Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Paul Clegg – Jefferies.
Paul Clegg – Jefferies
You mentioned a loan guarantee program and I was curious is you're seeing any strings attached to the loan guarantee program that make them less palatable for you to pursue. Some parties we've been talking to seem to be worried about the requirements for labor rates and environmental estimates and things like that.
Joseph Tenne
The new loan guarantee doesn't have the regulation but in the existing loan guarantee, the 2005 loan guarantee you are right, there is a requirement to pay a labor rate which is equivalent to union rate. It's not that you have to use the union, but the rate has to be equivalent to union rates. It may cause a slight increase in construction costs, but the benefit outweighs the additional costs. On the environmental side we don't see any changes.
Paul Clegg – Jefferies
You mentioned a decrease in global commodity costs or commodity pricing again. Last quarter you were talking about that expecting to start seeing the benefit at some point, but really you were just not at a point yet where you were seeing it. Any better visibility this quarter on seeing that flow into your capital costs?
Joseph Tenne
The gross margin in our product segment which is way higher than what it used to be is a reflection of the reduction in the commodity price. How to quantify this, I'm not sure that it has reached the bottom or not, but we definitely see it for this segment.
Paul Clegg – Jefferies
Any visibility of when that might actually start flowing for you into the guarantee or construction costs at some point?
Joseph Tenne
I believe the [inaudible] because most of the cost has been incurred before. If only some of the costs had been incurred before, some realized benefit from the reviewed costs, I think the logically the first quarter we are going to see the full impact/
Paul Clegg – Jefferies
What kind of magnitude would you be looking for in a CapEx for a megawatt basis?
Dita Bronicki
It's hard to say, but probably in the 7% to 15%.
Operator
Your next question comes from Dan Mannes – Avondale.
Dan Mannes – Avondale
On North Brawley, with an incremental three month delay there, what sort of confidence level as to the start up now with the end of Q3 just given the delays we've seen to date and if you could just give us a little bit more color on the specific issue with the solids, if you've seen this anywhere else and what sort of mitigation plan you're actually putting into place.
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