March 2022, No.557

MARKETS

• Air, Water, Energy  (AWE) Markets with a Transworld Partnership

• The Russian Factor can Increase AWE Revenues by 35% or Decrease them by 50%

COAL FIRED BOILERS

• EPA Issues Power Plant Emissions Data for 2021

BIOMASS

• Tri-Mer’s UltraCat® Catalytic Ceramic Filter System to be Used at Biochar Facility

• Andritz Successfully Starts Up Biomass Boiler Plant at Vattenfall AB, Uppsala, Sweden

WELDING FUMES

• Nanofiber Filter Upgrade Yields Efficiency Improvements for an Industrial Steel Pipe Manufacturer

COMPANY NEWS

• Donaldson Company Reports Record Second Quarter Sales

• B&W Posts Significantly Higher Sales and Earnings

• Advanced Emissions Solutions Reports Fourth Quarter and Full Year 2021 Results

MARKETS

Air, Water, Energy  (AWE) Markets with a Transworld Partnership

A surprising consequence of the Russian invasion is the potential for a Transworld Partnership.

The Russian invasion of Ukraine takes on growing importance day by day.  Last week we discussed the impact as ranging from the Grey-Blue Two Step to Tactical Nukes. On one hand the market would grow due to substitutions for Russian oil and gas.  On the other hand  Russia could use its tactical nukes and greatly reduce the European market for many decades.

This week began with overwhelming support for the Ukrainians but predictions that the move toward globalization has suffered a huge set back. The week is ending with the potential creation of a Transworld Partnership which would actively resist the attempts by any nation to occupy another while at the same time promote free trade.

Finland, Switzerland, and Germany have changed non-intervention polices. No one would have predicted just a few weeks ago. Billions of dollars in humanitarian and defense aid is being supplied by EU countries. Only four countries opposed the U.N condemnation of Russia.

There is serious planning of a 21st century Marshall Plan for Ukraine. The goal would be to build back the demolished cities. There are also a number of economic efforts which will be needed.  The Russian nuclear power plants need to be restored and even made safer. The Ukrainian grain crisis will need to be addressed immediately. The production of rare metals needs to be resumed.

The AWE markets will benefit from this Ukrainian renovation. But the potential is for increased trade and tariff reduction for every free country.

President Zelenskyy yesterday proposed a new international security organization and asked President Biden to be the leader not only of the US, but also of the world. If aggressors know that they will be punished in the way that  Russia is now it will discourage events such as the occupation of Taiwan by China.

In a phone call this morning between  President Biden and President Xi Jinping, the Chinese president stated, “Peace and security are the most cherished treasures of the international community.”  The realization that Switzerland, and every free country is willing to maximize sanctions on an aggressor will discourage China from invading Taiwan.

For the AWE industry just the alleviation of the Taiwanese takeover threat will have major implications.  Its role in  supplying most the world’s advanced computer chips makes its fate of the highest importance to the AWE industry.

Due to COVID and Chinese posturing over Taiwan we have started to veer away from the free trade policies which have made the world increasingly prosperous and peaceful. U.S. Chinese activities are so intertwined that both countries would suffer greatly from a suspension of trade.

The Biden Administration policy to become more self-reliant is inconsistent with maximizing prosperity. Seventy years ago U.S. valve manufacturers success depended on their iron foundries. Today no major U.S valve manufacturer operates an iron foundry in the U.S. Many major markets for U.S. AWE suppliers are offshore. Thermo Fisher has its main air pollution research center in China.

The new international security organization envisioned by President Zelenskyy may only need to be as active as the support Ukraine is now receiving. In the short term the military aid is proving effective. In the long term the embargo of advanced chips from Taiwan to Russia will seriously impair its military capability.

The Ukrainian invasion has proven that free nations are willing to band together when liberty is at stake. The threats of a nuclear holocaust are just as real now as at any time since World War II. We are only as far away as one madman with the nuclear button.

In 2014 President Obama negotiated the Trans-Pacific Partnership. The TPP was a trade agreement with 11 other countries in the Asia-Pacific region, including Canada and Mexico. It did not pass congress. We need to now think bigger and include the entire free world and other countries which will agree to abide by the national sovereignty rules. China should be included  but with the proviso that it would lose its membership with rules violations.

The AWE markets are very international. Suppliers and the world will benefit from a  Transworld Partnership.

The Russian Factor can Increase AWE Revenues by 35% or Decrease them by 50%

The Air, Water, Energy (AWE) revenues in the 2022-27 period can increase by 35% with a grey- blue two step scenario or decrease by 50 % in the Tactical Nuke Scenario.

Due to this uncertainty McIlvaine forecasts for air, water, and energy (AWE) products will now include high, base and low predictions. The low will be based on the Tactical Nuke Scenario and the high on the Grey-Blue Two Step.

Tactical Nukes:  Putin does not dominate Ukraine and uses his tactical nuclear weapons for a limited war which leaves Europe and Russia greatly diminished.

Grey-Blue Two Step:  Various green technologies are initially combined with grey technologies which are upgraded to blue over time.

Under the Tactical Nuke scenario the AWE suppliers cannot be pro-active. But the Grey-Blue Two Step will have many pro-active opportunities for AWE suppliers. This is not true of some past crises such as the 2008 financial meltdown.

One of the most important objectives could be to reduce reliance on Russian and Saudi energy.  In the short term the U.S has become the leading supplier of gas to Europe. IEA forecasts that an immediate reduction of European gas needs of 30% can be achieved by utilizing the nuclear and coal capacity and with some consumer restraint.

Longer term solar and wind can obsolesce fossil fuels.  But over the next 30 years we will need to use our fossil fuel resources. Over 20 million tons per year of hydrogen are being produced from coal in China. Indonesia has a big coal to methanol project underway. Pakistan has more energy reserves with Thar lignite than all the reserves of oil and gas in Saudi Arabia. This lignite can be used to create methane, hydrogen, or ammonia. Carbon capture and sequestration can be added later.

Bioenergy with carbon capture is carbon negative. So there is no tipping point. If more carbon negative technology is applied in the 2030-2050 period we can offset any increase in the next 10 years.

All these technologies involving fossil fuels require major investments in AWE products. New AWE systems such as in situ capture of rare earths during combustion will prove to be very cost effective.

Forecasts will be critical for AWE companies not only to prepare for what will be needed but to actually shape the needs.

There was a big proactive opportunity in 1989 with the dissolution of the Soviet Union and the opening of the Chinese market. During  a 20 year period the most successful AWE companies were those who pursued an open world market. The Russian invasion of Georgia and the switch in Chinese priorities from capitalism to authoritarianism started to slow down the progress. The invasion of Ukraine has moved the world back to the 1980s.

It is helpful to compare the impacts of past crises on the AWE companies

World War II is used as a base for relative magnitude of 10. No event until now compares. It was not anticipated by most. It completely changed the type of  purchasers. The products became valves for tanks and planes rather than automobiles. AWE suppliers were primarily reactive.

The 1973 energy crisis was small in magnitude compared to WW II but created many proactive opportunities for AWE suppliers in coal gasification and liquefaction as well as shale. U.S. utilities ordered 80,000 MW of new coal plants which turned out to be more capacity than has been actually installed in the 1974-2022 period. 

Within two years OPEC resumed normal production and the crisis ceased. Rather than continue with energy independence, the U.S. canceled all the partially completed and planned projects.

This is not likely to be the case in the present crisis. The slaughter of innocent Ukrainians and the bravery of the nation have galvanized the free world to escape the OPEC/Russia yoke. The impact could be higher than World War II. It is generally believed that Putin will do what is necessary to stay in power. If he cannot dominate Ukraine he may resort to a war with NATO using his 2000 tactical nuclear weapons. He has a 10 to 1 superiority with these weapons.

This use of the tactical nukes would force the free world to make decisions about mutual destruction using the larger strategic weapons. So assigning a relative risk factor of two times World War II is justified. There is also the potential that Putin could be toppled and the situation become much better.

Many complicated decisions are needed in this crisis. The climate change needs have to be balanced against the high energy prices facing developing as well as developed countries.

AWE companies need to quantify the potential markets and understand the product needs.  These needs can be characterized as cost of ownership factors. The Total Cost of Ownership  (TCO) will be determined by connecting all the sources of wisdom.

With all the uncertainties caused by the invasion, there are a number of unresolved issues.  Some are general such as climate change versus energy costs. The wisdom of government bodies and consultants will be needed to determine the TCO  factors. Consultants, industry associations, and suppliers will provide industry insights such as green versus grey hydrogen.   System suppliers will compare processes such as hydrogen versus ammonia for combustion.  Product suppliers will provide cost factors for the increased NOx control products required while burning hydrogen.

The product factors will be disputed by individual suppliers and will need to be carefully evaluated. History shows that when one approach is selected initially it is hard to substitute a better alternative.

The Ukraine invasion presents a challenge to the AWE industry. It is one which can be best met with a range of relevant continually updated forecasts along with connection of the wisdom  available from governments, consultants, associations, suppliers and purchasers.

The McIlvaine Company AWE market reports, databases, and Decision Systems are described at www.mcilvainecompany.com

Bob McIlvaine can answer your questions at rmcilvaine@mcilvaincompany.com or call him at 847 226 2391.

COAL FIRED BOILERS

EPA Issues Power Plant Emissions Data for 2021

The U.S. Environmental Protection Agency (EPA) released publicly available, annual data on 2021 emissions of nitrogen oxides (NOX), sulfur dioxide (SO2), carbon dioxide (CO2), and mercury from power plants in the lower 48 states. Emissions in 2021 were higher than 2020, reflecting a rebound in coal-fired generation as natural gas prices and energy demand increased. However, compared to 2019, 2021 emissions fell between 3% and 11%, reflecting the long-standing trend of decreasing annual emissions.

“The 2021 increase in coal-fired generation and resulting rise in air pollution shows how important it is to urgently forge ahead in building and supporting a cleaner power sector,” said EPA Administrator Michael S. Regan. “Thanks in part to EPA rules and policies, we have made great progress in lowering dangerous pollution over the last several decades. But it’s clear our work is far from done, as we deliver on our commitment to protect the health of everyone and especially those most vulnerable among us.” 

Compared to 2020, the 2021 data show a 6% increase in NOx emissions, a 20% increase in SO2  emissions, a 7% increase in CO2 emissions, and a 13% increase in mercury emissions. Additionally, ozone season (May 1 to September 30) NOx  emissions increased by 5%. Overall, based on the first 11 months of 2021, electricity demand increased by 3% compared to 2020.

Between 1990 and 2021, annual emissions of SO2  from power plants fell by 94% and annual emissions of NOx from power plants fell by 88%. In 2021, sources in both the Cross-State Air Pollution Rule (CSAPR) annual program and the Acid Rain Program (ARP) together emitted 0.94 million tons of SO2, a 14.8 million ton reduction from 1990 levels. In 2021, sources in both the CSAPR NOx  annual program and the ARP together emitted 0.78 million tons, a 5.6 million ton reduction from 1990 levels. While complying with programs to reduce SO2, NOx and mercury, CO2 emissions from power plants dropped by 21% between 1995 and 2021.

Long-term declines in emissions are due primarily to changes in the mix of fuels used in electricity generation. While data from 2021 showed a one-year 16% increase in coal generation and a 3% decrease in natural gas generation, there is a shift underway from higher emitting to lower and zero emitting generation.

These long-term reductions in power sector emissions protect community health. NOx and SO2 emissions contribute to the formation of ground-level ozone and particulate matter, which can lead to respiratory and cardiovascular problems, and exposure to mercury, a potent neurotoxin, effects the nervous system and brain functions, particularly in infants and children, and is known to cause other significant health effects.

Ambient particulate sulfate concentrations in the eastern United States have shown substantial improvement, decreasing between 76 and 79% from the 2000-2002 to 2018–2020 observation periods. All areas of the eastern United States have shown significant improvement in wet sulfate deposition in this period, with an overall 70% reduction. In addition, these emissions reductions are resulting in positive ecosystem impacts. The level of acid neutralizing capacity, an indicator of recovery, improved significantly from 1990 levels at lake and stream monitoring sites in the Adirondacks, New England, and the Catskill mountains.

BIOMASS

 Tri-Mer’s UltraCat® Catalytic Ceramic Filter System to be Used at Biochar Facility

Aries Clean Technologies, a leader in biomass gasification and wastewater conversion, will shortly commission Tri-Mer Corporation’s UltraCat® Catalytic Ceramic Filter System to help the company meet multi-pollutant air quality standards.

Sited in Linden, NJ, the system will transform 430 tons of biosolids into 22 tons of biochar each day. The biochar, Bio-Fly-Ash™, will be beneficially used as a substitute for fly ash in improving the workability of concrete. Notably, the renewable energy generated from the system is recovered and used within the system; no fossil fuels are used.

Andritz Successfully Starts Up Biomass Boiler Plant at Vattenfall AB, Uppsala, Sweden

Andritz has successfully started up a new biomass boiler plant, including a biomass receiving and handling system, at Swedish energy company Vattenfall AB for its “Carpe Futurum” project.

The heating plant is located on Vattenfall’s existing combined heat and power plant site in Uppsala, Sweden, some 70 km north of Stockholm. This new plant supplies more than 110 MW of district heat to the Uppsala area and is also prepared for electricity production at a later stage. The fuel for the new plant comprises different kinds of wood-based biomass, such as recycled wood, bark, wood chips, and sawdust.

The Andritz scope of supply included biomass receiving, handling and storage silos, a biomass-fired boiler with flue gas cleaning, and a flue gas condenser. The boiler is based on the Andritz EcoFluid bubbling fluidized bed design, which combines high efficiency with excellent environmental performance. Flue gas emissions are reduced to very low levels, with the selective catalytic reduction (SCR) method for NOx emissions and a baghouse filter, including sorbent feeding, for sulfur dioxide (SO2), hydrochloric acid (HCl), heavy metals, and dust emissions. The flue gas condenser significantly increases the district heat output and, therefore, improves plant efficiency to beyond 110% when calculated using the fuel lower heating value.

The “Carpe Futurum” project is an important part of Vattenfall’s goal of becoming CO2 neutral with their energy systems and its combined heat and power plants by 2030. Vattenfall delivers district heat to more than 90% of the houses in Uppsala, providing heating for more than 180,000 people.

WELDING FUMES

Nanofiber Filter Upgrade Yields Efficiency Improvements for an Industrial Steel Pipe Manufacturer

 A long-standing mining and metal solutions provider for infrastructure and oil and gas customers worldwide needed a fume extraction solution to handle difficult welding applications found during the manufacturing process of heavy industrial steel pipes.

A portable fume extraction solution was needed for this company to handle a 50/50 mix of the welding fumes from flux core welding processes using a gas mix of 75% Argon and 25% CO2 and approximately a half day of solid core welding. Their filter life was less than one month on their original filters and knew they needed something more efficient and easier to clean to handle their difficult welding application. After only a few days of operation, they experienced frequent filter cleaning cycles and alarms sounding too often.  By the end of life, an alarm was sounding after only minutes of use between cleanings.  

Nederman supplied a new replacement cartridges for the FilterBox 12A utilizing nanofiber filter technology. After installing the new and improved cartridges, they experienced an improvement in the filter life from about four weeks to now lasting nine to twelve months. In addition to prolonged filter life, they experienced reduced cleaning alarms and more uptime. After only three weeks of operation, it was clear the nanofiber filter technology was superior.

Weld fumes surface loads better on nanofiber than the original spunbond polyester media, allowing the filters to clean better utilizing compressed air. Retrofitting their existing FilterBox units was quickly and easily done by removing the rubber flaps included with the original cleaning and added the new Nanofiber cartridge filter. No other changes were necessary.

COMPANY NEWS

Donaldson Company Reports Record Second Quarter Sales

Donaldson Company, Inc. reported second quarter 2022 net earnings of $71.8 million, an increase of 27.7% from $56.2 million in 2021. Earnings per share (EPS)1 for the second quarter 2022 increased 30.4% to $0.57 from $0.44. The prior year EPS includes an impact of approximately $0.08 related to restructuring charges. Excluding this impact, second quarter 2022 EPS increased 9.8% from adjusted EPS2 of $0.52 in 2021.

“Second quarter record sales demonstrate the resiliency of our business model, the Donaldson team and our commitment to delivering value to our customers,” said Tod Carpenter, chairman, president and chief executive officer. “Although ongoing inflation and supply chain challenges pressured gross margin more than we expected, we worked to mitigate the impact through our strategic pricing and expense management while continuing to invest for future growth.

“With the first half of the fiscal year behind us and given our expectations for robust sales through the balance of the year, we are increasing our fiscal 2022 sales and earnings guidance. Inflation and supply chain constraints are likely to remain a headwind, however, we expect our second half gross margins to improve sequentially as we realize increased benefits from pricing actions. More broadly, I am confident in the direction Donaldson is heading with our expanded global footprint, commitment to R&D, and integration and scaling of recent and future acquisitions.”

1 All earnings per share figures refer to diluted earnings per share.

2 Adjusted earnings per share is a non-GAAP financial measure that excludes the impact of certain items not related to ongoing operations.

Operating Results

Second quarter 2022 sales increased 18.2% to $802.5 million from $679.1 million in 2021, including a negative impact of 2.6 percentage points from currency translation.

Second quarter 2022 sales in the Engine Products segment (Engine) increased 19.8%, with Aerospace and Defense, Off-Road, and Aftermarket strength partially offset by a slight decrease in On-Road. Aerospace and Defense sales grew 29.6% compared with 2021, as stronger economic conditions in the commercial aerospace industry and market share gains drove results. Off-Road sales increased 22.6% versus the prior year, with growth in all regions as equipment production levels remained high and Exhaust and Emissions program wins in Europe bolstered results. Second quarter 2022 Aftermarket sales rose 20.6%, driven by strong demand across all primary end-markets. On-Road sales, down 0.7% year-over-year, continue to be negatively impacted by a strategic decision to discontinue sales of a low profit product line in the United States.

Second quarter Industrial Products segment (Industrial) sales rose 14.6%, with strong growth in Gas Turbine Systems (GTS) and Industrial Filtration Solutions (IFS). GTS sales increased 26.3% versus the prior year due to timing of project deliveries. IFS sales growth of 14.1% was the result of ongoing momentum in the industrial dust collection business as well as Process Filtration sales performance. Special Applications sales rose 9.8% compared with 2021, with growth in all regions and across the product portfolio.

Second quarter 2022 operating income as a percentage of sales (operating margin) increased to 11.9% from 11.2% in 2021. Second quarter 2021 adjusted operating margin, which excludes the impact of restructuring charges, was 13.4%. Gross margin decreased to 31.1% from 33.2% in the prior year, as inflation headwinds from raw materials, freight and labor costs persisted. Second quarter 2021 adjusted gross margin was 34.0%.

Second quarter 2022 operating expenses as a percentage of sales were 19.2%, an improvement from 22.0% in 2021 due to leverage on higher sales. Prior year adjusted operating expenses as a percentage of sales, which excludes $9.0 million of restructuring charges, was 20.7%.

Second quarter 2022 interest expense was $3.6 million, compared with $3.3 million in the prior year. Other income, net was favorable by $1.3 million versus the prior year, primarily driven by a reduction in donation expense. Second quarter 2022 effective tax rate increased to 24.1% from 23.9% in 2021.

During the second quarter, Donaldson paid dividends of $27.2 million and repurchased approximately 0.2% of its outstanding shares for $12.8 million. Year to date, the Company has paid $54.6 million in dividends and repurchased approximately 1.4% of its outstanding shares for $115.6 million.

Updated Fiscal 2022 Outlook

Donaldson is increasing its fiscal 2022 sales and EPS guidance to reflect a better-than-expected sales outlook given first half performance combined with additional pricing realization planned in the second half of the year. Net sales are projected to increase between 11% and 15% year-over-year, up from previous guidance of 8% to 12%. Currency translation is forecast to negatively impact sales by approximately 2%. Fiscal 2022 GAAP EPS is now expected to be between $2.66 and $2.76, versus a previous range of between $2.57 and $2.73. GAAP and adjusted EPS2 in 2021 were $2.24 and $2.32, respectively.

Fiscal 2022 Engine sales are projected to increase between 12% to 16% compared with 2021 and versus previous guidance of an 8% to 12% increase. Incremental pricing and ongoing demand are expected to drive the overall improvement, particularly in the Aftermarket segment. Aerospace and Defense sales are also projected to increase versus previous expectations due to improved commercial aerospace market conditions and market share gains. Forecasts for Off-Road and On-Road performance are unchanged.

Fiscal 2022 Industrial sales are expected to increase between 9% and 13% compared with 2021 and compared with previous guidance of 7% to 11%. Continued momentum in Special Applications is expected to benefit results. IFS and GTS sales are projected to be in line with previous guidance.

Fiscal 2022 gross margin is expected to be down between 1 to 1.5 percentage points compared with 2021 and versus the previous forecast of a decrease of 0.5 to 1 percentage point. Inflationary pressures were greater than expected in the first half and are anticipated to continue through the balance of the year.

Fiscal 2022 operating margin is forecast to be between 14.0% and 14.4% compared with previous guidance of between 14.1% and 14.7%. GAAP and adjusted operating margin were 13.5% and 14.0%, respectively, in 2021. Compared with 2021, leverage on higher sales and expense management will drive results.

The Company anticipates fiscal 2022 interest expense of approximately $14.0 million, and other income of between $7.0 million and $11.0 million. Donaldson expects a fiscal 2022 effective income tax rate of between 24% and 26%.

Fiscal 2022 capital expenditures are projected to be between $90.0 million and $110.0 million and free cash flow conversion is expected to be between 70% and 80%. Donaldson anticipates repurchasing approximately 2% of its outstanding shares during fiscal 2022.

B&W Posts Significantly Higher Sales and Earnings

Q4 2021 Highlights

1.    Revenues of $192.3 million

2.    Net income of $30.2 million, more than six times net income in the fourth quarter of 2020

3.    Earnings per share of $0.30

4.    Consolidated adjusted EBITDA of $27.9 million

5.    Bookings of $269.0 million, a 61.1% increase compared to fourth quarter bookings in 2020

Full Year 2021 Highlights

1.    Revenues of $723.4 million

2.    Net income of $31.5 million

3.    Earnings per share of $0.26

4.    Consolidated adjusted EBITDA of $70.6 million, meeting the Company's 2021 target of $70 million

5.    Bookings of $779.0 million, a 20.8% increase compared to full year 2020 bookings

6.    Ending backlog of $639.0 million, a 19.4% increase compared to the end of 2020

Babcock & Wilcox Enterprises, Inc. announced results for the fourth quarter and full year 2021. "Our strong results for the fourth quarter and full year 2021, combined with recent and anticipated bookings, have positioned us for an even stronger 2022," said Kenneth Young, B&W's Chairman and Chief Executive Officer. "Looking back, we did what we set out to do in 2021—we achieved our 2021 adjusted EBITDA target of more than $70 million, booked four new renewable waste-to-energy new build projects and a fifth last month, closed several strategic acquisitions, continued building our ClimateBrightTM decarbonization platform and ended the year with our highest level of annual bookings since 2017."

"Our recent acquisitions have strategically expanded our clean and renewable energy businesses," Young added. "We're excited about the substantial opportunities we see for solar installation and construction services in the U.S. through our Fosler Solar business, and we’ve launched our B&W Renewable Service platform for our expanding renewable service business in Europe through our acquisition of VODA A/S. Most recently, we expanded our portfolio of thermal and renewable technologies for hydrogen, natural gas and pulp and paper applications by acquiring FPS and we see significant potential for growth in those markets. We are continuing to explore additional acquisition opportunities in both emerging technologies and mature markets and aggressively pursuing opportunities to further increase shareholder value."

"Looking forward, we are reiterating our 2022 target of $110 million to $120 million in adjusted EBITDA. Our robust pipeline of more than $7.5 billion of identified project opportunities in the next three years, recent contract wins, and strategic acquisitions give us confidence in our ability to achieve significant year-over-year growth in 2022," Young stated. "While we expect 2022’s quarterly profile to follow our normal cyclical performance, which typically displays increasing profitability from the first quarter to the fourth quarter of each year, we anticipate that the full year 2022 will realize the potential and continued momentum of our ongoing growth strategies."

Full Year 2021 Financial Summary

Consolidated revenues in 2021 were $723.4 million, a 27.7% improvement compared to 2020. The improvement was primarily due to a higher level of activity in our Thermal and Environmental segments, expanded geographic presence and improved strategies to mitigate the continued impact of COVID-19, as well as the acquisitions of Fosler Construction and VODA in our Renewable segment. Net income in 2021 was $31.5 million compared to a net loss of $10.3 million in 2020. GAAP operating income in 2021 was $20.8 million, compared to an operating loss of $1.7 million in 2020. This increase was primarily due to the revenue increase discussed above; operating income in the prior year included the recognition of a non-recurring insurance loss recovery of $26.0 million under an October 10, 2020, settlement agreement with an insurer in connection with five of the six historical European B&W Renewable EPC loss contracts. The Company achieved its 2021 adjusted EBITDA target of more than $70 million, with adjusted EBITDA of $70.6 million compared to $19.7 million in 2020, excluding the non-recurring insurance loss recovery of $26.0 million in the third quarter of 2020 as described above. Total bookings in 2021 were $779.0 million, a 20.8% increase compared to full year 2020 bookings, and backlog on December 31, 2021, was $639.0 million, a 19.4% increase compared to December 31, 2020.

Babcock & Wilcox Renewable segment revenues were $156.8 million in 2021, compared to $156.2 million in 2020, primarily driven by the acquisitions of Fosler Construction and VODA on September 30, 2021, and November 30, 2021, respectively, and higher part sales offset by the timing of a large project order moving into early 2022. Adjusted EBITDA was $23.2 million compared to negative $1.0 million in 2020, excluding the non-recurring insurance loss recovery of $26.0 million recognized in third quarter of 2020 under an October 10, 2020, settlement agreement with an insurer in connection with five of the six European B&W Renewable EPC loss contracts, primarily due to improved project execution.

Babcock & Wilcox Environmental segment revenues were $133.8 million in 2021, an increase of 23.9% compared to $108.0 million in 2020. The increase was primarily driven by the postponement of several new projects in the prior year due to COVID-19 which have since resumed in addition to higher overall volume in ash handling, scrubbers, and precipitators. Adjusted EBITDA was $11.8 million, compared to $3.5 million in 2020, primarily driven by the higher volume as described above.

Babcock & Wilcox Thermal segment revenues were $433.3 million in 2021, an increase of 42.1% compared to $305.0 million in the prior-year, primarily due to a higher level of activity on construction projects, an increase in volume in the package boilers and parts business and the adverse impacts of COVID-19 on prior-year revenues.  Adjusted EBITDA in 2021 was $49.1 million, an increase of 36.3% compared to $36.1 million in the prior-year, primarily due to the increase in volume and the benefits of continued cost savings and restructuring initiatives.

Advanced Emissions Solutions Reports Fourth Quarter and Full Year 2021 Results

Advanced Emissions Solutions, Inc. filed its Annual Report on Form 10-K and reported financial results for the quarter and year ended December 31, 2021, including information about its equity investments in Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services") (collectively "Tinuum"), of which ADES owns 42.5% and 50%, respectively.

Advanced Purification Technologies (“APT”) Highlights

• Fourth quarter revenue totaled $23.3 million compared to $16.3 million in the prior year. Full year revenue totaled $85.9 million compared to $53.9 million in 2020.
• Fourth quarter APT Segment operating income was $0.8 million compared to $0.7 million in the prior year. Full year APT Segment operating income totaled $5.6 million in 2021 compared to an operating loss of $40.0 million in 2020.
• Fourth quarter APT Segment Adjusted EBITDA totaled $1.9 million compared to $2.3 million in the prior year. Full year APT Segment Adjusted EBITDA totaled $8.6 million in 2021 compared to an Adjusted EBITDA loss of $6.6 million in 2020.
• The APT segment experienced record revenue and production for the full year 2021.

 ADES Consolidated Highlights

• Fourth quarter consolidated revenue was $25.8 million compared to $19.7 million in the prior year. Full year consolidated revenue was $100.3 million compared to $67.4 million in 2020.
• Fourth quarter consolidated net income was $5.8 million compared to $0.4 million in the prior year. Full year consolidated net income was $60.4 million compared to a net loss of $20.3 million in 2020.
• Fourth quarter consolidated Adjusted EBITDA was $9.1 million compared to $23.4 million in the prior year. Full year consolidated Adjusted EBITDA was $84.9 million compared to $55.1 million in 2020.
• As of December 31, 2021, cash balances, including restricted cash, totaled $88.8 million, an increase of $52.8 million compared to the prior year. The Company's only debts outstanding are finance lease obligations.
• In May 2021, the Company initiated a strategic review to assess a range of strategic alternatives to maximize shareholder value. There is no assurance that the review process will result in pursuing or completing any action or transaction, and no timetable has been set for completion of this process. The Company has been encouraged by continued progress and will provide an update as appropriate.

“The strong demand environment for our APT segment persisted through the end of the year and drove a 45% increase in segment revenue in the fourth quarter compared to the prior year,” said Greg Marken, CEO of ADES. “Continued high prices for alternative energy sources such as natural gas, coupled with the cold winter months, along with fully implementing the Cabot Supply Agreement, are supporting strong performance for the APT segment and delivering better gross margin leverage compared to 2020. With capacity utilization high, we continue to source inventory from third parties to meet rising customer demand and expect inventory tightness and general supply-chain constraints to remain in the near-term and to continue to weigh on our margin profile. We are working to offset margin pressures through methodical adjustments in pricing, as contracts become eligible for repricing, and we have been successful at better aligning new contract terms to current market conditions. Looking ahead to 2022, we expect volumes and our plant utilization to remain elevated, though we anticipate some gross margin compression due to elevated levels of third party purchases and rising input costs. More broadly, we remain focused on diversifying our end market mix and advancing our technologies alongside partners like Cascade Environmental for the soil and groundwater remediation market.”

Marken concluded, “We are also updating our forecast for the expected after-tax net RC cash flows and wind down of Tinuum. Net of collections during the fourth quarter, we now expect between $4.0 million and $5.0 million of cash flows from Tinuum to ADES during the first half of 2022. Lastly, we continue to undertake our previously announced strategic review and remain focused on fulfilling our customer commitments and running the business efficiently as this process progresses.”

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