CH2M CREDIT NOTES - Responsible Strategic · PDF fileCH2M CREDIT NOTES Richard J. Reilly DueDilly, LLC d/b/a Responsible Strategic Management (917) 882-2880 Page 3 of 41 Management

CH2M CREDIT NOTES

Richard J. Reilly DueDilly, LLC d/b/a Responsible Strategic Management (917) 882-2880

The best outcome will result from openly airing the issues while pursuing operational improvement and equitable IOT concurrent with seeking strategic business combination (merger) with one or more existing E&C concerns (at least one being a public Corporation). A fixed share collar being the preferred structure. Setting us in this direction, an objective review of past performance is required to weigh value destruction and management response as recalibrated performance goals and investment expectation may be established and communicated. Three fundamental forces drove value destruction, inverted the capital structure and challenged solvency/liquidity beginning Dec 2011 through Dec 2014.

1. Large pension deficit relating to Nov 2011 Halcrow acquisition - $375 million increase in liability ($150 realized loss and $225 unrealized loss) and $122 million cash contributions to db plans. The December 2014 unfunded status (deficit) is $532 million/18% of total assets. 2. A failed venture into power announced April 2012 resulted in $140 million loss. 3. A $491 million cash drain relating to 2012 – 2014 IOT redemptions.

The Company’s current strategy effectively punts $225 million of unrealized pension losses and claims performance improvement on suspending the associated loss recognition. Whereas the higher road calls on the company to:

• Quantify, communicate and address the value destruction head-on

• Affirm it’s financial accounts/policies/procedures

• Identify any/all available performance improvement and/or strategic measures

• Track the progress toward restoration of lost value

• Normalize balance sheet risk associated with pension deficit (bring it back under industry bell curve). Indeed EBITDA enjoys the appearance of benefit under current program, however unrealized losses of such size and delayed acknowledgement/address of the underfunded status calls for increased scrutiny of Ch2m as business partner, potential suitor/merger candidate, or employer of choice. In this regard, review of public record can be quite revealing, with observations falling into three categories:

Financial health, market value and earnings quality observations Management Response, Fiduciary and Other General Observations Contingent and Reputational Risk Issues

These talking points then turn to operating initiatives that can enhance strategic outcome before addressing indicative value and investment outlook.

Mounting Capital Challenges

Project Desc StatusTotal

ChargeTotal

On-going

Cum Pension & Power

ItemsCum Stock

Redemption

Northeast US Power Complete 64,400 0Europeean IUE Risk 17,800 1/2 9,000Australian JV Risk 140,000 >> 140,000 140,000SW US Transportation Risk 92,300 >> 92,300Western US Power Complete 42,900 >> 0Total Project Losses 357,400 241,300 140,000Restructuring 87,900 >> 87,900Total Project and Restructuring 445,300 329,200Goodwill Impairment 73,312 >> 73,312Total 518,612 402,512 140,000

Contributions to db plans (Cash) 122,782 122,782 122,782OACI (Net of ~$70mm tax Bene fi t) 225,000 >> 225,000 225,000Cum stock redemption (Ca sh) 491,929 >> 491,929 491,929 Cum DB liability realized (Accrual) 150,000 150,000 150,000

1,508,323 1,392,223 637,782 491,929

CH2M CREDIT NOTES

Richard J. Reilly DueDilly, LLC d/b/a Responsible Strategic Management (917) 882-2880 Page 2 of 41

Financial health, market value and earnings quality observations

• Unfunded pension status of $532mm (18% of total assets at Dec ’14) outweighs that of any peer and requires significant discount in relative value determination (calculated based on plan buy-out at 10% increase/1.1x plan liabilities). Total unrealized losses in AOCI(L) (pension plus currency) represent $9 or 16% of current calculated share value of $55.75

• A Pension Comparison Worksheet is provided at the end of these discussion points.

• Declining asset efficiency highlights revenue vs asset impairment. A $73 million impairment came on weakened 2014 revenue. The combined sales growth/impairment necessary to charge to maintain ~2x TTM ratio is shown.

• A remarkable revenue shift is demonstrated in growing unbilled accrual (on track to exceed client accounts), this challenges both revenue and asset quality.

Ch2 (discount)/premium on pension aloneVs SNC (650.3) = (682.7) less (32.4)Vs AECOM (372.0) = (682.7) less (310.7)Vs WSP (609.6) = (682.7) less (73.1)Vs KBR 46.8 = (682.7) less (729.5)Vs JEC (112.7) = (682.7) less (570.0)Vs FLR (463.7) = (682.7) less (219.0)Vs UGL (648.1) = (682.7) less (34.6)

Pension Position 2010 2011 2012 2014US Non US Total US Non US Total US Non US Total US Non US Total

Plan Obligations $187.5 $0.0 $187.5 $205.8 $926.4 $1,132.1 $245.1 $1,064.0 $1,309.0 $268.5 $1,236.5 $1,505.0Plan Assets $138.6 $0.0 $138.6 $141.5 $624.0 $765.5 $162.7 $701.3 $863.9 $196.1 $776.7 $972.8Underfunded Status ($48.9) $0.0 ($48.9) ($64.3) ($302.4) ($366.6) ($82.4) ($362.7) ($445.1) ($72.4) ($459.8) ($532.2)Total Assetts 1,967.1 2,694.9 3,114.6 2,941.3

-2.5% -13.6% -14.3% -18.1%

Asset Efficency $0 $50 $100 $150 $200 $250 $300 $350 $400$0 1.83 1.87 1.90 1.93 1.97 2.01 2.05 2.09 2.13

$50 1.85 1.88 1.92 1.95 1.99 2.03 2.07 2.11 2.15$100 1.87 1.90 1.94 1.97 2.01 2.05 2.09 2.13 2.17$150 1.89 1.92 1.95 1.99 2.03 2.06 2.10 2.15 2.19$200 1.90 1.94 1.97 2.01 2.04 2.08 2.12 2.17 2.21$250 1.92 1.95 1.99 2.03 2.06 2.10 2.14 2.18 2.23$300 1.94 1.97 2.01 2.04 2.08 2.12 2.16 2.20 2.25$350 1.96 1.99 2.03 2.06 2.10 2.14 2.18 2.22 2.27

Asset Impairment

Asset Impairment

Sale

s Inc

reas

e

CH2M CREDIT NOTES


Management Response, Fiduciary and Other General Observations

• It is not unreasonable for parties to construe that the Halcrow deal and related due diligence was a hurried bid to secure a late role on infrastructure 2012 Summer Games program (2010 bid for Scott Wilson PLC was lost to URS)

• A formal report/opinion on the Halcrow Pension Scheme had not been delivered since 2008. It is understood that Ch2 was not in agreement with Halcrow Pension Trustees re the assumptions on which plan obligations should be calculated. And following the transaction, a former Halcrow executive joined valuation consultant EFCG.

• An unsupported shift in cost basis identified in consolidated reporting underscores the pension dilemma. Noticeable correction in direct expenses occurs in conjunction with Jacque Hinman’s defense of Halcrow acquisition published April 2013 and again with lending group’s consultant’s inspection and continuing presence following the March 2014 amendment.

• Annual segmented, estimated 2014 and Ex-Power financial data (2010 – 2019) offered in the February 2015 Investor Presentation (IP) provides further insight: o A reconciliation request for the company; actual consolidated 2012 revenue of $6,160.6mm vs ex power

historical consolidated of $5,534.8mm vs segmented revenue of $4,951.3mm reveals a $583.5mm variance. This methodology flows through the Income statement to reveal: $390mm Direct cost var, 193.9mm gross profit var, 464.1mm SG&A var and ($272.1)mm EBIT var for 2012.

o $77mm unidentified charge in estimated 2014 approximates the restructuring and transportation losses reported in first and second quarter 2015. This would have effectively eliminated equity at Dec 2014. It

seems the second quarter 2015 transportation loss was contemplated prior to the 2014 10k filing and fourth quarter 2015 shareholder call.

Variance

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Consolidated Revenue $177.2 $125.5 $583.5 $13.8 $15.0 3.3% 2.3% 9.5% 0.2% 0.3%Consolidated Income From JVs $0.0 ($0.1) $0.5 $0.2 $0.0 0.0% 0.0% 0.0% 0.0% 0.0%Consolidated Direct Costs $121.9 $83.2 $390.1 $8.4 $1.9 2.2% 1.5% 6.3% 0.1% 0.0%Consolidated Gross Profit $55.3 $42.2 $193.9 $5.6 $13.1 1.0% 0.8% 3.1% 0.1% 0.2%Consolidated SG&A $291.9 $322.1 $464.1 $282.9 $340.6 5.4% 5.8% 7.5% 4.8% 6.3%

Consolidated EBIT ($239.1) ($284.0) ($272.1) ($278.6) ($327.5) -4.4% -5.1% -4.4% -4.7% -6.0%NCI $0.1 $0.0 $0.0 $0.0 $0.0 0.0% 0.0% 0.0% 0.0% 0.0%

Air Ball - Losses and Restructuring ($40.6) $1.8 $13.4 ($5.8) ($338.3) -0.7% 0.0% 0.2% -0.1% -6.2%

EBITDA ($279.8) ($282.2) ($258.7) ($284.4) ($665.8) -5.2% -5.1% -4.2% -4.8% -12.3%Project $0.0 $0.0 $0.0 $0.0 $204.4 0.0% 0.0% 0.0% 0.0% 3.8%Impairment $0.0 $0.0 $0.0 $0.0 $73.3 0.0% 0.0% 0.0% 0.0% 1.4%Restructuring $0.0 $0.0 $0.0 $0.0 $70.4 0.0% 0.0% 0.0% 0.0% 1.3%Air Ball- Further Impairment weighed? $0.0 $0.0 $0.0 $0.0 ($77.0) 0.0% 0.0% 0.0% 0.0% -1.4%Adj EBITDA - Corp Overhead rr ($279.8) ($282.2) ($258.7) ($284.4) ($240.7) -5.2% -5.1% -4.2% -4.8% -4.4%

As % of Statutory Revenue -5.2% -5.1% -4.2% -4.8% -4.4%As % of Segments Revenue -5.6% -5.4% -5.2% -5.3% -4.6%

Statutory Consolidated less Power less Segments Common Size

CH2M CREDIT NOTES


o Consolidated gross profit margin in segment data is distorted by IP revenue variance in in year over year comparison and requires adjustment (yellow highlights).

§ Ex-Power Direct Cost less Direct Cost on Segments identifies an unknown direct cost component. § Add change in margin component (as calculated with segment overhead) to derive Unknown plus

Change as % of Ex-Power and Core Direct Cost Basis that further support aforementioned 2013 Direct cost loading (and reversal).

§ Prior to the direct cost correction occurring at the time of the Halcrow purchase defence (April 2013), approx $50 million direct cost reduction on year over year revenue declined is replaced by regognition of DB pension losses.

Segment Direct Costs (Gross Profit Less EBITDA)2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Water 74.9% 72.3% 72.6% 73.9% 73.7% 75.0% 75.0% 75.0% 75.1% 75.1%Environment & Nuclear 88.5% 86.7% 82.0% 81.2% 82.3% 83.1% 82.0% 82.0% 81.9% 81.9%Transportation 73.3% 73.9% 78.7% 73.7% 78.6% 74.8% 72.1% 72.1% 71.9% 71.8%Oil, Gas & Chemicals 83.8% 86.5% 86.6% 79.6% 78.2% 80.2% 78.6% 78.4% 78.8% 78.7%Indust, Urban Environ 80.8% 77.5% 78.1% 78.5% 85.7% 77.5% 79.2% 79.3% 79.4% 80.8%

Direct Basis Segment 81.9% 80.7% 79.7% 77.5% 79.5% 78.5% 77.6% 77.5% 77.6% 77.8%Direct Cost Segment 4,092.6 4,207.0 3,944.7 4,136.2 4,116.9 4,267.2 4,398.0 4,653.1 4,954.4 5,286.4 Direct Cost Basis Xpower 81.4% 80.4% 78.3% 77.5% 79.3% 78.5% 77.6% 77.5% 77.6% 77.8%Direct Cost Xpower $4,214.50 $4,290.20 $4,334.80 $4,144.60 $4,118.80 $4,267.17 $4,397.98 $4,653.03 $4,954.40 $5,286.40

Unknown Direct Component $121.9 $83.2 $390.1 $8.4 $1.9 ($0.0) ($0.0) ($0.1) ($0.0) ($0.0)Direct Cost Change in Margin $0.0 ($65.0) ($24.8) ($104.0) $105.2 ($39.6) ($46.2) ($2.3) $3.2 $10.6Unknown Plus Change in Mar $121.9 $18.2 $365.3 ($95.6) $107.1 ($39.7) ($46.2) ($2.4) $3.2 $10.6Unknown Plus as % of Xpower 0.34% 6.60% -1.79% 2.06% -0.73% -0.81% -0.04% 0.05% 0.16%Core Direct Cost Basis 80.0% 71.7% 79.2% 77.2% 79.2% 78.4% 77.6% 77.5% 77.6%

change in revenue $161.2 $196.8 ($184.2) ($154.6) $242.6 $231.3 $331.8 $384.1 $413.1Ex-Power Revenue 5,177 5,338 5,535 5,351 5,196 5,439 5,670 6,002 6,386 6,799

CH2M CREDIT NOTES


o Transportation, Oil & Gas and IUE segments appear to bear relatively heavier overhead and non-cash burden than Water and Environment & Nuclear segments. Below are the carry contributions and reduction targets identified. Aggressive reduction pursuits (the possibility the efficiency of Water and Environment and Nuclear segments may be matched) would essentially double the target figures below. Is this achievable? Or do energy and water segments somehow benefit?

o Total segment overhead, segment overhead resulting from margin shift, segment overhead on new revenue and core segment overhead are shown. Segment overhead resulting from margin shift (border highlight) is the estimated management response ($ accrual) to mounting Halcrow DB deficit. Notice the margin decline/correction shifts the year peak overhead appears from 2013 in total overhead to 2014 in core overhead. This shift is consistent with appearance of consolidated direct margin loading and correction identified in consolidated direct expense above.

CH2M CREDIT NOTES


Contingent and Reputational Risk Issues

• Government audit

• Continuing government investigations

• ~$75mm cost surrounding LMI/Steadfast Insurance/Ch2m IUE cleanup row (current litigation - investigating knowledge of sight condition)

• Zurich (parent of Steadfast Insurance), who issues the surety behind a complex ($1.6 billion) Panama Canal contract dispute between GUPC (Grupo Unidos por el Canal) and the Canal Authority, is again probing Ch2m’s knowledge of site condition and at one point threatened to pull its bond had Ch2m assumed the work at the center of this dispute. Ch2m acts as project consultant to the Canal Administration and ran the RFP that included disputed representations.

CH2M CREDIT NOTES


Improvement Strategies Project Discipline; the best approach to sharpening discipline is through talent management and effectively leading in this direction requires the company identify and equip staff who demonstrate the strongest ability to excel within the changing culture. Strong change leaders are particularly important due to breadth of services and geography.

Staff Delivery Mix; process and quality improvement are best achieved together with positive change in the workplace environment that leaves resources feeling effectively utilized performing at or above their pay grade. Staff utilization and activity based costing (time entry) records can help identify which groups of resources are performing at what levels so we understand how or where to employ uplifting strategy.

Shape/Style/Habit; Avoid characteristics associated with hourglass and diamond shaped organizations and make every attempt to stick to pyramid shaped units/teams/organization. Hands-on management has advantages, but delivery units cannot lose sight of the importance and economies in leveraging and developing staff. And in this spirit, senior delivery personnel may be coached to avoid reaching too far down the work stack so capture economies of mix in leveraging staff.

Seniors - BD and Backlog; Business development efforts and backlog are areas where seniors might welcome an invitation to participate. These activities are the future of the enterprise as well as the birthplace of the project life cycle and require particular client facing and administrative discipline to properly report and make the appropriate accounting determination (expense vs. capitalization).

CH2M CREDIT NOTES


Cash Flow, Capital Structure and Value Indication TTM EBITDA of $324mm includes $403mm of extra ordinary items, with the risk of further project losses. Other quality considerations include:

• Earnings and asset quality (most notably relating to revenue, receivables, goodwill and deferred tax assets).

• Inverted capital structure and solvency underscored by deferral of $73mm charges identified in the IP (presumably representative of 1st and 2nd quarter transportation and restructuring charges). Certainly the company remains in the zone of insolvency as determined by balance sheet test incorporating fair value.

Litigation and reputational risks are raised in part because clients could require bank LCs over other sureties to escape risk of future litigation. Contingent obligations reported Dec. 2014 are shown. As of June 2015 there is ~$1.7 billion unsecured between funded bank debt, LT employee related, payables and billings in excess. Accrued Payroll and ST employee related push this figure to ~$2.1 billion

In light of all, a ($100)mm – ($125)mm EBITDA adjustment is applied. This is consistent with maintaining asset efficiency of ~2x, well below the ratio anticipated on Ch2m-Halcrow combination yielding revenues of $7 billion. Further impairment may be recommended based on continuing evaluation of the $583mm 2012 revenue variance.

At 7.6 times multiple (per Jan 2015 NYU Stern study based on 56 global E&C business) and backing out a $682mm buy-out, $532 on-going deficit and $425mm competitive pay-down we arrive at a range following range $840mm –$1,082 (average) mm - $1,285mm. (A $25mm increment increase/decrease in EBITDA translates to +/- $190mm of value.)

Competitive Pay-down Competitive Pay-down6.7 7 7.3 7.6 7.9 8.2 8.5 6.7 7 7.3 7.6 7.9 8.2 8.5

200.0$ 915.0$ 975.0$ 1,035.0$ 1,095.0$ 1,155.0$ 1,215.0$ 1,275.0$ 200.0$ 29.3$ 31.2$ 33.1$ 35.0$ 36.9$ 38.9$ 40.8$ 225.0$ 1,082.5$ 1,150.0$ 1,217.5$ 1,285.0$ 1,352.5$ 1,420.0$ 1,487.5$ 225.0$ 34.6$ 36.8$ 38.9$ 41.1$ 43.3$ 45.4$ 47.6$ 250.0$ 1,250.0$ 1,325.0$ 1,400.0$ 1,475.0$ 1,550.0$ 1,625.0$ 1,700.0$ 250.0$ 40.0$ 42.4$ 44.8$ 47.2$ 49.6$ 52.0$ 54.4$ 275.0$ 1,417.5$ 1,500.0$ 1,582.5$ 1,665.0$ 1,747.5$ 1,830.0$ 1,912.5$ 275.0$ 45.3$ 48.0$ 50.6$ 53.2$ 55.9$ 58.5$ 61.2$ 300.0$ 1,585.0$ 1,675.0$ 1,765.0$ 1,855.0$ 1,945.0$ 2,035.0$ 2,125.0$ 300.0$ 50.7$ 53.6$ 56.4$ 59.3$ 62.2$ 65.1$ 68.0$ 325.0$ 1,752.5$ 1,850.0$ 1,947.5$ 2,045.0$ 2,142.5$ 2,240.0$ 2,337.5$ 325.0$ 56.0$ 59.2$ 62.3$ 65.4$ 68.5$ 71.6$ 74.8$ 350.0$ 1,920.0$ 2,025.0$ 2,130.0$ 2,235.0$ 2,340.0$ 2,445.0$ 2,550.0$ 350.0$ 61.4$ 64.8$ 68.1$ 71.5$ 74.8$ 78.2$ 81.5$

On-going Deficit adj On-going Deficit adj6.7 7 7.3 7.6 7.9 8.2 8.5 6.7 7 7.3 7.6 7.9 8.2 8.5

200.0$ 807.8$ 867.8$ 927.8$ 987.8$ 1,047.8$ 1,107.8$ 1,167.8$ 200.0$ 25.8$ 27.8$ 29.7$ 31.6$ 33.5$ 35.4$ 37.3$ 225.0$ 975.3$ 1,042.8$ 1,110.3$ 1,177.8$ 1,245.3$ 1,312.8$ 1,380.3$ 225.0$ 31.2$ 33.3$ 35.5$ 37.7$ 39.8$ 42.0$ 44.1$ 250.0$ 1,142.8$ 1,217.8$ 1,292.8$ 1,367.8$ 1,442.8$ 1,517.8$ 1,592.8$ 250.0$ 36.5$ 38.9$ 41.3$ 43.7$ 46.1$ 48.5$ 50.9$ 275.0$ 1,310.3$ 1,392.8$ 1,475.3$ 1,557.8$ 1,640.3$ 1,722.8$ 1,805.3$ 275.0$ 41.9$ 44.5$ 47.2$ 49.8$ 52.5$ 55.1$ 57.7$ 300.0$ 1,477.8$ 1,567.8$ 1,657.8$ 1,747.8$ 1,837.8$ 1,927.8$ 2,017.8$ 300.0$ 47.3$ 50.1$ 53.0$ 55.9$ 58.8$ 61.7$ 64.5$ 325.0$ 1,645.3$ 1,742.8$ 1,840.3$ 1,937.8$ 2,035.3$ 2,132.8$ 2,230.3$ 325.0$ 52.6$ 55.7$ 58.9$ 62.0$ 65.1$ 68.2$ 71.3$ 350.0$ 1,812.8$ 1,917.8$ 2,022.8$ 2,127.8$ 2,232.8$ 2,337.8$ 2,442.8$ 350.0$ 58.0$ 61.3$ 64.7$ 68.0$ 71.4$ 74.8$ 78.1$

Buyout Adjusted Buyout Adjusted6.7 7 7.3 7.6 7.9 8.2 8.5 6.7 7 7.3 7.6 7.9 8.2 8.5

200.0$ 657.3$ 717.3$ 777.3$ 837.3$ 897.3$ 957.3$ 1,017.3$ 200.0$ 21.0$ 22.9$ 24.9$ 26.8$ 28.7$ 30.6$ 32.5$ 225.0$ 824.8$ 892.3$ 959.8$ 1,027.3$ 1,094.8$ 1,162.3$ 1,229.8$ 225.0$ 26.4$ 28.5$ 30.7$ 32.9$ 35.0$ 37.2$ 39.3$ 250.0$ 992.3$ 1,067.3$ 1,142.3$ 1,217.3$ 1,292.3$ 1,367.3$ 1,442.3$ 250.0$ 31.7$ 34.1$ 36.5$ 38.9$ 41.3$ 43.7$ 46.1$ 275.0$ 1,159.8$ 1,242.3$ 1,324.8$ 1,407.3$ 1,489.8$ 1,572.3$ 1,654.8$ 275.0$ 37.1$ 39.7$ 42.4$ 45.0$ 47.6$ 50.3$ 52.9$ 300.0$ 1,327.3$ 1,417.3$ 1,507.3$ 1,597.3$ 1,687.3$ 1,777.3$ 1,867.3$ 300.0$ 42.4$ 45.3$ 48.2$ 51.1$ 54.0$ 56.8$ 59.7$ 325.0$ 1,494.8$ 1,592.3$ 1,689.8$ 1,787.3$ 1,884.8$ 1,982.3$ 2,079.8$ 325.0$ 47.8$ 50.9$ 54.0$ 57.2$ 60.3$ 63.4$ 66.5$ 350.0$ 1,662.3$ 1,767.3$ 1,872.3$ 1,977.3$ 2,082.3$ 2,187.3$ 2,292.3$ 350.0$ 53.2$ 56.5$ 59.9$ 63.2$ 66.6$ 69.9$ 73.3$

Contingent Obligations Reported Dec 20141 Year 1‑3 Years 4‑5 Years Over 5 Years Committed

Letters of credit $71.8 $20.4 $35.1 $35.1 $162.4Bank guarantees $32.8 $2.5 $0.6 $1.0 $36.9

Long-term debt $5.0 $6.4 $498.8 $2.8 $513.0

Interest payments $9.0 $17.4 $16.9 $0.1 $43.4

Operating lease obligations $95.2 $144.0 $83.6 $124.8 $447.6Surety and bid bonds $783.5 $527.6 $22.3 $0.1 $1,333.5

Total $997.3 $718.3 $657.3 $163.9 $2,536.8

CH2M CREDIT NOTES


Investment Outlook Indicative values can be compared to the cv Pfd investment; $300mm for approximate 23% equity future stake/valuation implies $1,300mm - less premium you assign to $600 liquidation preference and significant control. Investment return, reinvestment opportunity and related economies appear most attractive in the near term.

• Analysis of cv Pfd IRR suggests investor may be inclined to consider a near-term business combination and perhaps weigh a haircut on its preference claim to retain skin in the game on a larger trade that is immediately accretive, tackling the pension deficit and capital structure challenges.

• The medium term horizon for cv Pfd performance is challenged by earnings and asset quality issues raised as well as the risks of further project losses, actuarial/market influence on pension deficit and plan delivery (revenue side and aggressive cost goals).

• Acknowledgement of such exists in form of cv price reset features that may become effective after year 5 and significantly reduce cv premium; though the consolidating move and competitive landscape may already be established before this time.

Combined cv Pfd InvestmentYr 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0%

. 240.0$ 250.0$ 260.0$ 270.0$ 280.0$ 290.0$ 300.0$ 310.0$ 2 408.0$ 437.5$ 468.0$ 499.5$ 532.0$ 565.5$ 600.0$ 635.5$ 3 489.6$ 546.9$ 608.4$ 674.3$ 744.8$ 820.0$ 900.0$ 985.0$ 4 587.5$ 683.6$ 790.9$ 910.3$ 1,042.7$ 1,189.0$ 1,350.0$ 1,526.8$ 5 705.0$ 854.5$ 1,028.2$ 1,229.0$ 1,459.8$ 1,724.0$ 2,025.0$ 2,366.5$

Traunch 1200.0$ 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0%1 240.0$ 250.0$ 260.0$ 270.0$ 280.0$ 290.0$ 300.0$ 310.0$ 2 288.0$ 312.5$ 338.0$ 364.5$ 392.0$ 420.5$ 450.0$ 480.5$ 3 345.6$ 390.6$ 439.4$ 492.1$ 548.8$ 609.7$ 675.0$ 744.8$ 4 414.7$ 488.3$ 571.2$ 664.3$ 768.3$ 884.1$ 1,012.5$ 1,154.4$ 5 497.7$ 610.4$ 742.6$ 896.8$ 1,075.6$ 1,281.9$ 1,518.8$ 1,789.3$

Traunch 2 (one year)100.0$ 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0%2 120.0 125.0 130.0 135.0 140.0 145.0 150.0 155.0 3 144.0 156.3 169.0 182.3 196.0 210.3 225.0 240.3 4 172.8 195.3 219.7 246.0 274.4 304.9 337.5 372.4 5 207.4 244.1 285.6 332.2 384.2 442.1 506.3 577.2

CH2M CREDIT NOTES


Updates: October 1, 2015; KBR, Inc. secures new revolver. It reads as if the company is also being encouraged to boost/raise additional equity. KBR’s current pension deficit is 12% of total assets (vs ch2m at 18%). This new facility requires 3.5:1 debt to EBITDA on foundation of 1.2 bn equity (3.25 debt to equity). Ch2m effectively requires an additional $600 million in equity with $175 million of it paying down pension deficit to 12% to get to get to the same position KBR.

The KBR Credit Agreement contains customary covenants similar to the Prior Credit Agreement which include financial covenants requiring maintenance of a ratio of consolidated debt to consolidated EBITDA of 3.5 to 1 and a minimum consolidated net worth of $1.2 billion plus 50% of consolidated net income for each quarter ending on or after September 30, 2015, and 100% of any increase in shareholders equity attributable to the sale of equity securities. The net worth covenant excludes the effects of changes in foreign currency translation adjustments from Shareholders' Equity (as defined in the Credit Agreement) for periods after January 1, 2015

November 3, 2015; Ch2m September 30, 2015 earnings release. Share price calculation has increases to $67.88 with 85% of “P” (TTM Income) being extraordinary with quality of remaining in question. Clearly management is trying to manage shareholder sentiment as it continues to face limitation on IOT/share redemption and wrestle solvency. The leverage ratio covenant returns to 3.0 x EBITDA at year end. Accounting liberties continue - expect KPMG to experience some heartburn facing this audit. The current tact is the reduction of liability (billings in excess) more rapidly than accrued revenue decline. Deferred tax asset continues to grow and has been added to chart (below) - related valuation allowance will be important piece of earnings/balance sheet quality determination in coming audit. Bank debt has been reduced disproportionately vs other unsecured creditors (payables and pension). This is significant change in cash management policy and may put others at odds with lenders (lender liability or preference claim). Expect the $100mm will be deployed here. Can argue increasing asset impairment estimate to $230 million from $150 million. Client Accounts, Unbilled, Goodwill and Deferred Tax Asset in question as are earnings. Solvency is still questionable on fair values.

CH2M CREDIT NOTES


Deferred Tax Asset and Receivables have also been appended to the Asset Efficiency graphic to compliment the benchmark analysis. Collective review of total revenue, the accrual component, receivables/receivables turn and deferred tax asset in these charts highlight the accounts and earnings quality concern as the relationship with efficiency ratio is examined.

CH2M CREDIT NOTES


December 17, 2015; Texas Authority declares Ch2m in default of loss transportation contract. Zurich NA is also the surety provider on this contract, the same project I infer is related to $77mm unidentified charge in IP estimated 2014 financials from investor presentation that would seemingly demonstrate second quarter 2015 transportation loss was contemplated prior to the 2014 10k filing and fourth quarter 2015 shareholder call. Technical insolvency continues.

January 15, 2016; January 8, 2016 dated opinion re Halcrow’s December 31, 2014 accounts carrying going concern doubt is filed with UK Gov’s Companies House.

Variance Analysis appearing on page 3 has been refined. The possibility $65 million 2014 cost (implied in the segment and power carve analysis) were deferred remains in question; a material issue in light of $87.6 million net equity reported fiscal 2014 and solvency test. $9.6 million allowed restructuring carryover (q1 ’15) plus $11 million and $42.6 million transportation losses (Q1 and Q2 ’15) represent $63.2 or 97.2% of this implied cost identified in management prepared financials.

Variance

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Consolidated Revenue $177.2 $125.5 $583.5 $13.8 $15.0 3.3% 2.3% 9.5% 0.2% 0.3%Consolidated Income From JVs $0.0 ($0.1) $0.5 $0.2 $0.0 0.0% 0.0% 0.0% 0.0% 0.0%Consolidated Direct Costs $121.9 $83.2 $390.1 $8.4 $1.9 2.2% 1.5% 6.3% 0.1% 0.0%Consolidated Gross Profit $55.3 $42.2 $193.9 $5.6 $13.1 1.0% 0.8% 3.1% 0.1% 0.2%Consolidated SG&A $291.9 $322.1 $464.1 $282.9 $340.6 5.4% 5.8% 7.5% 4.8% 6.3%Consolidated EBIT ($239.1) ($284.0) ($272.1) ($278.6) ($327.5) -4.4% -5.1% -4.4% -4.7% -6.0%

NCI $0.1 $0.0 $0.0 $0.0 $0.0 0.0% 0.0% 0.0% 0.0% 0.0%

Air Ball - Losses and Restructuring ($40.6) ($32.2) $16.4 $13.2 ($64.8) -0.7% -0.6% 0.3% 0.2% -1.2%EBITDA ($279.8) ($316.2) ($255.7) ($265.4) ($392.3) -5.2% -5.7% -4.2% -4.5% -7.2%

Project $0.0 $0.0 $0.0 $0.0 $204.4 0.0% 0.0% 0.0% 0.0% 3.8%Impairment $0.0 $0.0 $0.0 $0.0 $73.3 0.0% 0.0% 0.0% 0.0% 1.4%Restructuring $0.0 $0.0 $0.0 $0.0 $70.4 0.0% 0.0% 0.0% 0.0% 1.3%Project Impairment rec. $0.0 $0.0 $0.0 $0.0 $204.4 0.0% 0.0% 0.0% 0.0% 3.8%Adj EBITDA - Corp Overhead rr ($279.8) ($316.2) ($255.7) ($265.4) ($248.6) -5.2% -5.7% -4.2% -4.5% -4.6%

As % of Statutory Revenue -5.2% -5.7% -4.2% -4.5% -4.6%

As % of Segments Revenue -5.6% -6.1% -5.2% -5.0% -4.8%As % of Supported Revenue -5.3% -5.8% -4.6% -4.5% -4.6% 0.0% 0.0% 0.0% 0.0% 0.0%

Statutory Consolidated less Power less Segments Common Size

CH2M CREDIT NOTES


February 26, 2016; Ch2m announces intention to pursue capital structure alternatives. Credit perspective turns to analysis of cash / non-cash impact on Changes in assets and liabilities.

Company comment absent, the observation is that the $583.5 million 2012 revenue gap represents the approximate sum of i. $317.2 non-cash increase in long term employee related and other, ii. $22.0 addition to AOCI (both occurring between Sep and Dec 2011) and iii. $244.2 2011 EBBT (per IP).

A non-cash gap is identified when comparing change in receivables and unbilled accounts reported per balance sheet vs cash flow (inverted for comparative purposes). Allowance for uncollectable accounts per cash flow also appears. This is the provision charged to expense; additional components of allowance include accounts written off and “other”.

Similar gap analysis is performed on asset and liabilities accounts affecting cash from Operations. Direct and SG&A as percentage of gross revenue also appear.

CH2M CREDIT NOTES


A representation of change in OACI and LT employee related balance sheet accounts appears atop the non-cash gap in P&L and cash flow for comparative purposes.

March 24, 2016; Evercore Partners identified as Ch2m’s restructuring advisor. April 22, 2016; financing and litigation update; April 11 closing of PE investment tranuch 2. Also, Ch2m’s response to LMI crossclaim resulting from allegations in second amended Steadfast (Zurich) complaint is due before May 17. LMI asserts contractual and equitable grounds for seeking indemnification relating to liability which may potentially result from amended complaint citing acts, errors, or omissions, faulty performance and negligence.

CH2M CREDIT NOTES


May 5, 2016; the subjective nature of C&E financial accounting/reporting and working capital position top the list for this update. C&E accounting and the difficulty of restructuring programs in the industry are notorious. And in the case of Ch2m, one must weigh the subjective aspects of accounting/reporting (with consideration to timing and valuation) of pension obligations, deferred tax assets, and goodwill, and, as is pointed out in this document, their impact in weighing solvency and value. Safe harbor provisions, the push for a Delaware Chancery forum for any future dispute, speculative grade securities issuance and, most recently, renewed D&O indemnification all call for prudence in financial review and weighing the quality of business judgement and decision making. While client accounts days sales have declined, unbilled revenue remains considerably off-side to the tune of approx. $200 million. Quality remains in question.

Payables remains $100 million off-side and billings in excess may reflect weariness of clients to provide credit support.

CH2M CREDIT NOTES


Offside working capital is shown in perspective with leverage. And the consolidated view previously shown (a trend line added to the payables series.

May 12, 2016; On May 6 we learned of an attempted cram-down restructuring of Halcrow pension scheme that was defeated (individual consent required by UK pensions legislation) in Dec 2015. The ruling represents a £600m deficit benchmark ($869 at 1.45 GBP:USD) vs 12/32/15 reported Non US underfunded status of $423m. This would suggest significant balance sheet ramifications across goodwill, liability and equity accounts. A third attempt to establish meaningful dialogue with independent leadership at the company was extended May 8. Previous efforts were April 2015 and February 2016; this report was shared with PE and the company at the time of the latter. May 14, 2016; Fiduciary background study shared with independent director and member of Audit Committee. June 1, 2016;

Notwithstanding the financial, materiality, disclosure and executive independence matters raised, the apparent flight of confidence in management and stakeholder dissent from incumbent policy grows alarmingly. Even published remarks of outside counsel re Halcrow financial condition and acquisition due diligence can be construed as being pointed.

As it seemingly escaped him in responding to the above, Independent counsel to Audit Committee was reminded that materiality was the topic that led a Feb 2016 review this financial analysis when clarification re $800 million revenue gap identified between 2010-12 was specifically sought. And my own reconciliation of $580 million 2012 gap was offered when request for clarification was declined. The company/committee have been afforded opportunity to investigate/rebut evidence of apparent cost loading/earnings management occurring in key interims, elasticity that is apparent in receivables accounting through the 2014 liquidity crisis and my questioning the growth of goodwill and deferred tax assets basis through these periods (vs fair value assumptions) and, most recently, background evidence that highlight unique personal relationships that exist between current and former executives/executive directors and a nuclear watchdog that display remarkable correlation to key events from significant chapters of ch2m’s 2005 - present history including executive turn, Panama Canal win and the Halcrow acquisition.

CH2M CREDIT NOTES


August 1, 2016; Accounting quality and materiality issues were issues raised with Audit Committee Counsel, Chief Ethics Officer, Internal Audit and General Counsel in February 2016 review of this credit critique. In particular, the following issues were specifically raised:

• $886 million unsupported revenue Gap in 2010 – 2012 statutory financials ($177m in 2010, $126M 2011 and $583M 2012) (see pages 3 and 13).

• Asset quality concerns highlighting apparent weakness in accounts receivable, deferred tax asset and goodwill accounts.

More recently, following end late May 2016 rehashing of these issues with the audit committee defense counsel and immediately prior to June 6 form 8-k disclosure re additional charges, Ch2m and its audit professional took keen interest this analysis. And now, with continued warnings contained in second quarter 2016 financials, it is recommended prudent stakeholders ought to consider the benefit of pursuing 291 Administration in Delaware Chancery as a means of enforcing greater oversight/accountability. It is noted that this would likely precipitate a Chapter 11 petition, now more so just an eventuality in the company’s quest to recapitalize. Solvency and accounting concerns I maintain current and predecessor ch2m management have been papering over difficulty and disappointing financial performance via merger and cookie jar reserve accounting for some time. And because of such shenanigans in overstating profitability, the company is now left wrestling solvency both on fair value as well as its ability to meet future obligations as they come due. Revenue overstatement aside, several of the balance sheet and liquidity concerns that exist today are Highlighted below. Note that available cash on hand at June 24 2016 was lower than in 2014 when the Company experienced technical default and was forced to seek external financing. Credit availability of $85.2 million is, by the current 3 times consolidated leverage ratio, supported by just $28.4 million cash flow (where TTM D&A and restructuring fees are ~ 3x this amount alone). An opaque $105 million increase to Deferred Tax was booked in the most recent calendar quarter. The company continues to carry, at least, $280 million of goodwill associated with Halcrow, whose 2014 and 2015 accounts carry a going concern qualification. All of the $200 million capital infused in 2015 and $100 million in 2016 has been expended and the net working capital position is weakening and approaches 2014 crisis levels.

CH2M CREDIT NOTES


Accounts receivable gap: $247.1 net use of cash appears on statement of cash flows (Mar 2012 through Dec 2015). o $260.2 million use - Receivables and unbilled o $13.1 million source - Receivables allowance $189.6 million use is demonstrated in net balance sheet account increase (client and unbilled accounts). $57.4 is attributed to receivables reserve accounting Mar 2012 through Dec 2015. ($52.2 million Mar 2012 to date)

Note the gap is particularly apparent Mar 2014 – June 15 interim at the height of the liquidity crisis Deferred tax asset gap:

$(10), – $18 and $(12) variances occur in the 4th quarter of 2012 – 2014, respectively.

Account turn Sharp increases in client accounts, unbilled revenue and billings in excess DSO are worrisome when compared to historic impact of revenue decline and, together, suggest deteriorating quality of revenue mix where, again, client accounts and unbilled each account for roughly ½ total revenue.

CH2M CREDIT NOTES


Net Working Capital The NWC position remains inverted and has worsened in the first 2 quarters of 2016. Underperformance/weakness of current assets quality is the highlight.

Asset Efficiency: Erosion of total asset efficiency is also driven by remarkable increase in deferred tax asset. Depression of the ratio is also attributed to low quality/high carrying value of goodwill. Note that despite going concern opinions on Halcrow, Ch2m has booked only $74 million intangible impairment (Sep 2014) since booking $376 million goodwill on the 2011 acquisition. NOL/deferred tax asset, related valuation allowance and goodwill accounts deserve particular scrutiny.

CH2M CREDIT NOTES


August 15, 2016; Today, this report was submitted to UK pension restructuring consultant and former the head of insolvency and Restructuring with the UK Pension Protection Fund, currently working for with Ch2m and the Halcrow Pension Trustees toward an effective cram down that seeks to reduce, or effectively expunge, a portion of the pensioners’ claim through the rarely used and controversial RAA statute that is without transparency. And within an hour of sending the url to access, barristers/counselors from both Sackers and Hogan Lovells were also reading. Such urgency: 1) increases confidence in this analysis and 2) presented a good opportunity to also seek clarification from Hogan re whether it continues to represent JKC Australia LNG as well as Ch2m. Thus, this question was presented to the C&E and Project Finance partner who was identified as leading the JKC engagement in 2012. If yes, perhaps conflict counsel will be identified. JKC is the joint venture between JGC Corporation, KBR and Chiyoda Corporation associated with the US $34 billion Ichthys LNG Project on which Ch2m realized an approx. $300 loss interest. December 13, 2016; Ch2m is congratulated for granting retirees proxy access and announcing potential financial restatement in which it is hoped wider acknowledgement of value erosion resulting from the Halcrow pension deficit and related charges that existed in 2012 – current operating expense and G&A will be addressed. The potential shift of transportation cost growth from 4th quarter 2015 to earlier periods that was disclosed would effectively increase TTM “P” for the Sep 2016 price fix where $18mm pretax vs. $10mm tax-adjusted cost shift would represent approximately $5.00 vs. $2.75 in share price. Comparatively, consider $230mm Halcrow associated goodwill that remains where a $165 - $230mm charge against SE would result in $5 to $7 loss in calculated share value (pre-tax basis). Without any such potential adjustment(s), or under the assumption they offset, an approximate $33 formula share price is estimated. Note the 3rd Q 2015 net income to operating income reconciliation assumes $35m/$23.5m pre-tax and post- tax restructuring charge, respectively.

Pretax Assumed Tax Tax Adjusted Assumed 3Q 2016 Rec 43,000$ -$ 43,000$ Net Income52,300$ 13,075$ 39,225$ Power losses

-$ -$ -$ Goodwill Impairmwent35,000$ 11,550$ 23,450$ Restructuring

(221,250)$ (46,250)$ (175,000)$ (Gain) on sale/Restructuring of business18,000$ -$ 18,000$ D&A10,700$ -$ 10,700$ Interest & Other

-$ -$ (21,625)$ Tax(62,250)$ (21,625)$ (62,250)$ 3Q 2016 Operating Income Guidance

EffectiveDate 8/3/2015 11/2/2015 2/22/2016 5/2/2016 8/1/2016 11/16/2016 11/16/2016 11/16/2016PricePer 55.75$ 67.87$ 62.89$ 60.91$ 52.23$

M(1) 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 P(2) 110,060 153,652 139,622 131,724 110,648 54,650 31,200 900 SE(3) 713,723 728,232 686,890 684,531 693,619 736,619 736,619 736,619 CS(4) 31,270 31,918 31,702 31,482 33,111 33,111 33,111 33,111 Multiplier 7.8 7.8 7.8 7.8 7.8 7.8 7.8 7.8Change in P 8,746$ 43,592$ (14,030)$ (7,898)$ (21,076)$ (55,998)$ (79,448)$ (109,748)$ Price Calc 55.77$ 67.87$ 62.89$ 60.91$ 52.23$ 37.70$ 31.07$ 22.50$ Board Valuation 1,743,884.60$ 2,166,414.72$ 1,993,751.92$ 1,917,467.64$ 1,729,284.28$ 1,248,143.00$ 1,028,651.00$ 745,043.00$ ttm Net Income -278,744 -14,736 92,117 88,336 -81,488 -88,759 -88,759 -88,759TTM (Income) loss attributable to noncontrolling interests 131,625 40,070 -11,714 -6,852 84,652 146,012 146,012 146,012TTM less P -257,179 -128,318 -59,219 -50,240 -107,484 2,603 26,053 56,353Var (179)$ 682$ (219)$ 760$ (484)$ 3$ 3$ 3$ Power losses (after Tax) 107,000$ 43,000$ (1,000)$ (2,000)$ 63,000$ 107,500$ 107,500$ 53,750$ Goodwill Impairmwent (after tax) 61,000$ -$ -$ Restructuring (After Tax) 59,000$ 62,000$ 40,000$ 35,000$ 28,000$ 46,900$ 23,450$ 46,900$ (Gain) on sale/Restructuring of business (175,000)$ (175,000)$ (175,000)$ D&A (after Tax) 30,000$ 24,000$ 20,000$ 18,000$ 16,000$ 18,000$ 18,000$ 18,000$

Noted Exclusions from "P" Total 257,000$ 129,000$ 59,000$ 51,000$ 107,000$ (2,600)$ (26,050)$ (56,350)$

100% 100% 50%67.12% 66.60% 66.01% 68.63% 64.97% TTM Power TTM Power TTM Power87,900$ 93,100$ 60,600$ 51,000$ 43,100$ $70M $35M $70M

TTM Restrng TTM Restrng TTM RestrngAdjustment Adjustment Adjustment

CH2M CREDIT NOTES


$33 BOD share price fix estimate reflects earnings quality concern and provides some consideration for sensitivity surrounding adjustment for restructuring and project loss in so much as their recurring may, perhaps, be testimony to core margin weakness resulting from how projects were bid and predisposition to rely on claims/change order revenue on day 2 of the project lifecycle. Remarkable weakness in project performance across the broad portfolio confirmed in Ch2m’s 2016 project management summit also supports this contention and thus the 7.6x industry multiple approach has also been revisited. $383mm buy-out, $263 on-going deficit and $160mm competitive pay-down adjustments are derived from 2015 pension disclosure adjusted for Halcrow pension restructuring. A $250 million deleveraging new equity component is also assumed. $205 - $220 Cash flow is consistent with earlier analysis as well as average 2 and 3 year rolling 4 quarter TTM adjusted EBITDA. Core margin and earnings quality concerns warn of downside or extended term to work through existing core weakness.

Discussion points shared recently include; The suggestion that a leadership committee may serve as a mechanism to immediately deliver a path of confidence as well as provide a forum that can aid the search and selection process. Concerns re earnings quality remain (level of unbilled revenue & client receivables, accounting for change claims and insurance proceeds (sustainable operating revenue vs. unsustainable gains) and weakness in goodwill & deferred taxes accounts remain are the key issues). The hope that Ch2m will soon mend fences shared with the surety community. And anticipation that Apollo will seek a purchase price reset under contract indemnity provisions in connection with restatement and continuing losses (presumably historical stock price and trades would also require adjustment).

Sep 2016 Competitive Pay-down + $250 New Equity (on NT guidance) Sep 2016 Competitive Pay-down + $250 New Equity (on NT guidance)6.7 7 7.3 7.6 7.9 8.2 8.5 6.7 7 7.3 7.6 7.9 8.2 8.5

160.0$ 661.9$ 709.9$ 757.9$ 805.9$ 853.9$ 901.9$ 949.9$ 160.0$ 21.2$ 22.7$ 24.2$ 25.8$ 27.3$ 28.8$ 30.4$ 175.0$ 762.4$ 814.9$ 867.4$ 919.9$ 972.4$ 1,024.9$ 1,077.4$ 175.0$ 24.4$ 26.1$ 27.7$ 29.4$ 31.1$ 32.8$ 34.5$ 190.0$ 862.9$ 919.9$ 976.9$ 1,033.9$ 1,090.9$ 1,147.9$ 1,204.9$ 190.0$ 27.6$ 29.4$ 31.2$ 33.1$ 34.9$ 36.7$ 38.5$ 205.0$ 963.4$ 1,024.9$ 1,086.4$ 1,147.9$ 1,209.4$ 1,270.9$ 1,332.4$ 205.0$ 30.8$ 32.8$ 34.7$ 36.7$ 38.7$ 40.6$ 42.6$ 220.0$ 1,063.9$ 1,129.9$ 1,195.9$ 1,261.9$ 1,327.9$ 1,393.9$ 1,459.9$ 220.0$ 34.0$ 36.1$ 38.2$ 40.4$ 42.5$ 44.6$ 46.7$ 235.0$ 1,164.4$ 1,234.9$ 1,305.4$ 1,375.9$ 1,446.4$ 1,516.9$ 1,587.4$ 235.0$ 37.2$ 39.5$ 41.7$ 44.0$ 46.3$ 48.5$ 50.8$ 250.0$ 1,264.9$ 1,339.9$ 1,414.9$ 1,489.9$ 1,564.9$ 1,639.9$ 1,714.9$ 250.0$ 40.5$ 42.8$ 45.2$ 47.6$ 50.0$ 52.4$ 54.8$

Sep 2016 On-going Deficit adj + $250 New Equity (on NT guidance) Sep 2016 On-going Deficit adj + $250 New Equity (on NT guidance)6.7 7 7.3 7.6 7.9 8.2 8.5 6.7 7 7.3 7.6 7.9 8.2 8.5

160.0$ 558.9$ 606.9$ 654.9$ 702.9$ 750.9$ 798.9$ 846.9$ 160.0$ 17.9$ 19.4$ 20.9$ 22.5$ 24.0$ 25.5$ 27.1$ 175.0$ 659.4$ 711.9$ 764.4$ 816.9$ 869.4$ 921.9$ 974.4$ 175.0$ 21.1$ 22.8$ 24.4$ 26.1$ 27.8$ 29.5$ 31.2$ 190.0$ 759.9$ 816.9$ 873.9$ 930.9$ 987.9$ 1,044.9$ 1,101.9$ 190.0$ 24.3$ 26.1$ 27.9$ 29.8$ 31.6$ 33.4$ 35.2$ 205.0$ 860.4$ 921.9$ 983.4$ 1,044.9$ 1,106.4$ 1,167.9$ 1,229.4$ 205.0$ 27.5$ 29.5$ 31.4$ 33.4$ 35.4$ 37.3$ 39.3$ 220.0$ 960.9$ 1,026.9$ 1,092.9$ 1,158.9$ 1,224.9$ 1,290.9$ 1,356.9$ 220.0$ 30.7$ 32.8$ 35.0$ 37.1$ 39.2$ 41.3$ 43.4$ 235.0$ 1,061.4$ 1,131.9$ 1,202.4$ 1,272.9$ 1,343.4$ 1,413.9$ 1,484.4$ 235.0$ 33.9$ 36.2$ 38.5$ 40.7$ 43.0$ 45.2$ 47.5$ 250.0$ 1,161.9$ 1,236.9$ 1,311.9$ 1,386.9$ 1,461.9$ 1,536.9$ 1,611.9$ 250.0$ 37.2$ 39.6$ 42.0$ 44.4$ 46.8$ 49.1$ 51.5$

Sep 2016 Buyout Adjusted + $250 New Equity (on NT guidance) Sep 2016 Buyout Adjusted + $250 New Equity (on NT guidance)6.7 7 7.3 7.6 7.9 8.2 8.5 6.7 7 7.3 7.6 7.9 8.2 8.5

160.0$ 438.7$ 486.7$ 534.7$ 582.7$ 630.7$ 678.7$ 726.7$ 160.0$ 14.0$ 15.6$ 17.1$ 18.6$ 20.2$ 21.7$ 23.2$ 175.0$ 539.2$ 591.7$ 644.2$ 696.7$ 749.2$ 801.7$ 854.2$ 175.0$ 17.2$ 18.9$ 20.6$ 22.3$ 24.0$ 25.6$ 27.3$ 190.0$ 639.7$ 696.7$ 753.7$ 810.7$ 867.7$ 924.7$ 981.7$ 190.0$ 20.5$ 22.3$ 24.1$ 25.9$ 27.7$ 29.6$ 31.4$ 205.0$ 740.2$ 801.7$ 863.2$ 924.7$ 986.2$ 1,047.7$ 1,109.2$ 205.0$ 23.7$ 25.6$ 27.6$ 29.6$ 31.5$ 33.5$ 35.5$ 220.0$ 840.7$ 906.7$ 972.7$ 1,038.7$ 1,104.7$ 1,170.7$ 1,236.7$ 220.0$ 26.9$ 29.0$ 31.1$ 33.2$ 35.3$ 37.4$ 39.5$ 235.0$ 941.2$ 1,011.7$ 1,082.2$ 1,152.7$ 1,223.2$ 1,293.7$ 1,364.2$ 235.0$ 30.1$ 32.4$ 34.6$ 36.9$ 39.1$ 41.4$ 43.6$ 250.0$ 1,041.7$ 1,116.7$ 1,191.7$ 1,266.7$ 1,341.7$ 1,416.7$ 1,491.7$ 250.0$ 33.3$ 35.7$ 38.1$ 40.5$ 42.9$ 45.3$ 47.7$

Pension Position 2015 Adjusted 2015Non US Total US Non US Total

Plan Obligations $1,174.6 $1,423.5 $248.9 $953.4 $1,202.3Plan Assets $751.9 $939.2 $187.3 $751.9 $939.2Underfunded Status ($422.7) ($484.4) ($61.6) ($201.5) ($263.1)Total Assetts 2,861.3 2,861.3

-16.9% -9.2%

CH2M CREDIT NOTES


Most recently it was suggested that fiduciaries may find a strategic path to enhance shareholder liquidity/equity participation and provide choice in the identification of strategic alternatives available to the company through a courtship capital raising contest.

Proposed mechanism: • issue transferable/assignable equity or straight pfd subscription rights whereby shareholders may elect to

deliver rights to any party making an expression of goodwill and interest that can accumulate >5% pledge (or another suitable threshold).

• rights program to require BOD to launch succession plan, installing disinterested interim leadership (committee suggested), and appoint an independent professional plan trustee to act on behalf beneficiaries who neglect to exercise/reserve rights under such an offering.

• uncommitted rights program, to not force cv pfd conversion, that allows up to $300 - $550mm to be written (~27% and ~47% ownership interest having representative board participation), with proceeds over $300 or $350mm available to redeem cv pfd or repurchase shares. The first $250 - $300mm shall be utilized to deleverage and satisfy bank and trade creditors.

• new 5% holders may participate in quarterly trade but agree not to trigger 382 change of control threshold

• after some prescribed interim time period 5% holder(s) may tender for control of the Ch2m brand without defense or penalty (offering cash and/or stock election).

Benefits of proposed: • avoids expensive court process and/or equitable challenge • provides strategic interests who court Ch2m opportunity to actively develop competitive advantage and

efficient acquisition plan(s) • the BOD embarks on path toward earning blanket release • bank and unsecured trade creditors would benefit • Ch2m shareholders would be provided opportunity to participate in the process of identifying and

choosing the future ownership and direction for the enterprise. • stimulates a competitive environment that focuses on strategic benefit and unlocking intrinsic value • is consistent with transactional rights/alternatives under Apollo agreement

December 26, 2016; Reflecting on the possibilities of restatement and Apollo seeking price adjustment brings us to the question of whether Apollo might have benefitted from discussions with or services provided by former Ch2m executives/directors. Antione Munfakh acknowledged that Apollo held some level of dialogue with Robert Card during his tenure with SNC-Lavalin, and it has been suggested that Apollo might also have retained the services of Lucki advisors in connection with their cv Pfd investment. The existence of such relationships may, in fact, be significant insomuch as associated communications and deliverables might become discoverable were a dispute between Apollo and the company and/or its stakeholders to arise. Also, there is reason to believe that the board has sought the services of Russell Reynolds, whose previous cooperation with the lead director is noted. Services offering include; leadership assessment, board effectiveness and executive/board search & succession.

CH2M CREDIT NOTES


January 18, 2017 (AM); If specific guidance with respect to timing of September 10-Q filing is not available as part of scheduled January 20 SEC filing update to shareholders, the probability material error or “Big R” restatement is increased. In this circumstance, it is noteworthy that shareholders would be presented the opportunity to seek greater control in governance and presenting their own proposals for solicitation in so much as all Delaware companies, under Section 211 of the Delaware General Corporation Law, are requires to hold an annual meeting independent of whether they are able to distribute current financials to shareholders, as management must prior to any solicitation under 17 CFR 240.14a-3. Professional investors would not hesitate to capitalize on such an opportunity, neither should ch2 shareholders.

The accounting, actuarial and ratings communities, including organizations such National Association of Corporate Directors and the Financial Reporting Council, generally agree that, particularly in a time of crisis, when the chairman and CEO are one and the same person, the Lead Director becomes an important part of the governance structure where their responsibility would include;

• calling, setting the agenda for and chairing executive sessions of independent directors • acting as an intermediary between the independent directors and the chairman/ CEO in discussing issues • ensuring the appropriate and timely flow of information between company management and the

independent directors • if necessary, intervening in order to maintain board and company stability and/or act a spokesperson or

interim CEO if management is involved in the problem. • ensure the process of orderly succession

The independent members of this board must acknowledge evidence of chronic management disconnect and growing call for intervention. The list includes;

• broad portfolio weakness; 2016 project management summit that closed with only general conjecture outlining about $100-$150 million in core portfolio improvement.

• delayed realization and insufficient response to loss projects; lack of action/accountability across leadership.

• Vague and unsupported reporting of recovery claims/change orders on loss projects in shareholder calls which are unsupported in financials and disputed by clients (and others).

• July 21 CTMRA letter to Ch2m that communicates gross inept • inability to formulate and stick to business structure/plan that has rendered management incredible;

constant business/leadership reorg convolutes segmented financial disclosures and begs for scrutiny • Demonstration of incompetence or contempt toward independent directors and/or employees and

shareholders in failing to acknowledge material accounting and financial issues associated with Halcrow purchase (pension deficit, hidden cost, going concern doubt and goodwill impairment) after having sat on its board.

• premature and unsupported statements re 2015 return to profitability following 2014 restructuring • further inaccurate guidance re early January filing of September quarterly and a January trade date

January 18, 2017 (PM - post filing); The Big “R” restatement is not a surprise nor is the new reference to “potential inquiry by the United States Securities and Exchange Commission with respect to the proposed restatements or CH2M’s accounting practices” in the Cautionary Note Regarding Forward Looking Statements. Foley and Larder’s recent interest in this report is suspected to be associated with the latter.

CH2M CREDIT NOTES


January 24, 2017; Observations re Q3 2016 and related filings In addition to a $46mm tax benefit resulting from pension restructuring, there is a $32.4mm tax benefit in Q3 2016, which, through the price formula, represents $315 million or $9.30 per share. If this benefit were driven by losses, how much might be attributed to power and should the same be excluded from “P” but included in SE as are power losses? (TTM Transport and Power charges, net of transport restatement above, amount to $296 million and are split 50/50). Also, a $15mm gain/$31mm goodwill resulting from the acquiring of a controlling interest in one joint venture for $2.1mm (net) are based on fair value re-measurement of the original equity method. Through the price formula, this would represent $140mm or $4.40 per share. Together this amounts to $47.4mm of “P” / $13.61 per share price that should be considered when weighing the quality of core operations/project portfolio performance. This highlights the significance of accounting quality for shareholders and underscores why, due to the latitude that exists in establishing fair value and deferred tax asset value, shareholders might seek enhanced disclosure in these areas. In reconciling the Q3 ’16 the share price an $8mm accounting discrepancy in 2015 between 10-K/A restated and Q3 2015 financials is identified. The net variance in share price is attributed to a combination of tax benefit and gains outlined above.

Unbilled revenue remains at peak levels and has overtaken client accounts which has returned to an acceptable activity level. Net working capital position improved as a result but the pattern suggests the influence of bank intervention. Asset Efficiency highlights continuing weakness in goodwill and deferred tax accounts. Re the Third Amendment to Credit Agreement; the collateral grab is worrisome and indicative of bank sentiment.

EffectiveDate 11/16/2016 11/16/2016 Reconciliation $37.1 - $46.83 RemarkPricePer P SE Net P

M(1) 1.20 1.20 P(2) 54,650 88,288 54,650 736,619 33,638 SE(3) 736,619 701,279 -27,067 $15.9 actual vs $43 Net Income Guidance CS(4) 33,111 32,622 -8,270 Accounting Discrepancy; Cash Flows 10-KA vs 10-Q Multiplier 7.8 7.8 -32,438 Non Pension Tax BenefitChange in P (55,998)$ (22,360)$ -1,200 Other (gain?)Price Calc 37.70$ 46.83$ Board Valuation 1,248,143.00$ 1,527,654.68$ ttm Net Income -88,759 -151,114 -62,355 Largely attributed to Mopac cost growth ($66 vs $25)TTM (Income) loss attributable to noncontrolling interests 146,012 143,294 -2,718 Non-controling varTTM less P 2,603 -96,108Var 3$ (108)$ 111$ Power losses (after Tax) 107,500$ 102,000$ (5,500)$ TTM Power Losses varGoodwill Impairmwent (after tax) -$ Restructuring (After Tax) 46,900$ 25,000$ (21,900)$ Restructuring Var(Gain) on sale/Restructuring of business (175,000)$ (46,000)$ 129,000$ Pension Restructure - opposite approachesD&A (after Tax) 18,000$ 15,000$ (3,000)$ Non-cash var

Noted Exclusions from "P" Total (2,600)$ 96,000$

ttm Net Income 100% Restated 88,288$ 701,279$ -$

TTM (Income) loss attributable to noncontrolling interests TTM Power Actual - 3 - $70M

TTM RestrngAdjustment

CH2M CREDIT NOTES


-100000

0

100000

200000

300000

18

28

38

48Offside Working Capital; Unbilled Revenue

Sum of Unbilled revenue Days RevenueSum of NWC Fix BarSum of NWC Unbilled revenue Days RevenueSum of NWC Unbilled revenue Days Revenue (Var)

-150

-50

50

150

25

30

35

40

45Offside Working Capital; Payables

Sum of Payables days outstanding (on direct cost)Sum of NWC Fix BarSum of NWC Payables days outstanding (on direct cost)Sum of NWC Payables days outstanding (on direct cost) (Var)

0

50

100

$(200)

$300

Net Working Capital

Sum of Debt (Current + LT)Sum of NWC Fix BarSum of NWC Inversion Assets Less LiabSum of NWC Working Capital Inversuion Liability side

HalcrowAcquis ition

AustralianPower

Announced

HalcrowDefended Bank

ConsultantBenchmark

MostRecent

Quarter

0.0

10.0

20.0

30.0

40.0

50.0

60.0

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800Revenue, Receivables and Debt

Gross Revenue Client accounts Unbilled revenue

Billings in excess of revenue Other Debt (Current + LTD)

Payables days outstanding (on direct cost) Client accounts Days Revenue Unbilled revenue Days Revenue

Other Days Revenue Billings in Excess days Revenue Deferred Income Tax Days revenue

CH2M CREDIT NOTES


February 7, 2017; A quick study of comparative share value is worthwhile in light of merger speculation. Below, Atkins’ recent share price £14.68 is evaluated on its own TTM financials under the Ch2 price formula with an “M” factor of 1.21 identified (includes a £18.5 adjustment to “P” relating to 2017 goodwill impairment, less gains of £1.5 on pension curtailment and £6.4 on disposal of property). Utilizing the same 1.21 in the most recent Ch2m calculation, excluding both the $15m gain on fair value adjustment and $16.2 tax benefit attributed to Power losses from “P”, a $37.99 share price results. A 0.2 reduction in “M”, 16.7% of 1.2 board discretionary and comparative factors, lends

consideration to Atkins’ stronger performance/condition; in this context, a $35.25 share price is determined. And in light of questions surrounding Goodwill, Deferred Tax and Pension position the $33 estimate holds. Talk is not a surprise; a deal is needed.

February 20, 2017; Return On Shareholder Equity ROE = net profit margin * asset turnover * equity multiplier

Declining Asset Efficiency Increasing leverage

Atkins Ch2m Equitable Like Performance PerformanceFeb-17 Sep-16 Adj Comparison Discount Adjusted

M(1) 1.21 1.20 0.01 1.21 -0.20 1.01P(2) 135,600£ 88,288 (31,200) 57,088 57,088 SE(3) 185,600£ 701,279 701,279 701,279 CS(4) 99,687 32,622 32,622 32,622 Multiplier 7.8 7.8 7.8 7.8

Price Calc 14.68£ 46.83$ 37.99$ 35.26$ Market

0

0.5

1

1.5

2

2.5

3

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Asset Efficency

Goodwill Sum of CS | Deferred Tax (Current + LT) Sales/Total Assets Client accounts Unbilled revenue TTM Sales/Total Assets

CH2M CREDIT NOTES


ROE = tax burden * interest burden * operating margin * asset efficiency * leverage ratio * return on assets

Flat EBIT/Sales highlights historic low margins Tax burden (Net income/Pretax or EBT) highlights importance of exploring tax considerations. Mar ’13 Tax and operating expense anomaly is consistent with Halcrow pension cost concealment discussed earlier. $50mm is again calculated; EBT/sales drop & recovery of 0.23 (0.034 to 0.010 to 0.032) across Q1 and Q2 ’13 on

average revenue of $1.48bn is $34.5mm ROE = pretax margin * asset efficiency * return on assets * (1-tax rate)

An additional $15.1 results from reduced effective tax rate over same period.

Tax Gap (EBT/Sales vs. Net Income/Sales)

Deferred Tax Asset declined from 10.3% to 7.3% of total assets on the Halcrow acquisition and again from 7.9% to 5.8% between Jun ’13 and June ’14. It has since risen to 14.6% of total assets. The shift in the asset base where current assets move further from cash (growth of unbilled) and toward the long term (deferred tax and goodwill) is alarming.

CH2M CREDIT NOTES


February 25, 2017; Comparison of July 2015 and Feb 2017 Forms 13-D shows Apollo’s holding has increased by 306,871 shares despite the subscription agreement providing that, prior to the 5th anniversary, the cumulative dividend is not to be paid in cash or kind but added to the liquidation preference. It is noteworthy to mention that including an additional 306,871 shares in the second closing (4/11/16) would reduce the price of this traunch from $62.22 to $52.24, the August 1, 2016 calculated share price (whereas the May 2, 2016 share price effective at the time was $60.91). A $22.15 million cum dividend to date is calculated which by 306,871 shares is $72.16 per. The origin of the additional shares is not clear. Perhaps Apollo has participated in the quarterly trade or, alternatively, might this be a purchase price adjustment associated with the 2016 restatement?

7/27/2015 2/24/2017 Total Investment VarInvestment 200,000,000$ 300,000,000$ 300,000,000$ 14,370,769$ Apollo Shares Held 3,214,400.0 5,128,471.0 4,821,600.0 306,871.0 Investment/shares held 62.22$ 58.50$ 62.22$ 46.83$ % ownership 10.5% 17.0% 16.0% 1.0%share float 30,613,333 30,167,476 30,167,476 30,167,476

Form 13-D Form 13-D PotentialReported Reported Quarterly Trade

Participation

7/27/2015 2/24/2017 VarianceInvestment 200,000,000$ 300,000,000$ 100,000,000$ Apollo Shares Held 3,214,400 5,128,471 1,914,071 Investment/shares held 62.22$ 58.50$ 52.24$

% ownership 10.5% 17.0%share float 30,613,333 30,167,476

Form 13-D Form 13-D Aug 1/2015Reported Reported Share Price?

5% Traunch 1 Traunch 2 Cum Dividendstart 5/27/2015 4/11/2016end 2/26/2017 2/26/2017days 360 629 315Yrs 1.75 0.88Investment 200,000,000$ 100,000,000$ Annual compounding 17,845,833$ 4,343,750$ 22,189,583$

Quarterly trade Participation

5/25/2015 Second Closing

Compounded Cum Dividend

CH2M CREDIT NOTES


March 1, 2017; This critique lead with the premise that a strategic business combination with one or more existing E&C concerns presented the strongest prospect for Ch2’s future and recovery. And April 2015 Playbook highlighted the issue of valuation presenting a fiduciary dilemma for its BOD; while it may serve shareholder desires, an inflated share price limits strategic alternatives available as common shares are not a desirable currency and access to capital is impaired, carrying the additional cost of priority. So, one has to weigh, at what price might share liquidity, access to capital and available strategic alternatives generate superior accretive growth opportunity? Also, what is the value of choice and liquidity for former and current employee shareholders? Speculation re Atkins has been noted previously, but an alternative prospect would be the possibility CIMIC/Hochtief pushed the Ichthys contract termination to gain leverage and put themselves, perhaps together with SNC-Lavalin and/or others, into a position to negotiate a global Ichthys settlement and target Ch2m in that process. A deal is needed… And Moelis & Co (London) is most recent to join the list of professionals who find interested in this critique. As the importance of tax considerations grow evident, a closer look is deserved. Tax Gap represents cash paid for income taxes less the P&L provision and Deferred Tax Asset Gap represents the change in deferred tax asset on balance vs statement of cash flows. The cumulative Tax Gap since either Jan 2010 or Jun 14 bank intervention has grown to $175mm (cum cash paid exceeds provision) and the Deferred Tax Asset Gap reveals net use in Dec 10, Dec 13 and Dec 15 and net source in Dec 12, Dec 14 and Sep 16. The Cum DTA Gap area represents net use above and net source below the horizontal axis, a $20mm swing.

A core DTA component that is significant in size, less volatile and on a growth trajectory is identified by netting the Cum Tax Gap from the Deferred Tax Asset and it is suggested an accounting for this core is warranted as it consists of temporary differences that grow in age. In Nov 2016 a conservative $70mm at risk Deferred Tax Asset Component was identified and communicated; the above affirms the same identifying weakness consisting of $50 - $75 million core and $20mm swing.

CH2M CREDIT NOTES


March 11, 2017; Sticking to the points. Goodwill; Approximately $230 million of goodwill related to Halcrow acquisition can be questioned, the facts/business judgement sentiment surrounding the Halcrow investment warrant inquiry re the qualitative and quantitative considerations Ch2m management relies upon in its goodwill impairment reviews. • 2012 annual SEC filings last listed CH2M HILL Europe Limited - UK as a subsidiary (replaced by CHIHB,

LP – Bermuda). • Companies House filings indicate that in November 2013 Ch2m Hill Global Holdings S.à.r.l. disposed of its

interest in CH2M HILL Europe Limited to CHIHB, LP – Bermuda and that in 2014 CH2M HILL Europe Limited took a full £123 impairment charge, eliminating all value associated with its Halcrow investment.

• Hinman served as director of CH2M HILL Europe Limited between Jun 2010 and Feb 2014. And recent

turmoil/turnover on CH2M HILL Europe Limited board. Pension Restructuring/Remaining Deficit; While the RRA was successful in reducing benefit obligation, the creation of and transfer to HPS2 was less exciting/successful, effectively transforming $65 million deficit contingency into a contingent guarantee as opposed to a reduction of total deficit or an outside transfer of risk. In the deficit account or as a guarantee, the banks’ fundamental view is the same when they evaluate credit worthiness/borrowing ability. Financial/strategic capital would view this similarly as should shareholders. The adjusted 2015 view (page 19) is affirmed and the buy-out, on-going deficit and competitive pay-down scenarios in enterprise value calculations are fundamentally unchanged.

Pension Position 2015 2016 Adjusted 2015Non US Total US Non US Total US Non US Total

Plan Obligations $1,174.6 $1,423.5 $262.6 $909.4 $1,171.9 $248.9 $953.4 $1,202.3Plan Assets $751.9 $939.2 $194.6 $786.5 $981.1 $187.3 $751.9 $939.2Underfunded Status ($422.7) ($484.4) ($68.0) ($122.9) ($190.9) ($61.6) ($201.5) ($263.1)Total Assetts 2,861.3 2,670.5 2,861.3

-16.9% -7.1% -9.2%

Risk Transformation ($65.0)Underfunded Status ($68.0) ($187.9) ($255.9)Total Assetts 2,670.5

-9.6%

CH2M CREDIT NOTES


Deferred Tax; The tax multiplier in the ROE analysis demonstrates to what extent tax accounting is driving “P”, since June 14 and the Tax Gap has grown to $174 and $191 million cash out (paid for taxes vs recognized in P&L accrual accounting) through Sep and Dec 2016, respectively.

Volatility in the DTA Gap has increased the frequency of swing; $18.5mm from source to use in the Dec 2016 quarter.

Though Core DTA appears to have returned normalized levels, it is driven by the net of $223mm reduction in DTA Valuation Allowance ($59mm and $163mm in fiscal 2015 and 2016, respectively) and Cum Tax Gap of $138mm cash out ($4mm cash in and $142mm out in fiscal 2015 and 2016, respectively) in the same interim. The net $85 mm less $18 mm swing from source to use in the last quarter represents the $68 fall in Core DTA. This is fundamentally the same $70 million weakness as is identified in the March 1 update and, whether identified as having been transferred to earnings or remaining on the balance sheet, this weakness still exists.

CH2M CREDIT NOTES


On common sized and activity basis core DTA offers the appearance of a return to levels still slightly heightened in comparison to immediate post-Halcrow levels and the valuation allowance on aging core DTA has served to support borrowing capacity by allowing the company to maintain a compliant consolidated leverage ratio (total funded debt/adjusted EBITDA). Just $107mm unused availability at 12/31/16 is supported by only 30 - $35 million of EBITDA assuming 3.5 and 3.0 leverage ratios, respectively. Less fiscal 2016 depreciation and amortization of $63.5mm, we begin to gain perspective on the importance of, goodwill impairment review, valuation allowance, management’s business judgement and the quality of earnings.

While asset impairment/improved asset efficiency, is healthy for business soundness, shareholder ROE and improved earnings quality, it would trigger a default event. This should also highlight the insufficient capitalization and solvency issues that remain. The 250 million new equity assumption in enterprise value calculations on page 20 is affirmed.

unused availability

Leverage ratio

Adjusted EBITDA Support

TTM D&A

Earnings Support

107.0$ 3.5$ 30.6$ 63.5$ (33.0)$ 3.0$ 35.7$ (27.9)$

CH2M CREDIT NOTES


Working capital; Net working capital inversion of at least $100mm continues. Payables remain stretched highlighting liquidity constraint and improved receivables activity demonstrates move back toward cash (decline in unbilled) and improved client account turn.

Apollo buy-out model; Investment outlook on page 9 supports a $1.1bn average enterprise value estimate comparing Apollo’s cv Pfd investment of $300mm for approximate 23% equity future stake/valuation (before recent adjustment) implying $1,300mm - less premium you assign to $600 liquidation preference and significant control. In comparison and in support the post-pension restructuring valuation (pages 20 and 21), goodwill impairment, core DTA weakness, average pension deficit adjustment and the Apollo purchase price adjustment total $588mm or $98% of Apollo’s $600 liquidation preference. Addressing the same issues is what is required to restore confidence, discover bonafide sustainable growth opportunity and restore access to capital.

Familiar figures; If $582.7 or $588.4 seem familiar, they might…. Recall the early 2016 reconciliation request to company representatives including General Counsel, Audit Committee Counsel, Chief Ethics Officer and head of Internal Audit concerning the $583.5mm variance identified in the analysis of the Feb 2015 Investor Presentation (pages 3, 8, 13 and 17).

Comp Pay-down

On-going deficit Buy-out Average

Preference claim

Goodwill Impairmnt 230.00$ 230.00$ 230.00$ DTA Weakness 70.0 70.0 70.0 Pension Deficit 160.0$ 263.0$ 383.0$ Purchase price adjustment 19.7$ 19.7$ 19.7$ Total 479.7$ 582.7$ 702.7$ 588.4$ 600.0$ Percentage of Preference claim 98.1%

CH2M CREDIT NOTES


March 31, 2017; Analysis of potential earnings management through merger accounting, reserves and deferred tax asset valuation allowance.

AR Reserves and Earning Management Potential is derived from cash vs accrued receivables gap identified previously. The accounts demonstrate a distinct change of characteristic following the Halcrow acquisition that could be consistent with the creation of reserves and/or masking of charge-offs through M&A accounting. The cumulative potential smoothing identified amounts to $82mm (Dec 2011 to date). Presumable motivation would be to manage or dampen the impact of pension deficit, cost creep and charges relating to impairment, restructuring, power and transportation reported in P&L and OACI (SE) and maintain solvency ratios. Note the $60mm increase in Foreign Currency Translation

across 2015-2016 interim relating to permanent investment in foreign subsidiaries in OACI (vs a $15 million 2016 P&L gain on equity re-valuation) Net Deferred Tax Assets (represented by the dashed VA line in the stacked presentation) and Valuation Allowance (area between valuation allowance and accrued employee benefits line above) are included to complete the perspective. The release of VA is

remarkable in so much as it results in material direct non-cash, non-recurring increase in earnings (tax benefits) that are discretionary and generally carry little value with investors.

CH2M CREDIT NOTES


Not only do accounting literature and academics highlight the discretion businesses have over the DTA valuation allowance account because of there being no well-established accounting standard or clear guidelines, but analytical convention also supports both that an increasing DTA is correlated with declining credit quality and that the VA account has features that recommend it as a place to investigate potential earnings management. For these reasons, the following analysis utilizes benchmarking and is based on a Risk Weighted Valuation Allowance factor, the product of the following multipliers (all associated with major points in this critique). • Benefit Plan (component) as a percentage of total OACI – isolates the Pension risk in OACI • Valuation Allowance as a percentage of Total Deferred Tax Assets – isolates valuation allowance before

netting of Tax Liabilities • Valuation Allowance as a percentage of the Underfunded Pension Status – captures correlation between

pension restructuring and Valuation Allowance and is adjusted to include $65mm guarantee (off-balance sheet risk transformation) as bank covenants do.

• Valuation Allowance as % of Total Assets; Captures impact of Valuation Allowance in asset efficiency measure

Historic average two-year (2010 - 2011) and three-year (2010 – 2013) risk-weighted factors serve as benchmarks from which it is determined that the allowance has weakened (declined) between $57 and $63million. An additional $5 million is also included to adjust for the net $45 million equity re-valuation in OACI and P&L noted above using a 9.36 multiple (consistent with 7.8 and 1.2 factors in the share price fix formula). This

amounts to $63-$70 million and affirms previous analysis, suggesting the quality of this quantity of earnings resulting from tax benefit might be questioned. And together with the amount of ”P” supporting the Dec 2016 $107 million liquidity position outlined on page 32, these amounts might highlight the possibility of potential of earnings management motivated by solvency concern. The $70 mm risk-adjusted VA is represented by dotted lines in Weighted-Average Risk chart.

Unachieved combined revenue expectation of $7bn set on the Halcrow acquisition, cancellation of restricted stock grant incentive comp, performance against the 2014 restructuring and 2015 investment plans and anticipated lower profitability from equity investments in foreign affiliates identified in 2015/2016 OACI all demonstrate the challenge in the pursuit restored sustainable profitability/growth and, thus, highlight the need for comparison of 2011 post-acquisition forecast vs. 2015 investment solicitation forecast vs. current forecasts to weigh the quality of the VA, prospects for DTA recovery, earnings quality and business judgment demonstrated in establishing the same.

Pension Position 2010 2011 2012 2013 2014 2015 2016 Adjusted 2015Total Total Total Total Total US Non US Total US Non US Total US Non US Total

Plan Obligations $187.5 $1,132.1 $1,309.0 $1,368.4 $1,505.0 $248.9 $1,174.6 $1,423.5 $262.6 $909.4 $1,171.9 $248.9 $953.4 $1,202.3Plan Assets $138.6 $765.5 $863.9 $923.1 $972.8 $187.3 $751.9 $939.2 $194.6 $786.5 $981.1 $187.3 $751.9 $939.2Underfunded Status ($48.9) ($366.6) ($445.1) ($445.3) ($532.2) ($61.6) ($422.7) ($484.4) ($68.0) ($122.9) ($190.9) ($61.6) ($201.5) ($263.1)Total Assetts 1,967.1 2,694.9 3,114.6 3,056.4 2,941.3 2,861.3 2,670.5 2,861.3

-2.5% -13.6% -14.3% -14.6% -18.1% -16.9% -7.1% -9.2%

Risk Transformation ($65.0)Underfunded Status ($68.0) ($187.9) ($255.9)Total Assetts 2,670.5

-9.6%

Risk Adjusted Valuation Allowance2010 - 2011 Avg

2010 - 2012 Avg

2010 - 2013 Weighted VA Risk Factor 0.2672% ($62.7)2010 - 2011 Weighted VA Risk Factor 0.2280% ($57.1)Weighted VA Risk Factor 0.1720% 0.2840% 0.3456% 2.0586% 2.0393% 1.1143% 0.0203% 0.2280% 0.2672%BP Balance at end of year (33.2) (60.1) (143.2) (146.2) (255.5) (225.7) (133.2) (133.2) (133.2)Total OACI (18.8) (60.9) (132.4) (137.7) (273.6) (274.7) (209.4) (209.4) (209.4)

OACI-BP/Total OACI 177.10% 98.77% 108.15% 106.21% 93.37% 82.15% 63.62% 63.62% 63.62%Valuation allowance (27.7) (99.3) (117.0) (227.0) (269.2) (210.4) (46.0) (103.2) (108.8)Total DTA 227.9 344.7 361.5 443.2 570.5 495.4 448.4 448.4 448.4Underfunded Status (48.9) (366.6) (445.1) (445.3) (532.2) (484.4) (255.9) (255.9) (255.9)Total Assetts 1,967.1 2,694.9 3,114.6 3,056.4 2,941.3 2,861.3 2,670.5 2,670.5 2,670.5

VA/Total DTA -12.16% -28.81% -32.37% -51.21% -47.19% -42.47% -10.27% -23.01% -24.26%VA/Underfunded Status 56.67% 27.08% 26.28% 50.97% 50.58% 43.44% 18.00% 40.32% 42.51%VA/Total Assets -1.41% -3.68% -3.76% -7.43% -9.15% -7.35% -1.72% -3.86% -4.07%

CH2M CREDIT NOTES


April 13, 2017; Examining Lavalin’s £20.8 expression of interest valuing Atkins at £2.08bn, sticking with a 7.6 multiple… Based on yr. ended Mar 2016 financials £20.8 per share (100.11 mm shares outstanding) breaks down as follows: £13.2 EBITDA enterprise value £4.2 cash on hand £3.2 50% reduction in overhead calculated at 4.5% of 2016 revenue Lavalin’s reserving the right to bring a lower bid is attributed to the Atkins pension deficit, however, and as identified previously, its balance sheet provides a credit advantage in absorbing pension deficit of a target(s)… Beginning with a £215mm Atkins competitive paydown (£2.15 per share) divided by 7.6 multiple produces an EBITDA equivalent of £28.3mm (vs 2016 contributions of £32.8mm. Increasing this by 2.5% annually between 2019-2025, as per the recent pension agreement, and using a discount rate of 5%, the same as ch2m’s cost of CV Preferred capital, drives a PV of £221mm. The same cash flows under a 12% assumed ROE as discount rate drives a £164mm present value. The net benefit of £55.6mm or £0.56 per share. Provided combined Lavalin-Atkins operating performance is sustainable and ROE exceeds the cost of deficit capital, this benefit might be viewed as a reduction in the effective purchase price or reducing the deficit premium calculated on competitive pay-down to £1.59 (£2.15 less £0.56). By the same token, a Ch2 – Atkins combination would be challenged to achieve the same economies and scale. All in all, at 7.6 x on Atkins year ended 2016 performance, Lavalin’s £20.8 bid indication appears rich, leaving much on the table, including £3.2 per share of cost reduction premium and £1.59 per share deficit premium. The combined entity might also enjoy a boost to profitability/cash flow after 2025 assuming sustainable pension schemes result from Atkins’ recent actuarial settlement. A £0.7 per share PV is based on 2016 deficit funding of £32.8mm and 12% discount rate and this benefit would drop to £.18 if ROE were to double to 24%, however; quite acceptable based on the horizon and potential purchase premium identified. Though Lavalin is the best strategic fit for ch2, leadership of these organizations may not share or appreciate this view. Perhaps Ch2 might benefit from the display of humility considering that SNC-ATK combination would effectively strip it of its best and, perhaps, its management’s alternative of choice, however.

Price Component Multiple Per ShareATK Fiscal 2016 Underlying EBITDA 173.8£ 7.6 1,320.9£ 13.2£ ATK March 2016 Cash on hand 419.3 4.2£ Assumed Overhead Cost Reduction of 50% 41.9£ 7.6 318.4£ 3.2£ Total 20.6£

Deficit Capital Analysis

Competitive Pay-down Multiple year Cash Flows r PV year

Agreed Cash Flows r PV

215 7.6 2017 28.3£ 0.05 215.9£ 2017 34.5£ 0.05 263.3£ 2018 28.3£ 0.12 160.3£ 2018 34.5£ 0.12 195.5£ 2019 29.0£ 2019 35.4£ 2020 29.7£ 55.6£ 2020 36.2£ 67.8£ 2021 30.5£ 2021 37.2£ 2022 31.2£ 2022 38.1£ 2023 32.0£ 2023 39.0£ 2024 32.8£ 2024 40.0£ 2025 33.6£ 2025 41.0£

Sustainable Pension Beyond 2025

year

Agreed Cash Flows r PV year

Agreed Cash Flows r PV

2017 -£ 0.05 175.6£ 2017 -£ 0.05 175.6£ 2018 -£ 0.12 70.2£ 2018 -£ 0.24 17.9£ 2019 -£ 2019 -£ 2020 -£ 2020 -£ 2021 -£ 2021 -£ 2022 -£ 2022 -£ 2023 -£ 2023 -£ 2024 -£ 2024 -£ 2025 -£ 2025 -£ 2026 32.8£ 2026 32.8£ 2027 32.8£ 2027 32.8£ 2028 32.8£ 2028 32.8£ 2029 32.8£ 2029 32.8£ 2030 32.8£ 2030 32.8£ 2031 32.8£ 2031 32.8£ 2032 32.8£ 2032 32.8£ 2033 32.8£ 2033 32.8£ 2034 32.8£ 2034 32.8£ 2035 32.8£ 2035 32.8£ 2036 32.8£ 2036 32.8£

Pension Econommies SNC.TO ATK.L SNC-ATK SNC-ATKTotal Assetts 9,298.3CAD 1,387.3£ 11,601.2CAD 6,988.7£ Unfunded Pension Liability 100.8CAD 265.3£ 541.2CAD 326.0£ Unfunded Pension Liability as % of Total Assets 1.1% 19.1% 4.7% 4.7%Competitive Paydown (233.98)CAD 215.4£ 123.5CAD 74.4£

GBP : CAD 1.66

CH2M CREDIT NOTES


Trade update raises acute liquidity concern: Though no trading will be based on TTM ended Q1, its impact on already thin liquidity position is emphasized and the possibility that exploration of refinancing alternatives includes debtor in possession financing and priming the bank group (borrowing funds secured by a lien equal or senior to the existing) to ensure adequate funding for future operations is distinct. Stressing its own inability to determine whether it is in possession already (because it’s Q1 books are not yet closed) or may become aware of material non-public information before April 28 raises the question of Ch2m’s concern re financial covenant calculations that have yet to be delivered to the lender. Also, the statement that, if a refinancing occurs, that there is the possibility that obtaining consent from current lenders under the amended credit agreement and Series A Preferred Stockholders might involve substantial cost (as opposed to customary fees and expenses being substantial) raises questions re the cost of bankruptcy administration and whether the bank group would consent to or extend Potential DIP financing agreement vs, in the case of a 3rd party DIP provider, ch2 having to convince a bankruptcy judge that existing bank liens would be "adequately protected". Recall the April 2016 Ch2m Playbook suggests the possibility of earnings management supporting the argument for substantive consolidation and that sum-of-parts offering(s) (asset sale(s)) would likely require free and clear exchange under 363 process. The possibility of chapter 11 is now greater than ever before. April 17, 2017; Brownstein Hyatt Farber Schreck LLP, a leading lobbyist and Denver based corporate law firm, is the latest to join the list of paid professionals who find interest in this critique. April 19, 2017; The Tri-city herald reports that a DOE Office of Inspector General audit revealed improper use of a management reserve to conceal $18 million cost over-run at Ch2m Hill Plateau Remediation Company, expressing concern that project performance would be over stated. April 21, 2017; It is clear that the ch2m, its management and its board all struggle, with perhaps a consensus opinion, that the risen leadership contingent may not be receptive to independent directors, forming. Direct feedback and inclination that all potential conflicts have yet to be fully vetted would support the same. The consensus among those polled within the industry and advisory communities suggests that independent directors placed too much confidence in management, perhaps partially because of being distracted by duties elsewhere, and today, when a fully functional independent body is most needed, this concern has been reborn considering the continuing investigation and Italian proceedings concerning the OPL 245 oil block. Also, examination of the independence of the valuation consultants (relationships, revenue concentrations, etc.) and a review of IOT methodologies are worthwhile considering both the broad gap between Bank group’s sentiment and the stock valuation and EFCG’s own assertions that methodologies require updating from time to time. And because the current methodology does not do well to capture a credit variable, the board and retirement plan trustees ought to pursue the identification of parties/or institutions willing advance against pledges of ch2m company stock at current levels. Lavalin and Atkins are both congratulated on a very good deal with a sound financing package. On reported cost synergies, 2016 fiscal EBITDA and yr end cash balance, the deal makes good sense.

Price Component Multiple Per ShareATK Fiscal 2016 Underlying EBITDA 173.8£ 7.6 1,320.9£ 13.2£ ATK March 2016 Cash on hand 419.3£ 4.2£ Assumed Overhead Cost Reduction of 50% 69.4£ 7.6 527.4£ 5.3£ Total 2,267.6£ 22.7£

Less Calculated Deficit premium 1.59£

Effective Indicative Atkins Bid Price (Net of Deficit Capital Financing Efficency) 21.06£

CH2M CREDIT NOTES


May 15, 2017; Deconsolidation of VIE (Ichthys) produced an $87.8 million gain in Shareholder equity (Note 4) whereas the negative book value of ch2m’s 50% retained interest in the noncontrolling investment in the joint venture partnership as of January 24, 2017 was approximately $86.0 million (which approximated its evaluation of the potential future costs (Note 14)). These values are all estimated, regardless of whether labeled book or fair value. The share price fix has historically excluded Power losses from “P” but retained them in “SE” and whether such treatment will be impacted by deconsolidation should be monitored going forward, as should cash and accrual disclosures relating to discontinued operations. For example, $1.8mm increase in the gain on deconsolidation between 1/24 and 3/31 should be weighed in conjunction with $390m income from discontinues ops and net use of cash from discontinued of $12,523mm ($14,587mm use in operations, $2,571mm use in financing and $4,635mm source from investment activity) Net Working Capital remains considerably off-side with a backdrop of peak debt and continuing liquidity concern/constraint imposed through restrictive covenants. Client accounts turn has been tamed though it remains susceptible to swing that can quickly consume significant cash resources. Unbilled DSO demonstrates that it is a greater challenge and perhaps deserving of scrutiny re underlying fundamentals (concentrations of line-of-business, clients, geography, milestones, etc.). Payables days’ return to normalized levels should be leveraged to achieve improved delivery performance and/or elevate quality to serve active management of the unbilled and the rest of the receivables cash cycle.

CH2M CREDIT NOTES


Operating performance Cash Flow and overhead review; Indeed, Q1 2017 over 2016 operating income excluding charges grew by 61%, which equates to $25-$28mm cost reduction (or $100 – 115 mm if annualized), however the comparison of Q1 2015 vs 2017 operating income excluding charges reveals just 8% improvement. As a percentage of revenue, EBITDA excluding charges for the quarters ended March 2015, 2016 and 2017 were 6.1%, 4.3% and 6.2%, respectively. Recall that Ch2m was actively soliciting CV pfd investor in Q1 2015 and had put forth 2010 – 2018 investor package (IP)

that included a five-year year plan. Corporate Overhead was revealed through EBITDA analysis; beginning with statutory consolidated and subtracting that attributed to power and business segments. Oppositely, by carrying overhead budget forward through the projected periods, implied consolidated EBITDA estimates emerge at 6.7 and 6.9% of plan revenue for estimated 2015 and 2016, respectively. Actual EBITDA excluding charges for these periods represents 6.8% and 5.0% of plan revenue for 2015 and 2016, respectively. The variance from 2016 EBITDA plan is attributed to $104 million funding required as part of the pension restructure, and the various balance sheet/earnings quality weakness identified will weigh similarly on normalized future results whether through actual housekeeping or due diligence associated with recapitalization / M&A activity. As evidence, a backwards look reveals $127 million of cost loading that was and remains unacknowledged / unaddressed which was purposefully disguised. This serves to warn of margin weakness and speaks to the quality of leadership, offering testimony to the cost imposed on shareholders in the executives’

pursuit of grace.

Segment Revenue

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Water $1,077.0 $1,118.0 $1,173.0 $1,205.0 $1,240.3 $1,381.1 $1,457.3 $1,523.8 $1,591.4 $1,663.0Environment & Nuclear $1,667.0 $1,778.0 $1,337.0 $1,319.0 $1,373.3 $1,653.5 $1,642.6 $1,710.4 $1,780.5 $1,852.6Transportation $491.0 $498.0 $577.0 $931.0 $944.8 $1,022.3 $1,028.7 $1,086.0 $1,147.1 $1,212.5Oil, Gas & Chemicals $837.0 $894.0 $1,018.0 $958.0 $835.3 $822.3 $839.3 $911.5 $1,035.5 $1,104.0Indust, Urban Environ $927.6 $924.5 $846.3 $923.8 $787.3 $559.4 $702.0 $770.0 $831.3 $966.8

$4,999.6 $5,212.5 $4,951.3 $5,336.8 $5,181.0 $5,438.6 $5,669.9 $6,001.7 $6,385.8 $6,798.9

Segment EBIT2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Water $146.1 $168.6 $169.9 $137.8 $174.1 $196.2 $197.9 $209.6 $219.8 $231.5Environment & Nuclear $130.3 $161.4 $150.6 $141.7 $145.2 $164.0 $169.5 $175.4 $183.4 $189.9Transportation $61.9 $47.6 $53.1 $104.4 $65.3 $115.3 $135.7 $147.6 $160.7 $175.6Oil, Gas & Chemicals $28.8 $22.9 $29.8 $76.0 $72.1 $65.0 $67.1 $77.6 $94.2 $103.0Indust, Urban Environ $59.1 $96.3 $82.7 $75.9 $11.2 $46.5 $50.2 $60.1 $68.7 $80.0

$426.2 $496.8 $486.1 $535.8 $467.9 $587.0 $620.4 $670.3 $726.8 $780.0

Segment EBITDA2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Water $134.4 $165.4 $170.3 $137.9 $174.2 $196.5 $198.2 $209.9 $220.1 $231.8Environment & Nuclear $130.4 $160.9 $150.0 $140.8 $144.6 $164.7 $170.2 $176.1 $184.1 $190.6Transportation $54.5 $47.3 $52.7 $104.4 $64.9 $115.5 $135.9 $147.8 $160.9 $175.8Oil, Gas & Chemicals $50.7 $34.1 $37.6 $83.7 $82.5 $77.8 $80.1 $92.4 $107.1 $118.0Indust, Urban Environ $58.0 $95.5 $81.4 $72.2 $7.4 $47.2 $50.9 $60.8 $69.4 $80.7

$428.0 $503.2 $492.0 $539.0 $473.6 $601.7 $635.3 $687.0 $741.6 $796.9Derrived Corporate OverheadStatutory Consolidated less 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Power less Segment EBITDA $279.8 $316.2 $255.7 $265.4 $248.6 $239.3 $241.3 $244.3 $247.6 $251.3

EBITDA ('14 - '16 IP Es t or de rri ved) $213.0 $221.0 $233.3 $254.6 $232.9 $362.4 $394.0Power EBITDA - IP $64.8 $34.0 ($3.0) ($19.0) $7.9 $0.0 $0.0 $84.7

Se gment EBI TDA- IP $428.0 $503.2 $492.0 $539.0 $473.6 $601.7 $635.3

Cal cula ted Overhead Reconcile d ($279.8) ($316.2) ($255.7) ($265.4) ($248.6) ($239.3) ($241.3)

Adjusted EBITDA- IP page 69 213.1 221.2 233.1 254.1 232.9Var from Statutory Less…. $66.7 $95.0 $22.6 $11.3 $15.7Cum Var from Starutory Less…. $161.7 $184.3 $195.6 $211.3

Segment Less Adjusted p. 69 $214.9 $282.0 $258.9 $284.9 $240.7Var From Adjusted p. 69 $64.9 $34.2 ($3.2) ($19.5) $7.9Cum Var from Adjusted p. 69 $99.1 $95.9 $76.4 $84.3

Other Var $1.80 $60.80 $25.80 $30.80 $7.80Cum Var $62.6 $88.4 $119.2 $127.0

Statory Consolidated $213.1 $221.2 $233.1 $254.1 $216.2 $370.2 $285.2 as % of 2015 Plan 4.3% 4.2% 4.7% 4.8% 4.2% 6.8% 5.0%2015 Plan/Impied Plan $213.0 $221.0 $233.3 $254.6 $232.9 $362.4 $394.0 as % of 2015 Plan 4.3% 4.2% 4.7% 4.8% 4.5% 6.7% 6.9%Statutory Vs. Plan $0.1 $0.2 ($0.2) ($0.5) ($16.7) $7.8 ($108.8)Pension Restructure Cash Contribution 104.0Statutory Vs. Plan, Net of Pension Restructure $0.1 $0.2 ($0.2) ($0.5) ($16.7) $7.8 ($4.8)Cum Overhead Var. Reconciled ($14.0)

Disguised Cost Var - Unsupported

Cost Var Attributed to Power

IP Est Vs Statutory 2014 - Rec

IP Estimated Fiscal 2014

IP Estimated Fiscal 2014

2014 Statutory

IP Est Vs Statutory 2014 - Var

CH2M CREDIT NOTES


10% $200 Million 3 yr debt refinancing (+850 bp) serves to relieve the business’ immediate liquidity constraint though the threat of performance sureties being called and/or adverse rulings on legal cases looms. The capital structure is remarkably fragile with the board agreeing to add dilutive risk at default cash rates without securing added share liquidity. The average return on equity over the last 26 quarters (Q4 2010 to date) is negative 21.8% which improves to just 8.4% by excluding quarters ended Sep 2014 through June 2015 - still less than the cost of new debt and yet significant balance sheet and earnings quality risk remains. Cash fees and identity of the purchaser(s) are still to be identified. Aug 15, 2017; No doubt Ch2 shareholders will enjoy a sense of relief in the merger proposal and let us hope that JEC shareholders are equally enthused. Disclosure of continuing material weakness in controls and procedures reported as of June 30, 2017, highlights the deal risk and should be evaluated in contrast with Representations and Warrantees of the Company (Article 3) and Termination, Amendment and Waiver (Article 7) of the merger agreement. It is noted that this disclosure occurred after both JEC’s merger announcement and earnings calls where leadership declined to comment on their evaluation of Ch2 legacy EPC liability. Also, archived reports, including that highlight accounting concern provided to Ch2m and its audit committee/committee professionals may have become a point of interest. Among those interested, O’Melveny & Myers is a newcomer. The proposed transaction value (before assumption of debt) is remarkably rich at 10.33x average 3 year historic TTM Adjusted EBITDA of $276mm. Extra ordinary adjustments over this interim include $311mm, $294mm and $186mm transportation EPC, Power EPC and restructuring charges, respectively, averaging $26mm, $24.5mm and $15.4mm (quarterly basis) / $104mm, $98mm and $62mm (per annum). Adjusted EBITDA for TTM ended June 2017 of $313mm includes $240mm of adjustments ($90mm power, $59mm transportation and $55 restructuring) with core cash flow of $164 million ($313 - (90 + 65)), just marginally greater than Ch2m’s 2017 Water EBITDA forecast of $210 less 30% pro ration of $244 forecast 2017 overhead and highlights continuing underperformance within the broad project portfolio. Including $150mm of JEC identified cost synergies pro-forma cash flow grows from $276 to $426 which yields a 6.7 multiple on reported transaction value. All in all, the proposed deal and related economies (in revenue, cost savings and scale) leave much still to be realized.

CH2M CREDIT NOTES


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Documents

CH2M CREDIT NOTES - Responsible Strategic · PDF fileCH2M CREDIT NOTES Richard J. Reilly DueDilly, LLC d/b/a Responsible Strategic Management (917) 882-2880 Page 3 of 41 Management