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Table of Contents
<br />supply chain delays, weather and other events, we were unable to complete the projects by August 1, 2022 (the "Guaranteed Completion Date") and made related force majeure
<br />claims. In late 2022, SCE also instructed us to adjust the completion of the sites into 2023. Under the SCE Agreement, a failure to reach the Guaranteed Completion Date could,
<br />under certain circumstances, result in liquidated damages up to a maximum amount of $89 million being applied. We have been working with SCE to analyze the applicability
<br />and scope of force majeure relief based on our force majeure claims. In February 2024, in response to us issuing an invoice to SCE for one of the sites, SCE notified us that
<br />they intend to withhold liquidated damages for that project. Our view is that liquidated damages should not be applied. If we fail to come to an agreement with SCE about the
<br />applicability and scope of force majeure relief and liquidated damages, we may be required to pay liquidated damages up to an aggregate maximum of $89 million and may not
<br />be able to recover costs associated with the force majeure events.
<br />We are working closely with SCE on the final steps toward substantial completion for two of the three projects. Construction activities and preparation for commissioning have
<br />begun for the third project, which was significantly impacted by the heavy rainfall in California in 2023. This last site is expected to reach substantial completion in the summer
<br />of 2024.
<br />A majority of our revenues under this contract were recognized in 2022 based upon costs incurred in 2022 relative to total expected costs on this project.
<br />Stock -based Compensation
<br />During the year ended December 31, 2023, we granted 170,000 common stock options to certain employees and 66,247 restricted stock units to our employees and non -
<br />employee directors under our 2020 Stock Incentive Plan. Our stock -based compensation expense decreased from $15.0 million for the year ended December 31, 2022 to $10.3
<br />million for the year ended December 31, 2023. Stock -based compensation decreased in 2023, primarily due to the reversal of previously recognized expense of approximately
<br />$5.1 million related to performance -based option grants as the estimated probability of such awards vesting was reduced to zero based on the expected attainment of certain
<br />performance targets due to revised results in 2023.
<br />In addition, our unrecognized stock -based compensation expense decreased from $46.7 million at December 31, 2022 to $30.1 million at December 31, 2023, and is expected to
<br />be recognized over a weighted -average period of two years. See Note 14 "Stock -based Compensation and Other Employee Benefits" for additional information.
<br />Backlog and Awarded Projects
<br />Backlog is an important metric for us because we believe strong order backlogs indicate growing demand and a healthy business over the medium to long term, conversely, a
<br />declining backlog could imply lower demand.
<br />The following table presents our backlog:
<br />(In Thousands)
<br />Project Backlog (t)
<br />Fully -contracted backlog
<br />Awarded, not yet signed customer contracts
<br />Total project backlog
<br />12-month project backlog
<br />(1) Project backlog net of minority interests
<br />O&M Backlog
<br />Fully -contracted backlog
<br />12-month O&M backlog
<br />As of December 31,
<br />2023 2022
<br />$ 1,323,742 $ 1,001,325
<br />2,555,197 1,638,640
<br />$ 3,878,939 $ 2,639,965
<br />$ 718,577 $ 595,020
<br />1,221,661 $ 1,231,120
<br />88,930 $ 89,520
<br />Total project backlog represents energy efficiency projects that are active within our sales cycle. Our sales cycle begins with the initial contact with the customer and ends, when
<br />successful, with a signed contract, also referred to as fully -contracted backlog. Our sales cycle recently has been averaging 18 to 42 months. Awarded backlog is created when a
<br />potential customer awards a project to Ameresco following a request for proposal. Once a project is awarded but not yet contracted, we typically conduct a detailed energy audit
<br />to determine the scope of the project as well as identify the savings that may be expected to be generated from upgrading the customer's energy infrastructure. At this point, we
<br />also determine the subcontractor, what equipment will be used, and assist in arranging for third party financing, as applicable. Recently, awarded projects have been taking an
<br />average of 12
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