Q4 2023 Energy Vault Holdings Inc Earnings Call

Participants

Bernie Colson; Vice President, Investor Relations; Energy Vault Holdings Inc

Robert Piconi; Chairman of the Board, Chief Executive Officer, Co-Founder; Energy Vault Holdings Inc

Jan Kees van Gaalen; Chief Financial Officer; Energy Vault Holdings Inc

Justin Clare

Joseph Osha

Thomas Boyes; Analyst; TD Cowen

Chris Ellinghaus; Analyst; Siebert Williams Shank

Noel Parks; Analyst; Tuohy Brothers

Presentation

Operator

Greetings and welcome to Energy Vault's fourth-quarter and full-year 2023 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bernie Colson, Vice President of Investor Relations. Please go ahead.

Bernie Colson

Thank you. Hello and welcome to Energy Vault's fourth-quarter and full-year 2023 financial results conference call. As a reminder, Energy Vault's fourth quarter earnings press release and presentation is available now on our Investor website, and we will be referring to the presentation during this call. A replay of this call will be available later today on the Investor Relations page of our website. This call is now being recorded.
If you object in any way, please disconnect now. Please note that Energy Vault's earnings release and this call contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only estimates and may differ materially from the actual future events or results due to a variety of factors. We caution everyone to be guided in their analysis of energy vote by referring to our 10-K filing for a list of factors that may cause our results to differ from those anticipated in any forward looking statements.
We undertake no obligation to publicly update or revise any forward-looking statements except as required by law. In addition, please note that we will be presenting and discussing certain non-GAAP information, please refer to the Safe Harbor disclaimer and non-GAAP financial measures presented in our earnings release for more details, including a reconciliation to comparable GAAP measures.
Joining me on the call today is Robert Piconi our Chairman and Chief Executive Officer, and Jan Kees van Gaalen, our Chief Financial Officer. At this time, I'd like to hand the call over to Robert Piconi.

Robert Piconi

Well, thank you, Bernie. And I'd like to welcome everyone to our fourth quarter and full year 2023 earnings call for announcing results on our second year now as a public company, which happens to be also our 2nd year of revenue, as you tend to do, sometimes that can be helpful to step back and zoom out, if you will, and look at how we progress these past two years, as I did after our first year, we've grown this company as a public company globally in unprecedented ways across multiple continents, multiple technologies while serving different customer segments, public utilities, independent power players and large industrial energy users.
The result has been the fastest growing company in energy storage in only our first two years. We continue to monetize our long-duration gravity technology via regional license and royalty agreements that will pay long-term dividends and royalties and capped a tremendous second half of 2023, executing multiple battery energy storage projects across the US market with a newly developed energy management software platform that is winning rave reviews from customers and has been a key differentiator in our rapid commissioning timeframes and ability to quickly get through commissioning and site energization regardless of the underlying hardware.
I think finally -- and as a testament to our strategy of solving customer problems as an energy storage solutions provider, we began construction on a first-of-its-kind green hydrogen hybrid energy storage system to provide multi storage to the city of Calistoga, California for Pacific Gas and Electric, California's largest utility energy Vault uniquely will own this system under a tolling agreement to PG&E as we also presented the only fully sustainable solution to replace their prior diesel generation systems historically used to secure continuous power, and it will be operational in the mid part of this year. Those are some of the key highlights, very proud of our progress, our delivery in our first two years and never been more excited about what the future holds as I am now as we continue to push boundaries and innovation while fortifying strong customer relationships that will be the basis of our future.
Clearly, we continue to operate in our sector and a very volatile capital market. And despite that, the team has remained focused on the most important investor priorities. And I would say there are three of those first executing for our customers and keeping the customer loyalty that are really the key to our future and really the foundation of our house that we're building here after getting through two years without those customers and without those future revenue streams.
And with those customers now uniquely as reference points for future deals and future customers, we would not have a bright future. I feel very good about that second profitable unit economics as we grow. You can imagine, as a new company, we're near priced approaching the likes of some of the largest public utilities and some of the most prominent independent power producers. You don't necessarily have the highest leverage in the contract negotiation despite us having I think one of the most experienced team in the industry, which is what led some of the largest customers.
They have the confidence and faith in us to deliver for them on very critical projects we negotiated. We put they put their faith in us, and we've delivered quarter over quarter with profitable unit economics. And finally, and I think this is definitely not least from an investor perspective, we have protected our balance sheet and liquidity as a company to allow us to control our destiny to invest in growth and eliminate any dilutive types of financing to shareholders.
I think this and as you've seen in our results if you've happened to read through them, which I'll highlight them here in just a minute. This has been an important aspect, in particular in Q4 where we took some proactive actions. As it is clear, the market has spoken on the desire for even new young companies in a very high growth and necessary market for the future of the planet. Must get to cash flow positive.
With that, I want to begin by covering some of the highlights from our release with some more color, and then we'll turn it over to Jan Kees, our CFO, to review detailed financials and get to questions off the top. Our revenue finished in the range that we've been reaffirming all year $341.5 million, which is up over 130% year over year and 18% quarter over quarter and within our annual range due to some shifts of revenue at the end of Q4 that will take place in Q1 and in 2024, it's toward the lower end of that range.
We ended the year, however, with an increased cash position of $146 million and with no debt, which is above our prior guidance of 132 million from Q3 2023 earnings and projections. This is pretty noteworthy as we have kept and funded projects in California, for example, the Calistoga project for PG&E and taxes on our balance sheet. But we can participate in these projects in a longer term, predictable and less lumpy cash flows and revenue streams from these tolling agreements. Yet we were still able to grow cash quarter over quarter as we began to turn some of our first projects in the second half of the year to substantial completion and final completion.
Very importantly, we also reduced our quarterly cash operating expense run rate by 25% to 30% through actions taken in Q4 2023. This should enable a 2024 reduced quarterly cash OpEx of a range of 13 to $15 million. We expect these actions to help us accelerate our shift to cash flow positive as we exit 2024 and for full year 2025 results, which we'll be sharing more about during our announced Investor Day, which I'll be talking about shortly for the year.
On gross margin, we delivered a positive gross margin of 5.1%, while reflecting a portion of that a lower than expected Q4 gross margin due only to timing of revenue and associated gross profit recognition that shifted from Q4 into Q1 and 2024 for gravity license and also some battery projects. As I will discuss, gross margins will improve significantly in the first quarter of 2024, benefiting from this shift from Q4, but also due to the mix of revenue with gravity and battery project timing. While this did impact Q4 for both revenue and final EBITDA and EPS this represents only a timing shift, which will be recognized under U.S. GAAP accounting in 2024.
And finally, our commercial pipeline continues to expand with annual year-over-year growth of 24.5 gigawatt hours to a total of 52 gigawatt hours or almost 90% growth, but also expanded sequentially quarter over quarter by 5.8 gigawatt hours up 13% shows continued market growth, continued market activity also with significantly larger projects, two of which we are announcing as new project awards in the US for gravity and a large 2.5 gigawatt hour long-duration battery project, representing an additional Continental expansion with a large global IPP.
While these larger project awards have large impacts in forecasting revenue recognition and can create more lumpy quarters and annual guidance. They are both quite transformational in size, scope and technology adoption in both first-of-a-kind because of those attributes. As always, we are focused on converting these growing this growing commercial funnel into contracts that further bolster our revenue and backlog. And we remain committed to continue our track record of building profitable growth and unit economics with all new projects we choose to take on. We want to work on the velocity through our funnel.
We post every quarter are four stages of our more near term sales funnel that starts from submitted proposals goes to shortlisted goes to awarded projects and then to final bookings, I encourage you to keep an eye on that and take a look at our latest investor website with that update with the numbers that I just reviewed.
As you all know, from our announced and executed projects so far, we focus on larger and meaningful projects with strong customers that have a funnel of projects where we are developing deep partnerships over time. I realize for many of you in our investor base, energy Vault is quite a unique animal relative to any other pure play energy storage company, given our unique portfolio of short long and even ultra-long duration storage solutions. But I believe this has also enabled us to be one of the most customer-centric energy storage customers listening to our customers and solving their problems with a broad portfolio of technology, innovation and solutions. It is unmatched in the market.
Looking forward, as we are just a few weeks away from our Q1 2024 finish, we expect revenue to be in line with our prior Q1 2023 given normal seasonality of revenue recognition and project starts with potential for upside from items that were expected in Q4 2023. We also expect stronger double digit gross margins in Q1 again, given the shift of revenue and gross margin recognition from the prior Q4 2023.
I think very importantly, as we go to investor priorities, we expect to exit Q1 2024 with an unrestricted cash balance in a range of 125 to $150 million. Additionally, we've reduced any remaining restricted cash on the balance sheet to less than 1 million and remain 100% debt-free.
Our performance here in cash is a tribute to our focus and tight management of our business as our growth in our cash balance at the end of the year shows. And we project to keep cash levels maintained at these levels without the need for debt or any dilutive equity transactions going forward.
As we continue to look at owned projects on our balance sheet, providing predictable longer-term revenue streams, we may evaluate project financing alternatives if they're attractive this aspect of cash management, managing our operating expense, our culture tied to innovation and focus on customers is all ingrained and the employees of this company.
And as demonstrated by the proactive actions we took in Q4 to reduce our quarterly cash OpEx rate by about 30% as we entered into 2024. We took these actions to continue to provide strong balance sheet flexibility for growth while accelerating our move to operating cash flow positive, which we have guided for our finishing Q4 this year and for the full year of 2025. We understand the nature of the lumpiness in our current business model and are also taking actions to adapt our product mix and business to reduce this volatility over time.
We will be sharing much more detail in this regard in May formally at our first Investor Analyst Day on May, while we are discussing forecast, I want to mention two projects that were awarded in Q4 that are both multi gigawatt hour and transport, transformational and technology and territory expansion. We were awarded in Q4 a 2.5 gigawatt hour DC. long-duration battery energy storage project by leading international IDP. It also represents a territorial expansion, and we'll be sharing more details on this project at our Investor Day.
We also announced a new development agreement with a large primary public utility in the state of Washington using our gravity energy storage technology to address another multi gigawatt hour storage need regionally in the Northwest. This is so exciting for us as it represents the first public utility in the U.S. with an agreement of this size and scope for gravity, which complements the previously announced gravity collaboration project with Enel Green Power insider taxes, which is now an up up and out of the ground.
Most of you are aware that demand for long-duration storage remains more nascent at this stage. Although energy Vault continues to solidify its global leadership role here with various gravity and green hydrogen, ultra-long duration solutions and multi-day storage solutions that are now starting deployment in large scale across three of the largest energy storage markets in the world in the U.S., China and Africa.
Specific to our gravity business, important to highlight our territory expansion to Southern Africa, as I just mentioned, across the 16 member stated member countries via a new license and royalty agreement that was executed in Q4 in China and route on, we achieved state grid interconnection as planned in December of Q4 2023 for the first 25 megawatt EBX gravity storage system and achieved invoice power operations also in China. There are now three additional gravity energy storage systems of 360 megawatt hour, bringing the total projects underway and announced to over 3.7 gigawatt hours. China continues to be an amazing bed of growth and growth and focus state mandated for not only renewable generation projects, but also for the state mandated energy storage.
We continue to be very excited about the work with China timing and their active development and expansion in the market locally. As also noted above, we have our first USA based gravity project with a public utility with the announcement of the new development agreement in Washington and an application of our technology that's been uniquely applied to take advantage of existing topology to maximize efficiency at a reduced CapEx and thus providing strong economics without the need for any subsidies. We'll be very excited to share more on this project given its scale size an application of a new technology.
Moving from gravity to our battery businesses. We delivered and progress final commissioning on our first three battery storage system totaling almost one gigawatt hour, specifically with wellhead electric. As previously announced in Nevada Energy 400, 40 megawatt hour were commissioned on schedule and in record time frames from site mobilization to system energization. Also the project with Jupiter power is expected to be fully commissioned in the coming weeks here prior to the first quarter close regarding our green hydrogen microgrid and ultra-long just storage duration.
We commence construction on the largest green hydrogen project and microgrid system in the US with California's largest public utility Pacific Gas and Electric. The project is supported by a 10.5 year tolling agreement with commercial operation expected in mid 2024. This solidifies Energy Vault global leadership role in green hydrogen technology for long duration, energy storage and specific microgrids for multi-day storage supported a note here that while owning this project, our balance sheet will impact near term revenue recognition in favor of long-term and predictable revenue streams from a tolling agreement.
We believe this will also result in more predictable and less lumpy revenue streams with increased margins over time, which we believe is best for Energy Vault and our investors. As we scale our business, we're excited to share progress now as we ramped up new systems with our new software platform and energy management system, our proprietary Vault OS. energy management software, showing its innovation right out of the gate, enabling efficient commissioning of our first projects that were turned over in the second half of 2023 and will begin contributing SaaS-based recurring revenues in 2024, albeit small at the start and will always be a smaller percentage of the overall portfolio, but critical high margin part of the portfolio.
And our product mix to software portfolio continues to introduce new capabilities, which now includes two additional products that we will be reviewing in more detail at the upcoming Investor Day one being involved manager for maximizing project return on investments via optimizing asset performance using enhanced performance, analytics and predictive models to provide greater system reliability and visibility. And secondly, Vault bidder to provide competitive dispatch continuous revenue optimization via market participation serving the ISO and IPP. markets as well as for our own projects that we manage.
And operator, finally, I'd be remiss if I was not recognizing a great year around our project execution. This was an important proven year for us to execute on over 1.7 gigawatt hour of projects announced in our 1st year of revenue as and as a public company in 2022, in which we demonstrated that we can deliver on our promises and complete world-class energy storage facilities on time on budget and at performance levels at or above expectations of our very challenging customers.
Although there are many to mention one example, we built commissioned and energize the 440 megawatt hour system in Nevada Energy's Reed Gardner site about an hour outside of Las Vegas within four months of site mobilization energizing the system on December 29, in order to meet the customer's requirement to be online prior to year end.
I spent some time at the site with our team on site that was working with the local contractors with some of our partners and the tremendous work. They did to do something that as far as we know, has never been done before at this size at this scale. And within this timeframe, these are the things that go on unseen, and I've heard about these unprecedented turnaround times and project delivery and energization are the night weekends holiday time dedicated by our NGL team to move have an inner to deliver for the customer.
I want to recognize all of our employees that make this happen every day for our customers as our first projects demonstrated none of which were without supply chain and supplier delivery issues that needed to be managed, solve, anticipated and resolved to our employees.
I'm happy to be on this call today to stand upon your shoulders on this quarterly report to talk about these results. I do not take it lightly. As you know, it is a pleasure to be here and support you and what you're doing. Every day. These customer satisfaction areas and testimonials are proving to be some of our best sales tools as we are well positioned now for the next level of success, both within these customers. We've executed four, as well as new customers that observe our propel our performance. We look forward to providing more detail on our Investor Day and Analyst Day that is scheduled for May 8, 2024 in New York City.
We've relieved -- received a lot of feedback from the investor base about getting in front of you in more detail and more detail about our strategy about the evolution of our part of our portfolio and also about a view into where we're going as a company in achieving the vision that we set out at the beginning, the event's going to include new product and customer announcements, portfolio updates and financial guidance.
It will include customers and partners who will be speaking for customers and partners that have experience with us in delivery, but also new technology and new partners that we're working with and expanding our growth across the globe. I look forward to seeing any of you that can't attend at that session.
I'd like to now turn it over to Jan Kees, who will share some financial details for the quarter.

Jan Kees van Gaalen

Okay, and thank you, Rob Good afternoon, everybody. Let's talk about revenue financial results, highlighted by our full year 2023 revenue of more than 340 million and within 34% higher than in 2022. This revenue reflects the successful execution across our project portfolio in the United States and they were built COMMISSION.
I'm trying to model next going into gross margin. Our gross margin was 5.1% for the full year of 2023, temporarily impacted by the unfavorable timing of a few items. First, we delivered a significant amount of hardware in the second half of the year that didn't have any margin associated with it due to the POC accounting rules under GAAP value at margin on that hardware will be recognized in the first half of 2024.
And second, higher margin licensing transaction shifted out from the fourth quarter of 2023, 2024 adjusted EBITDA during 2023, our net loss amounted to 94 point -- EUR98.4 million, reflecting the points I previously mentioned. And for the quarter, net loss amounted to EUR22.2 million for the year ending December 31st, 2023, our adjusted EBITDA was negative $62.1 million.
And for the fourth quarter, adjusted EBITDA declined $3.6 million year over year to negative 14.8, reflecting a shift in timing of both battery and gravity revenue and gross profit from Q4 2020 23 to Q1 2020 for the key non-cash items, added back in the fourth quarter were $8.6 million of stock-based compensation expense and $2 million in net interest income. We do remain laser focused on optimizing our cost structure to realize profitably to realize profitability as soon as possible as the business continues to scale and we remain fairly encouraged with our progress towards positive adjusted EBIT cash.
As of December 31, 2023, we had $145.6 million in cash, cash equivalents and restricted cash, leaving us well positioned to continue our growth strategy and execute on our projects. Primary uses of cash are cash, operating expenses and working capital needs associated with equipment purchases for us, energy storage projects as the projects achieve milestones and ultimately begin to generate revenue and gross margin.
Some of that cash will return to our balance sheet. In addition to this strong cash position, as of today, we have reduced restricted portion of our cash significantly from $35.6 million, two that we had at the end of December 2020. Restricted cash is now down to less than EUR1 million as of today. Please keep in mind that we maintain a bonding capacity in excess of USD1 billion to facilitate additional growth projects as we desire.
Thank you. And with that, I'll end it go back to Robert.

Robert Piconi

Great. Thank you again. Looking closing here before we get into questions. I want to first thank again all of our employees and that in only our 2nd year as a public company delivered with quality with velocity and profitability across all of our projects model behaviors define our culture in customer focus, innovation, delivery, all underscored by our core values and humility, collaboration, problem-solving and leading as an organization to deliver a more sustainable world for our future.
A few critical milestones upcoming this year, full operation of multiple gravity energy storage systems in China, which will generate future royalty streams and help China curtail its current increasing greenhouse gas emissions, which are larger than the next six to seven countries combined delivering commissioning of the first and largest green hydrogen energy storage system in California to serve as a critical replacement of diesel generation for the residents of Calistoga California sustainably and then territory expansions for our entire storage portfolio from Southern Africa to new starts in Europe, Australia and the Middle East.
Two things to keep an eye on their priorities this year. We'll begin updates on all those areas at our upcoming Investor Day and then financially very clear, as you've heard as a theme on this call, setting ourselves up in 2024 as a profitable growth platform while achieving cash flow positive as we exit and for full year 2025. As you have seen in our results and forecast, we have a strong balance sheet with no debt, strong OpEx management in place, and that's the flexibility to continue to invest in growth.
This has enabled us to invest in own projects with longer term and more predictable and higher margin cash flows, advocates and Calistoga. For example, with PG&E with a long-term tolling agreements for this business, while result in less recognized revenue in the near term fund projects that we would otherwise build, commission and transfer under an EPC model. As previously discussed, we believe this can be in the best long-term interests of our shareholders and US Energy Vault while helping to buffer the quarterly impact of larger projects being awarded on a global basis.
We look forward to seeing many of you that could join us in New York at our Investor and Analyst Day on May 8. We will be speaking again on May 7, at our Q1 earnings announcement, we have a lot of new and exciting developments to share that will help provide context on the next 12 to 24 months, given the magnitude of the project awards we've announced here today as well as our ongoing growth of the business.
With that, operator, we're now ready for questions.

Question and Answer Session

Operator

(Operator Instructions) Justin Clare, Roth MKM.

Justin Clare

Yes, hi, thanks for taking my questions here. So I guess first off, I just wanted to see if you could talk a little bit more about the revenue that had shifted from Q4 into Q1. If you could provide a little bit more detail on what led to the shift. It sounds like the projects just moved out slightly here. And then maybe if you could just speak to how much additional battery revenue and then royalty or licensed licensing revenue shifted? And then is that all going to be in Q1 or mix of Q1 and Q2?

Robert Piconi

Sure, Justin, good to hear you.
Yes, we had a combination of, as John Case mentioned, there was the hardware deliveries we took that led to the implementations and towards substantial completion and in some cases final completion of some of the battery projects. There's a portion of that that has double-digit margins that just due to POC accounting is shifting into Q1.
Okay. The other thing, as you know, we announced a new gravity energy storage license agreement, and that also shifted in revenue recognition that will be shifting into 2024 Our expectation is that some of that will be recognized in Q1 and then throughout 2024 as we progress. So those were the two, I think main items that are just timing related and even on I think the gravity portion alone we had we recognized that we would have exceeded the adjusted EBITDA EPS. It numbers as well. But those that's the color I'd say on those on the two areas that have shifted and in terms of the amount that shifted, I can share with you that it's a double-digit million amount at this point. And as I said in the comments, we'll be providing clarity around about 2024 and into 2025 with the updated information that we're going to have regarding our some of these larger project awards and as well as our Investor Day in the context of some of the new product announcements that Dave referenced on the release here.

Justin Clare

Got it. Okay. Okay. Appreciate that. And then I was wondering if you could maybe just speak to the visibility that you have into battery projects for 2024 beyond after you complete the NV Energy project, the Jupiter project, those are fully operational and what's next in the pipeline? And then are there key projects that need to reach NTP. before you could see awards get converted into the backlog and then you can start moving forward on projects?

Robert Piconi

Sure. Great question. We have a few projects between awards and bookings. That are essentially you have noticed to proceed dates, some of which are known in other cases and are being finalized. Some of this has to do with some of the supply chain time lines that are not for our scope but around things like Transformers, for example, in the market, which I know as you're probably aware, have some longer lead times breakers is another item. And we also have a set of projects that we can choose to own on our balance sheet that have attractive double digit IRRs. And so we're working on some of those relative to what I mentioned about on potentially continuing to own, not necessarily all, but part of those projects that has an impact on rev rec as well. So as you can see from the growth in the funnel itself, we have a lot of those sitting in that awarded category. We're finalizing the actual starts and therefore will be critical to the 2024 rev rec number. So we're we'll be in a better position to give an update on that at our Investor Day, just after our Q. one earnings on May eighth.

Justin Clare

Got it. Okay. And then just one one more on your gravity solution was wondering what's the latest on the route on project that's expected to be fully operational and in use in the near term here? And then a sense for the timing on when you could provide performance metrics, would that likely be at the Analyst Day? Could we see something sooner? And then any sense for what might be shared at that time?

Robert Piconi

Sure.
Yes.
We as I mentioned, we were stating or State Grid interconnected in December, and they are actively commissioning that system, especially now as things are warming up there and route on our CTO was just at the site 2.5 weeks ago, and we're expecting per their guidance to have in the second half of this month or in the coming weeks, some initial performance data. By the time we get to our Investor Day, we should have a good set of metrics for you on performance data that system as well as I think as we announced before, there is a second system that's up out of the ground we don't expect anything on that system because it will be nearing its completion for the second half of 2024 and into the first quarter 2025. So I would expect more significant updates, potentially even some videos of the operations of that system by the Investor Day. But as we get performance data on more than likely, we will be doing probably some announcement dependent on the robustness of the data and some of the timeframes on having accurate data in terms of the actual operation of the systems in the places Okay. Got it. Thank you.
Thanks, Justin.

Operator

Joseph Osha, Guggenheim Partners.

Joseph Osha

Yes, hey, everybody. Thanks for the detail. Yes, just to follow up a little bit on Justin's question. I believe I heard during your prepared comments, Rob, that you said full operation of these other systems following on were down this year. Or did I mishear that? I just wanted to make sure I understand what the expectations are for these other systems that are breaking ground?

Robert Piconi

Well, we have, as I mentioned, one system that's up out of the ground. I think we actually put that in our announcement. We did an update announcement during the quarter. This up about five floors right now. And Rudolph remains the focus in terms of getting full operational performance data as there I have to state grid interconnection, they're going through, Joe, the homologation process. They're now they've demonstrated inverse operation. These are all local announcements. They've made publicly. They're a public company. China tend to timing there. So I what I would expect is what I just outlined adjusted is initial performance data coming out in the coming weeks and months that again, as we get things third party validated, we will be sharing that. And then on the other projects that we've announced one ones up and out of the ground. And there's two others that have broken ground on the one that's up out of the ground. They might be able to get started on commissioning in Q4. The others will be 2025 in terms of operation commissioning as well of those systems.

Joseph Osha

Okay, thank you. On the next question, we haven't heard much about Todd Snyder, Texas for a while. I'm wondering what the story is there.

Robert Piconi

Yes. We're our collaboration with NL remains, and we're up out of the ground Insider. So we'll get a measure. We get pictures of some of the site and where we are there. We actually have a and a key customer and international customer that's there at the site with the team as well.
The other thing you all share with you, we haven't announced this publicly yet, but we are and in the interest of and now utilizing that site to also demonstrate other applications of our gravity technology. So Joe, we're going to be sharing more about that at our Investor Day, but there's no change in the collaboration agreement with Anadarko and enforcing what we're sharing with them on our progress in building up that site. What I'll anticipate to you, as I just mentioned, is we're going to be sharing what we're doing within other applications of gravity technology at that site and in line with our our discussions with them now.
Okay.

Joseph Osha

So I guess just to because this is a site that it's going to be easier for some of us to get to any sense as to when we might be able to roll up on that site and see it work Sure.

Robert Piconi

I would say Q3 would be a good time to get to the site and we might have some surprises for you there when you talk.

Joseph Osha

And then, Mike, my last question on your own. I'm trying to track all this stuff. I apologize. Are you made reference on your on your Q2, our call and your Q2 press release by two of our major project award with a major Southeast Asian sustainable energy company for two energy storage products totaling 500 megawatts to be booked in the second half of 23, probably I'm trying to understand whether there it is in your because that's a good chunk of business, right? Whether that's shown showing up in your 2024 backlog?

Robert Piconi

Yes, that that project is still in our awarded Poland. So it's not in a booking column. It's in our wording because that project is just awaiting final development. And there's a local study that was done in that on that continent and in that country on for that project. So it still remains in our funnel. It remains in the awarded category, and we're looking at trying to convert that within 2024, that may be a project. Also any one of the ones that we might look to help develop in line with some other comments Joe made about us looking at maintaining some equity ownership in some of the projects as they get developed through these tolling agreements on. But there's active work going on in the project the studies that have to be done, it's a country where on the grid operates a little bit differently as some special requirements and studies that have to be performed and those studies are underway funded and ongoing.
Okay.

Joseph Osha

And then finally, my last West, last last question, I do apologize, I'm trying to understand a little bit more detail what your roadways on this PG&E project on I assume they're not your electrolyzers. Are you integrating using plugs electrolyzers? Are they your batteries or RUDPCMZ.? I'm just trying to understand a little bit more what your role is in this project pair?

Robert Piconi

Our Alex plant, it's some essentially we designed this microgrid and the energy storage system with a combination of a hydrogen fuel tank. So to be clear, we are making the green hydrogen. We're procuring it. We designed and sized a hydrogen fuel tank. We announced this. We work with chart on that. We also, as part of the design work with plug on their fuel cell, so not the electrolyzers, but with the fuel cells themselves on to we architected the number of fuel cells. Combining with that with the hydrogen tank, we also architected in one of our B Vault. So to address the grid forming and Black Start capabilities that PG&E wanted. So we architected and designed this entire system brought some pieces to the table. And then we have our energy management system that's orchestrating the essentially the discharge and charging charging in terms of the small amount, there's a single container of our B volt lithium-ion combined with the and the green hydrogen and fuel cell aspect. And that is the project that we're building. We are that owner and EPC. So there's a separate company. We own it and we have a 10.5 year tolling agreement with Pacific with PG&E.
Okay. Thank you I could broaden the role of asset until we're managing the asset as well. Is that is that clear?

Joseph Osha

And I just heard you say I just heard you say that's a black store capable facility. I assume that's part of why they part of the attraction of this to peaking.

Robert Piconi

We offer black start. You have oil black started as a portion required is on this is a microgrid backup system. So to be clear, the use case here is something that's not going to be discharged frequently, probably four to five times a year on PG. and E. can probably speak better to that, but it's designed so that in the fire season, you'll you'll note, Joe, because I think you're up in that area, you'll remember that Calistoga was hit pretty hard and they had to shut down the grid until this microgrid. It can work stand alone. It actually is also interconnected. But the design of this is to be discharged during events of what they call PSPS any power shutdown or safety shutdown event. This thing will kick in. They don't need diesel generation anymore. The lithium-ion helps them with some specific services and even even ancillary power by the way that they can use daily. That makes sense.
Okay.
Thank you.

Joseph Osha

I understand that much better.
And I appreciate it.

Robert Piconi

Thank you.
Yes, no problem.
Okay.

Bernie Colson

And we have about 15 minutes left, and they'll still have a list of people to get through. So if if you can limit your questions, please to one and a follow-up. That would be great.

Operator

Thomas Boyes, TD Cowen.

Thomas Boyes

Appreciate you taking the questions. Maybe the first is the royalty structure for the gravity deal in South Africa, similar to the one in China, where it's like 5% royalty on the projects and then about $0.9 a 90% gross margin, just trying to get a sense of how that is situated it is.
Thank you. And then the on the other question was just obviously great progress in China, but I know in the EBS system in Texas is going to are slated to use wind blades and the block construction dry seems still on the table. Just wondering if you're seeing that type of demand for solutions in China or are they also looking to use waste materials and block construction something on the yes, on the direct impact on that.

Robert Piconi

Yes, just to share with you on what C. and TY. are kind of tightening funds are they are a waste remediation and environmental service company. So I mean, they do a lot of the standard waste management and have an incinerator and they are using that incinerated ash as part of their bread production as a part of our license with gravity. We are collaborating around other forms of waste materials like coal ash, for example, and even the wind blade, the shredded fiberglass wind blade that they can use there as well. As you know, there's massive wind deployments in China and about every 10 years, those blades and silver was called fatigue and the blades have to be replaced. And so that is a large opportunity for them. There are in China as well and the similar types of, let's say, reuse subsidies there. And China timing is a player, let's say, in that market. So they are they are required in some cases through their core business to utilize it. But specifically for the energy that was one of the synergies and that we have and that they have with our technology and working with them.
I appreciate I'll jump back in queue.
Okay. Thank you.

Operator

Chris Ellinghaus, Siebert Williams Shank.

Chris Ellinghaus

Hey, everybody.

Robert Piconi

How are you accurate data?

Joseph Osha

And Rob or whoever wants to talk about this, but the efforts that you undertook in the fourth quarter to sort of conserve your cash run rate, what sort of line items did you address in terms of reducing costs?

Robert Piconi

Great, great question. Because we focused in two areas, basically the controllable OpEx. So that's everything from our internal IT cost and internal infrastructure and things like and also our travel, all the things that are really controllable in that sense, but also and things that are related to our infrastructure. I mean, as an example, we're consolidating some things in Snyder, Texas as a facility since we actually own that site now and consolidating some infrastructure, for example, is we're winding down the the R&D facility that had our EFX. or YBX. and so has our EBS system there were finalizing some testing with the build up an outsider. We're going to be doing things there and we had some other things that were somewhat discretionary. We had other on projects, some of them were IT related. There were some R&D things also that we made some choices based on priorities that we saw in the market, which, as you know, in this market in terms of looking at different storage duration and different technology mediums were given our expertise across multiple domains and we invest and invest in a, I'd say, a strong way and in R&D and future energy storage technology. So there were some optimization, I'd say around that. So anything that was sort of controllable we addressed and we also addressed a bit on our given the business model on gravity, where we're essentially continuing to license the technology. That means what does that mean? We don't have to open up offices in places like what we announced for the the product, the 16 member countries in Southern Africa or in China in places because we don't have that and that and we don't have to staff up or keep a certain level of engineering team to go build things directly. They're built by other local EPC companies with our our technical support and guidance, but they're basically executing our partners in the regions. Because of that, we did adapt a bit our both our functional and engineering model to that model. And I'll translate Deca. They were an easy decision, but we did optimize and make decisions around hit some headcount level that were related to the expansion of our business model. And we proactively did that just looking at as you do as things evolve in the market and looking at and where our direct management is required on projects, in particular, these complex projects where we're integrating and our own equipment potentially other equipment and doing some new things that does require a little more hands on areas. We are accelerating some investments in some of the software capabilities. I mentioned that today so. So it was a combination of those things in terms of controllable on OpEx and some headcount related that it was just essentially an optimization of our matching our infrastructure costs and to that to our business model.
And then secondarily, Chris, I'd say that it's clear, given the market volatility in our sector and amazing to me, honestly, that with everything we've delivered in only our first two years. And with the revenue growth we've done in positive unit economics and making the adjustments we just made. It's amazing to me, I'm aware of where our stock continues to trade. So it is clear investors I've spoken on the desire to see accelerated road map to cash flow positive. And so with that also as a backdrop, we wanted to take actions in Q4 to enter 2024 at a at a lower cash OpEx rate to enable us to essentially accelerate that timeframe into the cash flow positive and we're going to be sharing much more on that and by region and some new products and things and providing color on some of the announcements made today on May eighth.

Joseph Osha

Okay, thanks.

Robert Piconi

That helps.

Joseph Osha

I assume that you'll sort of give us some kind of regional overview of where development stands and say domestically or I mean on gravity storage projects in general at the Investor Day. Is that sort of where you're headed along with some detailed guidance?

Robert Piconi

Yes, correct. Both of those and some other things, too. We have some new product announcements to make it tied to some new customer announcements. So we'll have a Yes, correct, absolutely. Those two.

Joseph Osha

And if I can give a little sub follow up on that will you have at the Investor Day, the ability to give us a little more color on this Washington State customer?

Robert Piconi

Yes, we're planning to on that. It's a we're really excited about it because of the nature of the application of the gravity technology. And that's tied to Chris, one of the new product announcements that we're going to be making and so we will be adding more color, one thing to share on these and some customers as they're as we're developing projects with them, okay, they have to go acquire land. So it. And we're very sensitive about sharing and naming themselves until they've acquired it. So it's not to drive up pricing on that land.
And when any time you speak about gravity you aren't talking about 10 acres, especially you're talking about large, large plots of land and things. So because of that, we are our customers will require we hold confidential their name until such time as they've acquired acquired the land.
That makes sense.

Joseph Osha

Yes, you're absolutely. I'm going to dig into that one myself, but I'm looking forward to the Investor Day. Thanks for the detail.

Robert Piconi

Thank you, Chris. Appreciate it.

Operator

Noel Parks, Tuohy Brothers.

Noel Parks

I just had a couple of quick ones. One of them is on with the storage market. It does seem that the last year in particular, we've seen like a greater investor awareness specifically of the role of intermittent power sources solar wind that destabilizing effect on the grid. And I'm just wondering as a driver of business to you, has that sort of ascended in importance is about the same?

Robert Piconi

Yes, I'd say that that continues to be I mean, it continues to widen what we're seeing in terms of what used to be a massive one to two, our market shifted to a two to four hour market. So the longer durations, meaning was more intermittency there and quite frankly, the severity of the of the weather patterns. And we are driving some of that and so we're that's going to continue over time. I would say, as you know, we've seen a tremendous drop in lithium ion prices and and even then, therefore, the ability for lithium-ion to be utilized and definitely it for hours and dependent on where pricing goes or any other new technologies that come, you know, I think there will be additional flexibility there but it's definitely this aspect of addressing intermittency is more renewables come on the grid and thus the need for storage. We haven't seen any any slowdown necessarily there. We are continuing to see, I think a a strong market in, you know, in shorter duration tech combined with very interestingly and needs that are in this eight to 12 our range for you know some specific applications. And as you know, we we can serve those things pretty pretty pretty broadly.

Jan Kees van Gaalen

Great.

Robert Piconi

Thanks.

Jan Kees van Gaalen

And then last month, when you disclosed the South African license deal I believe it was 20 million over 10 years, and it would be helpful if you have application just take a stab, maybe how many similar deals like that you can envision over the next year or two? Are we talking about a handful dozens and he doesn't pay?

Robert Piconi

Yes, no, it's not dozens. It's sub-10 because if you think about where where do we do those types of deals and we're going to do them in places where we can find very credible, reliable, large partners, ideally in markets where that are established that are experiencing growth, meaning where there's a defined market need to look at South Africa. I think that the things are fairly well, but I'd say they're about what they called load shedding which in California we sort of call rolling blackouts. And so there's an absolute need for the storage there. And I put in places where we prefer not to go set up shop. I mean, we're more of a technology provider. I'd say overall, although we have the ability to asset manage as we're doing now and Calistoga on, so I'd say that there would be definitely something if you look at over the next few years, there's other locations that it can be interesting for that model and in particular, say for gravity where Jure is think about it that all that is all local construction projects can be done mostly locally in some places don't have the other power electronics or they aren't making the big multi megawatt motors. So those may have to come in. But otherwise, because of the nature of it's a building and a construction project, it lends itself to on these types of business models. And it's I think it's from an investor perspective, it's interesting because there's and typically licenses that are paid upfront or in some cases or they're paid in cash over time. And then there's the royalties tied to volume. And I know it can be frustrating when you're new and you just do them in the timing of those royalties and understanding when are they going to come in as systems get built and turned over and specifically with gravity, obviously, we're talking about systems that take 12 to 18 months to build. So on. But those of those are coming, they are at quite a significant royalty percentage. I mean on revenue, 5% is the I'd say, toward the higher end of what you see and in or in royalty agreements. So it's something that we're going to be providing some indicators on in terms of when we expect those to kick in on some of the initial agreements going forward.
Great.

Jan Kees van Gaalen

Thanks a lot for.
All right.

Robert Piconi

Thank you.

Jan Kees van Gaalen

Okay, thank you.

Operator

There are no further questions at this time. I'd like to turn the call back to Robert Piconi for closing.

Robert Piconi

I'd just to thank everyone for joining and their time and again, to thank the employees of energy Vault and what we achieved in 2023 and what we're looking forward to here in 24 and 25. So I'm just I think the the employees of the company and those of you that have joined and have been supporters of of energy Vault. We thank you for that are the investors there, and we'll look forward to hopefully seeing some of you on post our Q1 earnings May seventh, we'll be speaking again then and and potentially in person on May eighth in New York. Thank you very much.

Operator

This concludes today's conference. You may now disconnect your lines. Enjoy the rest of your day.