Excelerate Energy Inc

NYSE:EE

Earnings Call Analysis

Excelerate Energy Reports Strong Growth and Positive Outlook

Excelerate Energy reported robust financial performance for Q2 2024, with adjusted EBITDA reaching $89 million, up 18% sequentially. The company increased its 2024 full-year adjusted EBITDA guidance to $320-$340 million. Key growth projects include a new FSRU delivery in June 2026 and strategic LNG investments in Vietnam and Alaska, projected to start operations in 2027 and 2028, respectively. The company maintains a strong balance sheet with $609 million in cash and remains committed to shareholder value through an active share repurchase program.

Strong Financial Performance

Excelerate Energy reported substantial growth in its second quarter results for 2024. The company demonstrated a solid adjusted EBITDA of $89 million, reflecting an impressive increase of $14 million or approximately 18% from the previous quarter. This growth was notably influenced by the FSRU Summit dry-dock expenses being accounted for in the first quarter, setting the stage for improved performance moving forward.

Investments and Debt Management

The company continues to prioritize investments in its fleet, showcasing a maintenance capital expenditure (CapEx) of $21 million for the quarter. Year-to-date, the total maintenance CapEx stands at approximately $32 million. This strategy aims to uphold reliability in its operations. As of the end of the second quarter, Excelerate's total debt reached $734 million, contrasted by a robust cash position of $609 million, alongside almost the entire $350 million available from its revolving credit facility.

Share Repurchase Strategy

Excelerate's ongoing share repurchase program is notable; during the second quarter alone, the company repurchased 674,000 shares, amounting to $11 million at a weighted average price of $16.27 per share. As of now, 40% of the authorized $50 million program has been utilized, affirming the company’s commitment to enhancing shareholder value.

Ambitious Growth Outlook

The company has revised its adjusted EBITDA guidance for 2024 upwards, now anticipating a range between $320 million and $340 million. Alongside this, expected maintenance CapEx for the year is projected between $50 million and $60 million, with growth capital commitments estimated between $70 million and $80 million. This growth capital largely pertains to investments in the new-build FSRU Hull 3407, which is scheduled for delivery in June 2026.

Strategic Expansion Initiatives

Excelerate targets three main areas for value creation: acquiring LNG re-gasification terminals, diversifying its LNG portfolio, and investing in downstream natural gas infrastructure. Among its key projects are the Northern Vietnam LNG terminal, which will have a 1.2 million tonnes per annum capacity and is expected to begin operations in 2027. Further, the company is making strides in South Central Alaska, where it seeks to develop an LNG terminal to cater to the region's projected gas supply needs by 2028.

Technological Advancements

Excelerate is integrating modular re-liquefaction technology into its fleet, which is designed to enhance operational efficiency by recovering excess boil-off gas. This investment not only reduces cargo volatility but is anticipated to bolster revenue generation significantly. The technology will be available for deployment in about 18 months, making it a valuable addition to the company’s operational capabilities.

Market Context and Future Prospects

Despite recent political changes in Bangladesh affecting project timelines, the underlying demand for natural gas remains robust. Excelerate continues to express confidence in its ability to meet energy demands in the region, suggesting a long-term commitment amidst transitional government dynamics. As the LNG market evolves, the company is strategically positioned to leverage its assets in response to growing global gas demands.

Conclusion: A Bright Future Ahead

In summary, Excelerate is experiencing a period of significant growth, marked by a strong financial performance, strategic investments, and ambitious expansion plans. The company’s adept handling of its financial obligations while simultaneously pursuing new opportunities indicates a well-rounded approach to navigating the challenges of the energy sector. For investors, this paints a promising outlook as Excelerate continues to position itself as a leader in the global LNG market.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning, all, and thank you for joining us for the Excelerate Energy Second Quarter 2024 Earnings Conference Call. My name is Karli, and I'll be the call co-ordinator for today. [Operator Instructions] I'll now hand over to Craig Hicks, VP of Investor Relations to continue.

[Craig Hicks, executive]

Good morning, everyone. Welcome to Excelerate Energy's Second Quarter 2024 Earnings Call. Participating on the call today are Stephen Kobos, Chief Executive Officer; and Dana Armstrong, Chief Financial Officer. Also joining the call today are Oliver Simpson, Chief Commercial Officer; and David Liner, Chief Operating Officer.



Our second quarter 2024 earnings results press release and presentation were released yesterday afternoon and can be found on our website at ir.excelerateenergy.com. I would like to remind everyone that we will be making forward-looking statements on this call that involve a number of risks and uncertainties. Our actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update or revise them. Today's remarks will also refer to certain non-GAAP financial measures. We provide a reconciliation to the most directly comparable GAAP financial measures at the back of the presentation. With that, it is my pleasure to pass the call over to Steven Kobos.

[Steven Kobos, executive]

Thank you, Craig. To all of you on the call, good morning. Today, I will share with you a story of strength. Strong financial results, strong operational performance and strong execution of our strategy. On the financial side, we delivered $89 million of adjusted EBITDA in the second quarter. Our robust FSRU and terminals contract portfolio and our ability to meet our customer commitments, create the foundation for a compelling financial performance. In operations, I want to take a moment and Salute Excelerate's global team. They focus every day on providing critical services to our customers and operating at the highest levels of safety. I'm extremely proud of this team. When it comes to execution, we are doing what we said we would do. The Excelerate team continues to make great progress towards our plan to grow our company and maximize value for our shareholders. Now I'll provide a recap of our business strategy and an overview of the progress we are making. Then I'll turn the call over to Dana for more on our financial results.



Let me recap our strategy. We are operating and optimizing our core re-gasification business. We are executing our comprehensive growth road map, and we are focused on 3 key areas for value creation. First, acquiring ownership interest in LNG re-gasification terminals. Second, establishing a diversified LNG portfolio; and third, investing in downstream natural gas infrastructure. We are advancing our plans to expand our fleet. Our new-build FSRU Hull 3407, remains on schedule for delivery in June 2026. Engineering and fabrication work on 3407 are underway and the next major milestone in construction, steel cutting, set for October. We are confident that we will place Hull 3407 with one of the projects in our pipeline. Several of these projects would be an ideal fit for 3407.



As an operator of one of the largest FSRU fleet in the world, we remain bullish on the asset class. Part of our strategy in investing in our fleet is to meet our customers' needs for efficiency, reliability and sustainability. We've got a great example of this with our plan to integrate modular re-liquefaction kits onboard our vessels. These will improve the overall efficiency of our operations. Pleased to report we have placed an order for rejig kits and are prioritizing it for integration into our fleet. Now purpose of the re-liquefaction kit is to recover excess boil-off gas by re-liquefying and storing LNG in the cargo attacks. It also helps prevent the loss of LNG cargo volume. This means that the energy value of our cargo can be productively used by our customer and not wasted. This technology will enhance the value of the services we provide our customers. It will create opportunities for increased revenue generation, and it's going to support development of the re-gas projects in our pipeline.



You'll remember that last quarter, we shared with you a prioritized list of growth opportunities. These projects expand the downstream LNG value chain and range from terminal ownership to fully integrated solutions. Today, we want to share 2 tangible peak points of our progress. First one is a strategic investment we are making to enter the Vietnamese energy market. In [ Suning ], Excelerate signed a term sheet with a [ Tecajoint ] stock company, a Vietnamese-based private development company with whom we're going to develop a greenfield LNG import terminal in [ high fog ] Vietnam. The Northern Vietnam LNG terminal for NVLT is anticipated to be the first LNG terminal in the region. Vietnam, as you know, is expected to have one of the fastest-growing economies in Southeast Asia. Hanoi, capital city located in the North, and this offers an enticing entry point into the country for Excelerate due to its rapid industrial breadth.



As domestic production declines, these industrial complexes in the north provide a foundational base of customers with a ready need for LNG, which will play a pivotal role in their energy mix. The planned LNG import terminal will have a total import capacity of 1.2 million tonnes per annum constructed in 2 phases. Phase 1 of NVLT will have a capacity of 0.7 million tonnes per annum, and we expect operations to commence in 2027. We Second point of our value creation strategy is an integrated solution that is going to allow for the delivery of natural gas supply into South Central Alaska. For over 50 years, the South Central region of Alaska has relied on Cook Inlet natural gas for most local heating systems and electricity generation. But with domestic gas reserves in the Cook Inlet area declining, the region will need to import LNG to meet its anticipated local natural gas needs from 2028 onwards. Excelerate is in advanced discussions with local utilities in South Central Alaska for the development of an integrated LNG terminal in the lower Cook Inlet region.



Excelerate with the FSRU based terminal, source LNG supply is required and sell gas to liquid utilities and other off-takers. Start of commercial operations is targeted for 2028. We talk often with many of you on this call about our efforts in LNG markets all over the world. I can assure you that as an American company, it feels great to bring the critical services we provide to customers here in the United States. Let me sum this up. Once again, when it comes to our strategy, we're doing what we said we would do. We look forward to sharing even more information about the NVLT project, Cook Inlet project and other projects in our pipeline with you in the future. Before I turn the call over to Dana, I want to address the current situation in Bangladesh.



As many of you have seen, on Monday, the Prime Minister resigned, and a caretaker government is currently being informed. During this time, safety of our team members, is and remains our top priority. All of our people are safe. The continuity of our operations is of utmost importance for the country as a long-term partner of Bangladesh, we continue to operate as usual. As an American company that provides essential energy services to the people of Bangladesh. We are confident we will continue to play a vital role in helping to meet the energy needs of the country. With that, I'll now hand the call over to Dana for a deep dive into our numbers for the quarter.

[Dana Armstrong, executive]

Thank you, Stephen, and good morning, everyone. As Stephen said, we are pleased with our second quarter financial results. Adjusted EBITDA for the second quarter was $89 million, up $14 million or up about 18% versus last quarter. The sequential increase in adjusted EBITDA was driven by the impact of the FSRU Summit dry-dock, which occurred and was expensed in the first quarter of 2024. As a reminder, because the FSRU Summit is under a build, own, operate transfer or boot structure. The majority of the dry dock costs were expensed last quarter through the income statement instead of being recorded as maintenance CapEx to the balance sheet.



We continue to invest in our fleet to ensure that we consistently operate at the highest levels of reliability, doing so essential to maintaining a best-in-class fleet of vessels. Our maintenance CapEx spend for the quarter was $21 million and year-to-date through the second quarter, we spent roughly $32 million on maintenance CapEx. As of the end of the second quarter, our total debt, including finance leases, was $734 million. We had $609 million of cash and cash equivalents on end and roughly all of the $350 million of capacity under our revolver was available for borrowing as of quarter end. With the free cash flows generated by our core re-gasification business, our stellar balance sheet and the liquidity provided by our revolving credit facility, we remain confident that we have more than sufficient capacity to fund our near-term growth and strategic objectives.



As an update on our share repurchase program during the second quarter, Excelerate purchased 674,000 shares or $11 million of our Class A common stock at a weighted average price of $16.27 per share. Through the second quarter, we've utilized 40% of the $50 million share re-purchase program that was authorized in early 2024. We will continue to take an opportunistic approach to the share re-purchase program throughout the remainder of the previously authorized 2-year tenure, which runs through February 2026. Now let's turn to an update on our financial guidance for 2024. We are raising our previously communicated adjusted EBITDA guidance for 2024. For the full year, we are now expecting adjusted EBITDA to range between $320 million and $340 million. For the full year, we continue to expect maintenance CapEx to range between $50 million and $60 million and committed growth capital to range between $70 million and $80 million.



The majority of our committed growth capital range is related to capital spend on our new- build FSRU, all Hull 3407, including a 15% milestone payment due to the shipyard in the fourth quarter of this year. As a reminder, committed growth capital is defined as capital allocated and committed to specific investments for previously approved capital projects. For the projects that we talked about today, plus the others in our pipeline, once we signed definitive agreements will layer in the incremental estimated capital spend into our committed growth capital estimate at that time. With that, we'll open up the call for Q&A.

[Operator]

[Operator Instructions] First question comes from Chris Robertson of Deutsche Bank.

[Christopher Robertson, analyst]

Steven and Dana, this is related to the Alaska proposal. I know one of the concerns that the utilities up there have had is the kind of the extreme tidal ranges that happened in the Cook Inlet and the operating environment there as it relates to an FSRU. In these discussions, have you guys discussed that particular problem and kind of proposed a technical solution that would sway their fear around that issue?

[Steven Kobos, executive]

I'll lead off there, Chris, and then hand it over. Also joining Dana on me in the room today are Oliver Simpson, our Chief Commercial Officer; and David Liner, our Chief Operations Officer. So I'll take a crack and then hand it off to David. But we're well aware of conditions in Cook Inlet. Let's face it. We have embraced tough conditions all over the world. Most of our fleet was designed for the North Atlantic. We deal with cyclones in the Bay of Bengal. We have been in all kinds of extreme weather. We're well aware of the tidal conditions of Cook Inlet. We believe that there are suitable technical solutions for that to provide the sort of reliability that is essential to any of these projects. Energy needs to be reliable. But David's team ultimately will be involved with that. So Dave, do you want to add some insight?

[David A. Liner, executive]

Yes. It's certainly an issue that's on our radar screen, and it's going to be a challenge for the project, no doubt. There are existing facilities in the area that are similar to what's proposed for this project. So we feel fairly confident we're going to be able to develop a technical solution. As Stephen says, we do this all over the world in similar challenging environments. This one is a little bit down. But it's a technical problem. We have the engineering capabilities. We have a really strong engineering team that can develop a solution that's appropriate for the conditions that are there at the site. So yes, we're fully aware of it and confident we can work through it.

[Christopher Robertson, analyst]

I guess turning to other parts of that project, would this be part of a, I guess, conversion of the existing Kenai LNG export facility? Or is this imagined as a new location?

[Steven Kobos, executive]

I'll hand this to Oliver Simpson for a little more color, but the answer to that one is pretty crystal I think.

[Oliver Simpson, executive]

I think we're focused on delivering a solution to the customers in the region. I mean, I think you just heard from David, we have some ideas on the technical solutions. We'll continue to work with our partners there. There's a number of options to the technical solution. I mean I think for us, ultimately, it's a product that has re-fundmentals. There is we see the demand for gas in the Cook Inlet region, and that's what we're focused on. We'll work on the best technical solution over the course of the project.

[Christopher Robertson, analyst]

I guess last question related to this, the utilities group up there and put out a study with a kind of a cost estimate around $700 million for an FSRU solution. Is that a fair starting point or some type of CapEx assumption? Or do you guys have any guidance as it relates to what you think the project might cost?

[Oliver Simpson, executive]

I mean we're not in a position if I could comment on the cost, but typically, we come in well below that. As you guys know, Craig is looking at our other facilities.

[Operator]

Our next question comes from Theresa Chen of Barclays.

[Theresa Chen, analyst]

On the Northern Vietnam onshore terminal project, can you just add a little bit more color on the genesis of this project, how long you've been in the discussion related to this? What got it across the finishing line? Any potential economics to think about and other potential projects like this in emerging markets that you're assessing right now?

[Steven Kobos, executive]

I'm going to hand this to Oliver Simpson. It's good to hear from me, by the way. I'm going to hand it to Oliver. I think what I want to say, though, in general, we're giving you guys a peak at different types of projects using different types of assets. We've told everybody we love FSRUs, but we're not wed to them if that's not the right solution for a particular project. In terms of Vietnam in general, we've been looking at Vietnam forever. Over time, I think, I don't know, they've been, when you look at all the gas to power to the south and everything else, I think at one time or another, there have probably been more than 50 projects proposed, but we've been patient. We've been a little counter intuitive into what we think will cross the post first time in terms of demand and the like. But Oliver, closer to Vietnam. Why don't you take a run at it?

[Oliver Simpson, executive]

I think as Steven said, we've been looking at Vietnam for a while that there's been a number of projects. Stepping back, the prospect for LNG in Vietnam, we're extremely bullish on. I think when we saw this project, the fundamentals Steven said in his remarks, the fundamentals and notes would be the first LNG terminal up there. This is based on industrial demand that's there today. It's not the LNG to power projects, which we believe in, but we think have a slightly longer time line potentially. So we looked at the number of projects, but we felt that this one had the right attributes for us. Importantly, to your broad question is, we think of projects like this is an integrated project where Excelerate brings its international expertise. We can bring our LNG supply portfolio and deliver gas and LNG solutions to these customers. That's what we're doing here in Vietnam. That's what we said we're going to do, but that's also what we're looking to do in other projects around the world. So I think this is a good poster child of the type of projects that we're looking at.

[Theresa Chen, analyst]

Maybe turning to capital allocation. Just with the visible growth ahead of you, while still executing the share purchase plan. What is your updated view at this point on balancing growth endeavors, returning cash to shareholders while still optimizing liquidity of the stock and maintaining a healthy balance sheet.

[Dana Armstrong, executive]

So I'll just reiterate what we said before. Obviously, growth is our priority. We have several projects. We've talked about these projects. In the last quarter call, we just highlighted a couple of other projects in more specifics. We'll continue to maintain our best-in-class fleet. So CapEx on our projects and CapEx for our growth increase and for our existing fleet as well as the new additions. Obviously, we have all Hull 3407 come out 2026. That's our priority. We will continue to maintain our dividend. We will look at potentially increasing that dividend when the time is right. Right now, our focus is on growth. As far as the share repurchase. We're very pleased with where we are there. We've executed $20 million of the $50 million that program runs until February 2026 and we'll continue to use it opportunistically when it makes sense for us based on the share price and other factors

[Operator]

Our next question comes from Wade Suki of Capital One.

[Wade Suki, analyst]

Would you mind giving us a sense, I think you answered it already, but what kind of vessel requirements might be required for maybe Alaska or some of the projects that are further up in the queue to whatever extent you feel comfortable in discussing that?

[Steven Kobos, executive]

From our chart we shared last time, we showed some FSRU projects. Some are new building-type projects. Some are going to have lower send out will likely be a conversion and kind of TBD on the specific here, but we do recognize that not all of these projects required enormous send outs. So we'll tailor the vessel for the circumstances. But we do intend to grow our fleet. That is part of this pipeline, and we will grow it in the right way. I guess I can't tell you we continue to evaluate different ways to grow that fleet. I mean, it's a bit of an obsession right now.

[Wade Suki, analyst]

Industry-wise, do you know how many FSRUs are under construction today? I guess if you ordered one today, when do you think delivery might be?

[Steven Kobos, executive]

There are 2 new buildings, I guess, under construction. Actually ours is in fabrication and has steel cutting in October. In October, if you ask me, there will be one that's had steel cutting. So maybe that's how I answer that. In terms of when you can get one, I know that, but I don't want to tell the world. So it's a while, but we're happy with how we can grow the fleet.

[Wade Suki, analyst]

One last one, if I could. I'd love to just hear just from a commercial sense, what the tenor is like maybe more recently with the customers and how that's changed here in the last few months given all that's going on in the world?

[Steven Kobos, executive]

I mean, you're not talking to our average remaining life of contracts, right? What's your question get to?

[Wade Suki, analyst]

Really thinking about new projects. I know following Ukraine and Russia and the gas price spike, we had a little bit of a pause. I'm just kind of curious if the sentiment or psychology to what extent that might have shifted here in the last few months given gas prices, things like that, a global LNG prices, geo-political all those other

[Steven Kobos, executive]

I'm going to hand this to Oliver. I'm going to make a couple of just big statements that are gospel for us, and that is the world understands that LNG is a critical fuel. The global South sees LNG as affordable as a critical fuel. The whole world sees it as affordable as a suitable bridging fuel. As your first question to us made clear, there remains a tight within the asset class to re-gasify LNG beyond the terminals that are out there right now, FSRUs are a tight asset class. So I'll leave it at that, but Oliver you're closer to the customer.

[Oliver Simpson, executive]

I think that's exactly right. I think what we've seen is the customers are on the back of the war in Ukraine, the customers are now coming back. There's LNG, there's a strong pipeline of LNG coming online in the coming years. So you're seeing LNG as an affordable fuel again. We're seeing that the customers are coming to us and they're wanting that integrated solution with the LNG and what we can provide. So I think we feel strongly we have a great product to offer our customers. We're seeing demand for it. I think we're picking markets that have the fundamentals. So these are markets that need the LNG, you need the gas for a long time. So we're selective on where we're going, but we see that long-term need.

[Operator]

Our next question comes from Mike Scialla of Stephens.

[Michael Scialla, analyst]

Just trying to characterize the 2 projects that you announced here. You said last quarter that 10 of the 12 were kind of in that $50 million to $400 million range, somewhere 2, I guess, Payra, one of them was longer term and above that range. Is it fair to characterize these 2 as kind of toward the higher end of that range and longer term? Just trying to get a sense of how they fit into the pipeline.

[Oliver Simpson, executive]

I think they're certainly in that range. I think, obviously, each project has its own fundamentals. But as we said in the case of Vietnam, we're extremely bullish on the need for LNG in that country. The project is an integrated project, providing gas to customers downstream. So we expect to be there for many years. I think Alaska, it's similar to different fundamentals, but also there's a need for LNG in the region. Again, we're looking at this from an integrated point of view.

[Michael Scialla, analyst]

I guess looking at the remaining projects in the pipeline, what would cause you to unveil those. Is it getting the term sheet like you have in Vietnam or something else that would be required before you could talk about them.

[Steven Kobos, executive]

We want to be as transparent with you guys as possible, short of inviting you guys to travel around the world and sit at conference room tables with us or walk around side. So we want to be as transparent as we can. But we think it's important, as we said last time, we'll come to you guys when we've got tangible proof points. We want as much transparency as we can. We want to show you as much consistency as possible. These just happen to be unfolding. It's all a horse race, and these horses happen to be ahead at this point in time. We also thought they were good in showing the whole range of opportunities that we're looking at geographically. We had hinted last time that we were looking at the Americas that might have been too faint bread crumbs. So we wanted to make clear that we are looking all over the globe, and that includes US of A when it's appropriate. So we just thought they were interesting proof points, and we were advancing them coming into the quarter in a way that felt like it was comfortable to talk about them. We'll try to continue that.

[Operator]

Our next question comes from Bobby Brooks of Northland Capital Markets.

[Robert Brooks, analyst]

I just want to start off with the re-liquefaction technology that you guys are integrating to your current FSRUs. It's a really interesting way to uplift revenue generation on your current footprint. So what I was curious to hear about it. First, how quickly can that technology be added to your current FSRU footprint? Then secondly, once that is added, how quickly can you see a financial benefit? Is that something where you need to go back to the customer and re-negotiate the contract? Or is that something that is that something that's already baked into those new contracts? Maybe if you could just give a sense of how incremental the financial benefit would be that would be appreciated.

[Steven Kobos, executive]

I'll take the last point. In general, yes, we're going to have some communication with the customer. It's a great benefit, but we're not in the business of giving things away for free. So it's a nice piece of kit. We think a customer, it will pay for itself, many customers easy within a year. So we think they'll value it, and we think they're going to fly off the shelf. David can talk about timing on it. We're excited. This is going to lower emissions of our fleet. Of course, we're excited about it. Yes.

[David A. Liner, executive]

To build on that, in terms of time line, so the lead time for this equipment is about 18 months. We want to buy this equipment or we have bought this equipment now so that it will be ready and available to deploy as soon as our customers decide they want to employ it. As Steven says, we know that there's strong demand for it. By buying it now, that enables us to save our customers from having to make a decision 2 years in advance that they want this technology. So we're cutting the implementation time down from a couple of years, down to a series of months to be able to deploy this from the time a customer says, yes, we're ready to go. So yes, roughly 18 months from now, as early as 2026, we could be able to deploy the technology to an existing vessel or something coming into the fleet as well.

[Robert Brooks, analyst]

You said that you've already bought these the items. Have you bought enough for all 10 or 11 FSRUs because that's what you guys have come to in 2026 or you only bought it for a half? Or any color on that?

[Steven Kobos, executive]

We've done our engineering. We've done our design work. We've done the work to ensure that it's plug and play across the different class of vessels within our fleet. But we placed our initial orders. We expect as we get further customer traction, we will continue this. We're not aware of any other FSRU that has one of these kits on it out there in the world. David's team does accept about our fleet being best in class. We are determined to keep it best in class. You can look over time for us to put it across the fleet. I don't want to get into the sausage making. There are 2 or 3 vessels that are used in a way that maybe it's not as useful as it is for the way that most of our customers use their vessels. So it shouldn't be surprising how people use these assets, vary. But over the long run, I'd look to put it on, I don't know, 6 or 7 of the fleet probably.

[Robert Brooks, analyst]

Then so the opportunity set for Excelerate is vast going forward just with these growth opportunities and new projects, and you guys have roughly $960 million of dry powder, add that to you guys are producing $50 million to $60 million of quarterly free cash flow. Then finally, layer in your expertise in history in importing LNG. So you feel you are well positioned to capitalize on the best opportunities in front of you. What I'm trying to get a sense of is, what are the constricting factors for you going forward? Do you see the $960 million of that dry powder as the limit in terms of what you'd be comfortable putting towards growth or maybe something else? It really seems like the fact the limit here for you guys.

[Steven Kobos, executive]

That's true. I do feel in all seriousness, there's an enormous TAM out here. It is enormous. We don't need all of it. We don't want all of it. It was kind of picky. We do think there are a lot of markets with the great fundamentals that we're looking for. I think what you've seen from our proof points today, just a reminder, we are carefully looking all over the world for the right market, the right chance to advance our business model, not just chasing some projects somewhere whose dispatch doesn't make sense. So I do think, over time, we are incredibly well positioned with the tools, including our dry powder that we have to bring to bear. So I think the TAM is so big that we're going to be able to kill it while still being selective.

[Robert Brooks, analyst]

Last one for me, just a clarifying point. It seems like just reading through how you guys talked about the VNLT, the Vietnam the North LNG import terminal that you guys just talked about. Would you be selling gas to actually those industrial factories in the market? Or would you be selling it to utilities? I just kind of wanted to get some clarity on that, like who would be the customers off taking the gas.

[Steven Kobos, executive]

I think we don't want to get into too much details on the commercials here. But essentially, the idea, as I mentioned, it's an integrated terminal where we will be providing the LNG to that terminal and the terminal company that we're in, that we're partnering will be selling gas and al LNG out of the terminal to local customers, local industries. Over time, we'll see exactly how far downstream we are, but we do see that there is demand for the product from the terminal. I think I'll sort of leave it at that.

[Robert Brooks, analyst]

So healthy amount of demand, not through utilities, but probably more industrial players there.

[Operator]

Our next question comes from Puneet Satish from Wells Fargo.

[Puneet Satish, analyst]

On Payra, do the political changes in the region and potential prime ministerial candidates? Does that have any bearing on support for this project? Then just broadly, where does Payra stack now versus some of the other opportunities you're looking at here with Vietnam, Alaska and all those other projects in the backlog?

[Steven Kobos, executive]

I would say what I'll tell you about Payra tell you about the market is nothing really changes about the need for natural gas in Bangladesh. The supply-demand balances, the decline curve and their historic onshore production, all those fundamentals are there. So the need remains. But at this point, we're less than a week into a change in government. We don't have the caretaker government lineup, filled out yet. So clearly, any time you're dealing with a counterparty who's a state energy company like Petrobangla they're going to need a remit from a government to proceed with it. That will take a little while. We will continue with some of the efforts that were ongoing this year. Some of the MetOcean, we've got a MetOcean buoy out there. We're doing all kinds of things to assess what the needs are. We're going to keep doing that because we need to, but things will ebb and flow on that pipeline. Everything doesn't proceed at a uniform pace. That's why you want and why we have a robust overall pipeline. But let's not forget, Harvest 1 of 12. That's why we came to you all last quarter, 1 of 12 projects in our pipe. That's why we are trying to give you all more color, more detail, more proof points, just so you guys have better visibility into what's really going on here at our conference rooms day to day. So I think it's obvious that there would be some slowdown because we don't even have a government yet. Fundamentals are still there. I think there's a great opportunity in country for an American energy company to keep providing ever more energy for the people of Bangladesh. So I like our prospects long term.

[Puneet Satish, analyst]

Then how are you weighing at this point, organic investments versus M&A? Clearly, you've got a robust pipeline here of organic growth opportunities. So how are you kind of thinking about the balance between the 2? Do you think there's more of a bias now on organic investments over M&A? Just curious for your thoughts.

[Steven Kobos, executive]

I don't want to make light of it, but we like the deals that we'll make. We like fundamentals, and we don't really care how they get served up. We know what we like to do. We know we're a critical part of the energy transition. We know LNG is affordable. We know LNG needs to find a home. We know most of the world and most of the big players are focused on liquefaction and building their supply portfolios. We are the ones opening markets and finding a way to take that LNG and get it where it needs to go. So we know that's what the need is. What tool you use to bring us to the table and fit into that value chain, we're going to be agnostic to.

[Operator]

Our next question comes from Zach Van Everen of TPH.

[Zackery Van Everen, analyst]

Just going back to Alaska. I note you guys are in advanced discussions. I guess what's the time line and when you put pen to paper there? What are you looking at as far as getting over that hurdle for that project.

[Steven Kobos, executive]

Yes. I'll pass that to Oliver, because I'm impatient. I always want yesterday, but I'll let the folks actually facing the customer speak to that.

[Oliver Simpson, executive]

Yes. I think, look, the time line we announced a project with a time line start-up of ‘28. We think that, that's achievable for the project. So obviously, I think you can back out of there sort of a rough idea of what sort of time line we'd be looking to get into definitive contracts. It's obviously there's a process we've got to go through in the region. I don't think we're going to speak to a specific time line here, but we'll keep working with our partners, and we're confident we can move this along fairly quickly.

[Steven Kobos, executive]

The decline curve for the Cook Inlet domestic production is a real thing moving at a real pace though, right? That's going to drive the need on the timing for papering the approvals to everything else because there is going to be a need for this bridge. It's going to have to happen.

[Zackery Van Everen, analyst]

Then between the 2 projects, I know on the Cook Inlet project, you note that the gas sales will have take-or-pay style obligations for Vietnam and Alaska, is the majority of these terminals plan to be take-or-pay? Or will you open up some marketing or commodity exposure with these?

[Oliver Simpson, executive]

I think what we're looking at on these types of projects is to get the right level of anchor customers that support the project. We're always interested in trying to see upside opportunities. But we're not looking to take commodity risks in these markets. So they're going to be underpinned by the customers that allow us to take FID. Then we'll be looking different markets will have different growth prospects, but we'll be looking to take those opportunities on the growth side.

[Operator]

Our next question comes from Craig Shere of Tuohys.

[Craig Shere, analyst]

I want to dig a little deeper in the way to our capacity question. Maybe you could speak to availability of shipyard slot, the timing differences between new build and conversion, how you think about conversion because you've talked about it for maybe a couple of years or more, but up until now, you've only done new build. Then on top of that, FSRU capacity is critical. Obviously, that's not the only thing you do, but that's critical. But what are your thoughts about the need for more long-term LNG supply beyond your venture global contract?

[Oliver Simpson, executive]

I will take some of your 6 questions and then I'll pass it around the table. You don't know how long we've talked about Vietnam. We talk and look for opportunities for a very long time. We have talked about conversions for years. We will pull the trigger on that depending upon the project. We are bullish on the asset class of FSRUs. By the way, we love being able to geek out, design bespoke new buildings that we know what we need, okay? We think 3407 is going to be the best-in-class asset of float. We want more of those, too. Conversions are a significant project, and it's got its own execution risks just like every other major project, but the reality is there will be some that are suitable for it. I can't tell you what the sequencing will be on when we move to access a conversion candidate versus a new building. I mean, as soon as we can give you visibility to that, we will, because it's a key element of transparency. What I tried to tell you guys is just not faltering on our view on this. Our view on the TAM, our view on being able to get LNG into these countries, our view on how valuable this asset class is, our view on how sticky that infrastructure will remain in Europe, by the way. We're pretty consistent on everything we say all around that. From that, you can no doubt define our intentions. But you also have some questions about the portfolio. I think that was your fifth or sixth question, so I'm going to toss 5 and 6 over.

[Steven Kobos, executive]

I think the sort of the proof points we gave today look in and NVLT, great opportunities for us to expand the LNG portfolio. We've talked about the LNG portfolio. I think we had some great successes last year with our inaugural sort of long-term deals there. Now we've got volumes, we're able to bring solutions to our customers now with the LNG when we go into these markets. We're going to grow that portfolio as the projects come online. So it's a bouncing act between growing the supply as the demand is there. As I mentioned earlier, we see there's a lot of LNG coming online. We've got some great relationships, great partnerships out there. So I think what we're doing opening these markets, we're going to have plenty of opportunities to grow that portfolio.

[Craig Shere, analyst]

Just to clarify on the timing difference between new build and conversion as we think about backing into project-specific time lines.

[David A. Liner, executive]

There is a difference in execution time, a new build on the order of 3.5 years, can be a little bit shorter than that. Conversion times are generally less than that, but there is the execution risk that goes with a conversion, as Steven mentioned before. That's always something that we're always managing those 2. When we're looking at a prospective project, you have to understand that execution time line and the capacity of the vessel that you want to employ before you want to pull the trigger on a conversion or a new build. Of course, a new build is generally going to be a much higher capacity vessel than a conversion. They're going to be more appropriate for a smaller [ Syndo ] type project. So it just depends on which project your conversion would be. Conversion would be more appropriate for a smaller center. Or a smaller set yes. I hope that helps great.



We currently have no further questions. So I would like to hand back to Steven Kobos for closing remarks.

[Steven Kobos, executive]

I really appreciate the conversation that we have today with Dana and Oliver and David and me, and it's always a pleasure to get with you guys. The questions we got about our strategy in Vietnam, what we're doing in Alaska and our overall value creation strategy. We will continue to be transparent with you guys. We will continue to do what we say we will do. With that, thanks very much for your time.