Dear Shareholders,
Aecon’s 2022 results were driven by record full year revenue of $4.7 billion, representing an 18% year-over-year increase. While overall profitability was impacted by a net operating loss of $120 million on four legacy projects, execution and margin performance
across the rest of the business was solid. Backlog1 at the end of the year was $6.3 billion, diversified across Aecon's operating sectors.
Strong revenue growth, and new awards in the year of $4.8 billion, were underpinned by a strategic focus on clean energy and decarbonization projects. This past year, Aecon continued to work with clients to help them meet their sustainable infrastructure
needs and harness the opportunities that are expected to come from the transition to a net zero economy.
Aecon was also pleased to be awarded contracts for major projects that were procured and will be delivered through more collaborative models than have traditionally been used, especially as these awards were for projects linked to the energy transition.
A consortium in which Aecon is a participant is delivering the long-term GO Expansion On-Corridor Works project in Ontario under a progressive design, build, operate and maintain contract model, which commenced with a two-year development phase, leading
into both the construction phase and a 25-year operations and maintenance component. Another consortium in which Aecon is the lead partner is delivering the Scarborough Subway Extension Stations, Rail and Systems project in Ontario under a progressive
design-build model, beginning with an 18-month development phase leading into the implementation phase under a target price contract. None of the anticipated work from these two long-term projects is yet reflected in backlog.
Subsequent to year-end, an Aecon partnership executed a six-year alliance agreement to deliver North America’s first grid-scale Small Modular Reactor through Ontario Power Generation’s Darlington New Nuclear Project. In addition, Oneida Energy Storage
Limited Partnership (Oneida LP), a consortium in which Aecon Concessions will be an approximately 10% equity partner upon financial close, executed an agreement with the Independent Electricity System Operator (IESO) for the Oneida Energy Storage
Project to deliver a 250 megawatt / 1,000 megawatt-hour energy storage facility in Ontario, which would currently represent the largest battery storage project in Canada. Under the agreement, Aecon was awarded an Engineering, Procurement and Construction
contract by Oneida LP.
Also subsequent to year-end, Aecon announced it entered into two definitive agreements which are consistent with its goal of targeting prudent balance sheet leverage and liquidity, preserving capital for long-term growth and concession opportunities,
and reducing the overall capital intensity of Aecon’s business:
A purchase agreement with Green Infrastructure Partners Inc. (GIP), under which Aecon has agreed to sell its Aecon Transportation East (ATE) roadbuilding, aggregates and materials businesses in Ontario for $235 million in cash. In 2022, ATE’s revenue represented approximately 7% of Aecon’s consolidated revenue. The transaction is expected to close in the second quarter of 2023 and is subject to customary adjustments and closing conditions, including obtaining all necessary regulatory approvals; and
An agreement with Connor, Clark & Lunn Infrastructure (CC&L Infrastructure) to sell a 49.9% minority interest in the L.F. Wade International Airport (Bermuda International Airport) concessionaire, Bermuda Skyport Corporation Limited, for US$128.5 million in cash. Aecon Concessions will retain the management contract for the airport. The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2023.
Aecon continues its focus on achieving its greenhouse gas emissions reduction goals, including a 30% reduction in direct CO2 emissions (scopes 1 and 2) by 2030 as compared to 2020 and net zero (scopes 1, 2 and 3) by 2050, which are intensity-based
targets based on economic output and represent tonnes of CO2 per million dollars of revenue. In 2022, Aecon Sustainability Solutions was launched, establishing a single point of entry to its sustainability capabilities and offering integrated
project management throughout a project’s lifecycle to assist clients in navigating the complexities of decarbonization and energy transition opportunities. Aecon looks forward to publishing its 2022 Sustainability Report in April 2023, celebrating
key accomplishments and goals in its Environmental, Social and Governance (ESG) practices.
Building on Aecon’s inaugural Reconciliation Action Plan (RAP) released this past year, Aecon also looks forward to publishing its progress in collaboratively seeking meaningful ways to engage in reconciliation by working together with Indigenous Peoples.
Moving forward with $6.3 billion of backlog as at December 31, 2022 Aecon believes it is positioned to achieve further revenue growth over the next few years, further supported by growing recurring revenue programs and ongoing recovery in airport traffic
in Bermuda. Aecon and its joint venture partnerships are also prequalified on a number of project bids due to be awarded during the next 12 months, representing a pipeline of opportunities to further add to backlog over time.
While volatile global and Canadian economic conditions are impacting inflation, interest rates, and overall supply chain efficiency, these factors have stabilized to some extent and have largely been and will continue to be reflected in the pricing and
commercial terms of the Company’s recent and prospective project awards and bids. However, certain ongoing joint venture projects that were bid some years ago have experienced impacts related, in part, to those factors, that will require satisfactory
resolution of claims with the respective clients – see Section 5 "Recent Developments", Section 10.2 "Contingencies" and Section 13 "Risk Factors" in the Company’s December 31, 2022 MD&A regarding the risk on four large fixed-price legacy projects
entered into in 2018 or earlier by joint ventures in which Aecon is a participant.
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 addition to expecting an ongoing recovery in travel through the Bermuda
International Airport in 2023, 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 projects with private sector clients that support a collective focus
on sustainability and the transition to a net zero economy.
Aecon remains dedicated to the Moving Aecon Forward Together 2022–2024 Strategic Plan and its key focus areas designed to motivate a culture of safety, adaptive risk management, innovation, operational excellence and continuous improvement while unlocking
people’s potential and executing targeted and disciplined growth.2
Thank you for your continued support.
Sincerely,