Aecon Group Inc. (ARE) Earnings Call Transcript & Summary

Good morning, and thank you for attending today's 2021 year-end results for Aecon Group. My name is Jason, and I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to our host, Adam Borgatti. Adam, please proceed.

Thank you, Jason. Good morning, everyone, and thanks for participating in our year-end 2021 results conference call. This is Adam Borgatti speaking. And presenting to you this morning are Jean-Louis Servranckx, President and CEO; and David Smales, Executive Vice President and CFO. Our earnings announcement was released yesterday evening, and we posted a slide presentation on the Investing section of our website, which we will refer to during this call. Following our comments, we'll be glad to take questions from analysts. And we ask that analysts keep to one question before getting back into the queue to ensure others have a chance to contribute. As noted on Slide 2 of the presentation, listeners are reminded that the information we're sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although Aecon believes these expectations reflected are reasonable, we can give no assurance that the expectations will prove to be correct. And with that, I'll now turn the call over to Dave.

Thank you, Adam, and good morning, everyone. I'll touch briefly on Aecon's consolidated results, review results by segment and then address Aecon's financial position before turning the call over to Jean-Louis. Turning to Slide 3. Revenue for the year of $4 million was $334 million or 9% higher compared to 2020. Adjusted EBITDA of $239 million, a margin of 6% compared to $265 million, a margin of 7.3% last year and operating profit of $119 million compared to operating profit of $150 million in 2020. After adjusting for the impact of amounts related to the Canada Emergency Wage Subsidy, or CEWS, reported in both years, adjusted EBITDA of $207 million and operating profit of $87 million for 2021 increased by 22 and $17 million, respectively, compared to last year. Diluted earnings per share for the year was $0.78 compared to diluted earnings per share of $1.29 in 2020, both amounts before adjusting for the types of CEWS. Reported backlog of $6.2 billion at the end of 2021 compared to backlog of $6.5 billion a year ago and $6 billion at the end of the prior quarter. As announced yesterday, Aecon's Board of Directors approved an increase to the quarterly dividend, with this being the 10th increase in the last 11 years. The quarterly dividend will increase at $0.185 per share from $0.175 per share previously, with the first increase of quarterly payments to be paid on April 4, 2022. Now looking at results by segment. Turning to Slide 4. Construction revenue of $3.9 billion in 2021 was $301 million or 8% higher than last year. Revenue was higher in nuclear driven primarily by an increased volume of refurbishment work in Ontario, adding utilities driven by gas distribution and telecommunications work. Partially offsetting these increases were lower revenue in industrial operations driven by decreased activity on mainline pipeline work in Western Canada and in civil operations driven by lower road building construction and foundations work. Adjusted EBITDA in the construction segment of $212 million, a margin of 5.4% compared to $262 million, a margin of 7.2% in 2020. After adjusting for CEWS in both periods, adjusted EBITDA of $180 million decreased by $2 million compared to 2020, primarily driven by lower volume and gross profit margin in civil and urban transportation solutions in industrial. These decreases were largely offset by higher volume of gross profit margin in nuclear and utilities operations. New contract awards in 2021 totaled $3.6 billion compared to $3.3 billion in the prior year. The construction backlog at the end of 2021 was $6.1 billion compared to $6.4 billion at the end of 2020. Turning to Slide 5. Concessions revenue for the year was $69 million compared to $98 million in 2020. This lower year-over-year revenue was primarily due to decreased construction activity related to the Bermuda International Airport Redevelopment Project, which was completed in the fourth quarter of 2020. This decrease was partially offset by an increase in airport operations, as commercial flight service continue to recover and more severe impact of COVID-19 on passenger volume experienced in 2020. Adjusted EBITDA in the concessions segment of $64 million increased by $22 million versus 2020, primarily due to results from Bermuda Airport. Turning to Slide 6. As of the year end, Aecon had a committed revolving credit facility of $600 million, of which $23 million was drawn and $3 million utilized for letters of credit as well as the $900 million facility provided by EDC to support letters of credit. Aecon committed facilities for both working capital and letter of credit requirements totaled $1.5 billion. Aecon has no debt or credit facility maturities until the second half of 2023, except equivalent of proxy loans and leases in the normal course. As at December 31, Aecon is in compliance with all debt covenants related to its credit facility. Capital expenditures in 2022 are expected to be similar to 2021. At this point, I'll turn the call over to Jean-Louis.

Thank you, Dave. Turning now to Slide 7. Despite the ongoing impacts of COVID-19 on Aecon's operations, we continued to deliver solid results in 2021. Aecon's balanced and diversified portfolio and a giant culture continue to be significant strength and are well suited to the market opportunities across Canada today. The construction segment is aligned to the significant infrastructure investment commitments by all levels of government across Canada and on a select basis internationally as well as by the private sector across the market sectors in which we participate. The concessions segment is purpose-built for the large scale construction projects being developed and brought to market by government with the history and aligning power and is also targeting innovative development and private finance opportunities in power, tech and other related markets as well as participating in the concessionaire of the 5 different projects identified on this slide. Turning to Slide 8. Backlog, recurring revenue program and the pipeline of bidding opportunities for new work remain at strong levels across Canada. New awards of $3.7 billion in 2021 exceeded 2020 by $413 million and early 2022 have already seen a number of new projects awarded, but not included in year-end backlog, including the Interstate 90/State Road 18 interchange improvement projects in the Washington State and the Annacis Water Supply Tunnel project in British Columbia. And Aecon partnership was also selected as a preferred proponent on the Montreal-Trudeau Airport REM Station in Quebec. And most recently, an Aecon consortium was named as first negotiation proponent for the transformative GO Rail Expansion On-Corridor Works project in Ontario and the re-collaborative model with Infrastructure Ontario and Metrolinx. This potential award would be the largest project undertaken by Aecon in its history. These awards clearly demonstrates the strong demand for Aecon services for projects of all sizes and across our operating sectors and geographic areas of focus. Aecon is also prequalified on a number of large project bids to be awarded over the next 2 years, including several procurements for the Ontario Subway Line and most recently, the Scarborough Subway Extension Stations, Rail and System. We expect demand for our services to remain healthy for the foreseeable future as the federal government and provincial governments across Canada have identified investment in infrastructure as a key source of stimulus as part of economic recovery plan and an essential part of the transition to a net 0 carbon economy through more sustainable infrastructure. Recurring revenue was up 28% in 2021 versus last year, primarily from growth in utilities operations. Recurring revenue is expected to continue to grow, driven by demand in the utility sector and the concessions segment is expected to see airport traffic in Bermuda continue its recovery during 2022 from the impact of the COVID-19 pandemic. I would also like to formally welcome our new employees from Pacific Electrical Installations or PEI, which we acquired in November 2021. PEI is the largest independent to full-service power line contractor in British Columbia, providing maintenance, construction and emergency restoration services for critical electrical infrastructure to the majority and the last service agreements and recurring revenue arrangements. PEI is a designated power line service provider for BC Hydro for the Lower Mainland South and Okanagan regions and also works with a variety of private sector customers. Turning now to Slide 9. We are continuing our drive to build industry leader in sustainability. Last year, we announced our GHG reduction target of 30% by 2030 and net-zero by 2050. In 2021, we focused on operationalizing these targets by integrating new technologies to reduce emissions across our portfolio, and we are the first construction company in Canada to try an electric mini escalator. We also tried technologies such as battery power to solar powered equipment and battery packs to replace diesel use on our project sites. We further cemented our ESG commitment by becoming the first Canadian construction company to incorporate a sustainability-linked credit facility tied to ESG objectives. We plan to release our next sustainability report in April 2022 and look forward to highlighting our achievements and opportunities, as we continue to focus on building what matters to enable future generation to stride. Turning to Slide 10. The trend that I've spoken to already in terms of the strength of the construction market in Canada, both in the public and private sector continue to be positive and well aligned to Aecon's diversifying of special facts. In the concession segment, in addition to expecting continued recovery in travel through the Bermuda Airport during 2022, there are a number of opportunities to add to the existing portfolio of Canadian and international concessions in the next 12 to 24 months, including in the U.S. and innovative projects with private sector clients that support a collective focus on sustainability and the transition to a net-zero company. The overall outlook for 2022 is positive as construction continues on a number of projects that ramped up in 2020 and 2021, the strong level of backlog and new awards during 2021 and the strong demand environment for Aecon services, including recurring revenue programs. Thank you. We will now turn the call over to analysts for questions.

[Operator Instructions] Our first question is with Yuri Lynk from Canaccord Genuity.

I don't know who wants to take this one, but you mentioned the outlook for '22 is positive, but I struggle to see how the construction segment EBITDA grows this year, your 12-month backlog is down about 5%, and the margin comps are really tough, at least through Q3, especially in light of the weakness we saw in the fourth quarter. So how do we get to growth in the construction segment in '22?

Yuri, I would take this one. I would ask vectors to answer your question. The first one is about the quality of our backlog. So as you know and as I have been repeating the quality of backlog is not an issue. The issue is about selectivity of projects and it's about going on derisking our portfolio, our backlog, as you have seen, all the indicators of what we decided to do go in the right direction, indicators about the kind of projects between the part of lump sum and fixed price to unit price about the size of projects you have not even from September 2018. I mean we have not taken a project superior to $1 billion because we just want to go on with the ones that are at the moment. We are more and more diversified. Geographically, our sectors, I mean, are quite stable and equally weighted. And our backlog is paying between 6 and $7 billion. So no real issue with the quality. It's a problem of selectivity and quality of backlog and contracting more. We're not doing extreme swing to the left or to the right. I mean it's -- we have decided and quitely expertly, I mean, we are shaping the activity of tomorrow, knowing and convinced that this will drive better profitability. If I say, for example, the area three on core project, I mean it's transformational for Ontario, but also for Metrolinx and in terms of Ontario and of course, for Aecon, I mean it's -- when you calculate about what share Aecon can have, it's about works around $3 billion and operationally, we have 28% of operation for 25 years between 2024 to 2050. The cumulative value is around $6 billion. It's all collaborative. It will begin with the development phase of 2 years where we will, with the client stick together, what will be the service level for the trade, what strategy are we going to use in line with our offer. And from these effects, what kind of work, how are we going to do this, what will be the price. I mean, it's a totally transformative way for Aecon to work, and this is a way to drive profit up. My second answer, my second vector will be about execution. Execution is key. We are extremely happy with our continuous improvement program. A lot of enthusiasm within the company on most of our job side, I'll just give you an example. You can see on the better presentation, the picture is about Gordie Howe Bridge, and you can see the 2 pillars on the Canadian side lose the alpha, you just asked segment for segment we are counting like 35 segments to do. We were stuck at around 40 days per segment. Then we implemented our continuous improvement. We went over quickly to 10 that 7 and a few days ago, we reached 5 base per segment. This is profitability, it goes directly to the bottom line. We are investing a lot in our Aecon university project management group. But all this is important because this is money at the end of the day and now but not least, actually, we have totally reorganized our procurement, and we are much, much more efficient. So this is why we say that construction in is not a good trend.

Yuri, I can just add to that. Should you tell from Jean-Louis' strong focus on profit growth, but in terms of revenue, I think if you look at the comparison of 2020 to 2019, where we came into 2020 with exactly the same amount of backlog we were to over the next 12 months as we had in 2019 and yet we still grew by 9% top line coming into this year. So it's really driven by maturing revenue. This is driven by a level of new awards within the year, and we've already had a significant number of wins early this year. It didn't happen months earlier, year-end position, the backlog that you're looking at, which is very similar to the position at the end of last year, it will look very different. So we're not too soon to reach about the revenue side, and as Jean-Louis spoke about the big focus is on ensuring that revenue growth is profitable.

Okay. So the margin weakness -- sorry, the margin weakness that we saw in the fourth quarter, you don't see that spilling into 2022? That's my last question, and I'll hop off.

Yes. No, if you look at the fourth quarter, we're really talking about impacts compared to civilian transportation space, a small handful of projects where we've come through a pretty simple operating environment, resurgence to Omicron late in 2021. Obviously, supply chain disruptions, and we made a lot of progress in selling some significant claims in the quarter. And the impact of all of that kind of coming together, there's no one particular issue is always significant out of those actions, but combined, they call to obvious to be a little lower in Q4, but we don't see that easing overall. Obviously, there was some Omicron impacts early in January, but we're through that now very much back to normal from a COVID perspective, so we've been living with for 2 years, but that all across additional ways in absolute impacts for the space of about this facility. And now in terms of space issue is always bring at some shift some disruption. We've been in with the impacts of supply chain now for so long enough that in all our new work and our new bids and potential arrangements, we're able to back to that age. So we don't expect that to be something that impacts in this financial year.

Our next question is with Jacob Bout with CIBC.

I want to continue on with the construction margin question. Maybe just help us understand what the biggest drivers were? How much was Omicron impact? And then as far as the civil/urban transportation projects, you talked about claims adjustments, is there any -- could there be any positive adjustments to offset this in later quarters?

Yes. So taking those together, I think if you look overall, I mean, put this into context of the full year, our construction segment over the full year on a like-for-like basis, excluding CEWS saw a progression from 2020, which in an environment, again, which was subject to a lot of depression. So we think the construction segment across the year actually performed well. With Omicron, as I said earlier, if you look at where people are looking at EBITDA that we reported in the quarter, just over $60 million versus a consensus of just over $80 million, I would say the fact that I talked about in the call across supply chain and projects, roughly very similar count impacts in terms of that interest.

Maybe I can add a few words on Omicron. Omicron has peaked from December to the end of January. As we all know, it was not as strong as the Delta variant. Pretty cool it's spread over, I mean, much quicker. And we had, I mean, from December, some occasion, more than 50% of our people isolation I mean at all levels of the company, I've got Omicron with very much too good to isolate myself for 7 days. And on all our jobs, I mean it was like this. So yes, it has affected us on the good side of it I mean we are closing easily all our emergency centers for COVID due to the situation is getting better and better.

And then do you get back to pre-pandemic levels as far as margins in 2022?

Yes. We're actually -- again, you're going back to kind of pre-COVID days as you say, looking 2019, and this psychology about the concession segment because, as you know, the concession segment will continue to be a ramp-up this traffic recovers. So looking at the Construction segment alone, yes, we do expect to get back to pre-pandemic levels for sure.

Our next question is Jean-Francois Lavoie with Desjardins Capital Markets.

So David, I just wanted to come back on the question for margin on the construction segment in 2022. You mentioned, for sure, would go back to pre-pandemic level, but would it be achievable to go beyond the 6% level? I know you don't like to provide -- you don't provide specific guidance, but looking at consensus with the actual revenue target and the visibility that you have in the backlog, I was just wondering if you could provide a bit more color on the potential for margin in construction, please?

Yes. Jean-Francois, I mean you partly answered your own question by saying we don't give specific margin guidance, but I think if you go back to Jean-Louis's comments at the beginning in answer to the first question, the focus is very much on the margin profile of the work we're bidding, the execution of that work, and we feel pretty confident about the mix of work we have for 2022. We feel very confident about the progress we're making on productivity and execution. So all subject to any other surprises, we think we've dealt with everything we know about right now, but we're in a world where things change quickly, but absent any surprises in yes.

Okay. That's great color. And then moving on to free cash flow standpoint, should we expect a positive reversal of working capital in 2022, given the significant consumption we saw in 2021? Or the ramp-up of key projects will continue to consume some working capital.

Yes. So we do expect -- there's always some seasonality in our cash flow where we only see an unwinding of working capital and generation of cash flow in Q4 and Q1. Sometimes it's more Q4 and less Q1 and sometimes it's the reverse. We expect to reverse this time around. The biggest impact in Q4 with the issue we disclosed at the end of Q3 around the cost of gasoline pipeline impact that had on our cash flow as we've noted, we've made a lot of progress on that front. So that will help in Q1 2022 as we formalize those agreements. So that will benefit the first quarter were the normal seasonal unwinding. So we should start to see that position improve in 2022 and to get back to a more normal cash flow profile that we see historically.

Okay. Very helpful. And maybe one last for me. Considering the outlook for 2022, it looks quite positive. You increased your dividend once again. I just wanted to pick your brain on your preference for M&A versus share buyback in the current context with the share price that is unjustifiably being finished this morning.

Yes. I mean, obviously, the dividend has been focused for a long period of time now over a decade, and we continue to see that as a ratable and consistent approach that's a focus on other things. We do see opportunities on the M&A side. And we are focused on looking at where we can continue to secure all the business. Jean, we talked about a focus on recurring revenue and continuing to look at the profile of the type of work we do. So we're looking for overall opportunity to help us achieve that.

Our next question is with Frederic Bastien with Raymond James.

Would you mind discussing more the collaborative nature of the GO Rail Expansion project that you recently secured? And how we should think about how the development phase will transpire over the next few years?

Yes, I will do it, Frederic. We have been advocating and working with all our clients about changing the contracting mode of the big and complex project. I mean, basically speaking, estimating those major complex projects, especially the one where the system integration on a lump sum price is extremely difficult. So we have been exploring all these ways with our clients to say we need to define much more together what we want to do and what is going to be the cost of it. And this is what we call the development phase. So we have been chosen on the Encore expansion program. I would say we have been true then on the capacity of our team. I would say the way we have explained and put on the table the various strategy for service operation during the 25 years and how the service operation, I mean, could after drive the CapEx for Metrolinx and Infrastructure Ontario. Now that we have been chosen, I mean, during 2 years, in addition to do some early works, I mean that will happen and that are important to enable when we begin after the 2 years, the main works, I mean, to go quicker and to go better, I mean, during these 2 years, we are going to finalize the operational strategy with Metrolinx and from its finalize what are the infrastructure in our accessory and the equipment that are necessary to be and together, we will define what can be the purchase to this, and we will work with our clients on a cost-plus basis during execution with a target price. So at this stage, we are negotiating with our clients. I would say the detailed rule of the project, and then we will begin with the development stage. So it's what we call progressive in diabetics, what we call collaboration. And we are extremely happy. I think that Aecon has been a 3 years long first fit and to have warm is for 3x and we're happy because these are the projects -- those are the projects of the future. The risk profile is totally different as you can imagine.

Okay. Second question relates to sort of the progress you are making entering the U.S. market. I know it's going to be earmarked or identified as an opportunity a few years back, but we won a recent contract in Washington State and then you shortlisted for another one in Michigan. And I don't think it's a coincidence that these states are bordering Canada, but just wanted to know maybe is this the combination of many years of business development? Or have these opportunities kind of presented themselves more recently?

Yes. You probably remember what I told you, I mean, a few months ago, we cannot ignore state, although we know there's a huge pipeline for affecting Canada. When we are the neighbor of the site currently new infrastructure bill. So we have been working a lot during the last 4 months. What we have discovered is that it's not only about Gordie Howe Bridge, it's also a lot of our facilities about network, about cell communication, about increased capacity and so with those 2 vectors, we will go, I would say, prudently, but steadily, we are going to enter the U.S. market. In terms of civil, we have decided that we will enter this market from our basis in Vancouver and go down the West Coast progressively. So this is why the first job we look at in Washington State, it's relatively small so. It's $125 million. It's a job, I mean, extremely classical for Aecon, which is the bread and butter that we do, I mean, on all our divisions. We have studied extremely carefully. We think we are with us a very good team of local companies and in China. And then we will expand on job maybe a little bigger, maybe different kind of association with bigger companies and go down the West Coast to go at least to California, where there is probably the of the biggest part of the infrastructure deal, there has a lot to do. So this is a plan. In utilities, we are looking at the market, looking at the alliances we can do. But as always, I mean, for these 2 examples, it's where I have always told we're not going to have a new country and added to a new activity. I mean we have a new country, okay, but we do it on, I would say, our core businesses so that we don't have any surprise.

Our next question is with Chris Murray from ATB Capital Markets.

Maybe turning back to the market question just a little bit, just trying to understand a little bit of the disclosure on Q4. Dave, just what was the Qs contribution in Q4? And you didn't call it out, but I got to expect that there's try to be some revenue that you probably lost in the quarter just due to Omicron. Just trying to get a sense of what the normalized margin would have been for the quarter?

Yes. The CEWS impact was around $4 million in Q4. So that's not big. I mean in terms of revenue, as Jean-Louis said, we had some impacts through December. I wouldn't say the revenue impact was hugely significant. It was more of a productivity impact that impacted us through December. So revenue may be kind of in the $20 million range, but it's not that significant in the overall revenue, just tougher to schedule work and get the right crews with the right number of people. So it is a bit more of a scramble in December in terms of availability of workforce.

Okay. And so just, I guess, what I'm also trying to understand is as we go into '22, I mean I think the first thing I'm assuming is that there'll be no more Q standards next year. And if you think about the, call it, the $32 million of Qs that were in earnings this year, should we be thinking about that, backing out that $32 million as a contribution and kind of -- but then I think you also mentioned thinking about 2022, maybe kind of like a pre-COVID year. I'm just trying to -- so the assumption that you'll overcome the loss of the $32 million in margin type of thing. Is that the right way to be thinking about this direction?

Yes. So you're right. The CEWS program has ended now. So there won't be any contribution from that in 2022, but we've obviously been impacted by COVID throughout the year, including early in the year, including impacts on Bermuda as well, obviously, that we expect to see recovering through 2022. So when we look at CEWS and COVID impacts together, assuming we continue in the operating time we're in right now, which is really having no impact on the business in terms of current COVID situation. Yes, we think those 2 kind of offset and that allows us to get back to kind of a pre-COVID type of margin performance.

Okay. Great. And then just to make sure, too, I know in previous years, you sort of talked about the fact that just the first half of the year might not be as substantially down in the second half just because of the need for some of the work, but we should still be thinking that the recent seasonality impact into Q1 and Q2, again, in '22. Is that also fair to think?

That's right. This Q3, Q4, typically the highest revenue quarters. That has moderated to some extent over time, but it's still definitely the case. So don't expect that to see now in different this year really.

Our next question is with Troy Sun from Laurentian Bank Securities.

Maybe just quickly on the Coastal GasLink project here, obviously, you noticed the change in language in the disclosure sounds pretty positive here. I'm just trying to get a sense from you in terms of how, I guess, comfortable that you're feeling in terms of derisking the free cash flow exposure there on that project, if possible, please?

Maybe thinking about CGL. So CGL is a very complex project. by its nature, but also by dramatic change in all the regulation about erosion and segmentation control. So it's not only a problem at CGL. I think everybody is aware, I mean not the same kind of issues that have been encountered in Trans Mountain in terms of cost overrun in terms of schedule being pushed on to the right. So those are complex projects. We have developed at the highest level, I mean, with our clients, a very good relation based on trust and transparency to make the best out of this difficult situation. We have been, during the last quarter, we have reached some agreements with our clients, all this agreement have been formalized during Q1. So they are just fix the cash position for Aecon. You know that in addition, we have begun an arbitration to decide later on what is going to be the final value for this project. In between, we are also working with our clients to try to settle some little of ties issues because arbitration is time and money consuming. So we are also advancing well on this. So this is at the moment where we are on an operational way at it. Maybe, David, you can take more financial policy.

Yes. I mean I think just building on what Jean-Louis said, obviously, the disclosure in Q3 was focused on cash flow, and we've obviously made -- disclosed now Jean-Louis commented on the progress on that front. I think we've obviously been working on this project for quite a period of time now. And we've reflected the challenges we've had other projects, and obviously, the contract is basically similar challenges. We've reflected that in how we position the projects. So from that perspective, that was heavy the one concern we really ran cash flow, and we make the progress on that front.

Okay. Great. That's helpful. And maybe just also, I guess, a big picture question for Jean-Louis here. Just in terms of the infrastructure spending potential, let's call it, in Canada, I think people largely were expecting a meaningful pickup post COVID. I guess just based on what you're seeing now, like where are we in terms of that progress from a spending perspective for 2022? Are we still in the early days of seeing the full potential of government funding or like it's quite mature at this point?

You probably remember, I mean, I told you more than 1 year ago, I don't believe in so already profit in the construction. So the fact is on prior year we're going to invest a lot in infrastructure, you don't happen on Monday mornings. So yes, I'll just give an example, for example, in Toronto, there have been a lot of work on industries, rehabilitation of it during the COVID because there was no more trucks and normal cars because everybody was at also it has allowed us to work there, but mainly the program on which our teams at the moment are preparing then say the firstly, are first weeks that we have been knowing, and we knew that we're on our runout for the figures. We were ready to this. So I would say it's steady. The pipeline is construction is strong, is there a strong correlation with COVID and with recovery plan, they didn't know that much. It's not the main driver. The main driver is that we're something like 0.5 million new comers in Canada and lose are smart immigrants. They need better highways and need better telecommunication. They need a better source of power, better source of communication and also drive what we are seeing at the moment. The backlog to come back to something extremely positive for us. I mean it's $680 million in recurring revenue. I mean telecommunication is fully it either to the whole to rural places alternative energy or also so we are extremely happy to be well positioned. I was this morning reviewing with one of my operational leaders, who probably remember this company that we had quite a few months ago, so now that it is well integrated, you can imagine the prospect, the pursuit and the wall. I mean we are now working extremely strongly with either one on the CGL. We're working with Hydro BC. We're working in 4 player, comprising private finance. We're working with Manitoba Hydro. I mean, there's a booth which, of course, I mean, may be partly a sequence of COVID, but it's not the main driver, the main driver in Canada is growth and there the need and that with the opposite.

Our next question is with Naji Baydoun with IA Capital.

Just wanted to start off on the nuclear side. A competitor of yours recently ended a joint venture partnership. Those folks on nuclear decommissioning work in the U.S. I know you can't comment on that partnership specifically, but how does this event impact or inform your view of the U.S. nuclear market?

So maybe I will begin with what are we doing on the nuclear, I mean, at the moment in Canada. We are full speed ahead with the refurbishment of the two power plants, I mean, OPG, we are now working with a second reactor. We are extremely happy with the renting we the lessons learned from the first one to the second one. We are early a few dozens of days on the schedule. Our time is devised with our work. On Bruce Power, that we are working on the first reactor, we have added our backlog, the second reactor. There are still 4 to come in three generators. So this is good our key targeting better. Second point of importance, small modular reactors. So you have noted that OPG has decided about this technology partner, we're going to PG. We are part of the team with OPG again as a constructor and installers. We are extremely as in well phase, I mean SMR is 300 megawatts, it is the right size. I mean it's, of course, carbon-free energy. I mean, the delay is 1,200 in terms of safety with new reactors four wings are getting much better. I just remind you that there are passive for a minimum of 7 days with a power shortage and without operator action. I mean, it's totally innovative to be happy to work on. The United States, we have a quite 3 years ago with one company specialized in welding that we are using in Canada and United States. I have to say that during the last 2 years, because of COVID and because of nuclear power plants were rather reluctant to elect and to reaching the plants people working on core CapEx and mixing with people working on operation, we have not seen a lot of activity during the last 2 years, but it's coming back, and it's coming back rather quickly. I cannot comment on the spending of the JV, but it's all about dismantling existing plans. And so far, we are not in this business in the United States.

I guess you also said -- maybe that's not a business you want to be in. That's not a market that you're going after at the moment.

In the United States, we're not pursuing this. I mean, evidently when the time for entry will come, I mean, it's in Toronto, it's our CT supplier that we know perfectly, and we are working in collaboration with them about future packages. But entering into the mega dismantling project in the United States is not part of our strategy.

Okay. Understood. That's great. Just one last quick question. Obviously, you mentioned this in your opening remarks and in the MD&A, pursuing more transition on sustainability-related projects and opportunities. Can you just provide a bit more detail on that and perhaps quantify what the market opportunity is for you in Canada?

It's not easy to quantify, but the way it is coming definitely in terms of how do we look at ESG, I mean first of all, as a company, we are a citizen, and we have to take care of our planet. So this is why we are the first construction company to set up targets on greenhouse gas emission reduction for 2030 and 2050. So I have to admit, I mean, we have a plan, and we know perfectly how we are going to reduce by 30% for 2030. We don't have really approved our net-zero in 2050. We are working on it. The second part, I mean, our outlook at ESG as a business, definitely, you have the new avenues of growth coming from everywhere, mainly in the energy sector, I mean the electrical sector, alternate energy. So you have probably not that most of our tuck-in acquisitions remain the last year was about this. And we are extremely focused on this new stream of businesses. So much that we have decided to create a single point of entry at Aecon in order to take our clients with the ambitious program regarding sustainability. A single point of entry will allow us to be more agile in our first reach model in our solution and being able to share the work between all the sectors that take on from a centralized point of view.

The perfect example was to the old project -- area of project that Jean-Louis told you, I mean clearly electrification of the rail system in the DTA through plateway. These are the times of capital allocation decisions that we made across all levels of items with private clients, and we're right in the middle of the whole activity. So it will drive our growth and our opportunity for the foreseeable future. We don't see that trend going anywhere other than continuing over the long period of time.

Our next question is with Michael Tupholme with TD Securities.

I was wondering if you can provide an update on traffic levels at the Bermuda Airport through the first part of the year here in 2022? And maybe to put that into some context, just give us a sense for how that's evolved from what you would have seen in the fourth quarter?

Yes. So overall, for the 2021 traffic was up compared to the previous year by about 50%, but still only around 30% to 2019 levels. We do see that based on tracking all the forecasts that are out there in the market plus our own knowledge of the plans of the airlines and what's going on in terms of on the ground in Bermuda, we do see that growing to about 60% of 2019 levels on average over 2022. There's a type of seasonality to that Q1 is always the slowest quarter for traffic in and out of Bermuda. So clearly, Q4 was kind of impacted in the last month of December because of Omicron. January 2022, the same kind of impact. Things are now picking up again. So I think Q1 will be too dissimilar to Q4. And then we think through the course of the year, it starts to ramp up quite likely.

Okay. And then one follow-up. You were asked earlier about changes in noncash working capital. And I think most of the comments you made were around sort of the possible difference in seasonality Q4 versus Q1 reversal. So it sounds like you expect more of a reversal in Q1 in 2022 as opposed to what you would have historically seen in Q4. I'm just wondering for the full year of 2022, what -- it sounds like an expectation of some revenue growth in 2022, how do we think about the full year for changes in noncash working capital?

Yes. I think overall for the year, we expect working capital to be fairly neutral across the year. As you said, some of that is due to growth in the profile of the projects, but all this can be thrown off by timing post the end of the year in terms of where you're entering or wrapping up projects and things like that. But all things being equal based on what we see today, we expect it to be fairly neutral in 2022.

Our next question is with Sabahat Khan from RBC.

Just I guess, looking forward, I think there's a bit of commentary shared earlier in your outlook for '22 and some of the impacts that COVID had through the late last year. And then I guess as we think about the outlook, do you think you've kind of in the provisioning that you did going through Q4, taking into account some of the COVID earlier in the year and maybe some of the disruptions, like just trying to figure out if there's still larger negotiations or larger projects where there's still discussions related to COVID and how your service is managing that for kind of full year looking forward?

Yes. No, I think in terms of those Q4 impacts, we felt that we know with those in Q4, so we don't expect those to carry forward into '22.

Okay. But I guess in terms of...

Sabahat, sorry. The comment we made earlier, which is the Omicron impact continued through January. January, obviously, a pretty slow month is anyway from a construction perspective in Canada, but that would be the only thing that kind of carries into the first month of this year. But everything else, we feel will go with in Q4.

Okay. Great. And then I think you noted in the press release and the call around just opportunities for concessions like outside of Bermuda. I guess, is that something that's sort of opportunistic? Or are you actively looking to build out that concession segment and add more assets? I'm just trying to get an understanding of what that is on the priority list? And is that something you compare to the opportunity maybe on M&A or buybacks? Or is it that big of a kind of focus for you guys?

Generally speaking, I will begin on my side, I mean our strategy is to work together concession and construction segment. We don't go to invest in brownfield assets only to operate it. We just see that our job is to develop a project, is to engineer projects, is to finance it, is to build it and to operate. And we are extremely expected in following this model. And I have to say that all the sustainability way that I was talking about is giving us new opportunities with private sectors with private companies about all those alternate energy issues. So this is generally a specific. Yes, we want to pursue, and we are ready to test. Maybe, Dave, you can add on the...

Yes. I mean very much we're focusing on those opportunities, I mean some of these things that we're working on through government procurement. So Ontario Line Subway, it's a P3 opportunity, different trail improvements in Calgary, the P3 opportunity and our concession group, sometimes it's investing at cheaper, but it's always around that long-term revenue stream. And again, on corridor be a perfect example of where in the 25-year operations and maintenance piece attached to the opportunity that our concessions group is heavily involved in and will be participating in throughout the O&M life span so that's a big focus for us. And we're also looking at opportunities to replicate what we did in Bermuda. There was some very interesting discussions going on around that space that will take time to come to fruition. And obviously, with all the impacts of air travel over the last little while has been kind of a pullback, but those discussions are back of the rain again. And we're looking across the board for how we can continue to evolve that concessions group and there's quite a number of very interesting opportunities to do that.

There are no further questions waiting at this time. So I'd like to pass the conference over to the management team for closing remarks.

So great. Thanks very much, everybody, for attending today. And as always, feel free to reach out with any further questions. We look forward to connecting again next quarter. Have a great day.

That concludes the 2021 year-end results for Aecon Group conference call. Thank you for your participation. You may now disconnect your lines.