Recently announced a $41.7 million contract with the US Navy to develop multi-megawatt versions of its carno power generator for unmanned maritime vessels.
Now this does represent the company's largest defense contract to date.
And at the same time, the organization is attempting to leverage its modular power architecture for commercial use cases.
To discuss the Navy contract as well as the commercial roadmap as Thomas Healey, founder and CEO of Leon.
Well, good morning.
Thank you so much for joining us.
I do want to start out with that contract that was awarded to high Leon.
So what are the specific performance as well as maintenance requirements for these systems and what is the timeline here?
Morning.
So, this contract is not only to focus on ships, and powering ships for the military, but it's also looking at powering military bases.
And so, the military needs a new source of power generation, right?
They've been reliant on diesel engines for many, many years, uh, but there's problems with diesel engines.
They're loud, they can, they require a lot of maintenance, they're not as efficient, and so those are areas that our carno power module are able to solve, and that's where they're seeing this.
As a future technology for them, even to the point where a brand new fully unmanned autonomous ship that the Navy is producing, the USX 1 Defiant, we are going to be the power plant on that because we don't require the same level of maintenance that a normal diesel would.
And so that's one of the opportunities you mentioned, timeline.
Uh, this is something that we are already building, uh, the, the unit for that unmanned ship I mentioned, uh, and then over the next couple of years, we'll be delivering towards that $42 million contract.
Yeah, and Thomas, while I have you here, I would like to get your perspective on what we're seeing, especially given the demands of artificial intelligence, and as you highlighted, capacity constraints on the electric grid have increasingly driven interest in on-site power generation for AI data centers.
So give us your take on to what extent power as well as efficiency requirements of these commercial hyper scales actually align with the modules that you are building.
Maybe just to start with, to give your viewers a sense of, like, what's happening in the data center space.
So, if you go to areas like Virginia, which is where most of the data centers are in the US, or if you go to Ireland, the utility, the grid is already saying, we do not have enough power available, you have to take, to go with this model of bring your own electricity.
You can't plug into the grid anymore.
And so, that now forces the data centers down a roadmap where they're looking at, all right, what technology can I use on site that can make clean, efficient, reliable, and ultimately low noise as well, uh, electricity, and ideally do it for cheaper or less than what you could buy from the grid.
And those are all the value problems.
Positions that this Karno power module that we're producing uh really enables.
And so, we are seeing a tremendous amount of demand out of the, the data center space, uh, and, you know, right now we're working on how do we actually scale up in order to meet that demand because these data centers are talking not about tens of megawatts, they're talking about hundreds of megawatts to even gigawatts of power that they need.
Yes, and while we're talking about the Carno system for our viewers who may not be as familiar, tell us, tell us how the system actually runs and in terms of fuel flexibility, how does it actually impact CAPX as well as operational costs for commercial adopters?
This is truly a new form of power generation.
So if you think about technologies of the past, you have turbines, which is, you know, big power plants are powered off turbines, you've got internal combustion engines, fuel cells.
We are a new category of a heat engine or based off of Stirling technology.
Now, this isn't new, it's been around for 200 years, a Stirling engine, but the problem has been, it's been Extremely difficult to manufacture.
So, this is one of our key things.
Uh, just behind me here, you can see 3D printers, metal 3D printers, and we're actually using these machines to make parts that could never have been made before, and that's what's enabling us to bring this 200 year old tech to life.
Uh, and the benefits of it are extremely high efficiency.
Low maintenance, and you mentioned fuel flexibility.
So, since our generator is powered by heat, we can use natural gas, we could use diesel, hydrogen, propane in order to make that heat that then runs the system.
So this gives, uh, whether it's data centers or the military, a pretty unmatched advantage because now you have one asset that can run on all these various fuels.
Yeah, so for the layperson out there who may not be as familiar, can you walk us through the efficiency as well as cost and even maintenance when you're comparing carno to say established fuel cell systems that are currently on the market.
Sure.
So let's, let's start with, uh, the average wall outlet in the US is 36% efficient.
So that means that for every drop of fuel that goes into making electricity, only 36% of it actually comes out as being, you know, electricity you can use.
Our Kno power module, we are targeting a 50% fuel to electric efficiency.
So, a pretty good step change above what the average grid electricity is.
Uh, so then that goes to, well, what's the cost?
How much does it cost to make a kilowatt hour?
And we just did a study with one of the large box retailers in New York, and, uh, New York has pretty high grid prices, also high natural gas prices.
Uh, so, Grip prices were about 22 cents per kilowatt hour, and we're targeting a cost of electricity out of our box at 17 cents per kilowatt hour.
So, pretty good savings for the customer there.
If you go to states like California, uh, it would even be greater savings, or if you go to a state like where we're headquartered, Texas, you can be producing electricity out of our box even a lot less than that 17 cents per kilowatt hour.
And Thomas, finally, before I let you go, you've highlighted the competitive advantages here, but what are some of the manufacturing as well as operational challenges that Haileeon actually faces as you move towards more commercial deployment?
So, just to frame this up for your, your viewers, we're the early innings of the rollout of this technology.
It was 2025 when we started deploying it to the Navy.
It's 2026, where we're starting to do commercial customer deployments, uh, and then 20207 and beyond is where we're going to be scaling this technology.
So, the way we scale it is actually through 3D printers.
So, I mentioned the machine behind me here, uh, as we want Go scale production, we need to buy and add more and more of those 3D printers to our fleet.
We actually, on our most recent earnings call, we just announced that we have an economical model to really go scale additive, where for every megawatt of yearly production capacity we want to add to our plant, it's going to cost about 1.5 million million of machines, and then that will in return generate about About 2.5 to $3 million a year of revenue for Hon.
And so this is the first time that we really put manufacturing economics to our business model.
And over the coming years here, the goal is to get a lot more of these machines, we source them from GE who's a great partner, and uh really build out our manufacturing plant in Texas, which is capable of producing hundreds of megawatts a year of uh of Kno power modules.
Well, Thomas, we will have to leave it there for today, but I appreciate your time.
Thank you so much for weighing in, and I appreciate your perspective.
Thank you.
