CALGARY,
AB, April 4, 2022 /CNW/ - Tidewater Renewables
Ltd. ("Tidewater Renewables" or the "Corporation")
(TSX: LCFS) is pleased to announce that it has entered into a
strategic renewable natural gas ("RNG") and feedstock
partnership (the "Partnership") with Rimrock RNG Inc.
("Rimrock"), and Rimrock Cattle Company Ltd. ("RCC").
RCC and its affiliates are one of the largest cattle feeding
operations in North America. The
Partnership will secure feedstock supply for both Tidewater
Renewables' RNG and Renewable Diesel business units, while also
accelerating the diversification of the Corporation's low carbon
intensity fuels product offering. The Partnership will provide a
material addition to Tidewater Renewables' RNG production
capabilities and is expected to be secured by 10 to 20-year offtake
agreements with investment grade counterparties.
Feedlot Inventory and Feedstock
Ownership Partnership
The Partnership creates alignment between Rimrock and Tidewater
Renewables, secures feedstock supply for Tidewater Renewables and
allows each party to focus on their core competencies to build and
advance RNG projects. Tidewater Renewables will invest $30 million in exchange for a 50% ownership of
RCC, including its associated cattle feeding operations
("Feedlot Infrastructure") and cattle inventory. The
$30 million investment will be paid
for in four (4) equal quarterly instalments with the first
instalment beginning in April 2022.
RCC has existing Feedlot Infrastructure in operation and is
expected to generate gross annual EBITDA of $10-20 million. Tidewater Renewables' ownership
will be accounted for under the equity method of accounting.
Feedlot Inventory and Feedstock
Ownership Partnership Highlights
- RCC is expected to control close to half the required feedstock
for Tidewater Renewables' Renewable Diesel facility (the "HDRD
Facility") in the form of tallow once the facility is operating
at full capacity. In combination with Tidewater Renewables' other
feedstock sourcing activities, the Partnership substantially
de-risks the feedstock supply requirements of the HDRD
Facility.
- RCC is also expected to produce substantially all the feedstock
for the RNG facilities (the "RNG Facilities") that make up
the Partnership, de-risking the feedstock supply requirement of the
RNG Facilities.
RNG Facilities
Partnership
Upon entering into the Partnership, Tidewater Renewables and
Rimrock plan to build and evaluate a number of projects across
North America through a separate
partnership (the "RNG Facilities Partnership"). Tidewater
Renewables and Rimrock plan to begin construction on their first
Alberta-based RNG facility at
High River (the "High River
Facility"). The High River Facility is expected to have a gross
capital cost of $65-70 million and
has received material government grant support. Tidewater
Renewables' net equity investment is expected to be approximately
$10 million, and the Corporation will
retain a 51% ownership in the RNG Facilities Partnership. The High
River Facility is expected to generate gross annual EBITDA of
approximately $10 million
(approximately $5 million net to
Tidewater Renewables). Tidewater Renewables and Rimrock are also
evaluating three additional RNG facilities located in Alberta and Nebraska. Each project is expected to attract
material government support which dramatically improves project
economics. Tidewater Renewables is pursuing 10-20 year investment
grade offtake agreements and has received multiple related term
sheets.
RNG Facilities Partnership
Highlights
- Material government support and investment grade offtakes drive
long term contracted cashflows with strong rates of return
- Ability to self-fund future projects through a combination of
prior RNG Facilities Partnership project cashflow, government
support and low-cost project financing tied to investment grade
offtakes
- Leverage Tidewater Renewables' natural gas storage asset, sour
natural gas processing expertise and industry leading natural gas
marketing and logistics experience
Tidewater Renewables will also retain a right of first refusal
("ROFR") on all future RNG facilities evaluated by
Rimrock.
Under the terms of the Partnership, RCC will continue to operate
the Feedlot Infrastructure and Tidewater Renewables will
operate the RNG Facilities, each leveraging their own corporate
expertise. The Feedlot Infrastructure also includes 7,200 acres of
land in Alberta and Saskatchewan, providing further low-cost
feedstock supply for the HDRD Facility and significant economic
upside.
Tidewater Renewables intends to fund these investments through a
combination of its $150 million
credit facility, a $26 million RNG
credit facility to be obtained by a newly formed wholly-owned
subsidiary (the "RNG Credit Facility"), government grants,
and project financing. RCC has received material government support
to date, which is expected to continue and dramatically improve
project economics and viability. The RNG Credit Facility is fully
committed, has a term of fifteen (15) months and has an initial
coupon of approximately 6.5%, which escalates every three (3)
months. The RNG Credit Facility is subject to certain conditions
that we anticipate will be met in advance of any funding
requirements.
Operational Update
Tidewater Renewables' base business continues to exceed
expectations, with quarterly adjusted EBITDA forecasted to be
10-20% above Q4-2021 throughout 2022. The Corporation has also seen
a material improvement in renewable diesel margins, with both
diesel and British Columbia Low Carbon Fuel Standard ("BC
LCFS") credit prices heavily outpacing the cost of feedstock.
In addition, Tidewater Renewables expects to realize an incremental
margin associated with the Canadian Clean Fuel Standard credits,
which are expected to come into effect in early 2023. Furthermore,
the two critical feedstock partnerships announced over the last six
months have reduced Tidewater Renewables' projected feedstock
costs. The Corporation remains confident that the value increase in
its previously announced BC LCFS credit sales will offset any
inflationary pressure associated with capital costs of the HDRD
Facility, which remains on schedule for Q1-2023 operations.
Advisors
National Bank Financial Inc. served as exclusive financial
advisor and Norton Rose Fulbright
acted as legal counsel to Tidewater Renewables in connection with
the Partnership and the RNG Facilities Partnership.
INFOR Financial Inc. served as exclusive financial advisor to
Rimrock and RCC in connection with the Partnership and the RNG
Facilities Partnership. Beaumont Church acted as legal counsel to
RCC.
Forward-Looking
Information
This news release contains forward-looking statements and
forward-looking information (collectively, "forward-looking
statements") that relate to the Corporation current
expectations and views of future events. These
forward-looking statements relate to future events or the
Corporation's future performance. Any statements that
express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumption or future events or performance
(often, but not always, through the use of words or phrases such as
"will likely result", "are expected to", "expects", "will
continue", "is anticipated", "anticipates", "believes",
"estimated", "intends", "plans", "forecast", "projection",
"strategy", "objective" and "outlook") are not historical facts and
may be forward-looking statements and may involve estimates,
assumptions and uncertainties which could cause actual results or
outcomes to differ materially from those expressed in such
forward-looking statements. No assurance can be given that these
expectations will prove to be correct and such forward-looking
statements included in this new release should not be unduly relied
upon. These statements speak only as of the date of this new
release. In particular and without limitation, this news release
contains forward-looking statements pertaining to Tidewater
Renewables' business as described under the heading "About
Tidewater Renewables" below; the Corporation's expectation that it
will secure 10 to 20-year offtake agreements with investment grade
counterparties; estimated addition of run rate EBITDA net to
Tidewater Renewables derived from the partnership; expected gross
capital cost of each facility and the expected gross annual EBITDA
generated therefrom; the expectation that free cash flow from the
first two facilities will be sufficient to help finance the
construction of at least two additional North American-based RNG
facilities; the expected gross annual EBITDA to be generated by the
feedlot and associated infrastructure; and the Corporation's plans
to build and evaluate a number of projects across North America. Forward-looking information is
based on a number of assumptions and is subject to a number of
risks and uncertainties, many of which are beyond the Corporation's
control, which could cause actual results and events to differ
materially from those that are disclosed in or implied by such
forward-looking information. Such risks and uncertainties
include, but are not limited to, the factors discussed under "Risk
Factors" in the Corporation's supplemented PREP prospectus dated
August 12, 2021, filed on SEDAR.
Tidewater Renewables does not undertake any obligation to update
such forward-looking information, whether as a result of new
information, future events or otherwise, except as expressly
required by applicable laws.
Non-GAAP Measures
EBITDA
This press release refers to "EBITDA" which does not have any
standardized meaning prescribed by generally accepted accounting
principles in Canada
("GAAP"). EBITDA is calculated as income or loss before
interest, taxes, depreciation, share-based compensation, unrealized
gains/losses, noncash items, transaction costs, items that are
considered non-recurring in nature and the Corporation's
proportionate share of EBITDA in their equity investments.
Tidewater Renewables' management believes that EBITDA provides
useful information to investors as it provides an indication of
results generated from the Corporation's operating activities prior
to financing, taxation and non-recurring/non-cash impairment
charges occurring outside the normal course of business. EBITDA is
used by management to set objectives, make operating and capital
investment decisions, monitor debt covenants and assess
performance. In addition to its use by management, Tidewater
Renewables also believes EBITDA is a measure widely used by
security analysts, investors and others to evaluate the financial
performance of the Corporation and other companies in the renewable
fuels. Investors should be cautioned that EBITDA should not be
construed as alternatives to earnings, cash flow from operating
activities or other measures of financial results determined in
accordance with GAAP as an indicator of the Corporation's
performance and may not be comparable to companies with similar
calculations.
Run Rate EBITDA
"Run rate EBITDA" is defined as the expected EBITDA to be
generated by a specific asset or specific growth project
corresponding to a full year of operations at full capacity. Run
rate EBITDA excludes non-cash items including stock-based
compensation. The calculation of run rate EBITDA is based in
certain estimates and assumptions and should not be regarded as a
representation by the Corporation or any other person that the
Corporation will achieve such operating results. Prospective
investors should not place undue reliance on the Corporation's run
rate EBITDA and should make their own independent assessment of the
Corporation's future results or operations, cash flows and
financial condition.
ABOUT TIDEWATER
RENEWABLES
Tidewater Renewables is traded on the TSX under the symbol
"LCFS". Tidewater Renewables is a multi-faceted, energy transition
company. The Corporation is focused on the production of low carbon
fuels, including renewable diesel, renewable hydrogen and renewable
natural gas, as well as carbon capture through future initiatives.
The Corporation was created in response to the growing demand for
renewable fuels in North America
and to capitalize on its potential to efficiently turn a wide
variety of renewable feedstocks (such as tallow, used cooking oil,
distillers corn oil, soybean oil, canola oil and other biomasses)
into low carbon fuels. Tidewater Renewables' objective is to become
one of the leading Canadian renewable fuel producers. The
Corporation is pursuing this objective through the ownership,
development, and operation of clean fuels projects and related
infrastructure, utilizing existing proven technologies.
Organically, Tidewater Renewables will seek to leverage the
existing infrastructure and engineering expertise of Tidewater
Midstream and Infrastructure Ltd., its majority shareholder,
regarding the development of the Corporation's portfolio of
greenfield and brownfield capital projects as well as the expansion
of the Corporation's product offerings. Additional
information relating to Tidewater Renewables is available on SEDAR
at www.sedar.com and at www.tidewater-renewables.com.
ABOUT RIMROCK CATTLE
COMPANY
RCC and its affiliates are one of the largest beef cattle
feeding operations and cattle marketers in North America collectively marketing over
600,000 head of cattle per year. RCC and its affiliates have cattle
feeding operations in Alberta,
Saskatchewan, Colorado, Texas, New
Mexico, Iowa and
Nebraska offering a strategic
logistical advantage to complement several of Tidewater Renewables'
key growth projects. The Rimrock RNG Partnership with Tidewater
Renewables has a path to $50-60
million of consolidated EBITDA ($25-30 million for Tidewater Renewables'
respective ownership) over the next 5-10 years supported by long
term investment grade offtake agreements which range from 10-20
years, ultimately enhancing the contract profile for Tidewater
Renewables through this partnership. Rimrock has received material
government support to date which is expected to continue and
dramatically improves project economics.
SOURCE Tidewater Renewables Ltd.