Charah Solutions Inc (CHRA) 2020 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Charah Solutions, Inc., Third Quarter 2020 Earnings Conference Call.

(Operator Instructions)

I would now like to hand the conference over to Steve Brehm, Vice President of Legal Affairs and Corporate Secretary for Charah Solutions. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us today. We appreciate your participation in our third quarter 2020 earnings call and look forward to sharing our prepared remarks and answering your questions.

We hope that you have had a chance to review the press release we issued yesterday after market closed. If not, you can find the press release, as well as a supplemental investor presentation you may follow during our prepared remarks, on the Investors section of our website at www.charah.com or ir.charah.com.

Joining me on today's call are Scott Sewell, President and Chief Executive Officer; and Roger Shannon, Chief Financial Officer and Treasurer. Following their prepared remarks, we will conduct the customary question-and-answer session.

Before we begin, I would like to remind you that our remarks regarding Charah Solutions include statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those disclosed in our earnings press releases and conference calls. Those risks include, among others, matters that we have described in our earnings press release as well as in our filings with the Securities and Exchange Commission, including our quarterly reports on Form 10-Q and our annual report on Form 10-K. We disclaim any obligation to update these forward-looking statements.

During this conference call, we will refer to certain non-GAAP financial measures. We provide reconciliations to the nearest applicable GAAP measure in our earnings press release and supplemental presentation.

Again, thank you for joining us today. Now I would like to turn over the call to Scott Sewell, our President and CEO. Scott?

Good morning, everyone. It's great to have you join us for our earnings call today. I'm happy to be speaking with you again and providing an update on our third quarter performance. This morning, I'll briefly review our third quarter accomplishments, provide an update on current business developments and update you on our pipeline opportunities. I'll then transition the call to Roger for a review of our financial performance during the quarter and an update on our 2020 guidance.

We continue to see an acceleration of customer activity relative to the $75-billion coal ash market opportunity and have committed to strengthen our balance sheet, reduce debt and maintain a laser focus on pursuing these growth opportunities and fully capitalizing on our industry-leading reputation. The team continues to perform well in this challenging COVID environment, and we are pleased with our progress as we continue working to convert our pending bids pipeline of over $4.5 billion. We hope to be making some exciting award announcements soon.

Now, our third quarter results were below expectations, primarily driven by low ash production resulting from COVID-19-related decreases in energy demand and severe hurricane activity in the Southeast. We remain optimistic about the near-term and long-term prospects for Charah Solutions as we continue to work with our major utility customers to meet their remediation and byproduct recycling requirements.

As highlighted in our press release, we continue to see significant increases in new award opportunities resulting from our customers' announced and expected remediation initiatives. We now have over $1.2 billion in new awards, primarily driven by the extension of the Exelon fleet-wide nuclear maintenance and modification contract from July 2022 to August 2025. We have outpaced the last year's record for new awards and we expect that significant new awards will advance in our Environmental Solutions segment through the remainder of the year and into 2021.

Our customers continue to seek our environmentally friendly customized solutions to recycling and remediating coal ash. Our ability to continue to provide essential daily operations and remediation services for our mission-critical utility customers during this period of high uncertainty and disruptions caused by COVID-19 pandemic speaks to the safety, operations plan and procedures we have implemented, the resiliency of our team and the essential nature of our services. We expect the growth in business opportunities to continue as utility companies increasingly develop and implement their plans to address the more than 1,000 regulatory-mandated surface impoundment closures in the United States.

The sustained, ongoing level of activity in our business development has never been higher. In addition to our $4.5 billion in pending proposals, we have an additional $11 billion in near-term pipeline opportunities that we will bid over the next two years.

As we have discussed on previous calls, states are becoming more prescriptive as to the means and methods of ash pond remediation, and the Environmental Protection Agency continues working with several states to establish their own ash recycling permit programs. Further, the EPA continues to work on its regulatory requirements, beneficiation guidelines and ash pond impoundment closure deadlines. We continue to see these movements as positive for Charah Solutions.

As the only full-service provider of mission-critical ash management operations, environmental remediation and compliance services, maintenance and outage services and byproduct sales for the utility industry, the company is ideally situated to partner with these utilities to deliver on their impoundment closure requirements and needs.

In addition to the pipeline remediation projects, we are also increasing opportunities to provide creative solutions to utilities by expanding our environmental risk transfer services, or ERT. We recently announced that we are in negotiations with a public utility in Texas to deliver our unique ERT solution, and we're successfully performing ERT project with a utility in the Upper Midwest. We believe our ERT offerings deliver turnkey environmental solutions to utilities while providing attractive growth opportunities and returns for Charah Solutions.

We also remain optimistic about our byproduct sales opportunities. Driven by expectations for greater infrastructure spend as we continue to expand the reach of our multisourced materials network and add new customers, our ability to continue to add new customers and new awards with our utility partners during this uncertain time speaks to our team's resiliency and the essential natures of our services. Among the $4.5 billion of pending proposals, we are in contract negotiation on several projects and expect to make official award announcements soon.

As we head into the winter season, with the potential for an uptick in COVID-19 activity, our highest priority remains the safety of our employees and customers. We remain committed to keeping our people safe, addressing our customers' needs and growing the business. Charah Solutions provides essential services to regulated utilities that must continue operating to provide power to the country, and we continue to believe we are well prepared to protect our staff and ensure the continuity of service to our customers during this time. I am very proud of the way we have partnered with our utility customers to maintain service safely, and I want to thank, again, our dedicated Charah Solutions employees, who are working every day to help our utility customers keep providing electricity.

Finally, on behalf of the entire Charah Solutions team, I want to again express our sincere gratitude to all the first responders, medical personnel and all others who continue working tirelessly to address the consequences of this pandemic.

With that, I will turn it over to Roger, who will discuss our third quarter financial results, our outlook for 2020 in more detail, and provide more clarity on our expectations in the current market environment.

Thanks, Scott. I'll continue with a review of our financial results and provide an update on our balance sheet, liquidity and 2020 outlook.

Revenue decreased $2.4 million, or 2%, for the three months ended September 30, 2020, to $118.7 million, as compared to $121.1 million for the three months ended September 30, 2019, driven by a decrease in revenue from our byproduct sales and nuclear services components.

Gross profit decreased $1.8 million, or 13.1%, for the three months ended September 30, 2020, to $12 million, as compared to $13.9 million in the three months ended September 30 of 2019. As a percentage of revenue, gross profit was 10.1% for the three months ended September 30, 2020, compared to 11.4% for the three months ended September 30 of 2019. The decrease in Q3 2020 gross profit is due primarily to the decrease in byproduct sales, as I will discuss more in detail later.

Operating income increased by $1 million to $791,000 in Q3 2020 versus an operating loss of $237,000 in Q3 2019. The improvement in operating income is due primarily to a decrease in general and administrative expense. The net loss attributable to Charah Solutions, Inc., increased $900,000 for the three months ended September 30 of 2020 to $4.2 million, as compared to $3.3 million for the three months ended September 30 of 2019. The increase was primarily attributable to the decrease in gross profit and increases in impairment expense, interest expense net and income tax expense, partially offset by lower general and administrative expenses.

We incurred an impairment expense of $6.4 million for the three months ended September 30 of 2020 due to the expiration of a purchase option liability that resulted in a noncash impairment charge related to the associated land asset. The decrease in general and administrative expense was primarily attributable to the $7.1-million reversal of the previously mentioned expired purchase option liability during the current period, cost savings from previous staff reductions, cost-cutting measures implemented in April 2020 in response to the COVID-19 pandemic, and lower transaction costs in the current period related to the credit facility.

Q3 adjusted EBITDA of $8.1 million was up $2.5 million from the year-ago period. This improvement was due primarily to lower general and administrative expenses.

Now I'll discuss results at our reporting segment level. In our Environmental Solutions segment, revenue decreased $200,000, or 0.5%, to $45.8 million, compared to $46 million for the three months ended September 30 of 2019, primarily driven by a decrease in byproduct sales. The decrease in byproduct sales as compared to the third quarter of 2019 was a result of less ash available for sale due to decreased production by our utility customers. The COVID-19 pandemic has reduced energy demand across the U.S., resulting in less energy production by utilities.

Environmental Solutions revenue for the quarter was also negatively affected by the severe hurricane activity in the Southeast that temporarily took some customer generating stations offline and also reduced our workdays for the quarter at a major remediation project due to excessive rain. The decrease in revenues was mostly offset by new project work within our remediation and compliance services component. Environmental Solutions gross profit decreased $300,000, or 4.5%, to $6.5 million, as compared to $6.8 million for the three months ended September 30, 2019.

In our Maintenance and Technical Services segment, revenue decreased $2.2 million, or 2.9%, to $72.9 million, as compared to $75.1 million for the three months ended September 30, 2019. The decrease in revenue was primarily attributable to less nuclear maintenance outage work in the period as compared to last year. Maintenance and Technical Services gross profit decreased $1.5 million, or 21.4%, to $5.6 million, as compared to $7.1 million for the three months ended September 30 of 2019, primarily attributable to a decrease in gross profit from our fossil services offerings, associated with our adoption of the new revenue recognition standard, ASC 606.

Turning to our balance sheet and liquidity now. For Q3, our operating cash flow was positive $1.7 million and CapEx for the quarter was $1.4 million, resulting in free cash flow of positive $300,000. At September 30 of 2020, we had gross consolidated debt of $212.5 million. The decrease in total debt during the third quarter is primarily due to debt principal payments on our term loans. Our liquidity was approximately $38.9 million as of September 30, 2020.

Next I'll address our 2020 guidance update. Though we have not experienced significant work stoppages at our onsite operations as a direct result of the COVID-19 pandemic due to the critical nature of our customers' operations, we believe that the COVID-19 pandemic has resulted in decreased energy demand across the U.S. and therefore decreased ash production by our utility customers. Although this work is under contract with our customers, this decrease in ash production has resulted in both our byproduct sales activities and our daily sales operations volumes being lower than expected.

We were also affected by the unprecedented hurricane activity in the Southeastern U.S. during the third quarter. The significant rainfall in the Southeast U.S. resulting from the hurricanes affected work activities at a large ash pond closure project, as well as ash production at several our customer utility locations.

We continue to see the risk of lower ash production going forward, as well as significant business disruptions beyond our control, creating a higher level of uncertainty. For this reason, we are adjusting 2020 guidance at this time based on our expectations of our backlog of business and executed contracts.

We are updating our 2020 guidance as follows. We now expect revenues for 2020 of $545 million and a net loss attributable to Charah Solutions, Inc., of $21 million. We're projecting 2020 adjusted EBITDA of $33 million and free cash flow for the year of $20 million. Included in our revised 2020 guidance is approximately $6 million of adjusted EBITDA resulting from a gain associated with an ERT project. We continue to believe that this gain will occur in the fourth quarter, but there is a risk that this transaction could slip into 2021.

This updated guidance continues to be based on our current expectations of no material worsening of the COVID-19 pandemic, and specifically including, but not limited to, no material customer work stoppages, no significant employee absences and no government-mandated quarantines. Any worsening of the COVID-19 pandemic could materially affect our 2020 outlook.

With that, I'll turn the call back to Scott.

Thanks, Roger. In closing, we anticipate our focus on balance sheet health and growth in contract awards will continue to position the company for long-term success. We remain committed to taking actions expected to preserve cash, reduce debt and enhance long-term value while positioning ourselves to take advantage of the expanding market opportunities.

Importantly, we are closely aligned with our utility partners in environmental remediation and sustainability initiatives, which should provide Charah Solutions with significant growth potential for many years to come.

Our activities during the third quarter demonstrate this positive momentum. These successes in winning new awards, along with our enhanced liquidity and financial flexibility, continue to expand our customers' confidence in our ability to bring our full suite of mission-critical services to meet their specialized needs. We believe we remain the environmental services partner of choice for the power generation industry.

Thank you again for your interest and participation, and with that, operator, let's begin the Q&A session.

(Operator Instructions)

Your first question comes from Michael Hoffman from Stifel.

Roger, when I think about the cadence of how the quarters will flow, and I get you haven't given '21 guidance, but are we looking at, or has it already happened -- so there's two questions in there. Has it already happened or are we looking at the leverage ratio on an LTM basis doesn't peak until -- so is that 4Q or 1Q '21 it peaks, and then begins to gradually improve from there as we lap disruptions, or has it already peaked?

No, Michael, thank you for the question. It's a great question. It has already peaked. Looking at the -- kind of the adjusted EBITDA and leverage ratio, you can go back over the past several quarters into year-end 2019, and as you know, we have been working closely with our bank group, including through the third amendment in March earlier this year. The peak actually occurred in the spring quarter of this year. Since then, it -- just kind of looking at the net leverage numbers, it reduced to about 7.7x at our June 30 quarter. It's at 6.8x for the just-ended September 30 quarter, and we've got it going down significantly and continually into Q4 and across 2021.

So since we don't have the bank's adjustment allowances, what's the adjusted number based on the guidance? So if you hit the guidance at $33 million, what do we add to that to then calculate leverage?

Michael, I think we're projecting around 4.5x.

Incrementally. So it would be 4.5 is the leverage or is -- 4.5 is what I'm adding?

4.5x is the leverage ratio at year-end based on the --

Oh, very good. Okay. Then Scott, on commentary about the reduced level of energy generation, electricity generation, are there specific states that we should pay attention to that this matters more to your model? And in that question, is it because the action's taken by the state, or is it by the contingent state who's buying their power?

Yes, good question, Michael. As we view it, it's been not really a regional thing necessarily, but more of a kind of across the board, just a downward trend in demand. But I would say if we're focusing on an area or a geographic region, the Southeast got hit pretty hard, and it was kind of a combination of both the drop in demand from COVID as well as just the cycle of hurricanes coming through there, really taking a lot of the plants that we have offline.

And when you say Southeast, what states are in those? That list?

Well, I would point to -- we've got significant operations in Louisiana, Arkansas, Texas. That area of the country is where we've seen some impacts this year, which we don't necessarily fully foresee going into '21.

Okay. Having grown up in the South, I would have called them the South, but that's splitting hairs. And then with regards to the awards generation, I appreciate there's the big nuclear in there, but the ERT awards number is up in 3Q too, I think $130 million or $140 million. So you're sort of running at about $375-million-ish, I think, and that means to beat next -- last year's goal, you're expecting at least $200 million of awards in 4Q?

Yes. So I think, Michael, what we're seeing, if you think about it, the $1.2-billion number, I think, we carved out and said $950 million of that was nuclear. Of that, the vast majority of that was -- it was not all the Exelon extension, but a good component of it was the Exelon extension. And then that leaves the remaining $280 million in the ES segment, and we do believe we've got a lot, like we've spoken to several times, we have several pending proposals and contracts that we believe will hopefully notch the ES number up over where the entire company was last year.

So we're extremely excited. The enthusiasm we have the Environmental Solutions segment of the business couldn't be higher right now. I mean, that goes back to the $4.5 billion in pending work right now, as well as the $11 billion of future pipeline work that we see in the next couple years to come. So that's really where we continue to try to put our focus and position the business, because you're right, there's going to be some significant awards, in our opinion, in Q4 as well as early -- or early '21.

Fair enough. So then, Roger, I know we haven't gotten '21 guidance, but directionally, am I -- are you spending more in capital in '21, similar or less? Just so we are at least in the right neighborhood on capital spending.

Yes, we will come back with more of an update on 2021. It really is going to be driven by these new project awards, and just kind of keep in mind that we have been able to kind of strategically, effectively utilize operating leases. We -- as an emerging growth company, we haven't been, yet, required to adopt the new lease standard, so we still are able to avail ourselves of operating leases. The lessor gets to keep the tax benefit of that. We get very attractive rates and get to finance, in most cases, 100% of the cost. So we kind of evaluate that based on a project-by-project basis. I would say, maybe as a general statement, probably roughly equivalent to where we are this year, but we'll kind of continue to monitor that and be opportunistic as we decide between operating leases, capital leases and equipment financing.

All right. And last from me, I can't remember whether you did or didn't; did you all take advantage of any PPP loans? And if you did, will you get forgiveness on those?

We did not. We did not utilize any PPP loans.

Your next question comes from Michael Feniger from Bank of America.

So I was just thinking, with the revenue guide, it implies sales down 14%. You guys kind of walked through a little bit what you're seeing right now. Is that mostly going to be -- should I be thinking in the ES segment? And how should we be thinking, with these declines -- does it maybe give you a softer start to 2021 before we kind of ramp up through the year with some of these big awards you guys are starting to book and churn? So just help me with how Q4 kind of ends on a soft note because of the things you guys have laid out, but does that kind of bleed a little bit into the first quarter, and then we kind of takeoff from there?

Yes, Michael, I'll take that one. That is kind of going to Michael Hoffman's question earlier. The sales on the byproduct sales side are really kind of driven by energy demand, ash production and the availability of ash that we have to sell. So if you think about that from the byproduct sales subsegment, that's probably -- we're guessing maybe a little bit softer going into Q1, but our [R&CS] division is independent of that, and that ramp in '21 is going to be dependent on the timing of awards and the timing of the ramp associated with those awards. So I would -- it's a little too early to tell at this time, but we are very confident about '21 and the growth in that year and years after.

That makes sense. And when I [spaced] out that, byproduct sales was down 20% or so, and your remediation, I (inaudible) that business was up significantly. I would have assumed that would be positive for your mix, but am I missing something there, when I figure the gross margin in ES? Or is byproduct sales a higher-margin business?

Yes, I think at least for the movements that we're seeing this quarter, it's really just kind of a mix thing. But theoretically, the way that we've modeled that in the past should hold true going forward. But I would say right now it's just really more of a mix issue.

Oh, it's really on mix -- oh, so byproduct -- okay. Okay. And then just when we think of 2021 -- sorry, go ahead.

To clarify that, yes, I mean, when I'm saying mix issue, I'm saying the byproduct sales is typically a higher margin than the ES side. So when we see that drop off, that would be a little margin compression there.

Okay. Okay, that makes sense. Margin -- okay. That's what I -- okay, perfect. Thanks, Scott. And then when I just think of 2021, just based on the bookings, I mean, is more -- and I know you're not talking about 2021 yet, but just with what you guys -- when I look at that $1.2 million and how much comes from maintenance services, is it fair to say your revenue growth -- between the two businesses, your revenue growth is going to be higher in MTS, or is it -- or you can't conclude that?

No. No, Michael, I think it's -- and I think we tried to highlight this and kind of qualify it in the press release. That new award and that extension and that growth on the nuclear side is really in the out years, so it shouldn't have much impact on the modeling that you have right now. That extension was from '22 to '25. So as you think about 2021, in your normal cadence of evaluating the business, there shouldn't be much change at all there.

Yes, Michael, it's Roger. Keep in mind that the -- on the nuclear side, it is very predictable in terms of the number of outages per year. Last year there were 10, this year we had 12. You recall that we performed the majority of those, 8, in the spring outage season, so we're in the process of going through the 4 fall outages now, and next year the schedule is for 12, and then it'll flip back to 10 the following year in 2022. So that's -- that cadence is a bit more predictable, but as you know, the gross margins are lower on that business.

Yes, and I would say that that extension was a great testament to our outage teams and their abilities to perform work over the last several years for our customers, and especially during the challenges this year of COVID, and they've performed fantastically, so that was a great testament to that. But as we continue to focus the business and look towards where the true growth drivers are, really the growth, and where we're positioning our focus, is on the ES side, just for all the reasons we've talked about as far as pending bids and future pipeline.

That makes sense. And Roger, you said it was -- there's 12 this year, and next year should be actually equal to that, right? 12 again?

That's right.

From what you could say? Okay, perfect. Thanks, guys. Then then I'm just curious as what your comments were about the ramp up or where we're hoping to see the ramp up on the ES side. I mean, you guys are going to do positive free cash flow this year; I think the number's $20 million. You kind of offered, on Michael's question, Michael Hoffman's question about the CapEx. As you guys ramp up on projects, is that a cash use on working capital? I know you're not guiding free cash flow right now. I guess I'm just trying to think of how the swings work, and as you guys ramp up, does that require a certain cash use on the working capital side?

Yes. I think it really goes -- the short answer, no. It's just not a cash use. And I would kind of go back to -- as Roger and I have tried to continue to transform the business to be more focused on the balance sheet, be more focused on working capital, and really drive value and put ourselves in a position to take advantage of these projects. We've changed the way that we provide proposals to our customers and make sure that when we're working through the proposal process and evaluating our projects, we're making sure that we're putting ourselves in a position that's always at least cash-neutral, but more importantly, making sure that we're cash-positive from day one so we're not using that working capital. Roger, do you want to add to that?

That's exactly right.

Okay.

It's -- we've talked about, in the past, a more disciplined approach, I think, is the term we've used, to the bid process, and that's -- that really encompasses a lot of that, that it's important that we be cash-positive, and that's what we are working to achieve, and that's kind of what our bids reflect.

And I think you'll see that work out in the numbers in future years as we bring work on and start performing.

Okay. And just -- I mean, you guys had record number of orders booked last year. You're kind of on target for another record this year. But your sales were kind of down slightly in 2020, so I guess I'm just trying to square these amazing booking orders with when we see this conversion to the P&L. I mean, is revenue growth next year, is it up? Like, is it up, ES, like 20%, 30% next year? Or is it just the timing, and sometimes these orders are booked over a longer period of time? Just, when does this massive inflection happen, since you guys had record orders kind of last year, and this year you're on pace to another really strong year?

Yes. So I think you're right, and thank you for that. We are -- we had record bookings last year, and very hopeful that we exceed that this year. But as you -- you see that, as you said, transfer to the P&L. '21 is where we're going to start to really see that growth. And to your point on duration, we've also -- to Roger's point on being disciplined and not being -- and working to de-risk the business and make sure that we've got longer-term, more predictable opportunities and projects and contracts inside of our wheelhouse here, that we're not seeing spikes, right? In our growth. It's a very progressed and deliberate plan as these projects ramp and grow and contribute to '21.

So we'll see that growth starting here in '21. We're seeing a little bit of it now, just kind of offset by COVID-related stuff, but as we roll through '21 and beyond, we'll see all those new awards layer on top of each other for many years, right? I mean, we're talking about projects that are 5 to 10 to 15 years in nature, and as those stack on top of each other, it would be a very nice long-term predictable revenue stream for us.

And Michael, I would add one thing. Just to add one comment, and we alluded to it some in our press release. And it pertains to the decrease in ash production from the lower demand, energy demand. On the other side of that, we're not seeing a decrease. We're actually seeing an increase in the market demand for spec fly ash or for things like green concrete, replacement of Portland cement, and this decrease in ash production is actually exacerbating the supply-demand imbalance between the available spec fly ash to be used and the opportunity.

So we've been really focused on developing and accelerating our MP618 ash beneficiation opportunities. That has accelerated over the course of the last few months. We're very close to being able to announce one. But as we look at, particularly, the Western U.S., where there is, on one hand, much, much less supply, but on the other hand, an increase in demand given the environmental friendly aspects of that recycling. We see a tremendous opportunity to kind of accelerate deployments, and they kind of go hand in hand with remediation opportunities as well. So we can go in and remediate an impoundment and then recycle that ash using our MP618 proprietary technology to meet that market demand. So that's something that we really -- that won't factor into 2021, just given the lead time, but we are kind of accelerating those efforts, and we'll work to take advantage of that supply-demand imbalance.

Fair enough. And I remember before you guys would talk about, with the conversion, these are larger projects, a little bit more complex, and you guys clearly converted some of it, for sure. I'm curious if that also means the contracts -- have you found -- you guys are trying to get more sustainable, de-risking the business. I mean, is there more competition? Is the bidding terms harder for some of these, or tighter than normal, for some of these projects? And who exactly are you guys kind of bumping into? Do you see a Waste Management or a Jacobs or a Bechtel, or is it more smaller private contractors? I'm just curious if you could kind of help us understand how the bidding environment has really played out over the last 12 months or so, and who you're really kind of bumping into for some of these -- this nice pipeline.

Sure. I think the biggest difference we've seen over the last several years is just the bid cycle, the duration associated with it. What used to take a couple months to go from RFP to contract signing is now taking 6 to 9 months to a year in some cases. So that's really the -- to the biggest extent, the change that we see.

When we look at the competitive landscape, I think we haven't really seen pressure from some of those larger E&C-type companies that you just mentioned. We continue to have at least -- and again, there's no pure competitor to Charah with the same suite of services that we have, but if you look at each of our service offerings independently, on the remediation compliance side, very, very fragmented geographically across the country. We see a lot of the same players in geographic regions. The byproduct sales side, there are some very large natural national competitors that we see across the country. And then on our maintenance and modification work, it's similar to byproduct sales. There's a select few that have that offering, and we see them coast to coast as well. But really different by business segment, but when you talk about the ES side and the -- it's really more fragmented.

And if I could just ask, I mean, I don't know if this is right, Scott. Is there a CCR deadline at the end of this month? Is that something we should keep an eye on? And with the election, I know it's more driven by -- at the state level. I'm curious if the CCR -- if this is the case -- the CCR deadline end of this month with the elections, you kind of mentioned that you guys see some big orders. Is that something that could make some of these order conversions maybe slip from Q4 into the first quarter of next year, just as we only have a month and a half to go, and we're all trying to sort out what -- after last week?

Yes. So I think I'll take the first one, the first question, relative to the November deadline. And that's really technical, so we don't see any impact to any of the work that we're talking about or we've spoken about in these calls associated with that. It's really a technical allowance to allow the utilities to provide an alternative demonstration for their unlined surface impoundments. So it's kind of a two-step process where they can kind of alter, make some calculations, and alter their -- the liners that they're offering, and that's only -- and I think if you -- you can go online and read a lot of comments about it, but it really affects a very small subsegment of the overall universe of ponds that need to be remediated. So that's something that should not impact, nor do we believe will impact any of the stuff that we're talking about right now.

And then as it relates to the election, or any kind of changes in regulations, we've traditionally stated, and this is definitely my belief, that right now, we really don't see any risk from stroke of the pen regardless of what happened last week or what happens four years from now. We think that the path is set very strongly for our industry, definitely at the federal level, and I think a lot of our regulated utilities are marching down that path very quickly for multiple reasons, and we're here to support them. And I think it also points back to, I think, where our focus is and what we see on the Environmental Solutions side, is that these changes at the state level, where they're going in and really mandating means and methods to our customers as to how they should remediate, are more impactful than anything happening at the federal level.

So short answer, we don't see any impact, and we don't build anything into that, into our future outlook or anything like that. We're very confident of where we sit right now.

Got it. And just lastly, I think Roger, you guys did a lot of work on the balance sheet and your credit side. Can you just remind me, is there a big tranche of maturity, anything due? When's the next big due date that we have to keep an eye out for?

No, there's not. It's just normal scheduled amortizations going forward. So we did the, as you point out, did the heavy lifting at the beginning of this year, made significant debt repayments in the fall of last year, we're continuing to pay down debt on a scheduled basis, and like we just talked about on a previous question, you will see a significant decrease in our leverage ratios going into year-end and across next year.

Your next question comes from [Robert Savs] from [Finelli] Investments.

This is [Peter Lynch] speaking for my colleague Roger -- for [Robert] (inaudible). Congratulations on going from 7.7x to 6.8x to 4.5x on leverage, and then you just said it would be lower next year. That's impressive. And did you win a power contract for another nuclear power company other Exelon? And is that going to be a revenue item in '22 or '21 or -- and what was the size of that? Is that just one nuclear power plant? And was it equal to the 18 Exelon has, or was it (inaudible)?

Yes, Peter, good morning, and thanks for the comments there. Much appreciated. But as it relates to the nuclear work, we talked about the $950-million addition. We announced last -- earlier in the quarter the additional customer that we had. We haven't given a value on that contract or announced that customer, but if you think about it, really no impact to 2020. It'll have a little bit of impact in '21, but even more impact in '22.

Okay. Is there a larger plant in the -- is it a significantly larger plant than the other 18? It's just one plant, one nuclear plant?

That's correct. So again, not the size of the entire suite that we have associated with Exelon, but it's a significant facility all to itself.

And the -- I always get the numbers wrong, the MP618. Would you hope to have one of those contracts in the next 90 days, or when's the -- when would that happen? And it's -- takes a year to build or something, so.

Yes. Well, you nailed it, Peter. It's -- you got the numbers in the right order, the MP618. But we do expect to have an order in hand here very quickly. We already have letter of intents, et cetera, signed with it. We're working on the financing right now. And to Roger's comment earlier, we're very excited about it and expect it, hopefully, to start here in the beginning of '21, but it will not have any impact on '21. It would have impacts on '22.

And Peter, we've identified a number of kind of follow-on opportunities as we look at the -- it's not just this one. It's that demand-supply imbalance that I was talking about. We see a number of geographies and opportunities, so our plan is to continue to move quickly after that next one.

And just -- would you hope to have other -- before you finish -- let's say it takes a year to get the first one on. Would you hope to have other contracts before the first one's done? I mean --

That's -- Peter, that's absolutely our hope and strategy. We have not quantified that yet. Yes.

And again, those are financed -- the project's financed, so they're not -- there's no cash --

That's right.

And the -- and you share the profits with the utility?

Each one will be different depending on the competitive or the kind of market focus in that area. But yes, there are options that we would be providing some sort of a revenue stream or an offset of costs back to the utility.

It's one of the great reductions in -- replacing -- I mean, Portland cement and concrete, it's like a -- one of the great all-time savings in CO2 in the country.

That's how we see it.

Yes.

And then you talked about there's a supply shortage in the West and demand in the West. Is that -- do you define the West as Texas, or is that California, or where the hell is the West? And --

Good question. Similar to Mr. Hoffman's question earlier on where's the South. But really that -- really when we speak of the West, there's a significant deficit, I'd say, in basically Utah West, primarily the -- when we say West, we mean West Coast. California is extremely deficient, and then you look at kind of Arizona and Nevada having some potentially equal deficits here as we move forward, so that's definitely -- Colorado as well. So Texas -- we consider Texas, kind of all to its own. But I'd say anything west of Texas we consider the West and really focus on the West Coast.

And are there remediation opportunities in the West as well for -- I mean, this $4.5 billion that you're bidding on, are any of those in the West, or are they all in the South, Southeast, Midwest?

We have a few out there in the West, but primarily, when we think about remediation, we think about remediation in the Atlantic Coast, the Southeast and the Midwest, more kind of -- call it east of the Mississippi.

But don't they have -- they don't have ash ponds in the West, or -- (inaudible) they use coal out there.

They have some out there, Peter, but if you look at the landscape, they're predominantly here in the Southeast and the -- and kind of the Atlantic Coast, and really the ones with the high priority are down here in the South where we're -- they're closer to groundwater, everything else. That's really what's driving that priority level of remediation.

Well, what do they do -- I thought that Four Corners was one of the biggest power plants in the world. What do they do with all their ash?

Can you say that again, Peter? Sorry.

The Four Corners plant in the West. Where -- that's one of the biggest power plants in the world. What do they do with all the ash there? Do they have a pond? Doesn't that generate ash?

So they've got several ways that they manage their ash. I don't -- I would just say that they -- that there could potentially be opportunities that -- for customers like them or others out in the West.

And how big is your NOL? Is that a -- (inaudible) when you start making money, you won't -- I haven't paid taxes for a long time, but.

Yes, it's -- so we'll get you the current number. I mean, we're adding a bit to it this year. I think we -- around, I don't know, the $15-million to $20-million area.

Okay. So the next $15 million to $20 million you make, you pay zero?

So that would offset $40 million to $50 million of income, of net income. Or taxable income.

Yes, yes. And the -- so the -- is there a potential for more nuclear wins after this unnamed company who wanted their other ones out there, you -- over the next couple of years, you might be able to win -- I mean, I was just -- so --

Yes, there's --

It's capital light and it's a -- it's not a great margin, but it's capital light and it's very predictable.

Yes. It's definitely capital light, definitely low margin, but as far as growth, there may be opportunities to pick up new work here and there as they -- as the opportunities present themselves. But again, as we've continued to stress, the real growth is on the ES side, whether it be remediation work or byproduct sales work. That's really where we see the growth drivers.

But didn't you get some kind of citation of positive performance from Exelon and some other people didn't do so well? In just different environments. So do you think that would be a nice advertisement for -- come to Charah?

Yes, it is. It's -- our performance of our teams is -- and the confidence of our customers by giving us extensions is definitely a good advertisement for us.

These nuclear power plants have no CO2, they're very low cost, and if you could win more of those, you'd take them, wouldn't you? You're not going to turn down more nuclear power (inaudible). If you could win some, you'd take them, wouldn't you?

That's right. No, we definitely don't turn down good work.

And your last question comes from Michael Hoffman from Stifel.

Just two quickies. The award number I can still use as a rule of thumb, divide by 6, and kind of just add that incrementally each year by 6, is the way that sort of --

Yes.

Okay. And then because of the disruption on the fly ash, is that helping the unit price? Are you getting any unit price leverage there?

Let me back up for the second question. I just want to make sure we're -- when you talk about dividing by 6, we're talking about the ES work, correct?

Yes, like 583 divided by 6, math that out, and if you did 600 this year, divided that by 6 and math that out, and if you did it again -- so you can see this sort of $100 million a year kind of compounding.

Yes, yes, okay.

Yes, okay. And then are we seeing any unit price upside? Because byproduct -- the shortage of that product, and there's demand, but shortage, and so you're getting better unit price?

We are seeing that regionally, yes. There are some places that there's a little oversupply, but definitely in the areas of undersupply, we are seeing prices increase.

There are no further questions. I'll turn the call back over to the presenters.

Great, thank you. Thank you, operator, and again, thanks, everyone, for joining us today. We look forward to updating you on our progress during our next earnings call. We'll end the call there. Thank you.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.