Aecon Group Inc.

Terrance McKibbon - CEO David Smales - CFO

Charles Perron - Desjardins Capital Markets Yuri Lynk - Canaccord Sara O'Brien - RBC Leon Aghazarian - National Bank Financial Michael Tupholme - TD Securities Anthony Zicha - Scoitabank Bert Powell - BMO Capital Markets Jacob Bout - CIBC Chris Murray - AltaCorp Capital Frederic Bastien - Raymond James Maxim Sytchev - Dundee

Thank you, Kathy, and good morning, everyone. And thank you for participating in our 2015 year-end conference call.

This is David Smales speaking and with me this morning is Terrance McKibbon, Aecon’s President and CEO. I’d like to remind listeners 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 that the expectations reflected in these statements are reasonable, we can give no assurance that these expectations will prove to be correct.

I’ll touch briefly on Aecon’s consolidated results and then review results by segment before turning the call over to Terry. Overall, Aecon’s 2015 results capped the year with further progress on revenue and margin performance.

Achievement at record levels of backlog and the successful completion of the sale of Aecon’s interest in Quito airport. Revenue of $2.9 billion for the year was higher than 2014 by $304 million with increases in all of Aecon segments.

This represents year-over-year revenue growth of 12% or 14% on a like-for-like basis excluding the impact of businesses sold during 2015. Adjusted EBITDA of $170 million at a margin of 5.8% of 2015, compared to $170 million and a margin of 6.5% in 2014.

On a like-for-like basis again excluding the impact of dispositions, adjusted EBITDA increased 33% in 2015 to $147 million versus $110 million in 2014. And adjusted EBITDA margin was 5% versus 4.3% in 2014.

In addition to progress on revenue margin, a new record yearend backlog position of $3.3 billion was achieved on the back of record new awards in 2015 of over 3.5 billion. This backlog position is 607 million or 23% higher than the position at the end of 2014.

The sales of Aecon's interest in Quito airport, which closed in December, realized net cash proceeds of $247 million and a pre-tax gain of $49 million. In addition to repaying in cash 92 million of convertible debentures that matured in the fourth quarter, the proceeds from the sale of Quito have strengthened Aecon's balance sheet and financial capacity.

It is considered to be an important step and a key advantage for Aecon in its transition in recent year into a partner choice to clients and governments to deliver large scale sophisticated projects and support Aecon's ability to continue to grow and take advantage of the significant opportunities ahead of this. As announced yesterday Aecon's Board of Directors have approved an increase to the annual dividend on the basis of continued financial progress and positive outlook.

The annual dividend will increase to $0.46 per share from $0.40 to be paid in four quarterly amounts of $11.5 per share beginning in April, this marks the fifth consecutive annual increase in Aecon's dividend. Turning to results by segment, Infrastructure revenue of $959 million was 87 million or 10% higher than the same period last year, driven by heavy civil and transportation operations, while revenue was lower in social Infrastructure.

Operating profit in the Infrastructure segment of 29.6 million improved by 25.2 million compared to an operating profit of $4.4 million in 2014, driven by improved results from social infrastructure operations and higher volume and Margin improvement in transportation. Infrastructure backlog at December 31, was 2.2 billion, which was $932 million or 74% higher than the previous year, largely due to the award of the Eglinton Crosstown LRT project.

New contract awards totaled $1.9 Billion in 2015 compared to 1.3 Billion in the prior year. In the energy segment revenue in 2015 of 1.3 billion was 17 million higher than in 2014 despite a $63 million year-over-year impact from the sale of IST with higher revenue in industrial operations largely offset by a reduction in utilities primarily from pipeline work.

Operating profit 46.3 million decreased by $10.2 million compared to the previous year, with the majority of the reduction in utilities and Atlantic industrial operations. New contract awards in energy of $1 billion in 2015 were 282 million lower than in 2014, and backlog at December 31, at 735 million with $220 million lower than the same time last year with an increase in utilities offset by lower backlog in industrial operation in part due to the sale of IST.

In the mining segment, revenue of $706 million in 2015 was $190 million, or 37%, higher than in 2014. This increase was due to site installation work in the commodity mining sector and a higher volume of civil and foundations work related to mine site projects, partially offsetting by reduction in traditional contract mining.

Operating profit in 2015 of 51.1 million improved by 30.4 million compared to the previous year due to a combination of higher volume, and margin for the mining segment as a whole. New contract awards in mining of 601 million in 2015 were $274 million lower than the prior year and backlog at December 31, of 331 million was $105 million lower than the end of 2014, primarily due to the work office [ph] site installation project.

In the concession segment revenue was $3.7 million in 2015 compared to $2.9 million in 2014, operating profit at 57.6 million increased 38.9 million compared to the prior year, representing the gain on sale of the Quito of 48.8 million, partially offset by reduced income from Quito following its classification as an asset held for sale in June 2015. At this time, I'll turn the call over to Terrance.

Thank you, David. As David mentioned, 2015 was a year of solid progress with margin growth in each of our segments and further year-over-year improvement in consolidated adjusted EBITDA margin driven by a growth on the pursue of large scale sophisticated projects with key clients in our core end markets and continued execution performance.

At the end of 2015 company’s backlog was that a year and record level of 3.3 billion, work to be performed in the next 12 months increased by 1.6 billion, at the end of 2014 to 2 billion at the end of 2015 and work to be performed beyond the next 12 months increased from 1.1 billion to 1.3 billion. The strong backlog position provides confidence and continued progress in 2015, particularly when combined with the announcement in the first quarter of 2016 of the contract award for the execution phase of the Darlington Nuclear Generating Station Refurbishment project which will add 1.375 billion to Aecon's energy segment backlog in the first quarter.

Aecon's performance and progress in 2015 with strong backlog position and diverse and flexible business model combined with the strong commitment to increase infrastructure spending by all levels of government across Canada bode well for Aecon's ability to continue to make progress despite weakness in certain markets. This resilience is further enhanced by the benefit of strong and liquid balance sheet that will afford the opportunity to capitalize on organic growth opportunities and positions the company well to benefit from the eventual rebound in the resource and commodity markets.

Increased infrastructure spending to address both the significant infrastructure deficit in Canada and slower economic growth is expected to be a key area focus with federal, prudential and municipal governments over the next few years and Aecon is well position to successfully bid on, secured and deliver these project. Aecon has recognized for its expertise and capability to deliver large complex multidisciplinary infrastructure projects and expect to continue to achieve success in these pursuits with its partners, which combined with recently secured projects is expected to lead ongoing growth in this segment in 2016 and 2017.

In the energy segment, fabrication and module assembly services are expected to remain solid into first half of 2016 and it's expected that increased demand for gas distribution facilities, utility work, power and nuclear refurbishment in 2016 will also offset in the oil related slowdown. The execution phase of the Darlington Nuclear Refurbishment project is targeted to commence in 2016 and we'll take approximately 10 years with further opportunities in the nuclear sector for Aecon likely to open up.

In the mining segment while our commodity prices remain relatively soft, new development projects linked to a variety of different commodities continue to move forward with engineering and feasibility work. Aecon is involved with the number of pursuits related to these prudential projects.

While contract mining operations in the oil sands are subject to some volume on certainty due to reduced spending in the current environment the current backlog and other non-oil related work as expected to sustain the mining segment in 2016. The concession segment continues to partner with Aecon's other segments to focus on the significant number of public private partnership opportunities and is actively pursuing a number of large scale infrastructure projects that require private finance solutions.

The Eglinton Crosstown project award is a further evidence of this strengthen of the concession business and its successful integration with Aecon's operating segments. The sale of Aecon's interest in the Quito International airport concessionaire further validates the concession build, operate and monetize model.

Overall we're pleased with the resilience of Aecon's model, the strength and experience of the team we have in place across each of our segments and the progress made on the number of fronts in 2015 despite some more challenging market sectors. The outlook for 2016 remains positive on a strong backlog, including revenue agreements and solid margin profile in each operating segments.

All four segments continue to bid on opportunities that should further enhance the level of backlog and support with the goal of continuing to improve adjusted EBITDA margin. As usual the first half of 2016 is expected to be weaker than the second half of 2015 reflecting the typical seasonality of Aecon's work.

Capital expenditures are expected to remain relatively consistent with 2015 levels. Aecon's balance sheet, financial liquidity and substantial bonding capacity continue to provide the financial resources require to capitalize on the opportunity before it.

Thank you. And we will now turn the call over to analysts for questions.

This is actually Charles Perron filling in for Benoit. Thanks for taking my questions.

Looking at the energy sector, you expect a better contribution year-over-year from fabrication and module assembly work doing the first half, combined with the ramp up of Darlington. How should we be thinking in terms of margin ramp up from 2015 to 2016, should we expect something more of a smooth increase throughout the year or maybe more of a backend loaded with Darlington?

Yes, I think within the energy segment, we definitely saw stronger margins in the second half of '15 than we saw in the first half of '15. We expect some typical seasonality in '16 that will reflect that a little bit so for example of big piece of our energy business is the utilities business, which doesn't do a lot of work in the first quarter of the year, for weather related reason.

So that always has an impact on margins in the first quarter. But then through the balance for the year, yes, I think you will see that smooth progression as Darlington and similar projects particularly on the utility side get going.

So, some seasonality in the first quarter and then relatively smooth ramp up after that.

Okay, very good color and now that the repayment from convertible debentures is completed how should we be thinking in terms of cash deployment opportunity going forward. Does the dividend remains your priority or are you also looking maybe at M&A and CIB or more organic growth opportunities?

I think, obviously one of the first uses of proceeds from Quito was to repay the convertible debentures in the fourth quarter and that take some debt off the balance sheet, I think, our focus from here on in is to have the kind of balance sheet that allows us to participate in the large scale sophisticated projects that we expect to be bidding on increasingly frequently over the next 12 to 24 months with the infrastructure build out that is in the pipeline. So, from a bonding, LC and financial capacity, we think it's a -- our balance sheet gives us an advantage there and it will help us grow the business on the infrastructure side and extra to that nothing particularly on the radar screen in terms of M&A, it's more organic growth through the number of project opportunities in front of us.

Okay and last question for me, backlog is near record level as a fourth quarter and you seem to have compelling bidding pipeline on the infrastructure side, I was just wondering if you can comment about your capacity to take on these new project that you're bidding on and also those that should come to the market in the coming year?

So, the infrastructure -- all three sectors have opportunity, I would say most of the things we're focusing on right now as infrastructure and energy in terms of new opportunities, infrastructure would be tighter in terms of capacity, so we're trying, we're looking at opportunities from an opportunistic way, with the capacity we have. On the energy side we're adding in the first quarter we announce the additional Darlington both energy and infrastructure sitting with closer $2 billion or in the ranger $2 billion of backlog.

So those businesses will be strong, mining is solid through ’16 and some of those resources have the ability to redeployed if thing don’t strengthen in the commodity sector, but we won’t see a line of sight on that mining side, till probably mid-way through ’16 in terms of the opportunities that are evolving in ’17.

Just as I look out on your energy segment, when we get the roll off of this oil sands contracts. I understand Darlington will be coming online, but you keep talking about the gas distribution opportunity, that should emerge in the second half.

How confident are you in those opportunities? Do they still need to be booked in the backlog or are they already in there just some details on that?

And secondly, in a similar vein mining looks good this year, given the backlog, but in ’17 what are the types of opportunities that you’re pursuing maybe by commodity or region that you think might help to in fill ’17? Thanks.

So it’s Terry, Yuri. Good morning.

On the mine side, we’ve got a full load that takes us into the early part of ’17 at this point and that may continue for some period of time on some of the assignments we have. On the gold side, with some strength in the gold markets, there is certainly continuing to be opportunities developing, I would say opportunities around existing assets where whether they’re doing refurbishment, whether they’re doing some technology upgrades that type of thing in mining.

But there is definitely headwinds there is everyone knows and we will see a better line into ’17 usually we’re six to nine months out. So by mid -- in the second quarter early August, we will have better color on the opportunities related to ’17, we expect.

On the energy side, it’s a mix of things there, we’ve got new construction site those, but as you know we do a fair amount of existing energy work and existing facilities whether they’re doing shutdowns. So in this environment, we’ll find that, they’ll do a fair amount of maintenance related activity.

So we take advantage of that and we’ll often do shutdowns and things like that and that will support our energy revenue. We still have very strong energy related revenue in our backlog for ’16 in Western Canada.

So pretty strong through the year and that’s evolving in gas and where it be gas compression, that’s evolving the Eastern Canada gas, it’s the gas compression related to both transmission and distribution. So we’ve seen some opportunities there that obviously augment.

On the nuclear side, there is a lot of activity around the nuclear programs. Some of that flows through the refurbishment, some of that also flow through the longer term MSA agreements we have.

So we’re feeling pretty good considering environment, certainly in energy and infrastructure and we’re feeling good into early ’17 on the mining side.

Okay. Just to be clear that the gas compression opportunities there.

Are there more MSAs that will be ramping up or its new work that still needs to be booked, but you’re confident on it.

It’s a bit of mix. So some cases MSAs and some cases still evolving.

Okay. And last one for me before I turn it over.

Just following up on the capacity question in infrastructure. I mean you’re still in the mix on a number of larger words particularly Gordie-Howe bridge.

Can you just remind us, which of these awards we should be hearing news on first and your -- because Gordie-Howe is a pretty big project, just how you’re feeling about that one in particular and any when we might get some news flow on it?

So Gordie-Howe is, to speak to that, first it’s got significant scale. We’ve simply went through a prequalification process and that’s really where we’re at.

So we’re not into the evolution of requests for proposals yet. So that’s a long way out in terms of when revenue within our books if we were success.

So it taking probably two years minimum because of the size and the scale of it. Other projects that are imminent, we got a mix of stuff that we are pursuing, some short term some that obviously have impacts in some of our core markets, some that don’t.

But it's a bit of a mix, there is heavy load of transits evolving in the GTA, there is transits being discussed in the west, with some larger highway stuff in the west, it's a coming along, it's was highway work in in Manitoba, highway work in Alberta, it's getting close our peace [ph] submittals. And then mainly the trends side of things is evolving.

And that would probably there more imminent side of things. There is significantly amount work coming in DC, at some points, some big transits stuff in DC.

That will be there more front ended.

Can you comment on where you see the biggest opportunity for margin improvement in 2016, just giving the current mix of backlog maybe in terms of segment, are we looking just in Infrastructure or do you see a big opportunity with the nuclear energy, helping those segment as well?

Yes, I mean obviously in terms of opportunity, if we look at kind of progressing through '15, Infrastructure was up pretty significantly year-over-year. I think it's still some traction behind Infrastructure given that scale and type of projects that are in backlog may, so I think there is upside potential there for further progress.

I think on energy we start to see margins recover in the second half for the year, relative to the first half and I think there is potential for that trend to continue into 2016 again based on the mix of work that we expect to have in similar projects that will be ramping up in the energy segment. Mining, I would say less so given the strength already in our mining margins.

Again 2015 saw almost 2 percentage point increase in margin in mining and I would say we’re kind of in the range of where we think mining should be and I think we look to maintain those margins in 2016 would be in pretty good shape. So I think the upside potential is in Infrastructure and Energy.

Okay, and maybe just flipping back to that mining, on the utilization of the equipment in the contract mining segment, just wondering how comfortable you are with utilization currently? And is there a risk that comes off and therefore the overhead is more difficult to observe in the back half for the year?

It' is pretty consistent Sara with -- it's not just oil price that has been affecting, the overall utilization there is also [indiscernible] and that kind of thing is affecting the current demand and we have been feeling that for few years. So we don’t expect to see any material really change in terms of our mix of utilization in '16.

Okay. And then maybe just on the concession side, I wondered if Aecon has giving some thought to partnership on the private side for opportunities of either co-investing or being there for the contraction play in private concession?

Well, there hasn’t been that many opportunities in that regard. But if things like, what's evolving in Quebec was the case.

Right.

Those types of initiatives so we’re very interested in that and very familiar with them in that landscape. We’ve other P3s [ph] successfully in Quebec.

So yes, in that regard when you are talking about that type of interface. But most of what we see concession wise is usually government oriented.

And can you comment just on international opportunities that you are bidding on now?

We’ve been working on a project in Bermuda that’s evolving, we’ve talked talk about that before that’s something kind of unique, obviously our experience coming out of other initial projects we have done like Quito and it’s really amount of things like that have given us great reputation in the international side and Canadian government is involved in this, so it's still early days in terms of the evolution but obviously when we compare with Canadian government and have the support and insurance with the government on these types of initiatives these sometimes peak our interest.

My question is regarding on the infrastructure side, I mean we are noticing that there is obviously lot of increasing bidding activity particularly on for large projects. I just wanted to get the sense on what the competitive environment is for those types of projects and also in addition to that maybe some of the smaller projects that aren’t really as I guess highly publicize if you would like and if we are seeing additional competition coming?

So on the ore side the bigger international companies have been Canada for a number of years. You do see at times, see someone arrive that you haven’t seen before but it’s more one-off.

Most of the companies they we’ve competing with have establish local knowledge and local presence in some way. So it's one of the same mix of guys, very mature, obviously understand the risk generally on this projects.

So it's a mature environment then we would see in smaller contracts generally, but here nothing really that there hasn’t been an influx of certain group that from certain parts of the world that we haven’t seen before, so pretty much stable. The smaller contracts we are generally seeing recently robust demand on the smaller and mid-size contracts and I think some of that is coming from the confidence that the federal government is moving aggressively towards shovel-ready [ph] type funding and in dialogue with municipal government about shovel-ready type initiatives and that helps us as well because that's our sort of a core foundation business.

So we benefit from those types of programs and we look forward to those types of programs in 2016 and 2017 to increase the demand in some of our less sophisticated businesses which will also improving margins.

Okay, that's helpful. And just a follow up I guess on the infrastructure again.

David you were mentioning that you see some traction on margin expansion opportunity and there is some further upside potential for infrastructure margins. Just wondering if you would like to is there sort of a guidance that we can follow there.

I know you guys were targeting closer to between the 5% and 6% EBITDA ranges so is that something that's feasible for 2016?

Yes. So in 2016 our overall EBITDA margin for infrastructure was 4.8 and I think that guidance of 5% to 6% certainly with a strong infrastructure market and strong backlog, yes we think 5% to 6% is the right kind of range for that business and so that's where we would be looking to move towards.

Dave last quarter you provided an indication around your expectation for overall revenue growth in 2016. Wondering if you can update us in terms of your thoughts on that for 2016 at this point?

Yes I think it's one of the things that you kind of have to look at sector-by-sector. I think obviously we've highlighted the growth in backlog particularly on the infrastructure side, so I think as certainly growth potential in infrastructure in 2016 I think on the energy side our outlook really talks about new initiatives offsetting other areas such as Auto [ph], so I think broadly an offset on the energy side and mining we have a pretty good backlog in line of sight through 2016, I would say it tends to be pretty much the same mix of work in mining through ’16 as we had in ’15 and so again I would say mining broadly in line with ’15.

Okay, thank you. Secondly in Q4 we saw corporate cost to EBITDA level higher that we've seen in some time, I think around $10 million, just wondering if there was anything unusual there and then secondly how we should think about that line in 2016.

Nothing particularly unusual, Mike. Obviously revenue grew significantly in '15 as well as in the fourth quarter and so the percentage of revenue SG&A has been coming down through the year on an absolute basis is being growing and that's really reflective of the activity we're not going on both on the bidding side and in terms of execution of work.

So, I think, as we look at '16, I think that trend of reducing SG&A as percentage of revenue is likely to continue and on an absolute dollar basis, I think it will be not too dissimilar to 2015

Okay, perfect and then David, can you help with some thoughts on changes in working capital in 2016?

Yes, I think overall, we expect to focus pretty hard on working capital in '16, I think there is certainly some stability in each of the segments now. In the '15 we're building a lot of backlog and get going on number of things.

I think that the nice thing about having such a strong backlog coming into the year and good visibility is that provide a pretty stable base for us to focus in on working capital improvements and collections and things like that, as opposed to when you're ramping up on lots of projects and we're seeing working capital investment needed which is what we saw with the growth in 2015. I expect we'll make progress on working capital in 2016.

So, just to be clear, you'd expected to be a source of cash or neutral?

Overall, I mean, it's always one of those things, really when you look year-over-year it really could bend to activity at the end of the year and mix of work at the end of the year versus what we had in '15 and so we're projecting forward nine months here and on timing of various things but all things been equal, yes, we will expect to see working capital be a source of cash for '16.

Terry in 2015, Aecon had about one third of their revenue stemming from projects and above 100 million and do you expect to proportion to grow? So how should we look at the proportion going forward and what's your optimum level and how long will it take to achieve?

Certainly it's with every project we pursue and every project we secure, each projects has got a bit of different mix, what I like about the growth on the larger projects that we've got in 2015 and '16 is that the longer term is less seasonality in those projects with transit lines, underground systems, nuclear refurbishment in a contained facilities. So that's what I'd really like about the balance of the new stuff that's long-term and takes us some vacant seasonality and that gives us more consistent, quarter-by-quarter performance, so in that regard, is there a specific -- it's difficult to put a specific target on the percentage other than to say that we generally like to keep a balance of risk with set up in thirds, where you've got high risk stuff, mid risk type work and less risk work, sort of a third-third-third, it's a nice ratio for us, that's typically where we run at.

Okay and now important as your ERP system and the successful execution of one Aecon strategy?

Huge, it's absolutely huge that something that we're very proud with the performance of the team getting that out, successfully launched across the entire company on schedule and below our budget. So really plays with the progress we made there.

What that gives us is an ability for each of our segments to work harmoniously on the same standard set of accounts the same schedule. Everything is integrated and what we’ve been able to build as a world class system that I’m not sure that even exists any wells in the world in terms of its capability.

So we’re very pleased with what that’s going to bring when a Aecon’s units comes to work on a site, it just integrate seamlessly, it allows us to have a consistent line of site for all of our leadership team to look at how we’re performing, where we’re performing, it really adds another level of world class project control for the company with way we’ve got this thing designed. There is still a lot time on it and we’ve had -- it’s been very, very successful.

And can you provide us some more color on other significant MSA opportunities and which segments you think should provide the greatest opportunities over the next two years?

We’re looking at all are segments sort of long-term, more too long-term view. There is, we’re always looking for the right opportunities and something that can increase our ability and our growth of the company and strength in our team, sometimes acquisitions bring you some really talented people as well.

So we’re constantly looking at how can we improve the business, but there is no specific area per say longer term looking at growth in the U.S., potentially some small tuck-ins that would help us have our foundation in a particularly state that will allow us to have a local knowledge would be logical, but that’s longer term. So nothing eminent looking at where we can improve our various companies and segments in Canada, currently or in the longer term.

You know we’ve looked at the U.S. like that.

One last question with reference to acquisition. In your MD&A, you mentioned that Aecon would like to capitalize on U.S.

P3 opportunities. So what would be the timing and would it be your existing partners in Canada pull you along into the U.S.

or would you require an acquisition to execute your plan? Thank you.

It would be a bit of both, but currently the partners we have in Canada, that have a major U.S. presence would be logical to work with, because one of the things you find on this really large project, is there is a lot of complexity, there is a ramp up of cultures and ramp up of teams and it’s really nice to be able to plug and play with companies we worked with before.

We’ve been the enabler for some of the international companies in Canada and all along it’s been our mindset that we would then reciprocate we’ve been enabled in some of the U.S. in opportunities.

But our success in Canada has been base in having strengthened local knowledge. And so we wouldn’t change that model going into the U.S., we’ll be looking for appropriate partners which potentially become acquisitions over some long-term.

Terry in your report or your press release, you talk about energy margins getting out from 3.6 back up and the reference is 5.8 in ’14. So are you thinking with the mix of work that that’s achievable in 2016 and just wondering that’s probably one of the businesses with utilities that has a little bit more seasonality around it that the pacing of how the EBITDA flows over the quarters, we won’t see as much seasonality this year relative to what we’ve seen in the past?

Clearly energy side with the amount of nuclear revenue that’s coming in, we’re expecting significant growth in that space in ’16 with various interfaces whether it would be in our assignment or MSAs. On the gas side, the pace of gas compression is high for us and we’re keen and focusing on those opportunities and those are Canada wide.

So we’ve got a nice mix of stuff, we’ve got some new things that we’re pursuing that we’ve got confidence we’ll have some success with, but in the mix of things we do expect strength through ’16, ’17 and obviously emerging nuclear opportunities as well. And these large pipeline you expect at some point you’d sees one of those if you had a social license you would expect, but we will see.

Could you [multiple speakers].

I think it's a seasonality piece, certainly utilities piece will continue to see the normal seasonality. I think the nuclear work will be more of a ramp up in Q2 and beyond so, to the extent that offset some seasonality in the future, I think that’s more over 2017, impact going than a ’16 impact.

So I don’t think seasonality in energy in '16 will be significantly different to what we’ve seen in historical.

Okay thanks, that’s very helpful David. And can you just with the awarded Darlington and the work you are doing with Burce and Pickering just trying to figure out what would be -- if you’re going to nearly double your revenues in '16, can you just give us -- because that’s probably certainly a pretty good line of sight on, can you just give us what that number would likely be for '16?

And I guess given the ramp like what's the exact rate in that business for '16? Assuming that most of this stuff now, once it’s up and running it's going to continue run at a fairly consistent pace on an annual basis not for number of years.

So I think in terms of the nuclear business when we talk about doubling our revenue in that business in '16, it's a couple of $100 million of revenue on an annual basis. And I think beyond 2016, I think that subject to new opportunities and obviously those are significant just in terms of kind of existing backlog and existing MSA and fabrication work that we do in the nuclear space that kind of run rate is I think going to be sustainable over the foreseeable future and then to the extent we are able to secure new projects whether that’s at Burce or whether it's additional projects with Darlington or work at Pickering that’s [indiscernible], we’re in above that kind of run rate.

Okay, okay that’s helpful. And then last question I had just on Infrastructure, reading through the commentary, it seem that social had a better contribution to margin than heavy civil which kind of seems a little bit counter intuitive and I know the mix has shifted away from let's say building within the social to more water.

But I would have thought that your part of the margin improvement story was these bigger more complex projects on heavy civil we’re going to drive margin. So just -- if you can offer any insight just in terms of what dynamic is going on with some of the heavy civil stuff?

Yes for sure. The commentary is really looking at kind of year-over-year and so as you said the shifting social Infrastructure has been away from lower margin, standalone building type work to work that is more integrated with typical Infrastructure type focus which is more as you said in the water and waste water space.

And so year-over-year without that standalone buildings piece pulling down the margin we have seen good progression in social infrastructure margin. On the heavy civil -- so that doesn’t necessarily say that those margins are any better or worse than heavy civil margins it’s just in terms of the year-over-year contribution to our overall growth in Infrastructure margin.

Social Infrastructure had a decent impact on that. Heavy civil margins remain pretty robust overall in 2015.

And are obviously getting going on some new pretty major heavy civil projects here in '16. So I think heavy civil margins, when I talked about potential areas of upside in '16, heavy civil would be in that category.

Great and then just lastly on maybe a -- while we’re on the topic of margins in Infrastructure. To be clear, when you talk about margins that are in the five plus range, you are also factoring in the kind of the levelization or the recognition or the concession side of it as well, not just the construction side and as you think about it in terms of reporting your EBITDA in infrastructure segment.

Did I got that correct?

No our infrastructure segment is purely construction. Anything concession related goes through the concession segment, so the margin you see we pulled it in infrastructure segment is pure construction margin.

So the EBITDA that you reported this quarter would not have any JV associated EBITDA with it?

To the extent that we’re carrying our construction work in the infrastructure segment in a joint venture, then yes it would. But that’s not a concession, a concession is just the active owner of these projects.

This is all construction revenue and construction margin shown within the infrastructure segment.

Wanted to revisit that that capital allocation conversation and maybe just talk a little bit about the level of debt that you are comfortable with and maybe talk a bit about your dividend payout ratio?

So going back to my comments earlier. We think the balance sheet we have today is an advantage for us in terms of our ability to secure larger projects on the go forward basis, I think when we look at levels we come through with this is really two components of debt on our balance sheet today, one is the ongoing equipment financing which we think of as more of a permanent piece of debt on the balance sheet, that's in and around $160 million and that need for equipment financing will be fairly constant over coming years.

The other piece of it is the last convertible debenture we have outstanding which is really a consequence of M&A financing from a few years ago and I think just looking at the equipment financing on a debt basis we've actually around one-times EBITDA, 50,050 and I think that's a level that we feel obviously particularly comfortable with and we feel it also gives us some financial capacity to grow the business and look at opportunities further down the road that might arise on the M&A side. So we want to keep that flexibility to take advantage of opportunities and so at one-times we feel we've got that, two-times we would say that would probably be the higher end of our comfort range.

And then on the payout ratio?

Yes. On the payout ratio we've been tracking around a 30% to 40% type payout ratio and I think we are pretty comfortable with that level.

Okay. And then my next question here is just on the mining division and your involvement in some of these potash projects.

Clearly you've had some success, but maybe talk a little bit about as we look out into 2016-2017 and this work at legacy starts to wrap up. Maybe just talk about what some of the implications are because I think if we look at the potash industry right now things are fairly dire as far as any Brownfield or Greenfield projects on the go forward basis.

Jacob, we certainly complete agree with you in that regard. First of all our -- the bulk of what we’re doing on in the potash side today is on the process installation set.

So we will ramp up, we’re currently ramped up to 1,500 men at legacy, men and women there and that it's a variable workforce for us. So as that work evolves we’ll redeploy those folks in other things.

If there is higher demand in energy markets which in certain parts of Canada there is for us specially Ontario, we’ll redeploy those assets and slow that work as well and we'll get that recovery in that regard. The goal for us right now is showing a bit of optimism, it’s one of the few areas that is and we've got activity underway at Rainy River for new gold [ph] and we expect to see potentially some strength there but it’s probably only glimmer of commodity related -- mining related work that we see.

But for us, we ramp up and ramp down in that space quite comfortably, in the process side related to potash and then the other half of our mining is really production related for oil sands and that's been and as we commented earlier expected to be reasonably consistent.

So the uptick in the mining revenues that you had in the quarter year-on-year, I think it was roughly around 35%, what is that composition if you look at from your end market perspective?

So the fourth quarter is a certainly where we get into better weather in northern Alberta on the oil sands side, so you do get a bit more activity in certainly December onward, so there's some strength there but we certainly were ramping up more heavily at legacy [indiscernible] asset that timeframe and that's continuing to grow in '16.

Just really quickly on, just thinking about recurring revenues at one point if we go back about a year, you're probably about call it just shy of 700,000 it sort of drags down with mix, I know there was lot of moving pieces that goes into that, part of that’s in the energy business but any thoughts on how that's going to evolve over the next little while and some of the key drivers in that?

So for recurring revenue perspective, we've really saw two dynamics in 2015, one was on the mining side, where we took fairly significant portion of the fleet that would normally performing traditional contract mining recurring revenue work over to the hard backlog projects for hills. That will continue to some extent in '15 but we expect to have an ability to move some of that back in to more traditional areas through '16 as well.

So, I think we'll see an increase in recurring revenue on the mining side in '16 and then on the energy side, we’re slightly below where we were in '14 but we didn't announce a number of new MSAs in the energy segment in the second half of '15, most of those MSAs don't really get going until Q2, 2016. With most of these type of agreement because of the long-term nature of them, once they’re signed up there is a fairly long planning and development phase and then you get into the Q1 winter season where there is not really any utility work going on and then it starts to ramp up in Q2, so there should be good directs in the recurring revenue side for our energy business in 2016 as these new MSAs get going

And any particular sectors of these MSAs? Really and I know you talk about some of the build out for some of the gas distribution networks, but what about telecommunications, things like that?

Telecommunication is interesting as we've been working for many, many years for companies like Bell and Bell has been continuing to expand their fiber optic communication system to homes. So we see a fair bit of that activity evolving and expect to participate pretty heavily there.

Generally just more focused there in communications, obviously home are requiring more data, Wi-Fi data that kind of thing. So there is just a fair amount of activity there that we expect is going to continue to grow for us.

Certainly more activity on the nuclear side, as you referenced the gas side with compression or things like that, some of that will fit into permanent backlog elements. It’s more MSA, so it's a mix but as David said, we feel pretty good about the demand on the recurring side

Okay. And I mean, if we'd take a stab at a number, at one point, you were running 25% of your total revenue, we're saw it in the recurring bucket and that step back down around the 20% range, is it fair to think that we’d probably be back kind of a 25% to 30% range by the end of the year, as we move into '17?

Yes, that’s not an unreasonable assumption Chris. In and around 25% of our business, the recurring revenue is reasonably comfortable level.

Correct. And then just one quick question just on the mining business in Q4 just.

In the revenue number was pretty good but the margin was I think a little bit lower than I was expecting, was there anything -- any sort of cost reforecast or anything unusual in the margin there?

No I mean, quite the opposite. I mean I think when we talked last quarter about our outlook for Q4, we actually flagged the fact that the mining margin in Q4 a year ago was unusually high.

Yes, I think almost 11% this quarter that’s actually a very respectable margin in mining and pretty much in-line with our full year mining margin which was up almost 2% versus full year 2014. So we are actually very pleased with the performance of mining both in Q4 and for the year as a whole from a margin perspective.

It’s just that in 2014 we had kind of a step up for one quarter which was really mix driven and we’d already flagged it, we didn’t expect that to continue in Q4 of 2015.

Okay so it’s fair to think that normalized for activity levels that that’s a kind of a sustainable margin looking forward?

Yes, and I gave my comments on mining margin overall and outlook earlier on the call. We’re sure in and around 11% and I expect that to be relatively stable.

You guys have seen a remarkable transformation over the past five years and you should be commended for that. Question is do the -- I guess it’s a bit philosophically here, but do the next five years bring additional changes or is the business finally where you want it to be?

I would say that we are in a really nice place right now. The team we have, the investments we have made, the systems that we never have and the opportunities we have in Canada, I think we are certainly in a place that we are really pleased with in terms of the positioning of the company with a very strong backlog, very strong balance sheet, [indiscernible] margins.

So yes, I think we are really pleased to see where we are at, we are focused on running the business consistently with consistent performance and the opportunities will be I think what's nice for us is we have been able to win opportunities when there is only few out there. And I think that’s something we are really please with when there is only a few line sites that are evolving and we are wining those are we’re performance very well on those, it's a nice position for any company that be in.

And we thank you for your comments, your comments are very kind. David?

Yes, I think just like Terry said, we have to that longer term use around continuing to diversify the model, but I think it's incremental here as oppose to anything radically different. So as Terry said we’re in a nice spots and there are always things we can do to add to that, but it's a more incremental than anything revolutionary over the next few years.

Just more of I guess it qualitative question than anything else. In your MD&A you talk about ERP deployment, risk evaluation committee, things like that.

I’m just wondering if you can maybe show us a little bit more color in relation to what exactly that will bring to you guys internally, whether it's going to be on increase margin sustainability, fagging potential issues on contract execution. Just maybe if you can marry the qualitative to the quantitative, I mean that will be much appreciated.

Thanks.

Sure, so on EOP system, Max, we developed a system that is fully integrated with our estimating system, so if you think of Aecon and how we operate, we build projects from usually an owners concepts right through to commissioning and now even operations in some case. So that original estimate, we are sort of roll up of lot of companies over the last 15 or so years.

And those companies all have their own systems, their own -- in every aspect on estimating systems and EOPs, with eight different EOPs with companies. So we went across the whole organization over the last two years and put a common system in place.

But starting with estimating our estimating system that are common, all of our operations use the same basic system, they use same standard chartered account and the estimate are build that way. We’re got a common scheduling system we used to have four or five different systems, which schedule our projects and now we have got a common enterprise wide system that we acquired from SAP.

And SAP has taken it even further and giving us some modules that allow those individual pieces to talk to each other and communicate. So that makes it very powerful in the sense of monitoring the overall company on a consistent way.

So whether you working in one group or the other you’ve have go this consistent application and it really adds a tremendous amount of value when you’re doing one Aecon style projects where we’re bringing in resources from other segment, that was always never easy for us, sometimes more difficult than doing an external JV, try to do an internal JV with our different division. But with the leadership team we have now and the way we’ve got ourselves recognized, this is a ton of work that’s going on between the different segments and if one segment’s got pressure and it’s got resources, we’re moving those resources in at the other segment quite consistently now.

On the risk side, obviously with projects that have more complexity, there is higher risk. So we have had to implement and put in place real fast with our project controls that obviously are now augmented by the systems and the consistency of the systems we have, we put together internal risk reviews that obviously we benefit from working world class companies from around the world and learn how you evaluate risk of certain thing that have happened in other markets, then you have got obviously more external reviews within the organization on a monthly basis of risk that’s happening.

And then we have launched a risk committee of our Board as well. And in that group we have got individuals, on that committee they have accepted experience in sectors and we expect considerable [indiscernible] going through any risk that are associated with projects and also with overall corporation.

Right. And I guess other any incremental cost attached to the roll out of these initiatives or it's sort of part of your SG&A run rate?

No, its part of a run rate and it's been a part of run rate now from couple of years. Thus we’ve been building this platform but there is certainly no incremental cost that will be include in '16.

It's basically build, it’s running, fully launched across the whole organization last October. So yes, we are really please where we are.

Okay excellent that’s it for me, thank you very much.

Thanks operator and thanks to everybody for joining us today on our 2015 yearend conference call. And for anyone who has any follow up questions, please feel free to reach out us.

Thank you.