Charah Solutions, Inc. (NYSE:CHRA) Q4 2021 Earnings Conference Call April 1, 2022 8:30 AM ET
Company Participants
Steve Brehm – Vice President of Legal Affairs and Corporate Secretary
Scott Sewell – President & Chief Executive Officer
Roger Shannon – Chief Financial Officer & Treasurer
Conference Call Participants
Brian Butler – Stifel
Alex Rygiel – B. Riley
Operator
Good morning, ladies and gentlemen, and welcome to the Charah Solutions, Incorporated Fourth Quarter and Year-end 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After today’s presentation, we will conduct a question-and-answer session and instructions will be given at that time, if you would like to ask a question.
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.
Steve Brehm
Thank you, operator. Good morning, everyone, and thank you for joining us today. We appreciate your participation in our fourth quarter and year-end 2021 earnings call, and we look forward to sharing our prepared remarks and answering your questions.
We hope that you’ve had a chance to review the press release we issued yesterday after the 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 today on our 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 the actual results to be materially different from those disclosed in our earnings releases and conference calls.
Those risks include, among others, matters 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, except as required by law.
During this conference call, we will refer to certain non-GAAP financial measures. We provide reconciliations to the nearest applicable GAAP measures in our earnings press release and supplemental presentation. Again, thank you for joining us today.
Now, I would like to turn the call over to Scott Sewell, our President and Chief Executive Officer.
Scott Sewell
Thanks, Steve, and good morning, everyone. Thank you for joining us for our earnings call today. I’m pleased to report that 2021 was an outstanding year for Charah Solutions, with a record level of new business awards, an excellent start to three major projects announced at the beginning of 2021 and strong progress in growing our ERT business.
Because safety comes first at Charah and is a cornerstone of our culture, I’m very pleased to report that we maintained a strong safety and operational record during a challenging environment, resulting from the COVID-19 pandemic and a tight labor market.
Our hard work in 2021 paid off, as our financial results for the year were at or above the top end of the revised guidance ranges we provided last November for revenues, adjusted EBITDA and adjusted free cash flow.
This morning, I’ll provide a business update covering our new business awards, our bid pipeline, the recent EPA ruling and other business developments. I’ll also update you on our ESG initiatives. Roger will then review our financial performance during the fourth quarter and full year and address our 2022 guidance.
Beginning with new awards, 2021 was a record year for us, with $840 million of new business awards, which exceeds a record level of $715 million that we set in 2020. In fact, this is our third consecutive record year of new works.
The 2021 Board span all of our lines of business and included two ERT projects, two large and several midsized and small remediation of compliance projects, several ash marketing agreements and multiple renewals of existing contracts.
The total for the year included approximately $35 million that was awarded after our third quarter 2021 earnings release last November. The most significant of these recent awards was with a Midwestern utility, for ash pond closures at one of its coal-fired power plants. Our ability to continue to win new business with both existing and new power generation customers speaks to the essential nature of our services, the reputation, experience and resiliency of our industry-leading team.
We currently have more than $3.1 billion of pending proposals, which has increased approximately $500 million since our conference call in November. We also have identified nearly $7.5 billion of opportunities across our businesses. We are optimistic about the prospects for converting some of these opportunities into additional new business that will further add to the predictability of our revenue stream and layer on growth well into the future.
At the federal level, we believe that the Environmental Protection Agency under the Biden administration will continue to accelerate its efforts on regulatory requirements, beneficiation guidelines and ash impoundment closure deadlines, which should result in additional market opportunities for Charah.
On our previous call, I indicated our expectation that 2022 would be a robust year for bid activity, both with respect to the number of solicitations, as well as the size of projects. On that note, I’d like to address a ruling issued by the Environmental Protection Agency in January of this year, which advances the EPA’s commitment to preventing groundwater contamination from coal ash.
The January ruling expands and strengthens regulations affecting coal ash and groundwater management of mandated surface impoundments and landfills, in particular, the 2015 CCR regulations. We review this development, the first, under the new administration is very positive for our addressable market over the next few years, as it significantly expands the amount of remediation work utilities will be required to perform. However, based on the scope of the EPA’s announcement which was stronger than expected, we expect the power generation owners will require time to assess the ruling in order to develop or revise their compliance plans. Since the January EPA announcement, we have seen an impact on timing of pending and anticipated bids for this reason, which may continue.
The regulatory environment continues to be favorable for our business at the state level as well. As we have discussed on previous calls, there continues to be significant activity at a number of states as they move towards a more prescriptive approach to the means and methods of ash pond remediation. As I noted, we remain very optimistic about the size of the addressable market and our competitive position.
As a partner of choice for solving our customers’ most complex environmental challenges and as an industry leader in quality, safety and compliance, we are ideally situated to help utilities and power generation companies deliver on their EPA and state regulatory requirements and needs. The January EPA announcement only adds to that optimism and expectations for future growth, particularly across our remediation and compliance and ERT services.
We also believe that the infrastructure bill signed into law in November 2021 will have a positive impact on our byproduct sales services and raw material sales businesses. The exact timing of the ramp in construction driven by the infrastructure bill is uncertain, we believe that recycled fly ash demand will grow. Much like the favorable impact we see from the recent EPA announcement, we believe that the demand by state and federal entities and end-use customers and consumers for more environmentally friendly alternatives to Portland cement will result in accelerating growth in the utilization of fly ash and green concrete.
As we have discussed on past calls, the substitution of the Portland cement with fly ash has almost a pound for pound effect in the reduction of CO2 greenhouse gash. It improves the quality of concrete and provides cost savings. As a leader in the recycling of fly ash, we are excited about the future growth of this part of our business.
Now, turning to an update on our businesses, 2021 was an excellent year for the growth of our ERT services business. Our unique ability to provide a single-source solution for customers looking to address the environmental and economic challenges associated with retiring older or less economically viable fossil generation assets positions us as a strong partner for existing and potential new customers.
In December 2021, we closed on the sale of nearly 80% of the real property acreage at our Gibbons Creek project in Texas for net cash proceeds of $23.6 million. This consisted of parcels that did not require remediation and that were available for immediate sale.
Last month, we announced a contract for the sale of the remaining real property acreage, with closing expected in the third quarter of this year. This remaining acreage includes remediated parcels and a valuable switchyard and administrative facilities.
On the remediation side at Gibbons Creek, we completed the planned implosion and demolition of the plant last October. With demolition completed, scrap sales accelerated in the fourth quarter, and we expect that to continue into the first half of 2022. Additionally, we were able to recognize gains on our AROs at Gibbons Creek due to the differences between the estimated costs used in the measurement of the fair value of the AROs and the actual expenditures incurred for specific remediation tasks. Our remediation work continues ahead of plan and is expected to be substantially completed in 2023.
In April, we expect to close on the acquisitions of the Avon Lake and Cheswick coal-fired generating stations from GenOn after the plant ceased operation. The Cheswick acquisition is a new ERT project that we announced in December 2021. We assume responsibility for demolition of the plant and environmental remediation and sustainable redevelopment of the site.
We have commenced environmental remediation and site redevelopment planning efforts for both projects. And after closing, we will immediately start plant and coal yard remediation. We plan to engage local vendors, contractors and workforce to support the remediation of these properties.
In all, we are very pleased with our performance at our ongoing ERT projects, particularly at Gibbons Creek, where the timing and results have exceeded our expectations. We continue to believe that Charah possesses unique competitive advantages and benefits for our utility customers compared with other alternatives. ERT represents an area for significant growth and profitability, and we continue to devote resources to expand those opportunities.
Now, I’ll turn to our remediation and compliance business. Prior to year-end, we successfully completed the first phase of the coal ash reclamation project for Dominion Energy, and we are moving into Phase 2 of that project.
Additionally, the two long-term ash pond closure project at a major Southeastern utility that we announced in early 2021 are continuing to ramp and progressing very well. We also commenced work on multiple mid-sized projects, including the recently awarded ash pond closure project in Midwest.
As we noted in our press release, we experienced construction delays, much of which were a result of adverse weather conditions over the winter and supply chain issues at certain remediation and compliance projects. These issues affected our fourth quarter 2021 gross margins. The construction delays occurred at projects, most of which are expected to be completed by mid-year.
As utilities and power generation companies deliver on their EPA and state regulatory remediation and closure obligations, they evaluate the options of beneficially reusing the coal ash or placing it into on-site or off-site conforming landfills. Charah is ideally situated to support our utility partners in either of these paths. The Dominion project is an excellent example of a beneficial reuse project, and the project at the major Southeastern utility demonstrate our ability to close ash ponds.
In our byproduct services business, we remain in contract discussions with potential utility customers and are optimistic that we will achieve our first commercial agreement for the use of our EnviroSource technology in the first half of this year. This technology can be used for the beneficiation of both wet and dry fly ash.
As a reminder, EnviroSource has a significantly lower cost profile than the competing technologies, as a vessel design and scalability and can be deployed in months. It reduces utility customers’ needs for landfill, ash ponds and other disposal methods.
I’ll close this business update with a comment about the impact of certain macroeconomic developments on our business. The labor market has become tighter and increasingly competitive. In addition, supply chain and logistics issues have affected many sectors of the economy. We have experienced some delays in obtaining certain construction materials.
But for us, the primary concern is transportation and logistics, particularly rail and third party trucking. Where labor constraints in the pandemic have reduced the availability of truck drivers and increased rail congestion, this has affected our raw material sales business, which is comprised of our international raw materials brokering business and includes importing raw materials and providing the sourcing, logistics and management needed to facilitate these raw materials transactions around the globe.
Sales decreased in 2021 due to the logistical issues that affected the movement of coal ash by ship, barge, rail and truck, in part due to the tight labor market and the impacts of the COVID-19 pandemic. As a result, we did not import coal ash from Europe, and we imported less ash from Asia than expected. We are continuing to monitor the international supply chain situation, and we are staying in contact with our global raw material suppliers and partners in the event that shipping conditions improve.
In terms of our workforce, we have been successful in retaining our leadership and middle management. Wages have been increasing, but to date, there have not been availability constraints that have hindered our ability to perform the work. The majority of our contracts contain pass-through clauses for cost increases in fuel, resin liner in certain other commodities.
Next, I’d like to review our performance with respect to our ESG initiatives. As we have indicated previously, sustainability is at the heart of our business. I am pleased to report that we achieved substantially all of our 1-year ESG objectives in the key areas of environmental performance, notably sustainable and land redevelopment, water, electricity and fuel consumption and waste disposal, as well as diversity and inclusion and safety.
In the key area of safety, we had no lost time incidents and we had a total recordable incident rate of 0.32, which is below our goal of 0.46 or lower. Our safety performance was recognized with several awards for construction, safety and employee safety in 2021.
In terms of environmental performance, we are on track to remediate or redevelop substantially 90% of the land owned, such as at the Brickhaven, B.C. Cobb and Gibbons Creek sites. We have increased both the number and quality of site audits and inspections with site team environmental compliance inspections nearly doubling since 2020. We did not receive any notices of violation or notices of deficiency in 2021. We also made progress in evaluating our water consumption to reduce, use or replace with recycled water. We have developed methods to track our electricity and fuel consumption and our waste production at individual sites.
I would also note that we expect to issue our second annual ESG report early in the second quarter of 2022, showcasing our significant leadership in fulfilling our ESG commitments and sustainably preserving our natural resources, for the betterment of our planet, our communities and our customers.
Before turning the call over to Roger, I’d like to thank our dedicated Charah Solutions employees who are working every day to help our customers ensure service reliability and to address their environmental and recycling needs. We remain committed to keeping our people safe, supporting our customers and growing our business.
With that, I’ll turn it over to Roger Shannon, our CFO.
Roger Shannon
Thanks, Scott. I’ll continue with a review of our financial results and provide an update on cash flow, balance sheet, liquidity and 2022 guidance. For the year ended, we have updated the descriptions of the types of revenue we include in our suite of services to better reflect how management operates the company, which is by customer arrangement. We moved the utility-sourced SCM’s management and marketing services to align with our CCR landfill operations and utility support, whereas it had previously been included with our raw material sales.
Raw material sales is now sales, such as fly-ash brokerage from nonutility sources, internationally sourced industrial fly products, iron ore, bauxite and other raw materials that customers use to produce cement, while also providing the sourcing, logistics and management needed to facilitate these raw material transactions around the globe. Please refer to the breadth of services chart that we added to our supplemental investor presentation.
I’ll now start with our fourth quarter 2021 results. Revenue increased $27.8 million or 42% to $93.4 million as compared to $65.7 million for the fourth quarter of 2020. This increase was primarily driven by an increase in remediation and compliance services revenue from the commencement of new project work. This increase was partially offset by decreases in raw material sales and by product services.
As Scott noted, the decrease in raw material sales was driven by reduced supply from international sources due to supply chain constraints, in particular, high ocean cargo rates that have reduced profitable sales opportunities. The decrease in byproduct services was mostly attributable to the dissolution of our joint venture, Ash Ventures, LLC in the second quarter of 2021 and the completion of certain projects in early 2021.
Gross profit decreased $400,000 to $3.9 million, as compared to $4.4 million for the fourth quarter of 2020. The decrease in gross profit was primarily driven by issues at certain projects, most of which are nearing completion, resulting from construction delays, supply chain issues and adverse weather impacts. As a percentage of revenue, gross profit was 4.2%, a decrease from 6.7% in the fourth quarter of 2020.
Net income attributable to Charah Solutions was $1.3 million, an increase of $35.2 million from a net loss of $33.9 million in the fourth quarter of 2020. The improvement was primarily due to a decrease in impairment expense, gains on sales of real estate property and equipment net from an ERT project and a gain on ARO settlements, also at our ERT project. These positive drivers were partially offset by the non-recurrence of a gain on change in the contingent payment liability, other operating expenses from ERT services, increased interest expense and increased general and administrative expense.
As on past calls, I’d like to remind you that the accounting treatment for our ERT services is different from our three other lines of business. Profit and loss results for ERT services are captured in two lines in the income statement, gains on sales of real estate property and equipment net and other operating expenses from ERT services. Thus, the ERT business is not included in our revenues or our gross profit, but is included in operating income and adjusted EBITDA. Adjusted EBITDA increased $11.6 million to $13.7 million as compared to $2.1 million for the fourth quarter of 2020. The Gibbons Creek ERT project was a significant contributor during the quarter, with gains recorded on sale of 80% of the real property acreage and a reduction in the ARO.
Now, turning to the full year ended December 31, 2021. Revenue increased $60.8 million or 26% to $293.2 million as compared to $232.4 million for the year ended December 31, 2020. The increase was primarily driven by an increase in remediation and compliance services revenue of $79.8 million from the commencement of new project work. This increase was partially offset by lower raw material sales of $13.6 billion and lower byproduct services revenue of $5.3 million. Drivers of these decreases for the year were similar to those previously mentioned for the fourth quarter.
Gross profit increased $3.1 million or 13.6% to $25.9 million, as compared to $22.8 million for the year ended December 31, 2020. The increase in gross profit was primarily driven by an increase in revenue, partially offset by a lower gross profit margin percentage of 8.8% in 2021 as compared to 9.8% in 2020.
The decline in gross profit margin was primarily driven by issues at certain remediation and compliance projects, most of which are nearing completion, resulting from construction delays and supply chain issues, again, mostly affecting the fourth quarter of 2021.
Net loss attributable to Charah Solutions decreased $50 million or 89% to $5.8 million as compared to a net loss of $55.9 million for the year ended December 31st, 2020. The decreased loss was primarily due to a decrease in impairment expense, gains on sales of real estate property and equipment net, gain on a sales type lease from an ERT project, gain on ARO, and the increase in gross profit.
These positive drivers were partially offset by the non-recurrence of a gain on change in the contingent payment liability and increases in general and administrative expenses and other operating expenses from ERT services associated with the startup of the Gibbons Creek project. The non-recurring gain from the change in the contingent payment liability was $9.7 million.
General and administrative expenses increased $8.1 million in 2021, primarily attributable to the absence of a $7.1 million reduction in expense from the expiration of our purchase option liability on our structural fill sites, as previously mentioned.
Other operating expenses from ERT services increased $5.1 million due to expenses associated with the commencement of operations of the Gibbons Creek ERT project in 2021.
Adjusted EBITDA increased $25.8 million to $40.1 million as compared to $14.2 million for the year ended December 31st, 2020. As I noted, with respect to the fourth quarter results, Gibbons Creek was also a significant contributor to adjusted EBITDA for the full year.
Now, turning to our cash flow. Operating cash flow was negative $12.5 million for the fourth quarter of 2021, a decrease of $10.9 million from a positive $1.6 million in the fourth quarter of 2020. The decrease was partially attributable to non-cash adjustments to net loss and changes in working capital.
Adjusted free cash flow was $12.6 million, an increase of $3.9 million from $8.7 million in the fourth quarter of 2020. The increase was primarily attributable to proceeds received from the sale of 80% of the real property acreage and scrap sales at Gibbons Creek, partially offset by the decrease in operating cash flow and an increase in capital expenditures.
As we have discussed on previous calls, adjusted free cash flow includes the gains on sale of real estate property and equipment net from ERT projects, which are reflected in cash flows from investing in the cash flow statement. While the ARO remediation spend is reflected in cash flows from operations.
For the full year, operating cash flow was negative $10.2 million, a decrease of $22.7 million from the positive $12.5 million in 2020. The decrease was primarily attributable to the net loss before non-cash adjustments.
Adjusted free cash flow was $52.6 million, an increase of $35.9 million from the $16.7 million in 2020. The increase is primarily attributable to the $34.9 million of cash and restricted cash from the Gibbons Creek ERT transaction and an increase of $30.2 million in proceeds from the sale of real estate, property and equipment, including proceeds from the sale of the 80% of the real property acreage and scrap sales at Gibbons Creek. These changes were partially offset by a decrease in operating cash flow as previously discussed, and an increase of $4.2 million in capital expenditures, including $4.1 million of demolition costs at our Gibbons Creek ERT project.
Turning now to our balance sheet. As we discussed in the third quarter conference call, in November, we closed on a new credit agreement with JPMorgan Chase Bank. The credit agreement provides for a four-year senior secured revolving credit facility of up to $30 million, plus an additional $5 million of capacity that is available for letters of credit, which are supported by cash collateral provided by the company at our option.
We currently do not expect to draw under the new facility, although in November and December, we used the new facility as planned to reissue and replace existing letters of credit that have been cash collateralized by a $17.9 million promissory note we issued to B. Riley. Once those letters of credit were replaced, the cash collateral was released. We repaid the promissory note in full in late December.
Our gross consolidated debt at December 31, 2021 was $167.7 million, which was an increase of $1.7 million from $166 million at December 31, 2020. Our liquidity at December 31 consisted of our unrestricted cash of $24.3 million and $9.5 million of availability under our credit facility after accounting for outstanding letters of credit and borrowing base limits.
I’ll conclude by addressing our 2022 guidance, which we issue with these results. Those are revenue of $325 million to $365 million, a net loss attributable to Charah Solutions of $8 million to $12 million, adjusted EBITDA of $35 million to $40 million and adjusted free cash flow of $5 million to $15 million.
Looking at the guidance in a bit more detail. Our 2022 revenue guidance reflects a strong increase from the 2021 level of $293 million, driven by the new business awards received in 2021 and the continued ramp of existing projects. Our 2022 adjusted EBITDA guidance is $35 million to $40 million. As you may recall, our 2021 results of $40.1 million included a $5.6 million gain on a sales type lease from an ERT project that actually cleverest in 2020, but for technical accounting reasons related to the agreement, was required to be recognized in 2021.
Adjusting for this carryover from 2020, our 2021 adjusted EBITDA would have been approximately $34.5 million. As you may recall, we adjusted our 2021 adjusted EBITDA expectations upward by that $5.6 million at the beginning of 2021. The 2021 results also include significant contributions by the Gibbons Creek ERT project arising from the sale of 80% of the real property acreage in December, which was a $14.7 million gain, ongoing scrap sales and a reduction in ARO of $3.6 million.
Contributions by ERT projects are expected to be lower in 2022, due to not receiving the large upfront cash payments that occurred at Gibbons Creek in 2021 and the startup nature of the two new projects, which do require remediation, although we will continue to receive proceeds from the sale of the real property on into the project.
On the favorable side, we expect adjusted EBITDA to benefit from contributions by new projects, as well as the completion of ongoing projects that have experienced issues.
Our 2022 adjusted free cash flow guidance is $5 million to $15 million. Our 2021 results of $52.6 million, which included $34.9 million in cash and restricted cash received when we closed the acquisition of the Gibbons Creek ERT project and another $23.6 million on the sale of 80% of real property acreage considerably exceeded our expectations.
Cash flows at the two new ERT projects are expected to be more modest, particularly in the early stages and there will be cash outflows associated to ramping of remediation activities in demolition over the balance of the year and continuing into 2023.
Lastly, as we’ve discussed in our previous calls, our guidance is predicated on certain assumptions, which are discussed in more detail in our earnings release.
With, that, I’ll turn the call back to Scott.
Scott Sewell
Thanks, Roger. In closing, we believe that our success in new business awards, our progress in growing our businesses and expanding our service offerings and our keen focus on environmental sustainability continue to position the company for long-term success. We remain committed to positioning ourselves to take advantage of the expanding market opportunities and enhancing long-term value for shareholders.
Importantly, we are closely aligned with our power generation partners’ environmental remediation and sustainability initiatives, which should provide Charah Solutions with significant growth potential for many years to come.
Thank you again for your interest and participation. With that, operator, let’s begin the Q&A session.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from the line of Brian Butler from Stifel. Brian, please go ahead. Your line is open
Brian Butler
Thank you. Good morning.
Scott Sewell
Good morning, Brian.
Roger Shannon
Good morning, Brian. How are you doing?
Brian Butler
Good sir.
Scott Sewell
Good.
Brian Butler
All right. I wanted to start with kind of the award pace. So three record years in a row, but we now have the EPA ruling for the remediation of the water. Does that slow the pace? I mean, do we end up with a slightly slower number of size of contract awards in 2022? And how do you think about — how long does that EPA ruling really delay the generators to award contracts?
Scott Sewell
Yeah. Thanks, Brian. You’re right. I mean, very proud about the three years concurrently, of record new awards. When we look at the kind of the new ruling from the EPA, or what happened in January, we’re really excited about how that increases and expands the addressable market. We’re not 100% sure how that’s going to impact FY 2022. We’re still tracking $3.1 billion in pending proposals and our near-term pipeline is still over $7 billion. So we’re very excited about that, and the visibility that we have into that. But we do think that — or what we’ve seen here kind of in Q1 is a little bit of a delay. We don’t believe it’s going to last too long, but we’re still focused on trying to hit our fourth year of record awards, and we think the potential is out there to do that, and that’s going to be our objective for the year.
Brian Butler
Okay. And then kind of switching over to the ERT, can you give a little bit more color, maybe, on timing based on all the moving parts for — in 2022? And then maybe, on a longer-term basis, how should investors think about what that potential contribution going forward?
Scott Sewell
Sure. I think as we stated in the prepared remarks, continued optimism — I mean, enthusiasm around that, that category of our business as it’s continued to grow over the last several years. The announcements of Avon Lake and Cheswick are very exciting to us is that they will contribute to this year. I think you’ll see kind of a little bit of contribution from Gibbons Creek is that or — not necessarily wind down, but it — we’re kind of progressing through that one. But you’ll see the ramp from Avon Lake and Cheswick and we continue to be excited about those two projects, and others out there that we’re chasing right now. So it continues to be a great category for us. Roger, do you want to speak a little bit to kind of more specifics on the contribution aspect?
Roger Shannon
Certainly. Thanks, Scott. Yes, Brian, I’m just kind of thinking about Gibbons Creek. As we stated, we have the purchase agreement signed to sell the remaining 20% of the acreage. We talked about that being comprised of some admin buildings some switch Charah which are some kind of some higher value type parcels of the total. We’re expecting net proceeds of the kind of remaining 20% of the parcels to say, in the low $20 million area.
Like we said in the prepared remarks, we also have scrap sales that are going through the first half of the year, and that will probably wind up around midyear in the second, beginning of third quarter, so several more million from that.
So we do have — we do still have good cash flow coming from TMPA. Like we said, one of the big differences between Gibbons Creek, that TMPA property at Avon Lake and Cheswick was the upfront payment. We discussed that we got about $35 million of upfront from TMPA for the Gibbons Creek property. There is upfront cash, but to a smaller extent for the two properties that we announced, primarily because the amount of the ARO and remediation is smaller.
That said, like Scott said, we will kind of immediately start work on the decommissioning. We will recognize scrap income over the course of this year. But unlike Gibbons Creek where we had parcels, that didn’t have to be remediated out of that 6,200 acres that were available for immediate sale. The bulk of the part — really all the parcels at the two acquired properties will be sold following remediation. So they’ll be a little more back-end loaded from that perspective.
Brian Butler
Okay. Great. That’s helpful. And on the materials where you talked about the kind of the supply chain and weather kind of impacting the numbers. If supply chain doesn’t improve, is the pace that you saw in the fourth quarter kind of the right level to use kind of going through 2022?
Roger Shannon
Yes. A couple of different things there. And I know you’ll look at this, but I’d kind of refer you to the footnote 4 in the 10-K on revenues. So the way that we look at product now, and again, like we mentioned in the prepared remarks, it’s kind of aligned with how we look at the business and customer related. So when you look at the revenue, what we consider sales or raw material sales decreased from about $45 million to just over $30 million, primarily — well, almost exclusively as a result of the supply chain ocean going — vessel cargo rates, which have really made that less profitable. So we’re not seeing that.
As we go into 2022, if you look at that kind of that raw material sales number that we report of around $31 million. I wouldn’t expect a whole lot of change in that. Byproduct services are really all things byproduct related as it pertains to working with the utility. So performing — not only performing the day in and day out services and ash management, but recycling that into the cement industry.
So that, I think we’ll expect to see that increase over the course of this year, particularly as the Dominion Phase 2 project ramp. So we’ve transitioned from Phase I which was more of a construction project that we basically completed in 2021, that’s transitioning as we speak to a beneficial reuse project. So that will go on for 10 years, but that number will increase.
Like we talked about, also, we’re getting close to, we believe signing the EnviroSource contract. Of course, we don’t expect revenue from that this year, but that — as those ramp, that will be in the byproduct services category. So — and then finally, like we talked about on the infrastructure bill, while we really don’t know the timing of that, we hope it’s sooner than later. We’re very bullish on the growth opportunities. So we’ll expect to see that byproduct services category increase.
Brian Butler
Clear. So that ramp — that potential ramp in award isn’t in the current guidance. That would be upside?
Roger Shannon
No. No, it is. No. It’s — so it’s — when we look at the guidance number, the revenue of the $35 million to $40 million, we have the current expectations around the Dominion beneficial reuse project. Of course, certainly, like I said, there’s nothing in 2022 for EnviroSource. It’s — that’s about nine months, nine to 12 months to get started. But to make sure I’m addressing your question though. It is in the guidance, but that’s — it falls within that byproduct services category.
Brian Butler
Right. But the new EnviroSource contract that you’re expecting in the first half, there’s no revenue contribution in the guidance from that?
Roger Shannon
That’s correct. Missing something
Brian Butler
Okay. So that’s nine months to ramp?
Roger Shannon
No, nine months to construct. So once we say, we signed the contract mid-year, we’re looking at probably second quarter of 2023 to start producing revenue from that.
Brian Butler
Okay. That’s helpful. And I guess, then just looking at — you talked about the impact on the construction delays in the fourth quarter. Do you have a number for that, how big that was on the growth profit?
Roger Shannon
Yes. I would put it kind of in the $3 million range — $2 million to $3 million. I mean, we certainly were disappointed by that. We had a fantastic year at over $40 billion of EBITDA. That was some offset that we saw from these projects that are very close to winding down and we’re expected, to a very large extent, by some weather issues that pushed that out. But yes, I’d put it in the kind of $2 million to $3 million area — $2 million to $3 million area.
Brian Butler
Okay. And then last one for me. Just on the outlook. Do you have a number for CapEx in the guidance for the cash flow?
Roger Shannon
Yes. It is — sorry, Scott. Anyone can answer that. So we’re excluding the EnviroSource unit, we’re kind of thinking in the mid-teens area. You’ll call it 15.
Brian Butler
Okay. Great. Thank you very much for taking my questions. I’ll get back in the queue.
Scott Sewell
Sure.
Roger Shannon
Thanks, Brian.
Operator
Thank you, Brian for your question. Our next question comes from the line of Alex Rygiel from B. Riley. Alex, please go ahead.
Alex Rygiel
Thanks. Good morning, gentlemen and great year.
Scott Sewell
Good morning, Alex. Thank you.
Alex Rygiel
You’re welcome. A couple of questions here. Obviously, due to the EPA ruling, some customers are reevaluating some of the remediation plans and delaying some awards. Is any of that reevaluation sort of going backwards, such that your opportunities are less? Or are all of those sort of reevaluations all to the incremental positive of the opportunity set, and therefore, we really just have a modest delay in timing here?
Scott Sewell
You’re spot on, it’s a modest delay in timing. Couldn’t be more the opposite of kind of the going backward standpoint. And that’s where our enthusiasm and optimism comes from is that, as they have to sit back and kind of reevaluate some of these groundwater issues, it only increases the size and scope of the project, primarily where they’re going to have to go out and clean close or dig out all of the ash from these impoundments.
So yes, it’s a net positive all the way around from an opportunity standpoint. We’re just going to have to bear with them here as they rescope and reengineer some of these projects for a kind of a modest delay as you phrased earlier. But no, we’re really excited about it. We think it’s going to be a great plus for the business.
Roger Shannon
Yes. And Alex, it’s Roger. I mean, I’m not — certainly not to give information on any specific customers, but there were even some comments — public comments from utilities following the announcement that where — to Scott’s point, where they had plans in place to do a cap in place, because of the groundwater discussion contamination issues, they’re having to go back and say, okay, the cap in place is not going to be permitted to have to pivot to a full clean closure. And that is exponentially larger in terms of a project. So it certainly is, we believe, expanding the addressable market.
Alex Rygiel
Sure. And then when you characterize the modest delays, are we talking modest delays in one to two quarters or modest delays of one to two years?
Scott Sewell
Our belief is we’re talking quarters, not years on this. And again, I think it goes back to one of the initial questions that Brian asked earlier. I mean, we’re still tracking that $3 billion in pending and $7 billion in near-term potential opportunities. And the business development team here is focused on trying to exceed our 2021 numbers. And we believe we have a path to do that, and we’re going to try our best to keep moving forward.
Alex Rygiel
And then, have imports from Europe or Asia improved at all in the first quarter? Or is there any, if not, is there any visibility that, that might change in the second quarter?
Scott Sewell
Yes. I think, and we alluded to this, I believe, in some of the comments earlier. We do not see any improvement on imports from Europe or Asia right now coming into Q1 and really don’t expect that any improvement in the balance of the year. But I would say that was a very small portion of our business. But we don’t see any improvement right now, no. And we’ve kind of included that in our calculations and thought process when it comes to guidance as well.
Alex Rygiel
That’s helpful. And then lastly, any update on additional EnviroSource opportunities beyond the first?
Scott Sewell
Yes. So we’re really excited to hopefully, be giving you guys some really good news here in the coming weeks or months, hopefully closer to weeks than months, but definitely expecting that Q2 should be a good year for — a good quarter for us for announcing.
So we get the first one behind us, and we’ve got a couple more in the queue that we’re talking to some customers on and have been talking to them for quite a while now. So the reception is great. And hopefully, we’ve got some — similar to our ERT announcements, hopefully, we’ve got a good cadence on announcements relative to EnviroSource in the future.
Roger Shannon
Yes. Just to add to that briefly, there are some conversations specifically around utility financed EnviroSource that we have kind of in that a $3 billion number that we’re continuing to try to progress. And then we do have a — we kind of developed a punch list of potential opportunities over the next several years. And there is — we are even seeing interest from like, the Department of Energy, federal government around being supportive of these.
It’s a concept on the ash recycling beneficiation and substitution in Portland cement that has a lot of receptivity and alignment with some goals within the DOE to reduce greenhouse gases. So there’s some conversations going on around there. So we’re more enthusiastic about the day — by the day about the opportunity to start to roll these out, and we think the first one is just to start.
Alex Rygiel
Excellent. Good luck.
Scott Sewell
All right. Thanks Alex.
Operator
Thank you, Alex, for your question. Our next question comes from Tony Bowers [ph] from Interac [ph]. Tony, please go ahead with your question.
Unidentified Analyst
Hey, Scott and Roger, great momentum and wonderful pull-through. I know it’s a lumpy business and it’s difficult to model, but to be more of an optimist, if your continued ability to execute on this pipeline gathers momentum. Where are the bottlenecks?
And we’re dealing with unprecedented inflation at the moment. What’s happening from a standpoint of the price of yellow iron and are you really able to find the contractors, should you win these new opportunities? Can you — what are the challenges to really scaling up on it?
Scott Sewell
Good morning, Tony and a great question. And also, thanks for the comments on the momentum and the progress we made in 2021. We share your view. We’re pleased with the results, but yes, we think we can continue the momentum, and we will. Just as we’ve always done, we’ve grown through challenging times. It’s kind of always been kind of one of Charah’s cornerstones is this continued growth when we look at kind of the different phases of our business over the years.
You’re right. There are — If we continue this momentum and we do continue to pick up new awards, there are going to be some bottlenecks or some constraints. But, I think, all of them are solvable. We have not — we haven’t come across anything yet that’s kept us from executing on any of the new awards or the record new awards that we had last year. I think, obviously, there are some supply chain issues out there, when it comes to availability of yellow iron or also, just some tighter labor markets in certain regions.
But I think the benefit of where we stand today is that as we do get these new awards, I think our customers understand those same challenges, and we’ll continue to bake in certain provisions into our contracts that make it de-risk some of those constraints. And we’ll continue to push forward and move forward. This work has to get done and will get done and we are the one of the suppliers of choice here for completing it.
So, I think, we’re in a good position, even with the momentum that we have right now, and kind of the current market conditions around inflation or supply chain issues, we’ll be able to solve those and move forward. So we’re comfortable with where we stand and where kind of our growth at path is.
Roger Shannon
And Tony, it’s Roger. Good morning. Just a quick follow-up on the yellow iron question. Look, in response to Brian’s question, we talked about approximately $15 million number for CapEx, excluding EnviroSource. So of course, there is some CapEx that goes into the ERT side as well.
So what I’d remind you is, last year was a bigger number in terms of sourcing equipment. Of course, we had the start-up of some very large jobs that we sourced equipment for. So we were — we feel really good about what we were able to get in last year. We had equipment even arriving towards the end of the year that has been put in service.
So, I think our procurement and fleet group does a fantastic job of looking ahead. We’re not really seeing any bottlenecks at the moment in terms of not being able to get the equipment need. In fact, we’ve — I think they really planned ahead very well, and we just didn’t expect to bring as much in.
Of course, as these awards convert, we would look to either sourcing new equipment or redeploying existing equipment coming off jobs that are finishing. Of course, we do the latter first, and then — but we feel confident about being able to do that.
Unidentified Analyst
That’s helpful. And on the ERT, I mean, Gibbons Creek, you guys turned out around really efficiently and maybe, it was just a unique opportunity. Do you see other decommissioning projects that have the characteristics of a Gibbons Creek? They’re all slightly different, I imagine.
Scott Sewell
You’re right, Tony. They are all slightly different. If you look at the ones that we performed, I think each one has been pretty bespoke in its characteristics, both from our performance standpoint, as well as the financial and commercial characteristics of each one. So, you’re right. Gibbons Creek has been a great example of how we perform these projects and what we can do.
I mean, if you look at the kind of portfolio of them right now, Gibbons Creek’s on the larger end. I think the other ones, just from a size perspective, are a little bit smaller, but they still have some of the similar characteristics. And I think to your point on other potential Gibbons-types of projects, they’re out there. They’re out there and they’re — our team is focused on bringing those in as well.
So, it will continue to be a good mix of — from a size standpoint when it comes to the ERT business. And it is a bit lumpy. But as we continue to layer more and more of these on top of each other, we’ll hopefully smooth out some of that lumpiness and continue to drive good, predictable revenue and EBITDA streams for the business.
Unidentified Analyst
Thank you.
Scott Sewell
You’re welcome. Thanks, Tony.
Operator
Those are all the questions we have for today, so I’ll now hand back to the management team for any concluding comments.
Scott Sewell
Great. Thank you, operator, and we appreciate everyone’s time today. We are, again, very pleased with our FY 2021 results and look forward to future calls and reporting out Q1 and the balance of 2022. So, thank you for your time and your interest.
Operator
Thank you, everyone, for joining us today. This concludes our call. Please now disconnect your lines. Have a lovely day, everyone.
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