Q4 2021 Brookfield Business Partners LP Earnings Call

Welcome to the Brookfield business Partners' fourth quarter 2021 results conference call and webcast.

A reminder, all participants are in listen only mode and the conference is being recorded after.

After the presentation, there will be an opportunity to ask questions.

Joining the question queue simply press star and one on your Touchtone phone.

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Now I'd like to turn the conference over to Alan Fleming Senior Vice President of Investor Relations. Please go ahead Mr. Fleming.

Good morning, and thank you operator before we begin I'd like to remind you that in responding to questions and talking about our growth initiatives and our financial and operating performance. We may make forward looking statements. These statements are subject to known and unknown risks and future results may differ materially for further information on known risk factors I encourage you to review our.

<unk> with the securities regulators in Canada, and the U S, which are available on our website.

Joining me on the call today is Cyrus Madden, Chief Executive Officer, Denis Turcotte, Chief operating officer, and Jeffrey <unk>, Our Chief Financial Officer, I will turn the call first over to Cyrus to provide an update on our business and then Dennis will give us an update on our recent business operations activities Chesapeake will finish with a review of our finance.

Results will then be available to take your questions and with that I'll pass the call over to size.

Thanks, Alan Good morning, everyone. Thanks for joining us on the call today.

2021 was a very busy year for us we invested $7 billion of capital about $2 2 billion of that coming from <unk>.

To acquire six really high quality market, leading businesses and we generated about $1 billion of proceeds from our capital recycling initiatives.

In addition, Brookfield asset management recently committed $1 billion of long term preferred equity capital to be Bu.

<unk> further strengthens our liquidity position.

We're really pleased with the performance of our operations.

Adjusted EBITDA for the year increased to $1 8 billion driven by a 20% increase in the performance of our existing operations over the prior year.

Annual adjusted EBITDA on a run rate basis has now increased to more than $2 billion.

Up from $250 million annually, when we created <unk> in 2016.

As we've grown the profile of our operation has also evolved through a continued focus on higher quality and larger scale business acquisitions.

Each of the businesses, we've acquired over the past year is either a market leader.

It has the potential to generate strong growth and high cash returns.

<unk> fortunate to have acquired these businesses for what we believe is reasonable value given their exceptional quality and the strong cash yields we will generate on our capital.

Since our last update we closed our acquisitions of <unk> global and modular group two market, leading large scale businesses that strengthen our global footprint.

We're in the early stages of implementing our value creation plans and later Dennis will talk more about what we're doing to support growth at each business.

We're also on track to close our acquisition of scientific games corporations Global Lottery services and technology business in the coming months.

Last week, we reached an agreement to acquire Cooper group.

A leading provider of premium slate roofing products.

<unk> has a track record of consistent organic growth supported by our market leading position non discretionary replacement driven demand and long term price stability.

This will be a smaller investment for us, but the business will increase our footprint in Europe and should provide a strong cash returns on our capital.

In addition to growth our new business acquisition should contribute to the substantial levels of cash flows our operations are generating today.

These are cash flows that can be used to fund growth pay down debt or support recurring distributions up to <unk>.

This past quarter, our operations generated about $350 million in distributions to <unk> to support our growth activities towards the end of the year, our Canadian residential mortgage insurer paid of $400 million dividend funded by excess cash in the business our share was one one.

Third $65 million.

The business continues to operate with excess cash, which we hope to distribute through additional dividends over time.

In addition, our nuclear technology services operation continues to generate strong cash flow in line with prior years. This business paid a 350 $300 million dividend at year end, our share was about $130 million.

In addition, our Canadian gaming and entertainment operations also paid us a $55 million dividend.

As the profile of our business has evolved we've.

We've also continued to build value within our operations as a result, the intrinsic value per unit of our business has increased at a compound annual rate of 18% over the past five years. Most of this value creation has been achieved by acquiring high quality businesses at reasonable prices and.

<unk> their performance.

As we continue to grow we expect our intrinsic value per unit will also continue to increase.

We're excited about how our business is positioned today, our balance sheet is strong our operations are providing growing sources of liquidity. We're focused on integrating our recent acquisitions accelerating initiatives to surface value in our existing operations and completing the spin out of our paired corporate entity.

Which we hope to do in the coming weeks, so with that I'm going to hand, it over to Dennis.

Good morning, everyone.

An important differentiator for our business is our ability to build value through our hands on and systematic approach to improving our operations with growth, we've scaled up the size and capabilities of our business operations team and now have over 30 people on the ground globally working closely with the management teams at each of our operations.

<unk> value and enhance underlying cash flows I wanted to touch on a few highlights of our efforts over the past year, it's simply they illustrate how this works in practice.

We supported our nuclear technology surfaces operation to complete three add on acquisition acquisitions during the year to strengthen its digital offering broadened service capabilities and grow its presence in adjacent markets. Westinghouse consistently provides tremendous value to its customers and to ensure this continues in the medium.

And longer term, we continue to support its ongoing investment in new technology, and R&D to maintain its market leadership position in micro reactors with the Vinci product small modular reactors that Mars and large scale power generation with a globally, leading technology of AP 1000.

At our advanced energy storage operations <unk>, we've been working with the management team to execute on a wide range of initiatives securing approximately half of the targeted $400 million of annualized cost savings.

In addition, the company's launch of New advanced Battery technologies has led to organic growth above expectations and strengthened <unk> position at the forefront of automotive electrification trends.

Our water and wastewater services operation in Brazil through a concentrated effort in improving business development and project management capabilities, we've effectively double the pace at which we are building out our concessions compared to several years ago, which will continue to positively impact customer and revenue growth.

Finally at our Canadian gaming and entertainment facilities, we successfully managed through Covid related operational challenges during the year opened a newly Redeveloped Pickering venue in July and are on track to open the $1 billion redevelopment of our Woodbine facility later this year.

With our more recent acquisitions <unk> and modular I wanted to take some time today to talk about the operational plans being developed for each of these businesses.

<unk> is the leading provider of components for total equipment manufacturers, primarily in North America and Europe .

Products include axles chassis and related systems for a wide range of total trailer applications. It is the only business in its industry, which has integrated manufacturing and distribution capabilities.

Working with a very strong management team with a track record of driving growth, we see opportunities to leverage our operational expertise to build value across three main areas.

In the area of manufacturing productivity were working with management to develop plans to improve efficiencies by rebalancing is manufacturing and delivery footprint correcting production gaps and pursuing quality initiatives, including value engineering to drive out cost.

We've also introduced our Brookfield purchasing and data analytics platform targeting opportunities to optimize supply chain by implementing a more consistent and centralized.

Procurement strategy that will allow <unk> to leverage those.

Size and global scale of its operations.

This includes supply chain rationalization, where appropriate correcting price variances and improving supplier qualification and purchasing programs.

The third area of focus is M&A as <unk> mentioned, the Companys acquisition strategy has historically been very successful and we plan to support management by targeting similar value accretive acquisitions in both the businesses core product offering and adjacent markets, where we can acquire businesses at reasonable Val.

<unk> and buy down multiples through the successful integration and execution on planned synergies.

Moving to modular.

At its core.

This is the leasing services business in Europe , and Asia Pacific Bill.

Building off Brookfield to experience in this space, we plan to leverage this expertise to drive meaningful growth and operational improvement in four main areas.

ESG operating performance organic growth and acquisitions.

Focusing on our employees, we are initiating the rollout of our safety training and broadening the skills development program across the company's 170 branches, we plan to strengthen our focus on customer service via reduce lead times and improve quality.

More centralized supply chain procurement and sourcing initiatives will help us reduce cost supporting our competitiveness and margin performance.

At our assembly and light manufacturing facilities, our initiatives include launching lean manufacturing and optimizing the network and product range to meet evolving customer requirements for a modular space with reduced carbon footprint.

We plan to support the company's growth by improving its commercial strategy, leveraging the Brookfield ecosystem and expanding the range of high margin value added products and services offered to customers.

We also intend to support margin modular growth through accretive acquisitions to build market share and expand into new regions with enhanced product and service offerings.

And with that I'll hand, it over to Jeff speak Thanks, Dennis and good morning, everyone.

As far as noted we generated strong financial performance in 2021.

<unk> EBITDA increased to one 8 billion compared to $1 4 billion for 2020 with strong results across each of our three segments.

In business services, we generated 2021, adjusted EBITDA of $561 million more than double compared to 2020.

Adjusted earnings from operations or <unk> improved $397 million.

Our residential mortgage insurer contributed 269 65 million of adjusted EBITDA benefiting from underwriting activity that reached record highs and mortgage default suite that remained well below normal we.

We expect strong underlying fundamentals and moderate home price appreciation to contribute to stable Canadian housing market activity in 2022.

Healthcare services in Australia reported adjusted EBITDA of $69 million, which is an improvement over 2020, despite the ongoing impact of Lockdowns and restrictions on surgical activity during the year.

Demand for elective surgeries remained strong but restrictions remain in place which are impacting financial performance.

We're optimistic that activity levels at our hospitals will increase once restrictions are lifted.

Yes.

Our construction business reported adjusted EBITDA of $85 million for the year.

Performance recovered significantly in 2021 and benefited from strong project execution in the UK and Australia.

Backlog increased to $7 4 billion from $5 6 billion at the end of 2020.

Moving on to our industrial segment we.

We generated adjusted EBITDA of $713 million for 2021 compared to $604 million in 2020.

Adjusted <unk> improved to 879 million and included after tax gains of $476 million from the partial sale of our investment in graphite electrode operations and in public Securities.

Our advanced energy storage operations performed well in 2021 and reported adjusted EBITDA of $784 million.

Growing aftermarket demand.

That reduced volumes from original equipment manufacturers impacted by auto production shortages.

Business is generating strong cash flows and paid down $760 million of debt during the year.

Performance of our water and wastewater operation in Brazil increased 15% compared to 2020, reflecting our continued focus on cost management and network expansion.

And finally, our infrastructure services segment generated adjusted EBITDA of $613 million for 2021 compared to $602 million in 2020 <unk>.

Adjusted <unk> improved $396 million.

Nuclear technology services performed well in 2021 and reported adjusted EBITDA of $299 million.

The business benefited from higher volumes and activity levels during the fall outage season, as well as our ongoing cost saving initiatives.

Strong execution on new planned projects nearing completion contributor to results this quarter.

Work access services contributed $84 million and adjusted EBITDA for 2021.

<unk> is improving despite the impact of reduced activity in some end markets and higher labor costs.

During the fourth quarter 2021, the business acquired a full service scaffolding provider in Germany, which expands its market presence into new end markets in Europe .

Our offshore oil services operations reported adjusted EBITDA of 223 million.

Performance in the second half of the year benefited from profit sharing agreements tied to oil price and production volumes of customers.

Now turning to liquidity, we ended the year with $2 $2 billion of corporate liquidity, just recently Brookfield asset management, our sponsor majority unit holder.

To subscribe for up to $1 billion of 6% perpetual preferred equity securities.

Which further enhances our liquidity and will be available to us to fund our future growth activities as they are right.

Before I close I wanted to briefly note our continuing effort around communication of our ESG program.

We are committed on.

An ongoing focus on strong ESG practices.

And aligned with that commitment, we recently published iron.

All growth ESG report.

This report.

The highlights relevant ESG initiatives within our business and operations and is available on our website.

And with that I'd like to close out our prepared comments and turn the call back over to the operator for questions.

As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone to withdraw your question press the pound key.

Our first question comes from Geoff Kwan with RBC capital markets.

Hi, good morning.

My first question was on Alterra.

The supplement kind of talked about how there was a little bit of upside given improvement in.

Oil prices just was wondering.

How you can kind of quantify the effect of strength in terms of the potential for upside and then how much of the business.

Could participate in better pricing in the oil markets.

How much this may help.

Demand for in terms of actual services that altera provides.

Well, maybe I'd respond I'd respond didn't routes.

Sorry, Dennis here.

Would respond in reverse order that clearly the price of oil where it is.

At least in the short to medium term, it's a very good environment.

It's always promoting our customers to try to extract more and extract for longer. So we see that as a welcome tailwind in the short to medium run run as.

As far as though responding to your first two questions in the sense of not wanting to give you a false sense of ability to forecast that.

It really is.

Volatile type of incremental above business plan always but an incremental.

Mount of EBITDA, we generate and there are probably two of the company's operations that are in that category.

<unk>.

Again.

I wouldn't want to give you.

Anything that could be suggestive of forward guidance on it.

Okay.

On the on the on the Cooper acquisition.

Are you able to kind of talk about what.

And if the does the thesis was in terms of how you plan to generate value.

While we see a couple of areas and Cooper.

This is this business has been run by exceptional entrepreneur, we think <unk> demonstrated.

This individual knows how to run the business, both commercially and operationally, having said that as we've worked with them. We've noticed that there are probably some.

Technology and automation techniques in the actual processing of the materials the yields because it is such a high quality and product are actually quite low when you look at from source to finished product. We think we can improve yields. We also think we can help them grow.

Though he has demonstrated a great track record of growth, we see some incremental acquisition opportunities to secure more supply.

And strengthen what is already 60% global supply of this premium product is locked up by this company and we see improving upon that.

Okay. Thanks, and just my last question.

Obviously <unk> has been very active buying and making your investments over the past year little bit less active on monetizing. They know it is always going to be hard to kind of predict but how do you see that.

The market conditions right now as you kind of take a look at on your Crystal ball.

The potential to monetize.

Assets within your portfolio.

Hey, Hey, Jeff Cyrus here.

Look it's a great question I think the Mark the environment is actually.

Ironically.

Quite a bit better now than it was a year ago or even six months ago for us.

There appears to be I'll say a pivot.

From.

Some technology oriented investor interest from what was technology oriented growth.

Two.

Value add.

And we think that should benefit us as we look to monetize things.

Down the road.

Okay. Thank you.

Our next question comes from Devin Dodge with BMO capital markets.

Thanks, I wanted to get started on the on the agreement with Bam for the perpetual perpetual perhaps can.

Can you walk us through the thought.

<unk> process for why this was the right approach versus maybe some of the other options that you could have considered such as adding capacity under the credit facility are accessing the public equity markets.

Yes look at Devon, and the nice thing about about.

What we've done here is it gives us maximum flexibility we drive when we want to drive it. So there is no cost of capital.

We don't have it drawn in citizens sitting there idle.

With a negative drag.

Two our caustic cost of equity here.

And we thought that the <unk>.

Rising as is reasonable in the context of the market obviously, we considered.

Various alternatives.

And it just show of support from our sponsor and majority owner so for all those reasons, we thought it's it's a great financing for.

<unk> and.

This is perpetual.

Redeemable in the instance of an asset sale.

Or an equity raise down the road, but otherwise it doesn't come due so.

It's a great outcome for us.

Okay. Thanks for that so maybe just switching gears over to Westinghouse.

It seems like there's been more of a concerted effort to expand the environmental services Division there can.

Can you speak to the growth opportunities for that part of the business and where you are in terms of building the talent base to go after this type of work yes.

Yes.

Dennis here, sorry, Dennis here.

That's correct, we do see it as an area with significant growth opportunity both domestically in North America, as well as Europe and we.

We have recently.

He has been with US I think about nine months now Sam <unk> was hired as president of that Division. We made some organizational changes there to restructure he comes with a tremendous track record in the space and he along with Patrick fragment, our CEO have been very focused since he's arrived.

That figure out strategically how to position. We're also looking at some opportunities to expand capabilities through acquisition in that area. So it's an area getting a lot of attention and focus and we feel really good about the team we have in place.

Okay. Thanks for that and maybe just one last one.

<unk> resources. This is the name we don't talk about very often but it seems like the strength in natural gas prices should be or could be a potential benefit in.

In 2022, or maybe 2023 can you frame for us how the hedge book looks this year versus 2021, and perhaps just a general update on the business.

Yeah, He it's Geoff I'll.

I'll take that and sorry can add to it so.

As you've noted.

There is.

Mendes upside with natural gas prices.

<unk>.

It's a great operation.

<unk> ability really dependent on.

Equal and on natural gas pricing so.

In the current environment.

Positive for Amber, we've been very mindful over the last number of years, just given where gas prices have been to make sure that we're appropriately kind of hedging.

Our exposure on natural gas and we haven't changed that approach so.

We've got about.

60% to 70% of our.

Natural gas exposure hedged for this year and I would say about half for the year after the 2023.

But all in all we should see Cigna.

Significantly improved profitability number.

And free cash flow generation now, we will probably use that cash flow to delever the business in the near term.

But there's definitely kind of tailwind softer after quite a period of time for this business.

Okay. Thanks for that I'll turn it over.

Our next question comes from Gary Ho with Aegis capital.

Great.

Just a quick question for Jeff just on the higher rates.

Can you remind us kind of how that impacts the financing cost side of things just looking out or have you run any sensitivities on 25 or 50 basis point move how that impacts your cash flow is looking at.

Yeah no that's.

Great question, just given the current environment. So we've been very focused on.

Interest rate exposure and impact of volatility.

In rates for the portfolio.

<unk> been working with all of our businesses. So we've done a few things to kind of just manage.

The impact of interest rate movements.

The first thing is.

Refined financing within our company. So we did we did a couple of refinancings.

Price things at Westinghouse.

In 2020, and then again in 2021.

Similarly at <unk>.

And then most recently the refinancing at one <unk> and our entertainment operations and these were all geared towards.

Locking in lower rates.

I'd say.

Overall on a consolidated basis, and Thats, probably about $50 million of annual run rate savings for the business.

That's not at our share of the total.

The other thing we've been very mindful of is making sure that we're hedging.

Floating rate exposure so in the book today.

About 65% of our floating rate exposure is hedged and the.

The piece, that's unhedged is really related to.

Either businesses, where we're paying down debt <unk> paid down.

Close to $800 million of debt this year.

And.

There's a couple of other businesses, where we're delevering. So we're not hedging died.

And we're not hedging in Brazil, where.

It's not economical to hedge so.

But outside of that 65% of the book is hedged with provides.

Strong protection.

The overall kind of cost today.

Our debt is approximately four 8%.

And we've got long maturities like five five year average maturity. So so we've got good protection within the portfolio against rising rates and we're going to be mindful moving forward, making sure that.

We're hedging right.

You probably saw this morning.

We raised the financing for scientific gaming that was.

$800 million in unsecured.

Unsecured bonds and then the balance about $2 6 billion.

In <unk>.

Term loan and we raised that at favorable rates and.

At a cost that's less than 5%.

So we are still able to kind of execute our financing at very good grade so quite pleased with that outcome.

And just can you just remind us.

Floating rate how much of your total debt is fixed versus floating.

About 65% is fixed today.

That 65% is a combination of fixed rate debt plus all of the hedging that we've done not floating rate exposure.

Okay got it okay. That's helpful.

And then my second question.

Dennis just wanted to hear your thoughts on all of these inflationary comments out in the market.

Company needing to bump up the comp to retain talent can you maybe talk about a couple of your businesses that youre seeing this impact the most I think you mentioned kind of brand.

And I guess in your prepared remarks kind of frankly, being one but any others that you're seeing.

Sure first of all as general commentary I would say that.

In most categories that form our cost of delivery, whether it be labor materials transportation logistics. There is cost pressure there is inflation pressure.

We see things like Labor for example is probably permanent increases to our cost structure and again, it's blanket across all businesses.

The.

The amount of pressure varies depending on what category of talent Youre looking for but.

That's there.

The logistics side is we believe transitory to a great degree in the sense that you see prices.

Look as an example shipping containers shipping containers from Asia to the West coast of the U S.

A year ago or 18 months ago, we are in the $25 $2700 a container range I think they peaked around $27000 of container six seven months ago, they're now down in the six to $7000 container range. So you can start to see those as leading indicators of what I see a solution.

<unk> to the root causes of those inflationary pressures in the beginning we see the same thing around materials steel is a good example.

Steel off of a record peak pricing of I think around $99 a ton for hot rolled coil now down I was talking to the field and steel company yesterday and they are down around 12.

200 for heartburn and although he spoke with confidence that was going to stay there I've been in that business is going down. So we see most of those things resetting back to trend line over time, but I think more importantly, we've been able.

<unk> businesses to put price increases in because.

It's required we're determined to maintain our margins.

I think our customers understand that these things are.

The root cause to them is not off there are macroeconomic wins and as a result, we have to increase prices to maintain margins and we're doing that.

And those price increases have been put in or should we see some lag in the results in terms of margin compression or whatnot.

Again, it's a general comment you always see a bit of lag because you have to go out and have conversations and people nobody wants to have a price increase so you have to working to maintain and build your relationships with your customers to help them understand why and that takes time so.

As the inputs to our businesses.

<unk> through our businesses.

There is that time lag that naturally occurs if youre looking for the results and the financial statements, but we are seeing.

Those results occur on a quarter to quarter basis.

Okay that makes sense and then just if I can just sneak one more in.

Just touch on kind of two businesses that see some challenges over the past year.

One car down it looked like there were some early signs of a turnaround there.

And then I think you mentioned on the Alterra side.

Yes.

I know you want to remove some of the exposure to commodity moves could this be an opportune time to maybe monetize that.

That asset given where.

Prices are.

Sure on card on our turnaround plan. There is actually ahead of plan. We're very encouraged by what we see we think we've got a rock solid management team in place.

<unk> put our commercial strategy to adjust the product mix for the business.

To move towards products that are more future oriented higher margin more stable and they have executed on that and we're seeing those improvements having said that it's still a challenging business. We've got it's sized properly we've got it organized properly and we got it focused properly.

And were we.

We're confident that as miles driven increases and thats really been the surprise to the downside frankly, we thought of Covid.

Two semi control I guess I would call it that the miles driven with spring back more rapidly and they just haven't.

But again thats not something management can control, but we have no doubt that miles driven will go up in the business, we will continue to improve as far as altera.

Short and mid term macro changes the price definitely provide short and mid term opportunities.

And we are exploring.

Everything we need to improve the balance sheet of that business. We're working on that the management team that's working on that.

In addition.

Looking at opportunities to execute more what we call asset light business development.

The company has been successful in securing some of this kind of business in the <unk> sector in Australia, we're working in Brazil with a couple of customers to see if we can bring.

The business model that the company developed in the North sea around Cola and how to optimize asset utilization to the benefit of all saving cost and sharing those cost savings because of higher.

Equipment utilization and.

Change takes time to manage through but we're feeling very optimistic about what's going on there.

Okay perfect. Thanks for those comments.

Our next question comes from Jamie <unk> with National Bank.

Yes, thanks, good morning.

First question is on the distributions from some.

Some of the various companies that looks like Westinghouse and building a nice track record here.

And John has released some of its excess capital, but agreed there's probably some more there can you just talk about what youre expecting from those two businesses or distributions going forward and then are there any other businesses.

That would look like they might have some more recurring type.

Distributions going forward.

It's a westinghouse at Cyrus here look I think.

We think Westinghouse can consistently generate the type of free cash that we've been seeing the last few years.

As for stage and yet there is still quite a bit of.

Excess.

<unk> in the company and obviously subject to regulatory approval, we would expect to pull that out of the business over time.

Yeah.

And any other businesses that you'd want to call out that have similar profiles.

It looked like one Toronto this quarter, but any other any other businesses that might have more of a recurring type distribution in nature.

Yes, so look we have several businesses that generate a lot of cash flow.

<unk> would be one of them for example, and what we've chosen to do in that case to pay our debt down I think you would have seen that during the year, we paid 700 ish million $700 million.

Our debt down that was all free cash generation within the business.

Sure.

At a point in time.

We may decide if we think it's the right thing to do and this is of course subject to <unk>.

Any growth investments the business may want to make we may decide to do.

Dark pulling regular distributions out of that company, which would be quite substantial for visa.

Okay great.

In terms of the liquidity position as it stands today pro forma all of the transactions.

It looks like it's around $1 1 billion or so.

And the company has been active on the on the buybacks still here in at least to start 2022. So how are you.

How are you thinking about the buyback and the liquidity position as it stands today.

And we get maybe pull on that band.

Accelerate some buybacks.

Well look we you've seen what we've been doing our posture has always been that we do.

Don't need to choose between the two when when we see compelling value in the units, we'll keep buying and why.

When we see compelling investment opportunities will continue making them and certainly with this.

Financing that we've just put in place we've got ample flexibility between that and our credit.

<unk> to continue growing.

And added to that of course.

Ongoing distributions from our companies.

Monetization proceeds from our companies down the road.

We're very comfortable with our capital position.

Sure.

Okay, great. Thank you very much.

Our next question comes from Nick <unk> with CIBC capital markets.

Yes. Thanks, just wanted to start with a question on the strong headline earnings contribution from Westinghouse in Q4 that really stood out this quarter I understand there can be a bit of quarterly variability there but.

What is the underlying rate of organic top or bottom line growth you would expect to achieve from that investment over the long term how should we think about that if you strip out some of these.

More transient influences.

Dennis here.

Your first comment I think is important for everybody to understand that there is some natural seasonality in this business and we tend to think about managing it on a year over year basis.

Just because customers can sometimes defer work pull work forward et cetera, and Thats, what you saw with Q4 versus the previous quarters of the year as far as overall over time.

As we said when we bought the business.

We believe this business would go through $700 million of EBITDA over a three to four year period, we are there.

We also were optimistic that we will continue to drive growth as we updated everybody about a year year and a half ago that we could bring this business through $800 million a year of annualized EBITDA.

As you can imagine as you move forward the incremental amounts on an organic basis get a little more challenging but.

But we remain very very confident again, we have a very strong management team in place.

They remain committed and have conviction that we're going to bring this company through $800 million over the next two or three years.

Okay.

And the other thing I wanted to ask about was I was hoping you could talk a little bit more about the pipeline for bolt on acquisitions.

<unk> been active at Westinghouse and <unk> as well can you tell us a little bit more about that strategy.

And how you see that contributing to value creation for some of those investments.

Sure.

<unk>, maybe I'll start and then Dennis if you want to add comments on specifics.

For all of our businesses.

We look for this type of opportunity.

We can.

Improve the footprint of the business improve the.

The product mix.

And improve the.

Value proposition to the business as customers.

And.

We can all often drive synergies that are standalone buyer cannot find.

And Thats really where the.

The bulk of the value creation.

Comes in when we make these bolt on acquisitions and Dennis I don't know if you want to talk about specifically at work I think that's absolutely the case synergies on the cost side, our most prevalent but also on the revenue side for example at Westinghouse.

You look back since we bought the business.

<unk> bolted on things that bring incremental capability to our franchise. So that when we interacting with our customers with the kind of trust and confidence they have and as you can imagine as we bring incremental products and services.

That is just a natural way to organically grow the top line and we're targeting the kind of services that have.

Higher margins because they are truly value added.

I think a recent example of the digital business that was embedded in the Rolls Royce acquisition, which frankly I think the seller had given up on for a variety of reasons, we saw that as a jewel within that acquisition aside from the cash synergies of folding in that business to ours.

And that business is now forming the foundation of a digital platform for Westinghouse that.

Just able to get a demonstration of three or four weeks ago. When I was up in Cranbury need.

Meeting with the team there and it is just phenomenal what they've created and how they're positioning again, none of that was underwritten in our acquisition and none of that incremental growth is actually in our current five year plan, but I've got to tell you I see huge opportunity there so.

When you think about just the typical cash cost savings that are synergistic. In addition, we really are focused on incrementally driving topline organic growth as well.

And it's Cyrus again look in the case of <unk>, you mentioned Exco that company has been a serial acquirer since we since we announced our acquisition of the company. It's made a number of acquisitions.

At very favorable values.

Spoke about it in our letter we wrote about in our letter.

Which is driving.

Highly incremental cash flows to our equity investment.

And we expect that to continue in that company for sure.

Understood. Okay. That's good color.

For me I will pass the line. Thank you.

Our next question comes from Dmitry <unk> with Veritas.

Hi, and thanks for taking my questions.

First question I'd like to ask is about the stadium.

So 2020 in 2021.

You have seen a remarkable growth in our premium written.

As well as underwriting income parts, including 2021.

And I just wonder.

How do you see that being sustainable whether it is sustainable.

1022.

Hi, Dmitry, it's Geoff I'll.

I'll take that and then Dennis in ferrous can add to it.

No.

You are right 2020 in 2021 of Poland, Spain.

Very strong years for Jacob.

We've seen record underwriting activity.

<unk> bye.

Extremely strong housing market and demand in Canada.

And.

I our view.

And we're seeing God, we saw some of that in Q4 as well is that new underwriting activity is healthy.

We've seen.

New premiums are coming in and normalize.

And.

As we as we look forward, we expect that overall the market is going to normalize.

So the level of underwriting as seen in 2020 and 2021 is.

Not kind of the long term sustainable level and we expect we're going to go to more normalized levels.

Having said that the housing market fundamentals, they still remain very supportive of strong demand.

And there's a few things driving died.

The biggest piece is probably just.

Right.

The supply shortage and kind of a mismatch.

Between demand and supply on the housing side.

But.

So we do think it will normalize and stabilize by it.

Sure.

Not expecting the same level of underwriting is the last two years, but.

Back to kind of more normal levels at the businesses down theme historically.

Okay awesome, Thank you and.

The other question is on.

Held scope and.

Safeway.

So I'm just curious why <unk> declined in Q4.

<unk> EBITDA for those two.

<unk>.

Yes.

Sure.

Last year in Q4, we sold our pathology business.

And when we sold that business we generated.

Gain on the scale.

Which would have been included in <unk>.

And.

Was additive between EBITDA and <unk> led to a higher.

And <unk>.

Q4 2020.

This year, we didn't have a similar type of gain.

Or any other unusual events between EBITDA and <unk>. So we didn't see a similar pickup.

And you saw kind of the more normal impact of interest and taxes.

So that with health scope on brand safe way.

I think the differential is really driven by taxes. So I think overall performance the financial.

<unk> financial performance and taxable earnings.

We're higher this year and I think that differential of taxes.

Happy to.

<unk> deeper and have enough brine conversation and give you. The exact same thing for the what's driving the change in taxes.

Awesome. Thank you.

And then the other question unclear.

Could you please update us with the proportion of advanced battery sales as a percent of revenue.

Flip styles in 'twenty one.

Sue.

I don't have the exact percentage off the top give me two but what we're seeing in the business is aftermarket demand continues to be very strong and.

Especially in the aftermarket we are seeing a trend towards.

More of the advanced battery sales and that's being driven by.

Kind of the the <unk>.

New generation of cars that had the advanced batteries that theyre now coming up to a cycle of replacement. We're seeing that replacement is really driving the demand in the advanced battery, especially in the aftermarket. So that's definitely been a positive from a margin and volume.

In perspective for the business.

But I don't know the exact percentage off the top.

Yes understood. Thanks, a lot.

On.

On inflation just to follow up on the previous questions that were asked.

Just curious whether price increases implemented thus far whether they were sufficient to offset higher.

Material and labor costs after normalizing for the time lag.

The vast majority of cases.

<unk> has more than offset.

Got it. Thanks, Thanks, a lot and then the last question.

He has to do with.

Alterra.

And there's been already a lot of questions asked about this just to want just wanted to ask one more.

Oh, Yes, I remember you spoke about the vessel redeployment.

So I was wondering if you can give us some more details what does that mean in practice, what kind of contracts that you're trying to obtain.

And how those would differ from prior arrangements.

Well the nature of the contracts are very similar but were they differ is in our requirements for certainty.

I think since we bought the business studying our competitors and are.

Just in general the industry dynamics. It seems that a past practice was common where individuals would put a tremendous amount of capital into these assets and they would contract them.

Two kind of partial life of assets on the assumption that renewals would be options to renew would be exercised <unk> that there would be other opportunities to reposition these assets.

And as the industry has gone through the I'd say the consequences of a shift around ESG.

<unk>.

That has not panned out.

So we are being very careful now that any contractual relationships moving forward any incremental capital we put in the business, we need to have certainty around recovery and returns.

Our next question comes from Matthew Weekes with <unk> capital markets.

Good morning, Thanks for taking my questions. The first was just on the Cooper acquisition and it looks like there is a number of facilities. There post testing facilities distribution centers things like that I'm wondering if there is any.

Owned real estate.

In that transaction.

Lisa.

Theres not a cyrus here, there's not a lot of owned real estate in the in the business. Obviously go into the mining rights that it owns and Thats the primary asset there.

Okay. Thank you and just another question on that acquisition and sort of broad trends in more transactions going forward. It looks like it builds a little bit on what we saw with modulator, which is acquiring companies that have natural sustainability considerations exposure to positive.

ESG trends in terms of the materials the product.

Given the pipeline of opportunities Youre looking at right now would you expect it to continue to be the trend in future acquisitions going forward.

Well, it's certainly a.

Serious consideration whenever we're looking at something.

I don't think I want to go so far as to say it'll be a trend, but it certainly has strong consideration.

Okay. Thank you and I think one of the businesses, we haven't talked a lot about today is the road fuels distribution and marketing business. I was just wondering what kind of tailwind do you might have seen there during the quarter and what kind of trends youre seeing in the outlook as we go forward here are you seeing strong.

Margins on the retail side, there's strong strong demand are you seeing any impact on mobility from the <unk>.

<unk>, just broad trends for that business.

Yeah, Hi, it's Jeffrey.

To add the road fuels business.

It is on the supply side, especially it is a volume.

Driven business. So we did see strong volumes in Q4 in the U K.

Some impact from that.

Omnicom and some of the kind of Lockdowns and things, but it wasn't substantial and didn't have a substantial impact in the quarter as we've seen in some prior quarters end of last year.

So on the supply side the business is performing well at retail margins in Canada to the gas stations have been.

Very strong and robust despite some decreased volumes, but overall profitability has been sustained through higher margin.

The retail side, and then I see more broadly tailwind.

A big part of this business is focused on biofuels and taking used cooking oil and using that in the fuel production.

Theres definitely ESG related and tailwind around that business. So we are focused on that to make sure that we're.

Bonding capacity and production.

Spending kind of the growth opportunity for that side of the business.

Okay. Thank you appreciate the commentary on that that's everything for me. Thank you.

Thank you.

That concludes today's question and answer session I would like to turn the call back for closing remarks.

Thanks, very much all of you for participating we look forward to.

Talking to you next quarter. Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Yes.

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[music].

[music].

Welcome to the Brookfield business Partners' fourth quarter 2021 results conference call and webcast.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions.

She joined the question queue simply press Star and one on your Touchtone phone.

Should you need assistance during the call you may signal, an operator by pressing star and zero.

Now I'd like to turn the conference over to Alan Fleming Senior Vice President of Investor Relations. Please go ahead Mr. Fleming.

Good morning, and thank you operator before we begin I'd like to remind you that in responding to questions and talking about our growth initiatives and our financial and operating performance. We may make forward looking statements. These statements are subject to known and unknown risks and future results may differ materially for further information on known risk factors I encourage you to review our.

Filings with the securities regulators in Canada, and the U S, which are available on our website.

Joining me on the call today is Cyrus Madden, Chief Executive Officer, Denis Turcotte, Chief operating officer, and Jasper Dale Our Chief Financial Officer, I'll turn the call first over to Cyrus to provide an update on our business and then Dennis will give us an update on our recent business operations activities Jesper will finish with a review of our finance.

Results will then be available to take your questions and with that I'll pass the call over to <unk>.

Thanks, Alan and good morning, everyone. Thanks for joining us on the call today.

2021 was a very busy year for us we invested $7 billion of capital about $2 2 billion of that coming from BB U.

To acquire six really high quality market, leading businesses and we generated about $1 billion of proceeds from our capital recycling initiatives.

In addition, Brookfield asset management recently committed $1 billion of long term preferred equity capital to be Bu.

Further strengthens our liquidity position.

We're really pleased with the performance of our operations.

Adjusted EBITDA for the year increased to $1 $8 billion, driven by a 20% increase in the performance of our existing operations over the prior year.

Annual adjusted EBITDA on a run rate basis has now increased to more than $2 billion.

Up from $250 million annually, when we created <unk> in 2016.

As we've grown the profile of our operation has also evolved through a continued focus on higher quality and larger scale business acquisitions.

Each of the businesses, we've acquired over the past year is either a market leader.

Or has the potential to generate strong growth and high cash returns.

We're fortunate to have acquired these businesses for what we believe is reasonable value given their exceptional quality and the strong cash yields we will generate on our capital.

Since our last update we closed our acquisitions of <unk> global and modular group two market, leading large scale businesses that strengthen our global footprint. We are in the early stages of implementing our value creation plans and later Dennis will talk more about what we're doing to support growth.

At each business.

We're also on track to close our acquisition of scientific games corporations Global Lottery services and technology business in the coming months.

Last week, we reached an agreement to acquire Cooper group.

A leading provider of premium slate roofing products Cooper has a track record of consistent organic growth supported by our market leading position non discretionary replacement driven demand and long term price stability. This.

This will be a smaller investment for us, but the business will increase our footprint in Europe and should provide a strong cash returns on our capital.

In addition to growth our new business acquisition should contribute to the substantial levels of cash flows our operations are generating today.

These are cash flows that can be used to fund growth pay down debt or support recurring distributions up to <unk>.

This past quarter, our operations generated about $350 million in distributions to <unk> to support our growth activities towards the end of the year, our Canadian residential mortgage insurer paid of $400 million dividend funded by excess cash in the business our share was one one.

Third $65 million.

The business continues to operate with excess cash, which we hope to distribute through additional dividends over time.

In addition, our nuclear technology services operation continues to generate strong cash flow in line with prior years. This business pay to 350 $300 million dividend at year end, our share was about $130 million.

In addition, our Canadian gaming and entertainment operations also paid us a $55 million dividend.

As the profile of our business has evolved we.

We've also continued to build value within our operations as a result, the intrinsic value per unit of our business has increased at a compound annual rate of 18% over the past five years. Most of this value creation has been achieved by acquiring high quality businesses at reasonable prices and.

<unk> their performance.

As we continue to grow we expect our intrinsic value per unit will also continue to increase.

We're excited about how our business is positioned today, our balance sheet is strong our operations are providing growing sources of liquidity. We're focused on integrating our recent acquisitions accelerating initiatives to surface value in our existing operations and completing the spin out of our paired corporate entity.

Which we hope to do in the coming weeks, so with that I'm going to hand, it over to Dennis.

Cyrus good morning, everyone.

An important differentiator for our business is our ability to build value through our hands on and systematic approach to improving our operations with growth, we've scaled up the size and capabilities of our business operations team and now have over 30 people on the ground globally working closely with the management teams at each of our operations Don.

<unk> value and enhance underlying cash flows I wanted to touch on a few highlights of our efforts over the past year. It simply they illustrate how this works in practice.

We supported our nuclear technology services operation to complete three add on acquisition acquisitions during the year to strengthen its digital offering broadened service capabilities and grow its presence in adjacent markets. Westinghouse consistently provides tremendous value to its customers and to ensure this continues in the medium.

And longer term, we continue to support its ongoing investment in new technology and R&D to maintain its market leadership position in micro reactors with da Vinci product small modular reactors as that Mars and large scale power generation with a globally, leading technology of AP 1000.

At our advanced energy storage operations <unk>, we've been working with the management team to execute on a wide range of initiatives securing approximately half of the targeted $400 million of annualized cost savings.

In addition, the company's launch of New advanced Battery technologies has led to organic growth above expectations and strengthened <unk> position at the forefront of automotive electrification trends.

At our water and wastewater services operation in Brazil through a concentrated effort in improving business development and project management capabilities, we've effectively double the pace with which we are building out our concessions compared to several years ago, which will continue to positively impact customer and revenue growth.

Finally at our Canadian gaming and entertainment facilities, we successfully managed through Covid related operational challenges during the year opened a newly Redeveloped Pickering venue in July and are on track to open the $1 billion redevelopment of our Woodbine facility later this year.

With our more recent acquisitions <unk> and modular I wanted to take some time today to talk about the operational plans being developed for each of these businesses.

<unk> is the leading provider of components for total equipment manufacturers, primarily in North America and Europe .

Products include actual chassis and related systems for a wide range of total trailer applications. It is the only business in its industry, which has integrated manufacturing and distribution capabilities.

Working with a very strong management team with a track record of driving growth, we see opportunities to leverage our operational expertise to build value across three main areas.

In the area of manufacturing productivity were working with management to develop plans to improve efficiencies by rebalancing is manufacturing and delivery footprint correcting production gaps and pursuing quality initiatives, including value engineering to drive out cost.

We've also introduced our Brookfield purchasing and data analytics platform targeting opportunities to optimize supply chain by implementing a more consistent and centralized procurement strategy that will allow <unk> to leverage the size and global scale of its operations.

This includes supply chain rationalization, where appropriate correcting price variances and improving supplier qualification and purchasing programs.

The third area of focus is M&A as <unk> mentioned, the Companys acquisition strategy has historically been very successful and we plan to support management by targeting similar value accretive acquisitions in both the businesses core product offering and adjacent markets, where we can acquire businesses at reasonable.

<unk> and buy down multiples through the successful integration and execution on planned synergies.

Moving to modular.

At its core.

This is the leasing services business in Europe , and Asia Pacific.

Building off Brookfield has experience in this space, we plan to leverage this expertise to drive meaningful growth and operational improvement in four main areas.

ESG operating performance organic growth and acquisitions.

Focusing on our employees, we are initiating the rollout of our safety training and broadening the skills development program across the company's 170 branches, we plan to strengthen our focus on customer service via reduce lead times and improve quality.

More centralized supply chain procurement and sourcing initiatives will help us reduce cost supporting our competitiveness and margin performance.

At our assembly and light manufacturing facilities, our initiatives include launching lean manufacturing and optimizing the network and product range to meet evolving customer requirements for a modular space with reduced carbon footprint.

We plan to support the company's growth by improving its commercial strategy, leveraging the Brookfield ecosystem and expanding the range of high margin value added products and services offered to customers.

We also intend to support margin modular growth through accretive acquisitions to build market share and expand into new regions with enhanced product and service offerings.

And with that I'll hand, it over to Jeff speak Thanks, Dennis and good morning, everyone.

As noted we generated strong financial performance in 2021.

Adjusted EBITDA increased to one 8 billion compared to $1 4 billion for 2020 with strong results across each of our three segments.

In business services, we generated 2021, adjusted EBITDA of 561 million more than double compared to 2020.

Adjusted earnings from operations or <unk> improved $397 million.

Our residential mortgage insurer contributed 260, not 65 million of adjusted EBITDA benefiting from underwriting activity that reached a record high and mortgage default rate that remains well below normal we.

We expect strong underlying fundamentals and moderate home price appreciation to contribute to stable Canadian housing market activity in 2022.

Healthcare services in Australia reported adjusted EBITDA of $69 million, which is an.

Movement over 2020, despite the ongoing impact of Lockdowns and restrictions on surgical activity during the year.

Demand for elective surgery remains strong, but restrictions remain in place which are impacting our financial performance.

We're optimistic that activity levels at our hospitals will increase once restrictions are lifted.

Yes.

Our construction business reported adjusted EBITDA of $85 million for the year.

Performance recovered significantly in 2021 and benefited from strong project execution in the UK and Australia.

Backlog increased to seven 4 billion from $5 6 billion at the end of 2020.

Moving on to our industrial segment.

We generated adjusted EBITDA of $713 million for 2021 compared to $604 million in 2020.

Adjusted <unk> improved to 879 million and included after tax gains of $476 million from the partial sale of our investment in graphite electrode operation and in public Securities.

Our advanced energy storage operations performed well in 2021 and reported adjusted EBITDA of 784 million.

<unk> aftermarket demand.

Offset reduced volumes from original equipment manufacturers.

Packed it by auto production shortages.

The business is generating strong cash flows and paid down 760.

Of that during the year.

Performance of our water and wastewater operation in Brazil increased 15% compared to 2020, reflecting our continued focus on cost management and network expansion.

And finally, our infrastructure services segment generated adjusted EBITDA of $613 million for 2021 compared to $602 million in 2020.

Adjusted <unk> improved $396 million.

Nuclear technology services performed well in 2021 and reported adjusted EBITDA of $299 million.

The business benefited from higher volumes and activity levels during the fall outage season, as well as our ongoing cost saving initiatives.

Strong execution on the new planned projects nearing completion contributor to results this quarter.

Work access services contributed $84 million and adjusted EBITDA for 2021.

<unk> is improving despite the impact of reduced activity in some end markets and higher labor costs.

During the fourth quarter 2021, the business acquired a full service scaffolding provider in Germany, which expands its market presence into new end markets in Europe .

Our offshore oil services operations reported adjusted EBITDA of $223 million.

Performance in the second half of the year benefited from profit sharing agreements tied to oil price and production volumes of customers.

Now turning to liquidity, we ended the year with $2 $2 billion of corporate liquidity, just recently Brookfield asset management, our sponsor majority unit holder.

To subscribe for up to $1 billion of 6% perpetual preferred equity securities.

Which further enhances our liquidity and will be available to us to fund our future growth activities as they are right.

Before I close I wanted to briefly note our continued efforts around communication of our ESG program.

We are committed on.

And ongoing focus on strong ESG practices.

And aligned with that commitment, we recently published iron.

ESG report.

This report.

Highlights relevant ESG initiatives within our business and operations and is available on our website.

And with that I'd like to close out our prepared comments and turn the call back over to the operator for questions.

As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone to withdraw your question press the pound key.

Our first question comes from Geoff Kwan with RBC capital markets.

Hi, good morning.

My first question was on Alterra.

The supplement kind of talked about how there was a little bit of upside given improvement in.

Oil prices just was wondering.

How you can kind of quantify the effect of strength in terms of the potential for upside and then how much of the business.

Correct.

Thanks.

Okay.

Okay.

Okay.

Okay.

Hello.

Sure Jeff.

Okay.

Okay.

Paul.

Okay.

Alright.

Hi, I just wanted to know.

For that.

First of all.

Yes.

At least in the short medium term.

The environment, then it's always promoting our customers to try to extract more drag from water. So we see that as a welcome tailwind in the short to medium run run as.

As far as though responding to your first two questions in the sense of not wanting to give you a false sense of ability to forecast that.

It really is.

Volatile type of incremental above business plan always but an incremental.

Mount of EBITDA, we generate and there are probably two of the company's operations that are in that category.

<unk>.

Again.

I wouldn't want to give you.

Anything that could be suggestive of forward guidance on it.

Okay.

On the on the on the Cooper acquisition.

Are you able to kind of talk about what.

And if the does the thesis was in terms of how you time to generate value.

While we see a couple of areas and Cooper.

This is this business has been run by exceptional entrepreneur. We think he is he's demonstrated.

This individual knows how to run the business, both commercially and operationally, having said that as we've worked with them. We've noticed that there are probably some.

Technology and automation techniques in the actual processing of the materials of the yields because it is such a high quality and product are actually quite low when you look at from source to finished product. We think we can improve yields. We also think we can help them grow.

He has demonstrated a great track record of growth, we see some incremental acquisition opportunities to secure more supply.

And strengthen what is already 60% global supply of this premium product is locked up by this company and we see improving upon that.

Okay. Thanks, and just my last question.

Obviously, <unk> been very active buying and making your investments over the past year little bit less active on monetizing. They know it is always going to be hard to kind of predict.

How do you see that.

The market conditions right now as you kind of take a look at on your Crystal ball.

The potential to monetize.

Assets within your portfolio.

Hey, Hey, Jeff Cyrus here.

Look it's a great question I think the Mark the environment is actually.

Ironically.

Quite a bit better now than it was a year ago or even six months ago for us.

There appears to be I'll say a pivot.

From.

Some technology oriented investor interest from what was technology oriented growth.

Two.

Value.

And we think that should benefit us as we look to monetize things down.

Down the road.

Okay. Thank you.

Our next question comes from Devin Dodge with BMO capital markets.

Thanks, I wanted to get started on the on the agreement with Bam for the perpetual perpetual perhaps.

Can you walk us through that.

<unk> process for why this was the right approach versus maybe some of the other options that you could have considered such as adding capacity under the credit facility are accessing the public equity markets.

Yeah look at Devon, and the nice thing about about.

What we've done here is it gives us maximum flexibility we dropped when we want to drive so theres no cost of capital.

We don't have it drawn in citizens sitting there idle.

With a negative drag.

Two our caustic cost of equity here.

And we thought that the pricing is is reasonable in the context of the market obviously considered.

Areas alternatives.

And it just show of support from our sponsor and majority owner so for all those reasons, we thought it's it's a great financing for.

The Bu and.

This is perpetual.

Redeemable in the instance of an asset sale.

Or an equity raise down the road, but otherwise it doesn't come due so.

It's a great outcome for us.

Okay. Thanks for that so maybe just switching gears over to Westinghouse.

It seems like there's been more of a concerted effort to expand the environmental services Division there can.

Can you speak to the growth opportunities for that part of the business and where you are in terms of building the talent base to go after this type of work.

Yes.

Dennis here, sorry, Dennis here.

That's correct, we do see it as an area with significant growth opportunity both domestically in North America, as well as Europe and we.

We have recently.

He has been with US I think about nine months now.

Sam <unk> was hired as president of that Division, we made some organizational changes there to restructure our he comes with the tremendous track record in the space and he along with Patrick fragment. Our CEO have been very focused since he's arrived at figuring out strategically how to position.

We're also looking at opportunities to expand capabilities through acquisition in that area. So it's an area getting a lot of attention and focus and we feel really good about the team we have in place.

Okay. Thanks for that and maybe just one last one.

<unk> resources look this is the name we don't talk about very often but it seems like the strength in natural gas prices should be or could be a potential benefit.

In 2022, or maybe 2023.

You frame for us how the hedge book looks this year versus 2021, and perhaps just a general update on the business.

Yeah, He it's Jeff <unk>.

I'll take that and <unk> can add to it so.

As you've noted.

There is.

Tremendous upside with natural gas prices.

Amber.

Yes.

Great operation.

So profitability really dependent on it.

Vehicle and on natural gas pricing so in the current environment.

It's very positive for Amber, we've been very mindful over the last number of years, just given where gas prices have been to make sure that we're appropriately kind of hedging.

Our exposure on natural gas and we haven't changed that approach. So we've got a boat.

60% to 70% of our.

Natural gas exposure hedged for this year and I would say about half for the year after the 2023.

But all in all we should see Cigna.

Significantly improved profitability number.

And free cash flow generation now, we will probably use that cash flow to delever the business in the near term.

But there's definitely kind of tailwind after after quite a period of time for this business and so on.

Okay. Thanks for that I'll turn it over.

Our next question comes from Gary <unk> with <unk> capital.

Great.

Just a quick question for Jeff just on the higher rates.

Can you remind us kind of how that impacts the financing cost side of things just looking out or have you run any sensitivities on 25 or 50 basis point move how that impacts your cash flow is looking at.

Yeah, No. That's a great question just given the current environment. So.

We've been very focused on.

Interest rate exposure and impact of volatility.

In rates for the portfolio.

<unk> been working with all of our businesses. So we've done a few things to kind of just manage.

The impact of interest rate movements.

The first thing is.

Refined financing within our company. So we did we did a couple of refinancings.

Re pricings at Westinghouse.

In 2020, and then again in 2021.

Early at <unk>.

And then most recently the refinancing at <unk> Entertainment operations and these were all geared towards.

Locking in lower rate.

Okay.

Overall on a consolidated basis, that's probably about $50 million of annual run rate savings for the business.

That's not at our share of the total.

The other thing we've been very mindful of is making sure that we're hedging.

Floating rate exposure so.

The book today.

About 65% of our floating rate exposure is hedged and the piece that's unhedged is really related to.

Either businesses, where we're paying down debt at <unk>, we paid down close to $800 million.

This year.

And.

There's a couple of other businesses, where we're delevering. So we're not hedging die.

And we're not hedging in Brazil, where it's.

It's not economical to hedge so, but but outside of that 65% of the book is hedged with provide.

Strong protection.

The overall kind of cost today.

Our debt is approximately four 8%.

And we've got a long maturities like five five year average maturity. So we've got good protection within the portfolio against rising rates and we're going to be mindful moving forward, making sure that.

We're hedging right.

You probably saw this morning.

We raised the financing for scientific gaming that was.

800 million.

Unsecured bonds and then the balance about $2 6 billion.

In.

Long and we raised that at favorable rates and.

At a cost that's less than 5%.

So we are still able to kind of execute our financing at very good grade so quite pleased with that outcome.

And just can you just remind us.

Floating rate how much of your total debt is fixed versus floating.

About 65% is fixed today.

That 65% is a combination of fixed rate debt plus all of the hedging that we've done not floating rate exposure.

Okay got it okay. That's helpful.

And then my second question.

Dennis just wanted to hear your thoughts on all of these inflationary comments out in the market.

Company needing to bump up the comp to retain talent can you maybe talk about a couple of your businesses that you are seeing this impact the most I think you mentioned kind of brands.

And I guess in your prepared remarks kind of frankly waiting and being one but any others that you're seeing.

Sure first of all as general commentary I would say that.

In most categories that form our cost of delivery, whether it be labor materials transportation logistics. There is cost pressure there is inflation pressure.

We see things like Labor for example is probably permanent increases to our cost structure and again its blanket across all businesses.

The <unk>.

The amount of pressure varies depending on what category of talent Youre looking for but.

That's there.

Our logistics side is we believe transitory to a great degree in the sense that you see prices.

Look as an example shipping containers shipping containers from Asia to the West coast of the U S.

A year ago or 18 months ago, we're in the $25 $2700 a container a range I think they peaked around $27000 of container six seven months ago, they're now down in the six to $7000 container range. So you can start to see those as leading indicators of what I see as a.

<unk> to the root cause of those inflationary pressures in the beginning we see the same thing around materials steel is a good example.

Steel off of a record peak pricing of I think around 1900, a ton for hot rolled coil now down I was talking to the field and steel company yesterday and they are down around 12.

200 for hot band and although he spoke with confidence that was going to stay there had been in that business is going down. So we see most of those things resetting back to trend line over time, but I think more importantly, we've been able.

<unk> businesses to put price increases in because it's.

It's required we're determined to maintain our margins and I think our customers understand that these things are.

The root cause to them is not off there are macroeconomic wins and as a result, we have to increase prices to maintain margins and we're doing that.

And those price increases have they all been put in or should we see some lag in the results in terms of margin compression or whatnot.

Again, it's a general comment you always see a bit of lag because you have to go out and have conversations and people nobody wants to have a price increase so you have to working to maintain and build your relationships with your customers to help them understand why and that takes time so.

As the inputs to our businesses.

<unk> through our businesses.

There is that time lag that naturally occurs if youre looking for the results and the financial statements, but we are seeing.

Those results occur on a quarter to quarter basis.

Okay that makes sense and then just if I can just sneak one more in.

Touch on kind of two businesses that see some challenges over the past year.

One car down it looks like there are some early signs of a turnaround there.

And then I think you mentioned on the Alterra side.

Yes.

I know you want to remove some of the exposure to commodity moves could this be an opportune time to maybe monetize that.

That asset given where.

Question Sir.

Sure on card on our turnaround plan. There is actually ahead of plan and we're very encouraged by what we see we think we've got a rock solid management team in place.

<unk> put our commercial strategy to adjust the product mix for the business.

To move towards products that are more future oriented higher margin more stable and they have executed on that and we're seeing those improvements having said that it's still a challenging business. We've got it's sized properly we've got it organized properly and we got it focused properly.

And were we.

We're confident that as miles driven increases and thats really been the surprise to the downside frankly, we thought of Covid.

Two semi control I guess I would call it that the miles driven with spring back more rapidly and they just haven't.

But again, that's not something management can control, but we have no doubt that miles driven will go up in the business, we will continue to improve as far as altera.

These short and mid term macro changes the price definitely provide short and mid term opportunities.

And we are exploring.

Everything we need to improve the balance sheet of that business. We're working on that the management team that's working on that.

In addition.

Looking at opportunities.

To execute more what we call asset light business development.

The company has been successful in securing some of this kind of business in the <unk> sector in Australia, we're working in Brazil with a couple of customers to see if we can bring.

<unk>.

This model that the company developed in the North sea around Cola and how to optimize asset utilization to the benefit of all saving cost and sharing those cost savings because of higher.

Equipment utilization and.

Change takes time to manage through but we're feeling very optimistic about what's going on there.

Okay perfect. Thanks for those comments.

Our next question comes from Jamie <unk> with National Bank.

Yes. Thanks.

Hey.

I guess first question is on the distributions from.

Some of the various companies that looks like Westinghouse and building a nice track record here.

And Hey, John has released some of them.

But I agree there is probably some more there can you just talk about what you're expecting from those two businesses or distribution going forward and then are there any other businesses.

What would look like they might have some more recurring type.

Distributions going forward.

It's a westinghouse at Cyrus here look I think.

We think Westinghouse can consistently generate the type of free cash that we've been seeing the last few years.

As for Sage and yet there is still quite a bit of.

Excess.

<unk> in the company and obviously subject to regulatory approval, we would expect to pull that out of the business over time.

And any other businesses.

You'd want.

That have similar profiles.

It looked like one Toronto this quarter, but any other any other businesses that might have more of a recurring type distribution in nature.

Yes, so look we have several businesses that generate a lot of cash flow.

<unk> would be one of them for example, and what we've chosen to do in that case to pay our debt down I think you would have seen that during the year, we paid 700.

700 plus million dollars of.

Our debt down that was all free cash generation within the business.

<unk>.

At a point in time.

We may decide if we think it's the right thing to do and this is of course subject to.

Any growth investments the business may want to make we may decide to.

Dark pulling regular distributions out of that company, which would be quite substantial for beef.

Okay great.

In terms of the liquidity position as it stands today pro forma all of the transactions.

It looks like it sits around $1 1 billion or so.

And the company has been active on the buyback still here in at least to start 2022. So how are you.

Are you thinking about the buyback and the liquidity position as it stands today and maybe pull on that band to accelerate some buybacks.

Well look we you've seen what we've been doing our posture has always been that we don't need to choose between the two when when we see compelling value in the units, we'll keep buying and when we see compelling investment opportunities, we will continue making them and certainly with this.

Nancy that we've just put in place we've got ample flexibility between that and our credit facilities to continue growing.

And added to that of course.

Ongoing distributions from our companies.

Monetization proceeds from our companies down the road.

We're very comfortable with our capital position.

Okay, great. Thank you very much.

Our next question comes from Nick <unk> with CIBC capital markets.

Yes. Thanks, just wanted to start with a question on the strong headline earnings contribution from Westinghouse in Q4 that really stood out this quarter I understand there can be a bit of quarterly variability there but.

What is the underlying rate of organic top or bottom line growth you would expect to achieve from that investment over the long term how should we think about that if you strip out some of these.

More transient influences.

Dennis here.

Your first comment I think is important for everybody to understand that there is some natural seasonality in this business and we tend to think about managing it on a year over year basis.

Just because customers can sometimes defer work pull work forward et cetera, and Thats, what you saw with Q4 versus the previous quarters of the year as far as overall over time.

As we said when we bought the business. We believe this business would go through $700 million of EBITDA over a three to four year period.

Are there.

We also were optimistic that we will continue to drive growth as we updated everybody about a year year and a half ago that we could bring this business through $800 million a year of annualized EBITDA.

As you can imagine as you move forward the incremental amounts on an organic basis get a little more challenging.

But we remain very very confident again, we have a very strong management team in place.

They remain committed and have conviction that we're going to bring this company through $800 million over the next two or three years.

Okay.

And the other thing I wanted to ask about was I was hoping you could talk a little bit more about the pipeline for bolt on acquisitions.

<unk> been active at Westinghouse.

Exco is well can you tell us a little bit more about that strategy.

And how do you see that contributing to value creation for some of those investments.

Sure.

Cyrus maybe I'll start and then Dennis if you want add comments on specifics.

For all of our businesses.

We look for this type of opportunity where we can.

Improve the footprint of the business improve.

The product mix.

And improve the value proposition to the business as customers.

And we can all often drive synergies that are standalone buyer cannot find.

And that's really where the.

The bulk of the value creation.

Comes in when we make these bolt on acquisitions and Dennis I don't know if you want to talk about specifically at work well I think thats absolutely the case synergies on the cost side, our most prevalent but also on the revenue side for example at Westinghouse If you look back since we bought the business.

Bolted on things that bring incremental capability to our franchise so that when we interacting.

Interacting with our customers with the kind of trust and confidence they have and as you can imagine as we bring incremental products and services.

That is just a natural way to organically grow the topline and we're targeting the kind of services that have.

Higher margins because they are truly value added.

I think a recent example of the digital business that was embedded in the Rolls Royce acquisition, which frankly I think the seller had given up on for a variety of reasons, we saw that as a jewel within that acquisition aside from the cash synergies of folding in that business to ours.

And that business is now forming the foundation of a digital platform for Westinghouse that.

Just able to get a demonstration of three or four weeks ago, when I was up in Cranbury.

Meeting with the team there and it is just phenomenal what they've created and how they're positioning again, none of that was underwritten in our acquisition and none of that incremental growth is actually in our current five year plan, but I've got to tell you I see huge opportunity. There. So when you think about just the.

Typical cash cost savings that are synergistic. In addition, we really are focused on incrementally driving top line organic growth as well.

And it's Cyrus again look in the case of <unk>, you mentioned Exco that company has been a serial acquire since we since we announced our acquisition of the company. It's made a number of acquisitions.

At very favorable values that we spoke about it in our letter we wrote about in our letter.

Which is driving.

Highly incremental cash flows to our equity investment in.

And we expect that to continue in that company for sure.

Understood. Okay. That's good color.

For me I will pass the line. Thank you.

Our next question comes from Dmitry <unk> with Veritas.

Hi, and thanks for taking my questions.

First question I would like to ask is about the stadium.

So 2020 in 2021.

You have seen a remarkable growth in our premium written.

As well as underwriting income per <unk> <unk> thousand 21.

I just wonder.

How do you see that being sustainable whether it is sustainable in 2022.

Hi, Dmitry, it's Jeffrey.

Take that and then Dennis in ferrous can add to it so.

You're right 2020 in 2021 of Poland, Spain.

Very strong years first Adrian.

We've seen registered under writing activity supported by.

Extremely strong housing market and demand in Canada.

And.

I our view.

And we're seeing that we saw some of that in Q4 as well is that new underwriting activity is healthy.

We've seen.

<unk> premiums coming in normalized <unk>.

And.

As we as we look forward, we expect that overall the market is going to normalize.

The level of underwriting we've seen in 2020 and 2021 is.

Not kind of the long term sustainable level and we expect we're going to go to more normalized levels.

Having said that the housing market fundamentals, they still remain very supportive of strong demand.

And there's a few things driving that.

The biggest piece is probably just.

Uh huh.

The supply shortage and kind of a mismatch.

Between demand and supply on the housing side.

But.

So we do think it will normalize and stabilized by it.

Sure.

Not expecting the same level of underwriting is the last two years, but.

Back to kind of more normal levels at the businesses down theme historically.

Okay awesome. Thank you.

The other question is on <unk>.

Held scope them.

Safeway.

So I'm just curious why <unk> declined in Q4 as compared to EBITDA for those two.

Patients.

Yes.

Unhelpful.

Last year in Q4, we sold our pathology business.

And when we sold that business we generated.

Dean on the scale.

Which would have been included in <unk>.

And.

As additive between EBITDA, and <unk> and led to a higher.

And <unk>.

Q4 2020.

This year, we didn't have a similar type of gain.

Or any other unusual events between EBITDA and <unk>. So we didn't see a similar pickup.

And you saw kind of the more normal impact of interest and taxes.

So that with health scope on brand safe way.

I think the differential is really driven by taxes. So I think overall performance the financial performance in taxable earnings.

We're higher this year and I think that differential taxes, but happy to.

Go deeper and have an offline conversation and give you. The exact same thing for the what's driving the change in taxes.

Awesome. Thank you and then the other question unclear.

Could you please update us with the proportion of advanced battery sales as a percent of revenue.

It flips thousand 21.

Sue.

I don't have the exact percentage off the top dmitry, but what we're seeing in the business is aftermarket demand continues to be very strong and.

Especially in the aftermarket we are seeing a trend toward.

More of the advanced battery sales and that's being driven by.

Kind of the the <unk>.

New generation of cars that had the advanced batteries that theyre now coming up to a cycle of replacement. We're seeing that replacement is really driving the demand in the advanced battery, especially in the aftermarket. So that's definitely been a positive shift from margin and volume.

<unk> perspective for the business.

But I don't know the exact percentage off the top.

Yes understood. Thanks, a lot.

On.

On inflation just to follow up on the previous questions that were asked.

Just curious whether price increases implemented thus far whether they were sufficient to offset higher.

Material and labor costs after normalizing for the time lag.

The vast majority of cases.

<unk> has more than offset.

Got it. Thanks, Thanks, a lot and then the last question.

He has to do with.

Alterra.

And there's been already a lot of questions asked about this just two one just wanted to ask one more.

Oh, Yes, I remember you spoke about the vessel redeployment in the past and I was wondering if you can give us some more details what does that mean in practice, what kind of contracts that you're trying to obtain.

And how those would differ from prior arrangements.

Well the nature of the contracts are very similar but were they differ is in our requirements for certainty.

I think since we bought the business studying our competitors and are.

Just in general the industry dynamics. It seems that a past practice was common where individuals would put a tremendous amount of capital into these assets and they would contract them.

Two kind of partial life of assets on the assumption that renewals would be options to renew would be exercised <unk> that there would be other opportunities to reposition these assets.

And as the industry has gone through the I'd say the consequences of a shift around ESG.

<unk>.

That has not panned out.

So we are being very careful now that any contractual relationships moving forward any incremental capital we put in the business, we need to have certainty around recovery and returns.

Our next question comes from Matthew Weekes with IAG capital markets.

Good morning, Thanks for taking my questions. The first was just on the Cooper acquisition and it looks like there is a number of facilities. There post testing facilities distribution centers things like that I'm wondering if there is any.

Owned real estate.

That transaction or if it's all leased.

Theres not a cyrus here, there's not a lot of owned real estate in the in the business obviously, the mining rights that it owns and Thats the primary asset there.

Okay. Thank you.

Another question on that acquisition and sort of broad trends in more transactions going forward. It looks like it builds a little bit on what we saw with modulator, which is acquiring companies that have natural sustainability considerations exposure to positive.

ESG trends in terms of the materials the product.

Given the pipeline of opportunities Youre looking at right now would you expect it to continue to be the trend in future acquisitions going forward.

Well, it's certainly a.

Serious consideration whenever we're looking at something.

I don't think I want to go so far as to say it'll be a trend, but it's certainly a strong consideration.

Okay. Thank you and I think one of the businesses, we haven't talked a lot about today is the road fuels distribution and marketing business. I was just wondering what kind of tailwind you might have seen there during the quarter and what kind of trends youre seeing in the outlook as we go forward here are you seeing strong.

Margins on the retail side, there's strong strong demand are you seeing any impact on mobility from the <unk>.

<unk>, just broad trends for that business.

Yeah, Hi, Geoffrey.

To add some road fuels business.

It is on the supply side, especially it is a volume.

Driven business. So we did see strong volumes in Q4 in the U K there was.

Some impact from that.

Omnicom and some of the kind of Lockdowns and things, but it wasn't substantial and didn't have a substantial impact in the quarter as we've seen in some of the prior quarters and last year.

So on the supply side the business is performing well at retail margins in Canada to the gas stations have been.

Very strong and robust despite some decreased volumes, but overall profitability has been sustained through higher margin.

The retail side, and then I'd say more broadly tailwind.

A big part of this business is focused on biofuels and taking used cooking oil and using that.

In the fuel production and Theres definitely ESG related and tailwind around that business. So we are focused on that to make sure that we're.

Bonding capacity and production.

Finding kind of the growth opportunity for that side of the business.

Okay. Thank you appreciate the commentary on that that's everything for me. Thank you.

Thank you.

That concludes.

Today's question and answer session I would like to turn the call back for closing remarks.

Thanks, very much all of you for participating we look forward to.

Talking to you next quarter. Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.