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Good morning and welcome to the Chart Industries, Inc. conference call. according to the results of the third quarter of 2021. [Notes to Operators] The company’s announcement and additional clarifications were released this morning. If you did not receive the press release, you can access it by visiting the Chart website at www.chartindustries.com. Today’s call replay will be available after the call until Thursday, October 28, 2021.
Information about the replay is included in the company’s press release. Before we begin, the company would like to remind you that the ahistorical statements made on this conference call are actually forward-looking statements. Please refer to information regarding forward-looking statements and risk factors contained in the company’s income statement and recent filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements.
Thanks Gigi. Good morning everyone, and thank you for joining us today for our Q3 2021 earnings call and updating our 2022 outlook. Joining me today is Joe Brinkman, veteran of the Chart Industrial Gases and now our chief financial officer, who will give you quarterly results later on the call. Today’s discussion is twofold and similar to what you’ve heard from other companies, I’m sure. First, the short-term macro challenges we faced in the third quarter, their impact on our quarter, and the actions we have taken and continue to take to weather the storm and deliver structurally stronger earnings, as we expected. years ahead. Secondly, we are seeing continued strong activity on a wide range of orders and all indicators point to continued underlying demand for our products.
So, starting with the fourth slide of the additional deck released today. Our order book of $350M in Q3 2021 shows continued growth in demand across the business, well above our expectations at the start of the quarter given that we did not expect or receive large liquefaction orders in Q3. quarter, our expectations are Approximately $300 million. Orders this quarter were 33% higher than in the third quarter of 2020, resulting in our order book YTD 53% higher than in the first nine months of 2020. In addition, orders for specialty products increased by more than 100% this quarter compared to the third quarter of 2020 and more than 150% year-to-date. Cryo Tank Solutions also posted impressive growth during these periods, up 35% in the quarter and 53% in nine months.
Orders in the third quarter contributed to our fourth consecutive record backlog quarter, now above $1.1 billion, bolstering our confidence in our 2022 outlook and now seeing higher levels of order activity in a quarterly stable trend . Pointing to the left side of slide four, this indicates what we consider to be the new normal level of quarterly orders that we expect. Before COVID and before the clean energy era, or between 2016 and 2019, the $238 million average quarterly backlog now consistently exceeds $300 million per quarter. There are a few other things to look out for in our order handling this quarter. We placed 60 orders worth over $1 million each in the third quarter and 152 this year. The third quarter was the second quarter in a row for us with 60 orders worth over $1 million. We also received 20 new orders and 65 orders from new customers.
From the beginning of the year until the third quarter of 2021, all of our orders for specialty product categories exceeded their corresponding order levels for all of 2020. In other words, in the first nine months of the year, the number of orders for specialty products in all these categories exceeded the figure for the full 12 months of 2020. Beverage orders in the third quarter were up 68% compared to the third quarter of 2020, driven by faster bookings and deliveries, and given current material cost levels. As a result, part of the business did not experience a decrease in profitability due to an increase in material costs. We are starting to see some recovery, albeit later than we expected, in traditional oil and gas markets, including natural gas exploration and compression, with air-cooled heat exchangers having the highest order volumes in two months of 2020-2021, sorry. In August and September, the third quarter of 2021 was the quarter with the most orders for air-cooled heat exchangers.
Another example where our products are not linked at the molecular level. Thus, as long as the energy transition continues, we will benefit from the recovery of oil. So now let’s look at the details of the cost burden and what actions have been taken to offset the expected further drag on these higher-than-expected costs in slides 5 and 6. Although we expect the third quarter of 2021 to be the lowest level of negative impact on margin due to these cost issues, as some of these issues have been resolved – fully mitigated, others remain and will be eased as compensating measures are taken. we expect margins to improve in subsequent quarters, but we are also adjusting our guidance for the next quarter, including changes in sales timing and pricing pressure. We have previously stated that we expect Q3 2021 to monitor whether material costs and availability are improving or deteriorating and then respond quickly. Things got even worse this quarter.
Despite strong growth in orders and backlogs, logistics and labor issues in the supply chain impacted our results. We quickly responded with markups, additional price increases and lower operating costs, but none of our intra-quarter actions had an immediate impact on earnings in the quarter. We are currently forecasting work in progress and markup times and normalized labor and operating efficiency resulting in a return to typical margins, the first step of the step starts in the fourth quarter and continues through the second quarter of 2022, which is included in our forecast for 2022 year. Let’s take a step back and understand the problems and what we do about them. Slide 5, line one shows how material costs continued to rise rapidly in the third quarter of 2021, with stainless, aluminum and carbon steel spending increasing by 12%, 18% and 24% respectively from June 30 to September 30. Since July 1, we have carried out a large-scale price increase.
We didn’t see much of a shift in Q3 given our time lag and quarterly cost increases. In addition, we started adding a surcharge to all new orders starting in the middle of the third quarter of 2021 and raised prices again in October 2021. Our design work allows you to set current prices for materials during the validity of the application. Therefore, all these quotes have also been updated. The second row shows disruptions in the supply chain, be it port congestion, drivers, trucks, containers, availability of materials. Obviously none of these are relevant to the chart and our team is working to reduce sales time differences due to supply chain disruptions. However, this further stimulates our fight for safety stock, which in turn affects free cash flow in the short term. Speaking of driver and truck availability, the third row shows an often less talked about, but very devastating, unexpected problem that we experienced between August 11th and October 7th.
Our industrial gas suppliers have imposed a force majeure event on nitrogen and argon supplies to industrial gas customers, including us, due to the resurgence in demand for oxygen due to COVID-19, especially in the United States. While we have the privilege of using one of our own cryogenic trucks in our leased fleet and hiring a certified driver to deliver natural gas through our distribution network to keep our production running, this failure has certainly increased our operating costs and inefficiencies. On the positive side, this force majeure event was lifted on October 7th and distributions are now back to normal. Go to the sixth slide, fourth row. We are facing labor availability and cost issues, including the impact of COVID-19 on the workforce.
We believe we have taken sufficient steps to ensure that we were not affected by labor problems in the fourth quarter, with the exception of a direct increase in hourly wages, which is not temporary and was implemented in the third quarter in response to the retention and hiring of a large number of production employees. team member. During the quarter, we hired 372 people, and more than 98% are still with us. While we will continue to raise wages, we also used enrollment incentives during the quarter, which negatively impacted costs but were not included in base wages. The second workforce issue that improved significantly in October is the new surge of COVID-19 at our US manufacturing facilities. From August 1 to September 30, an average of 3.7% of production employees at our critical US facilities were absent for a week due to COVID-19.
We have had very few direct workers for these stores since October. This created additional operational inefficiencies, scheduling changes, and extra shifts as our direct work spanned different areas of the store. During the quarter, two of our production facilities were briefly shut down due to Hurricane Ida, resulting in lost business hours. These are temporary effects with no lasting or permanent damage or effect. Finally, we expect and plan to continue to enforce China’s energy law enforcement measures at our offices in China. Where necessary, we have developed a range of mitigation strategies. But at this time, the weekly power supply for our Chinese business will be five normal, two limit or four normal, three limit, and if the current situation remains unchanged during the quarter, we will reach the midpoint of our fourth quarter without further limitation. Chinese forecast.
We — we have constantly responded to material cost changes and other cost changes with price increases and surcharges. You can see in slide 7 the increase in material cost in the top half of the slide. Since the beginning of the year, our three main categories of raw materials: stainless steel, aluminum and carbon steel have grown by 33%, 40% and 65% respectively. In the first 20 days of October, we saw carbon and stainless steel prices stabilize, but given the magnesium situation, aluminum prices continued to rise and availability declined. Having said that, before I talk about the required pricing and the premiums we’re putting in, and the reasons for the differences between these approaches, let me talk about our comfort level with safety stock. As you know, since the beginning of the year we have been increasing the safety stock where it makes sense to temporarily increase the stock balances above the norm, which will affect free cash flow. However, this strategic decision has allowed us not to miss a single major delivery for our customers.
For example, we have entered into certain one- and two-year contracts, delivering cost savings in the first half of 2022 compared to current levels based on the time we received the input. As far as pricing is concerned, we do not expect material costs to increase, as they did from the end of the second quarter to the end of the third quarter, respectively. When we saw this, in addition to the pricing change implemented from July 1 and the re-quoting of all materials for open calls for projects with a tender period, we also introduced a mid-quarter surcharge. Even with these changes, it’s not enough to keep up with rapidly rising costs. Therefore, we have implemented another price increase for all new orders, which will be temporary and permanent, depending on the product. We have worked and continue to work with our industrial gas customers with long-term agreements to help us use the material cost pricing mechanism more frequently in these agreements, given that these inflationary periods persist and we lag behind the quarterly adjustment mechanism during periods of hyperinflation. ineffective.
For our clients who have succeeded in this and maintain our long-term relationship, this mechanism will return to its usual schedule, whether quarterly or semi-annually, as macroeconomic conditions improve. A big thank you to everyone who works with us to ensure that we can deliver their products as required, but do so without negatively impacting our business. Secondly, thanks to those who are working on the pre-upgrade backlog to properly cover the additional shipping costs for some of the existing orders in our backlog. You will notice that we have structured these growths in two different ways. It was intentional. First, after the cost situation improves and returns to normal, some of our prices will remain at a high level, which will be a typical step for us to adjust prices on a regular basis. The second is the allowance, which is temporary, although currently indefinite. So we’re going to have some price rigidity, but be honest with our customers because they’re trying to be fair to us.
Before I talk about our outlook for 2022, I’ll hand over the floor to Joe to give you an overview of our structural cost reduction efforts and third quarter results.
Thank you Jill The eighth slide shows certain organic structural costs and actions to increase capacity. What you see on this slide serves two purposes: first, to reduce operating costs, and second, to make sure we have the right capacity in the right places to meet our customers’ deadlines. On the left side of the page, you can see a subset of the cost-cutting measures we took or implemented in the third quarter. This is of course not a complete list. We have integrated our Tulsa air cooler manufacturing facility into our Beasley, Texas manufacturing facility, creating a flexible manufacturing facility at our Tulsa facility, which is in various stages of launch, depending on the product line. The addition of flexible production lines in Tulsa gives us access to skilled workforce and allows us to move the production bottleneck from other locations. For example, we have completed the relocation of ductwork and vacuum insulated assemblies from New Bragg, Minnesota, and related revenues are expected to begin in the fourth quarter of 2021.
The same Beasley location will house our repair and service facilities in Houston, and over the next few months we will be merging with our independent repair facility in Houston. On the slides you can see some of the other efficiency initiatives being implemented in the US and Europe. Lastly, we continue to refine our SG&A structure with specific position eliminations taken in the quarter. Lastly, we continue to refine our SG&A structure with specific position eliminations taken in the quarter. Наконец, мы продолжаем совершенствовать нашу структуру SG&A, исключая конкретные позиции в этом квартале. Finally, we continue to refine our SG&A structure by eliminating specific positions this quarter.最后，我们继续完善我们的SG&A 结构，并在本季度进行了特定的职位裁减。最后，我们继续完善我们的SG&A 结构，并在本季度进行了特定的职位裁减。 Наконец, мы продолжили совершенствовать нашу структуру SG&A и в течение квартала сокращали определенные рабочие места. Finally, we continued to improve our SG&A structure and cut certain jobs during the quarter. On the ninth slide. Q3 2021 sales were $328.3 million, up over 20% from Q3 2020, with organic growth of 13.4%. As a reminder, Venture Global Calcasieu Pass sales in the third quarter of 2020 were approximately $25.6 million compared to approximately $5 million in the second quarter of 2021. Although there is no associated large-scale LNG revenue in the third quarter of 2021. Excluding sales of large-scale LNG projects over time, organic revenue increased by 25.2% in the third quarter of 2021 compared to the third quarter of 2020 and increased by 13.6% year-to-date in 2021 compared to the beginning of 2020.
Sales in the third quarter of 2021 included record quarter-on-quarter growth in specialty products and refrigerated tank solutions. CTS sales were up 14.7% sequentially QoQ 2021 and 10% YoY, while specialty products were up 9.5% QoQ 2021 and 108% YoY. .8% compared to the third quarter of 2020. Specialty repair, maintenance and rental products accounted for 49.7% of our total net sales. About 50% for the second quarter in a row and 34.1% for all of 2020. Our third quarter 2021 gross margin was negatively impacted by the expenses described by Gill. The reported gross profit was 22.8% of sales, including non-recurring costs associated with the costs of launching the facility, integration, restructuring and integration of the facility. Adjusted for non-recurring costs, adjusted gross margin as a percentage of sales was 26.5%, reflecting our cost burden during the quarter due to rapid increases in freight, supply chain and materials costs.
Adjusted gross margin as a percentage of sales has remained flat since Q3 2020, excluding LNG, and has declined consistently since Q2 2021. Issues had less of an impact on adjusted gross margin as a percentage of specialty products and sales, repairs, services and rentals. Adjusted gross margin for specialty products as a percentage of sales was just over 37%, in line with the second quarter of 2021, and indicates an overall view of the business. The Specialty Products business is primarily item-based pricing with short-term cost-effectiveness, or products with faster order-to-shipment times, reflecting more current costs in our current pricing. Repair, maintenance and rental adjusted gross margin was 28.7% of sales, including restructuring costs associated with our decision to consolidate our repair facility in Houston, Texas. RSL-adjusted gross margin increased 510 basis points consecutively in the second quarter of 2021, including low-margin shipments from China.
The most difficult for gross and adjusted gross margins are heat transfer systems. The timing of project-based revenue recognition, taking into account high segment content, lost production time, and higher margins. Sequential second quarter 2021 to third quarter SG&A increases are driven by the additions of LA Turbine and AdEdge. Sequential second quarter 2021 to third quarter SG&A increases are driven by the additions of LA Turbine and AdEdge. The sequential increase in general and administrative expenses from Q2 2021 to Q3 is driven by the addition of LA Turbine and AdEdge. 2021 年第二季度到第三季度SG&A 的连续增长是由LA Turbine 和AdEdge 的增加推动的。 2021 年第二季度到第三季度SG&A 的连续增长是由LA Turbine Последовательный рост SG&A со 2-го по 3-й квартал 2021 года был обусловлен добавлением LA Turbine и AdEdge. SG&A’s consistent growth from Q2 to Q3 2021 was driven by the addition of LA Turbine and AdEdge. Later, Gill will discuss the timing of cost recovery and the greater impact of the project on profits in the coming quarters. Slide 10 shows our third-quarter and year-to-date adjusted EPS of $0.55 and $2.09, respectively, including any mark-to-market revaluation activity in which we invested, which had a net positive impact on the third quarter. quarter and from the beginning of the year. EPS adjustments related to certain one-time expenses include restructuring, severance pay, launchers and production lines, and other one-time expenses. Given that our management assumes they will continue, and the timing of the expected offsets from the structural actions you hear about, we do not include the issues you hear about today in addition to negative production or efficiency impacts. In an effort to be more time-sensitive to prepared remarks and Q&A, we have included segment-specific details and First of a Kind, a new customer information in the appendix. In an effort to be more time-sensitive to prepared remarks and Q&A, we have included segment-specific details and First of a Kind, a new customer information in the appendix. To be more time sensitive for prepared remarks and Q&A, we have included segment-specific details and first-of-its-kind new customer information in the app. To be more timely for prepared comments and Q&A, we have included details for specific segments and, for the first time in the app, new customer information.
In addition, we frequently receive questions about 10-Q application deadlines. We plan to introduce it later today.
Slide 10 does not mean that we will provide quarterly guidance in the future, but we do want to provide more specific information for the next quarter. In the context of our fourth quarter outlook, our team has included some additional contingencies in our fourth quarter sales and earnings forecast, as well as the way we usually go about assuming supply chain, shipping and freight issues may not escalate. On slide 10 you can see the change from our previous estimated internal sales forecast to the lower end of our previous Q3 and Q4 forecast range as shown in the first row. Larger moving parts from the second to the ninth rows are not completely comprehensive, but include the largest movements, including deadlines and backlogs of heat transfer system projects and notifications of continuation.
These updates bring our updated Q4 2021 sales range to $370M and Q4 to $370M to $390M. As already mentioned, this is entirely due to the postponement of the projected revenue dates to 2022, and none of them is a loss of revenue. Our new forecast assumes that sales in 2021 will increase by 11-13% compared to 2020. Slide 11 shows our current outlook for 2021, which takes into account previously presented macroeconomic challenges, and actions and timelines to date to address these challenges based on current information. We expect gross margin to increase as a percentage of sales in each segment, excluding refrigerated tank solutions, in the fourth quarter of 2021, with the third quarter reflecting lagging and lagging margins in the fourth quarter due to the pricing schedule. Gross margins as a percentage of sales growth in the RSL and Specialty Products segments are expected to be driven by product mix backlogs and timing of price increases, while the expected slight increase in HTS margins is due to larger merchandise specific to higher margins. sales result.
The corresponding adjusted non-dilutive earnings per share for full year 2021 are expected to be approximately $2.75 to $3.10 on approximately 35.5 million weighted average shares outstanding, assuming an effective tax rate of 19.5%, compared to with our previous estimate of 18%. We expect the third quarter of 2021 to have the least negative impact on margins, followed by a consistent improvement in subsequent quarters, especially as certain visible margin positions will recognize significant revenue. Pricing and allowances are starting to show up in profits and often in higher volumes to help absorb labor. However, as already mentioned, in times of uncertainty, we need some contingency measures. Moving on to slide 13, our annual forecast for 2022. Overall, we are well versed in specific projects and expect the broad demand we have seen this year to continue, contributing to the impact of record backlogs and rising prices in 2022.
We have raised our sales forecast for all of 2022 to a range of $1.7 billion to $1.85 billion. While we are very optimistic about this revised forecast, excluding any additional or new large-scale LNG projects, we expect the three large-scale LNG projects on the US Gulf Coast that have already received FERC approval to make a final investment decision in 2022. We expect two of them to appear in our order book in the first half of the year. Later, I will talk about these potential dollar amounts for each major LNG project and why our faith has grown. However, to give you a quick overview of sales growth in 2022 on slide 13, the first row shows the backlog of orders we currently plan to ship in 2022. There is some backlog until 2023 with the possibility of a release in 2022, but this is not covered here. Given these levels of speculation, the second and third lines show typical books and ships expected to ship in 2022.
Lines 4-6 are specific small LNG projects that we expected to be booked but are expected to be completed within the next six months due to timing changes and the corresponding expected revenue impact in 2022. Row 7 presents potential revenue in 2022 based on additional liquefaction projects booked at the beginning of the year. Finally, line eight is the expected full-year impact of the AdEdge and LA Turbine acquisitions. The corresponding undiluted adjusted earnings per share are expected to be between $5.25 and $6.50 on the approximately 35.5 million weighted shares outstanding, subject to an effective tax rate of 19%. Again, excluding any major LNG. Given our current visibility of lagging, we expect to see strong quarterly and yearly linear sequential sales growth compared to the second half of the year. This thinking includes that we expect the first half of 2022 to include continued resistance to the challenges we currently face and gradual offsetting with positive actions that have been taken to date.
Now let’s take a step back and talk about the ongoing widespread demand. So the history of the two cities is the second part of what is happening in business. This constant broad demand supports our beliefs both in our strategy and in our future prospects. We are distinguished by our molecular-neutral processes and equipment, and we believe the energy transition will be a hybrid solution, all of which we will benefit from any recovery or recovery of conventional oil and gas reserves. So, on slide 15, we have shown the three tailwinds that we think will shape behavior over the next decade, as well as the general trend of the public and private sectors to work on more sustainable options. The IEA and its Roadmap to Zero Emissions show that today’s climate commitments will reduce emissions by just 20% by 2030, which is needed to put the world on a net-zero path by 2050.
Another way to think about it is that if we don’t start now, the world is unlikely to catch up with us to achieve these goals, even if you do your best later in the decade. In addition, 90 countries have announced zero targets, representing 78% of global GDP. Now 82% of global GDP is CO2 driven and 32 countries have state-backed hydrogen strategies. Compared to last year, the growth of these figures is significant, which indicates that the worldview is moving towards sustainable development. As the scale and infrastructure of renewable energy grows, we are also increasingly focusing on pragmatism, while ensuring the sustainability and permanence of energy. Natural gas plays a key role in this. The third row of slide 16 is important. This satisfies the urgent need for energy without interruption or interruption, and in some cases, for the first time, provides electricity to the population and regions such as South Africa and India. The need for sustainable energy, combined with the desire for cleaner and more environmentally friendly solutions, will benefit us.
So move on to slide 16 on the non-organic activities we’ve been doing in the last 12 months and how they position us well with our full range of clean process and related equipment. I won’t spend too much time on this slide other than to say that our links between cleaning, clean electricity, clean water, clean food and clean industry are well established and require no further inorganic activity. Our customers can choose from our wide range of processes and equipment, again regardless of molecule or technology. Thus, they can choose a complete solution or a component from our products. We are currently well positioned for this transition thanks to last year’s non-organic growth completed at a valuation that we believe is very reasonable. Having an end-to-end solution is starting to help, and we expect it to continue to grow our higher margin custom product business. In addition, integration activities in our non-organic business are on schedule and we expect transactional and integration-related costs to decrease in 2022.
The acquisitions we have done over the past year are shown on slide 17. They are substantially contributing to our backlog and will begin to flow through the P&L in a meaningful manner in 2022. The four acquisitions completed between October of 2020 and June of 2021, have a total purchase price of $105 million for all four and have pulled in over $175 million of orders since their respective deal close dates. The acquisitions we have done over the past year are shown on slide 17. They are substantially contributing to our backlog and will begin to flow through the P&L in a meaningful manner in 2022. The four acquisitions completed between October of 2020 and June of 2021, have a total purchase price of $105 million for all four and have pulled in over $175 million of orders since their respective deal close dates. The acquisitions we have made over the past year are shown on slide 17. They make a significant contribution to our order book and will begin to be recognized in profit or loss in a meaningful way in 2022. The four acquisitions completed between October 2020 and June 2021 have a combined purchase price of $105 million across all four and have received over $175 million in orders since their respective deals closed. The acquisitions we have completed over the past year are shown on slide 17. They significantly increase our order book and will start to move significantly in profit and loss in 2022. Four acquisitions were completed between October 2020 and June 2021 for a total purchase price of four companies of $105 million, with over $175 million in orders placed since they closed. Also, in the lower left corner of the slide, you can see some other synergies of these combinations. I would like to point out that the combination of BlueInGreen, AdEdge and Chart with ChartWater received a lot of support early on and as I said before, this is our most undervalued growth segment in recent years and water treatment is the front. For example, AdEdge posted its top order month for 2021 in September, our first month of ownership. Since our acquisition of BlueInGreen last November, As-a-Service offerings for water treatment and industrial applications have grown by 62%.
Slide 18 shows our hydrogen activity, which continued to exceed our expectations for consistent order numbers even without any orders for liquefaction equipment during the quarter. This year, we received about $200 million in hydrogen-related orders in nine months. We recorded record hydrogen sales, gross profit and operating income in the third quarter, coupled with the launch of our commercial onboard liquid tank and the launch of our 1000 bar psi liquid hydrogen pump. inch this quarter has given us confidence and may allow us to increase our short-term targeted hydrogen market in the coming months/quarters. This is small but important information as it shows the level of adhesion compared to 12 months ago. One of the bullets on the slide has now been delivered because we now have a unique way to use hydrogen to our advantage and not rely entirely on hydrogen because hydrogen is the only winner in the transition to energy.
This is also confirmed by our current offer of potential proposals for the design of hydrogen processing plants worth about $1 billion for more than 325 customers and potential customers, with an expected decision point for pipelines worth more than $500 million before the end of the third quarter of 2022 . . The pipeline includes offerings for over 115 trailers, approximately 30 filling stations and dozens of liquefaction options for customers worldwide including Europe, North America, South Korea and Australia, including six that we expect may be available over the next six months. In the third quarter of 2021, we also placed a $9.7 million order for liquid hydrogen storage tanks in China. USA, and we started the fourth quarter with an order for the development of 30 t/d hydrogen liquefaction equipment in the USA and a confidential project order in South Korea. that over the past few months, our geographic distribution of hydrogen procurement activities has become more widespread, which is not only beneficial for the development of our business. It is also a positive indicator of the global acceptance of hydrogen.
In terms of hydrogen trailers, we have over 60 pre-orders in the last 12 months and we shipped 7 in September, which is an example of our capacity expansion at a rate of 52 trailers per year, and we will continue to work hard. in 2022. Doubling this capacity annually. More and more of our customers are looking into liquid hydrogen as a solution for transporting heavy loads, from trucks to trains and planes. One example is STOKE Space Technologies, we purchased their hydrogen during the quarter. Another example is our partnership with Hyzon Motors to develop a 1,000 mile class 8 heavy duty truck using the newly introduced liquid hydrogen onboard tanks. Slide 19 shows the carbon capture activity in the third quarter, which I think is the catalyst for the expected increase in CCUS commercial activity in the near future. I said last year that I thought carbon capture was about a year behind hydrogen in terms of commercial activity, but given the various changes in the market, it turned out that carbon capture was 18 months behind hydrogen.
But this quarter’s events, including our partnerships with TECO 2030, Ionada and FLSmidth, have affected key markets where carbon capture will be a key part of its decarbonization efforts, including shipping, cement, industrial and energy. We also recently received a $5 million grant from the US Department of Energy for SES low temperature carbon capture technology to design, build, commission and operate our process at Central Plains Cement Company, a wholly owned subsidiary of Eagle Materials, and that their cement plant in Missouri. This project will expand our CCC system to a capacity of 30 tons per day and also demonstrate that the system captures over 95% CO2 from the oncoming flue gas stream and produces a liquid CO2 stream with a purity of over 95%. We expect the purity to actually be above 99%. Also significant during the quarter was that we received a technical order for our carbon capture products from a publicly traded industrial manufacturing company that produces materials for the heavy construction industry, as well as a CCUS technical order with KAUST in the Middle East.
Two engineering orders are expected to be converted into full orders for the CCS project within the next 12 months. Finally, our SES carbon capture technology was recognized as the most competitive carbon capture solution by MIT and ExxonMobil researchers and found the cost of producing cement and CO2 capture using our CCC technology to be 24% higher than producing cement without CO2 capture and other carbon capture technologies. . costs for cement production and CO2 capture are 38-134% higher than for cement production without CO2 capture. Thus, the final conclusion of this discussion is that without carbon capture and storage, carbon reduction targets by 2030 cannot be met. So stay tuned for further growth in this market. An important topic, we briefly discussed it on the Q2 P&L call, but I will spend more time on the specifics of the LNG due to the optimism we have had in the last few weeks about the upcoming big LNG announcement. Again, as you can see on slide 20, our commercial portfolio of potential LNG projects is also growing.
As a reminder, we divide the LNG business into three segments. Firstly, it is infrastructure, including trucks, gas stations, transport, ISO containers, rail LNG. The second is small-scale and communal projects. The third is large LNG, which we do not include in our forecasts or projections, but we have potential orders of around $1 billion next year as final investment decisions are made on these projects. As a result, LNG is well positioned in the market to move from short-term supply contracts to fast-track long-term supply contracts as the balance of supply and demand tightens. In particular, we see this in the projects of export terminals on the coast of the US Gulf of Mexico. We expect three major LNG export terminals on the US Gulf Coast to join FID in 2022. As I said, two of these three projects are expected to receive orders for us in the first half of this year. None of these projects are currently booked anymore and none of them are included in our 2022 forecast. We conservatively expect Venture Global Plaquemines Phase 1 (10Mtpa) to switch to FID in the first half of the year, and note what I said conservatively.
We also expect the project to contain over $135 million in graphic content. In the third quarter, VG and Polish Oil and Gas Co entered into an agreement under which PGNiG will purchase an additional 2 million tonnes from Venture Global over 20 years. With an annual production capacity of 11 million tons, we expect the first phase of the Tellurian Driftwood project to include over $350 million in the chart. They signed a sale and purchase agreement with Shell in the third quarter, which resulted in the completion of LNG sales for the first two plants, and intend to start construction in early 2022. We expect the Cheniere Corpus Christi Phase III project to include over $375 million in the schedules announced last week and ENN LNG has agreed to purchase approximately 900,000 tons of LNG per year. This marks another milestone in our long-term contract for our LNG capacity in anticipation of FID Phase 3 in Corpus Christi next year, Schenier said. The second type of LNG is on a small scale.
We have two LOIs for projects not booked yet, and that’s the bulk of our thinking for 2022 as you saw it on the walk. These designs apply to utility scale projects in Eagle Jacksonville, Florida and New England. The New England project is awaiting City Council approval. It’s unbelievable in itself that the board has been putting this on the agenda of the meetings for the last few months, but they don’t have time for these meetings. But we hope it will be approved at today’s board meeting, and we expect notification shortly thereafter. Finally, in the infrastructure category, we continue to see record growth in LNG tank trucks, ISO containers and other related equipment. At the end of September, we received a $19 million LNG purchase order for a series of tender cars, our second purchase order in many years. LNG tanker orders for motor vehicles remained very strong in the third quarter of 2021, exceeding $33 million, making 2021 year-to-date orders about $105 million more than any full year in our history, including new customer orders in Poland and India. , Indicates greater acceptance of LNG as a fuel during the energy transition.
Finally, as part of plans to transition two US ships to LNG gas propulsion in the coming quarters, we have received an engineering study for US ship owners.
As of September 30, 2021, our net leverage was 2.99. As shown on the left side of slide 22, we closed the refinance on October 18, 2021, which improved terms, increased capacity, extended the maturity of our instruments, and lowered costs. This $1 billion sustainable revolver increased our revolver borrowing capacity from $83 million to $430 million by removing the minimum dollar borrowing rate of 50 basis points, saving approximately $2.3 million a year at current borrowing levels, and by removing the cash accumulation rule in the COVID-related restrictions. . For the first time in our history, we are in compliance and include a sustainability product in our debt instrument, with further cost reductions associated with our reduction in greenhouse gas emissions intensity over the next five years. Goals are directly related. The offer is aimed at 150% of our existing banking group’s target of 100% of $1 billion.
Finally, you can see some recognition of our ESG actions on slide 23, including recognizing Gastech as the Emissions Reduction Champion of the Year this quarter, and being a finalist in the Gastech Awards category for organizations that stand for diversity and inclusion. Also last month, we were named finalist in S&P Global Platts Energy awards for corporate social responsibility. Also last month, we were named finalist in S&P Global Platts Energy awards for corporate social responsibility. Также в прошлом месяце мы стали финалистами премии S&P Global Platts Energy за корпоративную социальную ответственность. Also last month, we were finalists for the S&P Global Platts Energy Corporate Social Responsibility Award.同样在上个月，我们在S&P Global Platts Energy 企业社会责任奖中入围。 S&P Global Platts Energy 企业社会责任奖中入围。 Также в прошлом месяце мы вошли в шорт-лист премии S&P Global Platts Energy за корпоративную социальную ответственность. Also last month, we were shortlisted for the S&P Global Platts Energy Corporate Social Responsibility Award. Both Jill and I would like to take a moment in this challenging macro environment to thank our team members for staying focused, quickly executing various cost recovery actions, and continuing to generate more and more of our unique portfolio of sustainable solutions and interests and molecular needs. – agnostic products.
[Operator Instructions] Our first question comes from Ben Nolan of Stifel. Your line is now open.
Quickly combine the two here. Then turn it over. First, it must be fast. In Phase 3 Corpus Christi, is that number bigger than before in terms of your content? It seems so. Just curious if there is any additional content that could be sold. However, the other question was more thematic and obviously it was a difficult quarter. There are things that you didn’t expect, and nobody really expected them to have any impact here. But given your 2022 [technical issue], I’m just trying to figure out what’s in there to maneuver. And – what do you think, yes – if something inevitably happens, does not go as planned, if enough space in your state was taken into account?
Okay, thanks Ben. So let me present the first answer to Phase III of Corpus Christi. This number is higher than before. I would also like to say that this is the first time this has happened, which adds to my confidence that all relevant operators of the three projects that I described in the Big LNG are satisfied that we are releasing the level of content we expect into the public domain. . So it’s positive. And then, to answer your question directly, there is some, always in the way these projects work, continuous work in the background between the EPC, the operator and the Graph, around the structure, how it would look like, what parts fit together. .
So there is an associated change in scale that has been of great benefit to us, and the comments on repricing and repricing are simple given the changing macro environment. So these two are the driving force behind the increase in content for this particular project. And then, for the 2022 question, the bottom of the guide is built on the wiggle room you describe. We believe sales are more evenly distributed throughout the year. And you’re still pulling margins in the first quarter and getting better in the second quarter. We have a good understanding of these paths – a lag that we are losing. We have created a little wiggle room at the edge of the first half in our mindset as we finish the range confidently. Again, we don’t provide recommendations quarterly, so if anyone asks me about it.
But we think about it this way: when we look at the details of our backlog in the first half of 2022, the biggest part of our backlog is special products and freezer tank solutions. In the dedicated space, we see a lot of flexibility with regard to consistent margin levels. And then, as Brinkman just commented, some sections and parts of our specialty were faster in booking and shipping and kept up with pricing/value. And then, on the freezer tank decision, in the backlog in the first half, we also have a large part in EMEA, where there is a stricter mechanism for passing this price. So those two things give us a good idea of ​​the first half. But I think the distribution is much more even this year than in 2021, with margins improving from Q4 to Q1, Q1 to Q2 and at the bottom of that range.