Earnings Call Transcript - FLR Q1 2021

Operator, Operator

Good morning, and welcome to Fluor's First Quarter 2021 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 call 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 30 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 Landkamer, Director of Investor Relations. Please go ahead.

Jason Landkamer, Director of Investor Relations

Thank you, Operator. Welcome to Fluor's 2021 first quarter conference call. With us today are David Constable, Fluor's Chief Executive Officer; and Joe Brennan, Fluor's Chief Financial Officer. We released our earnings announcement 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 you to our safe harbor note regarding forward-looking statements, which is summarized on Slide 2. During today's presentation, we'll be making forward-looking statements, which reflect our current analysis of existing trends and information. There is an inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences, in our Form 10-K 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.fluor.com. I'll now turn the call over to David Constable, Fluor's Chief Executive Officer. David?

David Constable, CEO

Thank you, Jason. Good morning, everyone. Thank you for joining us today. If you could please turn to Slide 3. Before we get started on operational results, one of the strategic priorities outlined during our Strategy Day was to foster a high-performance culture with a purpose, and I'm pleased to announce that we have appointed Lonnie Aziz, a six-year Fluor employee with 20 years of EPC experience, to lead our diversity, equity, and inclusion efforts. Fluor is a vast and diverse company, and with Lonnie's leadership, she will help us retain, attract, and cultivate a workforce that represents the world in which we live and operate. On a separate subject, please note that earlier this week, a favorable motion was granted regarding an outstanding securities class action lawsuit. This motion dismissed with prejudice all allegations except those relating to a single statement in 2015 about one gas-fired power project. While no assurance can be given as to the ultimate outcome of this remaining obligation, we do not believe it is probable that a loss will be incurred. Please turn to Slide 4. It's been great to see the vaccine rollout around the globe, and I'm particularly encouraged by the speed of distribution here in the United States. Although there are still many regional challenges to deal with, the end of the pandemic seems to be in sight, which will be a relief to all of us. Currently, well over 90% of our project sites and about 80% of our offices are operating at limited capacity or better. One exception is our office in New Delhi where a surge in COVID cases has caused local officials to issue a lockdown and curfew order effective until May 10. The safety and well-being of all employees is our top priority. To help support our Delhi colleagues and families that are in medical need, we have lifted several oxygen concentrators from Houston. Our 1500 New Delhi employees are all now working safely and productively from home. In the first quarter, our book-to-bill ratio was 1.25, with new awards led by the PEMEX Dos Bocas refinery program in our Energy Solutions Group. While we continue to see softness in the markets regarding capital spending, we anticipate that awards will start to pick up as we get into the back half of 2021. Our teams are busy on front-end work in project pursuits that will help build a healthy backlog over the next few years. Note that we are now reporting in line with our three new business segments: Energy Solutions, Urban Solutions, and Mission Solutions. Additionally, Stork is now a part of discontinued operations. Joe will give an update on our divestitures of Stork and AMECO in just a few minutes. Moving to Slide 5 with regard to NuScale, on April 5, we announced a $40 million equity contribution from JGC. We know JGC well, having executed projects with them for more than 10 years. They are an ideal partner that can support NuScale's industry-leading carbon-free energy solution. In addition, this morning we announced that NuScale has retained Guggenheim Partners to explore financing options to fund the commercialization of NuScale's small modular reactor technology. This is consistent with the strategy announced in January to reduce Fluor's equity ownership of NuScale. Regarding our cost savings initiative, efforts are now well underway to streamline the organization. We will be updating you on our progress as the year proceeds. Key to this program will be ensuring the deployment of world-class execution teams onto new prospects over the coming quarters, coupled with the proper level of fit-for-purpose back-office support. I'd like to take the next few minutes to inform you about what is happening across our end markets, and what we expect to see over the next few quarters. Please turn to Slide 6. In Energy Solutions, this quarter our ECO Fluor joint venture was awarded three contracts totaling $2.8 billion for the PEMEX Dos Bocas refinery in Mexico. We have a long and successful history with PEMEX contracts, and we are pleased to be adding our $1.4 billion share of this refinery program to our backlog. During the quarter, a Chemicals project was canceled, and as a result, we removed approximately $1 billion from backlog while slightly increasing the Energy Solutions total backlog to $11.1 billion. When we unveiled our strategy in January, there was a lot of interest in Fluor's energy transition opportunities supporting a reduced carbon future. Over the past few months, we've had extensive conversations with clients about our energy transition capabilities. We are executing several carbon capture FEED and feasibility studies using our proprietary Economy FG+ technology. Additionally, we are doing early work in the areas of refinery efficiency, gasification to produce carbon-negative energy, green hydrogen, renewable diesel, renewable jet fuel, and energy storage. In each of these areas, we have identified projects and are continuing to pursue new opportunities as well. I'd also like to provide a quick update on LNG Canada on Slide 7 of the presentation. I encourage all of you to check out the project website and social media channels to see our progress. On site, we have completed all site preparation work, the Cedar Valley Lodge camp is filling up, filings are in place, and overseas modules are being constructed in the fabrication yards. We've been re-mobilizing craft workers on site and are currently at required staffing levels. In 2021, the focus on site is completing the installation of underground cable and pipe, as well as concrete foundations. This will allow the project team to go vertical and be positioned for the receipt of large equipment and the first modules which are scheduled to arrive later this year. COVID-19 and changes in law have impacted both engineering and material deliveries, as well as the site's ability to mobilize workers due to public health orders. However, several opportunities are being explored jointly with the client to mitigate the COVID-19 impact and changes in law. We will keep you updated on the outcome of these discussions. Moving to Urban Solutions on Slide 8. This segment is comprised of the infrastructure, mining and metals, and advanced technologies and life sciences end markets. In infrastructure, we completed the handover for the 183 South highway project outside of Austin, just a few miles from the Oak Hill Parkway project we booked in 2020. There is obviously a lot of interest and excitement with the proposed federal infrastructure plan. We think a long-term infrastructure bill would obviously be a good thing for the US economy. In addition to providing needed funding for surface transportation improvements, it would enable state and local governments to better plan for future growth and capacity needs. It's too soon to tell what impact the bill could have on Fluor, but we typically experience a two to three-quarter lag between any new federal infrastructure spending and the release of construction and services RFPs within the states. Within our infrastructure focus area of regional projects in selected states, we are tracking some key opportunities in Texas and North Carolina this year. Please turn to Slide 9. Next, we remain confident in our mining and metals opportunities and prospects. We are currently completing FEED work that represents $20 billion of potential projects, and we see a robust pipeline of FEED and feasibility studies ahead of us. These projects will support an increasingly urbanized and electrified world. This is driving the need for investment in minerals like copper and lithium. We have several large prospects in 2021 and expect awards throughout the year. For our last group in urban solutions, we have a lot of positive momentum in advanced technologies and life sciences. As we briefly mentioned in February, in the first quarter, we won a significant EPCM biotech project in Europe. This award from Fuji Film is for a world-scale biologics drug substance manufacturing facility that will be used to produce a variety of treatments including vaccines. We have seen over the last 18 months that vaccine development is an integral part of our global economy, and facilities like this one will be essential in protecting the population. Finally, there's been a lot of news recently about the inability of semiconductor chip manufacturers to increase production to meet demand. While it will take several months for the supply chain to overcome this shortage, this is another area where we can leverage our advanced manufacturing capabilities. Currently, we are tracking several semiconductor prospects in the United States. Moving to Mission Solutions on Slide 10. This quarter, our Fluor-led joint venture won an extension for the decontamination and decommissioning contract from the Department of Energy in Ohio. This reimbursable 12-month contract with two six-month options is valued at $690 million. The DOE is a key long-term client and we look forward to continuing our support at Portsmouth. A few weeks ago, the Federal Government announced that it would withdraw all troops from Afghanistan by September 11. Although uncertainty about the pace of withdrawal remains, Fluor expects to book an additional three-month extension to LOGCAP IV in the second quarter, which will allow us to further support the US Army as Afghanistan demobilizes. Before I turn the call over to Joe, I would be remiss if I didn't take the opportunity to acknowledge yesterday's retirement of Peter Fluor from the Company's board. Peter is the last of a long line of family members to serve the company since our founding in 1912. Joining the Board in 1984, he continued the Fluor family legacy of a commitment to excellence, integrity, and ethics, always putting the safety and well-being of employees first and recognizing that teamwork is a key component of our success. On behalf of the entire company, I would like to thank Peter for his outstanding service and wish him and his entire family much health and happiness going forward. With that, I'll now turn the call over to Joe for the financial update. Joe?

Joe Brennan, CFO

Thanks, David, and good morning, everyone. Please turn to Slide 11. For the first quarter of 2021, we are reporting adjusted earnings per share of $0.07. As a reminder, we are adjusting our NuScale expenses, foreign exchange fluctuations, impairments, and certain legal-related costs. Our adjusted results also exclude an embedded foreign currency derivative for an Energy Solutions project in Mexico. This derivative is based on exchange rates between the US dollar and the Mexican peso and will fluctuate over the life of the contract, or at least until the job has been fully procured. Our overall segment profit for the quarter was $60 million or 2% and includes the $29 million embedded derivative in Energy Solutions and quarterly NuScale expenses of $15 million. This compares favorably to $55 million in the first quarter of 2020. If we remove NuScale expenses and the effect of the embedded derivative, it would improve our total segment profit margin to 3.6%. Margins in Energy Solutions and Urban Solutions reflect reduced execution activity on certain projects and the lack of new awards to replace projects we are completing. We anticipate project activities will accelerate as we move through 2021, and Mission Solutions margins were strong due to the increased execution activity on DOE projects as well as an increase in performance scores on several projects. As David mentioned, we received a $40 million investment in NuScale from JGC this quarter and are anticipating other significant investments in the near future. Note here that even though partners are meeting new cash needs, we will continue to expense 100% of this investment on our income statement on a consolidated basis. Our G&A expense in the quarter was $66 million. This is higher than our expected run rate due to the increase in our stock price driving up the value of our executive compensation expense. As David said, our cost savings initiative is well underway. We have identified cost savings above the $100 million target previously discussed. I look forward to providing an update on the progress as we get into the execution phase later this year and transition into a fit-for-purpose organization. On Slide 12, our ending cash for the quarter was $2 billion, with 25% of this domestically available. As a reminder, the rest of our cash is tied up in either variable interest entities and projects or in foreign accounts and is not easily accessible. Our operating cash flow for the quarter was an outflow of $231 million and was negatively impacted by increased funding of COVID costs on our projects, higher cash payments of corporate G&A, including the timing and extent of employee bonuses, and increased tax payments. While it is typical to have a lower operating cash flow in the first quarter, we expect full-year operating cash flow to be positive. We used approximately $50 million in cash for challenged legacy projects in the first quarter. As I stated in February, we expect to spend an additional $65 million over the balance of 2021 to fund these projects. As we announced earlier this week, we have divested our AMECO North America business for $73 million. This follows our successful transaction of our AMECO Jamaica business last year. We are now focusing on our South American assets and will update you on that plan later in 2021. The Stork divestiture process is well underway, and we have received interest from a number of promising buyers. We are working through our diligence and targeting a sale near the end of this year or early in 2022. Please move to Slide 13. We are maintaining our adjusted earnings per share guidance of between $0.50 and $0.80 for the full year. Hitting this target is dependent on projects being awarded in a timely fashion and revenue picking up over the next two quarters. We are also maintaining our previous segment-level guidance and expect 2021 full-year segment margins to be approximately 2.5% to 3.5% in Energy Solutions, which excludes any fluctuation from the embedded foreign currency derivative, 2% to 3% in Urban Solutions, and 2.5% to 3% in Mission Solutions. Before we open up the line for questions, I know a number of you have asked for a historical view of our financials under the new segments. We have posted unaudited financials for 2019 and 2020 that align with our new reporting structure on the Investor Relations section of our website. Operator, we are now ready for our first question.

Operator, Operator

We'll go ahead and take our first question from Andy Kaplowitz from Citigroup. Please go ahead.

Andy Kaplowitz, Analyst

Hey, good morning, guys. David, the book to bill at 1.25 in Q1, Fluor actually grew backlog, even despite that billion-dollar cancellation you talked about. I know you talked last quarter and are pushing that one-time book to bill only at the end of 2021. So it seems like you've seen an acceleration of awards or is your expectation, but maybe you could comment on that. And then whether you think you now could sustain backlog growth for the rest of the year.

David Constable, CEO

Thanks, Andy. I appreciate the question. Good morning. It was a good quarter obviously for new awards across all three business segments. Obviously, we had the great award in Mexico with PEMEX for three different packages totaling, as I said, $2.8 billion, just over $1.4 billion as our share, and then some good activity in Mission Solutions and the big Fuji biotech plant, which, like I said, is world-scale over in Denmark, and there will be more where that came from as well down the road. So great to get started in the first quarter with those awards. I think you have to look at the book to bill in light of the lower revenue. I think because of the COVID impact on new awards in 2020 and the hangover in 2021 on revenue, in the volumes we couldn't push through on certain very large projects due to COVID that pulled down that revenue lower than our planned number. So I think that's the best way to look at it. Q1 saw that good book-to-bill but you can expect the revenues to be coming back up as we enter the second, third, and fourth quarters, and then we will probably get back to, hopefully get back to that 1.0 book-to-bill at the end of the year like we said in the last call. So that's how you should look at it.

Andy Kaplowitz, Analyst

Maybe I can ask you about the cadence then of EPS for the year based on the revenue comment you had suggested before. You've done that it would ramp up maybe a bit back-end loaded, but given the slow revenue start. Is it more back-end loaded even now and looking at maybe more of a moderate revenue decline versus the sort of slight revenue decline you guide us to for '21 versus '20? I could ask Joe to comment on how that's going to flow through the year.

Joe Brennan, CFO

The way I look at it, some of our major projects sitting in backlog today have had some additional impact in Q1 related to COVID that we had hoped during the planning process would have generated additional revenues. But we do believe as we get into Q2, that our backlog is really going to take off, specifically LNG Canada, as they ramp up their fabrication activities. Our TCO project is getting back on site. I think also, being able to add $3.7 billion of new awards at the beginning of the year will allow us to get significant burn on those projects. So I would suspect that we'll see a recovery within those revenues as we progress into Q2 and Q3.

Andy Kaplowitz, Analyst

And Joe, just to clarify, ongoing negotiations, you have related to COVID, even LNG Canada and elsewhere, you expect them to resolve at least favorably or not big cost creep for you guys. Any color you can give there?

Joe Brennan, CFO

So here, the work that we've done with our clients, I would not expect a significant cost creep. I think we’ve kept it out of a litigation type discussion, and we're working with our clients to get to the right resolution around change in law and force majeure and mitigation strategies. So I would expect that any type of cost that we have relative to positions between the two parties will be relatively minimal.

Andy Kaplowitz, Analyst

Thanks, guys.

Operator, Operator

And we'll go ahead and move on to our next question from Steven Fisher from UBS. Please go ahead.

Steven Fisher, Analyst

Thanks, good morning. Just a follow-up on Andy's question there, can you just give us an update on the timing of those negotiations? When do you think we could have that initial agreement resolved?

David Constable, CEO

Steve, you're specifically talking about LNG Canada, I take it?

Steven Fisher, Analyst

Yes. Sorry, LNG Canada.

David Constable, CEO

Yes. So we're working very closely with the clients on that and obviously have put all of our notifications in place for the impact on the project to date. As we said before, we have a weekly meeting that's a very complex topic obviously based on we’ve got three engineering offices, a massive site in Canada, a couple of fabrication yards, and a number of suppliers and vendors supplying the project that all have to be rolled into the discussions and the path forward that we're working on with the client. I can tell you that it's a very good discussion, very positive working relationship with them on the negotiations to put the COVID impact that took place in 2020 and into early 2021. Here is what we're working on right now, and I guess what I can tell you is that discussions are going very well, and I would expect at least the first negotiation to be closed off, the impact to be closed off here in the relatively near term.

Steven Fisher, Analyst

Okay, that's great. And just to clarify, I think there was some discussion of some of the general supply chain challenges. What we're seeing in the overall market today, will that be incorporated in this type of resolution, or will that just be kind of put off to some later point?

David Constable, CEO

Yes, I think on the supply chain, we're in very good shape on the project. We're nearing completion on engineering. I would say procurement is committed to 93% of the equipment and materials, and subcontractors are also over 80% committed. So we know all that pricing for commodities in bulk and equipment and materials and subcontractors, so there's not really a lot left on that front from an escalation perspective given some of the higher prices you're seeing in commodities and materials currently. So we're very comfortable on that front. I can also comment on the PEMEX refinery work; we're in a very good place there as well. With respect to escalation, we've been working for decades in Mexico with our joint venture partner on PEMEX on very large contracts primarily in the energy space, and those are all following our stringent pursuit criteria—an open book process with the customer—and engineering and equipment costs were clearly understood prior to converting those contracts. We negotiated with the customer that the price excludes any escalation; the actual escalation cost will be recovered through price adjustments. So we have really good contracts down there as well as union agreements where any revision to a labor agreement entitles us to a price adjustment. So we're really protecting ourselves well and following our strategic priority of fair and balanced contract terms as we talked about at Strategy Day. Joe has got a comment.

Joe Brennan, CFO

Well, yes, I know, Stephen. The only thing I was going to add in terms of impacts related to the executed POS we bought out, but there is obviously some fabrication going on around the world relative to being able to supply.

David Constable, CEO

Goes back on LNG Canada.

Joe Brennan, CFO

Back on LNG Canada for providing the fabrication yards. Those are all included in our force majeure and change in law claims, so they would be a result of COVID impacts as well. So they've been built into the discussions that we've been having relative to schedule delays and additional costs associated with supplying and feeding the fabrication yards to get the progress they need.

Steven Fisher, Analyst

Great. And then just from a business development perspective, I know you guys want to be very selective. But to what extent are you increasingly going on offense as the economy recovers and commodity prices are up here? Are you kind of increasingly pushing sales pursuits, or are you still more focused on kind of riding the ship and working through what you have to get through?

David Constable, CEO

It's a great question. Thanks, Steve. We're really focused on key account management with our sales executives and our wholesale operations technology teams that are the go-to market for us. And we've got this external push underway to enhance a relationship-based approach with our clients. We are definitely on offense. Our first strategic priority is to drive growth right across the business lines, including non-traditional oil and gas. I think that's the key area. I've been spending a lot of my time recently with the client base and talking with them about all of the expected CapEx, if you will, taking the lid off post pandemic and the pent-up demand that's coming to us. So we really are working in all the growth markets we've talked about: in Chemicals, in advanced technology, life sciences, mining, and obviously in infrastructure. So that's definitely the plan—to push that first strategic priority of driving growth. We've got great prospects; I talked last time about all of our FEED work—we're currently working on over 150 front-end design programs totaling over $110 billion in total installed cost that's in-house right now, all in early work, early phases of course, and they don't all go to FID. But it gives you a good indication of how much front-end work is out there, and then we're chasing another $140 billion in early front-end design and study work in 2021 and 2022. So, definitely on offense, Steven.

Steven Fisher, Analyst

Terrific, thanks so much.

Operator, Operator

We'll go ahead and take our next question from Jamie Cook from Credit Suisse. Please go ahead.

Jamie Cook, Analyst

Hi, good morning. I guess two questions, one just with commodity prices where you are. I understand your focus on more energy transition or green energy, but are there any green shoots that you're starting to see in your traditional oil and gas business? It sounds like Chemicals is positive, and I'm just wondering how what you're seeing in terms of terms and conditions as the economy starts to improve, and you have less players committed to the EPC market or have walked away from it. I'm wondering what that means for potential terms and conditions as we come out of this. And then my second question on the divestitures, I guess in particular Stork—with some of the cost-cutting you've done, and things start the economy starting to improve. I'm just wondering if the earnings for that business are potentially under-appreciated, and sort of how we think about the conversations with customers in terms of potential valuations that you could fetch for some of these divestitures. Thanks.

David Constable, CEO

Thanks, Jamie. Good morning. I'll have Joe answer the divestiture of Stork and talk about valuations and give us some thoughts on what we're seeing at Stork right now. Yes, with commodity prices—what is iron ore, $200 a ton now or something right?—as just one example; copper is up, Brent oil—all these things are driving our clients in the right direction from our perspective. Like I said, we're talking to a lot of chemical clients right now and a lot of downstream clients on traditional downstream work in addition to the energy transition that they've got to spend. They're starting to throw billions of dollars into energy transition. Obviously, it's very early days, but we've got a lot of energy transition work in-house with them as well to look at how they might attack that challenge that we all face regarding a lower carbon future. So, yes, I'd say chemicals downstream traditional work is picking up, and you just saw in Mexico, there is more of that internationally for us. Life sciences and manufacturing are definitely going to be picking up based on the challenges with supply across that sector and we've got infrastructure where we're expecting to see a lot of growth as well. So yes, green shoots, definitely. If I look at those FEED packages, I just was talking about, Chemicals features prominently, LNG is featuring prominently in front-end work for us and downstream. And then in addition, advanced technology life sciences in the mining space is one of the standouts as well.

Jamie Cook, Analyst

The terms and conditions stated, are they potentially more favorable as there's fewer players? You guys have stayed committed to EPC and a lot of players have not. I'm just wondering if that ends up being a positive for you guys at some point.

David Constable, CEO

I think the dynamics in the marketplace play in our favor to work towards fair and balanced terms with the right customers, and we are firmly on that track. I think the PEMEX contracts that were signed are just a great example where we improved our position there. I would say we will be seeing these fair and balanced contract terms. If not, then we'll go work on something else. That's just the way we're going forward, and with all this front-end work, there is no lack of prospects for us. It's not if, but when the full FIDs on this CapEx are pulled. So we will be very, very selective on our terms and conditions, but to your point, I do think we will be able to do better based on the smaller pool of contractors out there able to bring full-service rates from these early solutions and convert all the way into EPC and EPCM, so that's how we're seeing it.

Joe Brennan, CFO

In regards to how we're viewing Stork, I think we've always viewed Stork in terms of the pre-COVID valuations. During the COVID period, and I think we talked about it maybe on one of the previous calls, a lot of the refineries have put off operations, maintenance, and turnaround activities due to capital constraints. As we start seeing those come back into the market and the requirement to perform those activities, that's how we're looking at our quality of earnings analysis. We're looking more towards the future and what Stork is going to look like in terms of how we're discussing it with potential buyers. At the end of the day, in terms of what valuations I would see, I don't really necessarily have a range yet as we're still in the process of finishing the diligence and will have the data room open here in the next 2 to 4 weeks. Then we'll start getting some real feedback relative to how the market is viewing what Stork's potential valuation is.

Jamie Cook, Analyst

Okay, thank you. I'll get back in queue.

Joe Brennan, CFO

Thanks, Jamie.

Operator, Operator

We'll move on to our next question from Sean Eastman from KeyBanc Capital Markets. Please go ahead.

Sean Eastman, Analyst

Hi, guys. Thanks for taking my questions. On the $20 billion in mining scope that you guys are in process on the FEEDS, I'm just curious, historically, how much of that has translated into EPC for Fluor? Just trying to get a realistic idea of how much Fluor could win and execute out of that number and how that number translates into Fluor revenue? It would be helpful to get that detail.

David Constable, CEO

Thanks, Sean. Good morning, and thanks for the question. When you think about just straight prospects out there, the straight prospect list in the total TAC in revenue, we think about probably a 30% to 40% win rate there, based on historical prospects. But this over $20 billion work is actually in-house with front-end contracts in place, so obviously, it's much, much higher than that conversion rate because it's more a matter of does the project get to full FID based on the market, the internal rates of return for the client, and the cost schedule CapEx and so on. Assuming that all goes forward, then we've got a very high likelihood of converting a lot of this work. Let's ask Joe if he's got any exact percentage. I don't think we track that exactly.

Joe Brennan, CFO

No, we don't necessarily track it, but I would reiterate what David is saying relative to we are essentially in a sole source position during the FEEDS, working with the clients in order to get the right return on investment and through value engineering and relationship. So, it is a much higher percentage in the position that we're in in terms of our win rates typically.

David Constable, CEO

Sean, the way to think about that is if you've already got Fluor in place on your project, you can have a much lower project lifecycle cost if you convert the FEED into EPC because you're shortening your schedule and getting to market sooner. So that's a real value for the clients, and going back to strategy, that's what we're trying to do. We're trying to get front-end solutions with all of our customers and bring solutions to the table and then continue on.

Sean Eastman, Analyst

Okay, terrific. That's helpful. Maybe shifting over to the cash flow. You guys have talked about maintaining this cash balance at around $2 billion. There's a lot of moving parts in there. I'd just like to try and flush out what the underlying free cash flow outlook is for this year, whether that's fully intact? Just isolating that around sort of the debt paydown and funding for loss projects and whatever it is included in there for asset sales. If we could just kind of get that bridge, it would be helpful?

David Constable, CEO

Yes, it was a low operating cash flow quarter, and Joe has got—

Joe Brennan, CFO

Yes, we can talk about the first quarter. There were a number of non-recurring events that occurred in the first quarter—executive comp payouts, we had the CFHI payment to finalize our investment in CFHI, we had the provisions for the challenge projects, which will ultimately be a recurring impact; we had typically our project working capital adjustments flowing from Q4 into Q1. So we had a significant amount of accounts payable. But we do see based on the back of backlog and the strong bookings in quarter one that we will maintain and slightly grow our cash flow. What's not included yet is the AMECO divestitures, the $73 million. What's not included in that number are the two P3 divestitures, nominally between $40 to $50 million, and then ultimately our ability to divest Stork during the year, which will have a significant impact on that number, as well as the overhead reduction initiatives that we're putting in place, which will have a real cash positive impact. We're saying flat to slightly up, but it does not include a number of those moving pieces that I just outlined at this point.

Sean Eastman, Analyst

Helpful. Thanks for the time.

Operator, Operator

We will now take our next question from Michael Dudas from Vertical Research. Please proceed.

Michael Dudas, Analyst

Good morning, gentlemen. Maybe in the Urban Solutions area, certainly mining is going to be a big positive going forward. Maybe you can elaborate a little bit more. You touched on vaccines; just mentioned there are others to come. You talked about semiconductors. Maybe you can flush out some more on scope timing in your pipeline or the funnel opportunities? Do you expect acceleration because of what we've been seeing on the supply chain front domestically in the United States or worldwide? Is that something that can actually provide meaningful booking opportunities later this year? Is that something that's more looking into 2022 for those projects?

David Constable, CEO

Thanks, Mike. Good morning. The HLS business is doing extremely well. Their offices are full, and our home office engineering talent is doing lots of work around the world and actually bringing in personnel from other business lines to support them. So they are very busy, and they're busy in data centers. They're busy in manufacturing. Looking at quite a number of semiconductor chip plants primarily here in the United States—some massive facilities—and then obviously, life sciences, where they continue to make progress. There are new awards that will be spread across 2021 and just continue to grow. I don't think we would disclose the exact prospect list or the expected new award values to you, but you can look at it that way: they're going to be picking up as you go through 2021 and into 2022. They are in a very good space right now, and again, they're a faster book and burn as well. Their projects come up fairly quickly and burn fairly quickly. They don't have, like mining and metals or energy, a lot of long-term projects, but they come up fast and burn fast. Do you want to add anything, Joe?

Joe Brennan, CFO

No, I think it's appropriate.

Michael Dudas, Analyst

Thank you. My follow-up is regarding your announcement on NuScale today. You characterized that as quicker than you expected with the timing and structure of the financing. Is there a monetization opportunity for you and the other partners? Maybe you can flush that out and what do you think about the timing and the structure that certainly early indications that you're seeing with regard to accelerating net-zero carbon power opportunities, which should be well received in the marketplace once people understand it?

David Constable, CEO

Yes, and people are starting to understand it. We've got great partners, the DOE and DOD certainly get it, and the utilities are coming along. It's very exciting times, not just in the US, but internationally. Canada obviously is a nuclear country as is Japan and many others that we're getting a lot of incoming interest from regarding NuScale and seeing how that, as I said, is industry-leading technology because of its certification by the NRC. The only SMR, small modular reactor, to have that certification is placed extremely well in the market, and we’re seeing just a lot of interest. We're pleased with the additional money coming in from JGC—the $40 million that Joe talked about—and we believe it's the appropriate time to explore how to unlock more value from NuScale for Fluor shareholders. We've got the Guggenheim engagement now, and are going to be exploring opportunities to monetize the investment. As we said in January at the Strategy Day, the overarching goal is to start to monetize Fluor's investment in 2021. We've got renewed interest from existing investors that we've got, and added new investors post the JGC announcement, generating significant interest to come in and bring equity to support the commercialization. Partners support engineering, procurement, fabrication, and construction of the program. Again, coupled with Guggenheim driving financing options, all options are focused on monetizing Fluor's equity downward and driving shareholder value starting in 2021 to your timing question and then take it from there. But it's early days with Guggenheim, and we're looking for good things to come, and a highly valued company in NuScale based on their value proposition for carbon-free base load energy.

Michael Dudas, Analyst

Excellent. Thanks, David. Appreciate it.

Operator, Operator

With that, we conclude our question-and-answer session for today. I would now like to turn the call back over to David Constable for our closing remarks.

David Constable, CEO

Thank you, operator. Many thanks to all of you for participating on the call today. Today's results are beginning to show that Fluor is strategically shifting to align with our priorities outlined in January at our Strategy Day. Please stay safe, and hopefully, we'll be meeting in person relatively soon. In the meantime, we appreciate your interest in Fluor Corporation, and thanks again for your time today. Thank you.

Operator, Operator

With that, that does conclude today's call. Thank you for your participation. You may now disconnect.