Earnings Call Transcript - FTEK Q3 2024

Devin Sullivan, Managing Director

Thank you, Rob. Good morning, everyone, and thank you for joining us today for Fuel Tech's 2024 Third Quarter Financial Results Conference Call. Yesterday, after the close, we issued a press release, a copy of which is available at the company's website, www.ftek.com. Our speakers for today will be Vince Arnone, Chairman, President and Chief Executive Officer; and Ellen Albrecht, the company's Chief Financial Officer. After prepared remarks, we will open the call for questions from our analysts and investors. Before turning things over to Vince, I'd like to remind everyone that matters discussed on this call, except for historical information, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934 as amended, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and reflect Fuel Tech's current expectations regarding future growth, results of operations, cash flows, performance and business prospects and opportunities as well as assumptions made by and information currently available to our company's management. Fuel Tech has tried to identify forward-looking statements by using words such as anticipate, believe, plan, expect, estimate, intend, will and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to Fuel Tech and are subject to various risks, uncertainties and other factors including, but not limited to, those discussed in the company's annual report on Form 10-K in Item 1A under the caption Risk Factors and subsequent filings under the Securities Exchange Act of 1934 as amended, which could cause Fuel Tech's actual growth, results of operations, financial conditions, cash flows, performance, business prospects and opportunities to differ materially from those expressed in or implied by these statements. Fuel Tech undertakes no obligation to update such factors or to publicly announce the results of any forward-looking statements contained herein to reflect future events, developments or circumstances or for any other reason, and investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in the company's filings with the SEC. So with that said, I would now like to turn the call over to Vince Arnone, Chairman, President and Chief Executive Officer of Fuel Tech. Vince, please go ahead.

Vincent Arnone, Chairman, President and CEO

Thank you, Devin. Good morning, and I'd like to thank everyone for joining us on the call today. I'm pleased to report that we returned to profitability in the third quarter of 2024, due largely to continued strength in our Chemical Technologies business segment, where we are seeing an increase in interest from coal-fired utilities and other fossil fuel-based operators, resulting from our ability to assist them in reducing downtime, improving plant operations and providing the ability to maximize revenue generation during periods of high electricity demand. Revenues at our APC business declined quarter-over-quarter due primarily to customer-driven delays on existing projects and to the timing of new project awards. With that said, we are very pleased to have announced $2 million in new ATC orders yesterday, and we expect to close $2 million to $4 million in additional ATC orders by the end of 2024 or early 2025. We remain encouraged by the progress made toward commercialization with our Dissolved Gas Infusion or DGI business initiative. Earlier this week, we announced the execution of a demonstration agreement for an aquaculture application, and we are currently in discussions for demonstrations with operators in 2 additional distinct end markets and expect to have clarity on these opportunities as we move throughout the remainder of this year and into early 2025. We believe the diversity of these end markets highlights the versatility of DGI to address a wide range of water and wastewater treatment process issues. We ended the quarter in a strong financial position with cash, cash equivalents and investments of over $31 million and no debt. Now let's discuss our results for the third quarter in more detail, starting with FUEL CHEM. Revenues at FUEL CHEM rose by 8% from the same quarter of the prior year, reflecting contributions from 2 returning customers, which I had discussed last quarter, and a material contribution from our previously announced demonstration in the Western U.S. at a new coal-fired unit. We were very pleased to announce last month that this demonstration customer transitioned into a commercial account in October of this year and is expected to generate annualized revenues of approximately $1.5 million to $2 million at historic FUEL CHEM gross margins. We are continuing to pursue other FUEL CHEM opportunities, in particular, one other coal-fired utility unit in the Midwest, which could materialize into a demonstration in the first quarter of 2025, and also a biomass-fired power generation boiler operator in the Eastern U.S., which is also interested in a demonstration in the first quarter of next year. With respect to international FUEL CHEM opportunities, we remain in discussions with our partner in Mexico to expand the provision of our chemical technology in that country. Based on conversations with our partners in Mexico, it is our understanding that the newly elected government is targeting the implementation of environmental policy aimed at the reduction of pollutants that cause climate change. As Mexico is planning to use the heavy fuel oil generated from the refining operations as a fuel for power generation for the near-term future, we are hopeful that our FUEL CHEM program will be an integral part of President Sheinbaum's plan. Turning to our APC segment. Lower revenues compared to last year's third quarter reflected customer-driven delays and project execution on existing projects and delays in new project awards. As I mentioned previously, we were pleased to announce $2 million in new contract awards yesterday. And based on ongoing discussions with our potential customer base, we are expecting an additional $2 million to $4 million of additional APC orders by the end of this year or early next year. In 2023 and 2024 thus far, we have benefited from the continued adoption of our ULTRA, SCR, SNCR, FTC and ESP emissions control solutions at natural gas and coal-fired units in the U.S., Europe, South Africa, Southeast Asia and the Pacific Rim. I expect this to continue as we move through the end of 2024 and into 2025. Independent of the potential impact of regulatory drivers, we are well positioned to take advantage of current industrial market trends, which include plant capacity expansion across several industries, the incentivized use of small turbines to replace traditional less clean power generation, the development of the biocarbon industry, the continued emphasis on decarbonization on a global basis and the focus on using our ULTRA systems as the safe source of ammonia for SCRs at hospitals and universities across the U.S. On the regulatory front, in June, the Supreme Court granted states and industry applicants request to stay the Good Neighbor rule. In response, EPA saved the Good Neighbor rule last week for the 12 states where the rule was still active. As we had discussed on prior calls, the rule originally required 23 states to reduce emissions of nitrogen oxides from power plants and certain industrial facilities to limit their impact on downwind states. This EPA decision temporarily halted the implementation of the rule, pending the disposition of the applicants' petitions for review in the United States Circuit Courts and the Court of Appeals for the D.C. Circuit. As industry sources present their case and the objections are more clearly understood, EPA will then be in a position to formulate a response. We will continue to closely monitor the status of this case to better understand the impact and timing of the final decision-making. Additionally, we are continuing to monitor the progress of EPA's rule for large municipal waste combustor units, which is completely independent of the Good Neighbor rule. This rule reduces the nitrogen oxide emissions requirements for large MWC units. And Fuel Tech has had a long history of assisting this industry in meeting its compliance requirements, and we have had discussions with customers in this segment to support their compliance planning. The final rule is still expected yet in 2024 with compliance deadlines expected sometime in the next 3 years. Shifting over to our DGI technology. Our ongoing business development initiatives continue to gain momentum. We had a very successful exhibition of DGI at the Water Environment Federation Technical Exhibition Conference, also known as WEFTEC, held in New Orleans last month and generated significant interest in the technology for applications in multiple end markets. With respect to product demonstrations, as I mentioned previously, earlier this week, we announced that the DGI technology has been selected by a state government agency for an extended demonstration at a fish hatchery in the Western U.S. The demonstration is expected to commence late in the first quarter of 2025 to coincide with the hatchery's next growth cycle and is expected to last 4 to 6 months. Providing consistent levels of dissolved oxygen in the grow basins for fish hatcheries and other aquaculture applications is critical to growth rates, overall animal health and survival rates and potentially stocking density and food conversion ratios. This demonstration will have defined test protocols to evaluate the benefits of the DGI technology, resulting from the supply of consistent and precise levels of dissolved oxygen in the raising of gain fish in a controlled environment. In addition to this demonstration, discussions are progressing with one of the largest food processors in this country to utilize DGI to provide dissolved oxygen for a wastewater treatment facility at a food processing plant that they own and operate and also with the municipal wastewater treatment facility in the Southeastern United States. Lastly, there are multiple other end markets of interest that we are pursuing for DGI, including pulp and paper, food and beverage, chemical, petrochemical and horticulture, and we look forward to addressing these markets prospectively as we continue to advance towards commercialization. As we look out towards the balance of this year and into 2025, we are encouraged by the growth of our opportunities that we are pursuing at FUEL CHEM and excited about the demonstrations we expect to commence at DGI. For APC project awards, as I mentioned earlier, 2024 has been slower than expected from a contract booking and execution perspective. However, we remain encouraged by our pipeline of opportunities, and we look forward to converting these opportunities into contracts as we move from 2024 into 2025. Based on these factors, we expect that total revenues for 2024 will be in the range of $25 million to $26 million. In closing, I want to express my thanks to the Fuel Tech team for their contributions to our business. We are very encouraged by the resilience and potential growth of our FUEL CHEM segment, the outlook for APC as we move into 2025, and the opportunities we are pursuing for DGI. I thank our shareholders for their continuing support and reiterate to you our focus on delivering long-term shareholder value.

Ellen Albrecht, Chief Financial Officer

Thank you, Vince, and good morning, everyone. For the quarter, consolidated revenues decreased slightly to $7.9 million from $8 million in last year's third quarter, reflecting growth in our FUEL CHEM segment, offset by a slight decrease in APC segment revenue compared to the prior year period. APC segment revenue declined to $3.2 million from $3.7 million in last year's third quarter, primarily related to timing of project execution on existing contracts. FUEL CHEM segment revenue increased to $4.6 million from $4.3 million in the third quarter of 2023 due to customer accounts returning to service as a result of outage completions, increased dispatch and to contributions from a new coal-fired account. Consolidated gross margin for the third quarter was 43% of revenues, down from 45% in last year's third quarter. This decrease primarily reflected a decline in the APC segment gross margin compared to last year. APC segment gross margin decreased to 35% of segment revenues from 40% in the prior year period due to changes in product and project mix. As a reminder, the APC segment contains revenues from capital projects and ancillary revenues for items such as post-contractual parts and services. Ancillary revenues maintain a higher margin profile and will offset project margin revenues, which are recognized over time on a percentage of completion basis. FUEL CHEM segment gross margin was flat at 49% compared to last year. FUEL CHEM's third quarter gross margin increased from first and second quarter revenue levels, validating our expectation that FUEL CHEM segment gross margin will return to historic levels in the second half of the year. Consolidated APC segment backlog on September 30, 2024, was $6.4 million, down from backlog of $7.5 million at December 31. Backlog at September 30 included $1.1 million of domestic delivered project backlog and $5.3 million of foreign delivered project backlog compared to $6.9 million of domestic delivered project backlog and $6 million of foreign delivered project backlog at December 31. We expect that $4.6 million of current consolidated backlog will be recognized in the next 12 months. SG&A expenses increased to $3.2 million from $3 million in last year's third quarter, reflecting higher employee-related expenditures, partially offset by decreases in international administration expenses. SG&A as a percentage of revenue increased to 41% from 37% in last year's third quarter. However, it has decreased from each of the past 2 quarters. For 2024, we continue to expect SG&A expenses to range between $13 million and $13.5 million. Research and development expenses for the third quarter decreased by 30% to $361,000 from $513,000 in last year's third quarter. R&D expenses in the third quarter of 2023 were higher as a result of demonstration project expenditures. Our research and development expenditures are focused on the development of new technologies to expand our product offerings into the water and wastewater treatment market and more specifically, our DGI systems. Spending in this area to support the demonstrations Vince described earlier will be reflected in future periods. Our operating loss was $179,000 compared to operating income of $133,000 in last year's third quarter, reflecting the decrease in consolidated revenue and gross profit. We continue to take advantage of the favorable interest rate environment and as of September 30, have invested the majority of our $31.3 million in cash in held-to-maturity debt securities and money market funds. This generated $323,000 of interest income in the third quarter compared to $322,000 in the prior year period. Assuming no significant changes in the interest rate environment, we expect to generate interest income in excess of $1.2 million for 2024. We returned to profitability in the quarter, reporting net income of $80,000 or $0.00 per share compared to net income of $459,000 or $0.01 per share in the same period 1 year ago. Our adjusted EBITDA loss was $35,000 compared to an adjusted EBITDA of $352,000 in the same period last year. Lastly, moving to the balance sheet. Our financial condition remains strong. As of September 30, we had cash and cash equivalents of $12.3 million and short- and long-term investments totaling $19 million. Working capital was $25.6 million or $0.83 per share. Stockholders' equity was $43.9 million or $1.42 per share, and the company continues to have no outstanding debt. We remain greatly confident in our ability to maintain a strong financial position and to fund our short- and long-term growth initiatives. I'll now turn the call back over to Vince.

Vincent Arnone, Chairman, President and CEO

Thanks very much, Ellen. Operator, let's now please go ahead and open the line for questions.

Operator, Operator

And our first question is from Sameer Joshi with H.C. Wainwright.

Sameer Joshi, Analyst

So my first question is about the EPA action on the Good Neighbor provision. I know I'm asking you to peer into your crystal ball, but do you have any visibility on how long the circuit courts may take to review this and then for the EPA to formulate its new regulations? Any idea of timeline? Is it like a couple of quarters, 4 to 6 quarters?

Vincent Arnone, Chairman, President and CEO

My crystal ball, I think, unfortunately, doesn't have a good answer for you. Obviously, now we're going through a change of administration at the same time that some of these provisions are being reviewed. So I think a specific timeline is actually very difficult to predict as we sit right now at this point in time, Sameer. I wish I could give you a better timing on that. But unfortunately, it's very difficult for us to predict. We watch all of the regulatory boards for any updates that we see on these actions and these provisions. As we learn more, we'll share more with everyone that's interested in Fuel Tech as we do our conference calls. But right now, I hesitate to even give you a tentative timeframe. We just don't know.

Sameer Joshi, Analyst

Yes. That's a fair question. One of the reasons for asking is to understand if any of your existing revenue comes from the enforcement of the Good Neighbor provision in those 12 states, or is this potential upside only if it goes in your favor?

Vincent Arnone, Chairman, President and CEO

Correct. Good question, and thank you for asking that. The additional project opportunities that we were talking about with this, call it, updated Good Neighbor provision are all upside to us. And it will not impact any of the, what I would call, standard ongoing project work that we would expect to see from industrial unit business and some utility business as well as we move through the end of this year and into 2025 and beyond. The upgrade to the Good Neighbor rule that we were following was something that we were looking at for significant material upside potential. It will not impact the base level of revenues that we have been experiencing for these past couple of years.

Sameer Joshi, Analyst

For the FUEL CHEM business, you mentioned the $1.5 million to $2 million in annual revenue potential. This is in addition to your existing installed base, correct? This is something that has not been announced before and is expected to begin over the next few quarters and continue for several years thereafter.

Vincent Arnone, Chairman, President and CEO

Yes. It is definitely an incremental coal-fired unit for us. The revenue range that we're expecting is indeed incremental revenue for the Chemical Technologies business. I hesitate to go ahead and tell you with regard to forecasting just to add this number to revenues that we've experienced in prior years because every single year, we have impacts both upside and downside on base accounts relative to equipment outages that our customer base has, relative to some of the seasonal issues that we have with weather as well. But that being said, answering your question specifically, it's an incremental coal-fired unit that we are extremely pleased to see. And we are very hopeful that as we move into the first quarter of next year that we'll be able to add an additional coal-fired unit as well because as you well know, adding base accounts on Chemtech is extremely meaningful and very profitable for us.

Sameer Joshi, Analyst

Yes, thank you for that. It appears that apart from outages or downtime, the contracted coal plants or deployments are on the rise with the 1.5 to 2 and some additional potential expected early next year.

Vincent Arnone, Chairman, President and CEO

Yes.

Sameer Joshi, Analyst

In the press release from yesterday, again, the $2 million in orders, does it include the potential orders and the orders in hand that were described in that press release? Or is the $2 million only from orders in hand?

Vincent Arnone, Chairman, President and CEO

That's only the orders we currently have. As I mentioned earlier, we anticipate receiving additional orders as we approach the end of this year. There is a strong likelihood that we will secure between $2 million and $4 million in extra contract awards before the year concludes, with some possibly early in 2025 at the latest. The $2 million mentioned yesterday refers to the contracts we already have.

Sameer Joshi, Analyst

Great. Regarding the DGI front, I may have misheard, but is the demo being planned for the state government agency expected to be operational in the second half of 2025? Or is the demo already underway or scheduled for sooner than that, with a potential order in the second half of 2025?

Vincent Arnone, Chairman, President and CEO

The demonstration with the fish hatchery in the Western U.S. is set to begin around April 1, 2025. This marks the start of the agency's next growth cycle for the new batch of fish they intend to cultivate. The demonstration will run for about 4 to 6 months, and if it is successful, we anticipate having an order by the latter part of 2025. Additionally, the other two demonstrations I mentioned are likely to be finalized soon and could potentially start before the end of this year.

Sameer Joshi, Analyst

Understood. In terms of the outlook for the rest of the year, we expect top line revenues of $25 million to $26 million. Does that suggest a decline in year-over-year revenue for the fourth quarter? I believe you reported $63 million in the December quarter last year.

Vincent Arnone, Chairman, President and CEO

Yes, it appears so, Sameer. This is primarily due to the timing of our air pollution control projects. Specifically, we have experienced delays from our direct customers, which has led to a shift in project execution timelines for their end customers. Earlier this year, I would have indicated that our fourth quarter would perform better than what we're currently forecasting based on the expected execution timelines. Unfortunately, these timelines are beyond our control, and we need to adapt to the situation with our customer base. Consequently, the downside is that we will see lower-than-expected revenue in the fourth quarter. However, the positive aspect is that the dollar value remains in our backlog and will be recognized in 2025, so it doesn’t disappear.

Operator, Operator

Our next question is from the line of Marc Silk with Silk Investment Advisors.

Marc Silk, Analyst

All right. On the fish hatchery deal you announced a week or so ago, you said this is an extended demonstration. So does that mean you've been working with them previously and they just want to go to the next level?

Vincent Arnone, Chairman, President and CEO

By extended, that was referring more to the temporal aspect, just a longer-than-normal demonstration time frame because we're going to look to monitor the progress of the performance of DGI over the full growth cycle of the fish. And a 4- to 6-month demonstration is longer than what I would call a normal demonstration for us. So that's the basis for the extended terminology.

Marc Silk, Analyst

Okay. And then is there any revenue that will help you cover costs?

Vincent Arnone, Chairman, President and CEO

Not for this demonstration or the other two we are considering. We have not finalized the agreements for those two demonstrations. If we can cover some costs, Marc, we will certainly try to do so. Given our current situation with DGI, we aim to get this technology operational and demonstrated to commercialize it as quickly as possible. We are prepared to absorb the costs related to demonstrations, which are typically not very significant for us. However, to answer your question, we do not expect any cost recovery funds for the demonstrations at this time.

Marc Silk, Analyst

Could you provide more details about the exhibition and the show you presented at? Specifically, what feedback have you received from attendees? For example, are people expressing a need for this type of technology or mentioning that no one is addressing this issue? As we consider investing in the stock, it would be helpful to know what customers are saying. While I understand this may not directly lead to deals, it would give us as investors greater insight into the market's perception and excitement regarding this product.

Vincent Arnone, Chairman, President and CEO

Yes. The main feedback we receive is that customers are seeking new solutions for longstanding issues or for technologies that have been in use for many years. This is a common theme we hear from potential customers. It’s also evident in the three demonstrations we are currently engaged with. All three are eager to shift away from their current sources of dissolved oxygen to alternatives that could enhance their performance, reduce costs, and provide various other advantages.

Marc Silk, Analyst

As we move into next year, we will have a new administration that frequently expresses support for clean water and air. It appears that the energy sources in this country will incorporate both clean and traditional energy. On the traditional energy side, it may be worth discussing specific instances, such as plants that might have closed without this new administration, and how we can take advantage of that. I understand that as a small company, it may be difficult to invest in promoting your interests within the government. However, I believe it's important to consider ways to capitalize on this shift, especially since the administration has publicly stated its energy policy moving forward.

Vincent Arnone, Chairman, President and CEO

Yes. It's obviously in interesting times, and there is going to be a shift in how energy is going to be generated prospectively, right? I think that's apparent. But for us, it's probably going to be a little bit of a mixed bag of a scenario for us. So to your primary point, as it relates to fossil fuel generation, I think that we can expect that the fossil fuel is obviously going to remain in play in a very strong way. I think we're going to continue to see natural gas used as a significant source of fuel for power generation, perhaps an expansion of natural gas for power generation. And there's going to be more drilling for natural gas as a resource, if you will. That will occur. At the same time, we had talked earlier in the year about the extension of life of coal-fired units. Just as a general theme because we've been talking about in this country and in other parts of the world about there being a power generation shortage driven by data centers, driven by AI, driven by support for cryptocurrency mining and the like. And so even prior to what's transpired over this past handful of days, there have been public discussions and public statements about the extension of life for coal-fired units. So that's real. Now with now the new administration coming on board, I think we might see more of that. To what extent, it's difficult for us to forecast that right now. But if we're going to see possible extension of coal-fired lives, that could provide some additional business opportunity for us. And the way we capitalize on that is via putting ourselves out in front of those remaining coal-fired generators that could have an opportunity for either our APC technologies or for our chemical technology approach as well. So that's the way we would look to capitalize on that, okay? That's on the upside. On the other side of the equation, as I was answering Sameer's question earlier, proposed regulations for increased emissions reductions are likely going to be postponed or possibly modified. I think that's to be expected. We've heard about a decrease in support for regulatory bodies in general, shrinking regulation and regulatory bodies. There may be a reduction in funding for the EPA. We don't know that as we sit here today, but that's a possibility as well. So it will be interesting to see how this plays out. But there is a scenario whereby with a more heavily focused approach on fossil and its utilization for power generation that, that can give us a little boost over this next 2-year time frame. Long-winded answer, but it's what we know today.

Marc Silk, Analyst

No, that's what I was looking for. I appreciate that. And I also appreciate that you and Ellen showing the investment community how confident you are in the business by buying some shares for yourselves. So anyways, well, good luck, it will be an interesting year coming out.

Operator, Operator

Our next question is from the line of William Bremer with Bankers Capital.

William Bremer, Analyst

Okay. Did I hear you correctly that we will be implementing 2 additional pilots for the DGI division before the end of this year? And if so, can you give some granularity in terms of the end markets, maybe the depths, et cetera, the nozzles, the pressures that you're looking at, at these 2 different field trials?

Vincent Arnone, Chairman, President and CEO

To clarify, we are currently pursuing two additional demonstrations. Although the agreements are not finalized yet, there is a possibility that both could be operational before the end of this year. This is an optimistic scenario for those demonstrations. We are monitoring their progress closely and are engaged in daily discussions to move them forward. One demonstration involves a municipal wastewater treatment facility where we aim to supply supplemental oxygen to manage nonstandard or upset conditions. We anticipate using a smaller DGI unit due to the expected incremental oxygen demand, which represents a smaller capital sale opportunity for this site. The second demonstration is with a large food producer facing challenges at their meat processing facility. They have relied on outdated aeration technology for 25 to 30 years, which is now failing, raising concerns about the wastewater treatment plant potentially halting all operations. They have approached us to explore whether DGI can serve as a replacement technology for their wastewater treatment. This could result in a larger equipment sale, involving the largest DGI unit we plan to offer. We are actively working on both processes with these two customers and hope to share positive updates in our next public discussion.

William Bremer, Analyst

Agreed. You mentioned sale on these. Is it potentially an outright sale? Or do you think that maybe we have an opportunity to have, say, an MSA, a multi-service agreement over the next, say, 3 to 5 years in terms of the operating of these systems?

Vincent Arnone, Chairman, President and CEO

Right. We are open to either scenario, and we've been discussing more and more so the possibility to have long-term service arrangements for a DGI delivery system, if you will. For these 2 particular applications, I think they're more apt to be capital than long-term service contracts, but it's really too soon to know right now.

William Bremer, Analyst

Okay. But it's something that would be presented to both of them before the signing.

Vincent Arnone, Chairman, President and CEO

Yes, as options, depending on what would best meet their needs.

William Bremer, Analyst

Okay. All right. Let's turn to the Mexico opportunity. And if you could give us a little more granularity there, specifically within the past, say, 2 to 3 months, has there been more discussions, more meetings, et cetera?

Vincent Arnone, Chairman, President and CEO

Things have become more favorable due to the current administration. Our partner has been in contact with members of the new government, which has only been in place for about 5 to 6 weeks. They are making progress, and their environmental policy is now a key part of their discussions. Our partner believes that our chemical technology could assist them in addressing their environmental challenges. However, it is still uncertain how much funding the government will allocate for the environmental technologies they require for their fossil fuel burning units. We are more optimistic than ever about the potential opportunities, but it's challenging to predict when this will translate into actual revenue from our chemical technology in Mexico. Despite our encouragement and that of our partner, further progress with the Mexican government is still necessary.

William Bremer, Analyst

And it's my interpretation that you do have the FUEL CHEM deployed down there in a few of their boilers currently, right? So can you confirm that? And then how many additional boilers or opportunities, not saying that we have an opportunity to land all of them, but there is a potential of that. How many do you believe are available for us to at least petition, to at least try to land a contract with?

Vincent Arnone, Chairman, President and CEO

We have been operating a couple of small units at two different plant sites for over a dozen years, generating royalty income throughout this period. This has provided a continuous proof of concept for our system, demonstrating its capability for its intended use. Regarding additional unit opportunities, there are many. I would estimate that there are about 13 to 15 more units currently using heavy fuel oil that could adopt our program. This represents a significant opportunity for Fuel Tech. However, due to uncertainties in the timeline, we haven't been able to focus on it as much as we would like, as making it a reality is beyond our control. Nonetheless, the potential is considerable.

William Bremer, Analyst

No, it's sizable. You're proven down there. It seems to me it's a plug and play, especially with the new administration and her environmental background. I think that the probability has gotten a little bit greater than it was in the past. And if I'm correct on this, it could be a very material event if this should come to play, given the fact that, hey, you had been proven down there as you specified for a number of years. It just seems that, hey, these other ones, we could do it, and we should be able to. So right. That's good.

Vincent Arnone, Chairman, President and CEO

Bill, one more comment for you. You're correct on all those points. And what we did as a company within this past, call it, 12 to 18 months is actually we did invest in having equipment ready to go for one plant site already. So we have equipment ready to go should this become an urgent response requirement down in Mexico, we're ready to go to equip one plant site with equipment to run our Chemtech program. So we've made that investment already.

William Bremer, Analyst

And then. Okay. Let's just say we land 3, okay, I'm being optimistic here. How quickly do we need in terms of the purchase orders, et cetera, to ramp up for the next 2? Is that a month? Is that a quarter? Is that longer than that? How long of a wait if we had the order?

Vincent Arnone, Chairman, President and CEO

Yes. I would estimate that it would take a minimum of 12 to 16 weeks to prepare for the equipment installation needed to support other plant sites. If they decide to move forward, it's likely they would do it one site at a time rather than all at once. That's the indication we have at this point.

William Bremer, Analyst

So the sites are inherently slightly different than one another?

Vincent Arnone, Chairman, President and CEO

All sites are a little bit different in terms of unit sizes and so on and so forth. So it might be the case whereby we need to change our equipment configuration a little bit from site to site. So there are those idiosyncrasies that we have to deal with as we work from one plant site to other plant site.

Operator, Operator

Thank you. At this time, we've reached the end of the question-and-answer session. And I'd like to turn the floor back to Vincent Arnone for closing remarks.

Vincent Arnone, Chairman, President and CEO

Thank you, operator. I'd like to thank everyone for taking the time to listen to the call today. I'd like to thank our employee team for their continued dedication and efforts towards making Fuel Tech and continuing to make Fuel Tech a solid brand name and an excellent company to work for. I'd like to thank our shareholders for their continued support as well and also our Board of Directors. With that, thanks, everybody. Have a great remainder of the day. Thank you.

Operator, Operator

This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.