability, investing and as well as a very attractive cost of capital environment that really marries up well for long-term success and growth in our enterprise.

That's a great overview. And I think you made a really good distinction between kind of maybe capacity or half the exposure relative to generation. And I think that's something that sometimes that gets missed in the story. So that was helpful. From a carbon-intensity perspective, your generation is mostly renewables.

Yes.

So can you comment broadly around renewables economics in the U.S. with and without subsidies? There's been a lot of conversation around that, given the expiration of the PTC and the ITC or the phase down. And also how you think about those in the next 4 years with the new administration?

Sure, that was for me again? Or for Bryan? Yes.

That's for you. We'll switch to Bryan after that question.

Yes. I mean, look, I think at the end of the day, we all can look at various metrics that are out there, and I'm sure Bryan also has probably a lot of really good insight and upstream in the value chain as it relates to on some of the wind assets and other products that he has. Basically, what we've seen is -- the way I've always described it is the application of Moore's Law, which used to really be built around microchips, seems to apply to technology across the Board. And I think as we've looked at the renewable business over time in very short order, you've continued to see just the levelized cost of energy continue to come down to the point where with a lot of metrics we're seeing in various markets, depending on capacity factors, that can ultimately be achieved, whether or not it's wind or solar, you're seeing a levelized cost of energy on an unsubsidized basis compete quite well with various conventional sources of generation. So I think with that in mind, independent of whether or not there's additional incentives put in place, we think renewables continue to be -- will continue to proliferate just on the back of basic fundamental economics. I think as it relates to the Biden administration, I mean, I'm not going to sit here and try to venture to guess on a bunch of different policy changes with -- I mean, I think we've seen how the dynamics over the past 4 years have played out. But at the end of the day, I'm always reminded that the fact is we haven't had any type of federal policy, and you've seen over the -- for decades, you've seen a massive proliferation of renewables. I think I'm always reminded of the fact that the renewables are not a left or right side of the political spectrum. At the end of the day, some of the largest renewable states with renewable energy tend to be red states as well. From our point of view, there's a lot of job growth, a lot of momentum in the market. The private sector is a very big proponent of ongoing renewables and sustainable investing. And then when you marry that with an exceptionally low cost of capital environment, as I mentioned before, I think the prospects for renewable growth continues to be quite robust in the country.

Understood. Yes. For those on the call, we have a big model that forecasts the U.S. power supply by 2035. So feel free to retell that shows what happens with and without subsidies. Now we can switch to Bryan. Bryan, could you please provide same thing, like a big overview, given that these are very different companies, a big overview of what TPIC does? And also, I think important here is to highlight your global market share and dynamics globally and excluding China.

Yes. So thanks, and I appreciate the opportunity to speak to everyone today. So if you look at TPI, we are the largest independently-owned blade manufacturer with a global footprint. We have operations in China; India, we're ramping up right now; Turkey; Mexico; and the U.S. Typically, our plants are built to spec for our customers. We have the top 5 OEM of the wind blade manufacturers in the world. We work closely with them to design the blade. And typically, they sign long-term contracts with us, which are about 5 years in length, and then we build the spec kind of their blades. Now we work closely with them to make sure we're optimizing the manufacturability of the blades. But we're clearly more upstream than Chad. So that's an interesting perspective here on what we see from our standpoint, kind of on the front end and the driving the cost down on the LCOE and one of our -- I mean, what we've held to do over the last several years. So just high level, main side of our business is the blade manufacturing. We also have the other side of the transportation, but for now we'll focus on the wind side. And then if you look at our overall global market share, the top 5 customers, of course, with the OEMs and where we're at, we're about 18% of the global blade manufacturing capacity out there right now globally with our operations. Now what we enable our customers to do with that global footprint is reallocate wherever they need to go. So with demand being so high in the U.S. right now, they're able to ship our blades that we manufacture in China and other regions into the U.S. to meet that demand. So approximately 50% of our blade capacity can go into the U.S., especially in a year like 2020 where it's high demand. So kind of on the demand side of it.

Understood. That's helpful. And a lot of your facilities outside the U.S. also serve the U.S. market. So I was wondering if you could comment on U.S. market dynamics overall, and the same question that I asked Chad just in the next 4 years, how do you see that playing now within your administration?

Yes. And what we've seen, I mean, with the driving down of the levelized cost of energy and the demand, I mean, the economics just makes sense. So whatever happens with the PTC or extension with that and the demand under the Biden administration, again we won't speculate and say what it's going to be, but there's a lot of demand out there for it and the economics make sense. If you look at where the cost of wind is and solar compared to -- I mean, they're replacing coal energy plants, the marginal cost of coal, wind is cheaper than those. So you're seeing a lot of replacement in that on the wind side. So we don't see that changing. And you've also look at the initiatives that [indiscernible] put out there on the requirements for renewables, and that's going to continue to drive the demand. So although we see kind of right now 2020 being a very high year for kind of the wind market. I mean, it could be a small dip, but I mean, we're going to see overall future of wind and renewables look really good longer term.

Understood. Yes. I think that is consistent with what we have heard from other companies. And in terms of the cost of capital of wind systems, we have seen a massive decline over the past several years. And that drives -- of course, the improvement economics drives higher demand, wind becomes more economic related to other resources in the U.S. I was wondering if you could comment on the policy driver, so the tax credits, the impact that those have had in the economics of wind relative to the technology itself and blades getting longer? I know that's a lot in one question, but trying to understand over time and going forward, the difference between policy and technology?

Yes. And I see the PTC. I mean, to me, we're competing wind with other industries too being the coal, nuclear, solar, so you're going to see continued drive of the LCOE. Now on the wind side, and specifically, if you look at the overall turbine, I mean, the taller towers, bigger diameter of the rotors, I mean, obviously, on the -- with the blade lanes expanding helps drive down the LCOE. So I mean, that's what you're seeing from the actual technology side of it is continuing to drive that cost down. The actual turbine of blade is about 29% of it over the actual total cost of wind for about 22%. So wind blades are a main cost or a significant cost contributor to the overall cost, and we continue to drive that down through BOM, cycle time, leveraging kind of our lines and being able to put multiple customers in one plant. So we have a lot of that drive there. So with the PTC, yes, that has enabled it, but then you also have the technology just driving the cost down too because there are other competition out there with solar and other forms of electricity.

And I think that's a way to link this to Clearway. Chad, I was wondering if you could comment on how the changing economics of the resources impact your PPA length when you are contracting an asset? For conventional assets, maybe a 20-year contract makes sense, but given that renewables continue to drop in price, is that impacting your contract dynamics or negotiations with offtakers?

So maybe the -- so are you asking because of the lower cost, does that change? I mean, clearly, there's a price delta as it comes into play. I mean, obviously, the prices of PPAs 5 years ago are going to likely look different than where we are today, largely driven by that change in cost. I don't think you're dealing with a situation where there's a sacrifice in returns relative to that. I think as it relates to duration, I'm not sure that the cost per se is necessarily the influencer. I think a lot of duration changes that we're seeing in the market, at least from my perspective, you've had this poor difference where when the renewable business is really taking off, you had a lot of contracts directly with utilities and those were sort of done at long term, thus far, PPAs, 20-year type of contracts. I think as you've moved inside and you deal with more corporate offtake, you're dealing with shorter duration contracts, as that's just kind of what the demand is indicating. You're not going to find a lot of corporate customers that are going to want to commit to 20-year kind of PPAs. So I don't know, at least, it might be a question that I should go back and talk to our guys that are really focused on that development if cost is necessarily informing that. It may inform how we think about return and maybe an easier prospect to sort of get return of capital back during contract periods where you're sort of exposing the actual return on capital during sort of tail in noncontract periods. But what I would say is contract period doesn't inform economic life cycle of an asset. I think equipment technology improvements, you've got long-term economic life cycle of these assets. It gives you the opportunities to recontract in the future as necessary. And importantly, as we all know it, renewable energy has 0 marginal cost. So when you have 0 marginal cost power, the ability to generate profit in order to support your cost structure is very different than what you have in conventional generation, where you have a fuel input cost coupled with significant O&M type of costs as well in order just to maintain breakeven profitability on an asset.

That's a fair point. And I imagine that also the repowering of the systems helps in keeping those older systems, let's say, systems that were put in place 10 years ago, competitive with newer technologies. Maybe we can switch a little bit. And this is a question for both of you. In terms of bottlenecks for increased penetration of renewables. Maybe, Bryan, if we can start with you this time. I'm thinking in terms of, are there any capital constraints? Would the company consider equity markets to fund that growth? And I have a follow-up there.

Yes. So we've been fortunate over the lifespan kind of being able to operate by the cash flow of operations being able to expand with our plants. We continue to look at the needs for the capital, any capital we need kind of going forward, looking out. I mean, we're looking to expand into offshore eventually or additional lines for the onshore markets. We still have a couple of lines to fill up in our India facility that are not under contract and some in our Yangzhou facility, which, I mean, it's minimal capital investments at this point in time. So we're actively looking seeing where the expansion is, and then we're also looking at expansion on the transportation side. But again, we don't get out over our skis, I'll say, and then invest ahead of our customers so without the contracts. So at this point, we don't have anything announced that would lead us to need to go out to the markets necessarily. As far as other constraints in the renewables, I mean, if you look at the overall bottlenecks, historically, I mean, it's been -- balsa wood is one of our core components, which was a natural resource. They moved to PET. Everyone shifted that right away. Now it's kind of going back and forth to meet the demand. But going forward, I think it will work itself out. You see PET lines coming online for the core raw material there. So right now, we don't see a big constraint at all in the supply chains or where we're looking at for raw materials on this side. I think the bigger thing is kind of if you look at the holistic picture, is the transmission lines and making sure that you get there on where the renewable, whether it's solar or wind, farms need to get to and making sure the transmission lines are there, that could be the bottleneck for the expansion going forward because to me and how we view is that you need the transmission lines and battery storage and then solar and wind is kind of the main formula for the renewables right now. That's kind of our viewpoint. So transmission will be a key part of that for expanding.

Understood. And you touched on my follow-up, it was around the raw material bottleneck, and if that was a constraint. So you touched on that already. Before we move on to Chad, Bryan, maybe if you can touch on the installed capacity in place today and where there is unused capacity in terms of the location of that unused capacity and how quick you could see that filling up as, let's say, growth in the U.S. accelerates. And by that, I mean, if we see increasing acceleration in the U.S., how quick does that translate into higher volumes for you from the OEMs?

Yes. So if you look at our current footprint, I mean, we currently have our Iowa facility, which is built up. We announced a new line expansion in our Mexico Juarez facility. So pretty much all the lines there are filled up at this point in time. Over in India, we have 2 more lines of capacity that are open and available at this point in time. Of course, we're working closely with OEMs on those. And we recently announced the 2 with Nordex. And then Yangzhou, we have 4 lines of available space that are not under long-term contracts out of that facility. We do have a smaller facility, [indiscernible] which we have some line capacity there. However, due to the size of the blades, I mean, we're kind of looking at expanding our world-class facilities with Yangzhou and the India facility right now to fill those up. From a capital, I mean, it's about $6 million line to get those up and going, and it takes anywhere from about 6 months or so by the time we sign the agreement because the building and the rooftop space is there. It's just getting the lines and the molds and the customers in. So what we've seen is, our customers, as I mentioned earlier, are able to ship around the world. So that room in those facilities could be utilized to basically meet the demands in the U.S.

Understood. And Chad, maybe now I return to you, could you comment on any bottlenecks on your side, whether that is capital or other more technical considerations?

Yes. I mean, I think for us, equity and capital is a bottleneck for us. I know one distinction we have, given the way we've structured our business and how we sort of ascribe value and sort of garner shareholder attention as we are an income and income growth company and our business model is one where we allocate the preponderance of our excess cash flow, as you know, in the form of a dividend. So we are an active -- our company is always active in the formation of capital. That's just a fundamental tenet of everything we do. So -- but I think in this environment and what we've seen, we don't believe we're in a scarce capital environment. We believe the markets are readily open for us. And we manage that prudently as we've historically done to sort of continue to drive and bring the growth to the business. From the standpoint of bottlenecks, I -- given how we look at our business certainly over the next few years, candidly, we don't see a ton of bottlenecks mainly because with how our sponsor has positioned a lot of its development activity. We feel like we're in a very good position to sort of move through the market, avoid some of the supply chain constraints, workforce constraints that could show up, like even with COVID-related issues. We may have some timing delays on when something ultimately can achieve COD, but nothing that raises a tremendous amount of concern for us. So we feel pretty optimistic about it. I mean, as far as renewable development, certainly, making sure you can move power to load centers is always going to be a dynamic, making sure you have adequate sites to co-locate storage if that's part of the value proposition. I think we're fortunate, given the scale that we have in our enterprise where we have afforded a fair amount of flexibility overall.

Understood. And I imagine like we -- no I imagine, certainly, if we include storage into the next, the opportunity for renewal energy penetration increases significantly. So for Chad, is the company currently developing hybrid systems or assets in which you pair solar or wind with storage? And how do you see -- what's the growth opportunity in your footprint? And the reason why I bring that up is, from a utilities perspective, we have seen a very different conversation around storage because of their peak loads. If the peak load is in the summer, then they can use storage to smooth the supply, the power generation. But if the peak load is in the winter, then that's a little bit more challenging. So I was wondering if you could comment on, based on your footprint, what's the opportunity that you see today and just the economics of those hybrid systems?

Yes. I mean, as far as like the way I would look at the economics or -- I mean, as far as where the growth is going to go, I mean, I think there's a lot of market data that's out there and how folks kind of focus on the market data. I think we are seeing a pretty sizable expansion. I think if you look at our own portfolio with what our parent company's development opportunities are, I mean, we're upwards, I think, as of today, almost 1 gigawatt of sort of solar-plus-storage kind of solutions that are ultimately being offered to customers. I think the distinction is, is that we're not looking at storage as -- right now as just a bespoke product. It generally is merged with solar and it ends up just sort of being encapsulated in what you offer the customer. So we're not retaining dispatch economics or anything like that. It just -- if there's like a price for the PPA, it's a bundled product. But I think in talking to our development team, clearly, this is something that is becoming more prevalent, I think, as the solar tech -- excuse me, the storage technology, the cost of that declines, it ends up becoming more economical to bundle into a product. And you can really migrate away from like this original kind of unit contingent, take or pay kind of contract where you can offer a better product to a customer that includes both. But look, I think we're seeing a tremendous amount of growth in this area. And I would expect to see the merger of that overall. I think it's the acknowledgment that an intermittent resource needs some other type of vehicle to sort of maintain continuity and reliability. And the irony of it is, it's sort of similar to our peaking gas plants in California. When you think about that even on a bundled product, when you're able to offer capacity to sort of provide that bridge, there's a lot of different products out there that ultimately come interesting -- become interesting to customers.

I'm glad you bring that up because my next question is around those assets. In your asset mix, I think you have around 2.5 gigawatts of capacity in conventional assets. And as we said initially, the generation associated to those assets is actually very small. But I was wondering if you could comment on the capacity factors today of those assets, where they are located and how those stakes are viewing baseload generation today, given most of those, if not all of them, are in California and the blackouts that we have seen this year. Just trying to understand better the need for those assets given that the contracts are coming up for expiration in the next couple of years?

Yes. The one distinction I said, as you mentioned, baseload assets, and I would proffer up that of our 2.5 gigawatts, I think a little over 500 megawatts of that are combined cycle, all the rest are peaking assets. So I would not ascribe a peaking asset as a baseload asset. In fact, they're really purposely built to handle sort of the ramping needs that are required at the tail end of the day when the solar energy is coming off. That doesn't suggest that they don't operate during other periods of time. They are mostly California-based, as you described. The capacity factors tend to be very low, which gets to the point that I raised at the beginning, which is if you actually look at the divergence of how much cash flow we get from them versus the amount of megawatt hour generation, you can kind of see that distinction, which is they don't generate that ton of megawatt hours because they are capacity players, which has a unique advantage as well because it has lower O&M costs and operating costs as well that comes with it. I think in California, I mean, look, there's -- you obviously have California's commentary about wanting to go 100% renewable over a period of time. I think the time frame in which we're talking about that is 20-plus years away. So we'll all see how the market evolves. But I think what we saw this summer is exactly kind of the point in the importance of these assets is, in a market like California where you've got a heavy reliance on an intermittent resource, you rely a lot on import power as well and they've already shut down some traditional baseload assets, having the kind of capacity in the system that is not only carbon-friendly, which our assets are because they don't generate a lot, but also can provide the ramping needs, it's critical for the grid. And I think we saw that this summer. So from our point of view, we think they mix very well with our portfolio because they do provide kind of that hybrid element with regards to our renewable footprint. And we're very optimistic about the value that they can ascribe to our platform over the long run.

Understood. Yes, that is helpful. And it's something that from the utility perspective, who can drive this transition to renewable energy is important and that in some cases, those plants can be retired early. But in some other cases, having them online and only running them when they are strictly necessary is a key component.

And the only -- and I apologize, the other point I brought up is we talk a lot about the portfolio dynamic. I would emphasize, as we talked about, we are a -- we consume a lot of capital and we raise a lot of capital. And diversification also matters for our business. And in a way, it is very helpful also not to be 100% weather exposed as well when we think about that diversification of cash flow. So the marriage of decent cash flow contribution, plus a lower emissions profile given the nature of those assets, works very well for our enterprise.

Understood. Yes, that's helpful. Switching to Bryan, and apologize for the changing topic here, but the company has talked about providing an updated wind outlook early in 2021. So maybe if you can comment around the trends that you're seeing outside the U.S.? And we're just wanting to understand a little bit better, is that update driven by the U.S. market or by global dynamics?

Yes. So what we kind of referenced was we plan on kind of updating that longer-term viewpoint as policy gets defined. If you look at, of course, we've touched on the U.S. already, what's going on with Europe and kind of the Green Deal and what they expect to announce; you have India with some of their initiatives with what Modi has said on their front; and then China, of course, that has increased kind of their overall outlook for renewables. So if you look at the overall footprint, what's happening around the globe, we are already approximately on the top line, close to our goals of the $2 billion in revenue that we've talked about and put out there. So as you look kind of out and look at all the demand globally and what could happen as these policies get defined, that's what we talked about, we are going back and we're looking at that and what that means from a global footprint, from a requirement of the overall top line and just to kind of give the street some update on how we're thinking about it. So again, more will come on this as these policies get defined. But again, the renewable wave and based on the LCOE, I mean, we feel like there's a good wave of demand out there that's coming globally, and it's prudent for us to kind of put that out there and start talking about some of our longer term initiatives now on where we want to go.

And I think that is the key differentiator factor for TPI in the sense of having the global footprint, being able to access those markets that are growing the most. Could you comment a little bit, and this is a question that came from the audience, how does your strategy compare to other wind blade manufacturers out there that prefer to have one location only rather than a global footprint?

Yes. What we've tried to do is, with our multiple locations give our customers the optionality as far as where they want to base it to cut down on transportation costs if they need to and cut down on other risks. So with our global footprint where we're able to position, we're able to add localization of raw materials and making sure we can get the right raw materials to our plants timely and also leverage kind of the overall workforce too in different regions. So it's multiple things. And then it allows a footprint where if our customer only wants to put 4 lines in a factory, we can fill up the remaining factory with other customers. So it's not necessarily just putting it all in one location and having the overhead. We believe, in our overall global footprint. And they can shift it around the demand around the world too if they want to. And it's just worked out well for us in the past and we believe it's a good business model going forward too based on the discussions we've had with our customers.

And I imagine this, of course, it's going to be contract-dependent, but when you -- for an OEM, how big is the transportation component of the total bill? Because we have been getting that question a lot, given the main competitors of TPI are in China and in Brazil. So when you add that transportation component, how significant is that?

Yes. I mean, it can be fairly significant. You think the size of these blades, I mean, we're now producing 60- to 80-meter blades and moving those and whether you fill up a ship or if you just add a component, a few components of it. But it can be a significant amount of the blade cost. I mean, that's why it's important, like in Mexico, and even in our plant in Iowa on why it makes sense although the actual human cost of the capital and actual wages in Iowa, but the transportation cost saves on it because of the location of where the wind farms are going in that 500-mile radius. Similar with Mexico and what you're able to do with that. And that's what we've seen from our customers is the cost advantage of saving, basically not needing to transport those blades. And that's why we feel we're competitive. I mean, a lot of these people have stayed in their region and not necessarily come out of their geography. However, where we believe we're positioned to move those blades around the world, if necessary, however use it for localization too, which saves on the transportation cost. So it provides optionality to our customers.

Understood. And now I'm going to switch topics to EVs, and I know this is very different to what we have been discussing, but I think is relevant for both companies. So maybe, Chad, if we can start with you. Given that your main exposure right now is in California, EV's adoption in the state is really high. And the regulator there is expecting electricity demand to go up significantly because of electric vehicles. At the same time, we have community choice aggregators or other types of load centers that are not the utility. So could you comment on those 2 dynamics? Sometimes we see electricity demand going up because of the electrification of the transportation sector. And in other cases, we see the utilities demand coming down because of those other load centers. How are you thinking about those two? And how significant is EVs in your long-term strategy?

EVs, in particular, I mean, I think if you have electrification of the transportation grid and that drives demand in any given market, that's obviously good because what that does is that it will ultimately increase the amount of megawatt hours that ultimately are needed to be supplied in the state. And then when you think about a state with an RPS requirement, obviously, that will require more demand from renewables. So it seems like it would push it up. I think the distinction between the utilities and the community choice aggregators, that's just load shifting from one entity to another entity. It's not changing the total amount of demand in the state. So what it may inform, though, is just how the procurements of power and renewable energy get done and who you may contract with. And I'm mindful, with some of the recent drop-down transactions that we're in discussions with, with our development partner, some of the offtake that you're seeing with some of the California solar projects are actually with the CCAs. So to me, the load shift between one load-serving entity to another, that's less of a matter to me than just whether or not the market itself is growing. And we've lived in an environment for a lot of years now where power demand growth across the country has been lower than inflation because of a tremendous amount of penetration of energy efficiency and stuff. And I think electrification of the transportation sector has always been viewed as an area where you could start seeing that movement. So look, if we have more demand growth and it's certainly above inflation, that's a good thing for folks. And then when you marry that with a state that wants to continue to retire old fossil generation, it just stands to reason that you'll see more renewable growth.

Yes, maybe something that I wasn't clear on the question is, I guess, for Clearway, it is either way the change in load from one entity to another, it's not that relevant because your off-takers are both utilities and nonutilities.

Yes. I mean, that's sort of my point. I think it would shift where the demand is coming from more so than changing whether or not there's a lack in demand.

Okay. And going to TPI. Bryan, TPIC, in addition to manufacturing wind blades, they also have a transportation segment where they manufacture composite structures for lightweight vehicles. So I think that's an area where investors have always wanted a little bit more of color. So if you can talk about the size of that business today, where do you see that growing, the customers? Any comments that you can provide on that business, I'm sure, are going to be helpful for customers.

Yes. So right now, on the transportation side, we currently have POs where we produce buses, bodies for Proterra, that's been the biggest driver right now of our revenue on that front. And the economics, if you look at kind of how we think about composite material and utilizing that in the bus body or expectation of the last mile delivery or even the automobile, we want to make sure we're part of the structural components. We don't want to just be glove boxes or other things. We want to be part of the actual structure as you think about us. And we see the benefits of it in the life of the bus body is what we've demonstrated there. We've taken 4,000 pounds of weight out of it. So if you think of the electrification of the fleet, less mass, able to move more on the battery side. So that, the durability of it, the repairability of it, I mean, there's a lot of benefits when you're using composites on the electrification. So we have that right now. We've talked about workforce and doing some bodies for them on the last-mile delivery. There's a lot of benefits there and that we are able to yield special purpose vehicles for them, dropping the size. Whatever we need for requirements on those, we're able to do that with a composite whereas if you do metal, it takes a long time, it's heavier in weight and there's a lot of added costs associated with it. So that's some of the other benefits we see. So right now, as we've talked about it, I mean, we're going to grow that ideally to $400 million to $500 million top line over the coming years. We never gave a specific timeline. Right now, it's a very small portion. It takes time to get kind of traction in this, but we are seeing the traction talking with OEMs and getting some additional momentum behind us on that. We also had the pilot line that we put in kind of our Warren, Rhode Island facility where we're doing -- right now, we announced the production tooling on that. But hopefully, in the future, we'll be able to announce the production PO with that where we'll do high-speed manufacturing for the automobile lightweight vehicles eventually. So we kind of have different ways we're looking at, either full-body structures or structural components on the high-speed lines. So there's different ways we're kind of looking at it and penetrating these markets.

And is this a market, like the wind blades where OEMs can also manufacture these parts themselves? Or is it something that they always outsource?

Yes, this would definitely be pretty much always outsourced. It's not only -- especially in the U.S., not anyone's doing it. I mean, that's where we've kind of done the whole bus body, and it's our background in the composite space. I mean, we started off as a boat builder and then transitioned into blades. And now this is kind of another evolution for us. It's because of the know-how around composites and being able to manufacture those.

Understood. All right. [Operator Instructions] Last one for me here, and it's very broad again. So just to wrap it up, I guess, on the preferred Q&A, we have received an incredible amount of inbounds and interest from ESG investors around the 3 components of the ESG. And we focus a lot of the time on the e-component because of the sector. But I was wondering if both of you could comment on the efforts, the actions that the company is taking to improve the other components, I mean, in the S and the G? And what are metrics that investors out there can track in order to compare companies on an apples-to-apples basis? Those are very different in Europe to the ones in the U.S. and sometimes we don't know exactly what are the metrics that companies are using to measure those dynamics. So maybe, Chad, if we can start with you.

Sorry, I was scrambling here on the mute button. No, I mean, we see the same thing. I mean, I think there's been a tremendous amount of inbound. Funds flows are quite extraordinary in this area. So no, it clearly is and I think if you look at our portfolio, I mean, we've always kind of generally believe it's the E, especially with the E and the S parts, these are pretty easy for us to sort of isolate. I think we are very active right now in looking at all of this to make sure that we continue to position ourselves as we mature as a company to making sure we meet it. I think some of the standards that are out there like SASB and stuff like that, those are really good frameworks. And what we like about those is it's not just about say, "Oh, tell me what your CO2 emissions are." There's other elements of things within the context of ESG that are very important to us and things that we monitor. So for instance, safety is a very important element of most ESG reporting standards. And when you operate 7 gigawatts or you own 7 gigawatts of generation, that is a very important metric for us across the board. And when you look at things like incentives for management and what we disclose in our proxy, things like safety are already part of what we already do. So just using that as an example. So we're going to continue to evolve that and make sure that we're sort of putting ourselves in a position where various standards that are out there were ultimately going to be adhering to and reporting against. And these are things that we're evolving against, again as we sort of mature as a company. I'm always mindful when you think about us as a company, like while we've been around as a legacy company, we're really only a little over 2 years old. So there's a lot of things that we're working through pretty rapidly here.

Understood. Bryan?

Yes, similar. I mean, we issued our first report this year and we're doing a material update over this next year reaching out to our customers and others to see what's important and making sure we're addressing it. But you're right. I mean, TPI, I mean, with the E side of it, it's fairly easy. And then it's moving into the S and the G. And safety, again, similar for us. I mean, it's a key aspect of us. It's built into our bonus metrics. We're definitely looking at the DE&I side of it now and making sure that's baked into it. And as far as the governance, I mean, we've done -- tried to add Board members recently, diversify our Board and bringing in others. I mean, originally, we were more of a PE-focus Board, and now we've diversified over the last few years and most recently with 2 new board members added. So that's been key for us. So I mean, as far as actual standards, I mean, GRI and SASB kind of are the key ones, but we'll continue to monitor and, hopefully, there's a convergence kind of globally on how to look at this because it's confusing to shareholders and others to make sure everyone's measuring it the same. Ideally, that comes to in the next few years, just because this is so important to others and everyone and us. So we have equal standards to measure ourselves on.

Yes, that will be ideal. From the investors' perspective, we continue to get more and more inbounds from European investors. So sometimes it's just hard to compare those. I don't see any other questions on the website. So maybe we still have 5 minutes left. So I'll just -- given COVID dynamics cases peaking up, I -- maybe to wrap it up here, any comments that you can provide on the impacts that you saw in the first wave and whether investors can have a better sense of what a second wave means for the company? Chad, why don't we start with you.

Sure. I mean, I'll do it in 2 fronts. I think as it relates to sort of the most important thing, which is our employee population, I mean, we are -- I mean, we have multiple sessions a week to make sure we're rapidly tracking and monitoring that. And we've been operating within a sort of a lot of safety provisions around how we're handling our workforce and we've been very pleased to see how we've been able to operate remotely, keep all the cases and stuff down, especially with an organization collectively when we include -- if we think about like our parent company who operates our assets, I mean, you're over 1,000 employees. And I think we've had a lot of success there. I think it relates to the business, what we've seen really is only one part of our business that has been exposed, which we've talked about on our prior disclosures, which is our little thermal business where in certain parts of metropolitan areas where we sell steam and chilled water, we have seen volumetric sales impact on that. That's basically areas in cities where you've got hospitality center, hotels, convention centers, you will see a reduction in demand. I think the one thing that we're trying to get our arms around is this new territory. I think in the winter, ironically, you tend to see heating demand tends to be a lot more flat than the necessity of cooling demand because, obviously, in certain areas, you can't let heating load come down because you can create damage to infrastructure and stuff. So we're monitoring that. So we do expect to see that volumetric impact sort of prevail through part of next year. And we sort of factored that into our overall expectations. But again, from a materiality perspective, it's not what I would deem as a material issue to the business, but it's clearly something that we're monitoring. But otherwise, I think we've pleasantly been surprised overall within operations of our business that we've been able to manage this quite well.

Understood. Bryan, any comments from the TPI's side of you?

No. I mean, if you look at the first wave and what happened there, I mean, we were significantly impacted, started off in China and then pretty much the rest of our blade manufacturing facilities globally. What we've seen recently is not nearly as significant of an impact. I mean, we've been impacted mildly in Mexico, but that was mostly on weekends where they shut down, which we don't always operate our plants on weekends. So it wasn't that significant of an impact. And in Turkey, these cases have raised. However, we've been good at managing through that and it won't have a significant impact. So nothing like we saw in Q2 with everything shutting down. So much better impact this round. So again, our employees come #1, and we're keeping them safe. So we're still going to incur some costs associated with that. But so far, our plan has been able to stay up and operating.

Great. That's great, not just, of course, from a financial standpoint, but just the safety of all the employees of both companies. So I think we'll wrap it up there. Thank you so much. Thank you, Bryan. Thank you, Chad, for your time. And also Jancy Yang, she's the corporate access person here at Morgan Stanley who made this happen. Thank you, everyone and investors. If you have any questions, feel free to reach out.