Mr. Jean-Louis Servranckx reports

AECON ANNOUNCES $150 MILLION STRATEGIC INVESTMENT IN AECON UTILITIES GROUP BY OAKTREE

Funds managed by the power opportunities strategy of Oaktree Capital Management LP have agreed to make a strategic investment in an Aecon Group Inc. subsidiary, Aecon Utilities Group Inc., creating an enhanced growth vehicle focused on providing utility infrastructure services across North America. On closing, Oaktree will acquire a 27.5-per-cent ownership interest in Aecon Utilities by way of a net $150-million convertible preferred equity investment. The investment is expected to provide immediate benefits to both Aecon and Aecon Utilities:

• Creates a strategic platform -- Aecon Utilities is positioned to address industry growth opportunities across utility end-markets in Canada and the United States, many of which are tied to continuing energy transition and decarbonization. As a stand-alone legal entity, Aecon Utilities will have enhanced optionality regarding future capital raising.
• Establishes a value-add partnership -- Oaktree is a recognized value-added partner with an over 25-year record in utilities infrastructure investing. Aecon Utilities will seek to leverage Oaktree's expertise, and network of relevant investments and relationships to enable continued growth in its platform in North America.
• Further highlights the value of Aecon's portfolio -- the conversion value of the investment implies a $750-million enterprise value for Aecon Utilities, representing a trailing 12-month (TTM) adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) multiple of 9.3 times. On closing, Aecon will own 72.5 per cent of Aecon Utilities.
• Provides financial flexibility to accelerate acquisition strategy -- Aecon Utilities will have a stand-alone committed revolving $400-million credit facility, and supportive capital partners in Oaktree and Aecon, to enable its growth aspirations. Aecon Utilities' balance sheet will allow it to complement its record of organic growth with potential strategic acquisitions in Canada and the U.S.
• Generates significant proceeds to Aecon group -- strengthens Aecon's consolidated balance sheet with Aecon receiving proceeds of $150-million from the investment. This will provide Aecon the financial flexibility to finance strategic growth initiatives. In addition to Aecon Utilities' new credit facility of $400-million, Aecon will have a separate committed revolving credit facility of $450-million to replace its prior $600-million facility, following the closing of the investment.

Aecon Utilities is a leading provider of utility infrastructure solutions in Canada operating in four end-markets: electrical transmission and distribution, renewables and in-home services, telecommunications, and pipeline distribution. A significant portion of Aecon Utilities' revenues are generated from recurring revenue programs for public and leading private utility sector clients. Aecon Utilities has demonstrated a strong revenue growth profile with an approximate 19-per-cent compound annual growth rate (CAGR) from 2019 to 2022. Aecon Utilities has established a presence in the U.S. and sees attractive opportunities to expand its geographic reach and range of services in that market. As of the end of Q2 2023, Aecon Utilities generated TTM revenue and TTM adjusted EBITDA of $931-million and $80-million, respectively.

"This strategic investment will accelerate growth in Aecon Utilities, further strengthen Aecon's balance sheet to take advantage of growth and concession opportunities, and unlock value for our shareholders as we continue our strategic focus on infrastructure solutions delivered under more collaborative models, and linked to decarbonization, sustainability and the energy transition," said Jean-Louis Servranckx, president and chief executive officer, Aecon.

"We are delighted to partner with an experienced and value-added investor in Oaktree to continue to grow Aecon Utilities in Canada and the U.S.," said Eric MacDonald, executive vice-president, Aecon Utilities.

Jimmy Lee, managing director and assistant portfolio manager in Oaktree's power opportunities group, said: "Aecon Utilities' strong competitive position, long-term customer relationships and exposure to numerous market tailwinds provide an exceptional foundation for growth. We look forward to bringing to bear our resources and relationships to support Aecon Utilities' talented leadership team and employees as they execute their strategic plan."

"Aecon Utilities is widely known as a leading provider of mission-critical recurring utility infrastructure services across Canada. We see tremendous opportunity to leverage its capabilities to expand with new and existing customers, while maintaining the commitment to work force safety and exceptional quality for which Aecon Utilities is known," said Andrew Moir, senior vice-president in Oaktree's power opportunities group.

Investment summary

The investment will be effected through the purchase of newly created convertible preferred equity securities of Aecon Utilities. The gross subscription amount of the investment is $154.6-million of preferred equity, which represents $150-million after upfront fees (net investment amount). The investment is convertible at any time by Oaktree into a fixed 27.5 per cent of the common equity of Aecon Utilities and is mandatorily convertible upon a qualified IPO. Prior to conversion, the preferred equity will accrue a 12-per-cent annual coupon for the first three years and 14-per-cent annual coupon thereafter. At Aecon's option, the coupon is payable in kind by accreting the principal amount or in cash. On conversion of the preferred equity, Aecon's 72.5-per-cent equity interest in Aecon Utilities is not diluted as a result of the accretion feature. Aecon has the option to purchase the preferred equity for cash at any time at a value equivalent to the greatest of: (a) the as-converted value of the preferred equity; (b) the accreted value of the preferred equity; and (c) 1.5 times the net investment amount less all cash dividends and distributions paid to Oaktree. Following the seven-year anniversary of the investment, Oaktree may sell its investment, subject to a right of first offer in favour of Aecon, or may require Aecon, at Aecon's election, to either: (i) initiate an IPO process; and/or (ii) initiate a sale of Aecon Utilities; or (iii) purchase the preferred equity for cash at a price equal to the greater of: (A) the accreted value of the preferred equity; and (B) the as-converted value of the preferred equity.

A six-person board of directors will oversee Aecon Utilities, composed of four members nominated by Aecon and two members nominated by Oaktree.

In connection with the investment, Oaktree and Aecon will enter into customary agreements for investments of this nature, including standstill and transfer restrictions, and providing for minority investor rights. Aecon Utilities' management team will continue to lead the business and, as the controlling shareholder, Aecon will continue to consolidate the financial results of Aecon Utilities.

Additional information regarding the investment and the terms of the preferred equity will be included in a material change report available through SEDAR+. This press release is only a summary of certain principal terms of the investment and is qualified in its entirety by reference to the more detailed information contained in the material change report.

The closing is expected to occur within the coming days.

Advisers

CIBC Capital Markets is serving as exclusive financial adviser to Aecon, and Davies Ward Phillips & Vineberg LLP is serving as legal counsel.

About Aecon Group Inc.

Aecon Group is a national Canadian construction and infrastructure development company with global experience. Aecon Group delivers integrated solutions to private and public-sector clients through its construction segment in the civil, urban transportation, nuclear, utility and industrial sectors, and provides project development, financing, investment and management services through its concessions segment.

About Oaktree Capital Management LP

Oaktree is a leader among global investment managers specializing in alternative investments, with $179-billion in assets under management as of June 30, 2023. The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in credit, private equity, real assets and listed equities. The firm has over 1,100 employees and offices in 20 cities worldwide.

In 2019, Brookfield Asset Management acquired a majority interest in Oaktree. Together, Brookfield and Oaktree provide investors with one of the most comprehensive offerings of alternative investment products available today. While partnering to leverage one another's strengths, Oaktree operates as an independent business within the Brookfield family, with its own product offerings, and investment, marketing and support teams.

Reconciliations and calculations

Set out in the associated table is the calculation of adjusted EBITDA for Aecon Utilities for the most recent four quarters, and the calculation of TTM adjusted EBITDA multiple for the TTM period ended June 30, 2023.

We seek Safe Harbor.