Oklo Inc. (OKLO) Q2 2024 Earnings Call Transcript

Good to everyone and welcome to Oklo's Second Quarter, 2024 Earnings and Business Update Webcast. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note this call may be recorded and what I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Sam Doane, Director of Investor Relations. Please go ahead, sir.

Thank you, operator. Good day everyone and welcome to Oklo's inaugural company update and earnings. Joining us today are Jake DeWitte Co-Founder and Chief Executive Officer, and Craig Bealmear, Chief Financial Officer. Oklo's Q2 earnings were announced after market closed today. You can find the shareholder letter and supplemental slides on the investor relations page of our website. The information discussed during the course of our remarks and the subsequent Q&A session includes forward-looking statements, which reflect our current views of existing trends and are subject to a variety of risks, assumptions, estimates, uncertainties, and other factors that could cause actual results to differ materially from such statements. You are urged to carefully read the forward-looking statements language in our shareholder letter and supplemental slides. You can find a discussion of our risk factors, which could potentially contribute to such differences in our most recent filings with the SEC. Oklo assumes no obligation to update these statements, whether as a result of new information, future events, or otherwise, except as required by law. I'll now turn the call over to Jake DeWitte, Oklo's Co-Founder and Chief Executive Officer.

Thanks, Sam, and thank you all for joining us today. I'm excited to share a quarterly update and provide some insight into the progress we've made over the past quarter. By way of introduction and a little bit of background and history in Oklo, the company was born largely out of the view that there was a significant amount of opportunity with advanced nuclear technologies. Personally, I grew up in New Mexico. I was born and raised there and born and raised around the technology accordingly. And that's where I fell in love with it from a very young age. It was something that felt like it was from science fiction, but it was actually real. The fact that you can take an atom and split it and harness the strong nuclear force and produce 50 million times more energy than a conventional hydrocarbon oxidation reaction is incredible to me. It has always been astonishing to me, it still is today, but it's real. This is real technology. And it's been with us for over 80 years at this point. So I knew I wanted to work on it from a young age and I had a unique set of experiences to be around the technology. In high school, I got hired into the nuclear weapons program and I got a chance to learn a lot about it from that point. And from there, I got a chance to springboard into a number of different facets of the industry, from academic and government R&D, to licensing and procurement on the fuel enrichment side, to commercial reactor design and R&D, as well as research projects on the academic side, touching conventional large light water reactors, as well as next-generation advanced reactors. Along this path, I started to see a clear picture of what I thought was the case. When I went into it, which was new technologies were going to be what ushered in some of these new areas of growth for nuclear. But that was only part of the story. In fact, it was much more oriented to fundamentally needing to do some new things in a space. What I observed was an industry that had fairly radically stagnated in how it did things and approached things. And there was a ton of opportunity to rethink how you could approach taking new nuclear technologies to market. This led my Co-Founder Caroline and me to think about and ultimately start a company sitting around three major pillars that we saw were really important to catalyzing significant changes and opportunities in the industry. Those centered around taking, first, a different approach on the business model, second, a different approach around the size of the reactor, and third, a different approach around technology. To pick at those things really quickly, first on the business model side, this is a really important differentiation point for us from how things have been done and are done, generally speaking, across the industry. Typically, the nuclear business model from a reactor design perspective has involved designing a reactor to about 80% or so completion, maybe designing the power plant to something between 50% and 80% completion, and then going off and trying to license out that design to your customers, asking them to take the baton, to then complete the design, to permit it, decide it, build it, own it, and operate the plant. That puts all of the burden on the customers, and it's a highly frictional process. We found that people really wanted the wonderful attributes that nuclear power affords, so we decided to take a different approach. Early on, we took a view of asking the question. What would make it easier for people to buy what they really liked about nuclear technology? In other words, how could we make it easier for people to buy what they wanted? And so that led us to ultimately follow into an opportunity that's built on what renewables had done very well for a long time, which was to design, build, and operate the plant ourselves, and then just sell the power through power purchase agreements. That has significant benefits because it aligns with what customers want, perhaps that's the most important thing, and we see that reflected in how our customer interest and customer order book has grown and is growing. Additionally, we also see reflected in the significant benefits that come to the company with this kind of recurring revenue model. These factors significantly enable and accelerate us as we think about how the future of nuclear needs to ultimately evolve. Additionally, we wanted to take a different angle on size. We didn't want to start at bigger size ranges like a few hundred megawatts or even a gigawatt like today's plant. Instead, we wanted to start as small as we reasonably could so that we could have a technology that could service a market of reasonable size and grow into it, so not so small that it's kind of like a toy or niche system like a few hundred kilowatts or so, but actually big enough so that you can service a large market and grow into it. So we found a sweet spot at about 15 megawatts, which has allowed us to change the paradigm from needing billions of dollars to capitalize the plant and get it operational to only needing a few hundred million dollars. This has allowed us to significantly change the paradigm of how you take new technologies to market. Finally, we took the approach of pursuing what we see as the best-in-class economic potential from a technological perspective. Specifically, we're working on what's called a liquid sodium-cooled fast reactor technology. That means we use liquid sodium as the coolant. We do that because it's a technology that has a huge amount of potential with a really rich history of development behind it. As a society, we've built and operated more than 25 of these plants around the world. We've gained over 400 combined reactor years of operational experience. We've learned what works, what doesn't work, and we know how to take the technology ultimately into the market. In the U.S., we notably pursued a pathway of ultimately developing and demonstrating this technology in two meaningful ways, so in two plants. One was a plant in Washington State called the Fast Flux Test Facility, and the other was a plant in Idaho called EBR-II. At Oklo, we most directly build our lineage and legacy of the EBR-II plant, which was a just under 20 megawatt fast reactor that sold power to the grid. It ran for about 30 years, demonstrating superior operating characteristics to its temporary commercial light water plant at the time, while also highlighting the amazing features it had from an inherent and passive safety perspective, which can afford plant design simplification and therefore cost reduction, as well as the ability to recycle fuel. Altogether, these are significant enabling benefits. We like sodium because it operates at high temperatures without being pressurized. It's compatible with common alloys. It allows us to tap into existing value and supply chains. From there, we have the ability to leverage a technology that ultimately has best-of-breed economic potential in our eyes. Not only are we building on a mature technology base that's behind it, but the Nuclear Regulatory Commission has had experience in sodium fast reactors. We also have peers in this space that are developing sodium fast reactors, like TerraPower, who's developing a sodium fast reactor but at a larger size. The progress made by them, the progress made by us, all gives us a pretty clear line of sight for how the NRC can review and evaluate sodium fast reactor technologies. A fun little fact is most people often talk about advanced reactors or Gen 4 reactors, which are going to be milestones of the first one to do some milestone coming up. The reality is the first reactor that actually produced usable electricity in the United States was a liquid metal-cooled fast reactor named EBR-I. It was the earlier predecessor of EBR-II. It first produced usable electric power back in 1951. So we're ultimately at Oklo very excited to build upon the legacy of this technology and stand on the shoulders of the giants who came before us that developed it to the spot where we can now move this technology forward. Specifically, we're implementing this in what we refer to as our product offering, the Aurora. The Aurora product line is designed to scale to 15 and 50 megawatt offerings today, and we're also evaluating a 100 megawatt or larger offering that we're developing. The core focus of the business at this point is developing the 15 and 50 megawatt plants. They look very similar. They share the same fuel types and materials and coolant types, just slightly different sizes and packaging. We do that because we've been focused on being responsive to where customer interest and demand has been, and that's led us to these two size points to start. This technology is basically a way to make heat. When you split an atom, you're ultimately just producing heat that then conducts through the fuel, through the structure, and then is conductively removed by the coolant. We use sodium as that way to move the coolant from the fuel up to ultimately boil water. You can also use this heat product directly, which often opens the door for industrial heat processes. We operate in a temperature range that allows us to service the vast majority of heat markets that are available today. It also has some interesting connection points for advanced cooling technologies, which I know sounds funny, but thermal-driven cooling technology has a lot of promise, especially for scaling data centers. Technologies like absorption chilling have some significant upside in the data center markets. We're pretty excited about how that can integrate with our system. Aurora powerhouses are designed to maximize the use of materials, parts, and labor from non-nuclear supply chains. We develop and design this technology in a way to take advantage of these benefits because sodium gives us the ability to operate at high temperatures without being pressurized. It's compatible with commonly available alloys like stainless steel alloys, such as 316L and 304L, and form factors that are similar or identical to components available in other industries, such as oil and gas or food and beverage or chemical. That is great because we can then tap into existing value and supply chains to ultimately deliver these systems. The ability to utilize existing supply chain components allows us to leverage non-nuclear supply chains, which operate at much higher volumes and offer more diverse options that come at lower cost. This approach significantly enhances the economic scalability of our technology. That's one of the reasons we're so excited about is the economic potential. By leveraging the energy density of fission, Oklo's Aurora powerhouses have immense environmental benefits, creating a favorable technology platform that looks quite a bit different than what nuclear's been used to looking like. That was a big focus of ours. We wanted to focus on something that has aesthetic appeal while also offering functional benefits from a constructability perspective. Because of those benefits, the nuclear sector is receiving unprecedented support from all levels of government. This quarter has seen some exciting developments, including the signing of the Advance Act, but this builds on years of significant support at the federal, state, and international level. One of the big benefits legislatively for nuclear, frankly, one of the biggest in the last few decades, was the passage and signing of the Advance Act. This significant piece of legislation drives forward support from Congress and also support from this administration that has clearly been in favor of propelling and advancing nuclear technology. It brings forward several major legislative developments and policy support levels to basically support and scale the deployment of nuclear. This includes enhancing and modernizing NRC licensing and review timelines, as well as fee structures, but also supports driving forward accelerated deployment models, creating opportunities to enhance demand signals and indicators from the government, as well as aligning the NRC mission towards more successful and efficient scaling of nuclear technology. There's a lot more we can talk about what the ADVANCE Act does, and we will continue to do so, but we're quite excited about what this positions the industry to actually do and drive forward the deployment of new technologies going forward. Oklo has one of the most extensive regulatory engagement histories with the Nuclear Regulatory Commission, or the NRC. Accordingly, we find ourselves very well-positioned to benefit as an early mover with the regulatory side. We've been the longest engaged non-light water reactor company with the NRC, dating back to starting to work with them back in 2016. We've had several significant milestones along the path and are positioning ourselves to do a pre-application readiness assessment later this year, spanning into submitting our next application early in the next year, followed by subsequent applications thereafter. Oklo's integrated build, own, and operate business model enables an integrated and streamlined licensing pathway that's a bit different from what the industry does otherwise. An important feature for our business model, as well as our licensing plan, is taking advantage of a regulatory approach that allows us to do all the licensing we need to achieve a commercial operating permit in one step. In other words, you can take a lot of steps to get to what you ultimately need, which is a commercial operating license. Some of our peers are taking a process where they apply to get a construction permit, after which they can build and then apply to get an operating license. Others are taking an approach where instead of being the owner-operator, they're designing plans to get a design certification, or something similar, like a standard design approval. Then after that, they then need to work with their potential customers who also need to go through the actual licensing process to get a commercial operating license themselves. This means their customers still have to obtain a commercial operating license, even if a reactor design company has a design certification, because that's only part of what you ultimately need to secure a commercial license. So, the design certification is not regulatory approval, but it's a step towards submitting an application, which you're asking your customers to do to get that license. For us, we don't do any of that. We just go straight to the combined license approach. This is largely because of what we're doing on a business model side. We're owning these plants. We're not just trying to sell the designs or license off the design. So that means you go straight into licensing and allows us to build and operate a plant, which then sets the stage for us to then pursue this one-step licensing process and enjoy the benefits of repeatability that this framework allows. One really important thing that's been developed over the years when creating these regulatory frameworks was the ability to subsequently license additional plans in an expedited and more efficient manner. What that means is that after you've licensed your first plan, you get a combined license for that first plan that becomes your reference license. Every license you submit thereafter becomes a subsequent license. In other words, your reference license becomes your reference combined license, and then your subsequent license becomes your reference combined license. That benefits us because the subsequent reviews on the subsequent license applications will only focus on the things that have changed from the reference application. This has significant advantages for accelerating and reducing review timelines, while also allowing us to scale rapidly and follow-on plans. So on the design side, our product roadmap includes three reactor sizes to meet customer needs based on what we're seeing in the customer market. That spans megawatt to gigawatt scale deployments. What's great about this is it also positions us to have the benefits of spanning across different markets according to these size offerings. We've long known that there's not a one-size-fits-all design in this space. Instead, we wanted to start as small as we could for the aforementioned benefits, but then have a pathway to scale using the same technology. So we are currently offering a 15-megawatt and a 50-megawatt plan, and we are also developing a 100 to 200 megawatt plan as well. These are all very similar-looking technologies as we scale up, just slightly bigger from a physical footprint. We are targeting 15 and 50 megawatt ranges to start because based on the feedback from our customers, that's a really great size range to meet their needs. The numbers are large around the opportunities to service customers in these markets, especially with what we're doing through our business model of designing, owning, and operating these plants and selling power directly to our customers. So when we talk about providing power directly to energy users, these sizes present a good entry point for a number of different markets, and these projects can be quite large when they aggregate together. The reality is that data centers make up a vast majority of the market opportunity we see in front of us. While the numbers are significant regarding those opportunities, especially regarding the larger scale AI-purpose data centers, these projects are not being deployed all at once at a one gigawatt or multi-gigawatt scale. Instead, they're ramping into it. It's phased growth through a development process. When discussing these facilities as they grow, they also need power that meets their needs, which means something that is always on with high availability and high reliability. That means they require something that offers them that kind of NPlus one generation footprint so that they are confident to receive energy when they need it. In other words, you're going to build more power capacity as you ramp up with your customers, which is an exciting thing for us, given our size. We're uniquely positioned to do this, and it also allows us to grow with them as they build out their footprint and meet their customer needs, thus requiring more energy as it grows. The important thing to emphasize is that we can build up to match where our customers are going as they grow their order book and demand in a phased way, while also building an extra reactor providing standby power for them when they need it because we periodically have to take some of our plants offline for servicing or refueling. This means we can deliver full freight power solutions for our customers in an economically attractive way because our size is appropriate for this. Our size matches very well with both the growth and the NPlus one requirements that our data center customers have. To delve deeper into the data center side, we've discovered that a data center campus typically encompasses a number of data halls, as we like to call them. Those data halls are built out like building blocks to fill out a facility or a campus. We're finding that most of the planned data halls are designed to consume between 35 and 50 megawatts each. Each company has different architectures and approaches, but there is a significant amount of opportunity around the data halls we see. We do recognize some development on the smaller side, power chunks between 10 and 20 megawatts. Summarizing our project opportunities, we're matching well with how we see data center and other industrial markets developing. When today, based on conversations with our partners and customers, we see that the ranges of power needed are typically between 10 to 20 or 30 to 50 megawatts while also needing high reliability. Our ability to scale with them means we're well-positioned to build up. This position contrasts with one where you might say, let's build one plant to provide all the power for a facility. That's hard to offer an NPlus one dynamic because you would significantly have to overbuild your capacity. For example, for a 500-megawatt project, you would need to build two 500-megawatt projects to provide NPlus one. That would represent a lot of stranded capacity. But for a 500-megawatt project, we could build 10 15-megawatt plants along with an additional 50-megawatt plant. This essentially entails 11 total plants to offer NPlus one reliability while also providing the same amount of power. Additionally, as customers scale, they likely won't need 500 megawatts all at once. Instead, their scaling might occur over two or five or more years. So they might start by needing 50, then 100, then 250, and finally 500 megawatts in total as they expand. That's great because we can build to match their demands while also benefiting from ordering reactor components in volume, which creates a different dynamic than building one plant to meet that demand. If you built that 500-megawatt plant to fulfill that demand, you would have a lot of stranded capacity while your customer ramped up, creating economic challenges. Our model works effectively to match where we see data center development moving, along with other industrial users and energy consumers. With that, I'll go ahead and hand off to our CFO, Craig, who's going to discuss our business model.

Thanks, Jake. As we highlighted at our Investor Day presentation back in February of this year, slide 15 shows how we have developed and are implementing a business model with five key attributes that can be seen on the right-hand portion of this slide, namely, recurring cash flow from power purchase agreements. We expect these contracts to be at least 20 years in duration, which supports our build, own, and operate business model. Second, a capital-efficient approach to asset deployment enabled by the size and technology foundational pillars Jake discussed earlier. Over time, this should allow us to reduce cost and asset construction time through purchasing economies of scale, as well as efficiencies that should come from deploying essentially the same asset over time. Third, these two factors should generate attractive asset returns on their own. In addition, we look to deliver upsides to those returns by accessing investment tax credits or ITCs and utilizing project financing against the long-duration PPAs. Fourth, longer term, we are working to deploy fuel recycling technology, which should have the dual benefit of providing enhanced security to our fuel supply chain and potentially reduce our fuel cost by over 80% versus the cost of fresh fuel. Finally, a strong balance sheet to enable growth. Post the completion of our merger with AltC, we believe that we are now well-capitalized to execute our business plans, which should be a significant competitive advantage. Point 16 reflects that we expect this approach to asset and capital efficiency to create a strong position for our business in terms of our overall delivered levelized cost of energy or LCOE. Initially, we expect our first-of-a-kind or FOAK LCOE to be approximately $90 per megawatt-hour. This figure should improve as investment tax credits, scale economies, and improved project execution capabilities are utilized across our business. The overall ability to produce power 24 hours per day and at a high capacity factor should make our overall LCOE very competitive versus other clean energy alternatives. Finally, I would note that this chart does not reflect the potential upsides that can be achieved with the deployment of fuel recycling technology. Moving on, one question we've been asked is how we plan to capitalize the business going forward? One of the benefits of the extremely low level of redemptions from our merger with AltC is that not only does it put us in a great position to execute our business plan, but it also means we can be strategic as we develop and implement a go-forward financing strategy. Moving left to right on chart 17, you can see that over time, we expect to utilize Oklo's equity in the form of cash on the balance sheet to finance anywhere from 25% to 35% of our projects, with the remaining 65% to 75% being potentially financed through a mix of budget financing, tax equity structures, and the DOE's loan program office. We are currently assessing each of these options across a number of lenses and will provide further updates as our plans mature. As we have discussed at numerous investor and analyst meetings, we believe it is clear that significant untapped demand exists for the clean, affordable, and reliable power that nuclear in general can deliver and that is ideally suited for Oklo's build, own and operate business model. On slide 18, we see four macro trends providing tailwinds to our industry, which include increasing electricity demand, decreasing electricity capacity, grid reliability challenges, and decarbonization targets. Moving to the next slide, the impact of this growth at the macro level is providing increased demand for Oklo's clean, reliable, and affordable offer. As we've previously discussed, we are targeting customers across the six market sectors reflected on this slide. In the past 12 months, we made announcements across each of these sectors with the exception of master plan communities, but we do have commercial discussions underway with customers in this sector as well. Overall, we believe the strong level of customer interest and traction demonstrates the applicability of our Aurora powerhouses across a variety of use cases and should create a very strong pipeline of business to underpin sizable revenue growth. As reflected on the left bar on slide 19, at the time of our announcement of our merger with AltC, we noted that we had over 700 megawatts of business signed through a combination of memorandums of understanding and letters of intent. Since that time, we've made new announcements in the data center market sector with Equinix and Wyoming Hyperscale, as well as an announcement with Diamondback Energy in the oil and gas sector. These more recent announcements have also served to demonstrate our customer-oriented approach whereby we look to deploy 50-megawatt powerhouses to meet the needs of those customers. I would also like to point out that this customer momentum is continuing. Maintenance was not only Oklo's first day of trading on the New York Stock Exchange but also a day where we saw sizable inbound inquiries from customers looking about power from Oklo. As such, we expect to make more customer announcements during the remainder of 2024. I would now like to turn back over to Jake.

Thank you, Craig. As we talked about, we have some significant advantages with respect to our timing in the market as well as our product offering. After closing the business combination with AltC, we raised a significant amount of capital through that process, leading to a well-capitalized balance sheet to now execute against our plans. We are uniquely positioned in the advanced nuclear industry with respect to being the only company that has a site use permit to build our first plant at our national laboratory, a site use permit from the Department of Energy and having fuel that was competitively awarded to us from Idaho National Laboratory, both of which received in 2019. That's on top of the significant regulatory traction we've had to date. Additionally, the differentiation with respect to our business model, size, and technology makes us well-positioned to capitalize on the significant amount of opportunity in the market building up today. Over the course of the next few years, we have a couple of exciting milestones to look out for. As we think about the growth of the company, we're excited about the transition from turning our first plant on into growth and scale from there. Between now and 2027, we'll be working to deploy our first plant at Idaho National Laboratory. This is a fully commercial plant and it's a plant for which we have a site use permit, we have the fuel for, and we have significant regulatory traction around. In parallel to this, we'll also be developing plants in other areas and other sites to meet our growing customer needs, look forward to ramping up our growth after 2027. Over the first and second quarters of this year, we hit several major milestones. We closed the business combination and started trading on the New York Stock Exchange. We achieved a significant regulatory milestone with the Department of Energy with respect to our first fuel fabrication facility. We continued to advance our project in Southern Ohio and entered into land agreements to deploy two plants there. We signed an LOI to supply 50 megawatts of power to Diamondback Energy in the Permian Basin in Texas. We signed an MOU with Atomic Alchemy, a radioisotope production company, to collaborate on isotope production, particularly with the use of our fast neutrons, as well as radioisotopes that are coproducts from our recycling facilities. We partnered with Wyoming Hyperscale to deliver 100 megawatts through its data centers. We achieved significant milestones with Argonne National Laboratory, one of the leading experts in sodium and liquid metal fast reactor technology, involving the use of their state-of-the-art thermo-hydraulic testing facilities. We also established what we announced earlier today, our preferred supplier agreement for steam turbine generator products and services with Siemens Energy. We're very excited about this partnership because it is validation of our business model and our approach, that we can leverage suppliers who produce components for other purposes that we can directly use in our system. What we're buying from Siemens looks very similar to what they make for fossil-fired plants, and we're very excited about our partnership with them going forward. We also continue to progress in putting in place numerous supplier contracts critical to the deployment of our first Aurora plant at Idaho National Laboratories and supply chains required to deploy a fleet of powerhouses. Contracting is underway for site preparation and field fabrication at INL, which we expect to ramp up during the remainder of 2024 and beyond. In most cases, we're at the commercial negotiation stage with key vendors, so we are limited in the details we can provide at this time. Additionally, we recently announced that we finalized our preferred supplier agreement with Siemens Energy to provide steam turbine and generator technologies, as well as services for our fleet of powerhouses. We believe having an agreement with such a recognized name as Siemens Energy is unique for our industry and a testament to the type of partnership arrangement that our business model unlocks, not only for Oklo but also for our key suppliers. Additionally, one of the exciting aspects of this business is what we can achieve on the recycling front. Fast reactors have the unique ability to recycle used fuel, and we've been actively pursuing this to diversify our fuel supplies and capitalize on the benefits of fuel recycling. This approach not only improves fuel economics, but also opens up additional revenue streams from the sale of co-products generated during the recycling process. This technology has been demonstrated before and is already operating at a small scale at national laboratories. Our work with Argonne and our Department of Energy partners has focused on furthering the development of this technology to prepare for industrialization and scaling up operations. We hit several milestones in the last quarter, notably demonstrating a successful end-to-end recycling process with Argonne National Laboratory. We also continue to advance our regulatory engagement with the NRC, submitting white papers and holding pre-application meetings in several key topic areas. Finally, I mentioned this before, but we're also excited to advance and announce our strategic partnership with Atomic Alchemy, a company working on producing radioisotopes. Our partnership entails work on using the fast neutrons we produce for radioisotope production, as well as partnering with them to process co-products from the recycling facility that can be packaged and sold into various industrial, medical, and other markets. Going forward, we look forward to keeping the market updated on our progress in six major areas: reactor licensing progress, customer pipeline development, project execution, the development of fuel recycling, strategic partnerships, and financial updates. With that, I'll hand it over to our CFO, Craig, again.

Thanks, Jake. Both Oklo and AltC are very pleased with the outcome of our merger, which closed on May 9th, 2024. Slide 27 demonstrates several of the key outcomes of this transaction, whereby a record 0.002% of redemptions translated into gross proceeds of over $300 million. After associated fees, over $276 million in cash moved onto Oklo's balance sheet that is being used to fund our business. We believe the attractive pre-money valuation of $875 million, which also included the Equinix prepayment for power, as well as the straightforward nature of the deal that resulted in one class of common stock with no words or pipe, were also critical drivers of this successful outcome. As part of our public offering, as seen on slide 28, Oklo established a new world-class board of directors with individuals with backgrounds in defense, oil and gas, power generation, capital markets, and artificial intelligence. This deep expertise will benefit Oklo as the company executes its business plan to deliver its vision. Oklo is also fortunate to have an experienced management team with a broad spectrum of backgrounds from large Fortune 500 companies as well as relevant government agencies, including the U.S. Department of Energy and nuclear-focused research institutions such as the Idaho National Laboratory. Moving to slide number 30, we know there have been some questions post the close of our transaction regarding shareholder lockups. Post-deal completion, our total outstanding share account is slightly over 122 million shares. Of those outstanding shares, our co-founders, as well as our chairman and the AltC sponsor are under multi-year lockups that include an early release mechanism for share price appreciation, with triggers set at $12, $14, and $16 per share. These lockups represent approximately 34% of total shares outstanding. In addition, we have a few early-stage investors who are subject to a 180-day lockup from the transaction date, but which equate to roughly 11% of shares outstanding. All other original investors did not have lockups and were therefore freely tradable on May 10th, resulting in no sizable overhang on the stock. Moving on to our financial highlights. Year-to-date, Oklo's cash used in operation stands at $17 million, made up of a net loss of $53.3 million, offset by $38.9 million in non-cash impact, the main drivers of which I will highlight momentarily. At the end of the second quarter, cash and marketable securities were $294.6 million, primarily driven by the $276 million in proceeds, net of fees, received at deal closure. Year-to-date, our operating loss of $25.1 million included $9.2 million of non-cash, stock-based compensation expenses, which was primarily driven by a one-time fair market value adjustment of $7.8 million related to earn-out shares payable to Oklo's staff who had vested options at the time of deal closure. For the full year of 2024, our operating loss expectations are still in line with our prior guidance of $40 million to $50 million, as noted in our Super 8-K filing. Our year-to-date net loss of $53.3 million includes non-cash fair market losses of $30 million associated with a safe note revaluation and $7.8 million losses in stock-based compensation. Both of these non-cash adjustments will require these back closing entries. Further details on our second quarter and year-to-date results can be found at the end of these materials and in our 10-Q that will be posted to the investor section of Oklo's website. With the filing of our 10-Q for the second quarter, we're looking forward to several upcoming investor events, including Canaccord Genuity's Annual Growth Conference and Citi's one-on-one Midstream and New Energy Infrastructure Conference, both of which will occur later this week. Additionally, we are scheduling an Ask Me Anything session with our executive team for later in August. Finally, to close and emphasize the points made during this conversation, we believe there are six factors that make Oklo such a compelling investment proposition. First, our technology and size is based on a proven fast reactor approach that we look to deploy at scale to reduce complexity, cost, and time to delivery. Second, an attractive business model that is customer-oriented and enables recurring revenue and profits. Third, superior economics that aim to deliver power at a very competitive levelized cost of energy. Fourth, a diverse and growing customer base with interest across six market sectors. Fifth, a streamlined approach to regulatory approval underpinned by our combined license application process that leverages years of experience in our work with the NRC. Finally, a well-capitalized balance sheet that positions us well for the implementation of our business strategy. With that, I would like to thank you for your time and Jake and I will now open the call for questions.

Thank you. We will now take our first question from Vikram Bagri with Citi. Your line is open. Please proceed.

Hi, good afternoon, everyone. Very thorough update from the letter presentation, released and prepared comments, appreciate the color. To start off, very impressive increase in pipeline from 700 megawatts to 1.35 gigawatts now. The letter cites the AltC merger as one of the drivers of the increase. I was wondering what led to this meaningful increase in the pipeline? Is it due to more visibility from the merger? Is it driven by data center AI power needs, or more liquidity now that you actively engage the customers and your progress on the regulatory front? If you can identify what's sort of driving this level of interest and which sectors are majorly contributing to this demand?

Sure, Vik, it's Craig. I can take that. So, the growth from 700 megawatts to 1.3, 1.4 gigawatts was really the result of the things that we announced between the deal announcement and closure. So that would be the Equinix transaction, Wyoming Hyperscale, Diamondback Energy. But what we did see on May 10th is that Jake's phone started to ring off the hook and Brian Gitt's phone started to ring off the hook with even more customers expressing interest. But I think there probably was an element of some of those customers wanting to see if the deal would close and at what level the deal would close. Once it did, I think that gave them confidence to progress business development conversations. I would actually think that as those conversations progressed, when we do an update in the third quarter, that 1.3 to 1.4 gigawatt, we could be in a world where that figure could be higher, and we'll continue to work on those announcements or deals with customers. We hope to have more to announce in the coming month.

Thanks, Craig. And then on the relative note, the slides mentioned that you're converting many of these letters of intent into PPAs later this year, next year. I was wondering if you can talk about how many of these cases are you doing site evaluations? How are you thinking about doing site evaluations? And then how are you incorporating fuel costs in your PPAs when you convert these LOIs into PPAs? Will fuel costs be passed through? We've also seen a significant increase in capacity prices in recent auctions. If you can also talk about the PPA rates that you're seeing in the market, it seems like those should be uniquely higher than what you indicated at the time of the merger?

Yes, thank you, and this is Jake. It's a good set of questions and a good thoughtful set of questions. I think from a matriculation perspective, what we're excited about seeing is a pool of LOIs that then set the stage for us to start working with each of those customers, as well as others in the pipeline that are coming forward to identify site-specific considerations that move into the PPA negotiation process. Right now, we are actively looking at site exploration around several of the partners we've announced, not just where we want to go, but where on their specific sites of land that they already have makes the most sense to deploy. So we're going through a characterization process. We have a methodology we've developed, and we've been working on executing against that with our partners to identify what makes the most sense for their needs and ours. Those things all then play into the specific PPA terms and pricing development. In the LOIs, we try to set those forward, at least at that stage, to ensure we're all working in the same direction. But this will help refine what's to be expected based on the specifics that evolve during the actual PPA negotiation process. PPA negotiations take a long time, so we're excited to be in those discussions with several groups and we're eager for more progress in that space. That said, regarding fuel costs, what we're seeing — and this ties to your other question— is right now, energy pricing is quite constructive for us due to significant demand upticks for various reasons. Looking at the 650 megawatts we brought forward in the second quarter, 600 of those megawatts were for data centers. I would say that’s a reasonable approximation for the breakdown of customer input and engagement that we're seeing by sector. Accordingly, we're witnessing great demand, limited supply for power. Specific pricing has been advantageous to us, allowing us to leverage those benefits and have some bargaining power. What we've found is that since fuel is a potentially volatile pricing input for everything in the nuclear space, particularly for new advanced plants, we've found openness to fuel cost pass-throughs. This dynamic is further bolstered by the fact that, as we pursue recycling, it provides our customers a chance to save on fuel costs if recycling comes online. So that creates a favorable dynamic that helps us avoid getting hindered early on by fuel pricing volatility, while also providing a pathway to market entry. This, in turn, enhances our rationale for deploying recycling even sooner, ultimately helping us launch more reactors and lead to lower overall costs altogether.

Thanks, Jake. I have a couple more, and then I can jump back into the queue. I was wondering if I could again inquire about how many pre-filing discussions you've had so far, and the letter indicates the first plant will be by 2027 versus the previous expectations set for 2026 or 2027. I was wondering if I'm reading too much into the language or if there's a slight delay in the timeline. If you can share how those conversations are going and how many hours of discussions you've had so far?

Yes, and we've had lots of conversations with the NRC. I think the latest tally in our slides indicates that we've submitted about 55 draft and technical reports to the NRC, dating back to our engagement that started in 2016. We've had over 500 technical and planning meetings. That's a lot of engagement. We continue at a pretty regular pace. I would say we're meeting on average for a few hours once every couple of weeks right now as we ramp into the pre-application readiness assessment to move forward. This process is helping us and the NRC define the scope of what we expect out of the readiness assessment appropriately and move forward from there. One significant feature that brings along a lot of work for companies is the flexibility the NRC offers in terms of how you can ultimately get a commercial license from pre-application all the way through licensing. There’s a huge menu of items to choose from. Every company can pursue the path that makes the most sense for them. For us, it works favorably because of our business model—we're going straight to build and operate. We go directly into licensing to build and operate the plant. Instead of taking steps to get a design certification and then go through the process or take steps to receive a construction permit and then get an operating license, we do it all at once. This has some significant efficiencies for us. Similarly, on the pre-application side, as we ramp up the application process, there are several activities we can undertake to ensure that we're moving forward, minimizing risks as the company engages in the pre-application accordingly, and helping the NRC prepare for the review. It's highly iterative and dynamic. We're engaging with them regarding both the reactor and the fuel recycling aspects. There’s a lot of activity on this front, but at the end of the day, we're working to be in a position to submit an application as soon as reasonably possible, which we expect will be next year, with several subsequent applications coming the following year, depending on the timelines of how the PPAs and other factors develop to then have staggered reviews. Regarding the timeline, I would say that when we announced the deal, we were looking at 2026 or 2027. That was built under the assumption we'd close the deal in 2023. Since we ended up closing it closer to the midpoint of 2024, that's contributed to a shift in the deployment of the full capital, pushing us more towards 2027. There are also other factors concerning how we are managing supply chain, site development, and related pieces. So far, those have largely been moving reasonably well. It is beneficial that we have fuel awarded and allocated for our first plant—we're not subject to some of the supply constraints typical for initial deployment. We will face them for subsequent plants, but for our first plant, this is a big deal. That’s why the timeline reflects the firm establishment for the 2027 date and 2026 is not achievable due to when the deal closed.

We'll move next to Thomas Meric with Janney Montgomery.

Good afternoon. Congratulations on all the success there. Just wanted to start out on EBR-II. The question's really around capacity factor of sodium-cooled fast reactors. What does the data suggest, as you've reviewed it, that a sodium-cooled fast reactor can hit on a real-world capacity factor basis? I'm asking from the perspective of having a long, deep history of operating large light water reactors at 90% and 92% capacity factor. And how should I think about the time it'll take for your Gen 4 reactor to reach capacity factors in the 90s?

Yes, that's a great question. It's not the easiest thing to pull out. We developed all these amazing things in the nuclear industry starting back in the 50s and 60s, largely on paper. So all the great records of history and operations were largely paper-based for EBR-II and for prior fast reactors, as well as the Fast Flux Test Facility, FFTF. But the FFTF and EBR-II are the most direct legacy of our technical learning, as the latest iterations have come from previous developments in the U.S. The digitization of historical records has been a significant advancement. One of the most astonishing insights that stood out to me during the formation of the company was that EBR-II and FFTF, both liquid-cooled fast reactors, actually achieved superior operating capacity factors and performance characteristics compared to commercial light water plants at the time. This was incredible because their main job wasn't power production but material and fuel testing. So they were often shutting down and operating at a high frequency. Despite this, they managed to surpass what was happening on the light water side. You'll also find information regarding occupational dose rates which affect operational timing and maintenance schedules. In general, those rates were lower than what was observed at commercial light water plants. The key inherent design benefits of sodium fast reactor technology validated our capability to attain comparable, if not superior, operating capacity factors. Long-term, I think we might slightly beat our targets and get into the mid-90s. This trajectory will require time since we possess substantial operational experience with light water reactors, but we have the benefit of a successful past in fast reactor operations which we can leverage. Thus, having a head start compared to light water plants will positively affect our trajectory. We aim to outperform those technologies or at least match their performance, particularly in our engagements with potential customers. We build in some flexibility in determining what our early plants' operating capacity factors will be to navigate the initial learning curves towards achieving higher performance.

Super helpful, thank you. And then on the demand side, I'm curious about your thoughts on defense applications, specifically considering the defense innovation solicitation from earlier this summer. What are your thoughts regarding defense applications and micro reactors in that arena? Additionally, I have an administrative inquiry: how do I think about programs with the DOD and NRC licensing? Is there a crosswalk that makes one easier than the other? Just generally, how do I think about those licensing programs?

Yes, absolutely great questions. Regarding defense engagements, we've been actively working with various branches of the Department of Defense for some time. Last year, we were awarded the initial round for the Eielson project in Alaska. After that was challenged by protests, the procurement actions became conservative, which is common today given the protest cycles in the DOD. The project was re-awarded to us in February, but a protest was filed in March, and it is currently undergoing the next stages of review. Given the previous cadence, we expect updates on that in the near future. The fact that we were awarded it twice gives us confidence, although we must wait and see how that unfolds. Our offerings align with what they’re looking for, particularly given our flexibility regarding size ranges. We won't be targeting the one-megawatt or smaller scale, but we can be competitive in the upper ranges. We see great potential in the energy needs projected from the Defense Department, as their energy requirements are quite diverse. Thus, I believe multiple solutions will emerge from this, and our company is positioned to be among them. The overarching guidance in the Air Force call indicated a preference to be licensed by the Nuclear Regulatory Commission. However, in general terms, the Department of Defense can authorize their own nuclear plants, and that pathway is of interest to some, which provides them with a backup option to the NRC. That’s indeed a favorable feature for our space as well as for customers, enhancing overall supply chain reliability. Generally speaking, our ability to site where our customers need us, including on their lands, proves advantageous for our business.

Jake, one of the reasons we were pleased to have retired General Jansen join our board is to gain insights into that market sector. I would also mention that this call was initially set to end at 6 p.m. Eastern Standard Time, but Jake and I are more than willing to stay on and continue answering questions.

We'll move next to Ryan Pfingst with B. Riley.

Hey guys, thanks for taking my questions. Just curious, are you seeing a difference in demand between the 15 and 50-megawatt plants? Maybe if we're looking at the pipeline, how would that break down between the two?

Yes, so it’s a great question, Ryan. If you look back at my start with the company last August, the projects in Ohio, Idaho, and Allison were all in the 15-megawatt size range. However, most of the projects announced since then, which have driven growth in the order book, have been predominantly in the 50-megawatt size range. In fact, Jake and I were in a meeting a couple of weeks ago at our headquarters with a potential data center customer. One of the things that stood out was discussing how they envisioned deploying data centers at a Greenfield site and how we might align a deployment schedule of 50-megawatt powerhouses to support that. So we're aiming to be customer-oriented and responsive, and our order book now reflects that with probably more opportunities in the 50-megawatt size than in the 15.

Yes, I appreciate that color, Craig. Any update on how you're thinking about the estimated construction and fuel costs for your plants? I know we've spoken about $70 million being a reasonable target for the 15-megawatt version, but I wonder if you have an update there.

If you refer to our investor day materials, I believe the first-of-a-kind estimate for the 50-megawatt size was approximately $145 million. That number decreases as we apply some of those economies of scale. Though fuel costs have increased, at times we see pressures on that number, but as we discussed earlier, the overall demand and power pricing dynamics around PPAs have also risen, which helps offset those costs. Furthermore, we didn’t assume any benefit from ITCs in the financials shared during our Investor Day presentation, but the ITC actually applies to both the asset and fuel costs. So, considering the ITC at a 30% to 40% range can hedge against inflationary pressures.

We'll go to our next question from Jeffrey Campbell with Seaport Research Partners.

Good evening and thank you for all the color. As you think about possible Title 17 loan applications, is this effort aimed more toward installations after the initial national laboratory installation? Are you considering a project-by-project type of financing or perhaps combining multiple projects into one application?

I think, Jeff, at this point, we're probably looking at both of those scenarios, and there's probably a middle ground where we can bundle projects that consist of more than one powerhouse as we explore financing strategies. The chart I previously referenced described the mix for each project concerning how much funding will come from cash on the balance sheet versus financing structures. One thing that Graham Johnson, our Treasurer, and I are analyzing is the right mix around tax financing structures, loan programs, and project financing to establish both an optimal cost of capital and successfully implement these financing structures.

Okay, thank you. As you look ahead to a time when you have multiple installation projects operating simultaneously, do you imagine the work will accrue to a handful of EPCs who will be aligned to your work, or will it be more of a separate EPC aligned with each separate project?

Yes, that’s a thoughtful question, and it's more the former. Our strong inclination is to create and maintain a competitive environment among the EPCs and work with a number of different ones based on regional or site-specific experience, characteristics, or preferences. This allows us to have diversity in our EPC selection while maintaining flexibility and competitiveness from a cost perspective. While certain specific deployment scenarios may benefit from specialized contractors, we generally anticipate retaining a deep bench of EPCs from which to choose for completing these projects.

We'll take our next question from Graham Price with Raymond James.

Hi, good afternoon. Thanks for taking my question and for fitting me in. I just wanted to inquire about the project with Diamondback Energy. Specifically, what is a realistic timetable for deployment there?

Yes. So, we announced our partnership with them stemming from discussions initiated towards the end of 2023. We are currently working on identifying the specific sites they want us to be on. We view this project as an initial one, where we recognize the demand for electrification in the Permian Basin. This is only a small initial step, but we aim to make it impactful while positioning ourselves for future scalability. Completing essential site evaluations and structuring the PPA, we anticipate initial power generation around 2028 to 2029. However, these timelines hinge on the specific locations and site selection processes that Diamondback will dictate. That’s how we are marching forward on our end.

Got it. I guess just broadly, how do the opportunities look for the oil and gas space in the Permian and other basins?

It's an exciting landscape with substantial potential. We’ve observed some significant growth around electrification needs, especially in the Permian Basin. New studies project enhancing electrification will require multiple gigawatts of power, and this feedback has led us to believe we can tap into an expansive order book potential in that region and our model effectively provides into that. Discussions have suggested demand levels in high hundreds of megawatts to a couple of gigawatts needed for electrification. As we approach this, and considering we've built strong relationships with industry leaders, I envision great upside opportunities that can be realized through our nuclear energy solutions.

With 30 years in the oil and gas sector, I can confirm that operations require a 24/7 operational capability. They demand reliability, and most major firms are now embracing some form of carbon reduction targets. Our solutions align very well with these requirements.

We'll move to our next question. Your line is open. Please go ahead.

Thank you. Congratulations on the progress and the first public call. And thanks for taking my questions. On slide 20 with your pipeline, can you outline the steps from signing the initial letter to going through the process to getting a final power reactor?

Yes. The process begins with engaging customers first. This effort typically starts with a memorandum of understanding that sets a broad scope, followed by a letter of intent to effectively purchase power from us, outlining the site and size. Often, customers jump straight to the LOI. Next, we collaborate to identify the best sites for deployment. This often involves projects that entail multiple plants. During this process, we develop the physical site issue and negotiate PPAs in parallel. It is beneficial to pace ourselves with regard to PPAs, as there’s considerable demand and we want to ensure we optimize those opportunities. Additionally, we may face limits on our capacity to deliver in the next few years based on pipeline…

Jake, I know one of the challenges on a day like today is we’ve published a great deal of materials, and there is only an hour to look at them. I think page eight of our shareholder letter features a nice visualization of the steps from the MOU stage you mentioned to securing the PPA.

Okay. But now one of my questions: let's say you have a potential customer that is already running a data center. They have land and want to contract with you. Would they be able to streamline the licensing process? I believe you have substantial demand, and your bottleneck might be the ability to get regulatory approval for permits to build and implement. Do you have customers that fit this outline with this streamlining potential? And what is the process for achieving financial commitments from them?

Yes, definitely. Having clients with existing sites simplifies construction and installation considerably. This means the actual permitting process may see advantages but is significantly related to federal protocols. The main benefits reveal themselves during construction, facilitating a smoother transition. Many of our announced clients have specific locations that are in consideration. It's iterative. Typically, having existing site infrastructure expedites development. As for deposits and financing, we're open to discussions of financial arrangements with customers. Each company will likely evaluate these differently, as in the case of Equinix investing in the company, which sets a good precedent. Great, I appreciate all of your interest in Oklo and our business. We look forward to keeping everyone informed as we progress ahead in our very exciting fields.

And that will conclude questions altogether. I'll turn the conference back to Jake for any additional or closing comments.

Great, thank you for everyone for joining us today. We appreciate your attention, time, and the thoughtfulness of your questions. We are excited to continue updating you on our efforts as we move towards building our first plant, scaling up recycling operations, and expanding our order book. The technology we are harnessing affords us the potential to fulfill substantial energy needs sustainably, and we are motivated by the long-term energy solutions we can provide. I'm looking forward to our next session and communicating our developments moving forward. Thank you all.

Thank you. That does conclude today's program. Thank you for your participation. You may disconnect at this time.