AtkinsRéalis Group Inc.

Thank you Alias. Good morning, everyone, and thank you for joining the call.

I hope you and your families are still safe and well. We appreciate you taking the time to listen in today.

Our Q3 earnings announcement was released this morning, and we have posted a corresponding slide presentation on the Investors section of our website. The recording of today’s call and its transcript will also be available on our website within 24 hours.

With me today are Ian Edwards, President and Chief Executive Officer; and Jeff Bell, Executive Vice President and Chief Financial Officer. Before we begin, I would like to ask everyone to limit themselves to be one or two questions to ensure that all analysts have opportunity to participate.

You are welcome to return to the queue for any follow-up questions. I would like to draw your attention to Slide 2 and 3.

Comments made on today’s call may contain forward-looking information. This information, by its nature, is subject to risks and uncertainties.

And as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the Company’s relevant filings and SEDAR.

These documents are available on our website. Also during the call, we may refer to certain non-IFRS measures.

These measures are defined and reconciled with comparable IFRS measures in our MD&A, which can be found on SEDAR and our website. Management believes that these non-IFRS measures provide additional insight into the Company’s financial results and certain investors may use this information to evaluate the Company’s performance from period-to-period.

And now I will pass the call over to Ian Edwards. Ian.

Thanks, Denis and thank you all for joining us. Please turn Slide 5.

We continue to move forward on our strategic path, including building out our pipeline and delivering consistent performance and remain focused on exiting LSTK as effectively as possible. Firstly, we have continued to deliver solid results in SNCL Engineering Services in-line with our expectations.

We continue to benefit from a diverse business makes public sector work on long-term contracts and relationships. Secondly, the transformation of the resources service business is on-track, and we have moved quickly to restructure and reduce overhead, while winning new services contracts.

In SNCL projects infrastructure LSTKs continues to be affected by productivity losses due to COVID-19 and summary forecasts. Current resources LSTK projects perform well with a minimal loss.

However, project’s overall loss was disappointingly driven by an unfavorable arbitration ruling on a completed LSTK Legacy resources project. Finally, our financial position remains strong, we have $1.1 billion in cash and successfully issued a $300 million bond in the quarter.

Turning to Slide 6 and highlights from SNCL Engineering Services. This was another quarter of solid results for Engineering Services underscoring the strength and resilience of the business, which delivered an adjusted EBIT margin of nearly 10% and $186 million in cash flow.

Segment adjusted EBIT was slightly off compared to Q2 and EDPM nuclear and infrastructure services performance has remained consistent over the past six-months. This demonstrates the essential and long-term nature of the services contracts within our Engineering Services business.

Please turn to Slide 7. EDPM continues to perform well in our core areas of UK, Canada and the U.S.

Revenues from the UK and Europe transportation and defense markets were particularly strong and we continue to win new business. We were recently chosen to be the commercial delivery partner for the UK’s high speed rail to project.

This is a state-of-the-art high speed line critical for the UK’s low carbon transport future. Winning work continues in the U.S., where we have recently won several advisory and design service contracts for the State Department of Transports.

In the Middle East where the market is currently slower, we are winning new work also and recently have been awarded the master planning work for the new leisure park with six flags. Overall, Q3 backlog was solid $2.8 billion, slightly higher than Q2 in-line with Q3 2019.

Our prospects pipeline remains robust $27 billion. Please turn to Slide 8.

Nuclear continues to perform well with results for Q3 ahead of Q2. The segment benefited from a good mix of long-term contracts, field Services, ongoing engineering which has helped deliver enhanced EBIT.

The U.S. has been a strong growth market for nuclear, with two contracts moving forward with the Department of Energy, both relating to decommissioning and waste management work at the Hanford Site in Washington State.

Our proprietary nuclear technology has also been well recognized with a number of contract and industry awards. Moving to Slide 9.

Infrastructure Services also so higher performance in Q3 compared to Q2 with revenues and margin on target. Our operation and maintenance contract were at full service levels as deemed essential.

And we were active with both health care and power service contracts. Revenues from links on our substation JV with ABB increased for the UK and Europe.

We saw a number of awards for Infra services in qQ3, including Scopes relating to the ongoing pandemic and master service agreements in the Hydro space. Turning to Slide 10 and the capital highlights.

In Q3, the phase reopening of the Ontario province and the Greater Toronto Area meant that the 407 ETR reported an improvement in traffic compared to Q2. SNC-Lavalin received a dividend of $16.9 million from highway 407 on September 3rd, other concessions are performing very well with contracts placed on an availability model.

Moving to Slide 11, on SNCL projects. We generated a loss of $25 million in segment adjusted EBIT for infrastructure EPC projects, reflecting the continued impact on productivity as a result of COVID-19 and certain reforecast.

Negotiations continue to recoup these losses from our clients. We continue to expect that these Canadian light rail projects will be cashflow positive over their life.

With two quarters already completed under COVID restrictions and as we move through October, we have greater clarity on the impacts to productivity. We are now seeing industry productivity impacts of between 10% and 25% depending on the project and the activities involved.

The highest impacts tend to be on projects with extensive activities, including manual handling of materials or working at height or in confined spaces, where the necessary safeguards to social distance during the pandemic have had impact on productivity. On all sites, additional hygiene breaks and the constraints on travel to site have also affected productivity.

Despite the lower productivity, we continue to run down the LSTK backlog, which stood at $1.9 billion at the end of September. Turning to Slide 12 on the Resources projects.

The combined loss for Resources LSTK. And services was $75 million for the quarter, primarily due to an unfavorable arbitration ruling on a completed Legacy LSTK project.

Obviously, I’m disappointed with this ruling, which is outside our internal and an external experts assessment. While we believe our current litigation risk assessment processes are appropriate, we are undertaking a further review of the remaining Legacy LSTK litigation matters to provide additional assurance.

On a positive note the services side of the business performed better than expected and the loss on active LSTK projects was down of approximately $3 million. The enhanced performance of the services was as a result of our ongoing efforts to right size the business through divestment and overhead reductions, combined with work winning and better execution.

As previously stated, we remain on track to largely complete the backlog of resources LSTK by the end of the year. Moving to Slide 13.

We can see a significant reduction in LSTK backlog since our strategic direction in June 2019 to stop bidding on this form of contracts. You can also see that the resources services backlog that is currently contained within this sector has remained stable at around a billion dollars.

This provides further confidence that our resources services transformation. Our goal as you know, is to exit LSTK and we continue to focus on that.

Moving to Slide 14, on the transformation of a resources business announced in Q2. As stated, we have made significant progress in Q3 as we move towards profitability in the second half of 2021.

In Q3, we announced the sale of the South African resources business divested our European fertilizer business, reduced the overhead and headcount to approximately 10,000 strengthened the order backlog with renewed of key service contracts in cold countries. We remain on track to breakeven by the first half of 2021 and turn to profit next year.

With that, I would like to move to Slide 15 and conclude my remarks before Jeff takes you through more detail on the Q3 numbers. Our performance in the quarter continues to underscore the strength and resilience of the Engineering Services business on a continue to close out of Legacy LSTK business.

Currently, we are focused on four priorities to unlock value for all stakeholders. One, closing out LSTK business successfully.

Two, ensuring continued consistent performance across our core markets and geographies in Engineering Services. Three, position in the Company for a sustainable future, driving organic growth by sharing capabilities across our core markets.

Including looking at those capabilities that can help us enable clients to deliver sustainable infrastructure and clean energy. And leveraging technology in collaborative working to apply our major project expertise in new contract models that benefit our clients and the outcomes of projects.

And lastly four, we are building a connective - collaborative organization to efficiently deliver our overall strategic direction. I firmly believe that we have the business focused on the right markets, in the right geographies and we are taking the right role to achieve our future.

With that, I will thank you and I will pass on the call to Jeff.

Thank you, Ian and good morning, everyone. Starting on Slide 17, the company reported an IFRS net loss attributable to SNC-Lavalin shareholders of $85 million or $0.48 per diluted share in Q3 2020, compared with a net income of $2.8 billion, or $15.70 per diluted share for the corresponding period of 2019.

Q3 2019 included a significant gain on the disposal of a 10.1% stake of Highway 407 ETR of $2.6 billion or $14.74 per diluted share. Note that Q3 2020 income tax expense of $45 million included a $53 million reduction of deferred income tax assets, resulting from a reassessment of the future recoverability of loss carry forwards in the U.S.

While the Q3 2019 income tax expense of $309 million included $83 million of income tax recoveries on capital losses related to the capital gains on the Highway 407 ETR disposal proceeds. The Q3 2020 net loss also included restructuring costs of $33 million before taxes, mainly related to the resources services transformation.

Year-to-date, we have recognized $58 million in connection with the Resources segment transformation, which is in-line with management’s expectation of between $50 million to $60 million for the year. The adjusted net loss from PS&PM in Q3 2020 amounted to $58 million or $0.33 per diluted share, compared with an adjusted net income of $165 million, or $0.94 per diluted share in the corresponding period in 2019.

The variance was mainly due to lower segment adjusted EBIT in both Engineering Services and project segments, and the negative variation and income taxes. The company continues to maintain a strong financial position.

At the end of September, we had $1.1 billion of cash on hand and an additional $2 billion available to be drawn on the revolving credit facility. Now looking at the segments in more detail.

On Slide 18, we can see SNCL Engineering Services delivered solid results and continues to be resilient through COVID-19 with $1.4 billion of revenue in the quarter in-line with the second quarter, but lower by 3.6% when compared to Q3 2019. Segment adjusted EBIT was $142 million representing a margin of 9.8% in-line with our expectations.

EDPM segment revenue totaled $899 million, a decrease of 7.3% compared to Q3 2019 as strengthened several sectors, including transportation and defense within the segment core region of the United Kingdom in Europe was more than offset by the adverse impact of COVID-19 and some other markets, notably aviation and commercial property. EDPM segment adjusted EBIT was strong at $81 million and 9% margin in-line with our long-term target range of 8% to 10%.

That the Q3 2019 margin of 10.6% included some positive project settlements. In Nuclear, segment revenue increased by 5.5% in $225 million, mainly due to higher volumes across the geographies.

Segment adjusted EBIT was strong at $36 million at 16.1% margin above our long-term target range of 13% to 15%. Infrastructure services experienced at 1.6% revenue increase, mainly due to the growth and links on revenue in the UK and Europe region.

Segment adjusted EBIT of $25 million drove a 7.8% EBIT margin, also higher than our long-term target range of 5% to 7%. If you turn now to Slide 19, the SNCL Engineering Services backlog continues to demonstrate resilience against the backdrop of COVID-19 and at the end of September was $10.7 billion including awards for the third quarter of $1.2 billion.

EDPM had a particularly good quarter with an ending backlog of $2.8 billion, up 1.6% versus the end of Q2. Bookings in the quarter of $943 million resulted in a booking-to-revenue ratio of 1.05 in-line with the year-to-date ratio.

If you turn now to SNCL projects on Slide 20. In-line with our LSTK exit strategy revenues for Q3 2020 continue to decrease.

Infrastructure EPC project revenues fell by 18% to $237 million, mainly due to the continuing backlog run off of our major LSTK construction projects. The Infrastructure EPC project segment delivered a negative segment adjusted EBIT of $25 million, compared to a small profit of $2 million in Q3 2019.

This quarter’s loss was mainly due to some cost forecast adjustments, and lower productivity due to revised working conditions caused by COVID-19. Note that during the quarter the Husky White Rose project backlog has been reclassified from LSTK construction to reversible and Engineering Services as this project has been derisked following the changes in contractual terms.

The Resources segment recorded a negative segment adjusted EBIT of $75 million as you heard from Ian. The LSTK project business recorded a $61 million loss due to the $58 million provision taken for the unfavorable arbitration ruling.

The Resources services business which is currently being transformed to complement Engineering Services, recorded a loss of $14 million slightly better than management’s expectations as non-primary operations continue to be wind down. Turning to Slide 21, to decrease in capitalist segment adjusted EBIT was mainly due to reduced contributions from certain concessions and lower dividends from our Highway 407 ETR investments, for which we received $17 million of dividends in Q3 2020 compared to $42 million in Q3 2019 due to our reduced ownership stake.

Traffic volumes continue to be affected by the COVID-19 situation, but we believe these are exceptional circumstances and the 78-years remaining on the concession we continue to strongly believe in the long-term value of our investments. Moving to Slide 22, net cash used for operating activities was $136 million in Q3, 2020 compared to $51 million in Q3 2019.

The variance was mainly due to a timing difference between the $200 million payment for the first wave of claims in the paratype case, and the receipt of insurance coverage proceeds expected into for 2020, which should cover a substantial portion of the $200 million. SNCL Engineering Services generated cash flow from operations of $186 million due to strong EBIT conversion and working capital positions while SNCL projects continue to consume cash with the cash outflow from operations of $73 million.

While SNCL Engineering Services should continue to see strong EBIT conversion to operating cash flow in Q4, SNCL projects will continue to consume cash including the arbitration settlement payment. Combined with some unwinding in Q4 of the temporary working capital balance benefits related to COVID-19 government payment terms and sales tax deferrals as outlined in our Q2 results earnings call, net operating cash flow in Q4 is expected to be slightly negative.

During the quarter we have successfully issued $300 million of debentures due in 2024, from which the proceeds were used to fund the repurchase of a portion of our series one debentures and repay certain outstanding indebtedness under our revolving credit facility. At the end of September, the net recourse debt-to-EBITDA ratio on the revolving credit facility, calculated in accordance with the terms of the Company’s credit agreement was 1.7 times well below the required covenant level of 3.75 times.

And finally turning to Slide 23. With respect to Q4 2020, outlook we expect assuming no significant deviation from the current COVID-19 worldwide situation that SNCL Engineering Services revenue should decrease by a low to mid-single digit percentage compared to Q4 2019.

And we have tightened the outlook for segment adjusted EBIT as a percentage of revenue between 8.5% and 9.5% percent for the same period. This concludes my presentation.

And we can now open the line for questions. Thank you.

Good morning. My first question here is, so you are indicating that you are undertaking a further review of the remaining LSTK Legacy litigation matters.

How many of these projects could be subject to those?

Okay, thanks Jacob. I mean, let’s just walk through how these things come about first, and then put some context around what the number is in the whole.

I mean, clearly closing out LSTK is a priority for us and exiting the business. The intent of doing that is to complete all the life projects and close out anything that is from a Legacy perspective.

Now, generally, projects, they get settled, and in terms of the accounts has settled pretty quickly after we have finished the job in relative terms. And that is what we would expect to do by working with our clients and negotiating them out.

In some cases, those actually terms of dispute and, obviously, we are not in the business of not getting paid for the work that we have done. And we are not allowed to leave money on the table.

So we pursue recovery through a dispute or litigation where we feel that we can get recovery. So that is a much smaller number of instances then the whole.

I mean, this particular case, it goes back to the early part of last decade. So this is a long outstanding project has been through an arbitration.

And as we go through those arbitrations, we make the assessment of what the outcome is going to be. And obviously, in this case, we are pretty disappointed.

So the answer to your question is in context to the closeout of the whole of LSTK, we are talking about a relatively small number of projects here.

And then my next question is just on the margin guidance you gave for EBITDA margin between 8.5% and 9.5%. I think that is at the higher end of your previously disclosed H2 guidance range.

Is this just the next issue, a bit more nuclear or what is going on there?

I will let Jeff answer. I mean, it is a bit more of a kind of stronger phase as we close out the year.

But Jeff. I think you are on mute Jeff.

Really sorry. I was on mute.

So our previous guidance was 8% to 9%. And as I said, in my script, we have tightened that to 8.5% to 9.5%.

Now, you would be correct in observing that the middle point of both those ranges is effectively 9%. I think the difference though, at this point versus where we were at our Q2 earnings result is that we have got another quarter in a sense of the COVID backdrop against the business under our belt, and therefore I think we have better visibility on the impact that it is having and how the business is responding.

And as a result with one quarter to go, we feel confident about taking that range to 8.5% to 9.5% versus 8% to 10%. So, I think that is where we think our guidance is comfortable.

Okay. As we go forward here, and we do more of a ramp in the nuclear work, it is about a higher margin work for you?

Yes. I mean, I think, I use guided, as you have seen we tried to 13% to 16%.

Now, I think what we would say is obviously that is a higher margin business. It has to do with some of the very unique capabilities that we can provide to the market in that business.

And the importance of the quality and effect of the supply chain within the nuclear industry itself. I think overtime as well, some of our growth areas, particularly in the U.S.

will come through joint venture inequity or income pickups, where we will effectively be picking up revenue and margin in the same amount. So theoretically, overtime, you might see an increase as well in the reported margin percent, although that will - has much has to do with us picking up the net income as opposed to revenue.

Okay. I will leave it there.

Thank you.

Okay. Thank you.

Hi good morning guys. If I could just follow-up on Jacob’s question on the litigation.

I appreciate your comments. I understand it is a small number of additional projects.

But is there any way to sort of quantify the potential risks and/or sort of give us some comfort that this is really a one off?

Yes. I mean, clearly, we are really disappointed.

I mean, that is the first thing I would say. This is a 58 million deviation from where we expected this to land, so we are disappointed.

And I would probably explain, like I said, I mean, this arbitration has been running for over a decade. And the way that we assess the outcome of these kind of arbitrations and litigations is obviously with external counsel, external legal advice and external quantum analysis.

And we use our internal assessment process and risk assessment process to make a position that we either provide for and that we report on based on all the information and that is a life process. I mean, as it will go through its hearings, and as we get further information, that process is updated, and we adjust any provisions or any reporting against that as the case unfolds.

Now, in this particular case, the hearing was some time ago, and the actual award was in Q3. So we do think having kind of got this, which was disappointing, it is important to look at the few cases that we have got, and do a review of those cases.

We will kind of expect from that little change, because the process we have is pretty robust already. But we will do that to give us absolute additional assurance that there is nothing there that needs updating.

Okay. in that particular cases.

Is there an appeal on year-end or is this sort of this trial?

Well, sometimes I mean, it depends on the stage of the litigation and depends on the actual process itself. In this case, it is somewhat binding.

So obviously, that is why we have taken the loss side.

Okay. And just moving on just within the projects backlog and infrastructure ready.

I appreciate you guys sort of now have a better handle on where the inefficiencies exist. But is there any sort of remediation or actions that you could take to sort of get this to a breakeven sort of business in the current environment, or you just sort of need sort of more normalized "normalized" working conditions before the sort of extend the lawsuit there.

We no. For sure, I mean, we are actively looking to recover losses from COVID.

I mean, the contracts - I mean, we are down to three contracts basically. But we are down to Trillion rent projects, and Eglinton.

And all those contracts, and they are all slightly different. And obviously the kinds of different various avenues of recovery through the contract.

And we will pursue those. And we have yet to recover anything to be frank, but the discussions and the kind of contractual case is being put forward based on the impacts as we see them.

So in the fullness of time, we would expect to recover the losses specific to COVID. And then we will pursue them.

Okay. Maybe last one to Jeff.

I just I didn’t catch comments around Q4 cash flow expectations, or as you mentioned few or discrete items I just didn’t catch on.

Yes, that is fine. What I effectively said was, we expect to see continued good EBIT conversion to EBITDA and operating cash flow in Q4.

We will continue to see the use of cash in the SNCL project space. And at the end of this as a few contributing factors to those, including the need eventually to recover on some of the COVID-19sort of productivity impacts.

There is also an element and I talked about this in Q2of government support programs, where we see prompt payment terms that are advantageous to us, we see sales tax deferrals for instance in the UK. All of which have been effective in terms of providing us with positive working capital that will unwind to some extent through the end of this year, but also into 2021.

So the combination of all those means that, our best view is that operating cash flow will be slightly negative in Q4.

Okay, is it also the $50 million settlement?

Yes, exactly. I see that in my script as well.

But that is obviously a contributing factor also. And I think the other observation I make is nine-months into the year, we are actually just above breakeven from an operating cash flow perspective was slightly positive $117 million.

So obviously, where we end up in Q4 is effectively where we wind up for the full year as well.

Sure. Alright.

Thanks guys. I will turn it over.

Thank you.

Thanks, and Good morning. Just looking at the resources segment maybe outside of this arbitration ruling against.

Now they have got about one quarter and a little bit of work left. How you feeling about the remaining resources LSTK work that you are doing?

Yes, I mean, I think on the presentation, it shows, 0.2 billion of remaining backlog. It actually shows that in Q2, and it is not that we haven’t had any movement in the quarter, it is just around, we have burned about $60 million in the quarter of backlog.

And as you can see, the loss is pretty minimal from those projects. And as we get through to the end, then obviously, we are looking forward to putting the whole other resources LSTK business behind it.

Now, I would, we have always said that there is no, it is not zero risk going forward. But I think we have got a pretty good handle the run down to the end.

And we should be on track to put and put this behind is, certainly, by the early part of next year. So I think it is a good quarter in terms of progress and a good quarter in terms of closing out.

Okay, thanks. And then there was quite a few headlines coming out of the UK with a government focus on nuclear the Canada government, I think is investing a little bit in some SMRs here.

Can you maybe talk about the pipeline of nuclear and kind of where you are involved or with some of those opportunities might be for you?

Specifically nuclear or just generally?

Nuclear more so but as just generally.

Yes. So I think a range of capability in nuclear is really expensive.

And because it comes from several origins, so we have decommissioning capability, we have cleanup nuclear waste to remediation capability. We have new build capability that is being applied to the Hinkley point power station in the UK.

We only can do technology, we have lots of vendor support to exist in Canada reactors and we have a technology business, which really is quite innovative in providing technology solutions to the nuclear industry globally. We have seen really good opportunity, and absolutely our core markets which is the UK who are committed to build new nuclear.

There is a lot of rhetoric at the moment about sizewell and whether the sizewell of a project will go ahead. We will be there with the client, EDF if that goes ahead.

We have a great relationship with EDF. There is significant opportunity in decommissioning, I mean, all the power plants in the U.S., the UK, and to some extent in Canada are coming to the end of life, and our expertise in decommissioning and remediating existing power plants to the natural environment is something which we are obviously very proud to have this capability and that we would expect to obviously grow our market from.

So I mean, I’m obviously I could talk for quite a long time about this, because it is a pretty exciting part of our business, but I think that gives you a bit of a flavor.

And then just one last one for me, maybe on the infrastructure [indiscernible] side, you called out three big buckets, I guess, REM, Trillium and the Eglinton project and those seen some headlines around some litigation started on the Eglinton project. For us to think about where you are looking to get to recoveries or some cost offsets going forward.

Like I said, they are one we should focus on more so than the others are your cost headwinds that you call this spread evenly among the three big ones?

No, I think the productivity issues that we are facing are pretty even. And it depends on the absolute specific nature of the activities on the job.

So tunneling for example, is a confined space, then it is very difficult social distance , and there is a bigger impact. Traveling to heights in an elevated platform is difficult, because you can only get two people in a platform.

And normally you would get 20, that kind of thing that leads to the productivity loss. But we are absolutely experiencing it on all three jobs.

And we absolutely pursuing our recovery in all three jobs. And as you rightly say, we fell on Eglinton that the right step to take.

I have been trying to pursue this for quite some time is to file a claim into court. And that job, we really need to get alignment with our client as to the impact for many reasons, not just recovery for time reasons.

And I’m sure we will absolutely get there, but these things take time, and they obviously take to demonstration.

Good. Thank you.

Thank you.

Hey good morning guys. I wanted to follow up on the three Canadian LRT projects, just to be clear.

In your pursuit of these, to get these COVID losses back. If you are not successful in recouping these costs, do we see a cost three forecasts in the future because of that, or due to the numbers already assume that you are not going to get these recoveries?

I think what I would say is we are making a prudent assessment of where we think the outcomes going to land. Because obviously, we are in the business of exiting this business line.

We don’t want to carry risk forward into the future. So running with imprudent is the way I would answer that.

I think, this is Jeff. I think that is right.

I mean, obviously, we think our best assessment, as we have done it, at the end of Q3 on that. Where concerned or see a position where we think we need to reflect that in the financial statements we have.

But as Ian said earlier, we think under the different contracts, we are entitled to a cover with significant amounts of COVID-19 impact.

And to circle back on the arbitration issue. Is there a way to quantify the number of projects that might be, that you are still in arbitration on and I guess the follow-up to that is why.

If you want to have a robust process, why wouldn’t you just book a loss? Assume you are going to lose these process?

And if you do, then, you don’t have to report anything that is already in the numbers. And if you win, then it could be a positive reforecast.

I’m just trying to understand what is still left out there in terms of tail risk, and if there is any change to your approach warranted?

I mean, Jeff maybe I will take a view, respond to that. As you have heard us say, there is a small number of these.

We generally settled out and about negotiated commercially on these. But there are a small numbers of any significant value that are there in some form of litigation from many years past and that is where this one is.

As you heard him say, I mean, we employ experts advise internal views, external views and trying to make the best assessments and the part of the reason for that is in some of these cases, you can get quite a wide range and often end up in litigation. One side asked for, a larger number another side, you ask for a smaller number and, and therefore, you have no choice but to try and take your best assessment of what you think the outcome will be based on the best input that you can get.

We have obviously had a look at that, as part of receiving, this arbitration settlement, we think our provisions were necessary or appropriate, but we will absolutely, essentially, double check that and triple check in terms of have we got the best view on all of them. So, we think that is the right way forward.

And that is the process, we will undertake in here over the next few months.

Okay. I will sneak in one more for Jeff while I have got you.

I think we have had a change to the calculation of your net-debt-to-EBITDA ratio. And I don’t think we have had an update in a while on that.

So, can you just give us the covenant is it still 3.75 and where you paid your current ratio in relation to that?

Yes, I mean, I think as always, the slightly tricky part is that the calculation under our covenant ratio for the revolver credit facility isn’t a straight net-debt-to-EBITDA, there are a number of adjustments, that happened within there. And therefore, as we go forward, we are thinking about, certainly as we get into the first half of next year, how you can be clear in terms of our thinking going forward as LSTK projects, have continued to run down further, and they give better visibility on what cash flows look like going forward.

And our ability to forecast those, with some of the variability that comes with the LSTK projects. I think it will be easier to link a net-debt-to-EBITDA from the financial statements, so to speak, as opposed to just the current ratio calculation.

But as you saw in what we were doing, certainly at the level of cash and financial flexibility that we have, our focus on cash flow and our level of net debt, we are well within that covenant ratio at the current time.

Okay. I will turn it over.

Thanks.

Thank you.

Good morning everyone. First question.

Yes, with respect to the loss of productivity around the pandemic, could you maybe quantify the amount that has been lost so far, and the potential amount that you are looking to recover from clients and any thoughts about the fortunate fees around the government subsidies?

So, I think, so as we have incurred these losses, as we have incurred them through Q2 and Q3, I think we have been clear what our assessment of that is. Now, obviously, we are in some more discussion, negotiation and proof of loss with all the clients so we don’t actually want to get into the finer numerical details of that.

But what maybe, Jeff, if you can perhaps just add to that from what we have posted in Q2 and Q3.

Yes, I think in terms of in terms of Benoit, I think you are asking about the government support programs. Is that right?

Yes.

Yes. So for Q3, there was about $22 million of benefits in other notes to our financial statements note 16.

I guess I would make a couple of observations. The first is that is globally.

So that is not just Canada for instance, there is a government support program for instance in the UK, around retaining furloughed workers. So the observation I would make is that that is the government grants we have received, but merely that is there and has been used to offset the increased costs we have seen from either holding on to workers and employment levels that otherwise we would not have or returning workers from furlough or temporary leave.

So we use it in that way.

Okay. And for resources service business, could you talk about the ongoing restructuring efforts?

And whether you have more clarity visibility on the potential margin profile of this business in the long-term?

The first thing I would say is that what we said, we would do in Q2 is on track. I mean I think we gave guidance for the services business for Q3 and for Q4, and then into 2021 return to profit.

So after we have come in slightly ahead in terms of loss then we had. So slightly better than what we put out there for progress in Q3.

So obviously, we are pleased about that. And I think the other positive is that to get this business profitable, it is about rotating the overhead and winning work.

Certainly the right sizing of the overhead is going well. We are down to about 10,000 staff now, which was a significant decrease over 2019, where we were around about 15,000 staff.

So we have continued to push ahead with the restructuring and the right sizing. In terms of winning work, we are really pleased to have picked a framework agreement in the quarter from DP.

This is exactly the kind of project that we won, exactly the kind of mandate that we won, which gives us the framework to do Engineering Services and inspection work on a number of their assets. And as we said, I think when we put this together last quarter, working for IOCs and NLCs is the way forward for this business.

And I think before we get ahead of ourselves, obviously, we have got to continue this effort to get it into profitability during 2021. But what we are looking beyond that is to get the profitability or to a complimentary level to the other services businesses.

And obviously that is been intent beyond 2021.

Okay. And very quick one for me prioritize case, could you provide additional details on the case and maybe share your level of confidence that this payment will be reimbursed, and any color about the timeline with respect to the prioritized case?

Sure. It is Jeff, why don’t I take that one Ian.

So I think what you have seen as I and as we mentioned in the presentation, so the first wave of claims related to pirate sites require the payment or at least our shares the payment of $200 million and we have clarity, having actually gone to that court system that we will be paid $140 million should be this quarter from the Insurance Group. And in fact, there is another $33 million on top of that.

So there is about $175 of the $200. We would expect to receive back on that.

And the rest we have already provided in provision for in prior periods. So we don’t see a change from a P&L perspective as a result of that.

Obviously, there is a second wave of claims going on, but that settled the first wave.

Thank you very much.

Thank you.

Hi, thanks. You have a number of framework agreements with clients near Resources services division.

Just wondering, have you seen or has there been any movements toward revisiting the pricing under these agreements? On the one hand, the pandemic may have impacted your cost performance, but on the other hand clients are getting squeezed by lower commodity prices.

Is there any color where you can provide that.

No. I don’t see that on the framework agreements that we have got in the resources business.

I mean, I think that the LSTK part of the results is business which obvious we are in exit, is probably becoming more competitive as the market tightens. And there is obviously been all price fluctuation.

But no, I don’t think we are seeing that kind of pressure yet. We are very comfortable with the level of profitability in the framework that we want from BP.

So, no signs yet.

Okay. And another question for Jeff and picking up on an earlier question on the leverage.

But I guess what are you targeting in terms of financial leverage for the business? Does it change as those LSTK projects wind down?

And I guess at what point would you feel more comfortable being more active on the capital deployment front other buybacks or M&A?

Yes. No, I think it is a fair question.

I mean, I think I would start with 2020 in my view has about, you had been about building financial flexibility and resilience. I think the first catalyst with this, for this was just coming off everything from 2019.

But then obviously COVID has put us in the same situation. So, as a result, very focused on cash flow converting earnings to cash flow, preserving cash flow, and really getting the business highly focused on.

I think, as we go forward and particularly the LSTK portfolio that creates, generally variability to our cash flow delivery and our cash flow forecasting, and you just see that over the last few quarters. But I think we have said previously, as we get into the first half of next year.

We will have delivered a significant amount of the LSTK runoff. You saw from me and slide we started back in mid 2019, around 3.4 billion between info projects and resources.

We are down to just over two by the end of the year. We would forecast to be just under two and have delivered a fair number of those projects.

So I think as we get into the first half of next year. We have a lot better confidence in our ability to project that.

And I think our demeanor generally at this point is to have a balance sheet that would be consistent with investment grade, financial metrics, but we will have to take a view on, how fast and how long it takes, it takes to get back to that, and as a result, I would expect that our kind of gross debt would be at a similar or lower level than where we are now. And, and I think at the same time, that starts to give us some opportunity to think in 2021, about where we have positive cash flow, how we would appropriately deploy that, but we need to come back and get more visibility on that as we get closer to that point in the first half of next year.

Helpful. Thank you.

Thank you.

Yes, thank you. And good morning.

I was wondering if you could please go back to the comment he made about the Husky White Rose project being removed from the backlog. What is behind that?

Yes. Well, firstly, the project goes through two postponements, as we as we hit COVID, the client was pretty quick to postpone the project for a year.

And as we have gone through COVID and it is prolonged currently, our understanding is that the projects are going to restart until 2022. Although I do believe that is under review.

In addition to that, the contract was somewhat not a traditional lump sum contract anyway, it adds some risk sharing in it. And at the beginning of this year, we went through a period with the client of kind of relooking at the contracts and recasting the contracts to the point that it is not something we would class in our LSDK now.

The risk share in it is not, not under that profile. So, if the project does come back, and we are not clear about that right now, but if it does, it will be a good project for us with limited risk.

Okay, but that that decision, from failure to take a provision on the project in the quarter, I’m just curious -.

No, the client has actually been very fair in its approach to shooting the project down. I mean, we have got to have people there, kind of maintain the status of the project so they can be restarted.

So, we have worked closely with the client, and I think we have got a good relationship there. Well, we have been flexible to what they need.

And then obviously, we have not encountered any loss from it.

Okay, and can you provide an update on how that Trillium project is going?

Well, it is obviously, it is having some effect through COVID. But pretty much like the rest of the jobs.

It is, it is relatively early days in terms of completion. The big year for Trillium project is next year.

I mean, we are entering the winter phase now where works will become limited until spring next year, but we have got a big campaign planned for next year and it is a critical year for the success of the job. Apart from that.

We are pretty much on track. But as I say, the proof of it is really the next year’s work.

Okay, thanks. I appreciate the color.

Thank you.

Yes. Thank you

Yes, thanks guys. Good morning.

Just maybe going back to the EPC projects for a second, and just trying to understand how we should be thinking about margin profile going forward. Let’s assume that, in your comments here, you indicated that you are learning how to work within some of the COVID restrictions now, and let’s just assume your discussions with your clients so, will be ongoing.

But, how do we think about the margin profile over the next little while? Because I know, you talked about kind of free cash flow neutral call it historical margins.

But just, with three forecast now done, how do we think about this for Q4 and into 2021?

Yes. Ian maybe I will take a crack at that.

Chris, I think and you are absolutely right, we talked about them being cash flow positive over their life. As a result, we’d obviously see them as profitable over their life.

Part of the reason for the comment, of course, to the on the cash flow side is that the cash flows can be a bit lumpy, because obviously, we are incurring the costs, often on a reasonably reasonable way, wherein the cash payment profile, within the contracts can obviously be a bit more lumpy that way. As you have heard Ian say, we are where we are seeing constant impacts taking those as we go along.

We do think within and so that ultimately may drag the margin down a bit. But ultimately, when it comes to COVID, we think that the costs themselves are largely recoverable through time and through money within those contracts.

So, I think part of it is early days, we have been taking this quarter-by-quarter. I mean, it seems like we have been living in COVID forever, but in reality, at least here in, in Canada with respect to these projects, the impacts really just been in the last two quarters.

So we have been trying to assess that quarter-by-quarter, the position we have taken at the end of Q3 is the visibility that we see. And I think that takes us into the winter.

And then, as we get into next year, we believe have a chance to have you work through some of these issues with our clients and have a good idea, though what that means for the construction period next year.

Okay that is helpful. And then my other question just is in terms of, we talked a little bit about the resources business.

And certainly some of the comments, I think were more energy focused, but one of the questions or some of some of the commentary, and maybe it is a different way to think about, if you think about oil and gas, but just energy broadly, part of the transition, and the energy transition has also been some discussion around the mining business and resource requirements to build some of this new infrastructure. Can you just talk a little bit about how you are seeing some of the funding, especially out of the Canadian government that is looking to create this transition and how you think that that may impact you in the coming year?

You mean funding of energy and infrastructure, the whole market, Chris?

Yes, exactly.

Yes. I mean, I think the term it is generally been used in our core markets is shovel ready, shovel worthy, right.

And the shovel worthy component of really means Investment in infrastructure that gives an economic benefit. But also is sustainable and its nature and there is several announcements.

Obviously you are bit familiar with n Canada, but it is the same, it is pretty much same story, I think certainly in the UK, and to some extent in some states in the U.S. And for us is a very, very big positive, because actually delivering sustainable infrastructure.

And actually how we think about that and both, the type of capabilities that we have got, and how we apply those capabilities of pretty much in our sweet spot of the capabilities we have. I mean, if you think about clean energy, obviously, we have got extensive capability around hydro and clean energy wind farms in the UK.

We have got a nuclear capability, which is, in our consideration, clean energy. We just want this mandate in the UK, for the high speed rail, which absolutely, because of the Net Zero 2050 legislation has to consider its carbon footprint.

And we have done a lot of work looking at the carbon footprint in partnership with the client there. So we have seen the whole industry move in a bit more towards an outcomes based industry rather than just thinking about, let’s let work on an LSTK basis and get the cheapest price we can.

So I think where we are taking the company and the capabilities we got plays directly into this.

Okay. That is helpful.

Thanks folks.

Thank you very much for joining us today. I know there is few analysts still in the queue there, but we are running out of time.

But please don’t hesitate to contact me. I will be pleased to answer any of your questions.

Thank you very much everyone and have a beautiful day. Bye-bye.

Thank you.

Thank you.