Aecon Group Inc. — Interim / Quarterly Report 2022

Jul 28, 2022

AECON GROUP INC. SECOND QUARTER INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2022

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2022 AND 2021

TABLE OF CONTENTS

MANAGEMENT REPORT ................................................................................................................... 2 CONSOLIDATED BALANCE SHEETS ............................................................................................... 3 CONSOLIDATED STATEMENTS OF INCOME .................................................................................. 4 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ................................................. 5 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ........................................................... 6 CONSOLIDATED STATEMENTS OF CASH FLOWS ........................................................................ 7 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ................ 8 1. CORPORATE INFORMATION ........................................................................................................ 8 2. DATE OF AUTHORIZATION FOR ISSUE ...................................................................................... 8 3. BASIS OF PRESENTATION ........................................................................................................... 8 4. CRITICAL ACCOUNTING ESTIMATES .......................................................................................... 8 5. NEW ACCOUNTING STANDARDS .............................................................................................. 13 6. FUTURE ACCOUNTING CHANGES ............................................................................................ 14 7. CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH .................................................. 15 8. TRADE AND OTHER RECEIVABLES .......................................................................................... 15 9. INVENTORIES .............................................................................................................................. 16 10. PROJECTS ACCOUNTED FOR USING THE EQUITY METHOD .............................................. 16 11. PROPERTY, PLANT AND EQUIPMENT .................................................................................... 18 12. INTANGIBLE ASSETS ................................................................................................................ 19 13. BANK INDEBTEDNESS .............................................................................................................. 19 14. TRADE AND OTHER PAYABLES ............................................................................................... 20 15. PROVISIONS .............................................................................................................................. 20 16. LONG-TERM DEBT AND NON-RECOURSE PROJECT DEBT ................................................. 20 17. CONVERTIBLE DEBENTURES .................................................................................................. 22 18. CONCESSION RELATED DEFERRED REVENUE .................................................................... 23 19. INCOME TAXES .......................................................................................................................... 23 20. EMPLOYEE BENEFIT PLANS .................................................................................................... 24 21. CONTINGENCIES ....................................................................................................................... 24 22. CAPITAL STOCK ........................................................................................................................ 25 23. EXPENSES ................................................................................................................................. 27 24. OTHER INCOME ......................................................................................................................... 28 25. FINANCE COST .......................................................................................................................... 28 26. EARNINGS PER SHARE ............................................................................................................ 29 27. SUPPLEMENTARY CASH FLOW INFORMATION .................................................................... 29 28. FINANCIAL INSTRUMENTS ....................................................................................................... 30 29. CAPITAL DISCLOSURES ........................................................................................................... 32 30. OPERATING SEGMENTS .......................................................................................................... 32

AECON GROUP INC.

Page 1

MANAGEMENT REPORT

July 28, 2022

Notice to Reader

The management of Aecon Group Inc. (the “Company”) is responsible for the preparation of the accompanying interim condensed consolidated financial statements. The interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of interim financial statements including International Accounting Standard (“IAS”) 34 “Interim Financial Reporting” and are considered by management to present fairly the consolidated financial position, operating results and cash flows of the Company.

These interim condensed consolidated financial statements have not been reviewed by the Company’s auditor. These interim condensed consolidated financial statements are unaudited and include all adjustments, consisting of normal and recurring items, that management considers necessary for a fair presentation of the consolidated financial position, results of operations and cash flows of the Company.

(signed) Jean-Louis Servranckx, President and Chief Executive Officer

(signed) David Smales, Executive Vice-President and Chief Financial Officer

AECON GROUP INC.

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CONSOLIDATED BALANCE SHEETS

AS AT JUNE 30, 2022 AND DECEMBER 31, 2021

(in thousands of Canadian dollars) (unaudited)

(in thousands of Canadian dollars) (unaudited)
			June 30		December 31
			2022		2021
	Note
ASSETS
Current assets
Cash and cash equivalents	7	$	537,353	$	532,681
Restricted cash	7		90,304		98,010
Trade and other receivables	8		889,328		824,803
Unbilled revenue			662,069		585,974
Inventories	9		32,280		25,195
Income tax recoverable			27,724		10,901
Prepaid expenses			**77,367 **		68,152
			2,316,425		2,145,716
Non-current assets
Long-term financial assets			7,386		3,453
Projects accounted for using the equity method	10		94,350		69,294
Deferred income tax assets			56,561		41,899
Property, plant and equipment	11		391,193		379,506
Intangible assets	12		643,373		646,949
			1,192,863		1,141,101
TOTAL ASSETS		$	3,509,288	$	3,286,817
LIABILITIES
Current liabilities
Bank indebtedness	13	$	220,000	$	23,305
Trade and other payables	14		984,805		920,653
Provisions	15		18,844		21,850
Deferred revenue			393,243		430,985
Income taxes payable			3,664		11,201
Current portion of non-recourse project debt	16		3,184		2,957
Current portionof long-termdebt	16		59,519		58,568
			1,683,259		1,469,519
Non-current liabilities
Provisions	15		7,758		8,825
Non-recourse project debt	16		358,577		354,580
Long-term debt	16		173,243		166,327
Convertible debentures	17		176,370		173,898
Concession related deferred revenue	18		94,594		94,951
Deferred income tax liabilities			115,110		104,521
Other liabilities			**82 **		630
			925,734		903,732
TOTAL LIABILITIES			2,608,993		2,373,251
EQUITY
Capital stock	22		407,793		405,807
Convertible debentures	17		12,707		12,707
Contributed surplus			69,079		60,004
Retained earnings			404,908		451,294
Accumulated othercomprehensiveincome (loss)			5,808		(16,246)
TOTAL EQUITY			900,295		913,566
TOTAL LIABILITIES AND EQUITY		$	3,509,288	$	3,286,817

Contingencies (Note 21)

AECON GROUP INC.

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The accompanying notes are an integral part of these interim condensed consolidated financial statements

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

For the three months ended June 30 June 30 2022 2021 Note Revenue $ 1,123,238$ 971,286 Direct costs and expenses 23 (1,045,709) (879,416)	For the three months ended	For the six months ended
	June 30 June 30	June 30 June 30 2022 2021 $ 2,109,152 $ 1,725,316 (1,970,531) (1,576,113)
	2022 2021
Gross profit 77,529 91,870 Marketing, general and administrative expense23 (52,715) (44,313) Depreciation and amortization 23 (23,595) (21,399) Income from projects accounted for using the equity method 10 3,745 3,800 Other income 24 108 4,678		138,621 149,203 (105,826) (92,004) (46,469) (44,247) 6,766 6,418 2,345 5,043
Operating profit (loss) 5,072 34,636 Finance income 158 139 Finance cost 25 (13,186) (11,071)		(4,563) 24,413 261 266 (24,973) (21,846)
Profit (loss) before income taxes (7,956) 23,704 Income tax recovery (expense) 19 1,605 (6,113)		(29,275) 2,833 5,481 (3,653)
Profit(loss) for theperiod $ (6,351) $ 17,591		$ (23,794) $ (820)
Basic earnings (loss) per share 26 $ (0.10)$ 0.29 Diluted earnings (loss) per share 26 $ (0.10)$ 0.27		$ (0.39) $ (0.01) $ (0.39) $ (0.01)

AECON GROUP INC.

Page 4

The accompanying notes are an integral part of these interim condensed consolidated financial statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars) (unaudited)

Profit(loss) for theperiod	For the three months ended	For the six months ended
	June 30 June 30	June 30 June 30 2022 2021 $ (23,794) $ (820)
	2022 2021
	$ (6,351) $ 17,591
Other comprehensive income (loss): Items that may be reclassified subsequently to profit or loss: Currency translation differences - foreign operations Cash flow hedges - subsidiaries Cash flow hedges - equity accounted investees Cash flow hedges - joint operations Income taxes on the above		3,788 (7,760) - 1,668 22,621 9,364 2,269 (4,828) (6,624) (1,436)
	7,034 (2,933)
	- -
	9,911 3,652
	5,037 (2,157)
	(3,971) (401)
Total other comprehensive income (loss) for the period	18,011 (1,839)	22,054 (2,992)
Comprehensive income(loss) for theperiod	$ 11,660$ 15,752	$ (1,740) $ (3,812)

AECON GROUP INC.

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The accompanying notes are an integral part of these interim condensed consolidated financial statements

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

Capital Convertible Contributed Retained stock debentures surplus **earnings **	Accumulated other comprehensive income(loss) Currency Actuarial Cash translation gains and flow differences losses hedges
		Shareholders'
		equity
Balance as at January 1, 2022 $ 405,807 $ 12,707 $ 60,004 $ 451,294	$ (11,268) $ 2,101 $ (7,079)	$ 913,566
Loss for theperiod - - - (23,794)	- - -	(23,794)
Other comprehensive income (loss): Currency translation differences - foreign operations - - - - Cash flow hedges - equity accounted investees - - - - Cash flow hedges - joint operations - - - - Taxes with respect to above items included in other comprehensive income - - - -	3,788 - - - - 22,621 - - 2,269 - - (6,624)
		3,788
		22,621
		2,269
		(6,624)
Total other comprehensive income for theperiod - - - -	3,788 - 18,266	22,054
Total comprehensive income(loss) for theperiod - - - (23,794)	3,788 - 18,266	(1,740)
Dividends declared - - - (22,537) Stock-based compensation expense - - 9,846 - Shares issued to settle LTIP/ESU/Director DSU obligations 1,986 - (2,028) (55) Stock-based compensation settlements and receipts - - 1,257 -	- - - - - - - - - - - -	(22,537)
		9,846
		(97)
		1,257
Balance as at June 30, 2022 $ 407,793 $ 12,707 $ 69,079 $ 404,908	$ (7,480) $ 2,101 $ 11,187	$ 900,295

Capital Convertible Contributed Retained stock debentures surplus **earnings **	Accumulated other comprehensive income(loss) Currency Actuarial Cash translation gains and flow differences losses hedges
		Shareholders'
		equity
Balance as at January 1, 2021 $ 395,733 $ 12,707 $ 53,774 $ 444,088	$ (8,378) $ 729 $ (24,546)	$ 874,107
Loss for theperiod - - - (820)	- - -	(820)
Other comprehensive income (loss): Currency translation differences - foreign operations - - - - Cash flow hedges - subsidiaries - - - - Cash flow hedges - equity-accounted investees - - - - Cash flow hedges - joint operations - - - - Taxes with respect to above items included in other comprehensive income - - - -	(7,760) - - - - 1,668 - - 9,364 - - (4,828) - - (1,436)
		(7,760)
		1,668
		9,364
		(4,828)
		(1,436)
Total other comprehensive income(loss) for theperiod - - - -	(7,760) - 4,768	(2,992)
Total comprehensive income(loss) for theperiod - - - (820)	(7,760) - 4,768	(3,812)
Dividends declared - - - (21,105) Stock-based compensation expense - - 8,808 - Shares issued to settle LTIP/ESU/Director DSU obligations 1,393 - (1,430) (72) Stock based compensation settlements and receipts - - 1,464 -	- - - - - - - - - - - -	(21,105)
		8,808
		(109)
		1,464
Balance as at June 30, 2021 $ 397,126 $ 12,707 $ 62,616 $ 422,091	$ (16,138) $ 729 $ (19,778)	$ 859,353

During the six months ended June 30, 2022, the Company declared dividends amounting to $0.37 per share (June 30, 2021 - $0.35 per share).

AECON GROUP INC.

Page 6

The accompanying notes are an integral part of these interim condensed consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars) (unaudited)

(in thousands of Canadian dollars) (unaudited)
			June 30		June 30
			2022		2021
	Note
CASH PROVIDED BY (USED IN)
Operating activities
Profit (loss) before income taxes		$	(29,275)	$	2,833
Income taxes paid			(27,846)		(67,658)
Defined benefit pension			(82)		674
Stock-based compensation settlements and receipts			1,160		1,355
Items not affecting cash:
Depreciation and amortization			46,469		44,247
Income from projects accounted for using the equity method			(6,766)		(6,418)
Gain on sale of assets and other			(2,402)		(5,642)
Concession deferred revenue			(1,893)		(1,846)
Unrealized foreign exchange gain			665		(692)
Increase in provisions			2,160		10,399
Notional interest representing accretion			2,845		2,753
Stock-based compensation expense			10,722		8,808
Change in other balances relatingto operations	27		(135,213)		(66,005)
			(139,456)		(77,192)
Investing activities
Decrease in restricted cash balances			9,214		20,485
Purchase of property, plant and equipment			(9,431)		(21,693)
Proceeds on sale of property, plant and equipment			2,962		4,561
Investment in concession rights			-		(3,873)
Increase in intangible assets			(1,568)		(1,110)
Decrease in long-term financial assets			-		268
Distributions from projects accounted for using the equity method			1,749		2,210
Net cash outflow from business acquisitions			(5,878)		-
			(2,952)		848
Financing activities
Increase in bank indebtedness			196,695		10,242
Issuance of long-term debt			6,746		27,740
Repayments of non-recourse project debt			(1,712)		-
Repayments of lease liabilities			(25,352)		(26,889)
Repayments of long-term debt			(8,853)		(6,863)
Dividendspaid			(21,905)		(20,185)
			145,619		(15,955)
Increase (decrease) in cash and cash equivalents during the period			3,211		(92,299)
Effect of foreign exchange on cash balances			1,461		(3,310)
Cash and cash equivalents - beginning ofperiod			532,681		658,270
Cash and cash equivalents - end ofperiod	7	$	537,353	$	562,661

AECON GROUP INC.

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The accompanying notes are an integral part of these interim condensed consolidated financial statements

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

1. CORPORATE INFORMATION

Aecon Group Inc. (“Aecon” or the “Company”) is a publicly traded construction and infrastructure development company incorporated in Canada. Aecon and its subsidiaries provide services to private and public sector clients throughout Canada and on a selected basis internationally. Its registered office is located in Toronto, Ontario at 20 Carlson Court, Suite 105, M9W 7K6.

The Company operates in two segments within the infrastructure development industry: Construction and Concessions.

2. DATE OF AUTHORIZATION FOR ISSUE

The interim condensed consolidated financial statements of the Company were authorized for issue on July 28, 2022 by the Board of Directors of the Company.

3. BASIS OF PRESENTATION

Basis of presentation

The Company prepares its interim condensed consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) applicable to the preparation of interim financial statements including International Accounting Standard (“IAS”) 34 “Interim Financial Reporting”. The interim condensed consolidated financial statements do not include all the information and disclosures required in the Company’s annual consolidated financial statements and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended December 31, 2021. The accounting policies that are set out in Note 5, “ Summary of Significant Accounting Policies ” to the Company’s annual consolidated financial statements for the year ended December 31, 2021 were consistently applied to all periods presented, except for new accounting standards and amendments that became effective on January 1, 2022 as described in Note 5, “ New Accounting Standards ”.

Seasonality

The construction industry in Canada is seasonal in nature for companies like Aecon who do a significant portion of their work outdoors, particularly road construction and utilities work. As a result, less work is performed in the winter and early spring months than in the summer and fall months. Accordingly, Aecon has historically experienced a seasonal pattern in its operating results, with the first half of the year, and particularly the first quarter, typically generating lower revenue and profits than the second half of the year. Therefore, results in any one quarter are not necessarily indicative of results in any other quarter, or for the year as a whole.

Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities to fair value, including derivative instruments.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and all of its subsidiaries. In addition, the Company’s participation in joint arrangements classified as joint operations is accounted for in the consolidated financial statements by reflecting, line by line, the Company’s share of the assets held jointly, liabilities incurred jointly, and revenue and expenses arising from the joint operations. The consolidated financial statements also include the Company’s investment in and share of the earnings of projects accounted for using the equity method.

4. CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in a material adjustment to the carrying value of the asset or liability affected.

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

Critical accounting estimates are those that require management to make assumptions about matters that are highly uncertain at the time the estimate or assumption is made. Critical accounting estimates are also those that could potentially have a material impact on the Company’s financial results were a different estimate or assumption used.

Estimates and underlying assumptions are reviewed on an ongoing basis. These estimates and assumptions are subject to change at any time based on experience and new information. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Critical accounting estimates are also not specific to any one segment unless otherwise noted below.

The Company’s significant accounting policies are described in Note 5, “ Summary of Significant Accounting Policies, ” in the Company’s annual consolidated financial statements for the year ended December 31, 2021. The following discussion is intended to describe those judgments and key assumptions concerning major sources of estimation uncertainty at the end of the reporting period that have the most significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year.

COVID-19 PANDEMIC

The COVID-19 pandemic continued to disrupt global health and the economy in the first six months of 2022 and has created an indeterminate period of volatility in the markets in which Aecon operates. The COVID-19 pandemic has impacted Aecon’s operations since 2020 at varying times by way of suspensions of certain of the Company’s projects and operations, either by its clients or due to a broader government directive, by disruption to the progress of projects due to the need to modify work practices to meet appropriate health and safety standards, or by other COVID-19 related impacts on air traffic, inflation, the availability of labour or to the supply chain.

As the COVID-19 pandemic continues to evolve, notwithstanding the vaccination campaigns that are currently underway in Canada and other countries, the duration and full financial effect of the COVID-19 pandemic is still uncertain at this time, as is the efficacy of government and central bank interventions, the Company’s business continuity plan and other mitigating measures. Any estimate of the length and severity of these developments is therefore subject to significant uncertainty, and accordingly estimates of the extent to which the COVID-19 pandemic may materially and adversely affect the Company’s operations, financial results and condition in future periods are also subject to significant uncertainty. Therefore, uncertainty about judgments, estimates and assumptions made by management during the preparation of the Company’s consolidated financial statements related to potential impacts of the COVID-19 pandemic on revenue, expenses, assets, liabilities, and note disclosures could result in a material adjustment to the carrying value of the asset or liability affected. The major sources of estimation uncertainty and judgment affecting the Company are discussed in greater detail below.

4.1 MAJOR SOURCES OF ESTIMATION UNCERTAINTY

REVENUE AND GROSS PROFIT RECOGNITION

Revenue and income from fixed price construction contracts, including contracts in which the Company participates through joint operations, are determined on the percentage of completion method, based on the ratio of costs incurred to date over estimated total costs. The Company has a process whereby progress on jobs is reviewed by management on a regular basis and estimated costs to complete are updated. However, due to unforeseen changes in the nature or cost of the work to be completed or performance factors, contract profit can differ significantly from earlier estimates.

The Company’s estimates of contract revenue and cost are highly detailed. Management believes, based on its experience, that its current systems of management and accounting controls allow the Company to produce materially reliable estimates of total contract revenue and cost during any accounting period. However, many factors can and do change during a contract performance period, which can result in a change to contract profitability from one financial reporting period to another. Some of the factors that can change the estimate of total contract revenue and cost include differing site conditions (to the extent that contract remedies are unavailable), the availability of skilled contract labour, the performance of major material suppliers to deliver on time, the performance of major subcontractors, unusual weather conditions and the accuracy of the original bid estimate. Fixed price contracts are common across all of the Company’s sectors, as are change orders and claims, and therefore these estimates are not unique to one core segment. Because the Company has many contracts in process at any given time, these changes in estimates can offset each other without

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

impacting overall profitability. Changes in cost estimates, which on larger, more complex construction projects can have a material impact on the Company’s consolidated financial statements, are reflected in the results of operations when they become known.

A change order results from a change to the scope of the work to be performed compared to the original contract that was signed. Unpriced change orders are change orders that have been approved as to scope but unapproved as to price. Claims are amounts in excess of the agreed contract price, or amounts not included in the original contract price, that the Company seeks to collect from clients for delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price, or other causes of unanticipated additional costs. Management, in making judgments, estimates and assumptions that affect the contract revenue and cost amounts from unpriced change orders and claims, also considered the impacts of the COVID-19 pandemic on the Company’s operations. As noted above in greater detail, Aecon’s operations since 2020 were impacted at varying times by the suspension of certain of the Company’s projects and operations, by disruption to the progress of projects, or by other COVID-19 related impacts on air traffic, inflation, the availability of labour or to the supply chain. These judgments, estimates and assumptions affecting the revenue and cost forecasts of individual performance obligations were based on facts and circumstances that existed at the time when such judgments, estimates and assumptions were made. In accordance with the Company’s accounting policy, unpriced change orders and claims are recognized in revenue at the amount the Company expects to be entitled to, where it is highly probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Where such revenue amounts cannot be estimated with reasonable assurance, they are excluded from the revenue forecast of the related performance obligation. Therefore, it is possible for the Company to have substantial contract costs recognized in one accounting period with associated revenue recognized in a later period.

Given the above-noted critical accounting estimates associated with the accounting for construction contracts, including change orders and claims, it is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year or later could be different from the estimates and assumptions adopted and could require a material adjustment to revenue and/or the carrying amount of the asset or liability affected. The Company is unable to quantify the potential impact to the consolidated financial results from a change in estimate in calculating revenue.

LITIGATION RISK AND CLAIMS RISK

Disputes are common in the construction industry and as such, in the normal course of business, the Company is involved in various legal actions and proceedings which arise from time to time, some of which may be substantial, including the legal proceedings discussed in Note 21, “Contingencies” . The Company must make certain assumptions and rely on estimates regarding potential outcomes of legal proceedings in order to determine if a provision is required. Estimating and recording the future outcome of litigation proceedings requires management to make significant judgments and assumptions, which are inherently subject to risks and uncertainties. Management regularly analyzes current information about these matters, and internal and external legal counsel, as well as other claim specialists, are often used for these assessments. In making decisions regarding the need for provisions, management considers the degree of probability of an unfavorable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. As part of its analysis, the Company also considered any impacts of the COVID-19 pandemic on management’s assumptions and estimates related to the potential outcomes of legal proceedings. The outcome of matters related to disputes, legal actions and proceedings may have a material effect on the financial position, results of operations or cash flows of the Company, and there is no guarantee that there will not be a future rise in litigation which, depending on the nature of the litigation, could impact the financial position, results of operations, or cash flows of the Company.

The Company also pursues claims against project owners for additional costs exceeding the contract price or for amounts not included in the original contract price. When these types of events occur and unresolved claims are pending, the Company may invest significant working capital in projects to cover costs pending the resolution of the relevant claims. A failure to ultimately recover on claims could have a material effect on liquidity and financial results.

FAIR VALUING FINANCIAL INSTRUMENTS

From time to time, the Company, often through its subsidiaries, joint arrangements and equity accounted investees, enters into forward contracts and other foreign exchange hedging products to manage its exposure to changes in exchange rates related to transactions denominated in currencies other than the Canadian dollar, but does not hold or issue such financial instruments for speculative trading purposes. In addition, some of the Company’s equity accounted

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

investees enter into derivative financial instruments, namely interest rate swaps, to hedge the variability of interest rates related to non-recourse project debt. The Company is required to measure certain financial instruments at fair value, using the most readily available market comparison data and where no such data is available, using quoted market prices of similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs that can be corroborated.

Management considered the potential impacts of the COVID-19 pandemic on the Company’s cash flow hedges. For derivative instruments that hedge the Company’s exposure to variability in expected future cash flows and that are designated as cash flow hedges, management assessed whether the occurrence of future transactions that are the subject of these hedges were still considered highly probable as at June 30, 2022. Based on this assessment, the Company determined that there was no change that would require prospectively discontinuing the application of hedge accounting for such transactions.

Further information with regard to the treatment of financial instruments can be found in Note 28, “Financial Instruments.”

MEASUREMENT OF RETIREMENT BENEFIT OBLIGATIONS

The Company’s obligations and expenses related to defined benefit pension plans, including supplementary executive retirement plans, are determined using actuarial valuations and are dependent on many significant assumptions. The defined benefit obligations and benefit cost levels will change as a result of future changes in actuarial methods and assumptions, membership data, plan provisions, legislative rules, and future experience gains or losses, which have not been anticipated at this time. Emerging experience, differing from assumptions, will result in gains or losses that will be disclosed in future accounting valuations. Refer to Note 23, “ Employee Benefit Plans ,” in the Company’s annual consolidated financial statements for the year ended December 31, 2021, for further details regarding the Company’s defined benefit plans as well as the impact to the financial results of a 0.5% change in the discount rate assumption used in the calculations.

INCOME TAXES

The Company is subject to income taxes in both Canada and several foreign jurisdictions. Significant estimates and judgments are required in determining the Company’s worldwide provision for income taxes. In the ordinary course of business, there are transactions and calculations where the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Management estimates income taxes for each jurisdiction the Company operates in, taking into consideration different income tax rates, non-deductible expenses, valuation allowances, changes in tax laws, and management’s expectations of future results. Management bases its estimates of deferred income taxes on temporary differences between the assets and liabilities reported in the Company’s consolidated financial statements, and the assets and liabilities determined by the tax laws in the various countries in which the Company operates. Although the Company believes its tax estimates are reasonable, there can be no assurance that the final determination of any tax audits and litigation will not be materially different from that reflected in the Company’s historical income tax provisions and accruals. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the Company’s income tax expense and current and deferred income tax assets and liabilities in the period in which such determinations are made. Although management believes it has adequately provided for any additional taxes that may be assessed as a result of an audit or litigation, the occurrence of either of these events could have an adverse effect on the Company’s current and future results and financial condition.

The Company also considered the effect of the COVID-19 pandemic on projections and assumptions of future taxable income and therefore the recoverability of deferred income tax assets recognized as at June 30, 2022 and concluded that there was no significant impact.

The Company is unable to quantify the potential future impact to its consolidated financial results from a change in estimate in calculating income tax assets and liabilities.

IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLE ASSETS

Intangible assets with finite lives are amortized over their useful lives. Goodwill, which has an indefinite life, is not amortized. Management evaluates intangible assets that are not amortized at the end of each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Intangible assets with finite lives

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

are tested for impairment whenever events or circumstances indicate the carrying value may not be recoverable. As part of its review of impairment indicators, the Company also considered the potential impacts of the COVID-19 pandemic on goodwill and other intangible assets as at June 30, 2022. Goodwill and intangible assets with indefinite lives, if any, are tested for impairment by applying a fair value test in the fourth quarter of each year and between annual tests if events occur or circumstances change, which suggest the goodwill or intangible assets should be evaluated.

Impairment assessments inherently involve management judgment as to the assumptions used to project these amounts and the impact of market conditions on those assumptions. The key assumptions used to estimate the fair value of cash generating units under the fair value less cost to disposal approach are: weighted average cost of capital used to discount the projected cash flows; cash flows generated from new work awards; and projected operating margins.

The weighted average cost of capital rates used to discount projected cash flows are developed via the capital asset pricing model, which is primarily based on market inputs. Management uses discount rates it believes are an accurate reflection of the risks associated with the forecasted cash flows of the respective reporting units.

To develop the cash flows generated from project awards and projected operating margins, the Company tracks prospective work primarily on a project-by-project basis as well as the estimated timing of when new work will be bid or prequalified, started and completed. Management also gives consideration to its relationships with prospective customers, the competitive landscape, changes in its business strategy, and the Company’s history of success in winning new work in each reporting unit. With regard to operating margins, consideration is given to historical operating margins in the end markets where prospective work opportunities are most significant, and changes in the Company’s business strategy.

Unanticipated changes in these assumptions or estimates could materially affect the determination of the fair value of a reporting unit and, therefore, could reduce or eliminate the excess of fair value over the carrying value of a reporting unit entirely and could potentially result in an impairment charge in the future.

Refer to Note 14, “ Intangible Assets” , in the Company’s annual consolidated financial statements for the year ended December 31, 2021, for further details regarding goodwill and other intangible assets.

LEASES

The application of IFRS 16 “ Leases ” requires significant judgments and certain key estimations to be made.

Critical judgments required in the application of IFRS 16 include the following:

• Identifying whether a contract (or part of a contract) includes a lease;

• Determining whether it is reasonably certain that an extension or termination option will be exercised;

• Determining whether variable payments are in-substance fixed;

• Establishing whether there are multiple leases in an arrangement; and

• Determining the stand-alone selling price of lease and non-lease components.

Key sources of estimation uncertainty in the application of IFRS 16 include the following:

• Estimating the lease term;

• Determining the appropriate rate to discount lease payments; and

• Assessing whether a right-of-use asset is impaired.

Unanticipated changes in these judgments or estimates could affect the identification and determination of the value of lease liabilities and right-of-use assets at initial recognition, as well as the subsequent measurement of lease liabilities and right-of-use assets. These items could potentially result in changes to amounts reported in the consolidated statements of income and consolidated balance sheets in a given period.

Refer to Note 11, “ Property, plant and equipment ”, and Note 16, “ Long-term debt and non-recourse project debt ” for further details regarding leases.

ALLOWANCE FOR EXPECTED CREDIT LOSSES

The Company considered any potential impact of the COVID-19 pandemic in its analysis of expected credit losses as at June 30, 2022. The Company maintains an allowance for expected credit losses to provide for the estimated amount of

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

receivables that will not be collected. The allowance is based upon an assessment of creditworthiness of the portfolio of customers (most of which are government clients, crown corporations, or major industrial companies), historical payment experience, the age of outstanding receivables, collateral to the extent applicable, and forward-looking information regarding collectability. Based on this review, there was no significant change to the Company’s allowance for expected credit losses as at June 30, 2022.

4.2 JUDGMENTS

The following are critical judgments management has made in the process of applying accounting policies and that have the most significant effect on how certain amounts are reported in the consolidated financial statements.

BASIS FOR CONSOLIDATION AND CLASSIFICATION OF JOINT ARRANGEMENTS

Assessing the Company’s ability to control or influence the relevant financial and operating policies of another entity may, depending on the facts and circumstances, require the exercise of significant judgment to determine whether the Company controls, jointly controls, or exercises significant influence over the entity performing the work. This assessment of control impacts how the operations of these entities are reported in the Company’s consolidated financial statements (i.e., full consolidation, equity investment or proportional share).

The Company performs the majority of its construction projects through wholly owned subsidiary entities, which are fully consolidated. However, a number of projects, particularly some larger, multi-year, multi-disciplinary projects, are executed through partnering agreements. As such, the classification of these entities as a subsidiary, joint operation, joint venture, associate or financial instrument requires judgment by management to analyze the various indicators that determine whether control exists. In particular, when assessing whether an entity is classified as either a joint operation, joint venture or associate, management considers the contractual rights and obligations, voting shares, share of board members and the legal structure of the joint arrangement. Subject to reviewing and assessing all the facts and circumstances of each joint arrangement, joint arrangements contracted through agreements and general partnerships would generally be classified as joint operations whereas joint arrangements contracted through corporations would be classified as joint ventures. The majority of the current partnering agreements are classified as joint operations.

The application of different judgments when assessing control or the classification of joint arrangements could result in materially different presentations in the consolidated financial statements.

SERVICE CONCESSION ARRANGEMENTS

The accounting for concession arrangements requires the application of judgment in determining if the project falls within the scope of IFRIC Interpretation 12, “ Service Concession Arrangements ”, (“IFRIC 12”). Additional judgments are needed when determining, among other things, the accounting model to be applied under IFRIC 12, the allocation of the consideration receivable between revenue-generating activities, the classification of costs incurred on such activities, as well as the effective interest rate to be applied to the financial asset. As the accounting for concession arrangements under IFRIC 12 requires the use of estimates over the term of the arrangement, any changes to these long-term estimates could result in a significant variation in the accounting for the concession arrangement.

5. NEW ACCOUNTING STANDARDS

The following amendments to standards and interpretations became effective for the annual periods beginning on or after January 1, 2022. The application of these amendments and interpretations had no significant impact on the Company’s consolidated financial position or results of operations.

Reference to the Conceptual Framework (Amendments to IFRS 3, Business Combinations)

The amendments to IFRS 3 update an outdated reference in IFRS 3 without significantly changing its requirements and add an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination.

Fees in the “10 Per Cent Test” for Derecognition of Financial Liabilities (Amendments to IFRS 9, Financial Instruments)

The amendments to IFRS 9 clarify which fees an entity includes when it applies the “10 per cent test” in assessing whether to derecognize a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

Property, Plant and Equipment - Proceeds Before Intended Use (Amendments to IAS 16, Property, Plant and

Equipment)

The amendments to IAS 16 prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss.

Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets)

The amendments to IAS 37 provide guidance regarding the costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous. The amendments specify that the cost of fulfilling a contract comprises the costs that relate directly to the contract and can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts.

6. FUTURE ACCOUNTING CHANGES

Classification of Liabilities as Current or Non-current (Amendments to IAS 1, Presentation of Financial

Statements)

The amendments to IAS 1 provide a more general approach to the classification of liabilities based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent should be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer to the right to defer settlement by at least twelve months and make explicit that only rights in place at the end of the reporting period should affect the classification of a liability. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied retrospectively.

Disclosure of Accounting Policies (Amendments to IAS 1)

The amendments to IAS 1 require an entity to disclose its material accounting policies instead of its significant accounting policies. The amendments clarify that accounting policy information is material if users of an entity’s financial statements would need it to understand other material information in the financial statements. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied prospectively.

Definition of Accounting Estimates (Amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors)

The amendments to IAS 8 provide guidance to assist entities in distinguishing between accounting policies and accounting estimates. The amendments replace the definition of a change in accounting estimates with the definition of accounting estimates. Under the new definition, accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty. The amendments also clarify that a change in accounting estimate that results from new information or new developments is not the correction of an error. In addition, the effects of a change in an input or a measurement technique used to develop an accounting estimate are changes in accounting estimates if they do not result from the correction of prior period errors. The amendments are effective for annual periods beginning on or after January 1, 2023 and are to be applied prospectively.

Deferred Tax on Assets and Liabilities Arising From Lease and Decommissioning Obligation Transactions

(Amendments to IAS 12, Income Taxes)

The amendments to IAS 12 provide clarifications in accounting for deferred tax on certain transactions such as leases and decommissioning obligations. The amendments clarify that the initial recognition exemption does not apply to transactions such as leases and decommissioning obligations. As a result, entities may need to recognize both a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of leases and decommissioning obligations. The amendments are effective for annual periods beginning on or after January 1, 2023 and are to be applied to transactions that occur on or after the beginning of the earliest comparative period presented.

The Company is still assessing the impact of adopting these amendments on its future financial statements.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

7. CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH

		June 30		December 31
		2022		2021
Cash balances excluding joint operations	$	50,758	$	12,799
Cash balances ofjoint operations		486,595		519,882
	$	537,353	$	532,681
Restricted cash	$	90,304	$	98,010
	$	90,304	$	98,010

Cash and cash equivalents on deposit in the bank accounts of joint operations cannot be accessed directly by the Company.

Restricted cash is cash held by Bermuda Skyport Corporation Limited (“Skyport”). This cash cannot be used by the Company other than to finance the Bermuda International Airport Redevelopment Project.

8. TRADE AND OTHER RECEIVABLES

		June 30		December 31
		2022		2021
Trade receivables	$	522,838	$	467,157
Allowance for expected credit losses		(1,196)		(1,145)
		521,642		466,012
Holdbacks receivable		311,908		309,582
Other		55,778		49,209
		367,686		358,791
**Total **	$	889,328	$	824,803
Amounts receivable beyond oneyear	$	105,586	$	101,643

A reconciliation of the beginning and ending carrying amounts of the Company’s allowance for expected credit losses is as follows:

		June 30		December 31
		2022		2021
Balance - beginning of period	$	(1,145)	$	(1,140)
Additional amounts provided for during period		(233)		(531)
Trade receivables written off during period		20		165
Amounts recovered		162		361
Balance -end of period	$	(1,196)	$	(1,145)

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

9. INVENTORIES

		June 30		December 31
		2022		2021
Raw materials and supplies	$	11,681	$	5,996
Finished goods		20,599		19,199
	$	32,280	$	25,195

10. PROJECTS ACCOUNTED FOR USING THE EQUITY METHOD

The Company performs some construction and concession related projects through non-consolidated entities. The Company’s participation in these entities is conducted through joint ventures and associates and is accounted for using the equity method. The Company’s joint ventures and associates are private entities and there is no quoted market price available for their shares.

The summarized financial information below reflects the Company’s share of the amounts presented in the financial statements of joint ventures and associates:

Cash and cash equivalents Other current assets	June 30, 2022 Joint Ventures Associates Total $ 22,441 $ 755 $ 23,196 547,100 43 547,143	June 30, 2022 Joint Ventures Associates Total $ 22,441 $ 755 $ 23,196 547,100 43 547,143	December 31, 2021	December 31, 2021
	Joint Ventures Associates		Joint Ventures Associates	Total
	$ 22,441 $ 755 547,100 43		$ 42,750 $ 927 649,219 483
				$ 43,677 649,702
Total current assets Non-current assets	569,541 798 933,415 -	570,339 933,415	691,969 1,410 720,890 -	693,379
				720,890
Total assets	1,502,956 798	1,503,754	1,412,859 1,410	1,414,269
Trade and other payables and provisions	343,925 576	344,501	343,929 1,201
				345,130
Total current liabilities	343,925 576	344,501	343,929 1,201	345,130
Non-current financial liabilities Other non-current liabilities	1,061,459 - 3,444 -	1,061,459 3,444	996,796 - 3,049 -	996,796
				3,049
Total non-current liabilities	1,064,903 -	1,064,903	999,845 -	999,845
Total liabilities	1,408,828 576	1,409,404	1,343,774 1,201	1,344,975
Net assets	$ 94,128 $ 222	$ 94,350	$ 69,085$ 209	$ 69,294

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

Revenue Depreciation and amortization Other costs and expenses	For the three months ended	For the three months ended	For the three months ended
	June 30, 2022		June 30, 2021
	Joint Ventures Associates	Total $ 183,156 (153) (169,364)	Joint Ventures Associates	Total
	$ 183,156 $ - (153) - (169,375) 11		$ 229,038 $ 253 (155) - (215,480) (14)
				$ 229,291 (155) (215,494)
Operating profit Finance cost Income tax expense	13,628 11 (9,602) - (292) -	13,639 (9,602) (292)	13,403 239 (9,437) - (405) -	13,642
				(9,437) (405)
Profit for the period Other comprehensive income	3,734 11 8,620 -	3,745 8,620	3,561 239 3,378 -	3,800
				3,378
Total comprehensive income	$ 12,354$ 11	$ **12,365 **	$ 6,939 $ 239	$ 7,178

Revenue Depreciation and amortization Other costs and expenses			For the six months ended	For the six months ended
	June 30, 2022			June 30, 2021
	Joint Ventures Associates		Total 313,522 (307) (287,310)	Joint Ventures Associates	Total
	$ 313,522 $ - (307) - (287,321) 11			$ 370,391 $ 544 (307) - (345,336) (140)
		$			$ 370,935 (307) (345,476)
Operating profit Finance cost Income tax expense	25,894 11 (19,053) - (86) -		25,905 (19,053) (86)	24,748 404 (18,421) - (313) -	25,152
					(18,421) (313)
Profit for the period Other comprehensive income	6,755 11 20,039 -		6,766 20,039	6,014 404 8,147 -	6,418
					8,147
Total comprehensive income	$ 26,794$ 11	$	**26,805 **	$ 14,161$ 404	$ 14,565

The movement in the investment in projects accounted for using the equity method is as follows:

Projects accounted for using the equity method - as at beginning of period Share of profit for the period Share of other comprehensive income for the period Distributions from projects accounted for using the equity method	For the six months ended For the year ended
	June 30 December 31 2022 2021 $ 69,294 $ 37,378 6,766 15,101 20,039 19,951 (1,749) (3,136)
Projects accounted for using the equity method - as at end ofperiod	$ 94,350 $ 69,294

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

The following joint ventures and associates are included in projects accounted for using the equity method:

Name	Ownership interest	Joint Venture or Associate	Years included
Yellowline Asphalt Products Ltd.	50%	Joint Venture	2022, 2021
Waterloo LRT Concessionaire	10%	Joint Venture	2022, 2021
Eglinton Crosstown LRT Concessionaire	25%	Joint Venture	2022, 2021
Finch West LRT Concessionaire	33%	Joint Venture	2022, 2021
Gordie Howe International Bridge Concessionaire	20%	Joint Venture	2022, 2021
Sky-Tec Fibre JV	50%	Joint Venture	2021
Highway 401 Expansion Project SPV	50%	Joint Venture	2022, 2021
Pattullo Bridge Replacement Project SPV	50%	Joint Venture	2022, 2021
Eglinton Crosstown West Extension Advance Tunnel Project SPV	40%	Joint Venture	2022, 2021
ONxpress Transportation Partners	25%	Joint Venture	2022

Projects accounted for using the equity method include various concession joint ventures or project special purpose vehicles (“SPVs”) as listed above. However, the construction activities related to these concessions and project SPVs are classified as joint operations which are accounted for in the consolidated financial statements by reflecting, line by line, the Company's share of the assets held jointly, liabilities incurred jointly, and revenue and expenses arising from the joint operations.

11. PROPERTY, PLANT AND EQUIPMENT

Land Buildings and leasehold improvements Aggregate properties Machinery and construction equipment Office equipment, furniture and fixtures, and computer hardware Vehicles Total	Land Buildings and leasehold improvements Aggregate properties Machinery and construction equipment Office equipment, furniture and fixtures, and computer hardware Vehicles Total	Land Buildings and leasehold improvements Aggregate properties Machinery and construction equipment Office equipment, furniture and fixtures, and computer hardware Vehicles Total	Land Buildings and leasehold improvements Aggregate properties Machinery and construction equipment Office equipment, furniture and fixtures, and computer hardware Vehicles Total	Land Buildings and leasehold improvements Aggregate properties Machinery and construction equipment Office equipment, furniture and fixtures, and computer hardware Vehicles Total	Land Buildings and leasehold improvements Aggregate properties Machinery and construction equipment Office equipment, furniture and fixtures, and computer hardware Vehicles Total
Cost Balance at January 1, 2022 $ 53,343 $ 173,513 $ 57,975 $ 358,761 $ 40,525 $ 71,163 $ 755,280 Additions - purchased assets - 288 477 6,820 1,067 779 9,431 Additions - right-of-use assets - 5,658 - 20,371 - 6,517 32,546 Additions - business combination - - - - - 516 516 Disposals - (917) (2,264) (6,082) (16) (1,734) (11,013) Foreigncurrency translationadjustments - 33 - 112 17 21 183
Balance as at June 30, 2022 $ 53,343 $ 178,575 $ 56,188 $ 379,982 $ 41,593 $ 77,262 $ 786,943
Accumulated depreciation and impairment Balance at January 1, 2022 836 70,638 22,210 199,091 36,959 46,040 375,774 Depreciation - purchased assets - 2,896 765 7,853 1,122 480 13,116 Depreciation - right-of-use assets (a) 125 3,807 - 8,410 - 4,880 17,222 Disposals - (836) (2,264) (5,637) (16) (1,700) (10,453) Foreign currency translation adjustments - 20 - 43 13 15 91
Balance as at June 30, 2022 $ 961 $ 76,525 $ 20,711 $ 209,760 $ 38,078 $ 49,715 $ 395,750
Net book value as at June 30, 2022 $ 52,382	$ 102,050	$ 35,477 $ 170,222	$ 3,515	$ 27,547	$ 391,193
Net book value as at January 1, 2022 $ 52,507	$ 102,875	$ 35,765 $ 159,670	$ 3,566	$ 25,123	$ 379,506
Net book value of right-of-use assets included in property, plant & equipment as at January 1, 2022 $ 845$ 33,328$ 75$ 81,510$ -$ 22,965$ 138,723
Net book value of right-of-use assets included in property, plant & equipment as at June 30, 2022 $ 720$ 35,188$ 75$ 91,006$ -$ 24,585$ 151,574

(a) Depreciation of land relates to leases of land following the adoption of IFRS 16.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

12. INTANGIBLE ASSETS

						Licences,
		Concession				software and
		Rights		Goodwill		other rights		Total
Cost
Balance as at January 1, 2022	$	625,445	$	104,855	$	101,885	$	832,185
Additions
Separately acquired or constructed		-		-		1,568		1,568
Business combination		-		445		2,335		2,780
Foreign currency translation adjustments		10,262		-		19		10,281
Balance as at June 30, 2022	$	635,707	$	105,300	$	105,807	$	846,814
Accumulated amortization and impairment
Balance as at January 1, 2022		117,274		-		67,962		185,236
Amortization		9,761		-		6,370		16,131
Foreign currency translation adjustments		2,065		-		9		2,074
Balance as at June 30, 2022	$	129,100	$	-	$	74,341	$	203,441
Net book value as at June 30, 2022	$	506,607	$	105,300	$	31,466	$	643,373
Net book value as at January 1, 2022	$	508,171	$	104,855	$	33,923	$	646,949

Amortization of intangible assets is included in the depreciation and amortization expense line item on the consolidated statements of income.

13. BANK INDEBTEDNESS

13. BANK INDEBTEDNESS
		June 30		December 31
		2022		2021
Bank indebtedness	$	220,000	$	23,305
	$	220,000	$	23,305

As at June 30, 2022, the Company had a committed revolving credit facility of $600,000 (December 31, 2021 - $600,000). The Company also has uncommitted demand letter of credit facilities of $201,000 (December 31, 2021 - $201,000) from Canadian banks and $40,401 (€30,000) from a Spanish bank (December 31, 2021 - $43,173 (€30,000)). Bank indebtedness representing borrowings on the Company's revolving credit facility as at June 30, 2022 was $220,000 (December 31, 2021 - $23,305). Letters of credit amounting to $3,234 and $5,666, respectively, were issued against the revolving credit facility and the uncommitted demand letter of credit facilities as at June 30, 2022 (December 31, 2021 - $3,494 and $16,915, respectively). Cash drawings under the revolving credit facility bear interest at rates between prime and prime plus 1.20% per annum. Letters of credit drawn on the revolving credit facility reduce the amount available-foruse under this facility. These facilities mature on June 30, 2025.

The Company also maintains an additional performance security guarantee facility of $900,000 (December 31, 2021 - $900,000) to support letters of credit provided by Export Development Canada of which $568,804 was utilized as at June 30, 2022 (December 31, 2021 - $540,399). This performance security guarantee facility matures on June 30, 2023

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

14. TRADE AND OTHER PAYABLES

		June 30		December 31
		2022		2021
Trade payables and accrued liabilities	$	843,444	$	788,352
Holdbacks payable		141,361		132,301
	$	984,805	$	920,653
Amountspayable beyond oneyear	$	2,269	$	1,511

15. PROVISIONS

		Contract		Asset
		related		decommissioning
		obligations		costs	Tax assessments			Other		Total
Balance as at January 1, 2022	$	13,998	$	5,651	$	9,879	$	1,147	$	30,675
Additions made		1,013		6		-		1,074		2,093
Amounts used		(4,586)		(540)		-		(1,107)		(6,233)
Other changes		(64)		131		-		-		67
Balance as at June 30, 2022	$	10,361	$	5,248	$	9,879	$	1,114	$	26,602
Reported as:
Current	$	7,851	$	-	$	9,879	$	1,114	$	18,844
Non-current		2,510		5,248		-		-		7,758
	$	10,361	$	5,248	$	9,879	$	1,114	$	26,602

16. LONG-TERM DEBT AND NON-RECOURSE PROJECT DEBT

LONG-TERM DEBT

LONG-TERM DEBT
		June 30		December 31
		2022		2021
Long-term debt:
Leases	$	175,192	$	165,262
Equipment and other loans		57,570		59,633
Total long-termdebt	$	**232,762 **	$	224,895
Reported as:
Current liabilities:
Current portion of long-term debt	$	59,519	$	58,568
Non-current liabilities:
Long-term debt		173,243		166,327
	$	**232,762 **	$	224,895

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

The following describes the components of long-term debt:

• (a) As at June 30, 2022, leases of $175,192 (December 31, 2021 - $165,262) bore interest at fixed rates averaging 3.26% (December 31, 2021 – 2.95%) per annum, with specific equipment provided as security.

• (b) As at June 30, 2022, equipment and other loans of $57,570 (December 31, 2021 - $59,633) bore interest at fixed rates averaging 2.91% (December 31, 2021 – 2.81%) per annum, with specific equipment provided as security.

The weighted average interest rate on total long-term debt outstanding (excluding convertible debentures and nonrecourse project debt) as at June 30, 2022 was 3.18% (December 31, 2021 – 2.92%).

Expenses relating to short-term leases and leases of low-value assets recognized in the statement of income during the three and six months ended June 30, 2022 were $23,150 and $42,723, respectively (2021 - $18,963 and $33,450, respectively).

Total cash outflow related to lease liabilities for the three and six months ended June 30, 2022 was $13,039 and $25,352, respectively (2021 – $11,280 and $26,889).

Refer to Note 11, “ Property, plant and equipment ” for further details of additions to right-of-use assets and depreciation charged on right-of-use assets during the six months ended June 30, 2022.

Refer to Note 25, “ Finance cost ” for further details of interest on lease liabilities recognized during the three and six months ended June 30, 2022.

Refer to Note 28, “ Financial instruments ” for contractual maturities of lease liabilities as at June 30, 2022.

NON-RECOURSE PROJECT DEBT
		June 30		December 31
		2022		2021
Non-recourse project debt:
Bermuda International Airport Redevelopment Project financing	(a) $	361,761	$	357,537
Total non-recourse project debt	$	361,761	$	357,537
Reported as:
Current liabilities:
Current portion of non-recourse project debt	$	3,184	$	2,957
Non-current liabilities:
Non-recourse project debt		358,577	$	354,580
	$	361,761	$	357,537

• (a) Included in the Company’s consolidated balance sheet as at June 30, 2022 is debt, net of transaction costs, of $361,761 (US$280,739) (December 31, 2021 – $357,537 (US$282,013)) representing the debt of Skyport. This debt is secured by the assets of Skyport and is without recourse to the Company.

The financing is denominated in US dollars and bears interest at 5.90% annually. Debt repayments, made from Restricted Cash, commenced in 2022 and are scheduled to continue until 2042.

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

17. CONVERTIBLE DEBENTURES

Convertible subordinated debentures consist of:

Convertible subordinated debentures consist of:
		June 30		December 31
		2022		2021
Debt component:
Debenture maturing on December 31, 2023-5.0% Debentures		176,370		173,898
Total convertible debentures	$	176,370	$	173,898
Reported as:
Non-current liabilities:
Convertible debentures		176,370		173,898
	$	176,370	$	173,898
		June 30		December 31
		2022		2021
Equity component:
Debenture maturingon December 31,2023 - 5.0%Debentures	$	12,707	$	12,707

Finance cost associated with the debentures consists of:

Interest expense on face value Notional interest representing accretion	For the three months ended	For the six months ended
	June 30 June 30	June 30 June 30 2022 2021 $ 4,600 $ 4,600 2,472 2,403
	2022 2021
	$ 2,300 $ 2,300
	1,240 1,206
	$ 3,540 $ 3,506	$ 7,072 $ 7,003

At the holder’s option, the 5.0% Debentures may be converted into common shares of the Company at any time up to the maturity dates at a conversion price of $23.21 for each common share, subject to adjustment in certain circumstances. The 5.0% Debentures were not redeemable before December 31, 2021. The Company may, at its option, redeem the 5.0% Debentures from December 31, 2021 to December 31, 2022, in whole or in part, at par plus accrued and unpaid interest, provided that the volume weighted average trading price of the common shares on the Toronto Stock Exchange during a specified period prior to redemption is not less than 125% of the conversion price. From December 31, 2022 through to the maturity date, the Company, at its option, may redeem the 5.0% Debentures, in whole or in part, at par plus accrued and unpaid interest.

As at June 30, 2022, the face value of the 5.0% Debentures which remains outstanding was $184,000 (December 31, 2021 - $184,000).

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

18. CONCESSION RELATED DEFERRED REVENUE

Concession related deferred revenue consists of:

Concession related deferred revenue consists of:
		June 30		December 31
		2022		2021
Bermuda International Airport Redevelopment Project	$	94,594	$	94,951
	$	94,594	$	94,951

As part of acquiring, in 2017, the rights to operate the Existing Bermuda Airport, concession related deferred revenue includes the estimated value of the “inducement” received by Skyport to develop, finance and operate the New Airport Terminal as well as development funds related to the Bermuda International Airport Redevelopment Project. These concession deferred revenue amounts are amortized to earnings over the term of the New Airport Terminal concession period. The New Airport Terminal commenced operations on December 9, 2020. Amounts recognized as revenue for the three and six months ended June 30, 2022 were $949 and $1,893, respectively (2021 - $901 and $1,846, respectively).

19. INCOME TAXES

The provision for income taxes differs from the result that would be obtained by applying combined Canadian federal and provincial (Ontario, Alberta, Quebec and British Columbia) statutory income tax rates to profit or loss before income taxes. This difference results from the following:

Profit (loss) before income taxes Statutory income tax rate	For the six months ended
	June 30 June 30 2022 2021 $ (29,275) $ 2,833 26.40% 26.20%
Expected income tax recovery (expense)	7,729 (742)
Effect on income taxes of: Projects accounted for using the equity method Provincial and foreign rate differences Other	152 244 (2,137) (3,744) (263) 589
	(2,248) (2,911)
Income tax recovery (expense)	$ 5,481 $ (3,653)

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

20. EMPLOYEE BENEFIT PLANS

Employee future benefit expenses for the period are as follows:

Defined benefit pension expense: Company sponsored pension plans Defined contribution pension expense: Company sponsored pension plans Multi-employer pension plans	For the three months ended	For the six months ended
	June 30 June 30 2022 2021 $ 94 $ 249 2,604 2,403 25,933 23,172	June 30 June 30 2022 2021 $ 188 $ 373 4,976 4,571 46,334 39,490
Total employee future benefit expense	$ 28,631 $ 25,824	$ 51,498 $ 44,434

21. CONTINGENCIES

Coastal GasLink Pipeline, Sections 3 and 4

The project has been delayed and impacted by various events for which SA Energy Group (“SAEG”), a partnership in which the Company holds a 50% interest, asserts Coastal GasLink (“CGL”) is contractually responsible, including, but not limited to, significant scope changes and delays by the client, unforeseen site conditions, recoverable weather impacts and a suspension implemented by the client as a result of regulatory restrictions imposed due to the COVID-19 pandemic. SAEG asserts that it is entitled to additional compensation for costs associated with those delays and impacts and has commenced an arbitration pursuant to the terms of the contract to resolve the matter. While this commercial dispute could result in a material impact to Aecon’s earnings, cash flow, and financial position if not resolved favourably, the ultimate results cannot be predicted at this time.

Kemano Generating Station Second Tunnel Project

During the second quarter of 2020, Rio Tinto issued a notice of termination of contract to the joint venture in which Aecon holds a 40% interest with respect to the Kemano Generating Station Second Tunnel Project. Rio Tinto also issued notice to the joint ventures’ sureties asserting a claim on the 50% performance bonds; the sureties entered into a cooperation agreement with Rio Tinto but have not taken a position on the validity of this claim on the bonds. In the third quarter of 2020, the joint venture issued a notice of civil claim seeking approximately $105,000 in damages from Rio Tinto. The joint venture has also registered and perfected a builders’ lien against project lands, providing security over approximately $97,000 of the claimed damages. Rio Tinto has issued a counterclaim against the joint venture but has not articulated the amount of damages it may seek from the joint venture; such amount is expected to be material. While it is possible that this commercial dispute could result in a material impact to Aecon’s earnings and cash flow if not resolved, the ultimate results cannot be predicted at this time. The aforementioned notice of civil claim was commenced in the Supreme Court of British Columbia between Frontier Kemper Constructors and Frontier Kemper – Aecon Joint Venture as plaintiffs/defendants by counterclaim and Rio Tinto Alcan Inc. and Aluminum Company of Canada Limited/Aluminum Du Canada Limitee as the defendants/plaintiffs by counterclaim.

K+S Potash Canada

During the second quarter of 2018, the Company filed a statement of claim in the Court of Queen's Bench for Saskatchewan (the "Court") against K+S Potash Canada ("KSPC") and KSPC filed a statement of claim in the Court against the Company. Both actions relate to the Legacy mine project in Bethune, Saskatchewan. The Company is seeking $180,000 in payments due to it pursuant to agreements entered into between the Company and KSPC with respect to the project plus approximately $14,000 in damages. The Company has recorded $139,292 of unbilled revenue and accounts receivable as at June 30, 2022. Offsetting this amount to some extent, the Company has accrued $45,000 in trade and

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

other payables for potential payments to third parties pending the outcome of the claim against KSPC. KSPC is seeking an order that the Company repay to KSPC approximately $195,000 already paid to the Company pursuant to such agreements. The Company has also been brought into two other lawsuits in the same Court between KSPC and various other contractors involved with the Legacy mine project, both relating to matters which the Company believes are materially covered by insurance coverage, to the extent of any liability. These claims may not be resolved for several years. While the Company considers KSPC’s claim to be without merit and does not expect that the resolution of these claims will cause a material impact to its financial position, the ultimate results cannot be predicted at this time.

The Company is involved in various other disputes and litigation both as plaintiff and defendant. In the opinion of management, the resolution of other disputes against the Company, including those provided for (see Note 15, “Provisions” ), will not result in a material effect on the consolidated financial position of the Company.

See also Note 4, “ Critical Accounting Estimates ” for judgments and estimates impacting litigation risk and claims risk.

As part of regular operations, the Company has the following guarantees and letters of credit outstanding:

		June 30
	Project
		2022
Letters of credit:
Financial and performance - issued by Export Development Canada	Various joint arrangement projects	$ 568,804
Financial and performance - issued in the normal conduct of business	Various	$ 8,900

Under the terms of many of the Company’s associate and joint arrangement contracts with project owners, each of the partners is jointly and severally liable for performance under the contracts. As at June 30, 2022, the value of uncompleted work for which the Company’s associate and joint arrangement partners are responsible, and which the Company could be responsible for assuming, amounted to approximately $10,225,394 a portion of which is supported by performance bonds. In the event the Company assumed this additional work, it would have the right to receive the partner’s share of billings to the project owners pursuant to the respective associate or joint arrangement contract.

22. CAPITAL STOCK

Number of common shares outstanding - beginning of period Shares issued to settle LTIP/ESU/Director DSU obligations		For the year ended December 31, 2021
	For the six months ended
	June 30, 2022
	Number Amount	Number Amount 60,219,825 $ 395,733 603,064 10,074
	60,822,889 $ 405,807
	132,083 1,986
Number of common shares outstanding - end of period	60,954,972 $ 407,793	60,822,889 $ 405,807

The Company is authorized to issue an unlimited number of common shares.

STOCK−BASED COMPENSATION

Long-Term Incentive Plan

In 2005 and 2014, the Company adopted Long-Term Incentive Plans (collectively “LTIP” or individually “2005 LTIP” or “2014 LTIP”) to provide a financial incentive for its senior executives to devote their efforts to the long-term success of the Company’s business. Awards to participants are based on the financial results of the Company and are made in the form of Deferred Share Units (“DSUs”) or in the form of Restricted Share Units (“RSUs”). Awards made in the form of DSUs will vest only on the retirement or termination of the participant. Awards made in the form of RSUs will vest annually over

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

three years. Compensation charges related to the LTIP are expensed over the estimated vesting period of the awards in marketing, general and administrative expense. Awards made to individuals who are eligible to retire under the plan are assumed, for accounting purposes, to vest immediately.

For the three and six months ended June 30, 2022, the Company recorded LTIP compensation charges of $4,602 (2021 - $4,708) and $9,065 (2021 - $8,133) respectively.

Other Stock-based Compensation – Director DSU Awards

In February 2021, the Board of Directors modified its director compensation program by replacing the 2014 Director DSU Plan (as defined below) with a director deferred share unit plan that provides for the settlement of DSUs in cash only (the “2021 Director DSU Plan”) for future grants. A DSU is a right to receive an amount from the Company equal to the value of one common share. In addition to the discretionary award of DSUs, directors have an option to elect to receive 50% or 100% of their Board annual retainer fee that is otherwise payable in cash in the form of DSUs. The number of DSUs awarded to a director is equal to the value of the compensation that a director elects to receive in DSUs or the value awarded by the Company on an annual basis divided by the volume weighted average trading price of a common share on the TSX for the five trading days prior to the date of the award. DSUs are redeemable on the first business day following the date the director ceases to serve on the Board.

The Board of Directors will no longer issue new DSUs under the director deferred share unit plan dated May 2014 (the “2014 Director DSU Plan”). The last award of DSUs under the 2014 Director DSU Plan was made on March 12, 2020. DSUs granted under the 2014 Director DSU Plan will continue to be governed by the terms of the 2014 Director DSU Plan.

Director DSU awards are expensed in full on the date of grant and recognized in marketing, general and administrative expense in the consolidated statements of income. DSU awards under the 2014 Director DSU Plan are accounted for as equity-settled stock-based transactions. DSU awards under the 2021 Director DSU Plan are accounted for as cash-settled stock-based transactions with the related liability revalued to fair value at the end of each reporting period. Director DSUs have accompanying dividend equivalent rights, which are also expensed as earned in marketing, general and administrative expense.

For the three and six months ended June 30, 2022, the Company recorded Director DSU compensation (income)/expense, net of fair value adjustments, of $(403) and $975, respectively (2021 - $(6) and $1,166, respectively).

Other Stock-based Compensation – Employee Share Unit (ESU) Awards

In April 2019, the Company adopted an Employee Share Unit (“ESU”) plan, an employee benefit program that enables all permanent, non-unionized, Canadian resident employees to become shareholders of the Company. The program includes ESUs gifted to eligible employees, and additional ESUs that may be purchased by eligible employees during a predetermined window each year at a discounted price.

ESU awards and purchases vest annually over three years. ESUs are equity settled awards with compensation charges related to ESU awards and purchases expensed over the estimated vesting period in marketing, general and administrative expense.

For the three and six months ended June 30, 2022, the Company recorded an ESU compensation charge of $378 (2021 - $331) and $682 (2021 - $492), respectively.

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

Details of the changes in the balance of LTIP awards, Director DSUs, and ESUs outstanding are detailed below:

Balance outstanding - beginning of period Granted Dividend equivalent rights Settled Forfeited	For the six months ended June 30, 2022	For the six months ended June 30, 2022	For the six months ended June 30, 2022
	LTIP	Director DSUs	ESUs
		Share Units
	2,771,651 1,090,819 70,145 (132,083) (51,008)	351,776 82,688 8,402 - **- **
			318,958
			140,103
			13,524
			(6,322)
			(13,871)
Balance outstanding-end ofperiod	3,749,524	442,866	**452,392 **
Weighted Average Grant Date Fair Value Per Unit Balance outstanding - beginning of period $ 15.59 $ 16.25 $ 18.10 Granted including Director DSU fair value adjustments 15.90 10.11 16.72 Dividend equivalent rights 15.64 16.57 18.09 Settled 14.53 - 17.40 Forfeited 17.66 - 18.20	Weighted Average Grant Date Fair Value Per Unit
Balance outstanding-end ofperiod $ 15.69 $ 15.11$ 17.68

Amounts included in Contributed Surplus in the Consolidated Balance Sheets as at June 30, 2022 in respect of LTIP, Director DSUs, and ESUs were $45,537 (December 31, 2021 - $38,720), $4,740 (December 31, 2021 - $4,641), and $6,534 (December 31, 2021 – $4,705), respectively. Amounts included in Trade and Other Payables in the Consolidated Balance Sheets as at June 30, 2022 in respect of Director DSUs was $1,953 (December 31, 2021 - $1,077).

23. EXPENSES

Personnel Subcontractors Materials Equipment costs Depreciation of property, plant and equipment and amortization of intangible assets Other expenses	For the three months ended	For the six months ended
	June 30 June 30	June 30 June 30 2022 2021 $ 710,886 $ 553,775 828,956 708,928 409,239 305,990 105,032 90,681 46,469 44,247 22,244 8,743
	2022 2021
	$ 378,690 $ 313,603
	453,934 411,104
	201,467 153,282
	52,540 41,406
	23,595 21,399
	11,793 4,334
Total expenses	$ 1,122,019 $ 945,128	$ 2,122,826 $ 1,712,364

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

Reported as: Direct costs and expenses Marketing, general and administrative expense Depreciation and amortization
	For the three months ended	For the six months ended
	June 30 June 30	June 30 June 30 2022 2021 $ 1,970,531 $ 1,576,113 105,826 92,004 46,469 44,247
	2022 2021
	$ 1,045,709 $ 879,416 52,715 44,313
	23,595 21,399
Total expenses	$ 1,122,019 $ 945,128	$ 2,122,826 $ 1,712,364

24. OTHER INCOME

Foreign exchange loss Gain on sale of property, plant and equipment Othergains	For the three months ended	For the six months ended
	June 30 June 30	June 30 June 30 2022 2021 $ (57) $ (599) 2,402 2,975 - 2,667
	2022 2021
	$ (238) $ (102) 346 2,113 - 2,667
Total other income	$ 108 $ 4,678	$ 2,345 $ 5,043

25. FINANCE COST

Interest and notional interest on long-term debt and debentures Interest on leases Interest on short-term debt Notional interest on provisions	For the three months ended	For the six months ended
	June 30 June 30 2022 2021 $ 9,433 $ 9,023 1,156 1,039 2,553 1,168 44 (159)	June 30 June 30 2022 2021 $ 18,806 $ 18,206 2,245 2,106 3,855 1,635 67 (101)
Total finance cost	$ 13,186 $ 11,071	$ 24,973 $ 21,846

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

26. EARNINGS PER SHARE

Details of the calculations of earnings (loss) per share are set out below:

Profit (loss) attributable to shareholders Interest on convertible debentures, net of tax(1)	For the three months ended	For the six months ended
	June 30 June 30	June 30 June 30 2022 2021 $ (23,794) $ (820) 5,198 5,148
	2022 2021 $ (6,351) $ 17,591 2,602 2,577
Dilutednetearnings (loss)	$ (3,749) $ 20,168	$ (18,596) $ 4,328
Average number of common shares outstanding Effect of dilutive securities:(1) Convertible debentures(1) Long-term incentive plan	60,911,711 60,310,144 13,071,351 10,435,282 4,043,641 3,708,630	60,876,928 60,293,633 12,137,191 10,537,244 4,043,641 3,708,630
Weighted average number of diluted common shares outstanding	78,026,703 74,454,056	77,057,760 74,539,507
Basic earnings (loss) per share Diluted earnings (loss) per share(1)	$ (0.10) $ 0.29 $ (0.10) $ 0.27	$ (0.39) $ (0.01) $ (0.39) $ (0.01)

(1) When the impact of dilutive securities increases the earnings per share or decreases the loss per share, they are excluded for purposes of the calculation of diluted earnings (loss) per share.

27. SUPPLEMENTARY CASH FLOW INFORMATION

Change in other balances relating to operations

Change in other balances relating to operations
Decrease (increase) in: Trade and other receivables Unbilled revenue Inventories Prepaid expenses Increase (decrease) in: Trade and other payables Provisions Deferred revenue	For the six months ended
	June 30 June 30 2022 2021 $ (61,888) $ 18,195 (73,780) (48,036) (7,074) (3,814) (8,894) (92) 61,161 (13,653) (6,233) (1,842) (38,505) (16,763)
	$ (135,213) $ (66,005)

Cash flows from interest

Operating activities Cash interest paid Cash interest received	For the six months ended June 30 June 30 2022 2021 $ (21,939) $ (19,563) 261 305

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

28. FINANCIAL INSTRUMENTS

Fair value

From time to time, the Company enters into forward contracts and other foreign exchange hedging products to manage its exposure to changes in exchange rates related to transactions denominated in currencies other than the Canadian dollar but does not hold or issue such financial instruments for speculative trading purposes. As at June 30, 2022, the Company had contracts to buy US$1,200 (December 31, 2021 - US$4,000) on which there was a cumulative net unrealized exchange gain of $17 recorded in the consolidated statements of income as at that date (December 31, 2021 - gain $12). In addition, as at June 30, 2022, outstanding contracts to buy US$131,620 (December 31, 2021 – buy US$142,364) were designated as cash flow hedges on which there was a cumulative unrealized gain recorded in other comprehensive income of $1,045 (December 31, 2021 – loss $1,224). The net unrealized exchange gain or loss represents the estimated amount the Company would have received/paid if it terminated the contracts at the end of the respective periods.

In addition, some of the Company’s investments in projects accounted for using the equity method enter into derivative financial instruments, namely interest rate swaps, to hedge the variability of interest rates related to non-recourse project debt. As at June 30, 2022, for these derivative financial instruments designated as cash flow hedges, there was a cumulative unrealized gain recorded in other comprehensive income of $14,209 (December 31, 2021 - loss $8,412).

IFRS 13, “Fair Value Measurement”, enhances disclosures about fair value measurements. Fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs. The first two levels are considered observable and the last unobservable. These levels are used to measure fair values as follows:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

• Level 2 – Inputs, other than Level 1 inputs, that are observable for assets and liabilities, either directly or indirectly. Level 2 inputs include: quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the fair value hierarchy under which the Company’s fair value disclosures of financial instruments are calculated.

	As at June 30, 2022
	Total Level 1 Level 2 Level 3
Financial assets (liabilities) measured at fair value: Cash flow hedges $ 15,254 $ - $ 15,254 $ - Financial assets (liabilities) disclosed at fair value: Long-term financial assets 6,635 - 6,635 - Long-term debt (230,586) - (230,586) - Non-recourse project debt (361,761) - (361,761) - Convertible debentures (184,920) (184,920) - -

During the six months ended June 30, 2022, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

Risk management

The main risks arising from the Company’s financial instruments are credit risk, liquidity risk, interest rate risk and currency risk. These risks arise from exposures that occur in the normal course of business and are managed on a consolidated Company basis.

Credit risk

Concentration of credit risk associated with accounts receivable, holdbacks receivable and unbilled revenue is limited by the Company’s diversified customer base and its dispersion across different business and geographic areas.

As at June 30, 2022, the Company had $50,801 in trade receivables that were past due. Of this amount, $39,410 was over 60 days past due, against which the Company has recorded an allowance for expected credit losses of $1,196.

Liquidity risk

Liquidity risk is the risk the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled in cash or another financial asset.

Contractual maturities for financial liabilities as at June 30, 2022 are as follows:

				Due between				Total
		Due within		one and five		Due after		undiscounted		Effect of		Carrying
		one year		years		fiveyears		cash flows		interest		value
Bank indebtedness	$	-	$	220,000	$	-	$	220,000	$	-	$	220,000
Trade and otherpayables	$	982,536	$	2,269	$	-	$	984,805	$	-	$	984,805
Leases	$	52,001	$	117,420	$	21,551	$	190,972	$	(15,780)	$	175,192
Equipment and other
loans		13,971		38,279		11,365		63,615		(6,045)		57,570
		65,972		155,699		32,916		254,587		(21,825)		232,762
Non-recourse project
debt		24,644		108,435		528,876		661,955		(300,194)		361,761
Convertible debentures		9,200		188,600		-		197,800		(21,430)		176,370
Long-term financial
liabilities	$	99,816	$	452,734	$	561,792	$	1,114,342	$	(343,449)	$	770,893

Interest rate risk

The Company is exposed to interest rate risk on its short-term deposits and its long-term debt to the extent that its investments or credit facilities are based on floating rates of interest.

For the six months ended June 30, 2022, a 1% increase or a 1% decrease in interest rates applied to the Company’s variable rate long-term debt would not have a significant impact on net earnings or comprehensive income.

Currency risk

The Company operates internationally and is exposed to risk from changes in foreign currency rates. The Company is mainly exposed to fluctuations in the US dollar.

The Company’s sensitivity to a 10% change in the US dollar against the Canadian dollar as at June 30, 2022 to profit or loss for currency exposures would be $13,079. The sensitivity analysis includes foreign currency denominated monetary items but excludes all investments in joint ventures and hedges and adjusts their translation at year-end for the above 10% change in foreign currency rates.

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(in thousands of Canadian dollars, except per share amounts) (unaudited)

29. CAPITAL DISCLOSURES

For capital management purposes, the Company defines capital as the aggregate of its shareholders’ equity and debt. Debt includes the current and non-current portions of long-term debt (excluding non-recourse debt) and the current and non-current long-term debt components of convertible debentures.

Although the Company monitors capital on a number of bases, including liquidity and working capital, total debt (excluding non-recourse debt and drawings on the Company’s credit facility presented as bank indebtedness) as a percentage of total capitalization (debt to capitalization percentage) is considered to be the most important metric in measuring the strength and flexibility of its consolidated balance sheets. As at June 30, 2022, the debt to capitalization percentage including convertible debentures as debt was 31% (December 31, 2021 - 30%). If the convertible debentures were to be excluded from debt and added to equity on the basis that they could be redeemed for equity, either at the Company’s option or at the holder’s option, then the adjusted debt to capitalization percentage would be 18% as at June 30, 2022 (December 31, 2021 - 17%). While the Company believes this debt to capitalization percentage is acceptable, because of the cyclical nature of its business, the Company will continue its current efforts to maintain a conservative capital position.

As at June 30, 2022, the Company complied with all of its financial debt covenants.

30. OPERATING SEGMENTS

Segment reporting is based on the Company’s divisional operations. The breakdown by division mirrors the Company’s internal reporting systems.

The Company currently operates in two segments within the infrastructure development industry: Construction and Concessions. The other costs and eliminations category in the summary below includes corporate costs and other activities not directly allocable to segments and also includes inter-segment eliminations.

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

For the three months ended June 30, 2022	For the three months ended June 30, 2022	For the three months ended June 30, 2022
Construction Concessions Other and eliminations Total
Consolidated statements of income External customer revenue $ 1,104,082 $ 19,156 $ - $ 1,123,238 Inter-segment revenue 75 - (75) - Total revenue 1,104,157 19,156 (75) 1,123,238 Expenses $ (1,092,412) $ (17,349) $ (12,258) $ (1,122,019) Which include: Depreciation and amortization (18,049) (5,333) (213) (23,595) Other income (loss): Foreign exchange gain (loss) $ 260 $ 4 $ (502) $ (238) Gain on sale of property, plant and equipment 346 - - 346 Income from projects accounted for using the equity method $ 326 $ 3,419 $ - $ 3,745
	Total revenue 1,104,157 19,156 (75) 1,123,238 Expenses $ (1,092,412) $ (17,349) $ (12,258) $ (1,122,019) Which include: Depreciation and amortization (18,049) (5,333) (213) (23,595) Other income (loss): Foreign exchange gain (loss) $ 260 $ 4 $ (502) $ (238) Gain on sale of property, plant and equipment 346 - - 346 Income from projects accounted for using the equity method $ 326 $ 3,419 $ - $ 3,745
	Operating profit (loss) $ 12,677 $ 5,230 $ (12,835) $ 5,072 Finance income (cost): Finance income $ 158 Finance cost (13,186)
	Loss before income taxes $ (7,956) Income tax recovery 1,605
	Loss for theperiod $ (6,351)
	Revenue by contract type
		Fixed price $ 415,194 $ - $ (6) $ 415,188 Cost plus/unit price 688,963 - (69) 688,894 Concession operations - 19,156 - 19,156
		Total revenue 1,104,157 19,156 (75) 1,123,238
	Revenue by service type
		Construction revenue $ 1,104,157 $ - $ (75) $ 1,104,082 Concession revenue - 19,156 - 19,156
		Total revenue 1,104,157 19,156 (75) 1,123,238 Construction Concessions Other and eliminations Total
Consolidated balance sheets
Segment assets $ 2,844,591 $ 687,946 $ (23,249) $ 3,509,288 Which include: Projects accounted for using the equity method 33,247 61,103 - 94,350 Segment liabilities $ 1,368,161 $ 422,326 $ 818,506 $ 2,608,993 Additions to non-current assets: Property, plant and equipment $ 28,022 $ 54 $ 192 $ 28,268 Intangible assets $ 2,780 $ 829 $ 201 $ 3,810

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

For the six months ended June 30, 2022	For the six months ended June 30, 2022	For the six months ended June 30, 2022
Construction Concessions Other and eliminations Total
Consolidated statements of income External customer revenue $ 2,075,602 $ 33,550 $ - $ 2,109,152 Inter-segment revenue 181 - (181) - Total revenue 2,075,783 33,550 (181) 2,109,152 Expenses $ (2,064,367) $ (33,577) $ (24,882) $ (2,122,826) Which include: Depreciation and amortization (35,446) (10,638) (385) (46,469) Other income (loss): Foreign exchange gain (loss) $ 132 $ 1 $ (190) $ (57) Gain on sale of property, plant and equipment 2,402 - - 2,402 Income (loss) from projects accounted for using the equity method $ (5) $ 6,771 $ - $ 6,766
	Total revenue 2,075,783 33,550 (181) 2,109,152 Expenses $ (2,064,367) $ (33,577) $ (24,882) $ (2,122,826) Which include: Depreciation and amortization (35,446) (10,638) (385) (46,469) Other income (loss): Foreign exchange gain (loss) $ 132 $ 1 $ (190) $ (57) Gain on sale of property, plant and equipment 2,402 - - 2,402 Income (loss) from projects accounted for using the equity method $ (5) $ 6,771 $ - $ 6,766
	Operating profit (loss) $ 13,945 $ 6,745 $ (25,253) $ (4,563) Finance income (cost): Finance income $ 261 Finance cost (24,973)
	Loss before income taxes $ (29,275) Income tax recovery 5,481
	Loss for theperiod $ (23,794)
	Revenue by contract type
		Fixed price $ 1,091,724 $ - $ (46) $ 1,091,678 Cost plus/unit price 984,059 - (135) 983,924 Concession operations - 33,550 - 33,550
		Total revenue 2,075,783 33,550 (181) 2,109,152
	Revenue by service type
		Construction revenue $ 2,075,783 $ - $ (181) $ 2,075,602 Concession revenue - 33,550 - 33,550
		Total revenue 2,075,783 33,550 (181) 2,109,152 Construction Concessions Other and eliminations Total
Consolidated balance sheets
Additions to non-current assets: Property, plant and equipment $ 37,598 $ 162 $ 4,733 $ 42,493 Intangible assets $ 2,780 $ 902 $ 666 $ 4,348

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

For the three months ended June 30, 2021	For the three months ended June 30, 2021	For the three months ended June 30, 2021
Construction Concessions Other and eliminations Total
Consolidated statements of income External customer revenue $ 954,335 $ 16,951 $ - $ 971,286 Inter-segment revenue 279 - (279) - Total revenue 954,614 16,951 (279) 971,286 Expenses $ (923,831) $ (16,037) $ (5,260) $ (945,128) Which include: Depreciation and amortization (15,837) (5,166) (396) (21,399) Other income (loss): Foreign exchange gain (loss) $ 791 $ (198) $ (695) $ (102) Gain on sale of property, plant and equipment 2,113 - - 2,113 Other gains 2,667 - - 2,667 Income from projects accounted for using the equity method $ 976 $ 2,824 $ - $ 3,800
	Total revenue 954,614 16,951 (279) 971,286 Expenses $ (923,831) $ (16,037) $ (5,260) $ (945,128) Which include: Depreciation and amortization (15,837) (5,166) (396) (21,399) Other income (loss): Foreign exchange gain (loss) $ 791 $ (198) $ (695) $ (102) Gain on sale of property, plant and equipment 2,113 - - 2,113 Other gains 2,667 - - 2,667 Income from projects accounted for using the equity method $ 976 $ 2,824 $ - $ 3,800
	Operating profit (loss) $ 37,330 $ 3,540 $ (6,234) $ 34,636 Finance income (cost): Finance income $ 139 Finance cost (11,071)
	Profit before income taxes $ 23,704 Income tax expense (6,113)
	Profit for theperiod $ 17,591
	Revenue by contract type
		Fixed price $ 564,871 $ 193 $ (196) $ 564,868 Cost plus/unit price 389,743 - (83) 389,660 Concession operations - 16,758 - 16,758
		Total revenue 954,614 16,951 (279) 971,286
	Revenue by service type
		Construction revenue $ 954,614 $ - $ (279) $ 954,335 Concession revenue - 16,951 - 16,951
		Total revenue 954,614 16,951 (279) 971,286 Construction Concessions Other and eliminations Total
Consolidated balance sheets
Segment assets $ 2,755,936 $ 654,324 $ (186,888) $ 3,223,372 Which include: Projects accounted for using the equity method 16,842 32,891 - 49,733 Segment liabilities $ 1,372,832 $ 402,175 $ 589,012 $ 2,364,019 Additions to non-current assets: Property, plant and equipment $ 24,483 $ 219 $ 1,062 $ 25,764 Intangible assets $ - $ 3,275 $ 688 $ 3,963

AECON GROUP INC.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (in thousands of Canadian dollars, except per share amounts) (unaudited)

For the six months ended June 30, 2021	For the six months ended June 30, 2021	For the six months ended June 30, 2021
Construction Concessions Other and eliminations Total
Consolidated statements of income External customer revenue $ 1,697,009 $ 28,307 $ - $ 1,725,316 Inter-segment revenue 1,711 - (1,711) - Total revenue 1,698,720 28,307 (1,711) 1,725,316 Expenses $ (1,664,594) $ (33,106) $ (14,664) $ (1,712,364) Which include: Depreciation and amortization (33,081) (10,384) (782) (44,247) Other income (loss): Foreign exchange gain (loss) $ 879 $ (396) $ (1,082) $ (599) Gain on sale of property, plant and equipment 2,975 - - 2,975 Other gains 2,667 - - 2,667 Income from projects accounted for using the equity method $ 681 $ 5,737 $ - $ 6,418
	Total revenue 1,698,720 28,307 (1,711) 1,725,316 Expenses $ (1,664,594) $ (33,106) $ (14,664) $ (1,712,364) Which include: Depreciation and amortization (33,081) (10,384) (782) (44,247) Other income (loss): Foreign exchange gain (loss) $ 879 $ (396) $ (1,082) $ (599) Gain on sale of property, plant and equipment 2,975 - - 2,975 Other gains 2,667 - - 2,667 Income from projects accounted for using the equity method $ 681 $ 5,737 $ - $ 6,418
	Operating profit (loss) $ 41,328 $ 542 $ (17,457) $ 24,413 Finance income (cost): Finance income $ 266 Finance cost (21,846)
	Profit before income taxes $ 2,833 Income tax expense (3,653)
	Loss for theperiod $ (820)
	Revenue by contract type
		Fixed price $ 1,054,700 $ 3,014 $ (1,427) $ 1,056,287 Cost plus/unit price 644,020 - (284) 643,736 Concession operations - 25,293 - 25,293
		Total revenue 1,698,720 28,307 (1,711) 1,725,316
	Revenue by service type
		Construction revenue $ 1,698,720 $ - $ (1,711) $ 1,697,009 Concession revenue - 28,307 - 28,307
		Total revenue 1,698,720 28,307 (1,711) 1,725,316 Construction Concessions Other and eliminations Total
Consolidated balance sheets
Additions to non-current assets: Property, plant and equipment $ 46,395 $ 219 $ 1,447 $ 48,061 Intangible assets $ - $ 3,873 $ 1,110 $ 4,983

AECON GROUP INC.

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