Q4 2024 Aecon Group Inc Earnings Call
Adam Borgatti: Good morning, everyone, and thanks for participating in our year-end 2024 results conference call. This is Adam Borgatti speaking. Joining me today are Jean-Louis Servranc, President and CEO, Jerome Julier, Executive Vice President and CFO, and Alistair MacCallum, Senior Vice President, Finance.
Thank you Lisa good morning, everyone and thanks for participating in our year end 2024 results conference call. This is that I'm forgetting speaking joining me today are genre, we serve rocks president and CEO, Jerome Juillet Executive Vice President and CFO, and Alistair Mccallum Senior Vice President Finance.
Adam Borgatti: Our earnings announcement was released yesterday evening, and we've posted a slide presentation on our website, which we'll refer to during the call.
Our earnings announcement was released yesterday evening, and we posted a slide presentation on our website, which we'll refer to during the call. Following our call we'll be glad to take questions from the analysts and asked at the analyst keep to one question and a follow up before getting back into the queue.
Adam Borgatti: Following our call, we'll be glad to take questions from the analysts and ask that the analysts keep to one question and a follow-up before getting back into the queue.
Adam Borgatti: As noted on slide two, listeners are reminded that the information we're sharing with you today includes forward-looking statements, and these statements are based on assumptions that are subject to significant risks and uncertainties. Although Aecon believes the expectations reflected in these statements are reasonable, we can give no assurance that the expectations will prove to be correct.
As noted on slide two listeners are reminded that the information we're sharing with you today includes forward looking statements and these statements are based on assumptions that are subject to significant risks and uncertainties. Although aegon believes the expectations reflected in these statements are reasonable we can give no assurance that the expectations will prove to be correct.
Jerome Julier: With that, I'll hand the call over to Jerome. Thanks, Adam. Good morning, everyone.
With that I'll hand, the call over to Jerome.
Jerome Julier: Before we move into the financial discussion, I'll briefly touch on recent actions on the trade front. AECON is carefully monitoring the developments and assessing the potential effects on our procurement and purchasing. We're taking a cautious stance here, given the impact these measures and countermeasures may have on the cost of materials, the financial picture of our clients, and their decisions to advance projects.
Jerome: Thanks, Adam Good morning, everyone.
Jerome: Before I move into the financial discussion I'll briefly touch on recent actions on the trade front Acorn is carefully monitoring the developments and the potential effects on our procurement and purchasing we're taking a cautious stance here given the impact of these measures and countermeasures may have on the cost of materials, the financial picture of our clients and jurisdictions advanced projects.
Jerome Julier: And I'll speak to our consolidated results, review the results by segment, and address Aecon's financial position before turning the call over to Jon LeWitt. Consistent with prior quarters, we provided additional information to help clarify the underlying results, excluding impacts from fixed-price legacy projects and divestitures. We have detailed reconciliation tables included on slides 15, 16, and 17 in the conference call presentation.
Speaker Change: And I'll speak to our consolidated results by segment and address a confidential position before turning the call over to John Wade.
Speaker Change: Consistent with prior quarters, we provided additional information I'll clarify the underlying results excluding impacts from fixed price legacy projects and divestitures. We have detailed reconciliation table is included on slide 15, 16, and 17 in the conference call presentation.
Jerome Julier: Turning now to slide three. On a reported basis, revenue for the year of $4.2 billion was $401 million, or 9% lower compared to 2023. Adjusted EBITDA of $83 million compared to $143 million last year, consolidated adjusted EBITDA in 2024 was negatively impacted by $273 million in legacy project losses compared to $215 million in 2020.
Speaker Change: Turning now to slide three.
Speaker Change: On a reported basis revenue for the year of $4 2 billion with $401 million or 9% lower compared to 2023 adjusted.
Speaker Change: Adjusted EBITDA of $83 million compared to $143 million last year consolidated adjusted EBITDA between 24 was negatively impacted by $273 million legacy project losses compared to $215 million in 2023.
Jerome Julier: Operating loss of $60 million compared to an operating profit of $241 million in 2023. In addition to the items just noted, lower year-over-year offering profit was driven by a decrease in other income of $186 million, primarily due to a lower year-over-year gain related to the sale of 49.9% interest in Skyport of $133 million, and the lower gain on the sale of Aecon Transportation East, or ATE, of $28 million.
Speaker Change: Operating loss of $60 million compared to an operating profit of $241 million in 2023.
Speaker Change: In addition to the items just noted lower year over year operating profit was driven by a decrease in other income of $186 million, primarily due to a lower year over year gain related to the sale of a 49, 9% interest in sky part of $133 million and a lower gain on the sale of Aegon transportation or <unk> of $28 million.
Jerome Julier: Excluding the impact of the legacy projects and divestitures on an as-adjusted basis. Revenue for the year was $4.2 billion compared to $3.8 billion in 2023 and adjusted EBITDA of $349 million compared to $355 million.
Speaker Change: Excluding the impact of the legacy projects and divestitures on an as adjusted basis revenue for the year was $4 2 billion compared to $3 8 billion in 2023, and adjusted EBITDA of $349 million compared to $355 million last year.
Jerome Julier: Duluth loss per share for the year was $0.95 compared to Duluth earnings per share of $2.10. The reported backlog of $6.7 billion at the end of 2024 compared to backlog of $6.2 billion a year ago. New contract awards of $4.7 billion were booked in the year compared to $4.5 billion in the previous year. The reported 2024 awards include $275 million of backlog acquired at the time of acquisitions of United, Angelwood Power Construction, and Xtreme Corp.
Speaker Change: Diluted loss per share for the year with 95 compared to diluted earnings per share of $2 10 to 2023.
Speaker Change: Reported backlog at $6 7 billion at the end of 2024 compared to backlog of $6 $2 billion a year ago.
Speaker Change: Contract awards of $4 $7 billion were booked in the year compared to $4 5 billion in the previous year the.
Speaker Change: The reported 2024 awards include $275 million of backlog acquired at the time of acquisition of United anchored power construction and extreme closed.
Jerome Julier: Now looking at results by segment. And turning to slide four, construction, revenue of $4.2 billion in 2024 was $352 million, or 8% lower than the previous year. The largest decrease in revenue occurred in industrial operations, driven by a decreased activity on mainline pipeline work, following the achievement of substantial completion on a large project in the third quarter of 2023, partially offset by a higher volume of field construction work at wastewater treatment and industrial facilities in 2020. Revenue also decreased in urban transportation solutions as three LRT projects near completion and civil operations largely from a decrease in road building construction work after the sale of ATE in the second quarter of 2023.
Speaker Change: Now looking at results by segment.
Speaker Change: Turning to slide four construction revenue of $4 2 billion in 2024 was $352 million or 8% lower than the previous year.
Speaker Change: The largest decrease in revenue occurred in industrial operations driven by decreased activity on mainline pipeline work. Following the achievement of substantial completion on a large project in the third quarter of 2023, partially offset by higher volume of field construction work at wastewater treatment and industrial facilities in 'twenty four.
Speaker Change: <unk> also decreased in urban transportation solutions, three LRT project near completion and civil operations largely from a decrease in road building construction work after the sale of AC in the second quarter of 2023.
Jerome Julier: Partially offsetting these decreases were higher revenue in nuclear, driven by an increased volume of refurbishment work in Ontario and in the United States, and in utility operations, primarily from an increased volume of electrical transmission work in the U.S., and an increase in battery energy storage system work, partially offset by a decreased volume of telecommunications and gas distribution.
Speaker Change: Partially offsetting these decreases were higher revenue in nuclear driven by an increased volume of refurbishment work in Ontario, and in the United States and utility operations, primarily from an increased volume of electrical transmission work in the U S and an increase in battery storage energy.
Speaker Change: Battery energy storage system work, partially offset by decreased volume telecommunication and gas distribution work.
Jerome Julier: On an as-adjusted basis, construction revenue is $4.1 billion in 2024 compared to $3.8 billion last year. New contract awards of $4.7 billion in 2024 compared to $4.4 billion in the previous year.
Speaker Change: And as adjusted basis construction revenues $4 1 billion in 2024 compared to $3 8 billion last year.
Speaker Change: Contract Awards of $4 7 billion in 2024 compared to $4 4 billion in the previous year backlog at the end of 2024 was six.
Jerome Julier: Backlog at the end of 2024. $6.6 billion compared to $6.1 billion at the end of 2023.
Speaker Change: $6 6 billion compared to $6 1 billion at the end of 2023.
Jerome Julier: During his life, five, but just to keep it up, $34 million compared to $99 million. The largest driver of the decrease was negative gross profit on the four fixed-price legacy projects of $273 million in 2024, compared to negative gross profit of $215 million in 2020. Other than the impact of fixed-price legacy projects in 2024, lower operating profit in the balance of the construction segment was already driven by lower gross profit margin in civil operations and urban transportation solutions, and partially offset by higher operating profit in nuclear operations from higher volume and gross profit margin, and industrial due to higher gross profit margin.
Speaker Change: Turning to slide five adjusted EBITDA of $34 million compared to $99 million last year.
Largest driver of the decrease with negative gross profit on the four fixed price legacy projects of $273 million in 'twenty 'twenty four compared to negative gross profit of $2 15 and 2023.
Speaker Change: Other than the impact of fixed price legacy projects in 'twenty 'twenty four lower operating profit and the balance of the construction segment was largely driven by lower gross profit margin in civil operations, and urban transportation solutions, and partially offset by higher operating property in nuclear operations from higher volume and gross profit margin and industrial due to higher gross profit margin.
Jerome Julier: Other items contributing to the reduction in operating profit include an increase in acquisition-related transaction costs that were expensed in the year. aimed with power construction and united transactions in 2024. And a decrease in other income driven by lower gains on the jail's property, buildings, and equipment, primarily in the utility office. On an as-adjusted basis, adjusted EBITDA was $307 million in 2024, compared to $326.
Speaker Change: Other items contributing to the reduction in operating property to include an increase in acquisition related transaction costs that were expensed in the year.
Speaker Change: An increase in amortization expense related to acquisition related intangible assets from the extreme aimed.
Speaker Change: <unk> power construction and United transactions in 2024.
Speaker Change: And a decrease in other income driven by lower gains on the sale of property buildings and equipment primarily utility operations.
Speaker Change: On an as adjusted basis, adjusted EBITDA was $307 million in 'twenty 'twenty, four compared to 326 and slide 23.
Jerome Julier: Turning now to slide six. Concessions adjusted EBITDA for the year was $87 million compared to $90 million last year, and operating profit of $24 million compared to $174 million.
Speaker Change: Turning now to slide six.
Speaker Change: Concessions adjusted EBITDA for the year with $87 million compared to $90 million last year and operating profit of 24 compared to 174 last year.
Jerome Julier: 2024 adjusted EBITDA in the concession segment benefited from greater activity on certain progressive and collaborative projects, as well as higher fees on major transit and transportation projects nearing construction completion.
Speaker Change: 'twenty 'twenty four adjusted EBITDA in the construction segment benefited from greater activity on certain progressive and collaborative projects as well as higher fees on major transit and transportation projects nearing construction completion.
Jerome Julier: Adjusted EIPA does anticipate to be impacted in 2025 as these projects begin to shift to early stages of the respective operations and maintenance and concession phases as new projects start to ramp up. Lower operating profit in the quarter was primarily due to the Skyport transaction that was previously mentioned, which resulted in gains on sale of $133 million.
Speaker Change: Adjusted EBITDA is anticipated impact in 2025 as these projects begin to shift to early stages of their respective operations and maintenance and construction phases as new projects start to ramp up.
Speaker Change: Lower operating profit in the quarter was primarily due to the Skype for transaction as previously mentioned which resulted.
Speaker Change: Eight and gains on sale of $133 million.
Jerome Julier: On slide seven, we've brought together the as-adjusted information. to exclude the impact of legacy projects on divestitures to provide insight into this underlying performance we've been discussing. As previously mentioned, on an as-adjusted basis, revenue in 2024 was $4.2 billion, compared to $3.8 billion in 2023. Adjusted EBITDA was $249 million in 2024, compared to $355 million in the previous year.
Speaker Change: On slide seven we brought together the as adjusted information.
Speaker Change: To exclude the impact of legacy projects and divestitures to provide insight into this underlying performance we've been discussing.
Speaker Change: As previously mentioned on an as adjusted basis revenue in 'twenty 'twenty four was $4 2 billion compared to $3 8 billion in 2023, adjusted EBITDA was 349 million 'twenty 'twenty four compared to 355 in the previous year.
Jerome Julier: For the construction segment, on an as-adjusted basis, adjusted EBITDA was $307 million in 2024, representing a 7.4% margin.
Speaker Change: The construction segment on an as adjusted basis adjusted EBITDA was 307 million in 'twenty 'twenty, four representing a seven 4% margin.
Jerome Julier: Turning to slide 8, at the end of 2024, Aecon held cash and cash equivalents of $123 million, excluding the cash held in joint operations. In addition, at December 31, 2024, AECON had committed revolving credit facilities of $850 million, of which $153 million was drawn, and $4 million was utilized for letters of credit. Drawn credit is entirely at the AECON Utilities.
Turning to slide eight at the end of 'twenty 'twenty, four Aegon held cash and cash equivalents of $123 million, excluding the cash held them to an operations. In addition at December 31, 2020 for Acorn had committed revolving credit facilities of $850 million of which $153 million was drawn and $4 million was utilized for letters of credit drawn.
Speaker Change: Credit is entirely at the Aegon utility level.
Jerome Julier: Aecon has no debt or working capital credits due to maturity until 2027, except for equipment, loans, and leases in the normal.
Speaker Change: No debt or working capital credit facility maturities until 2027, except for equipment loans and leases in the normal course.
Jerome Julier: Aecon's next quarterly dividend of $0.19 per share will be paid on April 2, 2025 to shareholders of record on March 21.
Speaker Change: Hey, guys next quarterly dividend of <unk> 19 per share will be paid on April 25 to shareholders of record on March 21st 2025.
Jean-Louis Servranc: At this point, I'll turn the call over to Jean-Louis to address our business performance and... Thank you, Jerome. Turning to slide 9, Aecon continues to build resiliency through a balanced and diversified work portfolio, while enhancing execution capabilities and project selection to play to our strengths.
Speaker Change: At this point I will turn the call over to John Lee to adjust our business performance and outlook.
John Lee: Thank you Ron.
John Lee: Turning to slide eight on continues to build resiliency score a balanced and diversified portfolio.
John Lee: And I'm seeing execution capabilities and project selection to play to our strengths.
Jean-Louis Servranc: In 2024, roughly 45% of Aecon's construction revenue was generated from the utilities and nuclear sectors, compared to 39% in 2026. Our self-performed capabilities and one AECON approach help to maximize value for clients through improved cost certainty and schedule. while offering a broad range of services from development. engineering, investment, and construction to longer-term operations and maintenance to cover the food infrastructure value chain.
John Lee: In 2020 for roughly 45% of any columns construction revenue was generated from the utilities.
John Lee: Sectors.
John Lee: 79% in 2020.
John Lee: Our first platform capabilities and one eight on approach to.
John Lee: Maximize value for clients through improved cost certainty and schedules.
John Lee: While offering a broad range of services from development.
John Lee: <unk> investment.
John Lee: And construction to longer term operations and maintenance costs to cover the full infrastructure value chain.
Jean-Louis Servranc: We are embracing new opportunities to grow in areas linked to the energy sector and in US and international markets. These opportunities are intended to diversify AECON's geographic presence. provide new growth vectors and deliver more consistent earnings through economic cycles.
John Lee: We are embracing new opportunities to grow in our we have linked to the energy sector and in the U S and international markets.
John Lee: These opportunities are intended to diversify <unk> hall, and the geographic presence.
John Lee: Provide new growth vectors and deliver more consistent earnings through economic cycles.
Jean-Louis Servranc: Turning now to slide 10, demand for Aecon services across our markets continues to be strong. With a backlog of $6.7 billion at the end of 2024, recurring revenue programs continuing to see robust demand and a strong bid pipeline, Aecon believes it is positioned to achieve further revenue growth in 2025 and over the next few years and is focused on achieving improved profitability and margin predictability. Of note, year-end backlog excludes the recently announced award for the Scarborough Subway Extension Transit Project and the design phase for the refurbishment of four units at the Pickering Nuclear Generating Station, comprising $3.3 billion in total, which will be added to our backlog in the first quarter of 2025.
John Lee: Turning now to slide 10.
John Lee: For E Comm services across our markets continues to be strong.
John Lee: Backlog of $6 7 billion at the end of 2000, Twenty's Hall, our recurring revenue programs continuing to see robust demand and a strong pipeline.
John Lee: <unk> believes it is positioned to achieve further revenue growth in 2025 and also the next <unk>.
John Lee: He is focused on achieving improved profitability and margin predictability.
John Lee: Of note.
John Lee: And backlog excludes the recently announced award for the Scarborough or subway extension Transit project.
John Lee: Does the design phase of the refurbishment of all units and clean nuclear generating station.
John Lee: Rising three 3 billion in total which will be added to our backlog in the first quarter of 2025.
Jean-Louis Servranc: Remaining backlog to be worked off of the three remaining legacy projects was $121 million, or 2% of total backlog, on December 31st, 2024. We remain focused on driving this project to substantial completion. We still currently expect it to be substantially complete in mid-year 2025 and the final project by the end of the third quarter of 2025. Trailing 12 months recurring revenue was $1 billion in 2024, comparable to the previous year, and up over 30% versus two years ago, taking into account the diversity of ATE and the 49.9% interest in Skyport in prior periods on a like-for-like basis.
John Lee: Remaining backlog to be worked off all of the three remaining legacy project close to 121 million.
John Lee: 2% of total backlog at December 31, 2024.
John Lee: We remain focused on driving this project to substantial completion.
John Lee: Two current can you expect it to be substantially complete in midyear 2025, and as a final project by the end of the third quarter of 2025.
John Lee: Trailing 12 months recurring revenue was $1 billion in 2020 full comparable to the previous year.
John Lee: And up over 30% versus two years ago.
John Lee: Taking into account the divestitures of ETE.
John Lee: The 49, 9% interest in Skype or in prior periods on a like for like basis.
Jean-Louis Servranc: Recurring revenues are typically executed on a non-fixed price basis, with the majority being over and above our reported backlog.
John Lee: Recurring revenues are typically executed on the non fixed price basis with the majority being over and above our reported backlog figures.
Jean-Louis Servranc: Turning to slide 11, development phase work is underway on a number of major projects in which Aecon is a participant, including the GO Expansion on Corridor Works Project, the Darlington U-Nuclear Project, the Contra-Coeur Terminal Expansion, the U.S. Virgin Islands Airport Redevelopment Project, the Winnipeg North End Treatment Land Project, and the Howard Hanson Dam Project.
John Lee: Turning to slide 11 development phase work is underway on a number of major projects.
John Lee: Which as long as a participant including expansion on corridor works project. The Darlington Nuclear project the council the terminal expansion in the U S.
John Lee: Virgin Island Airport redevelopment project.
John Lee: The Winnipeg, it's north and treatment plant project the <unk> project.
Jean-Louis Servranc: For more information visit www.fema.gov These projects are being delivered using collaborative progressive design build models with the majority expected to move into construction phase in 2025. As a reminder, none of the anticipated work from this progressive design-build project is yet reflected in background.
John Lee: These projects are being delivered.
John Lee: <unk>.
John Lee: Progressive design build models with the majority expected to move into construction phase in 2025.
John Lee: As a reminder, none of the anticipated with some of these progressive design build project is yet reflected in backlog.
Jean-Louis Servranc: Turning to slide 12, Aecon is focused on achieving solid execution on its projects and selectively adding to backlog through a disciplined bidding approach that supports long-term margin improvement in the construction segment. Revenue in 2025 is expected to be stronger than 2024 due to an opening backlog of $6.7 billion combined with recent new awards in the first quarter. The impact of business acquisitions completed in the second half of 2024, solid recurring revenue, and a strong bid pipeline. Revenue growth is expected in most of the construction sectors, as progressive design-build projects move into the construction phase in 2025 and 2029.
John Lee: Turning to slide 12 economy is focused on achieving solid execution on these projects and selectively adding to backlog through a disciplined bidding approach that supports long term margin improvement in the construction segment.
John Lee: Revenue in 2025 is expected to be stronger than 2000, twenty's, all due to or not putting back sort of about $6 7 billion combined with the recent new awards in the first quarter.
John Lee: The impact of business acquisitions completed in the second half of 2020 for holiday.
John Lee: Solid direct lending revenue and a strong pipeline.
John Lee: Revenue growth is expected in most of the construction sector.
John Lee: As progressive design build projects moving into the construction phase in 2025 and 2026.
Jean-Louis Servranc: In addition, capital expenditure in 2025 are expected to be modestly higher than in 2024.
John Lee: In addition capital expenditure in 2025.
John Lee: <unk> to be modestly higher than in 2024.
Jean-Louis Servranc: In the concession segment, there are a number of opportunities to add to the existing portfolio of Canadian and international concessions in the next 12 to 24 months. Results in recent years were negatively impacted by the Thor Legacy Project. However, the recent coastal gasoline pipeline settlement, along with the additional write-downs of the fixed-price legacy project in 2024, are anticipated to lead to improved profitability and margin predictability.
John Lee: In the concessions segment is there a number of opportunities to add to the existing portfolio of Canadian and international concessions.
John Lee: The next 12 to 24 months.
John Lee: We haven't in recent years were negatively impacted by the four legacy projects.
However, the recent cost of gasoline pipeline settlement.
John Lee: Along with the additional wind downs of the fixed price legacy project in 2024 are anticipated to lead to improved profitability and margin predictability.
Jean-Louis Servranc: especially as the remaining three projects move closer to substantial completion. Until the remaining three projects are complete and the related claims have been resolved, there is a risk that this could also occur in future periods. As such, the completion and satisfactory resolution of claims on the remaining three legacy projects with the respective clients remains a critical focus for Aecon and its partners.
Especially as the remaining spec projects.
John Lee: Closer to substantial completion.
John Lee: And it seems the remaining three projects are complete.
John Lee: Related claims have been resolved.
John Lee: Reasonably good.
John Lee: Also alcoa in future periods.
John Lee: The completion and satisfactory resolution of claims.
John Lee: The remaining three legacy project with the respective clients remains a critical focus for Acorn and its partners.
Jean-Louis Servranc: Finally, turning to slide 13. The year 2024 was a period of significant progress for Aecon. marked by several positive developments. As previously mentioned, we successfully reached a settlement for Coastal GasLink Pipeline project while continuing to make steady progress in completing and satisfactorily resolving claims on the three remaining legacy projects. At the same time, we further de-risked our business by adding new collaborative projects into our development pipeline while transitioning the Scarborough subway extension project from the development phase into the implementation phase under a target price contract.
John Lee: Finally, turning to slide 17 months.
John Lee: As of year 2020 form was a period of significant progress for E com.
John Lee: Marked by several positive developments.
John Lee: As previously mentioned, we successfully reached a settlement for Costa in gasoline pipeline project.
John Lee: While continuing to make steady progress in completing unsatisfactorily resolving claim on the street remaining legacy projects.
John Lee: At the same time, we further derisked our business.
John Lee: By adding new collaborations subjects into our development pipeline, while transitioning the Scarborough subway extension project from the development phase into the implementation phase and target price contract.
Jean-Louis Servranc: We also strengthen our operation through three key strategic acquisitions. Xtreme Powerline, Ainsworth Power Construction, and United Engineers and Constructors. allowing us to capitalize on significant opportunities in the utilities, nuclear and conventional power sectors across North America. With that, we are pleased to once again welcome the teams from Xtreme, Ainsworth Power Construction and United as we work together to safely drive future growth. We are excited about the momentum we have built and remain focused on executing our strategy to drive long-term shareholder value.
John Lee: We also strengthened our operation through three key strategies acquisition.
John Lee: Extreme power line.
John Lee: Ainsworth power construction, and United Engineers and constructive.
John Lee: Allowing us to capitalize on significant opportunities in the utilities.
John Lee: In conventional power sectors.
John Lee: <unk> North America.
Speaker Change: With that we are pleased to once again welcome the team from extreme.
Speaker Change: East West power construction, and United as we work together to safely drive future growth.
Speaker Change: We are excited about the momentum we have built and remain focused on executing our strategy to drive long term shareholder.
Speaker Change: Under value.
Jean-Louis Servranc: Thank you.
Adam Borgatti: We will now turn the call over to analysts for questions. Thank you.
Speaker Change: Thank you we will now I will turn the call over to analysts for questions.
Operator: As a reminder, if you would like to ask a question, please press star 1-1 on your telephone. If you would like to withdraw your question, please press star 1 again.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone.
Speaker Change: If you would like to registered withdraw your question. Please press star one when again, we also ask that you. Please wait for your name and company to be announced before proceeding with your question good.
Operator: We also ask that you please wait for your name and company to be announced before proceeding with your question.
Kyle Brock: One moment while we take the first question. And our first question, we're coming from the line of Kyle Brock of ATB Capital Markets. Your line is open. Morning, guys. It's Kyle.
Speaker Change: One moment, while we take the first question.
Speaker Change: And our first question will be coming from the line of Kyle Brock of eight TB capital markets. Your line is open.
Kyle Brock: I'm for Chris.
Good morning, guys. It's Kyle on for Chris you EBITDA from concessions came in a bit lighter than we had been expecting if you look into 2025, how should we be thinking about the expected EBITDA contribution from this segment, particularly as the portfolio evolves in the second half.
Kyle Brock: Your EBITDA from concession came in a bit lighter than we had been expecting.
Kyle Brock: As we look into 2025, how should we be thinking about the expected EBITDA contribution from the segment, particularly as the portfolio evolves in the second half?
Jerome Julier: Hey Kyle, it's Jerome here. Thanks for the thanks for the question. The, you know, I think we previously talked about that 2024 had a lot of benefit in the concession segment with regards to, you know, development and construction fees earned as projects were in flight on the construction side. As those projects move into completion, you know, there'll be a natural headwind against that, right? So our perspective remains consistent, which is going into 2025, we won't see that pick up on the concession side. The counter, you know, the item that's going to help offset it, but not to a significant degree, would be continued work on the USVI projects, which we're targeting to hopefully kind of move into the second half of 2025, but beyond that, look, it is clearly a headwind on the concessions front from 2025, but as expected, just given the amount of revenue that was generated with the.
Speaker Change: Hey, Kyle it's strong here thanks for the thanks for the question.
Speaker Change: I think we previously talked about the 2024 had a lot of benefit in the concessions segment with regards to development and construction fees earned as projects. We're in flight on the construction side as those projects move into completion there'll be a natural headwind against that rate. So our.
<unk> remains consistent which is going into 2025, we won't see that pickup on the concession side.
Speaker Change: The counter.
Speaker Change: I am just going to help offset it but not not to a significant degree will be continued work on the USPI projects, which we're targeting to hopefully kind of move into.
Speaker Change: Through the second half of 2025 or beyond that look at it is clearly a headwind on the concessions Brian from 2025, but as expected just given the amount of.
Speaker Change: Revenue that was generated with the.
Speaker Change: Development fees and then the.
Speaker Change: Industrial revenue associated with that construction projects.
Kyle Brock: Thanks, that's very helpful.
Jerome Julier: And then shifting to the legacy projects, with the $36 million re-forecast in the quarter and the completion of the LRTs moving a bit to the right, do you still feel good about the $125 million loss bucket? Any colour there would be appreciated. Thanks.
Speaker Change: Thanks, that's very helpful and then shifting to the legacy projects with the $36 million re forecast in the quarter and the completion of the LRT is moving a bit to the right you still feel good about the $125 million loss bucket any color there would be appreciated. Thanks.
Jerome Julier: Yes, I will take this one. Yes, we do, is the answer. I mean, we are in line with the information we gave at the end of Q2 2024.
Speaker Change: Yes, I will take this one yes, we do is the answer that I mean, we are in line with the.
The information we gave at the end of Q2 2024.
Jerome Julier: Mainly speaking, I mean, on our three remaining legacy projects, Goli Hau International Bridge is perfectly on schedule and perfectly under control for a substantial completion still forecasted for September 2025.
Speaker Change: Mainly speaking I mean on our three remaining legacy project go.
Speaker Change: How international bridge is perfectly all the schedules and perfectly under control for a substantial completion steel.
Speaker Change: Forecasted for September 2025.
Jerome Julier: Again, Gemman Finch, our two LRPs in Toronto, we are now very happy to see that all stakeholders are working towards the same direction and we are getting ready to have revenue service demonstration around May and June and to get Zoom's project substantially completed around mid-year 2025. So, so far in front of the information that we gave you we are in like Thank you.
Speaker Change: Hey, getting tenants in our two mlps.
Speaker Change: Toronto.
Speaker Change: We are now very happy to see that all stakeholders.
Speaker Change: Working towards the same direction.
Speaker Change: We are getting ready to add revenue service demonstration.
Speaker Change: May and June and to get zoom.
Speaker Change: Project substantially completion completed around midyear 2025, so well so far in front of the information that we gave you online.
Operator: One moment for the next question.
Speaker Change: Thank you one moment to the next question.
Krista Fryson: And our next question will be coming from the line of Krista Fryson of CIBC. Your line is open. Hi, thanks for taking my question.
Speaker Change: And our next question will be coming from the line of Christopher Eitzen.
Speaker Change: C III BC your line is now open.
Speaker Change: Alright, Thanks for taking my question.
Krista Fryson: I was just wondering if you can speak to how we should be thinking about margins in the construction segment in 2025, and if there's any puts and takes there that we should be considering. Hey Chris, good question. So from a margin perspective on the construction side, given the seasonality of the business, we do try to think of things on effectively a rolling basis. So 2024 overall margins, adjusting out legacy projects and adjusting out divestiture impacts, roughly seven and a half percent. This is a good margin profile, not an exceptional one. So it's one that we're going to try to continue to work on from an overall perspective.
Speaker Change: I was just wondering if you can speak to how we should be thinking about margins in the construction segment in 2025, and if there's any puts and takes there that we should be considering.
Speaker Change: Hey, guys.
Speaker Change: Good question, so from a margin perspective on the construction side and given the seasonality of the business. We do try to think of things on effectively a rolling basis to 2024 overall margins adjusting out legacy projects and adjusting our divestiture impacts roughly seven 5%.
Speaker Change: This is this is a.
Speaker Change: Good margin profile not not an exceptional one it's one that we know we're going to try to continue to work on from an overall perspective, but that being said I think we just need to be cognizant.
Jerome Julier: But that being said, I think we just need to be cognizant that is a pretty good result to put up. And so I think for us, it's about maintaining it in this range and trying to really push the teams to operate efficiently to try to kind of inch that upwards. Right. But I think right now. In 2023, we had really good results supported by some very strong project closeouts. 2024, we're in flight and transitioning. 2025, we're just going to try to push that.
Speaker Change: That is a pretty good result, and put up and so I think for us it's about maintaining it in this range and trying to really push the teams to operate efficiently.
Speaker Change: To drive kind of insert upwards right, but I think right now.
Speaker Change: 'twenty three we had really good results supported by some very strong project Closeouts in 2024 were in flight in transitioning 2025 or in fact tried to push that number up a little bit more.
Krista Fryson: Great, thank you.
Jerome Julier: And then maybe just a higher level question, how you're thinking about capital allocation and M&A this year and any kind of difference between the Canadian market and U.S. market and kind of just what you're seeing there.
Speaker Change: Okay, great. Thank you and then maybe just higher level question.
How youre thinking about capital allocation and M&A this year and any kind of difference between the Canadian market in U S market.
Speaker Change: And kind of just what youre seeing there.
Jerome Julier: Sure. So capital allocation perspective remains consistent. First priority is the strength of the balance sheet. We think about it in two ways. One is at the Aecon Group level, where we've got the effectively undrawn revolver at the top of the house. And then one's at the Aecon Utilities level, where the small ticket, short cycle matrix will work, and its own credit facility, where we have the majority of our drawings to support the M&A program. So we maintain a strong balance sheet. And then the next flow is to ensure that operationally, the business has what it needs to execute the work programs that we have in front of it.
Speaker Change: Sure So capital allocation perspective remains consistent.
Speaker Change: First first priority the strength of the balance sheet and we think about it in two ways. One is at the Aegon group level, where we've got effectively undrawn revolver at the top of the house and then ones that the Aegon utility level clarity on this.
Speaker Change: Small ticket short cycle nature of the work.
Speaker Change: And its own credit facility, where we had the majority of our drawings to support the M&A program.
Speaker Change: Maintaining a strong balance sheet and then the next flow is to ensure that operationally the business had where it needs to execute the work program that we have in front of it our outlet noted that our capital expenditures are this may be slightly higher in 2025 versus 2024. This is largely is around building resiliency for the overall business.
Jerome Julier: Our outlook noted that our capital expenditures are slightly higher in 2025 versus 2024. This is largely around building resiliency for the overall business.
Jerome Julier: across the various sectors where we operate and spread across, you know, all operating regions where, where we execute programs. The dividend program, we've held the dividend flat this quarter and this year, and the perspective there being we've got a pretty robust dividend. And finally, from an M&A standpoint, we continue to have a lot of active discussions across both the utility side of the house and the balance of the agency. Within Canada, we have very strong operations. We have the market relatively well covered. We continue to tactically look to infill.
Speaker Change: Across the various sectors, where we operate.
Speaker Change: And spread across all operating regions, where where we execute programs.
Speaker Change: The dividend program, we've held the dividend flat.
Speaker Change: This quarter.
Speaker Change: Year.
Speaker Change: Active theyre being we've got a pretty robust dividend as it stands today.
Speaker Change: And CIB to execute tactically as we see appropriate and then finally add from an M&A standpoint, we continue to have a lot of active discussions.
Speaker Change: Across both the utility side of the house and then.
Speaker Change: The balance of the Aegon business.
Speaker Change: Within within Canada, we have very strong operations, we have the market relatively well covered we could continue to tactically look and Bel Ray I think APC transaction in December It was a great example of that against the strengthening in area, where we already had a good presence.
Jerome Julier: I think the APC transaction in December was But like look in 24, the teams were quite active, both on the utility side and on the balance of the agency.
Speaker Change: Like look in 'twenty for the team for quite active both on the utility side and on the on that.
Krista Fryson: with Xtreme and United, and I think, you know, filling out our capability and filling in our, you know, our geographies will Great, thank you. I'll jump back in the queue.
Speaker Change: Balance of the Aegon Si with extreme and United and I think building out our capability in filling in our.
Speaker Change: Our geographies will continue to be a priority from that perspective.
Speaker Change: Great. Thank you I'll jump back in the queue.
Speaker Change: Thanks for that.
Operator: One moment for the next question, please.
Speaker Change: Thank you one moment for the next question. Please.
Michael Tsipras: And our next question is going to be coming from the line of Michael Tsipras of Desjardins. Your line is open. Thanks for taking my question and good morning.
Speaker Change: And our next question is going to be coming from the line of Michael Tsai pre us.
Jonathan: This is Jonathan your.
Speaker Change: Your line is open.
Speaker Change: Yes, Thanks for taking my question and good morning, maybe going back to the Capex. You mentioned that is expected to be modestly higher versus last year can you maybe explain some of the ongoing dynamics with equipment now.
Michael Tsipras: Maybe going back to CapEx, you mentioned that it's expected to be modestly higher versus last year.
Jerome Julier: Can you maybe explain some of the ongoing dynamics with equipment now that the loonie has fallen so much versus the U.S. dollar, and if you're facing any increased costs on that front? Yeah, lots to unpack there. Potential for impact there exists. I'd say that, you know, we manage our programs pretty thoughtfully. We already have a base and so part of this is effectively, you know, parts and repairs and some of the equipment that we're purchasing comes from geographies where it's not tied to USD as well. So I think overall, I'd say the volume of equipment that we're expected to be onboarding is likely a little bit higher.
Speaker Change: Tony has fallen so much versus the U S dollar and if you're facing any increased costs on that front.
Speaker Change: Yes lots lots to unpack there.
Speaker Change: Potential for impact there exists.
Speaker Change: I would say that we manage our programs pretty thoughtfully, we already have a base in that part of this is effectively parts and repairs and some of the equipment that we're purchasing comes from geographies, where it's not tied to the USD as well. So I think overall I think the volume of equipment that were expected to be onboarding.
Jerome Julier: And also, you know, we do have a refresh program and so, you know, as we onboard new equipment, we offboard all older equipment and that shares in the same on on a net basis, maybe a marginal headwind. But, you know, overall, not something that we're we're over.
A little bit higher and also we do have a refresh program and so on.
Speaker Change: On board yields new equipment, we onboard all of older equipment and that shares the same dynamics. So on a net basis, maybe a marginal headwind.
Speaker Change: But overall not something that we're overly concerned about.
Jerome Julier: Yeah, maybe I can jump into you more generally.
Jonathan: Jonathan go ahead, yes.
Jonathan: I can jump into your more generally I mean your question was about Forex.
Jerome Julier: I mean, your question was about Forex, and what we can say now is that we have a natural way of edging because we have more and more revenue in U.S. dollars, so it helps us.
Jonathan: What we can say now is that we have.
Jonathan: A natural way of edging because we have more and more revenue in U S. Dollar so so.
Jerome Julier: And on a broader view, I mean, I imagine your question is also linked with tariffs. So, to be clear about it. Don't expect Aecon to react every day due to the flow of information left and right and up and down. But basically.
Jonathan: Chris.
Jonathan: And on a broader view.
Jonathan: I imagine your question is also linked with <unk> so to be clear about it.
Jonathan: Yes.
Jonathan: Don't expect a con to react every day due to just flaunting of information less spend right.
Jonathan: <unk> been down but basically.
Jean-Louis Servranc: Aecon is not a manufacturer. Aecon is not an exporter of goods. Aecon is a builder. So most probably the consequence of all these tariff issues is going to be quite limited for us and maybe reduced to what we call the changing loan, for which we are protected in our contract. You remember that following Covid, we have been extremely careful on this kind of clause on our contract. I mean, the protection of our revenues following changing laws. So I'm not particularly worried. But as I said in my introduction to this answer, I mean, we are much more American today.
Jonathan: <unk> is not a manufacturer.
Jonathan: <unk> is not unexplored homegoods Acorn is a builder.
Most probably as a consequence of all this.
Jonathan: This issue is going to be quite limited for us.
Jonathan: And may be reduced what we call the changing loan.
Jonathan: For which we are protected in our contracts you remember that.
Jonathan: Following Colgate.
Jonathan: <unk> been extremely careful I'll use kind of close on our common stock.
Jonathan: <unk> of our revenue.
Jonathan: Following changing laws, so I'm, not particularly worried but as I said in my in my introduction to the answer I mean, we are much more American to date I mean, we are in the United States.
Jean-Louis Servranc: I mean, we are in the United States. Aecon Works, you probably remember, it's a company that we acquired, I mean, early 2019. The revenue was four or five million U.S. dollars. It's now going to deliver between 150 and 200 million Canadian dollars. Xtreme is behaving extremely well. We are extremely happy with this acquisition. United, the last one, is also a very important acquisition for us. All this just means that we are in the United States. We are producing. We have our workshop. We have our engineer. We have our people. And this is important in front of what is happening at the moment between the two countries.
Jonathan: Any color on the walls.
Probably remember it's the companies that we acquired in early 2019 revenue was four or 5 million U S. Dollar is now going to deliver between 150 and $200 million Canadian dollar.
Jonathan: Extrema is.
Jonathan: Hey.
Speaker Change: Behaving extremely well, we ought to be happy with this acquisition.
Jonathan: It is the last one in.
Jonathan: Also a very important acquisition for us all of this just means that we are.
Jonathan: In the United States, we are producing we have a workshop we have our engineer we have when people.
Jonathan: And this is important in front of what is happening.
Jean-Louis Servranc: So my instruction to the team is very clear. Do your work and everything is going to be fine.
Jonathan: The moment between the two countries so.
Jonathan: My instruction to the team is very clear.
Jonathan: No politics.
Jonathan: No emotion.
Jonathan: Do you work.
Jonathan: Everything is going to be fine.
Michael Tsipras: That's very helpful, Jean-Louis, I appreciate it. Thank you.
Jonathan: That's very helpful. I appreciate it.
Operator: As a reminder, if you would like to ask a question, please press star 1-1 on your telephone.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone.
Operator: One moment for the next question.
Speaker Change: One moment for the next questions.
Michael Tupholme: And our next question will be coming from the line of Michael Tupholme of TD Cowan. Your line is open. Thank you. Good morning.
Speaker Change: And our next question will be coming from the line of Michael took home PD Cowen Your line is open.
Michael: Thank you good morning.
Speaker Change: Okay.
Michael Tupholme: You have several collaborative projects that have been moving through the development phase. You've talked about some more of these hitting the construction phase in 2025-2026.
Speaker Change: You.
Speaker Change: I have several.
Speaker Change: Collaborative projects that have been moving through the development phase you've talked about.
Speaker Change: Some more of these hitting the construction phase in $2025 26 are you able to provide a little bit more detail about how we think about those.
Jean-Louis Servranc: Are you able to provide a little bit more detail about how we think about those moving into the construction phase? Yeah, I mean, those collaborative contracts and what we call progressive design, I mean, it's a very interesting developing part of our business. Very interesting because it's straight on to our strategy of giving more predictability about our margin. You probably remember when I arrived at Aecon, the share of fixed price contract was something like 72% within our activity. And in line with our strategy, it has now decreased. We are between 35% and 38%. We have a totally inverse trend between variable price and fixed price.
Speaker Change: Moving into the construction phase and begin to contribute to revenues.
Speaker Change: Yes.
Speaker Change: Colorful ac's comp Fox in what we call Progressive design build I mean, it's a very.
Speaker Change: Interesting developing part of Fireeye and.
Speaker Change: Business very interesting because it's.
Speaker Change: <unk>, Tom to our strategy of giving more predictability about our margin you probably remember when I arrive at any time.
Speaker Change: Sure.
Speaker Change: Fixed price contract with something like 72% within our activity and in line with our strategy. It has now decreased we are between 35 and 38%.
Speaker Change: Hopefully in a trend.
Speaker Change: Between.
Speaker Change: Variable price and fixed price.
Jean-Louis Servranc: PDBs and collaborative contracts, I mean, is part of this strategy.
Speaker Change: <unk> collaborated contract.
As part of this strategy.
Jean-Louis Servranc: So, what happened with Scarborough is very important because it's a major one. that is now closed commercially, we finalize the development phase, and we reach an agreement toward a target price with our client. It's a big one for Aecon, it's probably a little over 2.8 billion in terms of activity. So the model works, and this is why it's so important, but it's not the only one. I mean, Pickering, and we have disclosed information about it, is a collaborative contract. I mean, we have in our backlog something like 1 billion for the development phase of Pickering.
Speaker Change: So.
Speaker Change: What happened with combo is very important because it's a major one.
Speaker Change: That is not all.
Speaker Change: <unk> commercially we finalized the development phase.
Speaker Change: And we reach an agreement.
Speaker Change: Toward a target price with our client it is a big one for a call me, it's probably a little over $2 8 billion in terms of.
Speaker Change: If activity.
Speaker Change: Model works and this is why it's so important.
Speaker Change: It's not the only one I mean.
Speaker Change: Yes.
Speaker Change: And we have disclosed information about it he's a collaborative contract I mean, we we have in our backlog.
Speaker Change: Something like 1 billion for the development phase of <unk>.
Jean-Louis Servranc: We are working on other progressive design bill. I mean, DN&P, the SMR, is a collaborative contract. It's a six-year alliance, and we expect during the first part of the year, 2025, to also go from development phase to construction phase, go to an expansion. Although it's a phased progressive design bill due to the fact that it's a brownfield environment. I mean, we are working under operation of the rail network, so it's going to be phased, but we have also closed the development phase and are progressively going to implementation and construction.
Speaker Change: We are working on also.
Speaker Change: <unk> design build I mean, DNN PZ SME.
Speaker Change: He's a collaborative contracts, it's a six year alliance and we expect nearing.
Speaker Change: The first part of the year 2025 to also go from development Phase two construction phase go try and expansion, although it's a phased progress.
Speaker Change: Progressive design build due to the fact that it's a brownfield environment I mean, we are working it and operation of the rail network. So is it going to be phased out but we are also.
Speaker Change: Close the development phases and all.
Speaker Change: Aggressively go into implementation and construction.
Jean-Louis Servranc: We have others. I mean, the Winnipeg... Wastewater Treatment Plant is also a collaborative one. Aubert-Hanson, I mean, with the U.S. Corp of Engineers in the United States, that is something like $250 million for Aecon, ultimately in construction, is a collaborative one. Contrecoeur in Quebec is a collaborative one. So, very important, very good, and perfectly in our strategy.
Speaker Change: Also as a means of Winnipeg.
Speaker Change: The wastewater treatment plant is also a collaborative one.
Speaker Change: I mean with the U S Gulf of engineer in United States.
Speaker Change: Something like $116 million for economy, Mclean and construction.
Speaker Change: <unk> is a collaborative one.
Speaker Change: In Quebec is a collaborative one so very important.
Speaker Change: Very good and perfectly in line with our strategy as I used to say.
Jean-Louis Servranc: As I used to say, there's not a universal contractual mode for every project. Each kind of project has its own favorite and optimal way of contracting. We can see, for example, now that our clients, from time to time, are ready to Come back to lump sum job, but taking out from the lump sum everything that depends on stakeholders that is not under our control and putting it on the time and materials or targets. So those are hybrid models that are also very, very interesting. All this is developing quite well and perfectly in line with what we have now.
Speaker Change: There is not a universal contractual mode.
Speaker Change: We project each kind of project out to each one.
David: Hey, David.
David: Optimal way of contracting and we can see for example, now that our clients.
David: Time to time already too.
David: Coming back to lump sum job, but taking out some lump sum and we're seeing that depends all stakeholders that is not under our control and putting in all the time and materials or targets. So as soon as I do.
David: With models that are also very very interesting <unk> is developing quite well and perfectly in line with what we have announced.
Michael Tupholme: Perfect, thank you.
Michael Tupholme: I apologize if I missed this earlier, if there was any discussion about this, but just on the subject of tariffs. Doesn't seem as though there's any real direct exposure, but obviously people are concerned about potential indirect impact.
David: Perfect. Thank you.
Speaker Change: I apologize if I missed this earlier if there was any discussion about this but just on the subject of tariffs.
Speaker Change: It doesn't seem as though there's any real direct exposure, but obviously people are concerned about potential indirect impact.
Jerome Julier: Can you just talk a little bit about whether or not you've seen any impact so far as it relates to you know work you're pursuing and I'm thinking more specifically about sort of any customers comments they may have made or sentiment from the customer side just trying to get a sense of if they're you know from an indirect impact perspective what what I'll tackle that one, Mike. It's a good question. I think the best way we can answer is that we're just monitoring the situation pretty closely. As noted, it's the measures and the countermeasures, non-tariff impacts, changes in procurement, changes in policies of national, subnational, regional governments.
Speaker Change: Can you just talk a little bit about whether or not you've seen any impact so far.
Speaker Change: As it relates to work, you're pursuing and I'm thinking more specifically about sort of any customers.
Speaker Change: Comments, they may have made or sentiment from the customer side.
Speaker Change: I'm just trying to get a sense if there from an indirect impact perspective, what what may come from this.
Speaker Change: Yes, I'll tackle that one.
Speaker Change: It's a good question.
Speaker Change: The best way, we can answer is that we're just we're monitoring the situation pretty closely.
Speaker Change: As noted the measures in the countermeasures non tariff impacts changes in procurement changes in policies of national sub national regional governments.
Jerome Julier: All of this is playing out in real time and we're just watching where it's going to land. In general, the uncertainty that this is causing potential inflationary impacts could have impacts on our labor force. The ways that this impacts operations is multifaceted. We're being cautious from that perspective. Client behavior may or may not change in association with this. I'd just say that it's something that we're very alive to.
Speaker Change: All of this is playing out in real time, and we're just watching where it's going to land.
Speaker Change: In general the uncertainty that business, causing potential.
Speaker Change: Potential inflationary impacts could have impact on our labor force. So there is the way that this impacts operations.
Speaker Change: It gets kind of multifaceted and so we're being kind of cautious from that perspective, and new client behavior, you may or may not change in association with this and I would just say that it's something that we're very live too that's probably all we can really share at this point.
Michael Tupholme: That's probably all we can really share. Oh, fair enough.
Michael Tupholme: It's obviously early days and very complex, so appreciate that.
Speaker Change: Fair enough. It's obviously early days and very complex. So appreciate that and then just lastly in terms of nuclear related work. Obviously there is some.
Jerome Julier: And then just lastly, in terms of nuclear-related work, obviously, there's some part of the Pickering Award and the latest refurbishment awards got added in the fourth quarter, and more to come in the first quarter, but can you just speak a little bit about nuclear in general? Obviously, there was a lot of excitement and I think continues to be around the opportunities in that area.
Speaker Change: Part of the Pickering Award on the latest refurbishment of words got added in the fourth quarter and more to come in the first quarter, but can you just speak a little bit about nuclear in general obviously, there was a lot of excitement and I think continues to be around the opportunities in that area.
Jerome Julier: But just wondering what you're seeing now in terms of future opportunities, if the level of discussion and opportunity set continues to expand, and I'm thinking specifically both about US and Canada, if you can comment on a new build as well, which may be a little further out, but just what the thinking is.
Speaker Change: But just wondering what youre seeing now in terms of sort of future opportunities. If the if the level of discussion and opportunity set continues to expand and I'm thinking specifically, both about U S and Canada.
Speaker Change: If you can comment on sort of new build as well, which maybe a little further out but just what the what the thinking there is.
Jerome Julier: Yeah, I will take this one. A lot of excitement and enthusiasm. Also, at Aecon, we are extremely happy with our nuclear activity and the way it's growing.
Speaker Change: Yes, I will.
Speaker Change: Take this one.
Speaker Change: A lot of excitement and enthusiasm, although what I call them and we are extremely happy with our nuclear activity as a way to it.
Jerome Julier: So as you say, let's split into Canada and the US. So Canada, basically, we have two vectors of growth. The first one is what we call the major component replacement. We are at the moment working on the fourth and last unit of Darlington that should be ready for 2026. I just remind you that the third unit, we completed it five months ahead of schedule, perfectly within the budget. And Bruce, you probably saw that we have added the four last reactors. We are at the moment working on the second one that should be ready next year.
Speaker Change: It is growing so.
Speaker Change: As you say net speed into Canada anyway, So Canada basically we have two vectors of growth. The first one is what we call the.
Speaker Change: Major component replacement.
Speaker Change: We are at the moment working on the fourth and last unit of Darlington that should be ready for 2026.
Speaker Change: I just remind you that the third unit, we completed five months ahead of schedule perfectly within the budget.
Speaker Change: And.
Bruce: Bruce that you probably saw that we have added a full lost.
Speaker Change: Reactors, we are at the moment working on the second one is that could be.
Speaker Change: Ready next year, Bruce will go up to 2032 now in terms of major component refurbishment.
Jerome Julier: Bruce will go up to 2032 now in terms of major component refurbished. Pickering is a very nice add-up because it comes exactly at the right moment that we were needing after Darlington. It means that all our teams coming from Darlington, all the lessons learned, I mean, will be directly applicable to Pickering, and we are very happy about it. We are also working on preparing our offers on a collaborative model for the turbine refurbishment. This is for the... refurbishment programs. In addition to this, you have the new build, and the main one at the moment, the one on the table, is a small modular reactor at Darlington, Unit 1.
<unk> is a very nice add.
Because it come exactly is the right moment that we were leading us to Darlington it means that all our teams coming from Darlington or.
Speaker Change: All the lessons learned I mean, it will be directly applicable to <unk>.
Speaker Change: And we are very happy about it we are also.
Speaker Change: Working on that.
Speaker Change: On preparing our offering on our collaborative model falls turbine that we saw this trend.
Speaker Change: This is for the.
Speaker Change: Refurbishment programs. In addition to this you have the new build.
Speaker Change: The main one is the moment of the one off the table as a small modular reactor Darlington unit one.
Jerome Julier: We are expecting that OPG will get licensing authorizations from the regulators around mid-2025. We are ready to shift from development phase to construction phase. I remind you that it's four units program of 300 megawatts where Aecon is in charge of all the construction services. After this, we are also getting ready for the new build of 1,000 megawatts that will arrive for OPG and for Bruce, getting ready, I mean, for those big jobs.
Speaker Change: We are expecting that <unk> will get licensing authorization from the regulators.
Speaker Change: Mid 2025, we already to ship from development Phase two construction phase I remind you is that.
Speaker Change: It's a full units.
Speaker Change: Program.
300 megawatt where corn is in charge of all the construction services.
Speaker Change: After this we are also getting ready for <unk>.
Speaker Change: New built on 1000 megawatts that tweet.
Speaker Change: It will arrive for LPG and for Bruce getting ready.
Jerome Julier: In the U.S., it's also quite interesting. As I said a few minutes earlier, I mean, we acquired Wox in early 2019, a very small company with a very specialized welder that we used on our Canadian refurbishment program. Now, this company that has been restructured, that has been nurtured with a lot of processes from Aecon, a lot of knowledge from our nuclear project is growing and is growing quite well. I mean, we are expecting that our activity in the U.S. for nuclear will be between 150 and 200 million in 2025. We are working for the federal government, Department of Energy on the Savannah River.
Speaker Change: It was a big joke.
Speaker Change: In U S. It's also quite interesting.
Speaker Change: As I said a few minutes earlier.
Speaker Change: It's quite a walks in early 2019 very small company.
Speaker Change: With a very specialized.
Speaker Change: When does that we used on our Canadian refurbishment program now all of these companies that has been the restructured that.
Speaker Change: As we nurture with a lot of processes from E com.
Speaker Change: A lot of knowledge.
Speaker Change: From our nuclear project is growing and is growing quite well I mean, we were expecting.
Speaker Change: Our activity in.
Speaker Change: In the U S for nuclear will be between $1 50, and 200 million in 2025.
Speaker Change: We are working for the federal government Department of energy and Stamina River, we are looking for Dominion.
Jerome Julier: We are working for Dominion. We have added a few days ago a very interesting purchase order for Energy Northwest. So, this is going quite well.
Speaker Change: We have added a few days ago very interesting purchase order for energy northwest. So this is going to this is going.
Jerome Julier: In conclusion, Always remember that the resiliency and the strength of Aecon is due to the balance of its activity. I mean, I don't want to become an 80% nuclear company. All this has to be balanced, but we are perfectly on our way and very happy with the nuclear.
Speaker Change: Quite well.
Speaker Change: In conclusion.
Speaker Change: Always remember is that the resiliency and the strength of E. Com is Duke has a balance of its activity I mean, I don't want to be common and 80%.
Speaker Change: Nuclear company.
Speaker Change: All this has to be balance, but we are crystal clear on our way and very happy with the nuclear activities.
Jerome Julier: Thank you very much for all the. Thank you.
Speaker Change: Thank you very much for all that.
Frederic Bastien: And there is a follow-up question. From Frederic.
Speaker Change: Thank you and there is a follow up question.
Speaker Change: Fredrik.
Frederic Bastien: Bastien from, excuse me, Raymond James, your line is open. Hey, Frederic. Good morning, everybody. I don't know if this question has been asked before.
Speaker Change: Boston from Ron Excuse me Raymond James Your line is open.
Peter: Hey, Peter.
Speaker Change: Good morning, everybody.
Speaker Change: I don't know if this question has been asked before I suppose it has been.
Frederic Bastien: I suppose it has, but it might have not come from me, but just wondering if Data Center is an opportunity for you guys from Google. Thank you. from maybe a power transmission perspective.
Speaker Change: Might have not come from me.
Speaker Change: Just wondering if.
Speaker Change: Data Center is an opportunity for you guys from.
Speaker Change: Tom maybe a power transmission perspective.
Jean-Louis Servranc: No, Frederic. I mean, this question has not yet come on the table.
Speaker Change: Non Frederic I mean discussion question marks yet to come.
Jean-Louis Servranc: Basically, in the data centers, there are two parts. One is a sort of huge workshop where the clients just insert all their equipment that are directly procured by them, plus a lot of AC, air conditioning.
On the table.
Speaker Change: Basically in the data centers.
Speaker Change: There are two parts. One is this sort of huge workshop, whereas the client, suggesting third or is that our equipment is.
Speaker Change: On direct fee.
<unk>.
Speaker Change: A lot of <unk>.
Jean-Louis Servranc: We are not going to this. We are late in this market, and Aecon is not really a building or commercial building company. As you say, what is quite interesting is the power that is related with those data centers and two kinds of power. The first one is to get autonomy of power generation. So we are looking at this. And the second one is to have a backup, so to be perfectly connected to the grid, to the balance of plant and energy. And yes, we are looking at it. It's a little similar to battery storage, you probably remember.
Speaker Change: And conditioning.
Speaker Change: Im not going to this.
Speaker Change: We are late in this market and economy is not really.
Speaker Change: Building, our commercial building company.
Speaker Change: As you can say what is quite interesting is the power that is related with new data centers.
Speaker Change: And two kind of powers. The first one is to get autonomy of power generation. So we are looking at list and the second one is to have a backup so can be perfectly connected to the agreed to the existing Greta.
Speaker Change: And it just means that there is.
Speaker Change: Fuller.
Speaker Change: Sub market linked with what we call balance of plant and energy and yes, we are.
Speaker Change: We are looking at it.
Speaker Change: It's.
Speaker Change: Similar to.
Speaker Change: Battery storage, you, probably remember I mean, we.
Jean-Louis Servranc: I mean, we didn't want to go in the pure battery aspect of it, but we are usually extremely, I mean, extremely interested and we are getting very strong in what we call the balance of plant, everything related with energy.
Speaker Change: We didn't want to go in.
Speaker Change: The pure battery aspect of it.
Speaker Change: But we are usually extremely I mean.
Speaker Change: Could we be interested in and we're getting very strong in what we call the balance of plant everything related with energy.
Jean-Louis Servranc: Okay. And are you seeing, I mean the market's really vibrant in the U.S., are you seeing the potential for Canada to become a major player in data centers? Not sure. I mean, the U.S. is very much in advance, but there are needs in Canada, and we are getting stronger and stronger in the U.S., as I was explaining, I mean, through our acquisition. United is a very interesting acquisition. So, first of all, you have noticed it's engineers and constructors. Constructors is because United has a joint in steam generation, and it's quite important because most of the major component refurbishment of existing nuclear power plant will have to deal with steam generation.
Speaker Change: Okay and are you seeing.
Speaker Change: The market's really.
Speaker Change: The vibrant in the U S are you seeing.
Speaker Change: The potential for kind of become a major player in the data centers.
Speaker Change: Not sure.
Speaker Change: In the U S is very much is very much an advantaged Brazil needs it.
Speaker Change: In Canada, and we are getting stronger and stronger in U S.
Speaker Change: He was explaining I mean through our acquisition.
Speaker Change: As you know ITT is a very interesting acquisition. So first of all you have notice it engineers and constructed constructive because United as a joint venture with <unk> with the worldwide leader in the steam generation and it's quite important because.
Speaker Change: Most of the major component.
Speaker Change: <unk> of existing nuclear power plant, we'd have to deal with steam generation.
Jean-Louis Servranc: But United is also an engineering company, pre-construction, feasibility, detailed engineering, everything related with power, and of course we want to leverage their capacities with the Canadian capacity that we have to be stronger in United. Okay, thanks.
Speaker Change: But.
Speaker Change: As you know ITD also an engineering company pre construction <unk> detailed engineering everything related with power and of course, we want to leverage that capacity with the Canadian capacity that we have.
Speaker Change: To be stronger in the United States.
Frederic Bastien: That's helpful.
Speaker Change: Okay. Thanks, that's helpful.
Frederic Bastien: I have a question regarding the construction segments result. It was highlighted that the gross margins on the civil side were responsible for some of the pressure you experienced.
Speaker Change: I have a question regarding the construction segments result.
Speaker Change: There was.
Speaker Change: It was highlighted that the gross margins on the civil side, where.
Speaker Change: Part of it.
Speaker Change: Responsible for some of the pressure in your expenses.
Jerome Julier: Are you able to comment further on that, provide additional detail? No, I can't comment further. Okay. Thank you.
Speaker Change: Are you able to comment further on that provide additional color.
Jerome Julier: Yeah, hey, Fred, it's Jerome here. So, you know, as Jean-Louis previously mentioned, one of the benefits of Aecon's platform is the diversification across the various sectors. And so, on occasion, we have a broad portfolio of civil projects spanning the continent, constructions and outdoor sport, and in some instances, you know, some of these projects just don't perform at the same level as others. And this would just been a quarter where some of the project performance on some of the civil works that we're doing, I think partly in kind of the western part of the continent, just didn't perform to the same level as our aspirations.
Speaker Change: Yes.
Jerome: Jerome here so.
Speaker Change: It was only previously mentioned one of the benefit of <unk> platform is the diversification across the various.
Jerome: Sectors and so on.
Jerome: On occasion, we have a broad portfolio of civil projects spanning the continent.
Jerome: Construction is an outdoor sport and in some instances some of these projects is don't perform at the same level of others and this would just been a quarter, where some of the project performance on some of the civil works that we're doing I think partly in kind of the western part of the continent, just didn't perform to the same level as our aspirations.
Jerome Julier: balanced out by other high-performance and other areas of the business. As Jean-Louis mentioned, Nuclear did very, very well. We have a strong margin profile out of our industrial business, but effectively, this is core civil works, just managing through challenging. The projects we execute on are not simplistic things. They are meaningful, critical infrastructure projects that are absolutely required, but it's not easy stuff. At times, some of these projects can get tough, and that was what we saw manifest in the margin profile. Thanks for your answers. Thank you.
Jerome: <unk>.
Jerome: Balanced out by other high performance in other areas of the business right is that you don't really you mentioned nuclear did very very well.
Jerome: Margin profile out of our out of our industrial business, but effectively this is Jim.
Jerome: Core Civil works just.
Jerome: Just just managing through challenging and the projects, we execute on our not simplistic things right like they are meaningful critical infrastructure projects that are absolutely required.
Jerome: But there it's not easy stop right in.
Jerome: At times some of these projects get tough and that was what we saw manifest in the merger profile in Q4.
Jerome: Okay. Thanks for your answers.
Eric: Thanks, Eric.
Operator: And that does conclude today's Q&A session.
Speaker Change: Thank you and that does conclude today's Q&A session I would like to turn the call back over to Adam for Gary for closing remarks. Please go ahead.
Adam Borgatti: I would like to turn the call back over to Adam Boghari for closing remarks. Please go ahead. Thanks, Lisa, and thanks everyone for joining us today. As always, feel free to reach out with comments and questions to us after. Happy to re-engage as you continue to work through the models and things like that, but we've.
Speaker Change: Thanks, Lisa and thanks, everyone for joining us today as always feel free to reach out with comments and questions to us after happy to re engage as you continue to work through the models and things like that but.
Operator: That concludes the call today and look forward to chatting next quarter. Thank you all for joining today's conference call.
Speaker Change: Conclude the call today and look forward to chatting next quarter.
Speaker Change: Thank you all for joining today's conference call. This concludes today's program you may disconnect.
Operator: This concludes today's program. You may disconnect.
Speaker Change: Okay.
Speaker Change: [music].
