Good morning, and welcome to the Fluor Corporation 3Q twenty twenty Earnings Conference Call. Today's conference is being recorded. At this time, all participants are in a listen only mode. A question and answer session will follow management's presentation. A replay of today's conference will be available at approximately 10:30 a.
M. Eastern Time today, accessible on Fluor's website at investor.fluor.com. The web replay will be available for thirty days. A telephone replay will also be available for seven days through a registration link, also accessible on Fluor's website at investor.fluor.com. At this time, for opening remarks, I would like to turn the call over to Jason Landcamer, Director of Investor Relations.
Please go ahead, Mr. Lancammer.
Thank you, operator, and welcome to Fluor's third quarter twenty twenty conference call. With us today are Alan Beckman, Fluor's Executive Chairman Carlos Hernandez, Fluor's Chief Executive Officer and Joe Brennan, Fluor's Chief Financial Officer. We released our earnings statement earlier this morning, and we are streaming a slide presentation on our website, which we will reference while making prepared remarks. Before getting started, I'd like to refer to you to our Safe Harbor note regarding forward looking statements, which is summarized on Slide one. During today's presentation, we will be making forward looking statements, which reflect our current analysis of existing trends and information.
There is an inherent risk that actual results experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences in the company's Form 10 Q filed earlier today. During this call, we may discuss certain non GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.floor.com. I'll now turn the call over to Carlos Hernandez, Floor's Chief Executive Officer.
Carlos?
Thanks, Jason, and good morning, everyone. It's great to be talking with all of you again, and I'm pleased to report that with this morning's 10 Q filing, Fluor is now current with its financials. Our team around the world has worked tirelessly over the last several months to get us to this point, and we are proud and grateful for their diligence and hard work. And we look forward to speaking with the investment community on a more regular and consistent cadence going forward. And we thank you for your patience as we confronted the challenges of 2020.
Moving to Slide two, I'd like to start by providing an update on the effects of the pandemic on our operations, As well as discuss and as we'll discuss in greater detail, since we last spoke, we have been we have seen our projects continue to come back online and recover from the initial rounds of regulatory lockdowns and COVID cases. We are monitoring restrictions in various states and countries with rising cases, and we'll keep you updated on any major impacts to our business that we might see. Over 75% of our offices are open and operating at a reduced level of operations with the remaining offices still closed. We can flex the level of personnel at our offices as local restrictions and community spread of the virus changes. Only about 7% of our projects are closed with the rest operating at normal, intermediate, or limited capacity.
We continue to engage with our clients on how to proceed successfully and safely and have provided notices asserting our rights under change of law and force majeure provision. We remain committed to the health and safety of our employees and communities where we work and we have launched new procedures, training and communications packages to help transition our people back to work safely and finish the year strong. We are proactively ensuring our people have the mental and physical support they need to remain resilient and keep our business moving forward. Despite the impact of COVID, we see a number of positive developments across the company. The majority of our projects have continued to safely and successfully progress in the field, and the projects we identified as problem projects last year have been holding to their revised cost forecast and schedule.
There were no significant charges incurred in the third quarter. Before handing the call over to Joe for a financial update, I'd like to provide you a high level outlook of what's going on in our various business segments and some specific project commentary. Turning to Slide three in Energy and Chemicals. The segment continues to make progress on executing its backlog in a pandemic constrained environment. However, we continue to hear from a number of our oil and gas plants that they expect to have reduced capital spending plans over the next few years.
We believe that our clients will focus on advantaged, high value projects that can generate returns in a weak commodity price environment. While we do see a pipeline of projects, we will only pursue the ones that fit our revised criteria as we focus on delivering consistent profitability. On TCO, remobilization continues as the COVID situation in Tangis and Western Kazakhstan has improved. We have successfully increased the project population to over 15,000 in Q3 and plan to remobilize the project to 20,000 by the end of twenty twenty. As of today, we are at over 19,000.
In October, the project completed the final key lift module delivery for the project on plan. This represents a tremendous accomplishment during the current pandemic and eliminates a high profile project list. The floor led JV is 98 complete with engineering and construction. Intentees is over 50% complete. Major construction activities include setting modules on foundations, completion of metering stations, and continued completion of power and control space.
In Kuwait, food has started pumping to the Al Zur refinery ahead of commissioning. We can when complete, this will be one of the world's largest oil refining facility. Finally, our offshore project work continues, and we are still planning to complete the fabrication and pre commissioning work in 2021. Ongoing COVID impact and travel restrictions in China are hampering the progress, but mitigation actions are being taken. Now moving to slide four.
Up in Kitimat, progress continues to be made on the LNG Canada project despite the ongoing challenges presented by the government imposed restrictions due to the COVID nineteen pandemic. Our engineering deliverables are being produced in various global operating centers for the ISBL and OSBL scope to keep pace with our COVID nineteen impacted schedules for the fabrication yards and construction progressing while maintaining all COVID nineteen recommended and required measures and mitigation. The site preparation and piling work for train one is complete, and train two is well underway. The module offloading facility, all road, and bridges required to transfer the modules to site will be ready in advance of receiving the first module in 2021. Pile capping concrete foundations placement and paving has started for training one.
While we continue to work on-site, the priority continues to be the safety and well-being of our people. And now to slide five. Moving on to our mining and industrial segment. Given the ongoing pandemic and the commodity price fluctuations, we have seen a lot of the large mining projects we were expecting to be awarded in 2020 and 2021 get delayed. We are well positioned when these projects when our clients are ready to proceed.
Revenue and segment profit were negatively impacted as execution activities were deferred on a few large mining projects due to the COVID nineteen pandemic. I am pleased to say that over the past month, we have started to see these projects be mobilized and expect to see revenues follow suit as they get fully back online. In our advanced technologies and life sciences business, we completed the Novo Nordisk project in North Carolina in the third quarter. New awards for the quarter include a cell based influenza vaccine manufacturing facility in Australia. Now turning to Slide six.
Infrastructure margins reflect execution on a few zero margin projects in our backlog. However, we are continuing moving these projects forward and should start to see some relief in our margins as these projects wrap up later this year and in 2021 and into 2021. This quarter, our infrastructure segment booked the Oak Hill Parkway Highway project in Austin for the Texas Department of Transportation. This project is another example of our focus on the Texas infrastructure market and is a testament to the value that TxDOT places on our services. As we have previously discussed, in the third quarter, we terminated our contract with the Maryland Department of Transportation for the Purple Line project.
This project has now been removed from our backlog. In November, the Maryland Department of Transportation reached a $250,000,000 agreement in principle with the consortium to settle all of the consortium's outstanding claims. Although this agreement is subject to approval by the Maryland Board of Public Works, it will result in Fluor and its joint venture partners avoiding additional project costs. Turning to slide seven. In government, third quarter reflects the return to a near normal results near normal results driven by solid performance and active management of work levels despite the global pandemic compared to the second quarter.
This was achieved across the government group with the largest increases at Strategic Petroleum Reserve, Portsmouth, and Savannah River. In Diversified Services, reduced business volumes as a result of the COVID nineteen continued to impact results in the third quarter. Over the past two months, we have started to see volumes increasing after lockdown restrictions lifted, especially in Europe and Latin America. In the third quarter, we also divested Equine, both professional equipment rental business in Europe. And now moving to our other segment on Slide eight.
This segment includes the fixed price Rackford and Warren projects that were previously part of the government segment as well as our new scale initiative. The margin forecast for the Rackford and Warren projects continue to remain relatively flat. The Rackford project is nearly complete with the site teams rapidly working off punch list items. Water trials have been successful and the project has made substantial progress in turning over subsystems to the client. Full turnover of all systems and effective site demobilization is expected early next year.
Warren has had an effective construction campaign through the summer and fall weather window, overcoming early design complications and making substantial progress with early structural work. The project successfully negotiated an extension of time order with the client mitigating the risk of scheduled damage. To date, impacts from COVID have been relatively modest and schedule impacts have been effectively mitigated. In August, we announced that NuScale received final design certification by the NRC. This approval establishes NuScale as the preeminent leader in the small modular reactor technology market and allows Fluor to respond to customers looking for a unique, flexible, safe, and carbon free energy solution.
Since that approval, have seen an increase in interest from potential customers, capital investors, manufacturers, and supply chain partners to move forward in our development effort, We were pleased to support NuScale's efforts in creating a carbon free power solution, and we look forward to discussing our opportunities in the near future. And now I'll turn the call over to Joe to provide a financial update. Joe?
Thanks, Carlos, and good morning, everyone. I'll start with a financial update on Slide nine. In the third quarter, we recorded revenue of $3,800,000,000 down slightly from Q2 and earnings from continuing operations attributable to Fluor of $19,100,000 or $0.14 per share. Results for the quarter include $30,000,000 of foreign currency transaction losses, 22,000,000 of NuScale expenses and $19,000,000 of internal investigation expenses. In regards to NuScale, while we previously stated 2020 expenses would be fully funded by investors, investment decision delays due to the pandemic have required Floor to provide $15,000,000 of the funding in the third quarter.
Our overall segment profit margin of 3.4% for the quarter is evidence of the work we have done over the last eighteen months to stabilize the business. We saw the strong performance across our business lines this quarter and have not taken any material project execution charges in the first three quarters of twenty twenty. Specifically in Energy and Chemicals, it's important to note that our higher than normal operating margins for Q3 do not properly represent our performance in the quarter. Although we did see increased project execution activity on our LNG project, the effects of COVID and normal project adjustments were reflected in Q1 because of our delayed reporting schedule this year. Results for the segment also benefited from favorable FX.
Thus looking at the business line from a year to date perspective provides a better picture of our performance in that segment. Corporate G and A expenses in the quarter were $68,000,000 Most foreign currencies strengthened against the US dollar in the quarter, resulting in the previously mentioned foreign currency loss of $30,000,000 which is driving up the corporate G and A expense. G and A also reflects $19,000,000 of
investigation expenses.
Moving to Slide 10, our cash balance at the end of the third quarter was $2,100,000,000 with 36% of that domestically available for use. Our operating cash flow for the quarter was $80,000,000 with free cash flow of $58,000,000 Moving to capital structure and liquidity. We continue to believe that we have ample liquidity to meet the demands of current projects and future prospects. As Carlos mentioned, with today's filing, we are now current with all financial filings and debt requirements. Furthermore, we continue to have extensive and ongoing communications with our banking community.
And before giving you some general comments about the fourth quarter and 2021, I wanted to provide a quick update on the sale of our Amaco equipment rental business. While this sale is still progressing, the pandemic has slowed progress on getting this transacted. We now anticipate that we will divest this business in the first half of twenty twenty one. In the third quarter, we sold substantially all of our assets of our Jamaica business for 18,000,000 net of working capital and recognized a loss of £1,000,000 You can see this reflected in this quarter's results from discontinued operations. Turning to Slide 11.
While we are not planning to provide 2021 guidance until our year end earnings call in February, I would like to point out a few items as we close out the fourth quarter and move into quarter one. As we stand today, our cash balance is north of 2,000,000,000 and we expect to maintain cash at this level through the end of the year. Our cash balance is roughly equivalent to where we stood at the end of twenty nineteen. Thus, we have been able to fund our lost projects through the year while maintaining strong liquidity. Our non cash compensation expense in the fourth quarter will reflect the delayed filing of the 10 ks and will increase our G and A expense for the quarter.
For our lost projects, we have approximately $100,000,000 left to fund in the fourth quarter and then marginal and then a marginal impact beyond this year. As a reminder, because these projects have been written down to zero margin, they continue to reduce our overall margins since revenue and cost are recognized on a dollar for dollar basis. This is particularly evident when you look at the Infrastructure segment. We expect to see margins increase as we wrap up these projects and are working through a healthier backlog. Finally, we continue to see a COVID impact on our business.
Several of our larger clients are slowing work to ensure they can meet their year end cash flow obligations. Additionally, the pandemic continues to impede our ability to staff projects. As we think about 2021, we will be starting from a lower backlog as we have worked down our existing backlog with much lower awards replacing them this year. This is especially apparent in oil and gas, and we will see a shift towards other business units until some of our larger clients feel comfortable reinvesting capital. Before we open the line for questions, I'd like to turn the call over to Alan Beckman, Loor's Executive Chairman, to provide some remarks on our upcoming Chief Executive Officer transition.
Alan?
Thank you, Joe. I'll now ask you to move to slide 12. And I'd like to start this morning by saying a few words about Carlos Hernandez. It has been my absolute privilege to get to work alongside Carlos since he came into the company in 02/2007. But more specifically, over the last nineteen months.
Carlos took over this company and quickly got to work stabilizing our business and positioning the company for growth going forward. His hallmark has to be always promoting a culture of transparency and accountability, and the changes he put in place have quickly filtered across the company. The revised pursuit criteria that Carlos enacted has significantly reduced the risk in our backlog and has allowed our sales team to focus on high quality projects where we can be profitable and successful. Additionally, I think it's important to note even again in this call, the tour has not taken any significant project charges in the last nine months. We have also maintained strong liquidity and have completed a very detailed investigation.
All of this is a testament to Carlos' focus on risk assessment, transparency, and accountability. The changes he made in this company were necessary to set us up for the next chapter. And we are truly thankful for his contribution and wish him well in his much deserved retirement. I'd like to now speak a bit about the CEO profession. As Carlos has put us on a stable operating platform, the Board recognized that it was time for this succession to allow us to move forward with a CEO that will own the forward strategy for the next time frame.
Therefore, on January, David Constable will return to Fluor as our Chief Executive Officer. David held various leadership positions at Fluor from 1982 to 2011 and has also been a member of our board since 2019. She has a deep understanding of our operations and opportunities and has a particular focus on effective risk management. I speak on behalf of board when we study, we fully support this appointment for the CEO position and are confident he is the right person to lead our company. I know that some of you remember David when he was last with the company, and he is looking forward to reconnecting and with the rest of the investment community soon.
As previously mentioned, we are planning a strategy day in early in early twenty twenty one. At that time, you will all get a chance to hear from David and the management team about their priorities and the actions that will move this company forward in 2021 and beyond. And now with that, operator, we will open the line for questions.
For questions. We'll go ahead and take our first question from Andy Kaplowitz with Citi.
Carlos, thanks for all your help. Was good working with you. Can you give us a little more color into how you and your customers are adjusting to COVID related delays, especially on your problem projects? Basically, have have COVID related delays generally pushed back your timing to complete projects and have customers in general agreed to the new completion dates and or agreed to force majeure as you talked about, or might we see more noise around some of your projects until COVID fades?
Thanks for that question, Andy. Actually, obviously, the clients understand that COVID is impacting our project. And generally speaking, we are negotiating with the clients on the effects of the COVID impact both as to schedule and as to cost. And I think that discussions are very collaborative for the most part. There's no question that there will be compensation to the contractor for impacts beyond our control, and we're in the process of resolving some of those to at to this point in time.
The problem is that, obviously, we don't know what the final COVID impacts are going to be until we get past the pandemic. But we're engaged in some discussions right now with clients to resolve them to this point and then reserve the right to further negotiate down the road additional impacts.
All right. And then, obviously, commodities have been rising relatively recently here. Have you sensed any increased willingness from your clients to open the spigots and start spending again outside of E and C? I mean, you've talked about these mining projects in the past. I know they're pushed out, but you did mention sort of a little bit more spend in mining, I think, over the last month.
So is there any higher probability, especially if these commodity prices continue their current trend to to see more of these EPC projects, you know, non energy in 2021 and beyond?
Yeah. Actually, we've we've reviewed a number of prospects in the mining in the mining area. As as we have a process that's very disciplined about how we decide on whether to bid a project or not to bid a project, and then what to submit as a proposal, we are seeing we're going through those process on a number of projects in mining and have been for the last several months. So, yes, I'm optimistic that mining will actually begin to to resurface as a major activity area for us. You know, as we as as the world becomes more electrified and copper becomes more necessary, I expect that that we will be seeing copper and gold projects coming up, and we are in the premier position to execute those projects.
And then maybe one more quickie for for Joe. I don't know if you can answer it, but, you know, your initial margin guidance for e c before you you had to pull it was three to 5% margin. You talked about margin being more, like, you know, year to date, which seems like it'd be in that range. So is that the way to think about e and c margin generally going forward?
Yeah. I I think that that we did call it out to to kinda take a look at the nine month run rate, Andy, and and and that would be a a better a better thought process around how you could view E and C moving forward.
Thanks, guys. Much appreciated.
We'll take our next question from Jamie Cook with Credit Suisse.
Hi. Good morning. I just wanted to follow-up on Andy's question on the on the E and C margins. Because, Joe, I think if you take the year to date, you know what I mean? I don't know if that's necessarily reflective because I think you had some charges in the first quarter, and and it implied probably more like a 3% margin.
So, like, why wouldn't margins be higher than that or at least at the high end, you know what mean, of your three to 5% in 2021 in particular as activity starts to pick up because that has meaningful implications for the earnings power for 2021. You know, if we just took the third quarter at face value and adjusted for tax and g and a, it implies, a 50¢ number. Now that's probably too high. But, you know, it just has meaningful implications for 2021. And then I guess my second question just is, you know, on the bookings outlook, understanding COVID, you know, has implications.
But I'm just trying to understand how much bookings are being weighed down by customers waiting for you to come out with your sort of strategic update in which businesses will be a focus or not. Thanks.
I'll take the first one. If you go back into the normally three point one percent run rate in E and C and you view some of the impacts that are dragging that number down to the 3%, they're they're really nonrecurring issues. And and I think you're right, Jamie. If if if you eliminate those nonrecurring issues, you're probably closer to the upper range of that three to 5%.
Amy, with respect to your your other question, second question, we have been, talking to customers, really all all along during this pandemic. And so we're very close to them. They know where we're coming from. And I don't expect that our strategy they're not waiting for our strategy to be announced to go forward on projects with us. I think they are very comfortable, especially our oil and gas customers are very much expressed to us very much the desire for us to, be available to them as a as a contractor that can execute, their large capital project.
Okay. And just one follow-up. Can you just help us understand? You said the projects are on the problem projects are on schedule and you haven't had material charges, but what's the dollar amount now associated with the problem projects that's in backlog? Thanks.
Well, in terms earnings, we're on plan. In terms of cash, we're on plan as well. In terms of the, you know, cost cash that we're gonna spend, go ahead and answer that.
Yeah. No. I I can speak to the cash side of it. We had signaled back in, I think, September, Jamie, that we had nominally 400,000,000. It's about 438,000,000 that we were gonna extend on problem projects in 2020, and that there would be a residual 200,000,000 at that point in time based on a number of things that have occurred in the '21, and beyond.
We've had improvement in execution. As it relates to those problem projects, we've had some cost avoidance. And so that 200,000,000 is is nominally somewhere between 50 to 75,000,000 at this point. So we have been able to improve what we what we saw as a cash outlay relative to problem projects in '21 and beyond and and seen some significant improvement in in in what that will entail.
Yeah. Overall, we're We're very pleased with the execution of all of our projects, given where we took over in in May of of, '19. So we have been focusing on execution as we said back then, and it's a paid dividend.
Okay. And Carlos, thanks for your help throughout this as well. So it was a pleasure working with you. Thanks.
Thank you. Likewise.
We'll take our next question from Steven Fisher with UBS.
Thanks. Good morning. And I'll echo the sentiment. Thanks a lot, Carlos, best wishes to you. So just to follow-up on Jamie's question about the project deferrals and activities.
It sounds like customers are not necessarily waiting for any strategy.
But could you just talk a little
bit more about what really is the thinking and driver of the project deferrals? How much is COVID? How much is it commodity price? How much is it economic uncertainty? Things like that.
And do you have a sense of where backlog could actually bottom or stabilize and when?
Yes. I think it varies by business segment. With respect to oil and gas, obviously, oil prices are a big part factor there. When in terms of of mining, commodity prices somewhat, but also COVID has impacted mining business maybe more than some of the other businesses. The the other business, life science is going very well, ATLS going very well, government well.
So we we expect to see growth in government, ATLS, and and even mining as we proceed into next year. In terms of the backlog, we're gonna where where are we now today, Joe? At fifteen no. 2022. '20 '20 '2.
We're burning some of that backlog. Obviously, we're not replacing the entire backlog, but we're we're replacing it where the backlog we're taking in and this is the this is really an important point. Backlog that we're taking in is very, very much based on the discipline that we've established early on in 2019. So we're not taking in bad projects. So backlog will decline somewhat, but it will be good backlog.
Okay. And then in the infrastructure segment, I wonder if you can just give us a sense of how the mix of legacy projects versus newer projects will trend over the course of the year. I know it sounds like the legacy ones will become a smaller piece. But do you think you're going to start off with a year, say, 20% newer project mix and by the end of twenty twenty one that becomes 80%? How do we see that split as this business could be the big contributor to profit as well?
I don't have the percentages, but I can Joe, could you Look,
I can give you a sense right now. We're not only about 500,000,000 that we're gonna be pulling from previous backlog into 2021 and beyond, and then some of the new work like Oak Oak Hill that that we just booked into, we'll start to kinda balance that out as we move forward. But right now, we're looking at about a half a billion of of projects that we're we're continuing to execute from from the previous two, three years that will flow into 'twenty one.
Okay. Thanks. Yep, that's helpful. And then just
One more point on that.
Steve, obviously, termination of the Purple Line project has been a very favorable development for us because that's a large project that the legacy project and we'll be able to exit that project and avoid any future risks and costs there.
Yes, that's certainly important. Just one last clarification. I know you were talking about the potential to resolve COVID project delays. Did you say or can you say that you expect a resolution on a force majeure decision in 2021 on LNG Canada in particular? Or could that extend beyond that?
Yeah. Thanks for that question. I think the way it probably will play out in LNGC is we'll probably have a a partial resolution with respect to the impacts to date. And then later on, when we're in a position to assess additional impacts, we'll negotiate that. It's like I said before, it's not something we can negotiate all at once because the situation of the effects are are pretty lengthy.
And just just a point of clarification, it's not just the force majeure claim, it's something we call change of law because many of the impacts are the result of government directed lockdown. So it's both of those provisions that give us the basis for resolution.
Got it. Thanks very much.
We'll take our next question from Jerry Revich with Goldman Sachs.
Yes. Hi. Good morning, everyone. And Carlos, congratulations on really stabilizing the business and the financials. That was certainly not an easy task here.
Thank you, Jerry. I'm wondering if
we could just take a step back and talk about the balance sheet going forward now that the cash outflows are wrapping up on the problem projects. Alan, how are you and Board? And thinking about the balance sheet going forward, what do you need to see before we're deploying cash as a completion of LNG Canada? Can you just talk about conceptually what signposts we should look forward to see when you folks might be deploying capital again once we're,
you know, we're continuing with the turnaround here?
Yes. Jerry, I'd be glad to talk about that. Clearly, I mentioned the Carlos putting us in a position to reach stability. We're at a at a point right now, Joe has also mentioned in his remarks, where we're engaging with our banks on our on our credit facilities, which will become planned here early in this next year. And so getting that done is an important step.
Also, solidifying our balance sheet and and looking to improve our credit ratings is important to us. And then starting to pay down debt against that balance sheet to improve the strength of balance sheet is another important part of the going forward strategy. We we believe that we've got strong liquidity right now, as Carlos said, to be able to manage the business, to be able to face face with the correct prospects, and to be able to have, you know, fund for any eventuality. But it's the balance sheet now that's our strong focus. And I think also, it is starting to make our mark in those industries where we can see potential growth.
And that's gonna be a very important part of the going forward strategy. We want to be able to invest in some of the industries where we think we have a great future, and it's and it's not necessarily the same business group that has been the engines in the past. So I I think I don't wanna be able to don't really wanna say much more, but those are our main goals going through the strategy session. We have a lot of strength in the company, and we have some opportunities, I think, to address the market that are coming forward and where we have strength, but haven't necessarily put the focus on them in the past. I hope that answers your question.
That's super helpful. And then in terms of maybe just to pick up on the strength of the company along the areas where there is perceived growth, hydrogen infrastructure, obviously, copper, you alluded to. Can you flesh out what are the company's strengths in some of those areas that are obviously not driving the P and L currently, but could be interesting if we do see alternative energy technologies going forward? Outside of NuScale, what are the company's capabilities today without spilling the beans on the strategy day?
I don't want to have to scoop David Constell here. So I'm gonna be very general. I think we do have some significant strengths both in intellectual property, but also in the ability to execute in locales, to be able to handle permitting, to work in difficult locations, to be able to use our project management overall skills to be able to drive a successful project. So I think the actual unveiling of the markets we're really gonna tend to focus and push hard on. So I'm gonna save for David and his team to unveil in our Investor Day coming up in early twenty twenty one.
But but I do think it's gonna be I think it is exciting, the opportunities that we have in front of us. And I think the position that we're in now that Carlos has gotten us to will allow us to start slowly at first, but to gain momentum and in a staged process, put a very strong forward strategy together.
And you know, something that we've seen from some companies in this environment is companies reducing the size of their office space and companies essentially rightsizing their organizations. And considering the new pockets of infrastructure build out over the next ten years will be different than what we've seen in terms of heavy energy investment, know, over, call it, the prior 2020. How big of an opportunity is it to right size the cost structure and right size the footprint? Is that something that
we should be thinking about?
I think can assume that there will be a focus on that.
I appreciate the discussion. Thank you.
Thank you.
We'll take our next question from Sean Eastman with KeyBanc Capital Markets.
Hi, gentlemen. Thanks very much for taking my questions. I just wanted to confirm how much zero margin work is left in the backlog as of the third quarter And how much is expected to be remaining going into 2021? I think you guys mentioned a $500,000,000 number for the infrastructure segment specifically. But I just wanted to understand, you know, how much of that zero margin work sort of rolls off and becomes a margin tailwind, into 2021.
And and and, Sean, you're talking about the the lost projects, if you will, that we're that we're pulling into '21?
Exactly.
Yeah. So I if I highlight the two biggest, you know, with Purple Line being pulled out of backlog, the the two biggest numbers that two biggest projects that are contributing to the backlog rolling into '21 are Green Line and Bergstrom. And Bergstrom is 35% complete and or excuse me. Berkshire is 80 complete, and Greenlight is 35% complete. So and they represent the lion's share of that balance.
So my my recommendation is that that I think it's it's tied up into those two projects, and then we'll start seeing some of the benefit of of the new work that's coming in that we booked in this quarter. That's helpful. Would you be able to tell us
how infrastructure margins are running year to date in 2020 x the lost project?
Yeah. No. I I it it it's it's it's difficult, at this point because they're all running at at kind of zero margin at this point for the lost projects. But then we we would have to do some some weighted view relative to what we're putting in the backlog. But but really any of the new work that's going into the infra side of the business is has just been booked in in in the previous quarter.
So I think it would be better to have that discussion in the February time frame when we have a little bit more color around it.
Okay. That that's fair. And then, you guys have previously talked about getting that domestic readily available cash balance up to sort of the $1,000,000,000 level. I'm curious where that number is today and kind of exiting 2020.
Currently, we'll exit. For the 2,100,000,000.0, about 36% of that is readily available domestic cash. So we're on our way. But but, again, to Alan's comment, I don't wanna I don't wanna get out in front of mister Constable's strategy meetings. As we go through the strategy, we'll probably have a a review of, you know, what that cash balance needs to be to support the organization and and the the brick and mortar footprint and some of the other things that that'll be, you know, a fallout of of of what the the new strategy is moving forward.
So that number may look or change as as we get into discussions in Investor Day.
Okay. Thanks. I I appreciate it.
Operator, can we take the next question?
Can you guys still hear me? Should I just keep going?
Think we have the floor.
Alright. I got the floor. Okay. So if you look at the corporate g and a expenses, you know, the underlying number is running, you know, quite low year to date. So could you guys talk a little bit about that dynamic, sort of where the savings are coming in there, what's sustainable, and and maybe where that corporate g and a run rate goes into next year?
Yeah. So I think if you take in my opening comments, I'm trying to think we if you take the 68,000,000 and you take the the FX impact out of that out of it and you take the investigative cost out of that, you're down at about a $30,000,000 number. But I would I would suggest that if I, you know, give a guidance around what that run rate may look like going forward, I'd say somewhere between 35 to 45,000,000 at this point.
K. Gotcha. That's helpful. I'll I'll try turning it over again for my colleagues to get a chance.
But if not, I'll keep going.
We'll take our next question from Justin Hoss with Baird.
You. I've got two here. First one, guess, probably looking at the easy one. But can you just quantify the descoping on the purple line, what that was, the backlog? And it looks like actually maybe there was a rescoping going through the queue.
Reconciliation shows that maybe something came back in. So can you just talk about those two those two items?
I I can talk top line on on Purple Line. What we did take out of backlog was 543,000,000. I I would suggest maybe we go back and see if we can follow-up on your second question, Dustin.
Is it Justin? Sorry.
Okay. That's that's fine. We can follow-up. Yeah.
543 is the number that came out of backlog for Purple Line.
Great. Thank you. Second one is just on the Amico sale. I guess, I mean, I understand, you know, it's being pushed back, but, you know, how, I guess, how advanced is that first half 'twenty one expectation? And I think in the past, you guys have quantified something like $200 plus million of proceeds from Amico.
You got the $18,000,000 from the Jamaica piece, which was obviously a small piece. But is that still a reasonable number? Or or is there anything that you can give us as an update about expectations for what cash proceeds might be from that? Thank you.
Yeah. And and
so as we had started this process and holistically trying to transact the business, it's become clear as we've gotten into some some fairly serious negotiations here that it it will more than likely be transaction on a regional basis, being North Africa or excuse me, North America and South South America being two discrete elements of of the transaction. We are very well progressed in discussion discussions on the North American side and and continue to develop a, you know, a a a transactional strategy for the South American side. So we wouldn't we wouldn't come off of that $200,000,000 range. We believe that's reasonable expectation. We are just significantly closer to the North American, sale than we are the South American sale.
But still still slated for first half of of twenty one for for North America.
Great. No, that's helpful. Thank you very much. That's all I have.
We'll take our next question from Michael Dudas with Vertical Research.
Good morning, Well done, Carlos.
Good morning, Mike. Thank you.
Recognizing how your new focus on discipline on bidding on projects and the overall decline in the market, Maybe you can highlight a couple of areas that you've seen in the last couple of months, maybe heading into year into 2021 on the energy side where you're seeing some green shoots. And also maybe in the government and diversified services, maybe a bit of some observations on recompetes, opportunities to grow backlog and generate better work in those two end markets. Certainly, government's a little bit countercyclical and the diversified services certainly are impacted by COVID and small cap projects being pressured. So it should be from those observations to set things up as we look towards '21 and beyond.
Sure. Well, in energy and chemicals, we didn't specifically mention this, but I I wanna mention now. The chemicals business is still a very steady business for us, and we don't expect to see a decline there. In the energy and chemicals business, we I mean, the oil and gas business, we we talked about the discipline that their clients are going to demonstrate. So we expect that that's going to be that's gonna be a challenging area for a little while.
But with respect to government, we are very well positioned in the DOE space. For example, We've got we've won a number of projects, but some of those are being challenged, being protested, but we feel pretty good about our position on those. And we see continued opportunities in the government space. And that's also true in the advanced technologies and life sciences where we're actually working on some COVID related facilities as well as other pharmaceutical type of projects. That is an area that we anticipate will have lots of opportunities for as well.
And, again, we mentioned we mentioned mining. I think mining may be a little bit later coming up, but
we're we're very bullish on mining as well. Infrastructure,
we we defined our that we're gonna restrict our our bidding to jurisdictions where the Department of Transportation executes projects or advances projects in a way that's fair and to our contract to us and to contractors in general, and we've been successful. And Texas is certainly one of those, and there are several other states we've mentioned in the past where we've been able to complete projects successfully for both the client and for the copyright.
Yes. And follow-up, Carlos. How do you guys feel about, in general, NuScale going into 'twenty one? Is some pretty big milestones can we anticipate on that front, whether it's a new project or more support on the development or investment side?
There's a lot going on there, I'm going let Alan take that one.
Yes, Mike, it's a very good question. I think several things have happened over the last six months that have been incredibly positive for the NuScale business and its development. Number one, we Carlos mentioned the NRC approval. That's clearly one of the biggest ones. But the the Direct Finance Corporation of the US announced lifting their prohibition on lending for nuclear projects internationally.
That that has gotten a lot of attention and has resulted in in probably two fairly good opportunities to to turn into projects here in in within 2021. The other thing that that happened is DOE announced a $1,400,000,000 award a grant award for the first nuclear project to use small modular reactors. And and right now, that's targeted for the UNF project to drive it forward. But we we are talking with at least two other clients with potential imminent project projects coming up within 2021. So the project side is starting to look good, but also we're having very serious discussions with investors who want to come into the equity side of new scale.
So both sides of the equation are looking strong right now. The timing is the issue and and getting, you getting these projects on board as well as the investors on board is taking a lot of our attention.
And and, Alan, I I would think that the incoming administration would be net positive towards this, I would think, given decarbonization. But I don't know if you have any observation on that.
Actually, the the answer to that is yes. The it's interesting that NewScale really got its boost and started moving forward under the Obama administration with secretary Moniz as the head of DOE. And we've seen over the last day even during this last administration, very strong bicameral support for this effort. So we don't think that will change at all. In fact, if anything, it may give a little extra book.
We'll now take our final question from Michael Feniger with Bank of America.
Hey, guys. Thanks for for for squeezing me in. I really appreciate it. You know, the the cash balance, the 2,000,000,000, you know, is is impressive that it's still at that level. And even year to date, the cash from ops, it looks like the hundred 44,000,000 is up from a year ago, even with some of losses that you guys talked about this this year.
I guess, anything we should be aware of that that has benefited you this year that that might reverse on the cash from ops side in 2021? And with with this question, I guess, the fact that the cash balance has been relatively stable over the last twelve months, yet your backlog is under pressure and new orders. Is it likely that the cash balance comes down, gets drawn down through 2021? Any context you can provide there on that?
Yeah. I'll take the question. It our cash balances are kind of a function of a number of the initiatives that we've we've put into place, the the least of which is the the the the bidding principles and and what is going into backlog and and the cash that it's generating, I think, one. Two, I think the the cost optimization program has been very, very beneficial. Fact, we had set a target of $100,000,000 and, without divulging what that number is, will be north of that number in terms of real cash savings, for the year.
I think to the extent that I had mentioned earlier, Michael, that that, we are, executing our, loss provision projects, more effectively and efficiently, than we had than we had anticipated back in September have all been benefits. But but I would call this most of the cash generation that you're seeing is through organic, decisions, and actions that the company is taking currently.
Understood. And when we talked about to Jamie's question earlier, the 3.1% margin, like year to date in E and C, it actually sounds like it's higher if we exclude some some charges. So mentioned maybe four to 5%.
Is
that what we're thinking heading early into 2020 that we should be more on the 5% number? And can you just help me understand with what you were saying year to date? How much has, like, LNG Canada actually contributed to that number? Is margin being recognized above that range as you guys start to build out that project?
Maybe we I'll answer it maybe holistically, and and and, we'll probably get into, you know, the the the LNGC, called or question maybe a little bit later in in February when we talk about it. But the the impacts really that that that are driving the three point one percent cumulative margins in through the first nine months are some of the disclosed COVID impacts. We have a credit risk on a on a project in in Mexico, and then we have a loss on a on the transaction for Seasir Floor, which we we would consider to be nonrecurring events at the end of the day. So if you normalize those out, we're we're we're closer to the five percent range. So I I would suggest, that's probably a better a better number to to to utilize moving forward.
Got it. That's really helpful. And then it's impressive when, as you guys mentioned, no project charges on execution in the last three quarters yet. Just following up on Steve's question, it sounds like a little bit more visibility on the impact of COVID for LNG Canada, guess. How many other projects out there right now that there are some need for a resolution?
I I understand that's kinda normal course of the business. I don't know if this is a little bit more than than normal course with with what you guys are stating. Because I guess I'm just trying to reconcile the really impressive last two quarters of of no big charges, yet the outlook states how the pandemic's impacting staffing and execution. You know, could could we wake up in the middle of twenty twenty one or end of twenty twenty one when the vaccine is out there, economy is humming, yet there still are some litigation or or charges. Is any way you guys can kinda frame that for us and how to think about that in timeline?
Yeah. I'll take that one. In terms of COVID, obviously, the fixed price projects are the ones that we have COVID impact that are being negotiated with the client. I don't think any client is denying entitlement. The client obviously will negotiate with us in terms of the the the amount and as to schedule and cost.
So it's it's still we're working with the clients on some of these projects and have already reached some preliminary resolutions which are favorable, but we still have a number of them to be resolved. And it's hard to resolve them because the impact is still ongoing in some case in many case. So I can't I can't, you know, create I can't tell you the magnitude.